The Aetna Casualty and Surety Company v. William T. Stover , 327 F.2d 288 ( 1964 )

RONALD N. DAVIES, District Judge.

On June 6th, 1961, a boat with an inboard motor in excess of fifty horsepower was being operated by William T. Stover on Lake Hamilton, Garland County, Arkansas. After having fueled the boat at the Lake Hamilton Marine Service Dock, Stover started the motor and drew away from the dock. After traveling a distance of some sixty yards, the motor died. While Stover was attempting to start it, an explosion occurred and the boat burned. As a result of the fire, seven passengers, in addition to Stover, suffered personal injuries.^*

Three actions were filed in the courts of the State of Arkansas against Willis P. Coleman doing business as Lake Hamilton Marine Service and Morgan Agar, a Coleman employee. Two of the actions were filed by or on behalf of the injured passengers while the third was filed by Stover. All the complaints alleged negligence by Agar in fueling the boat. The two actions instituted by the passengers were consolidated and the complaints amended to include William T. Stover and William T. Stover Company, Inc., as parties defendant, alleging willful and wanton negligence.

Aetna Casualty and Surety Company which had previously issued a personal liability policy to William T. Stover covering the period, April 14, 1959, to April 14, 1962, was notified of the pending litigation but denied coverage. William T. Stover thereupon commenced an action in the United States District Court for the Eastern District of Arkansas, Western Division, seeking a declaratory judgment that Aetna was liable under the terms of its policy. The District Court found for Stover and Aetna has perfected this appeal.

An exclusion contained in the policy and relied upon by Aetna in denying coverage provided that:

“This policy does not apply:

# * * * * #

“(b) Under coverages A and B to the ownership, maintenance, operation, use, loading or unloading of * * * (2) watercraft owned by or rented to an Insured, while away from the premises if with inboard motor power exceeding fifty horsepower. * * * ”,

it being Aetna’s contention that the boat which was being operated by William T. Stover at the time of the explosion and resultant injury was either “owned by” or “rented to” the insured.

The boat in question had been purchased in 1958 with corporate funds by William T. Stover, Inc., of which William T. Stover owned 48 of the 50 shares of capital stock. Substantial evidence was presented by Aetna in an attempt to establish that William T. Stover was either the actual or equitable owner of the boat or had rented it from the company. We do not feel a detailed summary of the evidence necessary. The Trial Court held that William T. Stover was not the owner of the boat, refused to disregard the corporate entity and found that William T. Stover had not rented the boat.

Terms such as “owned” or “owner” are subject to different meanings in different contexts. Cf. Blumenfield v. United States, 8 Cir., 306 F.2d 892: Blau v. Lamb, 2 Cir., 314 F.2d 618.

It is well settled that when any provision of an insurance policy is subject to more than one reasonable interpretation, the interpretation favoring the insured is adopted since the insurer authors the contract. Prudential Insurance Company of America v. Barnes, 9 Cir., 285 F.2d 299; Washington Fire & Marine Insurance Company v. Ryburn, 228 Ark. 930, 311 S.W.2d 302. It is also well settled that exceptions and words of limitations will be strictly construed against an insurer, Washington Fire & Marine Insurance Company v. Ryburn, 228 Ark. 930, 311 S.W.2d 302; and if a reasonable construction can be placed on the contract that would justify recovery, it is the duty of the court so to construe it, Traveler’s Indemnity Company v. Hyde, 232 Ark. 1020, 342 S.W.2d 295.

The question of the weight of the evidence was for the Trial Court, and we may not disturb its findings unless they cannot be sustained upon any rational view of all of the evidence, including all reasonable inferences of which it is susceptible. The conclusion of the Trial Court that the corporation “owned” the boat was, in our view, a reasonable one and sustained by the evidence.

Conditions under which the corporate entity may be disregarded or the corporation looked upon as the alter ego of the principal stockholder vary according to the circumstances of each case. The doctrine is founded in equity and is applied only when the facts warrant its application to prevent an injustice. We do not feel this situation exists in the instant case.

William T. Stover Company, Inc., for some years prior to 1958, when it acquired the boat here involved, maintained several other boats on the lake. Until 1956 the corporation had charged all the depreciation and operating expenses of the boats off as a reasonable and ordinary business expense on its corporate Federal income tax returns. In William T. Stover Company, Inc., v. Commissioner of Internal Revenue, 1956, 27 T.C. 434, the Tax Court affirmed the Commissioner’s determination that the corporation could only deduct one-half of the boat’s depreciation and operating expenses as a portion of the boat’s use was attributable to Stover personally. Subsequent to this decision, on advice of counsel and accountants, the corporation deducted only one-half of the boat’s depreciation and operating expenses and charged the remainder to William T. Stover’s personal account. In 1961, the year the boat burned, the corporation deducted as a reasonable and necessary business expense all the depreciation and operating expenses of the boat.

Aetna takes the position that since the corporation charged Stover on its books with one-half of the depreciation and operating expense of the boat, Stover was in effect renting the boat. The Trial Court rejected this theory, holding that the term “rented” referred to the conventional renter-rentee relationship and that this relationship did not exist between Stover and the company. We think in this respect a permissible conclusion was reached by the Trial Court.

When an insurance company claims that it is not liable on its policy because of some exception or exclusion with respect to coverage, the burden is on the insurance company to prove facts that bring it within the exception or exclusion. Riverside Insurance Company of America v. McGlothin, 231 Ark. 764, 332 S.W.2d 486. Aetna has failed to meet this burden.

In the light of the circumstances of this case wre cannot say that the Trial Court’s award of $3,800.00 against Aetna for attorney fees made pursuant to Ark. Stat.Ann., § 66-3239, is unreasonable. No additional attorney fees will be awarded appellee on this appeal.

The judgment of the District Court is

Affirmed.

* For a detailed discussion, of the background facts see St. Paul Fire & Marine Insurance Company v. Coleman, D.C., 204 F.Supp. 713; Aff’d., 316 F.2d 77, (8 Cir., 1963).