Indemnity Ins. Co. of North America v. Kellas

• Decision Date: 08 March 1949
• Docket Number: No. 4377.,4377.
• Citation: 173 F.2d 120
• Parties: INDEMNITY INS. CO. OF NORTH AMERICA v. KELLAS et al.
• Court: U.S. Court of Appeals — First Circuit

173 F.2d 120 (1949)

INDEMNITY INS. CO. OF NORTH AMERICA v. KELLAS et al.

No. 4377.

United States Court of Appeals First Circuit.

March 4, 1949.

As Amended March 8, 1949.

James P. Moriarty, of Springfield, Mass., for appellant.

Alton H. Grauman, of Boston, Mass. (Cohen, Bernkopf, Grauman & Goodman, of Boston, Mass., on the brief), for appellees Ednamarie Kellas and Ruth Kellas.

Before MAGRUDER, Chief Judge, WOODBURY, Circuit Judge, and PETERS, District Judge.

MAGRUDER, Chief Judge.

Indemnity Insurance Company of North America, a Pennsylvania corporation, appeals from a judgment dismissing its complaint for a declaratory judgment. The district court was of the view that it had jurisdiction of the complaint under the Federal Declaratory Judgment Act, 48 Stat. 955, now 28 U.S.C.A. § 2201, but declined to exercise such jurisdiction as a matter of discretion. Indemnity Ins. Co. of North America v. Kellas, D.C. 1948, 80 F.Supp. 497.

Prior to the occurrence of a certain automobile accident later to be mentioned, appellant had issued to the named insured, Willys-Overland Motors, Inc., an Ohio corporation, a blanket policy of liability insurance.

Under Insuring Agreements I-A and II-A, appellant agreed to pay on behalf of the insured, within the monetary limits stated in the contract, all sums which the insured should become obligated to pay by reason of tort liability for personal injuries or property damage sustained by any person or persons arising out of "the ownership, maintenance or use of any automobile". In respect of these agreements only, the unqualified word "insured", wherever used in the policy, is defined to include not only the named insured but also any person using an automobile "with the permission of the named insured".

Under Insuring Agreements I-B and II-B, appellant agreed to pay on behalf of the insured, within the monetary limits stated in the contract, all sums which the insured shall become obligated to pay by reason of tort liability for personal injuries or property damage sustained by any person or persons arising out of "all other operations of the insured as defined herein." By a later provision defining such "other operations of the insured", as here used, these operations were defined as covering "the manufacture, distribution, and sale of jeeps and other motor vehicles".

Under Insuring Agreement III, "in addition to the applicable limit of liability of this policy", appellant agreed that, as respects insurance afforded by this policy, it shall "defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent". As the district court construed the policy, we are inclined to think correctly, appellant's additional contractual obligation under Insuring Agreement III to defend suits "against the insured" is applicable only to suits against the named insured, and does not include suits against other persons operating an automobile with the permission of the named insured.¹

The policy further provided, in condition G, that the "insured" shall cooperate with the insurance company and upon the company's request shall attend hearings, assist in effecting settlements, securing and giving evidence, etc., and upon the company's request "the insured shall give to the company a signed statement of facts containing all available information deemed necessary by the company to determine and define its liability and rights under this policy." Condition H provided that no action shall lie against the company "unless, as a condition precedent thereto, the insured shall have fully complied with all the conditions hereof," nor until the amount of the insured's obligation to pay has been finally determined either by judgment against the insured, after actual trial or by written agreement of the insured, the claimant, and the company. Condition H also provided that any person who has secured such a judgment "shall thereafter be entitled to recover under the terms of this policy in the same manner and to the same extent as the insured", and that bankruptcy or insolvency "of the insured shall not relieve the company of any of its obligations hereunder."

The named insured, Willys-Overland, was the manufacturer and owner of a certain Willys station wagon, which it assigned to a field representative, one Alexander W. Kellas, Sr., with full authority as such agent and servant to operate the vehicle. On June 19, 1947, the station wagon was being operated on the streets of Hartford, Connecticut, by Alexander W. Kellas, Jr., hereinafter referred to as Junior, with his mother, Ruth Kellas, and his sister, Ednamarie Kellas, as passengers therein. The station wagon got out of control and crashed into an electric light pole on the sidewalk, as a result of which collision Ruth and Ednamarie Kellas allegedly received personal injuries.

