United Pac. Ins. Co. v. Northwestern Nat. Ins. Co.

• Decision Date: 07 December 1950
• Docket Number: No. 4085.,4085.
• Citation: 185 F.2d 443
• Parties: UNITED PAC. INS. CO. v. NORTHWESTERN NAT. INS. CO. et al.
• Court: U.S. Court of Appeals — Tenth Circuit

185 F.2d 443 (1950)

UNITED PAC. INS. CO. v. NORTHWESTERN NAT. INS. CO. et al.

No. 4085.

United States Court of Appeals Tenth Circuit.

November 13, 1950.

Rehearing Denied December 7, 1950.

Edgar C. Jensen and John H. Snow, Salt Lake City, Utah (Robert A. Burns, Salt Lake City, Utah, on the brief), for appellant.

Dennis McCarthy, Salt Lake City, Utah (Leonard S. Ralph, Zar E. Hayes and E. L. Schoenhals, all of Salt Lake City, Utah, on the brief), for appellees.

Before PHILLIPS, Chief Judge, and HUXMAN and PICKETT, Circuit Judges.

HUXMAN, Circuit Judge.

This was a declaratory judgment action instituted in the United States District Court for the District of Utah by the United Pacific Insurance Company, the appellant, herein called the insurance company, against Don Ogden, the insured, and others, to construe and determine the liabilities and rights of the parties under an owner's, landlord's, and tenant's liability insurance policy. The policy covered bodily injury liability and property damage liability arising out of the ownership, maintenance and use of Ogden's premises situated at 118 North Main Street in Richfield, Utah. The policy in controversy was issued August 1, 1948. It was a renewal of an identical policy issued August 1, 1947. The pertinent parts of the policy are as follows:

"Coverage B. — Property Damage Liability. To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages arising out of injury to or destruction of property, including the loss of use thereof, caused by accident and arising out of the hazards defined in and covered by the schedule of declarations and special provisions."

The declarations read in part as follows:

"1. The named insured is Don M. Ogden d.b.a. Don's Sport Shop.

"2. Post Office address of insured 118 North Main, Richfield, Utah.

* * * * * *

"6. Detail of insured premises, elevators, property, exposures, purposes of use thereof and method of premium computation:

"Division 1 — Premises, Operations, Property."

(Here follows a description of the area and the address of the premises.)

"Stores — Clothing or Wearing Apparel — Retail. (135)."

With regard to the declarations the policy reads:

"O. Declarations — By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance."

The special provisions in part read:

"The hazards shown to be covered in the declarations of this policy are defined below, subject to the agreements, conditions and declarations of this policy:

"1. Definition of Hazards: Division 1 — Premises, Operations — The ownership, maintenance or use, for the purposes stated in the declarations, of insured premises or property, and all operations occurring during the policy period which are necessary or incidental thereto * * *."¹

Appellant's prayer for a declaration of non-liability was predicated on its assertions that the policy covered only hazards and liabilities arising out of the operations of the retail clothing and wearing apparel business, known as Don's Sport Shop, and did not cover liabilities arising out of Ogden's operations in the same place of a business carried on in the name of Sevier Valley Liquid Gas and Appliance Company. The fire and resulting loss arose out of the operation of the latter business.

Ogden's affirmative defense and cross demand were that the policy covered both operations; that the insurance company knew the facts of the operations of the Gas Company business; and that the policy was issued with the intent of covering Ogden's entire operations on the premises. Ogden also pleaded estoppel in that he alleged that prior to the occurrence of the fire, three officers and agents of the insurance company visited and inspected the insured premises and thereby had knowledge of the gas and appliance business conducted thereon.

The following pertinent facts were found by the trial court and are not challenged by any of the parties to this appeal.

