[No. 197, October Term, 1949.]
Decided June 8, 1950.
Insurance — Intent of Parties from Words Used — Effort of Court Is to Ascertain, in Normal Interpretation of Contracts, Including Insurance Policies — Interpretation of Policy Against Insurer and Abolition of Rule of Strictissimi Juris — Questions of Do Not Arise Unless There Is Ambiguity — "Other Personal Property" — Meaning of in Comprehensive Crime Policy Is Property of Same Nature and Description as Particular Kinds of Property Mentioned, and Not Choses in Action for Unlawful or Fraudulent Competition under Doctrine of Ejusdem Generis — Doctrine Has Been Applied to Insurance Policies — Is Applicable to Contracts as Well as Statutes — Loss of Property Due to Fraud or Dishonesty of Employee — Policy Covering — Loss of Profit Which Insureds Would Have Made Had Not Their Employee Competed with Them Not Recoverable — Policy Did Not Insure Against Loss of Profits — Salary Paid Employee Not Recoverable — Based upon Work He Had Performed in Manner Acceptable to Insureds.
An insurance policy is a contract, and in the normal interpretation of contracts, including insurance policies, the effort of the court is to ascertain the intent of the parties from the words used. p. 541
The questions of interpretation of an insurance policy against an insurer, and of abolition of the rule of strictissimi juris do not arise unless there is an ambiguity. p. 541
Under the doctrine of ejusdem generis, the words "other personal property," as used in a comprehensive crime policy indemnifying insured "for all loss of property due to the fraud or dishonesty" of its employees, which defines "property" as "Money, securities, merchandise, furnishing, fixtures, equipment or other personal property" owned or held by insured, must be construed to mean property of the same nature and description as the particular kinds of property mentioned, and not choses in action for unlawful or fraudulent competition. p. 542
The doctrine of ejusdem generis is applicable to contracts as well as to statutes, and has been applied to insurance policies. p. 542
In the case at bar plaintiffs, appellants herein, brought suit on a comprehensive crime policy under a clause therein indemnifying insured "for all loss of property due to the fraud or dishonesty of any of the insured's employees, whether acting alone or in collusion with others." The definition of the word "property" as given in the policy is set out in the third paragraph of this syllabus. Appellants were engaged in the business of selling shirts, uniforms, caps, etc., which they obtained from a source of supply and then sold to their customers. An employee informed certain established customers that appellants could no longer supply them but that he could. He thus received orders from these customers, had the merchandise billed to himself and pocketed the profit. The lower court sustained a demurrer to appellants' amended declaration, and from a judgment entered in favor of defendant, they appealed. Appellants contended that they had sustained a loss of property within the meaning of the clause, either on the theory that they lost money which they would have received on the diverted contracts, or the theory that they lost the money that they were paying the employee for his entire services during the period when the diversion occurred. As to the first theory of recovery this Court held that what was actually lost by appellants was the profit they would have made had their employee not engaged in competition with them, or their prospective profit in the diverted contracts, and that the policy did not insure appellants against loss of profits. As to the second theory this Court held that the salary paid the employee was not lost, as it was based upon the work he had actually performed for appellants and which must have been acceptable to them, as evidenced by the fact that he received an increase in salary each year. pp. 539-542
J.E.B. Decided June 8, 1950.
Appeal from the Court of Common Pleas of Baltimore City (MOSER, J.).
Action by Samuel Levy, Jack Wilen, Ann Levy Harrison and Bertha Wilen Goldberg, trading as the Hanover Shirt Company, against the American Mutual Liability Insurance Company, a body corporate, for the recovery of losses allegedly covered by an insurance policy purchased from defendant by plaintiffs. From a judgment in favor of defendant, rendered after a demurrer to plaintiffs' amended declaration was sustained without leave to amend, plaintiffs appeal.
The cause was argued before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON, HENDERSON, and MARKELL, JJ.
Robert E. Coughlan, Jr., with whom were William Lovitt and Lord, Whip Coughlan on the brief, for the appellants.
Roszel C. Thomsen and Edward A. Supplee, with whom were Clark, Thomsen Smith on the brief, for the appellee.
This is a suit on an insurance policy brought by the appellants. A demurrer to the amended declaration was sustained by the trial court without leave to amend, and from a judgment in favor of the defendant for costs, the plaintiffs appealed.
