178 F.2d 322 (5th Cir. 1949), 12726, Anchor Cas. Co. v. McCaleb

Docket Nº:12726.
Citation:178 F.2d 322
Party Name:ANCHOR CASUALTY CO. v. McCALEB, et al.
Case Date:December 19, 1949
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 322

178 F.2d 322 (5th Cir. 1949)



McCALEB, et al.

No. 12726.

United States Court of Appeals, Fifth Circuit.

December 19, 1949

Rehearing Denied Jan. 27, 1950.

Under liability policy, insurer was required to pay expenses of defending claims against insured as well as to pay the liability provided for by policy, and insurer could not avoid obligation to pay expenses of defending claims by paying money into court.

Page 323

A. D. Dyess, Houston, Texas, for appellant.

William C. Perry, Jr., Jack Binion, Harold A. Crawford, B. B. Patterson, Houston, Texas, for appellees.

Before HOLMES, McCORD, and WALLER, Circuit Judges.

HOLMES, Circuit Judge.

This action was instituted as a suit for a declaratory judgment pursuant to Section 274(d) of the Judicial Code, now Title 28 U.S.C.A. §§ 2201 and 2202, to secure a construction of certain portions of a liability policy issued by appellant to the appellees. The claims are for property damages caused by an oil-well explosion. Appellant is a corporation, duly organized under the laws of Minnesota, and has a permit to do business in Texas. The appellees are citizens of Texas; there is complete diversity of citizenship between the parties; and the amount involved is in excess of $3000, exclusive of interest and costs.

The material facts, which were submitted to the court without a jury, may be briefly stated as follows: On July 5, 1947, Nichols McCaleb, H. A. Potter, Sr., and M. G. Hansbro, became associated as joint venturers in a mining partnership formed for the purpose of drilling for oil under a lease jointly owned by them. Potter and Hansbro agreed to advance the money necessary to meet the drilling expenses, and McCaleb agreed to take charge of the actual drilling operations. All parties were to consult on such matters as determining the sand in which completion would be sought, the point at which to perforate, and questions of like importance. In furtherance of the enterprise, H. A. Potter, Jr., was appointed trustee to hold legal title to the lease, and was authorized to countersign checks drawn by McCaleb on the joint account. At the request of Potter, Sr., and on behalf of the three joint venturers, H. A. Potter, Jr., secured the issuance of the policy in controversy through appellant's authorized agent. Potter, Jr., disclosed to the agent all of the material facts with reference to the partnership and the joint venture with reference to the drilling of this well. After being fully advised of all the facts, said agent decided that the policy should be issued in McCaleb's name, because the permit to drill, which was issued by the Texas Railroad Commission, was in his name. The premiums on the policy were paid by Hansbro and H. A. Potter, Sr.

Page 324

On March 17, 1948, while this policy was in full force and effect, and while the named insureds were attempting to accomplish their purpose, the oil well blew in with a tremendous gas pressure. It was a wild well for a period of approximately fifty hours before it was brought under control. During the time the well was out of control, considerable quantities of oil and gas distillate, sand, and mud, were blown into the air and carried by the...

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