Court Opinion

ID: 9444642
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:07:31.978649+00
Date Added: 2024-06-11T17:29:56.921101
License: Public Domain

RIVES, Circuit Judge.
This appeal involves the construction of‘ an insurance policy. Appellant issued to the appellee its policy captioned, “Credit Union Chattel Lien Non-Filing Insurance,” known ' in the trade more simply as- “non-recording” insurance,; de*207signed, subject to certain exclusions or exceptions, to compensate the appellee lender for its losses resulting solely from its failure to file for public record the instrument securing its debt, usually a bill of sale to secure debt, conditional sale contract, or chattel mortgage.
Appellee filed two claims under its policy based on two separate loans to a borrower named William W. Carney. The two loans aggregated $4,981.50; appellee’s loss from failure to record the instruments securing the debts amounted to $4,192.50, but it filed claims for only $3,500.00 of such loss, the figure set forth in Exclusion E of the insurance policy, hereinafter quoted.
Exclusions A to F, inclusive, appear in the policy under the caption:
“Exclusions
“Warranted Free of All Claim”.
Exclusion E reads: “For any loss covered by the terms of this Policy resulting from any loan or loans exceeding $3,500.-00 in all to any one borrower.”
Appellant insists that the phrase “exceeding $3,500.00 in all to any one borrower” clearly modifies the words “any loan or loans,” and that the loans to Carney having exceeded $3,500.00 it is not liable for any of the loss resulting therefrom. Appellee insists that the limiting phrase can reasonably be construed to modify the word “loss”, and that the appellant is liable to the extent of $3,500.-00.1 For reasons well expressed,2 3 the district court agreed with the appellee.
 Appellant calls attention that the rule applied by the district court, that an insurance policy is to be construed most strongly against the insurance company, is reached only in the event the construction is doubtful or ambiguous, and the contract is reasonably susceptible to the meaning arrived at by the construction against the company; and we agree.3 First we must seek to ascer*208tain the intention of the parties, for in Georgia, as elsewhere, that is the cardinal rule of construction.4 That intention is to be ascertained from the entire contract, construed as a whole.5 The rules of grammatical construction usually govern, but to effectuate the intention they may be disregarded.6
The difficulty lies not in the statement of these and other long settled rules of construction, but in their application to the peculiar facts and circumstances of the particular case. While Exclusion E, already quoted, is the most directly pertinent part of the insurance policy, that policy must be considered in its entirety and construed as a whole to arrive at the intention of the parties. At its beginning the policy shows “Amount As Per Form” “Rate As Per Form” “Deposit Premium 50.00.” In the first paragraph of the policy, the appellant undertakes to insure appellee for a term of one year “to an amount not exceeding------As Per Form------dollars.” The form referred to is the mimeographed “Form No. 573” captioned “Credit Union Chattel Lien Non-Filing Insurance”, which in turn is divided into a number of sections or divisions. First, the consideration and indemnification clauses are set forth. Secondly, under “Definition” the word “Instrument” as used in the first section is defined.7 Thirdly, under “Exclusions” “Warranted Free of All Claim”, six different situations designated A, B, C, D, E, and F are set forth. Paragraph A is “For losses not sustained during the term of this Policy * * B is “For any loss unless * * * ” the property or the person possessed of or who has title to the property has been located. C is “For any loss resulting directly or indirectly from any dishonest or criminal act of any officer, clerk or servant of the Assured.” D is “For any loss resulting from forgery”. E has already been quoted. F is “For any loss resulting from any loan due and payable more that thirty-six (36) calendar months after the making thereof.” Fourthly, under the division entitled: “This Policy Is Subject To The Following Agreements, Limitations And Conditions:”, fourteen numbered paragraphs are set forth, the pertinent provisions of which are as follows:
“1. Loss payable under this Policy shall not exceed the retail market value of the Property represented by the Instrument at the time the Assured makes claim under this Policy; * * *.”
“2. In computing the amount of loss under this Policy there shall be included all attorney’s fees, court costs, marshal’s or sheriff’s fees, and any other costs or expenses which, prior to acquiring ■ reasonable grounds of belief of the existence of a claim by a third person to a superior title to the property, the Assured may incur in an effort to recover the property, retain the proceeds of *209the sale thereof, and/or enforce its rights under the Instrument, and which would be recoverable from the borrower if the Instrument had been duly recorded or filed with the proper public officer or public office, or had an encumbrance been shown by the proper public officer or public office on the Certificate of Title. * * * ”
