Midwestern Ins. Co. v. Rapp

• Decision Date: 31 January 1956
• Docket Number: No. 36314,36314
• Citation: 296 P.2d 770
• Parties: MIDWESTERN INSURANCE COMPANY, a Corporation, Plaintiff in Error, v. H. E. RAPP, Robert E. Rapp, and Earl R. Rapp, a Partnership, d/b/a H. E. R. Drilling Company, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 770

296 P.2d 770

1956 OK 36

MIDWESTERN INSURANCE COMPANY, a Corporation, Plaintiff in Error, v. H. E. RAPP, Robert E. Rapp, and Earl R. Rapp, a Partnership d/b/a H. E. R. Drilling Company, Defendant in Error.

No. 36314.

Supreme Court of Oklahoma.

Jan. 31, 1956.

Rehearing Denied May 3, 1956.

Syllabus by the Court.

1. Where, pursuant to oral order of plaintiff, defendant insurance company issued to it a binder providing that loss occurring thereunder 'shall be settled in accordance with' a certain standard form of policy and that said binder would become void upon delivery of the policy in substitution therefor, and a claimed loss thereunder occurred before the delivery of the policy, the provisions and definitions in the standard policy form thus referred to in the binder, rather than the policy delivered to plaintiff after the loss occurred, prescribed defendant's liability, if any, for said loss.

2. A 'bowl shaped depression around the well' was not the only kind of 'collapsing of the earth's structure' beneath a drilling rig included in the definition of 'cratering' contained in the standard policy form referred to in the binder as above-stated; and the evidence as a whole was sufficient to support the jury's verdict that the loss involved was caused by 'wind storm' and 'cratering' acting together coincidentally, as those terms were defined in the court's unquestioned instructions.

3. The general rule usually applicable to binders which do not contain specific provisions as to settlement of loss occurring thereunder, that they bind the insurance company to pay such losses before the policy is actually issued in accordance with the terms of policies ordinarily issued by the insurer to insure like risks either to other insureds or policies covering like risks previously issued to the insured, did not, under the circumstances, apply to the binder here involved.

Appeal from the District Court of Oklahoma County; A. P. Van Meter, Judge.

Action by plaintiff against the defendant insurance company to recover, under an insurance binder, the damages to their portable drilling rig unit claimed to have been caused by wind storm and cratering. From a verdict and judgment for plaintiff, defendant appeals. Affirmed.

Dudley, Duvall & Dudley, Oklahoma City, for plaintiff in error.

V. P. Crowe, Wm. J. Holloway, Jr., and Embry, Crowe, Tolbert, Boxley & Johnson, Oklahoma City, for defendant in error.

BLACKBIRD, Justice.

This action was instituted to recover a 'loss' allegedly covered by an insurance policy, or contract. The 'loss' was the damages, in the stipulated sum of $35,000 done to a portable oil and gas well-drilling rig owned by defendant in error when it fell over on its side while being loaded on a specially built truck trailer called a 'lowboy', preparatory to being moved to another location from the well it had just previously been used to drill near Perry, Oklahoma.

The accident occurred January 7, 1952, only a few days after defendant in error had applied to plaintiff in error for insurance on the rig. To afford it immediate coverage, plaintiff in error issued defendant in error an instrument called a 'binder', dated January 3, 1952, whose purpose was to act as temporary insurance until the policy it had purchased could be delivered. The policy did not reach the office of defendant in error until January 12th, or 5 days after the accident, though, like the binder, it was dated January 3rd. In the meantime, defendant in error had given plaintiff in error notice of its above-described loss, and, upon the latter's denial of liability and refusal to pay for said loss, defendant in error commenced this action, as plaintiff, against plaintiff in error, as defendant, to recover the rig's damages under the aforesaid binder, rather than the policy that it received after the accident. The parties will hereinafter be referred to as they appeared in the trial court.

