TREASURE CRAFT JEWELERS, INC., Appellant, v. JEFFERSON INSURANCE COMPANY OF NEW YORK, Appellee, 583 F.2d 650

OPINION JAMES HUNTER, III, Circuit Judge: In this case Treasure Craft Jewelers, Inc., a Pennsylvania corporation, appeals an order of the district court granting

summary judgment for defendant, Jefferson Insurance Company of New York. The trial judge held that the terms of the insurance policy issued by Jefferson to Treasure Craft did not provide coverage for a loss suffered by the insured. We affirm. I At some point during the late evening of February 6 or the early morning of February 7,1976, the Southampton, Pennsylvania store of plaintiff Treasure Craft was broken into and robbed. Thieves stole $94,369 in jewelry and merchandise. Plaintiffs submitted a claim for reimbursement for part of the loss to defendant Jefferson Insurance.

The claim was based on a policy issued by Jefferson in June of 1974, covering the jewelry in plaintiff’s Levittown, Pennsylvania store. Treasure Craft claimed that certain of the jewelry in the Southampton store had been covered by the policy on the Levittown store up to a loss of $25,000. Jefferson rejected the claim on the ground that the loss was not covered by the policy. Treasure Craft then brought suit to recover the $25,000 it claimed. Defendant’s motion for

summary judgment was granted by the district court. The policy under which plaintiff claims provides standard “jewelers block” insurance for the plaintiff’s store in Levittown. The contract states in part: LIMITATIONS OF LIABILITY 2. The maximum liability of the Company resulting from any one loss, disaster or casualty is limited to: A. $100,000 in respect of property at the Insured’s premises as described herein; E. $25,000 in respect of property elsewhere and not included in Clauses (A), (B), (C), and (

D) above or otherwise limited herein. In endorsement entitled “Property in Custody of Personnel Away from Premises”, the insurer provided for limitation of its liability to the insured for property not in the Levittown store. The endorsement stated that the coverage would be limited to $5,000 for property in the custody of Treasure Craft’s officers and employees, unless the endorsement named the individual having custody at the time of the loss. Full $25,000 coverage was provided if the property was in the custody of an officer or employee named in the endorsement.

Donald Bound, president of Treasure Craft, was one of the individuals listed. Under paragraph 7 of the policy, entitled “Insuring Conditions”, the parties also agreed that coverage would not apply to “additional locations of the insured.” Plaintiff’s theory in the district court was that at the time of the robbery, the jewelry in question was in the custody of Bound, the president of the company. It argued that although the property was not on the premises of the Levittown store, the jewelry lost would nevertheless be covered by the policy since it was property in the custody of an officer of the insured.

In support of this proposition and in response to Jefferson’s motion for

summary judgment, Treasure Craft submitted the affidavit of Donald Bound. The affidavit stated that Bound, as president and chief executive officer of Treasure Craft, has exercised supervisory powers over the Southampton store and spent a substantial amount of time at that store. Thus, plaintiff argued, Bound had custody of the jewelry at the time of the robbery. Bound’s deposition further explained the nature of his supervision over the jewelry in the Southampton store.

Bound testified that the jewelry involved in this case was taken from the Levittown store to Southampton when that store opened in November 1975. Part of the merchandise was chosen for the inventory at the Southampton store and the rest, valued at approximately $33,000, was placed in that store’s safe and remained there during the three months prior to the robbery. Bound also stated that when he visited the Southampton store, he would work on the merchandise left in the safe, rearranging and resetting the stones.

He further related that the jewelry was being prepared for resale not in Levittown, but at a third store, which had not opened at the time of the robbery. The district court held that the policy did not cover the loss suffered by Treasure Craft. The court determined that the provisions in the contract were free from ambiguity, and that the parties had agreed to a limited scope of coverage. It read the policy to provide that the coverage of property outside of the Levittown store did not include property at another location of the insured.

The court thus held that Jefferson had not insured risks of loss at any location of Treasure Craft other than that mentioned in the policy itself — the Levittown store. Treasure Craft argues that the district court, in holding that the policy did not cover any losses of property from locations other than the Levittown store, erroneously, applied Pennsylvania law. It contends that

section 2-E of the policy should have been applied in this case, thus raising the issue of whether Bound, the president of Treasure Craft, was in custody of the merchandise at the time of the loss. Since that issue raises a disputed question of fact, plaintiff argues that

summary judgment was inappropriate. We agree with the trial judge’s reading of the policy, and thus do not reach the custody question. II The rules relating to the analysis of insurance policies in Pennsylvania are well established. Since the policy is a contract, the court’s duty is to ascertain the intent of the parties as manifested in the language of the agreement. In discharging its duty, the court should attempt to view the policy in its entirety, and give effect, if possible, to all portions of the contract. Blocker v. Aetna Casualty & Surety Co., 232 Pa.Super. 111, 332 A.2d 476 (1975); Masters v.

Celina Mutual Insurance Co., 209 Pa.Super. 111, 224 A.2d 774 (1965). Since insurance policies are often adhesion contracts prepared by the insurer on its own forms, ambiguities in the policy should be resolved against the insurer and not against the policy holder. Nevertheless, the court should read policy provisions so as to avoid ambiguities, if the plain language of the terms of the contract permits. Pennsylvania Manufacturers Association Insurance Co. v. Aetna Casualty & Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967).

A court should not torture the language of the policy in order to create ambiguities which, in turn, could be construed in favor of the insured. Urian v. Scranton Life Insurance Co., 310 Pa. 144, 165 A. 21 (1933). Treasure Craft argues that the terms of its policy with Jefferson are ambiguous as to the scope of the coverage of the merchandise that was stolen from the Southampton store.

