Before SPARKS, MAJOR and KERNER, Circuit Judges.
This is an appeal from a declaratory judgment in an action brought pursuant to Sec. 274d of the Judicial Code, 28 U.S.C.A. § 400, declaring the extent of the liability of the plaintiff and his co-insurers (hereinafter referred to as the plaintiff or insurer) on their policy of insurance indemnifying the LaSalle-Madison Hotel Company (hereinafter referred to as the defendant, insured or hotel company) against liability for damage to or loss of property of any guest or invitee of defendant's hotel. A fire occurred on June 5, 1946, which compelled all guests of the hotel to leave in great haste, and when they were later permitted to return to their rooms for the purpose of obtaining their belongings, approximately 250 guests discovered that their property had been damaged by fire, smoke or water, or had disappeared from their rooms. (The parties treat the property which had disappeared as having been stolen, and we shall do likewise.)
The provisions of the policy which give rise to the primary issues in dispute are:
"Section 1. - Insuring Agreements.
"A. Loss Liability. To pay, subject to the limits expressed in Section III B. hereof, on behalf of the Assured all sums which the Assured shall become legally obligated to pay to any person or persons by reason of liability for damage to or loss of property of any guest or invitee while said property is in the custody or control of the Assured or on the premises of LaSalle Hotel, Chicago, Illinois * * *.
"Section III. - Conditions.
"B. Limits of Liability. The limit of Underwriters' liability for any one occurrence or catastrophe during the Policy period is $10,000 (Ten Thousand Dollars) for all loss of and damage to property of any claimant or claimants.
"Any payment made by Underwriters on account of such loss or damage shall reduce Underwriters' liability by the amount so paid except as provided by Condition H. hereof for reinstatement of Insurance for subsequent losses.
"H. Reduction in Amount of Insurance and Reinstatement. Any payment made under this Policy shall reduce the aggregate amount of Insurance by the amount so paid, but in any such case, the amount of Insurance shall be immediately reinstated as respects any subsequent loss, to apply in accordance with the limits of liability as before any loss occurred."
Another provision of the policy having to do with the insurer's obligation to defend the claims here involved will be subsequently referred to.
The contested issues are: (1) whether all losses sustained by the individual guests, including those from theft, constitute "one occurrence or catastrophe," within the meaning of Section III of the policy, as contended by the insurer, or whether the losses sustained by the individual guests from theft each constitute a separate "occurrence," as contended by the hotel company; (2) if the losses of the individual guests by theft each constitute a separate "occurrence," is the insurer liable to the extent of the policy coverage of $10,000 for each of such losses within the terms of the second sentence of Sec. III-B and Sec. III-H; and (3) the extent of the insurer's obligation to defend the claims in suit based upon a provision of the policy which will be subsequently set forth.
For the purpose of the case, the facts were stipulated, which we think important to recite in detail. In a preliminary paragraph it is stated that claims have been made upon said hotel company for damage to or loss of property of guests and invitees aggregating altogether more than $100,000, which claims are made severally by more than 250 persons.The stipulation continues as follows:
"A portion of the claims are for destruction of or damage to property by fire, smoke or water, and the balance of such claims are for property of guests or invitees missing from their rooms on their return thereto subsequent to the fire. That the claims for property damaged or destroyed by fire, smoke or water exceeded Thirty Thousand Dollars ($30,000); and the claims for missing property exceed Sixty Thousand Dollars ($60,000). The fire began in the early morning, at approximately 12:30 o'clock, of June 5, 1946, and developed very quickly and in such intensity that all patrons and employees were compelled to evacuate the premises hastily, and were excluded from the premises until late in the afternoon of that same day, approximately seventeen hours after the fire first commenced. As a result of the fire the hotel premises were rendered unfit for occupancy, and thereafter, for a period of several months, only persons having immediate business in connection with the hotel were permitted access to any part of the hotel. Late in the afternoon of June 5, 1946, the representatives of the hotel and the public authorities began escorting guests and invitees to their respective rooms in the hotel for the sole purpose of recovering any property they had left in such hotel rooms when they evacuated the rooms at the time of the fire. Each guest so escorted to a room was escorted to the room occupied by that guest, and to no other room in the hotel, and no persons were permitted to loiter or visit various rooms about the hotel. Several days were required to escort to their respective rooms all of the several guests seeking to recover property. Some guests did not appear to claim their belongings for several days subsequent to the fire. It was on the occasion of their being escorted to their rooms that the several respective guests discovered that their property had been damaged by fire, smoke or water, or had disappeared from their rooms.
"It is agreed that the damage by fire or loss by reason of disappearance occurred after the time the fire began in the early morning of June 5, 1946, and prior to the time the respective guests were escorted back to their rooms."
It was further stipulated that the policy covered legal liability to the hotel company in the amount of $10,000, which was tendered in discharge of the insurer's liability for damage to or loss of property of any and all guests and invitees which occurred on the premises of the hotel during or within a period of several days immediately subsequent to the fire of June 5, 1946. It was agreed that the tender was without prejudice to any right of the insurer to deny liability under the policy for any further claim and ...