In the summer of 1946, Ogden commenced the operation of a store at 118 North Main Street. He handled sporting goods of all types, including sport clothing, and in addition handled paints, varnishes, and wall paper. This business was carried on under the name of Don's Sport Shop. In September, 1946, he began handling stoves, heaters, refrigerators, butane gas appliances and propane gas. This business was carried on under the name of the Sevier Valley Liquid Gas and Appliance Company. Both names appeared on the windows of the building. Under the latter business, Ogden engaged in the filling of butane and propane gas containers, as well as selling the containers. At the beginning of the operation, the containers were filled from a truck owned by Ogden and equipped for that purpose. Later a large storage tank was erected at the edge of the city and the containers were filled from this tank. On occasion some of Ogden's customers would leave small empty gas containers at the store for the purpose of having them filled. These would be taken to the storage tank where they were filled. When filled, some of them would be delivered to the customers by truck, and others would be returned to the store to be called for by the customers. No butane or propane gas was kept at the store for the purpose of filling the gas containers.

A fire resulted at the insured premises from a leak in a defective container which had been filled at the storage plant and brought to the insured premises for delivery to the customer. This resulted in extensive damage to the insured building, as well as to adjoining buildings.

During all the times herein material, Ray E. Carr, was soliciting agent for the insurance company, as well as for other insurance companies. As such, he solicited insurance on behalf of the company. He had authority to classify risks accepted by appellant, countersign policies of insurance issued by the company, deliver policies, collect premiums, and in some instances investigate losses. He received compensation on a commission basis.

Prior to the issuance of the original policy, Carr and Ogden had some discussions about a liability policy on Ogden's butane operations. As a result thereof, on May 6, 1947, Carr wrote the insurance company, as follows: "Please get me information relative to writing a CLP for a partnership handling butane and propane gas and appliances. They have a large — 6,000 gal. — storage tank and fill small tanks for individuals and sell appliances."

The company replied by letter that in view of previous disastrous experiences with such business, it did not desire to write this insurance and referred him to another company where it might be obtained. The company's reply to Carr's letter was made known to Ogden.

In June or July, 1947, Carr and Ogden discussed a policy of owner's landlord's and tenant's liability coverage for all of Ogden's operations at 118 North Main Street. As a result the original and renewal policies were issued. Ogden testified that he told Carr that he wanted a policy which would cover all operations at 118 North Main Street, and that Carr represented that the policy which he proposed would cover all such operations, and that it was then that he authorized Carr to obtain the policy. Carr also testified that it was his and Ogden's intention to cover all operations at Ogden's place of business, including the handling of filled gas containers.²

It is conceded that Ogden furnished the information, "Don Ogden d.b.a. Don's Sport Shop," and "Stores — Clothing or Wearing Apparel — Retail," as written into the declaration and that Carr selected the classification, "Retail (135)."

The trial court held that the insurance company could not challenge the classification of the risk inserted in the policy by Carr since Carr made the classification with full knowledge of the material facts and without any misrepresentation or concealment on the part of Ogden. The trial court concluded that the Insurance Company was obligated to pay on his behalf all sums which he had become obligated to pay by reason of liability imposed upon him by law or any damages to adjoining buildings, and to defend Ogden in any actions brought by reason thereof.³

The court found that appellant was liable to Ogden for $500.00 attorney's fees for services rendered by Ogden's attorney in an action brought against him by Monarch Fire Insurance Company and the Richfield Commercial and Savings Bank, and for an additional attorney's fee of $500.00 for services rendered by Ogden's attorney in the declaratory judgment action.

This is not a case in which the insurance company seeks to avoid liability on the ground that the operations on the insured premises or the purposes for which the insured premises were used were misstated or not fully set out in the declaration. The company's position is that it has no liability because the accident which caused the fire was not one arising out of the hazards defined in and covered by the schedule of declarations and special provisions, and therefore the liability of Ogden for the fire damage was not a liability within Coverage B.

The question then is, what is the coverage of the insurance contract? The rule of law that in the absence of fraud or mutual mistake, or unless the written terms of the contract are ambiguous, parol testimony of what occurred prior to or contemporaneous with the execution of the contract will not be received to vary the terms of the written instrument, applies with the same force to insurance contracts as to contracts generally.⁴

There is no contention here that there was fraud in the execution of the contract and we find no uncertainty or ambiguity...