Treasure Craft Jewelers, Inc. v. Jefferson Ins. Co. of New York

• Decision Date: 14 August 1978
• Docket Number: No. 77-1942,77-1942
• Parties: TREASURE CRAFT JEWELERS, INC., Appellant, v. JEFFERSON INSURANCE COMPANY OF NEW YORK, Appellee.
• Court: U.S. Court of Appeals — Third Circuit

Page 650

583 F.2d 650

TREASURE CRAFT JEWELERS, INC., Appellant, v. JEFFERSON INSURANCE COMPANY OF NEW YORK, Appellee.

No. 77-1942.

United States Court of Appeals Third Circuit.

Argued March 27, 1978.

Decided Aug. 14, 1978.

M. Stuart Goldin, Isenberg, Goldin & Blumberg, Philadelphia, Pa., for appellant.

Richard W. Hopkins, Thomas Gary, White & Williams, Philadelphia, Pa., for appellee.

Before HUNTER, WEIS and GARTH, Circuit Judges.

OPINION

JAMES HUNTER, III, Circuit Judge:

In this case Treasure Craft Jewelers, Inc., a Pennsylvania corporation, appeals an order of the district court granting summary judgment for defendant, Jefferson Insurance Company of New York. The trial judge held that the terms of the insurance policy issued by Jefferson to Treasure Craft did not provide coverage for a loss suffered by the insured. We affirm.

I

At some point during the late evening of February 6 or the early morning of February 7, 1976, the Southampton, Pennsylvania store of plaintiff Treasure Craft was broken into and robbed. Thieves stole $94,369 in jewelry and merchandise. Plaintiffs submitted a claim for reimbursement for part of the loss to defendant Jefferson Insurance. The claim was based on a policy issued by Jefferson in June of 1974, covering the jewelry in plaintiff's Levittown, Pennsylvania store. Treasure Craft claimed that certain of the jewelry in the Southampton store had been covered by the policy on the Levittown store up to a loss of $25,000.

Jefferson rejected the claim on the ground that the loss was not covered by the policy. Treasure Craft then brought suit to recover the $25,000 it claimed. Defendant's motion for summary judgment was granted by the district court.

The policy under which plaintiff claims provides standard "jewelers block" insurance for the plaintiff's store in Levittown. The contract states in part:

LIMITATIONS OF LIABILITY

2. The maximum liability of the Company resulting from any one loss, disaster or casualty is limited to:

A. $100,000 in respect of property at the Insured's premises as described herein;

E. $25,000 in respect of property elsewhere and not included in Clauses (A), (B), (C), and (D) above or otherwise limited herein.

In endorsement entitled "Property in Custody of Personnel Away from Premises", the insurer provided for limitation of its liability to the insured for property not in the Levittown store. The endorsement stated that the coverage would be limited to $5,000 for property in the custody of Treasure Craft's officers and employees, unless the endorsement named the individual having custody at the time of the loss. Full $25,000 coverage was provided if the property was in the custody of an officer or employee named in the endorsement. Donald Bound, president of Treasure Craft, was one of the individuals listed. Under paragraph 7 of the policy, entitled "Insuring Conditions", the parties also agreed that coverage would not apply to "additional locations of the insured."

Plaintiff's theory in the district court was that at the time of the robbery, the jewelry in question was in the custody of Bound, the president of the company. It argued that although the property was not on the premises of the Levittown store, the jewelry lost would nevertheless be covered by the policy since it was property in the custody of an officer of the insured.

In support of this proposition and in response to Jefferson's motion for summary judgment, Treasure Craft submitted the affidavit of Donald Bound. The affidavit stated that Bound, as president and chief executive officer of Treasure Craft, has exercised supervisory powers over the Southampton store and spent a substantial amount of time at that store. Thus, plaintiff argued, Bound had custody of the jewelry at the time of the robbery.

Bound's deposition further explained the nature of his supervision over the jewelry in the Southampton store. Bound testified that the jewelry involved in this case was taken from the Levittown store to Southampton when that store opened in November 1975. Part of the merchandise was chosen for the inventory at the Southampton store and the rest, valued at approximately $33,000, was placed in that store's safe and remained there during the three months prior to the robbery. Bound also stated that when he visited the Southampton store, he would work on the merchandise left in the safe, rearranging and resetting the stones. He further related that the jewelry was being prepared for resale Not in Levittown, but at a third store, which had not opened at the time of the robbery.

