Reliance Insurance Co. v. Orleans Parish School Bd.

• Decision Date: 12 December 1963
• Docket Number: No. 19580.,19580.
• Citation: 322 F.2d 803
• Parties: RELIANCE INSURANCE COMPANY, Appellant, v. ORLEANS PARISH SCHOOL BOARD, Appellee. ORLEANS PARISH SCHOOL BOARD, Appellant, v. RELIANCE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

322 F.2d 803 (1963)

RELIANCE INSURANCE COMPANY, Appellant, v. ORLEANS PARISH SCHOOL BOARD, Appellee.

ORLEANS PARISH SCHOOL BOARD, Appellant, v. RELIANCE INSURANCE COMPANY, Appellee.

No. 19580.

United States Court of Appeals Fifth Circuit.

September 19, 1963.

Rehearing Denied December 12, 1963.

Eberhard P. Deutsch, Rene Himel, Jr., Frank J. Peragine, New Orleans, La., Deutsch, Kerrigan & Stiles, New Orleans, La., of counsel, for appellant.

Samuel I. Rosenberg, New Orleans, La., for appellee.

Before TUTTLE, Chief Judge, and WISDOM, and GEWIN, Circuit Judges.

WISDOM, Circuit Judge.

In this action for a declaratory judgment the Court is asked to construe a fire insurance policy covering the public school properties in Orleans Parish, Louisiana. The principal question for decision is whether the policy is a scheduled policy, as the insurance company contends, or a blanket policy as the district court held. We agree with the district court on this major point.

In March 1954 the Orleans Parish School Board issued invitations for bids on fire and explosion insurance on its schools and their contents. The bid specifications included a form described in its heading as, "Location of Schools and Statement of Values". Reliance consistently refers to this form in its briefs as the "Schedule of Values" or the "Schedule". The bid specifications also included a form identified in its heading as, "School Form-Blanket". This form relates to coverage and other conditions. The aggregate face of the policies, when issued was $49,883,196.57, representing 90% of the aggregate valuation (then $55,425,773.96) of the insured properties according to the values listed in the "Statement of Values". The insurance was placed with the Reliance Insurance Company and three other companies. Reliance carried fifty per cent of the total insurance.

March 27, 1958, Landry School in New Orleans was almost totally destroyed by fire. On the date of the fire, the face value of Reliance's policy was $28,880,209.29. The school and its contents were valued at $337,192 in the statement of values. Reliance deposited $135,193 in the registry of the court, contending that this was the maximum amount it owed under its policy, and sought a judicial declaration that its liability was limited to the value of Landry School as shown in the statement of values. The Board withdrew the deposited sum of $135,193 and filed a counter-claim for $115,052.50 plus penalties, interest, and attorney's fees.

The Board contends that Reliance issued a blanket policy and was therefore liable for the full amount necessary to restore the damaged building to its original condition, together with the actual cash value of the movable (personal) property destroyed. Reliance contends that the only indication the policy may have been intended to be a blanket policy, is the word "Blanket" in the heading, "School Form-Blanket"; that, considering the policy as a whole, the "Schedule of Values" (that is, the statement of values) was incorporated by reference in the endorsements and was treated at all times as part of the policy. The district court held in favor of the School Board and, in a later phase of the litigation, refused to reduce the judgment by allowing for the building's depreciation at the time of the fire. Reliance appeals.

I.

Both parties agree that this action is governed by Louisiana's Valued Policy Law. Section 695 provides, in relevant part:

"Under any fire insurance policy * * * on any inanimate property, immovable by nature or destination, situated within the state of Louisiana, the insurer shall pay to the insured, in case of partial damage, * * * such amount, not exceeding the amount for which the property is insured, at the time of such partial damage, in the policy of such insurer, as will permit the insured to restore the damaged property to its original condition." LSA-R.S. 22: 695, subd. B.

The parties disagree as to whether the court may refer to the "Location of Schools and Statement of Values" in construing the contract. The Board takes the position that it is not part of the policy and is even inadmissible in evidence. Appleman states the general rule:

"The standard form fire policy evidences an intent to put the entire insurance contract into one instrument in the hands of the insured. Statements and agreements, to be effective as part of the policy, must usually be physically endorsed thereon or attached thereto, and while documents unattached to policies may be examined to ascertain the insurer\'s obligation, they may not control such obligation, or otherwise affect the insured\'s rights." Appleman, Insurance Law and Practice, § 7527, p. 261 (1962).