The policy sued on is what is known as a comprehensive crime policy, covering dishonesty of employees, burglary, theft, safe burglary, inside robbery, kidnapping, outside robbery, paymasters' robbery, destruction of or damage to monies and securities, money orders and counterfeit paper currency, forgery of issued instruments and forgery of accepted instruments. This suit is brought under Clause A covering dishonesty of employees. That clause reads "To indemnify the insured for all loss of property due to the fraud or dishonesty of any of the insured's employees, whether acting alone or in collusion with others." It is not contended in this case that the loss sued for was not occasioned by the fraud or dishonesty of an employee. The key word, however, of Coverage A is "property". The policy contains definitions of certain words whenever used in the policy. One of these definitions is of the word "property", which is said to be "Money, securities, merchandise, furnishings, fixtures, equipment or other personal property owned by the insured or held by the insured as pledgee, bailee, trustee, custodian, or agent, whether or not the insured is legally liable for the loss or damage thereof."
The facts alleged which it is contended render the appellee liable are these. The appellants are engaged in the business of selling shirts, uniforms, caps, etc. One of their full-time employees, who was on a straight salary basis, accepted an order for some uniform caps from a cab company, an established customer of the appellants. The appellants did not themselves manufacture these caps, and this employee placed the order with the appellant's regular source of supply. When they were ready, he had them billed to himself, took them to the cab company, received the money, paid the source of supply and retained the balance for his own use. Subsequently, he told the cab company that appellants could no longer supply them, but that he would, and later orders he had billed in his own name, and filled them in the same manner as he had in the first order. He then used this scheme as a pattern to divert to his own use other orders from other established customers of the appellants, by telling them that the appellants were no longer able to supply them, but that he could. The losses which the appellants claim, by reason of the diversion or appropriation of these contracts by their employee, amount to in excess of $13,500. It appears that the employee received a salary in 1945 of $2,189.90, in 1946 this was increased to $2,898, in 1947, $3,080, and in 1948, up to August, when his actions were discovered, he had received $2,054.
On these facts the appellants claim that they sustained a loss of property within the meaning of the policy. One theory is that they lost money which they would have received on the diverted contracts, or the personal property of the contracts themselves, and the other is that they lost the money they were paying the employee for his entire services during the period when the diversion occurred. It is not contended by the appellee that the actions of the employee were not fraudulent or dishonest, but it contends that no money or property owned by the insured was lost. The case, therefore, resolves itself into an inquiry what the definition of property in the policy means. Appellants urge that since the policy is a broad one, as indicated by its name, "Comprehensive Crime Policy", it was designed to fit all of the needs of people in business, and that it must, in the event of any doubt, be construed strictly against the insurance company. They cite in this connection, Hospital for the Women of Maryland v. United States Fidelity Guaranty Co., 177 Md. 615, 11 A.2d 457, 128 A.L.R. 931, and Maryland Casualty Co. v. Fowler, 4 Cir., 31 F.2d 881, 63 A.L.R. 1375. But a policy is a contract, and these cases do not change the general rule that in the normal interpretation of contracts, the effort of the court is to ascertain the intent of the parties from the words used. Hart v. Hart, 165 Md. 77, 80, 166 A. 414; Norman v. Century Athletic Club, 193 Md. 584, 69 A.2d 466. The questions of interpretation against an insurer, and of abolition of the rule of strictissimi juris do not arise unless there is an ambiguity. Southern Surety Co. v. MacMillan Company, 10 Cir., 58 F.2d 541.
It seems to be quite clear that, whether the word "profits" is used (as it was in the original declaration), or whether the word "proceeds" is used, as in the amended one before us, what was actually lost by the appellants was the profit they would have made had their employee not engaged in competition with them, or the prospective profit they would have had in the diverted contracts. The Insurance Company did not insure them against the loss of all kinds of property, intangible or otherwise, but only against the loss of money, certain specified kinds of personal property or evidences of personal property, and "other personal property". Under the doctrine of ejusdem generis the words "other personal property" must be construed to mean property of the same nature and description as the particular kinds of property mentioned, and not choses in action for unlawful or fraudulent competition. Mayor and City Council of Baltimore v. Smith, 168 Md. 458, 177 A. 903; Smith v. Higinbothom, 187 Md. 115, 129, 130, 48 A.2d 754. This doctrine is applicable to contracts as well as to statutes, and has been applied to insurance policies. E.H. Emery Co. v. American Insurance Company, 177 Iowa 4, 158 N.W. 748, 753. The insurance company did not insure the appellant against loss of profits. "* * * profits must be insured eo nomine". Couch, Cyclopedia of Insurance Law, Section 421; 4 Appleman, Insurance Law and Practices, § 2302, note 88.
The salary paid to the employee during the period of his employment was not lost. It was based upon the work he actually did for the appellants, which must have been acceptable to them, because he received an increase each year until his diversions were discovered. He was not paid his salary for these contracts which he diverted, because the appellants knew nothing about them. He was paid for what he actually did for them and if he breached his contract, appellants' right of action against him was not property lost within the meaning of the contract of insurance.
For the reasons stated the judgment must be affirmed.
Judgment affirmed with costs.