The district court held that the policy did not cover the loss suffered by Treasure Craft. The court determined that the provisions in the contract were free from ambiguity, and that the parties had agreed to a limited scope of coverage. It read the policy to provide that the coverage of property outside of the Levittown store did not include property at another location of the insured. The court thus held that Jefferson had not insured risks of loss at any location of Treasure Craft other than that mentioned in the policy itself the Levittown store.

Treasure Craft argues that the district court, in holding that the policy did not cover any losses of property from locations other than the Levittown store, erroneously, applied Pennsylvania law. It contends that section 2-E of the policy should have been applied in this case, thus raising the issue of whether Bound, the president of Treasure Craft, was in custody of the merchandise at the time of the loss. Since that issue raises a disputed question of fact, plaintiff argues that summary judgment was inappropriate. We agree with the trial judge's reading of the policy, and thus do not reach the custody question.

II

The rules relating to the analysis of insurance policies in Pennsylvania are well established. Since the policy is a contract, the court's duty is to ascertain the intent of the parties as manifested in the language of the agreement. In discharging its duty, the court should attempt to view the policy in its entirety, and give effect, if possible, to all portions of the contract. Blocker v. Aetna Casualty & Surety Co., 232 Pa.Super. 111, 332 A.2d 476 (1975); Masters v. Celina Mutual Insurance Co., 209 Pa.Super. 111, 224 A.2d 774 (1965). Since insurance policies are often adhesion contracts prepared by the insurer on its own forms, ambiguities in the policy should be resolved against the insurer and not against the policy holder. Nevertheless, the court should read policy provisions so as to avoid ambiguities, if the plain language of the terms of the contract permits. Pennsylvania Manufacturers Association Insurance Co. v. Aetna Casualty & Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967). A court should not torture the language of the policy in order to create ambiguities which, in turn, could be construed in favor of the insured. Urian v. Scranton Life Insurance Co., 310 Pa. 144, 165 A. 21 (1933).

Treasure Craft argues that the terms of its policy with Jefferson are ambiguous as to the scope of the coverage of the merchandise that was stolen from the Southampton store. It argues that the coverage for property outside the premises of the Levittown store in the custody of the employees or officers of the company, embodied in paragraph 2-E of the policy, reasonably could be applied to the stolen merchandise, and thus that term conflicts with the limitation of coverage in paragraph 7. Consequently, the company argues that paragraph 2-E, and not paragraph 7, should apply to its loss.

We agree with the trial judge that the language in paragraph 7 (that coverage shall not apply to additional locations of the insured) is unambiguous when read with paragraph 2-E. Reviewing the policy to give effect to all its provisions, we hold that the effect of the policy in this case was to exclude any losses sustained by theft of goods stored in any location of Treasure Craft other than the Levittown store. This accords with the expectations of the parties under a contract such as that involved here. In a policy for insurance against burglary, the specified location of the insured's property is crucial to the insuring company's assumption of the risks involved. The coverage of its policy should not extend to losses that occur at different places. In determining whether or not to accept a risk, the insurer will certainly require information as to the safety and security of the premises, and will condition its acceptance of the risks on the continued existence of those facts on which it bases its decision to insure. Cf. Morgan Smith Automotive Products, Inc. v. Continental Insurance Co., 418 Pa. 190, 210 A.2d 273 (1965) (fire insurance policy).

Treasure Craft argues that even if the policy is not ambiguous, the trial judge erred in granting summary judgment because a material issue of fact exists about whether the insured had knowledge of the limitation of coverage in the policy. On this point, Treasure Craft relies on Hionis v. Northern Mutual Insurance Co., 230 Pa.Super. 511, 327 A.2d 363 (1974), in which the court stated:

Even where a policy is written in unambiguous terms, the burden of establishing the application of an exclusion or limitation involves proof that the insured was aware of the exclusion or limitation and that the effect thereof was explained to him.

230 Pa.Super. at 517, 327 A.2d at 365.

In Hionis, the court refused to enforce a limitation of the insured's right of recovery for losses he had sustained as the result of a fire. The policy provided for supplemental insurance on the insured's premises, covering improvements to the property. The testimony established that the insured had asked an agent for the insurer to provide coverage for additions and improvements on the property, and entrusted the entire matter to the agent. After fire had destroyed the insured premises, the insurer refused to pay for the full amount of the loss basing its...