It argues that the coverage for property outside the premises of the Levittown store in the custody of the employees or officers of the company, embodied in paragraph 2-E of the policy, reasonably could be applied to the stolen merchandise, and thus that term conflicts with the limitation of coverage in paragraph 7. Consequently, the company argues that paragraph 2-E, and not paragraph 7, should apply to its loss. We agree with the trial judge that the language in paragraph 7 [that coverage shall not apply to additional locations of the insured] is unambiguous when read with paragraph 2-E.

Reviewing the policy to give effect to all its provisions, we hold that the effect of the policy in this case was to exclude any losses sustained by theft of goods stored in any location of Treasure Craft other than the Levittown store. This accords with the expectations of the parties under a contract such as that involved here. In a policy for insurance against burglary, the specified location of the insured’s property is crucial to the insuring company’s assumption of the risks involved. The coverage of its policy should not extend to losses that occur at different places.

In determining whether or not to accept a risk, the insurer will certainly require information as to the safety and security of the premises, and will condition its acceptance of the risks on the continued existence of those facts on which it bases its decision to insure. Cf. Morgan Smith Automotive Products, Inc. v. Continental Insurance Co., 418 Pa. 190, 210 A.2d 273 (1965) (fire insurance policy). Treasure Craft argues that even if the policy is not ambiguous, the trial judge erred in granting

summary judgment because a material issue of fact exists about whether the insured had knowledge of the limitation of coverage in the policy. On this point, Treasure Craft relies on Hionis v. Northern Mutual Insurance Co., 230 Pa.Super. 511, 327 A.2d 363 (1974), in which the court stated: Even where a policy is written in unambiguous terms, the burden of establishing the application of an exclusion or limitation involves proof that the insured was aware of the exclusion or limitation and that the effect thereof was explained to him. 230 Pa.Super. at 517, 327 A.2d at 365.

In Hionis, the court refused to enforce a limitation of the insured’s right of recovery for losses he had sustained as the result of a fire. The policy provided for supplemental insurance on the insured’s premises, covering improvements to the property. The testimony established that the insured had asked an agent for the insurer to provide coverage for additions and improvements on the property, and entrusted the entire matter to the agent.

After fire had destroyed the insured premises, the insurer refused to pay for the full amount of the loss basing its refusal on a provision in the policy that provided for less than full reimbursement if the insured failed to repair or replace the damaged property. The court found that the insured’s purpose in obtaining the insurance was do have complete protection for the improvements he had made to the property, and that he trusted the agent to fulfill that objective.

Thus the court held that the insurer had the burden of showing that the insured was aware of the exclusion in the policy and understood it in order to rely on the exclusion in disclaiming liability on the policy. In Miller v. Prudential Insurance Co. of America, 239 Pa.Super. 467, 362 A.2d 1017 (1976), the court distinguished Hionis and affirmed a grant of judgment on the pleadings in favor of the insurer.

The court held that even though the insurer had the duty of showing that the insured had knowledge of the exclusion from coverage in a “major medical” insurance policy, such knowledge in that case would be imputed to the insured. In Miller, the plaintiff-insured purchased a policy which provided for a deduction of other medical benefits payments received in the event of sickness or injury. The court held that knowledge of the limitation on benefits payments should be imputed to the plaintiff for four reasons: first, the plaintiff had other coverage at the time he applied for a policy from the insured.

The defendant’s policy was intended to cover costs not insured by the other policies, and not to be duplicate coverage. Secondly, the application for the policy required the insured to name all other medical insurance covering him. Thirdly, the language of the policy was clear and unambiguous in stating that other payments would be deducted from benefits under insurer’s policy. Finally, the court noted that the policy called the insured’s attention to the existence of the deductibility provision.

Because of these factors, the court found that the insured’s intent in acquiring the policy was to expand on, and not duplicate, existing coverage, and that he was on notice of the possibility of the deduction. We believe that this case involves a situation more closely related to Miller than to Hionis. The undisputed facts lead us to conclude as a matter of law that Treasure Craft must be held to have known of the limitation in the policy. First, at the time that the policy was agreed upon, Treasure Craft operated only the Levittown store.

Since the Southampton store was not yet in existence, Jefferson could not have evaluated the risks it would be required to assume concerning the second store. Second, the policy indicated that it was intended to cover only the Levittown store.

The first paragraph of the policy states that Jefferson “does insure the aforementioned Insured, whose premises are located at 7022 Bristol Pike, Levittown, Pennsylvania." Third, in the proposal for insurance, Jefferson specifically questioned Treasure Craft about the security arrangements in the Levittown store, including the description of the safe, the burglar alarm system, and the location within the store of the jewelry. Consequently, Treasure Craft was aware of the importance of the location and its security arrangements to the insurer in determining whether to assume the risks of coverage.

Finally, Treasure Craft was aware of the limited scope of coverage outside the Levittown store. In the proposal, the company listed the amount of time that jewelry was away from the store, and the maximum value of that jewelry at any one time. The responses in the proposal indicate that the insured was aware that this aspect of coverage was to be for short periods of time and for limited amounts of merchandise. All of these factors indicate that Treasure Craft was aware of the policy’s limitation as to coverage in locations of Treasure Craft other than the Levittown store.

Further, as we have held, the provision limiting coverage to only the Levittown store was clear and unambiguous. Thus we believe, as did the court in Miller, supra, that it would be inappropriate to find that an issue of fact exists as to Treasure Craft’s knowledge of the limitation in the policy. Since the trial court properly held that the scope of the policy did not include the loss suffered by Treasure Craft and that the insured was aware of the limitation, its judgment will be affirmed.