Van Sumner, Inc. v. Pennsylvania Nat. Mut. Cas. Ins. Co.

• Decision Date: 21 May 1985
• Docket Number: No. 8410SC590,V-S,8410SC590
• Parties: VAN SUMNER, INC. d/b/aRental and Sales v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY.
• Court: North Carolina Court of Appeals

Page 701

329 S.E.2d 701

74 N.C.App. 654

VAN SUMNER, INC. d/b/a V-S Rental and Sales v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY.

No. 8410SC590.

Court of Appeals of North Carolina.

May 21, 1985.

Manning, Fulton & Skinner by John I. Mabe, Jr., Raleigh, for plaintiff-appellant.

Henson, Henson & Bayliss by Perry C. Henson and Jack B. Bayliss, Jr., Greensboro, for defendant-appellee.

MARTIN, Judge.

The sole question for our determination is whether the exclusion clause contained in the insurance policy precludes recovery, under the policy, for loss of the backhoe. We hold that the circumstances under which plaintiff transferred possession of its property did not amount to an entrustment of the property and that the exclusion, therefore, does not deny coverage.

In the construction of an insurance policy, nontechnical words which are not defined in the policy must be given the same meaning usually given to them in ordinary speech, unless the context in which they are used in the policy requires that they be given a different meaning. Grant v. Insurance Co., 295 N.C. 39, 243 S.E.2d 894 (1978). Where there is no ambiguity in the language of the policy, the policy must be enforced according to its terms and liability for which the insurer did not contract may not be imposed. Id. However, exclusions from coverage provided by the policy are strictly construed, and when language which is reasonably susceptible of differing construction is used in the policy, it must be given the construction most favorable to the insured. Trust Co. v. Insurance Co., 276 N.C. 348, 172 S.E.2d 518 (1970); Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 314 S.E.2d 775 (1984).

In this case, the policy insured against physical loss of the insured property, but excluded loss caused by "[i]nfidelity of ... [a] person to whom the insured property was entrusted [emphasis supplied]." "Entrust" is defined by Black's Law Dictionary 478 (5th ed. 1979) to mean:

To give over to another something after a relation of confidence has been established. To deliver to another something in trust or to commit something to another with a certain confidence regarding his care, use and disposal of it. [Emphasis supplied.]

This definition comports with the ordinary usage of the term, as stated by Webster's Third New International Dictionary, which defines "entrust" as: "[T]o confer a trust upon; to commit or surrender to another, with a certain confidence regarding his care, use or disposal of." "Infidelity," according to Webster, means "a breach of trust." Thus, we construe the policy exclusion to exclude from coverage those losses resulting from a breach of a relationship of confidence pursuant to which property is voluntarily transferred.

There is no dispute as to the fact that plaintiff voluntarily transferred possession of its backhoe to "Lewis Jones." The dispute is whether the voluntary transfer arose out of a relationship of confidence existing between plaintiff and "Lewis Jones" so as to amount to an entrustment.

The California Supreme Court in Freedman v. Queen Insurance Company of America, 56 Cal.2d 454, 15 Cal.Rptr. 69, 364 [74 N.C.App. 658] P.2d 245 (1961), held that a policy provision excluding coverage for losses resulting from "theft ... or other act ... of a dishonest character ... on the part of any person to whom the property ... may be delivered or entrusted ..." did not prevent recovery where the theft was committed through false impersonation. Id. at 456, 15 Cal.Rptr. at 70, 364 P.2d at 246. In that case, plaintiff, a wholesale jeweler, received a call from a person who represented himself to be a retail jeweler known to the plaintiff. The caller requested that plaintiff provide him with several diamonds for selection by a customer and offered to send a messenger to pick up the diamonds. Shortly thereafter, a person arrived at plaintiff's place of business and identified himself as the retail jeweler's messenger and plaintiff gave him the diamonds. Plaintiff later learned that the retail jeweler had not called him nor sent the messenger and that the messenger was an impostor. The California court held that there could be no valid entrustment of the diamonds where possession of them was acquired by fraudulent means.

The Fifth Circuit Court of Appeals, however, in David R. Balogh, Inc. v. Pennsylvania Millers Mutual Fire Insurance Company, 307 F.2d 894 (5th Cir.1962), criticized the Freedman case on the grounds that, under its reasoning, the determination of coverage would depend on whether the person receiving the property conceived of the dishonest plan before or after he took possession. In Balogh, the Fifth Circuit held that an exclusionary clause virtually identical to that in Freedman prevented recovery where the plaintiff, also a jeweler, delivered an emerald to a prospective customer for the purpose of having the emerald examined by another jeweler. Instead, the prospective customer disappeared with the emerald. Under these circumstances, the Fifth Circuit determined that the emerald had been "entrusted" to the prospective customer who, unfortunately, turned out to be a thief.

In deciding the Balogh case, the Fifth Circuit relied on Abrams v. Great American Ins. Co., New York, 269 N.Y. 90, 199 N.E. 15 (1935). In that case, plaintiff delivered articles of jewelry to a known customer for the expressed purpose of her selling it to a third person. After receiving the jewelry, the customer absconded. The New York court held:

When the word "entrusted" appears in the contract the parties must be deemed to have entertained the idea of a surrender or delivery or transfer of possession with confidence that the property would be used for the...