Universal Underwriters Ins. Co. v. Ford, 97-CA-00298-SCT.

• Decision Date: 11 March 1999
• Docket Number: No. 97-CA-00298-SCT.,97-CA-00298-SCT.
• Citation: 734 So.2d 173
• Parties: UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a Mississippi Corporation v. Buddy Jones FORD, Lincoln-Mercury, Inc., a Mississippi Corporation.
• Court: Mississippi Supreme Court

734 So.2d 173

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a Mississippi Corporation v. Buddy Jones FORD, Lincoln-Mercury, Inc., a Mississippi Corporation.

No. 97-CA-00298-SCT.

Supreme Court of Mississippi.

March 11, 1999.

Joseph W. McDowell, Jeffrey A. Styres, Ridgeland, Attorneys for Appellant.

Luke J. Schissel, Greenwood, William Larry Latham, Jackson, Attorneys for Appellee.

BEFORE PRATHER, C.J., BANKS AND McRAE, JJ.

BANKS, Justice, for the Court:

¶ 1. Here we deal with a matter of insurance policy construction. We conclude that the successive policies provide coverage under our traditional doctrine of construing such policies in favor of the insured. We affirm the trial court in its judgment finding liability. We reverse the trial court in its decision limiting that liability to a single year.

I.

¶ 2. This matter arises out of certain alleged occasions of embezzlement committed by Patsy Ellis, a former bookkeeper and office manager of Buddy Jones Ford Lincoln-Mercury, Inc. (Jones Ford). Ellis misappropriated the monies from Jones Ford on 175 separate occasions from 1984 through 1988, resulting in a total loss to Jones Ford of $233,082.97. The embezzlement was discovered by Jones Ford on or about July 25, 1988, during an unannounced independent audit.

¶ 3. Jones Ford was insured by Universal Underwriters Insurance Company (Universal). Universal had issued a Unicover garage liability policy of insurance number 015527 for the policy period October 1, 1984, to October 1, 1985, with Jones Ford as the named insured. Four additional policies were issued by Universal to Jones Ford during the following periods: Unicover policy number 015527A for the policy period October 1, 1985, to October 1, 1986; Unicover policy number 015527B for the policy period October 1, 1986, to October 1, 1987; Unicover policy number 015527C for the policy period October 1, 1987, to October 1, 1988; and Unicover policy number 015527D for the policy period October 1, 1988, to October 1, 1989.

¶ 4. All of the Unicover policies issued to Jones Ford provided fidelity bond coverage for "Employee Dishonesty" under the section entitled "UNICOVER COVERAGE PART 380—CRIME," and contained identical language relating to the conditions, provisions, deductibles, limits of liability, exclusions and amounts of coverage for employee dishonesty. The stated limit of liability for employee dishonesty is $10,000 with a $250 deductible, as set forth on page 1-F of the declaration pages contained in the policies.

¶ 5. The pertinent provisions relating to the type of loss covered and the maximum amount of liability or limits for loss were set forth in the policies as follows:

INSURING AGREEMENT—WE will pay for LOSS as defined as follows:

EMPLOYEE DISHONESTY—WE will pay for LOSS of MONEY, SECURITIES, and other property which YOU sustain resulting directly from any fraudulent or dishonest act committed by an EMPLOYEE with manifest intent to:

(a) cause YOU to sustain such a LOSS, and;

(b) obtain financial benefit for the EMPLOYEE, or any other person or organization intended by the EMPLOYEE to receive such benefit other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions, and other EMPLOYEE benefits earned in the normal course of employment.

* * *

9. THE MOST WE WILL PAY— LOSS payment will not reduce OUR liability for other LOSSES. From the amount of LOSS, WE will deduct the net amount of all recoveries obtained or made by YOU (other than LOSS covered by any other bond or insurance) or US. If the net LOSS is in excess of the deductible stated in the declarations, and regardless of the number of persons or organizations included in YOU, the most WE will pay:

(a) under EMPLOYEE DISHONESTY, is the limit stated in the declarations as applicable to a LOSS caused by one or more EMPLOYEES, or to all LOSS caused by one EMPLOYEE or in which the EMPLOYEE is concerned or implicated;

* * *

Regardless of the number of years this Coverage Part continues in force, the limit stated in the declarations is not cumulative from one period to another, or from one year to another.