Subsequently Ruth and Ednamarie filed their complaint in the Superior Court for the County of Hartford, Connecticut, against Willys-Overland Motors, Inc., and against Junior, seeking to recover damages for their respective injuries, which were set forth in separate counts. Since the plaintiffs and Junior, one of the defendants, were all citizens of Massachusetts, this case could not be removed to the federal courts for lack of the requisite diversity of citizenship.

The complaint of Ruth and Ednamarie alleged that the defendant Willys-Overland, owner of the station wagon, had assigned the same "to its employee, as servant and agent, one Alexander W. Kellas, Sr., with full authority to operate said vehicle"; that Kellas Sr., in accordance with the authority granted him by Willys-Overland, had entrusted the station wagon to the defendant Junior, his son, "and authorized him to operate said vehicle"; that the accident, in which the plaintiffs received their bodily injuries as passengers in the station wagon, was attributable to various negligent acts and omissions of Junior in operating the vehicle. Paragraph 6 of the complaint alleged that the said collision was "also caused as a result of the negligence of the defendant, Willys Overland Motors, Incorporated, in that the station wagon which it manufactured was defective in that it was improperly, unskillfully and negligently constructed and inspected, endangering the safety and lives of the occupants of said vehicle."² The damages claimed were $15,000 for Ruth and $20,000 for Ednamarie.

On February 28, 1948, a joint answer to the complaint in the tort action was filed on behalf of the defendants.³ The answer admitted that Willys-Overland had entrusted the station wagon to Kellas Sr. with full authority to operate said vehicle; but denied the allegation that Kellas Sr., in accordance with such authority, had entrusted the vehicle to Junior and authorized him to operate it. The answer also denied the various allegations of negligence both on the part of Junior and of Willys-Overland. As a second defense, the answer alleged that Junior was in an unfit physical condition to have operated the vehicle, which the plaintiffs knew or should have known, and therefore they assumed the risk of injury. As a third defense, the answer set up contributory negligence of the plaintiffs in accepting a ride in the station wagon knowing that Junior was in no proper condition to operate the same. On March 4, 1948, the plaintiffs filed a replication denying the allegations contained in these special defenses.

On March 23, 1948, the plaintiffs filed an amendment to their complaint so as to allege that Kellas Sr. was entrusted with the station wagon not only with authority to operate it but also with authority to "entrust others with the operation thereof, particularly his son, the defendant, Alexander W. Kellas, Jr." Also, the complaint was amended so as to allege that Kellas Sr., in accordance with the authority granted him by Willys-Overland, had entrusted the station wagon to Junior and had authorized him to operate said vehicle "as servant and agent of the defendant, Willys Overland Motors, Incorporated." What answer, if any, has been filed to these amended allegations of the complaint does not appear.

Meanwhile, on March 11, 1948, the insurance company filed the present complaint for a declaratory judgment. Joined as defendants were Willys-Overland, the named insured, Junior, Ruth and Ednamarie. The complaint set forth the issuance of the liability insurance policy aforesaid, the happening of the accident aforesaid while the motor vehicle owned by Willys-Overland was being driven by Junior, and the pendency in the Connecticut state court of the damage suit brought by Ruth and Ednamarie against Willys-Overland and Junior. The complaint alleged that at the time of the accident the automobile was being operated by Junior without the knowledge, consent or permission, express or implied, of Willys-Overland, and was not upon any business on its behalf; that by reason of such fact the insurance company would be under no obligation under the terms of the policy "to defend said action upon behalf of the said Alexander W. Kellas, Jr. or to pay any judgment rendered against him or against Willys-Overland Motors, Incorporated." Furthermore, the complaint alleged that Junior, Ruth and Ednamarie have claimed that, under the terms of the insurance policy, the plaintiff is obligated to pay any judgments against Junior or Willys-Overland which may be rendered in the pending damage suit, "which liability this plaintiff denies." In addition to denying that Junior was an "insured" within the terms of the policy, the plaintiff further alleged that if Junior was such an "insured" he has violated condition F of the policy requiring him to give notice of the accident, and condition G requiring him to cooperate with the insurance company in the furnishing of information needed for the preparation of his defense. The prayer of the complaint was...