Slater v. U.S. Fidelity and Guaranty Co.

• Decision Date: 15 February 1980
• Parties: Richard S. SLATER v. UNITED STATES FIDELITY AND GUARANTY COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1256

400 N.E.2d 1256

379 Mass. 801

Richard S. SLATER v. UNITED STATES FIDELITY AND GUARANTY COMPANY.

Supreme Judicial Court of Massachusetts, Hampden.

Argued Nov. 5, 1979.

Decided Feb. 15, 1980.

Robert L. Dambrov, Springfield, for plaintiff.

William G. White, Springfield, for defendant.

Before HENNESSEY, C. J., and QUIRICO, KAPLAN, WILKINS and ABRAMS, JJ.

QUIRICO, Justice.

This is an action of contract in which we are asked to interpret language in an insurance policy and an endorsement thereto. The parties agreed to all the material facts, and at their request a judge of the Superior Court reported the case to the Appeals Court for determination without making any decision thereon. G.L. c. 231, § 111. Mass.R.Civ.P. 64, 365 Mass. 831 (1974). After a decision by the APPEALS COURT IN SLATER V. UNITED STATES FIDELITY & GUAR. CO., 7 MASS.APP. ---, 386 N.E.2D 1058 (1979)^A, we granted further appellate review on the application of the plaintiff. G.L. c. 211A, § 11.

The issues in the case as stipulated by the parties appear in the margin below. ¹ They may be summarized as follows: (1) whether the policy issued by the defendant to the plaintiff covers losses resulting from the theft of money by an employee of the plaintiff, and (2) whether each theft in a series of thefts by the employee over a period of fifteen months constitutes "one occurrence" within the meaning of the policy. We answer both questions affirmatively.

The plaintiff (Dr. Slater) is an orthodontist who insured his office property with the defendant (USF&G). The policy was an Inland Marine "Physicians' and Surgeons' Equipment Floater," dated January 30, 1967. It provided insurance against "(a)ll risks of loss of or damage to the property insured except as hereinafter provided." The enumerated exceptions were for losses or damage due to wear and tear, insects, electricity, "hostile or warlike action," and nuclear reaction or radiation. Also on January 30, 1967, the parties attached an "Extension of Coverage Endorsement." Item "C" of this endorsement reads: "C. Currency, Money and Stamps: This policy covers for an amount not exceeding $250 in any one occurrence, loss of currency, money and stamps in the premises, and as respects currency and money while being conveyed outside the premises of the Insured to bank of deposit and stamps from place of purchase to the Insured's premises while being conveyed either by the Insured or an employee of the Insured." The additional premium for this and other coverage extension was stated in the endorsement to be $7.50. Neither the policy nor the endorsement contained an exclusion for losses caused by theft, and neither defined "occurrence." The policy also included coverage for damage to the premises "directly resulting from theft or any attempt thereat, provided that, with respect to the premises, the Insured is the owner of such premises or is legally liable for such damage . . .."

During 1971 and 1972 a receptionist employed by Dr. Slater embezzled a total of $9,000 of the Doctor's funds. The parties agreed that the money was taken "pursuant to a plan or scheme" and that no one theft exceeded $250. Dr. Slater discovered his losses in March, 1972, and immediately notified USF&G. At all material times the policy was in full effect and Dr. Slater had complied with all its conditions.

1. The policy and the endorsement must be read together. Adamaitis v. Metropolitan Life Ins. Co., 295 Mass. 215, 219, 3 N.E.2d 833 (1936). For the reasons stated in the opinion of the Appeals Court, we agree that the "all risks" coverage provision of the policy covered loss by theft, including embezzlement. The insurer argued before this court that an "all risks" policy does not insure the fidelity of employees, and that other types of insurance are available to cover this type of loss. Language in an insurance policy must be given its ordinary meaning, however, and construed in the sense that the insured will reasonably understand to be the scope of his coverage. MacArthur v. Massachusetts Hosp. Serv., Inc., 343 Mass. 670, 672, 180 N.E.2d 449 (1962). August A. Busch & Co. of Mass., Inc. v. Liberty Mut. Ins. Co., 339 Mass. 239, 243, 158 N.E.2d 351 (1959). Panesis v. Loyal Protective Life Ins. Co., 5 Mass.App. 66, 359 N.E.2d 319 (1977). ^b Had USF&G intended to exclude losses incurred by reason of embezzlement from the coverage of the policy, it "could have employed plain language so as to be readily understood." Bates v. John Hancock Mut. Life Ins. Co., --- Mass.App. ---, ---, ^c 370 N.E.2d 1386, 1388 (1978). We hold, as did the Appeals Court, that the policy, reasonably construed, covered the insured's loss of money resulting from the theft thereof by his employee.

