United States Fidelity & Guar. Co. v. Tri-State Ins. Co., 6426.

• Decision Date: 31 December 1960
• Docket Number: No. 6426.,6426.
• Citation: 285 F.2d 579
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Appellant, v. TRI-STATE INSURANCE COMPANY, a corporation, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

285 F.2d 579 (1960)

UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Appellant, v. TRI-STATE INSURANCE COMPANY, a corporation, Appellee.

No. 6426.

United States Court of Appeals Tenth Circuit.

December 31, 1960.

Bryan W. Tabor, Tulsa, Okl. (Joseph A. Sharp and O. H. (Pat) O'Neal, of Rucker, Tabor, Best, Sharp & Shepherd, Tulsa, Okl., on the brief), for appellant.

Loyd Benefield, Oklahoma City, Okl. (Robert D. Hudson, Tulsa, Okl., on the brief), for appellee.

Before MURRAH, Chief Judge, LEWIS, Circuit Judge, and RICE, District Judge.

LEWIS, Circuit Judge.

This appeal involves the rights and obligations of two insurance companies as against each other for costs expended in the successful defense of liability claims prosecuted in the state courts of Oklahoma against an insured afforded coverage in each company's respective policy. The action was initiated by the United States Fidelity and Guaranty Company (U.S.F. & G.) as plaintiff below, to recover the sum of $17,449.15 so expended. The District Court for the Northern District of Oklahoma granted the motion of the defendant Tri-State Insurance Company (Tri-State) for summary judgment and, since no factual dispute survived the pre-trial procedures, the parties agree that summary disposition was proper. Our consideration is thus limited to the application of proper law to the undisputed facts of the case.

The incident giving rise to the state court liability claims made against the common insured, Kerr Glass Company (Kerr), was an automobile accident involving a non-owned truck being used by Kerr for a shipment of that company's product in interstate commerce. The U.S.F. & G. policy was issued directly to Kerr as a named insured and is referred to as a comprehensive general automobile liability policy. The Tri-State policy was issued to the owner-operator of the truck, one Barsh, as the named insured but defined "insured" as including "any person or organization legally responsible for the use (of the truck), provided the actual use (of the truck) is by the named insured or with his permission * * *." It is not disputed that Kerr was an additional insured as defined in the Tri-State policy and as applied to the circumstance of the accident premising the claims made against Kerr.

Both policies contained standard indemnification provisions, the policy limit of U.S.F. & G. being $100,000-$200,000 and Tri-State being $10,000-$20,000. Other applicable provisions of both policies provided:

"Insuring Agreements.

"II. Defense, Settlement, Supplementary Payments.

"As respects the insurance afforded by the other terms of this policy the Company shall:

"(a) defend any suit against the Insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; * * *.

"The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the Company in addition to the applicable limit of liability of this policy.

"Conditions

* * * * * *

"13. Other Insurance. If the Insured has other insurance against a loss covered by this policy the Company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance under this policy with respect to loss arising out of the use of any non-owned automobile shall be excess insurance over any other valid and collectible insurance available to the Insured, either as an Insured under a policy applicable with respect to such automobile or otherwise."

When claims arose after the accident involving the insured truck Tri-State settled with all claimants on behalf of all the insureds under its policy except Kerr and expended some $10,000 in so doing.¹ Covenants not to sue were taken which did not protect Kerr. Upon institution of the state court actions against Kerr, Tri-State refused to defend and thereupon U.S.F. & G. undertook the sole defense in behalf of Kerr. At the trial court level a judgment against Kerr was obtained in the amount of $76,000. Upon appeal the Supreme Court of Oklahoma relieved Kerr of the judgment in its entirety. See Barsh v. Mullins, Okla., 338 P.2d 845. The amount sought in the instant action is the reasonable cost, including attorneys' fees of the defenses made by U.S.F. & G.

In support of its contention that the court erred in granting an adverse summary judgment below, U.S.F. & G. asserts that Tri-State was guilty of bad faith toward both Kerr and toward it as the carrier of excess insurance² for Kerr. Emphasis is placed upon Tri-State's failure to settle for or protect Kerr while settling for its other insureds without exhausting its policy limits and its refusal to undertake the defense of Kerr against the claims made. These two aspects of...