Kipka v. Chicago & Northwestern Railway Company

• Decision Date: 18 September 1968
• Docket Number: No. 3-65 Civ. 183.,3-65 Civ. 183.
• Citation: 289 F. Supp. 750
• Parties: Joseph E. KIPKA, Plaintiff, v. CHICAGO & NORTHWESTERN RAILWAY COMPANY, a corporation, and Atchison, Topeka and Santa Fe Railway Company, a corporation, and Preco, Incorporated, Defendants. The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Third-Party Plaintiff, v. THEO. HAMM BREWING COMPANY, Third-Party Defendant. THEO. HAMM BREWING COMPANY, Fourth-Party Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Fourth-Party Defendant.
• Court: U.S. District Court — District of Minnesota

289 F. Supp. 750

Joseph E. KIPKA, Plaintiff, v. CHICAGO & NORTHWESTERN RAILWAY COMPANY, a corporation, and Atchison, Topeka and Santa Fe Railway Company, a corporation, and Preco, Incorporated, Defendants.

The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Third-Party Plaintiff, v. THEO. HAMM BREWING COMPANY, Third-Party Defendant.

THEO. HAMM BREWING COMPANY, Fourth-Party Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Fourth-Party Defendant.

No. 3-65 Civ. 183.

United States District Court D. Minnesota, Third Division.

September 18, 1968.

Maun, Hazel, Green, Hayes, Simon & Aretz, by Merlyn C. Green, St. Paul, Minn., for fourth-party plaintiff.

Diessner, Wurst, Bundlie & Carroll by A. Thomas Wurst, Minneapolis, Minn., for fourth-party defendant.

NEVILLE, District Judge.

Involved here is a question of insurance coverage, presented by a fourth-party complaint lodged by Theo. Hamm Brewing Company (Hamm) against Aetna Casualty and Surety Company (Aetna). The case was tried by the court without a jury on an agreed stipulation of facts.

On May 26, 1965 Joseph Kipka, the original plaintiff in this action and an employee of Hamm was injured while assisting in the loading of cases of beer into a railroad boxcar owned by the Atchison, Topeka and Santa Fe Railway (Santa Fe) and delivered to Hamm's siding by the Chicago & Northwestern Railway Company (C & NW). The injuries sustained by Kipka were occasioned by certain load divider doors within the boxcar manufactured by Preco, Incorporated, becoming detached and falling upon him. The injuries arose out of and in the course of the employment of Kipka as an employee of Hamm. Hamm, as a self-insurer, paid Kipka benefits totaling $3,357 pursuant to the provisions of the Workmen's Compensation Act of Minnesota.

In June 1965 Kipka as plaintiff brought this diversity action to recover $125,000 from Santa Fe and C & NW for his injuries, alleging negligence and breach of warranty. Preco was subsequently named as an additional defendant. Thereafter, Santa Fe served on Hamm a third-party complaint seeking recovery by way of indemnification from it. At the time of the accident Hamm carried with Aetna a comprehensive liability insurance policy. After service upon Hamm of the third-party complaint, Hamm tendered its defense to Aetna. Aetna refused. Hamm thereupon undertook the defense itself and served a fourth-party complaint on Aetna.

When the case was called for trial, a compromise settlement was effected between and among all parties except Aetna, resulting in the action being dismissed with prejudice as to all parties and as to all claims with the exception of the instant fourth-party claim. By the settlement the defendants jointly paid Kipka $15,000 and Hamm $1,500, the latter "in full release of all claims which Hamm may have by way of subrogation or workmen's compensation * * * benefits paid * * *." Hamm theretofore had paid Kipka $3,357, and had incurred in its defense attorney fees in the stipulated reasonable amount of $4,400, a total (less the $1,500 received in the aforesaid settlement) of $6,257 for which it claims Aetna is liable. It claims that Aetna breached its insurance contract in refusing the tender of the defense and in failure to pay $1,857, the balance paid by it to Kipka under the Workmen's Compensation Act.

Both parties have addressed themselves to the issue of this court's subject matter jurisdiction over the fourth-party action, admittedly involving diverse citizenship but less than $10,000 now that the main action has been settled. It is clear that this court retains jurisdiction over this fourth-party action. The court's jurisdiction attaches when the complaint is filed and subsequent proceedings ordinarily will not divest the court of jurisdiction once attached. Stewart v. Shanahan, 277 F. 2d 233, 236 (8th Cir. 1960). As set forth in the pleadings, the requisite diversity of citizenship and jurisdictional amount were present in the main action. It is well settled that third-party claims, and thus logically fourth-party claims, which are ancillary to the main action, need no independent jurisdictional grounds. See, Agrashell, Inc. v. Bernard Sirotta Co., 344 F.2d 583, 585 (2nd Cir. 1965); Waylander-Peterson Co. v. Great Northern Ry., 201 F.2d 408, 415, 37 A.L.R.2d 1399 (8th Cir. 1953). Further, jurisdiction over a third-party action, or in this case a fourth-party action, is not lost when the main action is settled. See, Dery v. Wyer, 265 F.2d 804, 808 (2nd Cir. 1959).

