MARYLAND CASUALTY CO. v. FIRST NAT. BANK OF MONTGOMERY, ALA., 246 F. 892

WANKER, Circuit Judge (after stating the facts as above). [1] The trial court decided that the instruments executed by the defendant made it liable to the extent of $7,500 for losses by the plaintiff caused by Campbell’s misappropriations during the period between January 10, 1907, and, April 10, 1913, those losses having been discovered after the expiration of the time within which claim could be made under the bond of the American Bonding Company of Baltimore, by which the fidelity of Campbell as bookkeeper had been insured; also to the extent of $7,500 more for losses similarly caused during the period beginning April 10, 1913, and ending January 10, 1914, these two dates being the ones stated in the

schedule which was attached to the bond when it was delivered; and also to the extent of $7,500 for losses similarly caused during the period beginning January 10, 1914, the date of the renewal receipt and of the second

schedule which was attached to the bond, and November 14, 1914, when Campbell ceased to be an employe of the plaintiff. The fact that the bond and the rider attached to it bore different dates —the date of the former being March 19, 1913, and that of the latter being April 15, 1913 — is some indication that the matter for which the rider made provision was the subject of negotiation and arrangement between the parties after the plaintiff had consented for the defendant to insure the fidelity of the former’s employes and after the bond had been drawn, dated and signed, preparatory to delivery.

The American Bonding Company’s bond to the plaintiff, which became effective January 10, 1907, and renewal receipts successively attached to it, were in evidence. They show that the fidelity of Campbell as bookkeeper was insured thereby to- the extent o.f $7,500. It is quite obvious that a purpose of the rider was to prevent the plaintiff’s transfer of the fidelity insurance it carried from one insurer to another, having the effect of depriving it of protection it would have had if the change had not been made.

Under the American Bonding Company’s bond a claim could not be made for a loss not discovered within six months after the determination of the obligation of the bond or a renewal of it. So the rider had the effect o.f making the defendant liable for losses which occurred while the American Bonding Company’s bond was in force, but were not discovered within six months after the transfer of the insurance to the defendant.

The rider evidences the defendant’s consent, given after it had signed and dated the bond, to be liable, without addition to the premium stated in the bond, for specified undiscovered losses which had been sustained before the bond and rider became effective; but it does not manifest a consent to double the amount of the liability incurred without increasing the premium charged.

We think the clause of the rider which states the obligation it evidences would have meant the same thing if its language had been as follows : “The company hereby agrees that claim may he made for any loss or losses which the employer may, during the period between the 10th day of January, 1907, and the 10th day of April, 1913, have sustained on account of any employes who is named also in the bond of American Bonding Company of Baltimore, Maryland, ,to the employer, dated December 28, 1906, and such loss or losses are cdvered by that bond on April 10, 1913, and shall be discovered after the expiration of the time within which claim can be made under the terms thereof: Provided that the aggregate liability of the company on account of any employé shall in no event exceed the sum set opposite the name of such employé in the

schedule attached to said

Schedule Bond No. 34455.’’ It is manifest that the concluding clause of that paragraph as it is found in the rider was a part of the proviso which qualified the previously expressed agreement of the defendant to be liable for losses which had occurred during a period not covered by the bond, and that it was not intended as a statement of the amount of such losses for which the defendant was to be liable. By the terms of the bond the defendant was not to be liable for any loss occurring before noon on the 10th day of April, 1913.

The rider was added to make it liable for specified losses which had occurred prior to that date. The amount of liability incurred was stated in a part of the bond which the rider did not purport to affect. Instead of the rider manifesting an intention to increase that amount, we think the concluding clause of its contrac-ing paragraph distinctly negatives the existence of such intention.

The conclusion is that the expression “aggregate liability,” as used in the rider, meant the liability created by the bond and the rider, taken together, and was not meant to be a statement of the amount of loss or losses insured against by the rider; the amount of insurance contracted for being a matter covered by a part of the bond which remained unmodified by the rider. The contract made by the delivery and acceptance of the policy with the rider attached stated in the body of it the date of the commencement of the period within which the losses insured against must occur or have occurred.

The policy recited that its consideration was “a premium, payable in advance, based upon an annual rate per hundred dollars of suretyship,” and attached fi> and made a part, of it was a schedule, which, so far as it is material in this case, is set out above.

