Sterling Merchandise Co. v. Hartford Ins. Co.

• Decision Date: 15 January 1986
• Docket Number: Nos. 12199,s. 12199
• Citation: 506 N.E.2d 1192,30 Ohio App.3d 131
• Parties: , 30 O.B.R. 249 STERLING MERCHANDISE COMPANY, Appellee and Cross-Appellant, v. HARTFORD INSURANCE COMPANY et al., Appellants and Cross-Appellees. * & 12284.
• Court: Ohio Court of Appeals

Page 131

30 Ohio App.3d 131

506 N.E.2d 1192, 30 O.B.R. 249

STERLING MERCHANDISE COMPANY, Appellee and Cross-Appellant, v. HARTFORD INSURANCE COMPANY et al., Appellants and Cross-Appellees. ^*

Nos. 12199 & 12284.

Court of Appeals of Ohio, Ninth District, Summit County.

Jan. 15, 1986.

Syllabus by the Court

1. Although Ohio has adopted rules of construction of insurance contracts which favor the insured, it has not implicitly adopted the theory of recovery known as the reasonable expectations doctrine.

2. A definition of "safe burglary" which requires visible marks of entry by actual force or violence before coverage is allowed is not ambiguous.

3. Evidence of the activation of a burglar alarm alone is insufficient as a matter of law to support a finding of a "visible marks" forced entry.

Richard T. Cunningham and Jack Morrison, Jr., Akron, for appellee and cross-appellant.

David Hilkert, Akron, for appellant and cross-appellee, Hartford Ins. Co.

Jack Alton and John A. Fiocca, Jr., Columbus, for appellants and cross-appellees, Underwriters at Lloyds of London et al.

GEORGE, Presiding Judge.

Defendants-appellants, Underwriters at Lloyds of London, Ennia Insurance Company (U.K.) Limited, and Terra Nova Insurance Company Ltd. (hereinafter referred to collectively as "Underwriters"), appeal the order of the trial court finding that plaintiff-appellee, Sterling Merchandise Company ("Sterling"), was covered under the policies issued by Underwriters for a loss resulting from an unauthorized entry into one of Sterling's jewelry store safes. Sterling, as cross-appellant, appeals the trial court's denial of its claim for prejudgment interest dating from the time of the loss.

In 1981, Sterling opened a new jewelry store in Los Cerritos, California. At that time, Sterling requested from its regular insurance agent, Ostrov Corporation, an additional $250,000 in coverage for loss due to burglary of the safe used at the new store. Ostrov procured policies from Hartford Insurance Company and Underwriters containing specific insurance entitled "safe burglary" insurance. The policies were delivered to Ostrov, but Ostrov, at the instruction of Sterling, retained possession of the policies. No one from Sterling ever received the policies prior to December 19, 1982. On that date, an unauthorized entry resulting in a loss occurred at the Los Cerritos store.

The facts and events surrounding the unauthorized entry and theft on December 19, 1982 have been stipulated by the parties as follows:

"(a) At closing time, 6:00 p.m., the store employees closed and locked the steel gate which leads to the main mall corridor.

"(b) The employees then took all the jewelry in the store, placed it in cardboard boxes, and placed the boxes in the safe.

"(c) The employees then placed two file tubs and the cash box in the safe and closed the safe door.

"(d) All except two employees went into the rear hallway, keeping surveillance and waiting for the remaining two.

"(e) The two remaining employees locked the store's safe, into which the store's inventory had been placed, manually checked the handle and spun the combination knob, locking the safe.

"(f) They then set the alarm and tested it to make sure it was set. The safe and store were protected by a three-trigger Honeywell burglar alarm system. The first trigger is wired into all the exterior doors of the store, including the back door. The second trigger is a sonic alarm, sensitive to noise or physical intrusion in the protected space. This trigger was located in the ceiling above the safe. The third trigger is bolted onto the outside of the safe and is attached to the exterior of the only door of the safe; it is activated by the opening of the safe door. These triggers are wired in a series, through one electric circuit, into an outside Honeywell monitoring device.

"(g) The activation of any one of these triggers sets off a visual, graphic, and audible signal at the Honeywell monitoring service site.

"(h) The activation of any one of these triggers sets off an audible signal at the store.

"(i) After setting these alarms, the two employees turned off the lights and exited together by the rear door.

"(j) One employee locked the door with a key. The other employee checked the handle and confirmed that it was locked.

"(k) All employees then walked in a group to a parking lot.

