YOUNGS MARKET COMPANY, a California corporation, Plaintiff and Appellant, v. AMERICAN HOME ASSURANCE COMPANY; Balfour-Guthrie Insurance Company; Commerce & Industry Insurance Company; National Fire Insurance Company; New Hampshire Insurance Company; New Zealand Insurance Company, Ltd.; Pacific Indemnity Company; Sun Insurance Office, Ltd.; Transit Casualty Company, and United States Fire Insurance Company, Defendants and Respondents.
For Opinion on Hearing, see 93 Cal.Rptr. 449, 481 P.2d 817
Appellant has appealed from a judgment that it is not entitled to be reimbursed on a policy of insurance issued by respondents for legal expense incurred by it successfully resisting an effort by the State of Texas to confiscate a cargo of liquor belonging to appellant. We conclude that the judgment must be reversed.
Respondents issued a policy of “Multiple Perils Personal Property Insurance” to appellant. The policy provides in paragraph 1 of Part II: “This insurance covers against all risks of physical loss of or damage to the insured property * * * except as hereinafter excluded, wherever located, including while in transit, within the continental limits of the United States * * * ” An endorsement to the policy states: “PERILS EXCLUDED: This policy does not insure against: * * * Loss or damage caused, directly or indirectly, by * * * (b) * * * seizure or destruction under quarantine or customs regulations, confiscation by order of any government or public authority, or risks of contraband or illegal transportation or trade.” The nature of the endorsement was called to appellant's attention at the time it was added to the policy. The policy contains the following provision: “14. SUE AND LABOR: In case of actual or imminent loss or damage it shall be lawful and necessary for the Insured, their factors, servants or assigns, to sue, labor and travel for, in and about the defense, safeguard, and recovery of the property insured hereunder, or any part thereof, without prejudice to this insurance; * * * ”
Appellant is a wholesaler of liquor. On May 1, 1962, while the policy was in force, appellant purchased a cargo of liquor and arranged for its shipment by truck on a common carrier to California. Without the knowledge of appellant, the truck was routed through Texas. In Colorado City, Texas, it was stopped for a routine inspection by an officer of the highway patrol. The driver of the truck was queried concerning its content. For reasons totally unexplained by the record, the driver stated that his cargo was “redwood furniture.” Acting in accordance with the law, the highway patrol officer opened the truck and ascertained that its content was in fact liquor. Texas law requires that a trucker hauling liquor through the state “shall have present and available a written statement furnished and signed by the shipper” showing the name and address of the consignor and consignee and the origin and destination of the cargo. The Texas highway patrolmen asked that the written statement be produced. While such a statement had been delivered to the carrier with the cargo, the driver did not produce it. The highway patrolmen, acting pursuant to the Texas law, then seized the truck and its cargo. After it had been notified of the seizure, appellant sent a bill of lading containing the required information to the Texas Liquor Control Board.
The State of Texas filed an action seeking a forfeiture of the truck and its cargo. Appellant engaged counsel and intervened seeking to resist the forfeiture. The intervention was successful in the Texas trial and appellate courts. The Texas Court of Appeal notes that the Texas penal code provides in part in Article 666–27: “It shall be unlawful for any person to transport into this State or upon any public highway, * * * in this State any liquor unless the person accompanying or in charge of such shipment shall have present and available for exhibition and inspection, a written statement furnished and signed by the shipper, * * * ” The Texas court concluded that: “ * * * the cargo was properly halted and seized by the officers * * * However, * * * When the lawful owner, Young's Market Company, immediately upon notification by the Texas Liquor Control Board of the violation by the truck driver, furnished the Board all information required by the Texas Liquor Control Act, fully complying with the provisions thereof and showing its innocence of any complicity in the unexplained violation by the truck driver, the cargo regained its lawful nature. It and the vehicles were no longer contraband subject to confiscation. * * * ”
Appellant expended $16,166.37 in legal expense in the Texas litigation in order to secure the release of the liquor. That sum is stipulated to be reasonable. Appellant filed a claim against respondents for reimbursement of the legal expense claiming that the loss was covered by its policy of insurance. Respondents rejected the claim contending that the loss was due to a peril excluded from the policy. Appellant then filed the lawsuit which results in the case at bench. The trial court found for respondents and this appeal followed.
The sole issue on this appeal is the applicability of the exclusionary provision of the endorsement to the insurance policy to the type of loss here involved. Parol evidence was neither offered nor received to aid in interpretation of the policy. We therefore are not bound by the construction given the policy by the trial court but must make our own determination. In making that determination, we are bound by the rule requiring that any uncertainty in the policy by resolved against the insurer and in favor of coverage. (Continental Casualty Company v. Phoenix Construction Company, 46 Cal.2d 423, 296 P.2d 801, 57 A.L.R.2d 914; Gray v. Zurich Insurance Company, 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168.)
Construction of the policy in the context of appellant's claim requires our consideration of three classes of loss excluded by the endorsement from coverage by the policy: (1) loss from confiscation by government authority; (2) loss by reason of risk of contraband; and (3) loss from illegal transportation. We conclude that the facts here present disclose a loss which falls in one of those categories.
In the context that the term is used in the policy, no “confiscation” occurred here. Confiscation by government authority does not occur until there has been final action appropriating the property confiscated to the authority taking the action. The concept must be distinguished from that of governmental “seizure” which can be a step preliminary to confiscation pending final action but which is not the same thing as confiscation itself. (11 Couch on Insurance 2d, § 42:468.) The record in the case at bench discloses that the Texas authorities seized but did not confiscate the cargo of liquor. The Texas Court of Appeal in upholding appellant's claim that the liquor should be returned to it stated: “The cargo was properly halted and seized by the officers of the State of Texas because of the violation of the law on the part of the driver of the carrier's vehicle. But Young's Market Company had no control over the transportation, and no complicity in or knowledge of the law violation * * * [I]n our opinion it is not contemplated by the Texas Liquor Control Act that under these circumstances a lawful and innocent owner of property should be deprived of the value thereof by confiscation.”
In the context of the insurance policy which is the subject matter of this litigation, the loss which here occurred was not by reason of risk of contraband. Here again we are aided by the construction given the transaction by the Court of Appeal of the State of Texas. The opinion of that Court declares: “In the instant case the cargo was not contraband. The transportation of the liquor was lawful from its inception and the only violation shown was on the part of a truck driver who was the employee of a common carrier, over whom the owner of the cargo had no control.”
We conclude, also, that in the context of the policy the loss here involved was not a loss from illegal transportation. The seizure out of which the expenses claimed by appellant arose was not the result of a transportation which was illegal. It occurred because the driver in charge of the cargo failed to supply to the Texas authorities documentation which had been delivered to the carrier with the cargo. The incidental illegal activity on the part of the driver is not that type of risk which is excluded by the “illegal transportation” clause of the policy. (See 11 Couch on Insurance 2d § 43:209.)
Having determined that the seizure by the Texas authorities was not the result of a risk excluded by the policy, we must conclude that the sum reasonably expended by appellant to recover its property is reimbursable by the insurer (respondents). That sum constitutes an expenditure, to defend, safeguard and recover insured property within the “Sue and Labor” clause quoted at the outset of this opinion. Such expenditures constitute a loss reimbursable by the policy. (6 Appleman on Insurance, § 3794 and cases there cited.)
The judgment is reversed.