The language of that schedule, considered, as it must be, in connection with the body of the instrument of which it was a part, makes it plain that the fidelity of Campbell was for a period ending January 10, 1914, insured as provided in the body of the bond to the amount of $7,500, and that it was for that insurance that $14.06, the amount of the premium set opposite his name, was paid. The policy did not, either conditionally or unconditionally, entitle the insured to, nor obligate the insurer to grant, indemnity for any loss or losses occurring after January 10, 1914.

The extent of the defendant’s liability under its contract, which became effective on the 10th day of April, 1913, was, subject to a compliance with conditions stated, to pay specified losses, not exceeding the amounts stated, occurring during a period which ended on January 10, 1914. For subsequently occurring losses that contract made no provision whatever. Payment of previously incurred losses would be a complete satisfaction of the liability imposed upon the defendant by its original contract.

That contract was what is known in the insurance business as a “term policy,” under which the insurance contracted for covers only losses occurring before the expiration of the stated term.

Further action of the parties, having the effect of creating a new contract, was required to make the defendant liable for any loss or losses occurring after January 10, 1914. .Such further action, if taken, would not, in the absence of a stipulation to that effect, either increase or diminish the amount for which the insurer, under its original contract, had already become liable in consequence of losses incurred during the period covered by that contract, though such losses had not been discovered when a new contract was made having the effect of insuring against losses occurring in a later period.

Florida Cent. & P. R. Co. v. American Surety Co., 99 Fed. 674, 41 C. C. A. 45; United States Fidelity & Guaranty Co. v. Williams, 96 Miss. 10, 49 South. 742; Commercial Bank v. American Bonding Co., 194 Mo. App. 224, 187 S. W. 99; Rosenplanter v. Provident Sav. Life Assur. Soc., 96 Fed. 721, 37 C. C. A. 566, 46 L. R. A. 473. .

Rulings made in cases involving contracts which contained stipulations for renewals and such provisions as one stating that the named amount of insurance was to cover losses occurring during the continuance of the bond or any renewal thereof, or one stating that the liability of the insurer should not be cumulative, or one stating that the liability should not be for more than a stated sum, whether the loss occurred during the term of the policy or bond or a continuance thereof, or other similar provision, are not applicable to the facts of the instant case.

As above indicated, the contract made by the bond with the rider attached made no provision for a renewal or extension of the liability it imposed and contained no provision similar to those just mentioned.

The insurer was not afcting under any obligation imposed upon it by its original contract when, in consideration of the payment of a premium of $691.25, $18.75 of which amount was the premium for insuring the fidelity of said Campbell in the sum of $7,500, it insured the plaintiff for another term beginning January 10, 1914, as evidenced by its renewal receipt bearing that date and by a new schedule, which was attached to the original bond. The period covered by the bond before the rider was attached was three-fourths of a year. The period covered by the renewal receipt and the additional

schedule was one year. The total amount of insurance was the same in both. The premium stated for the three-fourths of a year was in amount exactly three-fourths of the premium charged for insurance for the whole year. From these facts it fairly may be inferred that the charge for insurance against losses occurring after January 10, 1914, was exactly what it would have been if no contractual relation had existed between the parties prior to that date and the insurance against losses occurring after that date had been evidenced by an entirely new instrument.

Nothing in the instruments evidencing the new contract indicated that the amount of insurance for which it provided was to be diminished or affected in any way as a result of the circumstance that under a previously existing contract between the parties there had been in force the same amount of insurance against similar losses occurring during a former period. The conclusion is that the effect of the bond and rider was to insure, to the extent of $7,500, Campbell’s fidelity during a period ending January 10, 1914, and that the contract made by the renewal receipt and the attaching of a new

schedule to the bond was one for the same, but an additional, amount of insurance against losses occurring during a period commencing January 10, 1914. It is insisted in behalf of the defendant that the court erred in ruling that an item of $1,200 was covered by the bond. On the 9th day of November, 1914, Campbell presented for deposit to the credit of his individual account as. a depositor a $1,200 check drawn by him on another bank, and procured a credit on his account of the amount of that check by representing that it was good, when he knew that it was worthless.

At the time this was done there were checks of Campbell on the defendant outstanding for greatly more than the amount of tire credit balance shown on his account before the addition of the $1,200 item. When the $1,200 check was presented to the bank on which it was drawn, it was not.paid; the amount then standing to the credit of Campbell in that b.anlc being only $5.38. Before the defendant ascertained the worthlessness of the $1,200 check, it had paid tire outstanding checks drawn by Campbell, amounting to $1,117.

