Fruehauf Corporation v. Royal Exchange Assurance of America, Inc.

Appellant, Fruehauf Corporation, brought this action against appellee, Royal Exchange Assurance of America, Inc., under a casualty insurance policy issued by Royal to Pacific Far East Lines (PFEL). Fruehauf seeks indemnification for its security interest in eight tractors sold by Fruehauf to PFEL under an installment sales contract (chattel mortgage) that required PFEL to insure the tractors against loss. Following discovery and submission of affidavits, documents and memoranda by both parties, the district court granted Royal’s motion for summary judgment. We affirm.

I. Factual Background

On September 23, 1976, Fruehauf sold 12 tractors to PFEL. At PFEL’s request, Fruehauf executed bills of sale for eight of the tractors to “Saudi Trucking Services, c/o IACC Agency, P.O. Box 106, Dammam, Saudi Arabia, (Buyer).” PFEL executed a chattel mortgage to Fruehauf covering all of the tractors. The mortgage required, inter alia, that the buyer procure “insurance against theft, loss, total destruction of or damage to the goods being purchased hereunder.”

PFEL had a policy with Royal covering its shipping stores, office furniture, and shipping equipment. The relevant terms of the policy…