Appeal by The Ore & Chemical Corporation from a judgment entered after trial in the United States District Court for the Southern District of New York, John M. Cannella, Judge, dismissing its complaint against Eagle Star Insurance Company, Limited, seeking reimbursement for loss of gold, stolen in an armed robbery, under the "in transit" provisions of an All Risks Inland Marine Floater policy. Reversed.
Friendly, Anderson and Mansfield, Circuit Judges. Robert P. Anderson, Circuit Judge (concurring).
MANSFIELD, Circuit Judge:
At issue on this appeal is whether the loss of some 1,600 ounces of placer gold, stolen in an armed robbery carried out in a Sheridan, Wyoming, motel under conditions reminiscent of the days of Wild Bill Hickok, is covered under the "in transit" provisions of an All Risks Inland Marine Floater policy. Under the terms of the policy the Eagle Star Insurance Company, Limited ("Eagle Star") insured The Ore & Chemical Corporation ("Ore & Chemical") against all risks of loss on incoming and outgoing shipments of goods (including ores) "while in due course of transit until delivered."*fn1
In an action tried before Judge John M. Cannella, sitting without a jury, Ore & Chemical sought to recover under the policy for a theft of the placer gold, which occurred after the gold had been transported from Spearfish, South Dakota, to Sheridan, Wyoming, where it was being held overnight for inspection by and expected delivery to a purchaser. If no sale should be consummated, the gold was to be returned immediately to Spearfish. Judge Cannella concluded that the gold was no longer in due course of transit at the time of the theft because the overnight custody of the gold in the hands of Ore & Chemical's agents amounted to a delivery. We conclude that the district court construed the due-course-of-transit clause too narrowly. Accordingly we reverse.
The facts regarding Ore & Chemical's loss of the gold are undisputed. The sorry tale began with its direction to its agent, the Keystone Company, to seek a purchaser for a lot of placer gold amounting to 1,609.979 ounces, which it had purchased for $68,787.06. Keystone was authorized to negotiate with prospective purchasers and to make commitments for sale upon approval by Ore & Chemical. After an uneventful month of discussions with prospective purchasers, there came a call from one "Jack Stodder," who expressed an interest in the gold. In the course of negotiations by telephone Stodder agreed to purchase the gold for $112,106 on the understanding that he would have the right personally to inspect and assay the gold and then negotiate the precise purchase price. At his insistence the inspection, sale and delivery were to take place in Sheridan, Wyoming, presumably a city neutral for and centrally located between the seller and the purchaser. Keystone informed Stodder that on March 24 its President T. J. Oltmans and Vice President A. C. Zapf would bring the gold to Sheridan, where inspection and final negotiations on the price would take place.
Initially, all went as planned. Keystone's officers, Oltmans and Zapf, transported the gold from its bank in Spearfish, South Dakota, by chartered plane to Sheridan, where the gold was taken to the motel room for the inspection. Stodder met with Oltmans and Zapf twice that evening. The parties were unable to agree upon a final price but arranged to meet again at eight o'clock the next morning for continuation of negotiations. However, Oltmans, apparently doubting that the sale would be consummated as planned, had decided not to keep this final appointment and instructed Zapf and their pilot to prepare to transport them with the gold back to Spearfish the next morning before the scheduled meeting. Shortly after seven o'clock on the following morning Stodder returned with two companions and at gunpoint relieved Oltmans and Zapf of the gold.
The district court concluded that this loss would have been covered by the insurance policy but for the "interruption" at the motel. Placer gold was an insured commodity under the terms of the parties' contract (Par. 3). Loss due to armed robbery was a risk covered by it (Par. 12). The policy also permitted Ore & Chemical to act as its own carrier and to use the modes of transportation employed. However, the interruption at the motel was determined by the court not to have been "in due course of transit" but to have constituted a delivery for the plaintiff's purposes, i.e., to set up a place for doing business with Stodder, unconnected with the transportation of the gold. Since defendant does not seriously question here any of the district court's findings favorable to plaintiff with regard to the scope of the policy, the sole issue presented to us for consideration is whether the district court correctly interpreted the due-course-of-transit language under the prevailing law. We conclude it did not.
At the outset we observe that the courts of New York, the law of which governs, have not been niggardly in their reading of the due-course-of-transit clause. Their guiding rule of construction is one founded upon the "objectively reasonable expectations" of businessmen relying upon this type of policy.
"The true test thus appears to be not whether movement was interrupted overnight, or over a week end, but whether the goods, even though temporarily at rest, were still on their way, with any stoppage merely incidental to the main purpose of delivery. . . . If darkness had overtaken the driver on the road, and he stopped at a motel for a night's sleep before continuing on his journey, it could not be said that transit had ceased. . . .
"In the final analysis, the outcome of a case such as this should be determined not by precise semantic shadings of terms of art, but by common-sense appraisal of the overall situation." Ben Pulitzer Creations, Inc. v. Phoenix Ins. Co., 47 Misc.2d 801, 804, 263 N.Y.S.2d 373, 376 (Civ. Ct. N.Y. 1965), affd. without opin., 52 Misc.2d 934, 276 N.Y.S.2d 1009 (App. Term, 1st Dept. 1966).
To this observation must be added the rubric of insurance law that any ambiguity in the construction of a policy will be resolved against the insurer. Bronx Savings Bank v. Weigandt, 1 N.Y.2d 545, 136 N.E.2d 848, 154 N.Y.S.2d 878 (1956). See also Restatement (Second) of Contracts § 232.
Applying these principles here, there can be no serious doubt but that the transportation of the placer gold would as a general matter fall within the bounds of "due-course-of-transit" as that term has been construed by the New York courts even though there was not an unequivocal commitment from Stodder to purchase the gold. See Franklin v. Washington Gen. Ins. Corp., 62 Misc.2d 965, 310 N.Y.S.2d 648 (Sup. Ct. 1970), affd. without opin., 36 App. Div. 2d 688, 319 N.Y.S.2d 383 (1st Dept. 1971) (transport for purpose of exhibition covered by due-course-of-transit clause).*fn2 The gold was transported to Sheridan with the intention of selling and delivering it to Stodder at such "factory, store, or premises" as he should designate or, if no sale and delivery could be made after the inspection by Stodder, of returning it to the premises designated by Ore & Chemical at Spearfish.
The district court, although noting that Stodder was not a consignee, saw the plaintiff's case founder not so much for that reason, which would be insufficient, as because of the stoppage at the motel. However, an interruption in the course of transport does not in itself remove the goods from the coverage of a due-course-of-transit clause. That result will depend upon the extent and the purpose of the interruption. Franklin v. Washington Gen. Ins. Corp., 62 ...