State ex rel. State Dept. of Public Health and Welfare, Division of Welfare v. Hanover Ins. Co.

• Decision Date: 09 September 1968
• Docket Number: No. 1,No. 53249,53249,1
• Citation: 431 S.W.2d 141
• Parties: STATE of Missouri, ex rel. STATE DEPARTMENT OF PUBLIC HEALTH & WELFARE, DIVISION OF WELFARE, Respondent, v. The HANOVER INSURANCE COMPANY, a Corporation, Appellant
• Court: Missouri Supreme Court

Page 141

431 S.W.2d 141

STATE of Missouri, ex rel. STATE DEPARTMENT OF PUBLIC HEALTH

& WELFARE, DIVISION OF WELFARE, Respondent, v. The HANOVER INSURANCE COMPANY, a Corporation, Appellant.

No. 53249.

Supreme Court of Missouri, Division No. 1.

Sept. 9, 1968.

Elmore G. Crowe, Chief, Counsel, Curtis J. Quimby, Senior Counsel, Edward D. Summers, Senior Counsel, Jefferson City, for respondent.

Paul G. Koontz, Thomas J. Wheatley, Maurice J. O'Sullivan, Jr., Kemp, Koontz, Clagett & Norquist, Kansas City, Cullen Coil, Jefferson City, for appellant.

HENRY J. WESTHUES, Special Commissioner.

This is an action filed by the State of Missouri at the relation of the State Department of Public Health and Welfare, Division of Welfare, against The Hanover Insurance Company, a corporation, to recover on a bond for funds misappropriated by an employee of the Division of Welfare.

In Count I of the petition plaintiff asked for a judgment of $5,000 and interest on a bond in force from November 13, 1963, to November 12, 1964. The loss sustained was in excess of $5,000, that is, $17,527. The limit of liability under the bond was $5,000.

In the second count, plaintiff asked for a judgment of $10,000 and interest on a bond in force from November 13, 1964, to June 30, 1965. The loss sustained during this period was in excess of $10,000, that is, $10,353. The limit of the bond was $10,000.

Defendant by answer admitted that the losses were as stated in the petition. A caseworker, Mrs. Jeanne Scott, was alleged to have obtained the money through fictitious claims. However, defendant claimed that the total liability on the bonds was limited to $10,000 and offered to pay that sum to plaintiff. Defendant filed a motion for a summary judgment, asking that a judgment be entered in plaintiff's favor for $10,000. Plaintiff also filed a motion for a summary judgment, asking that the judgment be for $15,000 and interest. Plaintiff asked also for damages for vexatious refusal to pay.

The trial court sustained plaintiff's motion for a summary judgment in plaintiff's favor for $15,000 and interest from April 26, 1966.

A motion for a new trial and for modification of the judgment was overruled and defendant appealed to this court. The State is a party, and appellate jurisdiction is vested in this court.

Defendant claims that by virtue of Section 5 of the bond issued on November 13, 1964, its liability was limited to $10,000. Plaintiff claims that Section 5 is not applicable.

The two bonds were identical except that the first bond was for $5,000 and the second was for $10,000. The first was numbered 0--966634 and the second 0--966634A. The first was canceled when the second was issued.

Bond No. 0--966634 (under a caption reading 'Table of Limits of Liability') read: 'Item 4. Insuring Agreement 4--Faithful Performance Blanket Position Bond Coverage $5,000.00.' A provision in bond No. 0--966634A was identical except that the amount stated was $10,000. Under a heading 'Insuring Agreements' Item 4 read as follows: 'Faithful Performance Blanket Position Bond Coverage. Loss caused to the Insured through the failure of any of the Employees, acting alone or in collusion with others, to perform faithfully his duties or to account properly for all monies and property received by virtue of his position or employment during the Bond Period, the amount of indemnity on each of such Employees being the amount stated in the Table of Limits of Liability applicable to this Insuring Agreement 4.'

Section 5, which constitutes the basis of the dispute in this suit, reads as follows under a caption 'General Agreement--Loss Under Prior Bond':

'Limit of Liability Under this Bond and any Prior Bond. Section 5. With respect to loss under Insuring Agreement 1 or 3 caused by any Employee or in which such Employee is concerned or implicated or which is chargeable to such Employee as provided in Section 2 of this Bond and with respect to loss under Insuring Agreement 2 or 4 caused by any Employee or which is chargeable to such Employee as provided in Section 2 of this Bond and with respect to loss under any Insuring Agreement which occurs partly during the Bond Period and partly during the period of other bonds issued by the Surety to the Insured or to any predecessor in interest of the Insured and terminated or canceled or allowed to expire and in which the period specified therein for bringing suit, action or proceeding of any kind, or if no such period is specified therein, then within the period prescribed by the application statute of limitations, has not expired at the time such loss thereunder is discovered, the total liability of the Surety under this Bond and under such other bonds shall not exceed, in the aggregate, the amount carried under the applicable Insuring Agreement of this Bond on such loss or the amount available to the Insured under such other bonds, as limited by the terms and conditions thereof, for any such loss if the latter amount be larger.'

Defendant claims that Section 5 operated to limit the total liability to an amount which in the...