It is not open to question that the defendant’s payment of such outstanding checks, under the circumstances stated, resulted in loss to it caused by the fraud or dishonesty of Campbell. The bond insures against losses “sustained by reason of any act or acts of fraud, dishonesty, forgery, embezzlement, wrongful abstraction, or willful misapplication on the part of any employé (while in any position in the service of the employer and committed directly or through connivance with others) named in the

schedule hereto attached.” ’ Nothing in the terms of the contract confines the losses insured against to such as resulted from acts of fraud, dishonesty, etc., committed by the employe while in the performance of service for which he was employed. The bond was drawn by the defendant, and its language is to be construed most strongly against it. The language used is broad enough to cover a loss due to the fraud or dishonesty of a named employé, though his misconduct was in a dealing between him and the employer not connected with the rendition of the service for which he was employed.

But the amount of the loss due to the transaction in question was $1,081.25, not $1,200, as there was a balance of $35.75 standing to Campbell’s credit when the $1,200 check was deposited.

It is contended that the plaintiff was deprived of the right to recover for the losses alleged by its failure to comply with the requirement as to filing an itemized statement contained in the condition stated in the bond: “That notice of any loss covered hereunder shall be sent by telegraph and by registered letter, both addressed to the company at its home office, Baltimore, Maryland, within ten days after the discovery of such loss; that an itemized statement of such loss shall be filed with the company by the employer within ninety days after ihe date of said notice of loss; and, if required by the company, the employer shall produce for investigation all boohs, vouchers and evidence in the employer’s possession.” The bond insured against losses “of money, securities or other personal property.” The quoted provision requiring an itemized statement contemplates an enumeration of the things claimed to have been lost.

Where money is the only thing claimed to have been lost, it is not to be supposed that it was contemplated that the insured would be required to describe the money lost, or to> state exactly when or how the act or acts of fraud, dishonesty, forgery, embezzlement, wrongful abstraction or willful misapplication on the part of the employé were committed.

Within the time prescribed the plaintiff furnished to the defendant a detailed account of the loss resulting from the above-mentioned $1,200 check transaction, and also a statement showing the total amount of money claimed to have been lost in consequence of Campbell’s fraud and dishonesty, and setting out the exact amount claimed to have been lost during each year covered by the contract sued on.

The language of a provision requiring a statement by the insured to the insurer of the loss or losses claimed to have been sustained would have to be very explicit to warrant a conclusion that such requirement is not complied with, unless the statement discloses more than is necessary to be alleged and proved in a suit on the contract to recover for losses claimed to have been sustained, or in a prosecution of the employé for the criminal offense which his alleged misconduct involved.

The evidence showed that the books kept by the plaintiff and remaining in its possession enabled it to ascertain the amount of such losses, and indicated that its inability to. ascertain and state how the losses, other than that resulting from Campbell getting credit for the amount of the $1,200 check, were brought about, was due to Campbell’s successful concealment of his defalcations and of the method of their accomplishment. During the entire period covered by the contracts sued on Campbell acted in the capacity of individual bookkeeper.

He was in charge of books showing the accounts of depositors with the plaintiff bank. These accounts were kept in loose-leaf ledgers. Leaves showing a number of such accounts were missing when the plaintiff’s books were examined after the discovery of Campbell’s defalcation. There was evidence to prove that shortly before that discovery Campbell at night took from the bank’s storage room a large mass of papers. It was to' be inferred that the papers so taken included those showing false entries the making and concealment of which enabled him to defraud his employer.

The provision in the quoted stipulation that, “if required by the company, the'employer shall produce for investigation all books, vouchers, and evidence in the employer’s possession,” evidences the absence of an intention to require the insured to state anything which, due to no fault of his, it is impossible for him to ascertain. The conclusion is that the evidence adduced sufficiently showed that, within the time prescribed, the plaintiff furnished such itemized statement of the loss claimed to have been sustained as was called for by the contract.

The court erred in ruling that the rider had the effect of adding $7,S00 to the amount of loss caused by Campbell which was insured against, and in including in the amount for which a verdict was directed the sum of $1,200, instead of $1,081.25, as the loss occasioned by the above-mentioned $1,200 item.. The result was that the principal amount awarded by the verdict and judgment was $7,013.32 more than the evidence warranted.

Because of the errors mentioned, the judgment is reversed, with direction that a new trial be granted unless the defendant in error shall, within 30 days after the filing in the District Court of the mandate of this court, enter a remittitur of $7,013.32 of the principal amount for which the judgment was rendered.