"(l) Some time after 6:00 p.m., the shopping mall security dispatcher received a phone call from a male caller whose voice she did not recognize. The caller falsely identified himself as the Assistant Manager of Musicland, another shop in the mall. He falsely advised the dispatcher that they would be making deliveries to Musicland and that security officers should not be suspicious if they saw a red [T]oyota parked outside the corridor behind plaintiff's store. The caller could not be identified as an employee of plaintiff. After the store was secured, as set forth above, and after the employees had left the mall, between 6:20 and 6:30 p.m. the alarm system was activated.

"(m) Members of the Los Angeles Sheriff's Department arrived at the scene at 6:38 p.m.

"(n) When the police arrived, they found the rear door closed but unlocked. There were no signs, observable to the naked eye, that this locked door was opened with any tool. Inside the store, the police found the safe door closed and locked. Jewelry display boxes and a file tub which had been placed in the safe that night were found lying on the floor outside the safe. The jewelry which had been in the display boxes was missing. One of the store employees, who was called by security, arrived at the store and opened the safe by combination. Nearly all of the safe's contents were missing.

"(o) The police found fingerprints of an unknown person upon the top of the inside of the door of the safe. The fingerprints did not match any fingerprints of any employee, current or past, of plaintiff.

"(p) There was an unauthorized entry into the safe; however, there were no marks observable to the naked eye of such entry made by tools, explosives, electricity or chemicals upon the exterior of the only door of the safe.

"(q) Those responsible for the loss entered, without authorization, this store through the back door.

"(r) The entry into the safe (Item p) and the entry into the store (Item q) were each an unauthorized entry made with the intent to deprive Sterling of its property which was stored in the safe and taken therefrom.

"(s) The identities of the individuals responsible for the loss is [sic ] not known. Interrogation by the police of all employees of the store, including the taking of lie detector tests, did not establish involvement by the employees current or past.

" * * * "

Both Hartford and Underwriters refused to pay Sterling's claim for the Los Cerritos theft contending that it did not come within the terms of the policies issued. The insurance contracts issued to Sterling by Underwriters define a "safe burglary" as follows:

" 'SAFE BURGLARY' means the felonious abstraction of the insured property from within a safe or vault in the premises (or after removal therefrom by burglars) by any person or persons making felonious entry into such safe and also into the vault, if any, containing such safe, when all doors of such safe and vault are duly closed and locked by at least one combination, key or timelock thereof; provided that such entry shall be made by actual force or violence of which there shall be visible marks made by tools, explosives, electricity, gas or chemicals, upon the exterior of (1) all os [sic ] said doors of such safe and vault, if any, containing such safe if entry is made through such doors, or (2) the top, bottom, or walls of such safe and of the vault through which entry is made, if not made through such doors."

Sterling brought an action against Hartford and Underwriters seeking payment of its claim under the policies. After determining that Ohio law controlled, the trial court applied the doctrine of reasonable expectations and rendered judgment in favor of Sterling. Subsequently, the trial court denied Sterling's motion for prejudgment interest from the date of the burglary. Hartford, Underwriters and Sterling each filed an appeal. These were consolidated by order of this court. Hartford settled with Sterling prior to this case being argued and hence its appeal was dismissed.

The judgment of the trial court is reversed on the basis of Underwriters' assigned errors. Therefore, Sterling's assignment of error is not addressed. Further, since Underwriters' assignments of error are interrelated they are considered together.

Assignments of Error

"I. The lower court erred in its determination that the definitions of 'safe burglary' as contained in appellants' policies of insurance issued to appellee, are unclear and ambiguous.

"II. The lower court erred in its determination that the principles set forth by the Ohio Supreme Court in the case of Ady v. [West] American Insurance Company, 69 Ohio St.2d 593 (1982), mandates [sic ] that the definition of safe burglary as found in the policy, is void and contrary to public policy.

"III. The lower court erred in its determination that the loss suffered by appellee is covered by appellants' policies of insurance under a doctrine of reasonable expectations."

I. Trial Court's Application of the Reasonable Expectations Doctrine.

A. Adoption of the Doctrine in Ohio.

The trial court's decision is based entirely on the doctrine of reasonable expectations found in the Iowa Supreme Court case of C & J Fertilizer, Inc. v. Allied Mut. Ins. Co. (Iowa 1975), 227 N.W.2d 169, 176-177. The trial court justified application of this doctrine on the doctine's implicit adoption by Ohio in cases such as Ady v. West American Ins. Co. (1981), 69 Ohio St.2d 593, 23 O.O.3d 495, 433 N.E.2d 547, and River Services Co. v. Hartford Acc. & Indemn. Co. (N.D.Ohio 1977), 449 F.Supp. 622.

The doctrine of...