2. The Appeals Court held that the $9,000 loss was one "occurrence" and that therefore the insurer's liability should be limited to $250. SLATER, SUPRA AT ---, 386 N.E.2D 1058.^D It relied on decisions from other jurisdictions interpreting the word "occurrence" "as denoting a process . . .rather than a momentary or sudden event." Id. at ---, ^e 386 N.E.2d at 1061. Furthermore, it held that the "single scheme or plan constituted but 'one occurrence,' " and drew analogy to the criminal law concept that "a series of larcenous takings actuated by a single intent or pursuant to a general plan or scheme constitutes a single larceny." Id. at --- - ---, ^f 386 N.E.2d at 1061.

We take the opposite view based on our reading of many decisions from other jurisdictions which have interpreted policies limiting insurers' liability for one "occurrence" or "accident." We believe that the use of the words "one occurrence" in the policy, without giving a definition or other aid to help determine the sense in which the words were used, gives rise to an ambiguity which must be construed against the insurer, who wrote the policy. Massachusetts Turnpike Auth. v. Perini Corp., 349 Mass. 448, 454, 208 N.E.2d 807 (1965). Vappi & Co. v. Aetna Cas. & Sur. Co., 348 Mass. 427, 431, 204 N.E.2d 273 (1965). Accord, Saint Paul-Mercury Indem. Co. v. Rutland, 225 F.2d 689, 691 (5th Cir. 1955); Elston-Richards Storage Co. v. Indemnity Ins. Co., 194 F.Supp. 673, 679 (W.D.Mich.1960), aff'd, 291 F.2d 627 (6th Cir. 1961); Wilkinson & Son, Inc. v. Providence Wash. Ins. Co., 124 N.J.Super. 466, 469, 307 A.2d 639 (1973).

Like the Appeals Court and the parties, we have found no Massachusetts case dealing with the question what constitutes one "occurrence" within the meaning of an insurance policy limiting liability for any one occurrence. See Slater, supra at ---, ^g 386 N.E.2d 1058. The very fact that there have been so many decisions in other jurisdictions dealing with the question in a wide variety of factual settings, however, supports our conclusion that the term is indeed ambiguous.

Before discussing these cases, we observe that we are not faced here with a question of notice. The parties agree that Dr. Slater did not discover his loss until $9,000 was missing, and promptly notified USF&G. There is no evidence in the record that he was negligent in failing to discover the thefts earlier, nor does USF&G raise this as an issue. ² The issue at this point is solely whether Dr. Slater's total loss of $9,000 as the result of his employee's theft of sums of less than $250 on each of many occasions constituted "one occurrence," within the meaning of the policy, or whether each theft is a separate "occurrence."

The cases from other jurisdictions dealing with this question seem to turn on an analysis of three factors: causation, the resulting event or events (particularly the time and distance which separate them), and the subject matter of the insurance policy. ³

If there is one, uninterrupted proximate cause which results almost immediately in more than one impact or event, courts generally find there is one "accident" or "occurrence." ⁴ In Truck Ins. Exch. v. Rohde, 49 Wash.2d 465, 303 P.2d 659 (1956), the insured's car went out of control, crossed the center line, and struck three motorcycles in rapid succession. The court held that there was one "accident" or "occurrence," stressing that one negligent act was the proximate cause of the three impacts, and that the insured's automobile remained out of control the entire time. Similarly, in Bacon v. Miller, 113 N.J.Super. 271, 276, 273 A.2d 602, 604 (1971), two automobiles collided on a street and one went onto a sidewalk and hit three pedestrians. In holding that only one accident had occurred, the court stressed that the insured "did not straighten out after the accident but continued on an uninterrupted course onto the sidewalk," and that the entire event took only a few seconds and occurred within an area of eighteen to twenty-five feet. Other courts have agreed that there is but one accident or occurrence when there is an unbroken, immediate chain of events with a single, continuous proximate cause. E. g., Barrett v. Iowa Nat'l Mut. Ins. Co., 264 F.2d 224 (9th Cir. 1959) (fire damaged apartments of seven tenants); Hyer v. Inter-Ins. Exch. Club of S. Cal., 77 Cal.App. 343, 246 P. 1055 (1926) (auto of insured hit oncoming car and caused it to hit third car); Olsen v. Moore, 56 Wis.2d 340, 350, 202 N.W.2d 236, 241 (1972) (car crossed median and hit two other cars; "virtually no time or space interval between the two impacts").

Where one impact or event causes immediate damage to several persons or properties, courts also generally find one accident or occurrence. E. g., Saint Paul-Mercury Indem. Co. v. Rutland, 225 F.2d 689 (5th Cir. 1955) (insured's truck collided with freight train causing damage to sixteen cars and property of fourteen owners); Denham v. LaSalle-Madison Hotel Co., 168 F.2d 576 (7th Cir.), cert. denied, 355 U.S. 871, 69 S.Ct. 167, 93 L.Ed. 415 (1948) (hotel fire caused losses to several guests); McKeithen v. S. S. Frosta, 430 F.Supp. 899 (E.D.La.1977) (tanker owned by insured collided with ferry, causing death or injury...