Reliance Insurance Company v. Jones, 6741

• Citation: 296 F.2d 71
• Decision Date: 07 November 1961
• Docket Number: 6742.,No. 6741,6741
• Parties: RELIANCE INSURANCE COMPANY, Appellant, v. Dean JONES, Waynoka Cooperative Elevator Association and Farmers Elevator Mutual Insurance Company, Appellees. Dean JONES, Cross-Appellant, v. FARMERS ELEVATOR MUTUAL INSURANCE COMPANY and Waynoka Cooperative Elevator Association, Cross-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

296 F.2d 71 (1961)

RELIANCE INSURANCE COMPANY, Appellant, v. Dean JONES, Waynoka Cooperative Elevator Association and Farmers Elevator Mutual Insurance Company, Appellees.

Dean JONES, Cross-Appellant, v. FARMERS ELEVATOR MUTUAL INSURANCE COMPANY and Waynoka Cooperative Elevator Association, Cross-Appellees.

Nos. 6741, 6742.

United States Court of Appeals Tenth Circuit.

November 7, 1961.

Walter D. Hanson, Oklahoma City, Okl. (William L. Peterson, Jr., Oklahoma City, Okl., was with him on the brief), for appellant.

Coleman Hayes, Oklahoma City, Okl. (Denver W. Meacham, Clinton, Okl., was with him on the brief), for Dean Jones.

Alex Cheek, Oklahoma City, Okl. (John D. Cheek, Oklahoma City, Okl., was with him on the brief), for Farmers Elevator Mut. Ins. Co.

Before PHILLIPS, PICKETT and HILL, Circuit Judges.

HILL, Circuit Judge.

This action is brought under the provisions of 28 U.S.C.A. §§ 2201 and 2202, commonly known as the Declaratory Judgment Act, by the plaintiff-appellant, Reliance Insurance Company,¹ whereby it seeks an order declaring liability to its insured Dean Jones² for only a portion of a loss admittedly covered by its policy. It further asks that the remainder of the loss suffered by Jones be declared to be covered by a policy issued by another insurance company, Farmers Elevator Mutual Insurance Company,³ to its insured, Waynoka Cooperative Elevator Association.⁴

Jones entered into a contract with Co-Op to construct a steel grain storage building with a flat storage capacity of approximately 200,000 bushels and the necessary elevator mechanism, commonly referred to as a leg, on the exterior of the building. The work was to be completed in time for the harvest on or before June 5, 1959. About two weeks ahead of the anticipated completion of the building the Co-Op sought to protect itself against any loss which it might sustain by reason of fire, lightning or windstorm when and if it accepted the contract as having been completed and took over the ownership and occupancy of the building. It therefore made application to its insurance company, Mutual, to extend the coverage to insure the Co-Op against these losses. Mutual agreed to issue such insurance and did issue its binder, agreeing to issue a policy at a later date. Both the Co-Op and Mutual knew that Jones had a performance bond, knew that the building was covered by Jones' builders risk policy until its completion, and it was therefore the intention of both the insured, Co-Op, and the insurer, Mutual, that such insurance cover only losses suffered by the Co-Op. The effective date of the policy was to be the date Co-Op accepted the contract and took possession of the building.

Prior to June 11, 1959, Jones had in effect a builders risk insurance binder upon the new construction, and, on that date that binder was cancelled or an attempt was made to cancel it. On the evening of that same date Jones procured from Reliance a binder for a builders' risk policy in the amount of $60,000 to cover him on the construction job. On the following day, June 12, 1959, a windstorm toppled the unfinished leg which, in turn, fell upon the roof of the building proper causing great damage to it.

Jones proceeded to reconstruct and complete the damaged building in accordance with the original plans and specifications and was paid the full contract price by Co-Op for the job. He thereafter made claim against Reliance upon the binder dated June 11, 1959, for his loss in having to reconstruct the building as a result of the storm damage.

Reliance answered that it was liable for only a part of the loss. That part being only the damage related to the "leg", not to the building proper. This refusal was based upon a standard provision in the policy to be issued in conformity with the binder.⁵

Reliance relies upon this clause in its refusal to pay for the loss because at the time of the damage the Co-Op had stored in the building a small amount of grain. This, Reliance maintains was "occupancy" of the building.

It is undisputed that the construction of the building had not progressed as rapidly as both the Co-Op and Jones had anticipated, and that on or about June 11, 1959, the Co-Op's other storage facilities were filled to...