Article 1949 of the LSA-Civil Code limits reference to "other contracts or agreements made on the same subject between the same parties". Here, the valuation sheet was annexed to, and made a part of the invitation for bids resulting in a contract between the Board and Hardin and Ferguson, Inc., agents for both the Board and Reliance.

The authorities the Board cite only skirt this case. Here the parties incorporated the valuation sheet by reference in the first endorsement, which was a part of the policy when it was issued. The reference is repeated in almost all of the forty later endorsements.¹ Nothing in the Louisiana Insurance Code or in the Civil Code would prevent reference to the list. See Walker v. Gravier, La.App.1961, 131 So.2d 553; Dalgarn v. New Orleans Land Co., 1927, 162 La. 891, 111 So. 271; Bush Wine and Liquor Co. v. Wolff, 1896, 48 La.Ann. 918, 19 So. 765; Heirs of Delogny v. Mercer, 1891, 43 La.Ann. 205, 8 So. 903; Labiche v. Jahan, 1844, 9 Rob. 30; Suarez v. Duralde, 1830, 1 La. 260. See also 3 Williston on Contracts (rev. ed.), Section 628; Bell v. The Western Marine & Fire Ins. Co., 1843, 5 Rob. 423, 442; Paddleford v. Fidelity & Casualty Co., 7 Cir., 1939, 100 F.2d 606; cert. den'd. 306 U.S. 664, 59 S.Ct. 789, 83 L.Ed. 1060; Corley v. Travelers' Protective Ass'n, 6 Cir., 1900, 105 F. 854.

The Insurance Code does not define the term, "blanket policy". Appleman describes it as follows:

"A blanket, compound, or floater policy is written upon a risk as a whole, embracing whatever articles or items are included therein, often changing in its nature; in contravention thereto, a specific policy is one which allocates the amount of the risk in stated values upon the several items embraced in the coverage." 6 Appleman, Insurance Law and Practice, Sec. 3912, p. 297.

One well-know definition is:

"Blanket insurance is one that invariably covers and attaches to every item of property described therein. If the loss of one item exhausts the whole amount of the policy, the entire insurance must be paid, and there can be no apportionment. Another definition is that a compound, or blanket, policy is one which insures property collectively without providing in the event of a loss for a distribution of the insurance to each item." Wilson and Co. v. Hartford Fire Ins. Co., 1923, 300 Mo. 1, 254 S.W. 266.

"Blanket policy" is "a term of art". National Bank of Burlington v. F. & C. Co. of New York, 4 Cir., 1942, 125 F.2d 920, 924, 140 A.L.R. 694, "Terms of art or technical phrases are to be interpreted according to their received meaning with those who profess the art or profession to which they belong." LSA-Civ.Code, Art. 1947. Accordingly, both parties called witnesses to explain the meaning of "blanket" and "scheduled" in relation to insurance policies.

The experts all agreed on the basic differences between a blanket policy and a scheduled or specific policy. All agreed that the first six pages of the policy indicate that the policy here is a blanket policy. Reliance's expert testified that, taking the policy as a whole, with the endorsements, it is a scheduled policy. The Board's experts conceded that the endorsements incorporating the schedule are inconsistent with a blanket policy, but, as we read their testimony, they found many reasons for not characterizing the policy as a scheduled policy. The witnesses were in general agreement that the statement of values, here the "Location of Schools — Statement of Values", issued by an assured in connection with a blanket policy has no relation to a scheduled policy. The schedule used in a scheduled policy lists each piece of property with the amount of insurance applicable to each. The statement of values used in connection with a blanket policy is not a part of the policy but is furnished by an assured to the Louisiana Fire Prevention and Rating Bureau and is used by the Bureau for the purpose of arriving at an average rate for a blanket policy. The Bureau's printed form used for the Statement of Values in connection with blanket policies is identical with the document entitled "Location of Schools and Statement of Values", which was annexed to the School Board's specifications for bids. An average rate usually indicates a blanket policy. In adjusting prior losses under this policy, the parties did not refer to the statement of values. The Secretary for Hardin and Ferguson, Inc., (agents for the Board and for Reliance) whom the Board called as a witness, testified that he had handled the mechanics of issuing and servicing the policy. He described the policy in suit as a blanket policy, and testified that the parties intended to insure by blanket-insurance.

Reliance argues that, as the experts testified, a blanket policy usually covers an item, or class of property, such as inventory or a stock of goods, which fluctuates in content. This policy, however, covered specifically enumerated items of property, each of which had been assigned a specific value on the valuation sheet. Second, the policy was endorsed over forty times, and these endorsements either deleted or added property and specified the value of the property. If this policy had in fact been a blanket policy, Reliance argues, the School Board could merely have asked an increase or...