Wiseman v. Arrow Freightways, Inc. , 89 N.M. 392 ( 1976 )

LOPEZ, Judge

(dissenting).

I dissent.

I think the word “loss” in this contract is ambiguous. Thus, it is my opinion that the general principles applicable to the interpretation of insurance contracts should be followed and “loss” should be held to refer to the time when a judgment is entered against Arrow.

The insurance company’s argument that loss refers to the accident which is the basis for liability is a reasonable interpretation with decisional support. See, e. g. Mount Vernon Bank & Trust Co. v. Aetna Casualty & Sur. Co., 224 F.Supp. 666 (E.D.Va.1963).

Similarly Arrow’s argument that it suffered no loss until a judgment was entered against it is a reasonable interpretation of the phrase and is supported by case law. In Pierce v. Standard Accident Ins. Co., 70 Ill.App.2d 224, 216 N.E.2d 818 (1966), the issue was the effect of a limitations provision in an insurance policy procured by a person in the business of repairing boats. The policy covered loss to boats which were left in that person’s possession. The insurance contract had a requirement that suit be commenced within “12 months next after inception of the loss” yet the court allowed a suit filed more than twelve months after the theft of a boat. The court noted that the boat was not the property of the insured, and that the insured suffered no loss until he was sued for the loss of the boat by the boat’s owner. Thus, the court concluded, it was clear that the policy was one of indemnification, rather than liability and the loss to the insured occurred when a judgment was rendered against him. Accord, W. C. Brooks v. Great American Insurance Company, 131 Ill.App.2d 781, 267 N.E.2d 132 (1971).

In Sassi v. Jersey Trucking Service, 283 App.Div. 73, 126 N.Y.S.2d 389 (Sup. Ct.1953) the court concluded that the word “loss” was ambiguous. In that case a trucking company was insured for damage to another’s property while in the trucker’s possession. Merchandise was stolen from the truck and the owners sued the truckers, who in turn sued the insurance company. The issue was whether the action by the truckers was barred by the policy’s limitation of action period, which required that suit be brought within twelve months of the “happening of the loss.”

The court approached the issue by looking to the policy as a whole to determine when the loss to the insured was deemed to take place. The payments were to be made to the owner for damages for which the insured would be legally liable. The court concluded that the insured would suffer no loss until his liability to the owners was established. The insurance contract in Pierce also provided that the insurance covered losses for which the insured was legally liable.

The opinion of the majority finds these cases distinguishable on the grounds that the insured in the instant case could recover for damage without a claim by the owner. Although I do not believe that the policy is unambiguous on this score, I think the provisions in the policy requiring that payment be made to the owner, and stating that the policy is for the account of the owner, indicate that the policy contemplates payment when the owner has a legal claim against Arrow and not otherwise. Thus, the description of the scope of the insurance coverage in Pierce and Sassi is not a point of distinction.

This interpretation of the policy is not free from criticism. However, there are two principles by which I am guided in interpreting it this way. One factor is that in a policy of this sort, where the damaged property does not belong to the insured, the time for the bringing of suit is effectively controlled by the actions of the owner, who is not bound by the contractual limitations. Mortenson v. Chook, 145 N.Y.S.2d 609 (City Ct.1955), aff’d, 10 A.D.2d 962, 201 N.Y.S.2d 624 (1960). Where the insured is the owner, a different result is reached. McAlpin v. Day & Meyer, 327 N.Y.S.2d 387 (Sup.Ct.1971).

The second factor which should guide our interpretation of this clause is that principle of construction which states that ambiguous phrases are to be interpreted liberally in favor of the insured. Mountain St. M. C. Co. v. Northeastern N. M. Fair Ass’n, 84 N.M. 779, 508 P.2d 588 (1973) ; Couey v. National Benefit Life Insurance Company, 77 N.M. 512, 424 P.2d 793 (1967). In Sassi the court commented upon this principle of interpretation:

“Some intricate policy provisions may not yield to clear and unambiguous phrasing; but the simple limitation clause involved here, if it means what the insurance company contends it means, could have been worded in unmistakable and decisive language.”

I think the word “loss” is ambiguous and should be construed to mean the time when the owner’s judgment against the trucker was entered.

I would affirm the judgment.