“8. The Underwriters upon the payment of any loss hereunder shall become subrogated to all the rights and remedies of the Assured in respect of such loss; provided, however, that in the event the payment by the Underwriters is insufficient to liquidate the entire loan, then the subrogation rights of the Underwriters, as provided in this paragraph, shall be subordinate to the Assured’s claim for such unpaid portion of the loan.”
“12. The premium paid hereon is a provisional premium and is subject to adjustment at the end of the first year of the Policy term. The earned premium shall be based upon the number of loans secured by Instruments made during the first year of the Policy term. The earned premium shall be calculated at $0.40 per loan so secured by such Instruments. If the earned premium thus computed exceeds the provisional premium the Assured shall pay the excess to the Underwriters; if less, the Underwriters shall return to the Assured the unearned portion paid by them.”
While the early part of the policy repeatedly states that the amount of the policy is “as per form”, there are only two provisions in the form which limit the amount of, coverage under the policy: Provision 1 of the “Agreements, Limitations and Conditions” limiting the loss payable to the retail market value of the property; and .Exclusion E, the most pertinent provision of the policy, which, for convenience, is again quoted: “For any loss covered by the terms of this Policy resulting from any loan or loans exceeding $3,500.00 in all to any one borrower.” Exclusion E is the only provision of the policy limiting in stated amount the maximum liability of the appellant, and obviously such limitation was at least one purpose of the exclusion. Appellant can still insist however, that a further purpose was also made clear to exclude the entire loan or loans exceeding $3,500.00.
If Exclusion E does serve such double purpose, it can hardly be construed to limit the amount which might be added from items such as attorney’s fees incurred by the insured, costs and expenses allowed by paragraph 2 of the “Agreements, Limitations and Conditions”. The construction contended for by appellant would thus remove any definite limit from the extent of its liability for any particular loss. That does no harm to the appellant under the facts of the present case. We can only conjecture that its position would have been the same if it had been called on to pay a claim in excess of $3,500.00, because of the addition of attorney’s fees, costs and expenses. Paragraph 12 of the “Agreements, Limitations and Conditions” shows that the annual premium shall be forty cents per loan. The premium being for each loan separately, the maximum liability would be expected to be stated for each loan, and it is of no moment that the policy does not contain an over-all limitation of the aggregate amount of claims. In effect, for purposes of coverage, Exclusion E requires all loans to one borrower to be treated as a single loan.
There is no provision in the policy for a refund of the premium, or any part thereof, if there should be a loan which is not covered by the policy. Yet, as the district court so well observed, under appellant’s construction, the coverage of any number of loans to one borrower would be immediately annulled if an additional loan should make the total indebtedness of the borrower exceed $3,-500.00 by the slightest sum. The premiums paid for the annulled loans would be forfeited to appellant.
Paragraph 8 of the “Agreements, Limitations and Conditions” clearly shows *210that the parties recognized that situations might arise in which only part of a total loss would be covered as an allowable claim. One such situation, it is true, might be when the loss exceeded the retail market value of the property limitation in paragraph 1. That, however, is not exclusive; and another such situation would be that portion of a loss in excess of $3500.00, giving to Exclusion E the construction claimed by appellee. It occurs to us that a third such situation would arise under Exclusion F in the case of a loan payable in installments, some of which became due less than, and some more than, thirty-six (36) months after the making of the loan.
Considering the policy as a whole, it seems to us that the more reasonable construction is that the loss resulting from loans to any one borrower was limited to $3500.00, not that loans exceeding such sum were excluded in their entirety from the coverage of the policy. If, however, we go too far in reaching that construction, we would still think that the policy is ambiguous and reasonably susceptible to that construction.
A prospective insured might naturally assume that the insurer was more interested in limiting the loss for which it became liable than in limiting the amounts of the loans for which the insured bore the primary risk. That natural assumption would be corroborated and reenforced by the beginning words of each of the exclusionary clauses, emphasizing “loss” as the subject alike of the coverage and of the exclusions.
Whether the policy clearly means what the appellee contends, or is so ambiguous that it should be construed in favor of the appellee insured, the result follows that the judgment should be and is
Affirmed.

