235 F.2d 679 (5th Cir. 1956), 15944, Maryland Cas. Co. v. Southern Farm Bureau Cas. Ins. Co.

Docket Nº:15944.
Citation:235 F.2d 679
Case Date:July 20, 1956
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 679

235 F.2d 679 (5th Cir. 1956)




No. 15944.

United States Court of Appeals, Fifth Circuit.

July 20, 1956

Rehearing Denied Sept. 10, 1956.

Courts are not free to extend coverage to risks and circumstances not covered by contract.

Page 680

John R. Gilliland, Memphis, Tenn., William H. Maynard, Clarksdale, Miss., for appellant.

Don G. Owens, Memphis, Tenn., Semmes Luckett, Clarksdale, Miss., for appellee.

Before RIVES, CAMERON and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This is another of the increasing flood of cases in which liability insurers seek to escape judgment by claiming that another should bear the load. This frequently puts the assured, who through unusual prudence obtains two or more coverages, between the upper and the nether millstone and, in the place of the feeling of assurance (single or double) he finds himself facing not only the damage claimant with prospects of high judgment and cost, but a two, three or four-cornered free-for-all with as many underwriters whose only point of unanimity is: this policy doesn't apply because another (always a different company) does. This casts the insurers in strange and unique roles-- echoing, for example, the refrain so often heard against them, that the policy, if ambiguous or of doubtful meaning, must be most liberally construed in favor of the assured. And, then, almost invariably, through the plea of subrogation, omnibus extensions or other accessible legal fictions, they then take upon themselves the garb of the assured, the injured party, or at least someone with an inviting equitable appeal.

We have that here: Kyle and his family Corporation, Kyle Manufacturing Company, obtained two separate policies, at least one-- maryland Casualty-- on the strong representations by its agent that the other (Farm Bureau) policy did not afford coverage. An accident occurred. Kyle, his employee, Shull, and the Corporation were all sued, and after trial under full reservation of rights, a judgment had. Maryland, who alone insured the Corporation whose work alone was being done, contends that it owes nought because, to its fortune, Kyle was insured personally by Farm Bureau.

Kyle is a successful Mississippi planter with extensive agricultural operations. Thinking that, with growing mechanization on his plantations, it was good business to diversify, he organized a corporation, Kyle Manufacturing Company, in 1952, the stock of which was owned by his family but which was operated as a distinct enterprise in the manufacture of furniture. It was no mere hobby, and in the year prior to the accident, the Corporation, with a labor force of over twenty-five employees, had a volume of business approaching $200, 000.00. Of course, such a business required transportation which Kyle, as the chief executive officer of the Corporation, determined would come from two sources: one, commercial over-the-highway carriers and, two, when the first were not available or suitable, any one or more of the large fleet of some thirteen motor trucks owned and used by him as a planter. This included, as most frequently used, the 1952 Chevrolet pickup truck involved in this accident.

Maryland was aware of these two distinct enterprises. At the time it began soliciting the Corporation's Workmen's Compensation business, its agent strongly advised Kyle to procure from Maryland a Comprehensive General-Automobile Liability Policy since, concerning the Corporation's regular use of the plantation's trucks, he warned, 'well, you are not covered on trips that the factory might be involved in.' Whether he got this or something else, Kyle's purpose was plain for, '* * * it was agreed that he (Maryland's agent) would write a policy covering trips involving Kyle

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Manufacturing Company.' The policy was issued and it insures the Corporation's legal liability for damages occasioned by the use or operation of automobiles whether owned, hired, or borrowed.

In the meantime, Kyle, individually, continued his longtime practice, known to Maryland, of insuring his farm fleet with Southern Farm Bureau Casualty Insurance Company. Except for the two Buick sedans declared to be used as 'B & P' (business and pleasure), all of the vehicles were listed as 'Comm.' (commercial).

On November 24, 1953, the Corporation needed to obtain some supplies at Tullahoma, Tennessee. Kyle, as he normally did, made the pickup available along with Shull, one of his farm employees. The arrangement was for the Corporation to pay for all-out-of pocket expenses of operation. On this corporate trip the accident occurred with serious injuries to third parties. This was, by all tests business and legal, the Corporation's business and the Corporation's liability. Kyle in his individual capacity had nothing to do with this. To be sure, the truck was his, Shull was in hie normal general employ. But used here on corporated business, at corporate expense, under corporate control, operation of the truck was not his personal responsibility.

He was, however, dragged into this by Maryland who, to escape an otherwise clear obligation under its policy to defend and indemnify, urged that by other express terms of its policy, it was not to be liable for non-owned 1 vehicles if other valid and collectible insurance 2 was available. In the exploratory probing for 'other insurance', carried on with relative safety 3 from knowledge that it was quite unlikely that any 'other' insurer could turn the tables on it, Maryland's Geiger counter shortly reacted when it turned up Kyle's Farm Bureau Policy-What made the Farm Bureau Policy such a strike was the traditional Omnibus Clause 4 extending, in effect, the insurance

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to persons using the automobile with the permission of the named insured or an organization legally responsible for such use.

On it, Maryland then argued that since the truck was being used by the Corporation with permission of the named insured (Kyle personally) the Corporation is automatically included as a additional insured and, if there is any reason why it is not so directly, it actually has the same status since Shull was, without a doubt, using the truck with Kyle's consent and the Corporation, his temporary employer, would be a 'person or organization legally responsible for the use thereof.' Finally, it says, the Corporation as its assured undertook further to subrogate 5 Maryland to all of the Corporation's rights...

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