The essential question is whether the insurance contract between Hamm and Aetna provided coverage which obligated Aetna to accept the tender of the defense by Hamm and to pay any judgment that might ensue or that might have ensued against Hamm. The relevant portions of the insurance contract read as follows:

Coverage C:

"To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident."

Insuring Agreement II:

"With respect to such insurance as is afforded by this policy, the company shall:

(a) Defend any suit against the insured alleging such injury, * * * and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient."

Exclusion (f):

"This policy does not apply:

Under Coverage C, except with respect to liability assumed by the Insured under a contract as defined herein, to bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of his employment by the insured;"

Definition of Contract in Exclusion (f):

"The word `contract' means, if in writing, a lease of premises, easement agreement, agreement required by municipal ordinance, sidetrack agreement, or elevator or escalator maintenance agreement."

It is the position of Hamm that Coverage C and Insuring Agreement II provided coverage and placed upon Aetna the responsibility of defending the third-party action and paying for any resulting liability. Hamm argues that the third-party claim of Santa Fe against Hamm fell outside the provisions of Exclusion (f). While recognizing that Exclusion (f) relieves Aetna of responsibility for a claim brought against Hamm by an employee, Hamm asserts that the third-party claim of Santa Fe alleged a claim of indemnification for the breach of an independent duty owed by Hamm to Santa Fe. This duty, says Hamm, as stated in the third-party claim was threefold: (1) an undertaking to perform the loading of the boxcar in a competent and safe fashion; (2) an implied warranty that the work would be done in such fashion as not to expose Santa Fe to liability; and (3) a liability on the ground that the injuries occurred through the primary negligence of Hamm as opposed to the secondary negligence, if any, of Santa Fe. Hamm though not strongly urging ground (3) contends that Aetna did have the duty to defend at least under (1) and (2) above.

Aetna, on the other hand, contends initially that Coverage C is inapplicable, even without looking to Exclusion (f), because the indemnity claim against Hamm was not a sum which Hamm might be legally obligated to pay "as damages because of bodily injury * * caused by accident." Aetna strongly urges that in any event, such insurance coverage if applicable is excluded by Exclusion (f) because the third-party claim was based on bodily injuries to one of Hamm's employees "arising out of and in the course of his employment by the insured."

Under the Minnesota Workmen's Compensation Act, an injured employee is barred from any suit for damages against his employer. Minn.Stat. § 176.031. However, an employee may sue a third party tort-feasor for damages, notwithstanding the payment to him of compensation by his employer, where the third party is not engaged in a common enterprise with the employer or covered by the Act. Minn.Stat. § 176.061(5). In addition, such third party has been permitted to bring an indemnification action against the employer for an amount based on the third party's liability to the employee even though the employee could not sue the employer directly. In this regard, it is said that the Workmen's Compensation Act does not encompass nor limit the rights of a third party against the employer. See, Hendrickson v. Minnesota Power & Light Co., 258 Minn. 368, 104 N.W.2d 843 (1960); Lunderberg v. Bierman, 241 Minn. 349, 63 N.W.2d 355, 43 A.L.R.2d 865 (1954).¹

In view of the effected settlement of the principal case as above described, there is no verdict or judgment by Kipka against Santa Fe, C & NW or Preco for which as third-parties they might now be claiming recovery from Hamm, and which Hamm in turn might be asking Aetna to pay.

The parties in fact have stipulated that "if Hamm be entitled to recover against Aetna in this matter, the amount thereof should be and is in the sum of $6,257.00 * * *." Despite this stipulation, the court is of the view that there are two distinct questions presented to each of which there is a different answer. The first is whether Hamm is entitled to recover the balance not realized out of the general settlement of the amount paid out to Kipka in the form of Workmen's Compensation benefits, i. e., $1,857.00 — to which the answer is in the negative. The second is whether Hamm is entitled to the amount it expended for attorney's fees to defend itself upon Aetna's refusal of the tender of the defense, i. e., $4,400.00 — to which the answer is in the affirmative. Different considerations govern each question.

It can perhaps be argued that Hamm, by agreeing in the general settlement of the main action to accept $1,500.00 in full when it might have had, and certainly had there been a jury verdict clearly would have had a right of subrogation...