United States v. Eagle Star Ins. Co., Limited , 201 F.2d 764 ( 1953 )

HEALY, Circuit Judge.

On the original consideration of this case, 196 F.2d 317, attempting to apply the local (Washington) law, we held, in effect, that a certain provision of the insurance policy involved was unambiguous. So holding we approved denial of recovery from the insurer of damages growing out of the loss of an aeroplane belonging to the assured, appellant’s intestate, on the ground of the latter’s negligence in the operation of the plane. Feeling that wc had perhaps gone beyond the Washington holdings in our appraisal of the provision in question as well as in other respects, we granted a rehearing.

The facts of the case are fully set out in the original opinion. There we reviewed and relied on two Washington decisions, Isaacson Iron Works v. Ocean Acc. Corp., 191 Wash. 221, 70 P.2d 1026, and Hamilton Trucking Service v. Automobile Ins. Co., 39 Wash.2d 688, 237 P.2d 781, which we thought established for Washington a “literal” rule of construction of insurance policies.

In the Isaacson case [191 Wash. 221, 70 P.2d 1028] the insurer was sued upon its public liability policy containing coverage against liability for accidental property damage to third persons. Property of a third person was damaged in consequence of the negligence of the insured’s employees. The policy contained the following provision: “The Assured agrees to use due diligence and exercise reasonable care to avoid doing damage to property of others.” The court held that the words employed in the clause “are plain and scarcely susceptible of construction”, and that they excluded coverage for property damage caused by negligence attributable to the insured. It said that the provision “must either be given effect according to its plain language, or by judicial interpretation written out entirely.” It said: “This court has laid down the rule that, in construing policies of insurance, the general rules for construction of contracts apply.”¹ It added that “if the policy be ambiguous, such ambiguity should be construed in favor of the insured.”

In the Hamilton Trucking Service case [39 Wash.2d 688, 237 P.2d 782], supra, a policy issued to the owner of a truck listed among the perils insured against: “ ‘Accidental collision of the motor truck or trailer with any other automobile, vehicle or object; * * The insured was transporting a gang saw which had been loaded on the flat bed of the truck. The driver attempted to go through an underpass where the clearance was less than the height of the load, with the result that the saw was damaged by coming in contact with the framework of the underpass. The court said that the language of the quoted provision is “plain and unambiguous”, hence the damage to the load not having been caused by the truck colliding with any other object, the loss was not covered. It observed, in general, that it had “resorted to familiar rules of interpretation of words and construction of language used in such contracts in order to ascertain the intent of the parties, or what they contemplated, when it appeared that certain words were used in a special or restricted sense, were susceptible of different meanings according to the way in which they were used, or when the language used was of doubtful import or ambiguous.” It added: “We have taken the position in such matters that a rule of construction should not be permitted to have the effect to make a plain agreement ambiguous and then construe it in favor of the insured.”

There is nothing in either of these holdings, or in any other Washington decision to which attention has been directed, suggesting that clarity of thought is not requisite in insurance policies. Nor does it appear that a “literal” rule of construction of policies obtains in that state. The Washington court adheres to the general rule that policies of insurance are construed in favor of the insured and most strongly against the insurance companies. Starr v. Aetna Life Ins. Co., 41 Wash. 199, 83 P. 113, 4 L.R.A.,N.S., 636; Green v. National Casualty Co., supra, note 1. What it frowns upon is a tendency it claims to have observed in some courts of creating ambiguities where none exist and then using rules of construction to enlarge the policy coverage.

The insuring clause of the policy here, standing alone, concededly would afford protection for loss of the plane due to negligent operation thereof by the insured. Nor does any clause under the head “General Exclusions” take away this protection. What is relied on to negative such coverage is Condition 3, found under the head “General Conditions” at the end of the policy. This reads as follows:

“3. The assured shall use due diligence and do and concur in doing all things reasonably practicable to avoid or diminish any loss of or damage to the property hereby insured and in the event of the Aircraft sustaining damage covered by this Cértificate and/or Policy, the Assured or his/their accredited agents shall forthwith take such steps as may foe necessary to ensure the safety of the damaged Aircraft and its equipment and accessories.”

Even after repeated readings it remains unclear whether this condition was intended to exclude coverage due to negligence in operation of the plane, or whether it was designed only to prescribe the duties of the assured with regard to mitigating loss or damage and securing the safety of the craft in event of accident. The phrase “due diligence” is used, but it is related to the performance of affirmative acts by the assured similar to those commonly required in policy clauses relating to mitigation of damages. The latter portion of the clause, not separated from what precedes it by so much as a comma, would appear intended merely to emphasize or to prescribe with greater particularity the steps the assured is obliged to take to avoid or diminish loss or damage to the craft, its equipment and accessories, if an accident occurs. The annual premium paid by the assured for accidental loss or damage to the aircraft was in excess of $1700 on a valuation of $25,000, and it would thus seem that he' contemplated a broad measure of protection. If, as is claimed by the insurer, two quite distinct ideas were intended to foe given expression it would have been a simple matter to state them separately, thus rendering the thought unmistakable and avoiding misconception in the mind of the purchaser.

Had the insurance company deliberately set out to achieve obfuscation it could hardly have done a better job than was accomplished here. In contrast, the provisions confronting the court in the Isaacson Iron Works and Hamilton Trucking cáses dealt clearly with a single idea and were short and to the point.

In line with the principle, adhered to in Washington as elsewhere, of construing insurance contracts in favor of the assured and most strongly against the. insurer, we confine the clause before us to the one meaning it plainly expresses, namely the obligation of the assured to usé reasonable care to avoid or diminish loss or damage to the property in event of accident.

The judgment is accordingly reversed in its entirety.

1 . In support of this statement the court quoted language from Green v. National Casualty Co., 87 Wash. 237, 151 P. 509, 511, to the following effect: “Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of tlie terms which the parties have used, and, if they.are clear and unambiguous, their terms are to be taken and understood in their plain and ordinary meaning.”