¶ 6. There is also a discovery requirement and conditions for coverage for employee dishonesty in the policies which reads as follows:

1. DISCOVERY—LOSS is covered only if discovered not later than one year from the end of the Coverage Part period.

¶ 7. After the embezzlement was discovered, Jones Ford's account executive, Dan Tanner, contacted Universal and advised it that Jones Ford anticipated making a claim under the Unicover policy, coverage Part 380. Jones Ford was advised by Universal through correspondence that a sworn Proof of Loss statement should be submitted within four months of the discovery of the loss. Universal received a Proof of Loss statement from Jones Ford on or about November 14, 1988, and an Amended Proof of Loss on November 29, 1988, which itemized the 175 separate occasions of embezzlement by Ellis. On or about December 2, 1988, Universal issued and mailed to Jones Ford a draft in the amount of $10,000, contending that this amount represented Universal's limit of liability under the provisions of the policies. Universal took the position that the $10,000 limit of liability and the $250 deductible stated in the policies for "Employee Dishonesty" coverage apply to all loss caused by the employee Ellis, rather than to each separate occasion of embezzlement. Jones Ford received Universal's draft but did not negotiate nor deposit it. The draft was tendered to the chancery court at the time of the filing of this action.

¶ 8. On August 17, 1990, Jones Ford filed a complaint for declaratory judgment and other equitable relief against Universal in the Chancery Court of Leflore County. The complaint sought a determination of the amount owed under the "Employee Dishonesty" coverage provided by the Unicover policies. Patsy Ellis was also named a defendant but she subsequently filed bankruptcy and is not a party to this appeal. Also not pertinent to this appeal is the fact that this action was removed to federal court and subsequently remanded back to state court.

¶ 9. On September 19, 1990, Universal filed its answer admitting that it owed the policy limits of $10,000 under the "Employee Dishonesty" coverage, but that this amount had been delivered to Jones Ford upon receipt of its Proof of Loss. Universal denied that it owed more than the stated limits of liability in the policy and included in its answer a counterclaim for declaratory judgment to determine the rights of the parties under the Unicover garage liability policies issued to Jones Ford.

¶ 10. On October 16, 1991, Universal filed a Motion for Summary Judgment on the coverage issues to determine the amount owed under the insurance policies. In support of the motion, Universal submitted the affidavit of its claims manager, Thomas D. Dean and the affidavit of an insurance expert, Robert A. Hershbarger. On April 13, 1994, the chancery court entered an interlocutory partial summary judgment. Noting that it would "follow the directive that said policies shall be strictly construed against Universal and liberally construed in favor of the dealership," the chancery court determined that "the $10,000 limits of liability and $250 deductible under the applicable Unicover policies shall apply to each separate occurrence of embezzlement and shall not apply to the entire loss caused by the employee Ellis." The court also determined that the discovery provisions of the policies limited Universal's liability to "any loss discovered not later than one year from the end of the coverage part period." It retained jurisdiction for a final determination of the amount owed pursuant to its interlocutory ruling.

¶ 11. In order to assist the chancery court in a final determination in this cause, Universal and Jones Ford entered into a "Stipulation of Facts"establishing the essential facts, applicable policy language and the dates and amounts of each occasion of embezzlement by Ellis. On January 31, 1997, the court issued its Final Judgment determining the coverage issues and awarding Jones Ford the amount of $136,510.71, plus interest, under the applicable policies issued by Universal. Universal appeals, and Jones Ford cross-appeals from that judgment.

II.

¶ 12. Where a contract is clear and unambiguous, its meaning and effect are matters of law which may be determined by the court. Overstreet v. Allstate Ins. Co., 474 So.2d 572, 575 (Miss.1985); Dennis v. Searle, 457 So.2d 941, 945 (Miss. 1984); Pfisterer v. Noble, 320 So.2d 383, 384 (Miss.1975). In the present case, however, the chancellor ruled in his partial summary judgment that the contract provisions relating to "Employee Dishonesty" were ambiguous and therefore should be strictly construed against Universal as the drafter of the policy. The first question for this Court, then, is whether the chancellor erred in finding that the provisions were ambiguous.

¶ 13. Patsy Ellis embezzled a total amount of $233,082.97 from Jones Ford. Universal argues that the policy language is unambiguous, and clearly states that the $10,000 limit of liability and the $250 deductible in the declarations for "Employee Dishonesty" apply to "all LOSS caused by one EMPLOYEE or in which the EMPLOYEE is concerned or implicated." Thus, Universal argues that the limit of liability and deductible apply to the total amount of loss caused by Ellis, rather than to each of the 175 separate occasions of embezzlement in which she engaged.

¶ 14. Jones Ford agrees that the limitation provision applies to all "loss" caused by one employee. Jones Ford argues, however, that "loss" is defined to mean "loss or damage as defined in the Insuring Agreement." The Insuring Agreement, in turn, defines "loss," for the purpose of employee dishonesty, to mean "LOSS of MONEY ... which YOU sustain resulting directly from any fraudulent or dishonest act committed by an EMPLOYEE with manifest...