Certain Underwriters at Lloyds of London v. Engs Motor Truck Co.

[834]

Opinion

SCOTT, J.

Appellants, Certain Underwriters at Lloyds of London, England, by and through Lead Underwriter Stuart Edward James Fulton (hereafter Underwriters), appeal from summary judgment in favor of respondent Engs Motor Truck Company (hereafter Engs) awarding recovery in the sum of $24,919.37, plus interest ($1,405.05), plus costs of suit ($34.50). We reverse.

We briefly summarize the facts. David Clark bought a truck from Engs. Clark obtained a physical damage insurance policy from Underwriters. Among losses expressly excluded from coverage by the policy was loss resulting from a theft of the vehicle by an employee of the insured. Attached to the policy was a loss payable indorsement, which provided in part; “2.

The

insurance under this policy as to the

interest only of the Lien-Holder shall not be impaired ... by

any breach of warranty or condition of the policy, or by any omission or neglect, or by the

performance of any act in violation of any terms or conditions of the policy

or because of the failure to perform any act required by the terms or conditions of the policy or because of the subjection of the property to any conditions, use or operation not permitted by the policy or because of any false statement concerning this policy or the subject thereof,

by

the insured or

the insured’s employees,

agents or representatives, ... [H] Provided, however, that the wrongful conversion, ... by the Purchaser, Mortgagor, or Lessee in possession of the insured property ... is not covered under this policy, unless specifically insured against and premium paid therefor.” (Italics added.)

For purposes of the summary judgment and this appeal, it is conceded that the truck was stolen by an employee of Clark. After appellants denied that the loss was covered by the policy, Clark brought an action for breach of contract. Appellants cross-complained for declaratory relief, naming Crocker Bank and its successors and assigns, among others, as cross-defendants, as the bank was named as the lienholder in the loss payable indorsement. The bank had assigned to Engs all claims under that indorsement. Engs moved for summary judgment, in part on the ground that although the policy excluded coverage for loss from theft by an employee, the exclusion was inconsistent with the loss payable indorsement and was therefore not controlling. Summary judgment was granted, and this appeal followed.