Where two consecutive insurance polices issued by different carriers provided comprehensive crime coverage subject to limitations when other insurance policies were concerned. these limitations are construed strictly against the insurers. The insured is granted final judgment on appeal on its right to recover on both policies, despite its failure to discover on-going criminal activity until after the termination date of the first policy. and the subsequent insurer's payment for loss occurring during the effective period of its policy.
Insurance — Comprehensive Crime Coverage — Other Insurance — Succes-sive Coverage Periods — Construction of Policy Provisions
An insurer provided comprehensive crime coverage to plaintiff from April 7, 1982 through November 11, 1982. Another insurance company began to insure plaintiff on November 12, 1982, replacing the first coverage. Both insurance policies defined a series of related criminal acts by one or more persons as "one occurrence" and provided maximum coverage of $20,000 per occurrence. During the term of the second insurer's coverage, plaintiff discovered that one of its employees had been continuously forging checks since the period of the first policy. The loss during the period of the first policy totalled $24, 538.28, while the loss during the period of the subsequent insurer's coverage was $24,055.22. The second insurer paid the full $20,000 policy limit but the first insurer refused to make any payment. Plaintiff filed a motion for judgment against the first insurer, who contended that the terms of its policy did not cover the loss. The parties stipulated the facts and the case was submitted to the trial court, which rendered summary judgment for the insurer. Plaintiff was granted this appeal.
1. Where there is doubt or uncertainty as to the terms of an insurance policy and the language of a policy is susceptible of two constructions, the terms will be construed liberally in favor of the insured and strictly against the insurer. The interpretation which permits the greater indemnity will prevail since indemnity is the object of insurance.
2. A policy provision which states that recovery for loss occurring partly during the effective period of that policy, and partly during the effective period of another policy issued by the same insurer is limited to the aggregate of the amount available to the insured under such policies, applies only to successive periods of that insurer's coverage, not to a successive period of coverage provided by another insurance company.
3. A policy provision allocating coverage for losses resulting from a prior period is inapplicable to a situation where the issue concerns losses during and after the first policy period.
4. Here no other policy provisions declared payments by subsequent insurers to be a limitation on the first carrier's obligations.
5. Whether or not the second insurer was obligated to pay the insured, the payment is not a defense to the first insurer's obligations.
WHITING, J., delivered the opinion of the court.
White Tire Distributors, Inc. (White) filed a motion for judgment against its insurer, Pennsylvania National Mutual Insurance Company (Penn National), seeking to recover payment for a loss under the comprehensive crime coverage endorsement Penn National had issued to White. Penn National asserted that the terms of the policy did not cover the loss. Stipulating the facts, the parties submitted the case to the trial court, and it entered summary judgment for Penn National. The case is before us on White's appeal.
Penn National provided comprehensive crime coverage to White from April 7, 1982, through November Il, 1982. Unknown to White, during the period of Penn National's coverage, an employee forged a number of checks causing a loss of $24,538.28. White obtained similar coverage from another insurance company, INA/Aetna, effective November 12, 1982, to replace Penn National's coverage. The same employee continued to forge checks during the period of INA/Aetna's coverage, causing an additional loss to White of $24,055.22. White did not discover any of these forgeries from the two coverage periods until INA/ Aetna's period of coverage had commenced.
Each insurance policy defined a series of related criminal acts by one or more persons as "one occurrence," and provided for a maximum coverage of $20,000 for that occurrence. INA/Aetna paid $20,000 under its policy but Penn National refused to pay the $20,000 coverage of its policy.
Familiar principles guide our consideration of the issues in this case:
Insurance policies are to be construed according to their terms and provisions and are to be considered as a whole. Where there is doubt or uncertainty and where the language of a policy is susceptible of two constructions, it is to be construed liberally in favor of the insured and strictly against the insurer. Where two interpretations equally fair may be made, the one which permits a greater indemnity will prevail because indemnity is the ultimate object of insurance.
Surety Corporation v. Elder, 204 Va. 192, 197, 129 S.E.2d 651, 655 (1963) (citations omitted).
Penn National claims that two provisions in its policy limit White's recovery. Penn National points first to Section 12, which provides, in pertinent part, that recovery for a loss "which occurs partly during the effective period of this endorsement and partly during the period of other bonds or policies issued by the Company . . . shall not exceed, in the aggregate . . . the amount available to the insured under such other bonds or policies . . . ." (Emphasis added.) We read Section 12 as indicating that Penn National intended to limit its liability for losses during successive years of Penn National's coverage to its maximum coverage of $20,000, but it did not do so for successive years of another insurance company's coverage.
Penn National next urges that paragraph C of its policy, entitled "LOSS UNDER PRIOR BOND OR POLICY" (emphasis added), and a similar paragraph in INA/Aetna's policy also limit its coverage. These paragraphs provide coverage for losses resulting from the fraudulent acts of White's employees discovered during the periods of their respective policy's coverage, even though those losses occurred during previous coverage periods of similar insurance policies provided by other insurance companies. These paragraphs limit liability, however, to each insurer's maximum coverage for one occurrence, even though the losses in both periods exceed that insurer's coverage. Penn National says that INA/Aetna's payment of $20,000 under the policy activates this limitation.
[3-5] Penn National cannot rely upon INA/Aetna's payment to White for three reasons. First, paragraph C of the Penn National policy allocates coverage for losses resulting from conduct in a prior period, and the policy provisions do not deal at all with losses occurring subsequent to the policy period. Hence paragraph C is inapplicable in this case. Second, no other provision of the policy operates to make payments by an insurance company covering a subsequent period a limitation on Penn National's obligation to the insured. As Penn National asserts in its brief, "[t]he insurer's policy anticipates that the first insurer (Penn National) should be the first to pay the claim." Third, even if INA/Aetna mistakenly paid White, Penn National cannot reap the advantage of any such mistake; this is a matter solely between White and INA/Aetna. See Inter-Ocean Casualty Co. v. Smith, 167 Va. 246, 252-53, 188 S.E. 210, 212-13 (1936).
We conclude, therefore, that the trial court erred in limiting White's coverage and we will reverse that court's holding. Because the parties have agreed that $20,000 would be the amount due in the event Penn National was liable under the comprehensive crime coverage, we will enter judgment for White in that amount.
Reversed and final judgment.
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