Allstate Insurance Company v. Charneski
Citation | 286 F.2d 238 |
Decision Date | 19 December 1960 |
Docket Number | No. 13076.,13076. |
Parties | ALLSTATE INSURANCE COMPANY, an Illinois Corporation, Plaintiff-Appellee, v. Leonard CHARNESKI, Edwin Charneski, Laverne Gehrt, Bertha Mech, Arthur Mech, and Heritage Mutual Insurance Company, a Wisconsin Insurance Corporation, Defendants-Appellants. |
Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Richard P. Tinkham, of Smith, Puchner, Tinkham & Smith, P. L. Crooks, of Crooks & Crooks, Wausau, Wis., for appellants.
Hiram D. Anderson, Jr., of Peickert, Anderson & Fisher, Stevens Point, Wis., Ralph M. Lauer, Clintonville, Wis., for appellee.
Before HASTINGS, Chief Judge, and KNOCH and CASTLE, Circuit Judges.
Allstate Insurance Company, plaintiff-appellee, instituted this diversity action in the United States District Court for the Western District of Wisconsin. Allstate sought a declaratory judgment that it provided no insurance coverage for the 1950 Ford automobile operated by defendant, Leonard Charneski, at the time of a collision with an automobile driven by defendant, LaVerne Gehrt. Leonard Charneski's brother, Edwin, who claimed ownership of the 1950 Ford, the passengers in the Gehrt automobile, and the insurer of the Gehrt automobile were joined as defendants. A motion by defendants to dismiss the complaint for failure to state a claim upon which relief could be granted was denied. By defendants' answers issue was joined on the question of ownership of the Ford automobile, and the case proceeded to jury trial. The jury found that Leonard Charneski was the owner of the 1950 Ford at the time of the collision, and a declaratory judgment was entered as prayed by Allstate. Defendants moved to alter or amend the judgment or for a new trial. The motion was denied, and defendants appealed.
The contested issues presented by this appeal are:
(1) Whether an action will lie under the federal Declaratory Judgments Act to determine insurance coverage involving an automobile accident in the State of Wisconsin.
(2) Whether there was credible evidence from which the jury could conclude that ownership of the automobile was in Leonard Charneski.
(3) Whether comments, statements and questions by the trial judge or erroneous instructions require a new trial.
We shall first consider the question raised in contested issue No. 1 above set out.
It is conceded that plaintiff could not maintain such an independent action in a Wisconsin state court. This is so because of the holding of the Supreme Court of Wisconsin in New Amsterdam Casualty Co. v. Simpson, 1941, 238 Wis. 550, 555, 300 N.W. 367, 369, wherein it is said:
(Emphasis added.)
As is shown in New Amsterdam, unlike the practice in many other states, under Wisconsin statutes, in a negligence action the insurance carrier is made directly liable to the injured party; and the plaintiff in such an action may join an insurance company in any action on account of any claim against the insured. In Elliott v. Indemnity Ins. Co., 1930, 201 Wis. 445, 230 N.W. 87, it was held that the insured was not even a necessary party to an action for damages brought directly against the insurer for the negligent operation of the automobile.
Thus, the Supreme Court of Wisconsin has declared it to be the public policy of that state that an insurance company may not bring a separate declaratory judgment action under the Wisconsin Uniform Declaratory Judgments Act1 as being in contravention of the legislative policy declared in its direct action statute. Such state policy commands that all issues arising in a negligence action, including insurance policy coverage, be determined in a single action.
In the instant case we are required to determine whether in a diversity action under the federal Declaratory Judgments Act, 28 U.S.C.A. § 2201, a federal district court can assume jurisdiction in contravention of the declared state policy of Wisconsin. The resolution of this question brings into play the applicability of the doctrine of Erie R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188.
In 1938, the Supreme Court reversed a century of precedent, established in Swift v. Tyson, 1842, 16 Pet. 1, 10 L.Ed. 865, which had held that except where state statutes controlled, the law to be applied in diversity cases was federal common law. The Court, in Erie R. Co. v. Tompkins, held that constitutionally there could be no federal common law establishing rules of decision for diversity cases.2 Henceforth, the Court stated, the rules of decision to be applied in diversity cases were state statutes and state common law. Such a result discouraged forum shopping between the state court and a federal district court sitting in the same state; it promoted uniformity within the state. The basis of the decision was two-fold: First, constitutional theory that Article III of the Constitution gives to federal courts power to "make law" only in those areas which are delegated to federal legislative authority under Article I. Second, the statutory interpretation in Swift v. Tyson of Section 34 of the Federal Judiciary Act, 28 U.S. C.A. § 1652, limiting the definition of "law" to statutes and excluding court-made common law, was reversed.
The Erie decision became characterized as requiring federal courts to apply the substantive law of the state. However, much has been written since 1938 dealing with the complexities of the Erie decision. To a large degree, these decisions have focused on the problem of when it is necessary, under the Erie doctrine, for federal courts to adopt state rules of decision which are concededly "procedural" in other contexts. Such being the case, under the current standards set by Supreme Court decisions, the simple "substantive-procedural" classification will not suffice.
In Klaxon Co. v. Stentor Elec. Mfg. Co., 1941, 313 U.S. 487, 496-497, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477, the Supreme Court held that under Erie, a federal district court must refer to the state's conflict of law rules, rather than apply a "general law" of conflicts. Speaking for the Court, Mr. Justice Reed said:
In Guaranty Trust Co. v. York, 1945, 326 U.S. 99, 108-110, 65 S.Ct. 1464, 1469, 89 L.Ed. 2079, the Court in examining the effect, under the Erie doctrine, of a state statute of limitations to a federal equity case, recognized the futility of the mechanical approach of applying the labels of "substantive" and "procedural" rules. In this context the observations of Mr. Justice Frankfurter are pertinent:
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