The binder introduced in evidence at the trial provides that any loss occurring under it 'shall be settled in accordance with the standard drilling rig policy issued by Rig Insurance Underwriters.' The standard policy, also made a part of the evidence, contains provisions with reference to what is termed 'co-insurance', which term is explained in paragraph 'V' under the portion of the policy devoted to 'Definitions', as follows:

'It is expressly stipulated and made a condition of this contract that the Insured shall at all times maintain contributing insurance on the property insured by this policy to the extent of at least the specified percentage of the actual sound value at the time of the loss and that failing to do so, the Insured shall to the extent of such deficit, bear their portion of any loss. * * *'

Paragraph V. thus quoted from, begins with the following proviso in parenthesis: 'This clause shall apply only where a percentage has been entered in Column 3 of Item 3 of the Declarations.' The 'Column 3 of Item 3' referred to is a printed square or blank space on the first page of the policy that is porvided for use in writing in the percentage of the total insurance coverage that is to be co-insured. The binder contains no reference to 'co-insurance' except what may be inferred from, or included in, the aforesaid provision with reference to settlement 'in accordance with the standard drilling rig policy * * *'. Accordingly, one of the principal issues at the trial of the case was whether or not 'co-insurance' was applicable to the loss involved.

The other principal issue was whether or not the loss, because of its cause, was one of those covered. The standard form of policy covers, among others (with certain exceptions, or 'Exclusions' not material here) losses and damages from both 'windstorm' and 'cratering', which latter is defined as: '* * * The creating of a bowl shaped depression around a well caused by an eruption and/or the subsequent uncontrolled discharge of drilling fluid and/or gas and/or water and/or air and/or oil from such well or as the collapsing of the earth's structure beneath the unit.'

At the trial, the cause of the rig's fall was not positively or unequivocally established. Some witnesses gave testimony contemplated to show that the fall may have been due to a defect in the working of the hydraulic 'rams' used in the loading operation caused by an incorrect method of 'bleeding' the air from them immediately beforehand, while others gave testimony contemplated to show that the fall was due to a combination of wind force and 'giving way' of the ground under one leg or side of the derrick. This issue was submitted to the jury to be determined, under the court's instructions, by answering the following interrogations:

'1. Do you find from a preponderance of the evidence that the damage and loss sustained by plaintiffs was proximately caused by 'wind storm', as defined in the instructions?

'2. Do you find from a preponderance of the evidence that the damage and less sustained by plaintiffs was proximately caused by 'cratering', as defined in the instructions?

'3. Do you find from a preponderance of the evidence that the damage and loss sustained by plaintiffs was proximately caused by the two elements, 'wind storm' and 'cratering', acting together coincidentally as those terms have been defined in the instructions?

'4. Do you find from the evidence that the damage and loss sustained by plaintiffs was caused by a defect in the machinery or equipment being used by plaintiffs, or a failure of such machinery or equipment (t)o per(o)perly perform, or was due to some other cause other than 'windstorm' or 'cratering', as those terms have been defined in the instructions?'

The only answer to any of the above interrogations that was incorporated in the verdict the jury returned, was an affirmative answer to Interrogatory No. 3.

After the jury's verdict, the issue of whether the 'co-insurance' feature of the standard policy applied to the loss involved was tried to the court without a jury. In accordance with the jury's above-described determination on the first issue and the court's determination on this latter issue, judgment was entered for plaintiffs in the full amount of the loss. The defendant thereafter perfected the present appeal.

Defendant's argument for reversal appears in its briefs under seven propositions. Because of its fundamental bearing upon some of the other propositions, we consider first defendant's Proposition VII, which is to the effect that plaintiffs' cause of action, if any, should have been based upon the policy of 'permanent' insurance it issued plaintiff, rather than upon the 'temporary' binder. Defendant's argument under this proposition in worthy of little consideration. It is not only ambiguous--it is self-contradictory. Counsel first refers to the binder providing that the insurance afforded thereunder shall become void upon delivery of a policy. They follow this with the statement that said provision shows that when the policy is 'issued, the binder is voided * * *'. (Emphasis ours). The first, rather than the last statement, is correct. The true and exact wording of the binder's provision referred to in said argument is: 'This insurance is made binding upon the mutual agreement that it shall at once terminate and become void upon delivery of policy (policies) in substitution * * *'. Though, as hereinbefore mentioned, the policy was dated January 3rd, just as was the binder, and the evidence does not establish just when the policy was 'issued', it is undisputed that it was not delivered to defendants until after the loss occurred. Therefore, the binder was the only contract of insurance in force and effect on the date of the loss, just as was held to be the case in Republic Insurance Co., Dallas, Tex. v. French, 10 Cir., 180 F.2d 796. Having thus concluded that the parties' rights are governed by this contract, we need not discuss nor consider the policy's effect on any such...