. Appellant questions whether the appellee actually so understood the policy, because in its sworn statement of loss appellee included the expression “it was discovered that inadvertently a loan had been made him on December 3,1953.” Appellee then recognized that it could recover only a portion of its loss. “This claim is filed in the amount of $1465.00 in view of exclusion E of the policy which apparently limits our recovery to $3500.00.” The “inadvertence” could have been occasioned either by an understanding that the entire loan was excluded from the coverage of the policy, or that its excess over $3500.00 was so excluded. We do not construe the quoted words to be an admission of appellant’s understanding that the entire loan was excluded, for such admission would be wholly inconsistent with the rest of the statement, and indeed with the making of the claim.

. “The Court is of the opinion that the provision in question is capable of two constructions, that it is ambiguous, and that since it was worded and framed by the insurance company the ambiguity should be resolved against the plaintiff company.
“It would have been quite easy for the insurer, in framing this provision, to recite in effect that insurer would not be liable to any extent where the loss resulted from any loan or loans to any one borrower exceeded $3,500.00. The policy did not so recite, but left in doubt the question whether the company was exempted ‘for any loss exceeding $3,500.00’, (meaning the excess over $3,500.00) or, on the other hand, the company’s liability did not exist at all in such instances.
“Should this Court give the policy a different interpretation the following could result: The company could be liable on a loan to one borrower in the sum of $3,-500.00, but if the insured should then make an additional loan of even $1.00 the liability under the $3,500.00 would be immediately avoided rather than have an avoidance of the additional loan of only $1.00.
“It is no doubt true, as contended by plaintiff’s counsel, that the purpose of this provision was to prevent individual borrowers from actually going into business, financing purchases of automobiles through the defendant. However, should that occur the individual liability of the plaintiff would still be limited to $3,500.00 for each borrower and, as stated above, if plaintiff desires a further exclusion, its policies can be worded so as to clearly indicate such intention.”

. Georgia Code Annotated Sec. 20-704, subd. 6; Willingham v. Life & Casualty *208Insurance Co. of Tennessee, 5 Cir., 216 F.2d 226, 228; Johnson v. Mutual Life Ins. Co., 154 Ga. 653, 115 S.E.2d 14; 44 C.J.S., Insurance, § 297, pages 1169-1174; 29 Am.Jur., Insurance, Secs. 166, 167; 1 Couch, Cyclopedia of Insurance, Secs. 188, 188(a); 13 Appleman, Insurance Law & Practice, Sec. 7401; 1 A.L.I. Restatement of Contracts, Sec. 236(d).

. Georgia Code Annotated 1933, §§ 20-702, 56-815; Golden v. National Life & Accident Ins. Co., 189 Ga. 79, 87, 5 S.E.2d 198, 204, 125 A.L.R. 838.

. Georgia Code Annotated Sec. 20-704, subd. 4; Marbut v. Empire Life Ins. Co., 143 Ga. 654, 85 S.E. 834; Fisher v. American Casualty Co., 194 Ga. 157, 159, 21 S.E.2d 68, 69.

. Georgia Code Annotated Sec. 20-704, subd. 6.

. “For the purpose of this' Insurance, an ‘Instrument’ is defined to be Certificate of Title, or a Chattel Mortgage, Conditional Bill of Sale, Chattel Trust Deed, Trust Receipt, Deed of Trust, Conditional Sales . Contract or Bill of Sale to secure Debt, or any writing, evidencing or creating or reserving a lien or interest in household ' goods, appliances, equipment, machinery, automobiles, motor trucks or similar manufactured. products which customarily are ■ not so affixed to realty as to become a part .thereof, and on livestock in conjunction with the foregoing or alone.”