Service Welding & Mach. Co. v. Michigan Mutual Liability Co.

• Citation: 311 F.2d 612
• Decision Date: 28 December 1962
• Docket Number: No. 14831.,14831.
• Parties: SERVICE WELDING & MACHINE COMPANY, Inc., and Great American Indemnity Company of New York, Plaintiffs-Appellants, v. MICHIGAN MUTUAL LIABILITY COMPANY OF DETROIT, MICHIGAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

311 F.2d 612 (1962)

SERVICE WELDING & MACHINE COMPANY, Inc., and Great American Indemnity Company of New York, Plaintiffs-Appellants, v. MICHIGAN MUTUAL LIABILITY COMPANY OF DETROIT, MICHIGAN, Defendant-Appellee.

No. 14831.

United States Court of Appeals Sixth Circuit.

December 28, 1962.

James G. Bowman, Louisville, Ky., Richard I. McIntosh, Claude S. Eddleman, Jr., Louisville, Ky., on brief, for appellants.

Gavin H. Cochran, Marshall, Cochran, Heyburn & Wells, Louisville, Ky., for appellee.

Before McALLISTER, Circuit Judge, BOYD, District Judge, and DARR, Senior District Judge.

DARR, Senior District Judge.

On and before February 11, 1955, one plaintiff-appellant, Service Welding & Machine Company, Inc. (Service Welding) owned two insurance policies which were in full effect, one being a fleet automobile liability policy issued by the other plaintiff-appellant, Great American Indemnity Company of New York (Great American), with minimum coverage of $25,000, and the other a public liability policy issued by defendant-appellee, Michigan Mutual Liability Company of Detroit, Michigan (Michigan Mutual), with minimum coverage of $100,000.

On February 9, 1955, on Service Welding's premises in Louisville, Kentucky, Service Welding's flat bedded tractor-trailer type truck was loaded with twenty-three cylindrical metal tanks. The tanks were secured on the bed of the trailer by chains. The tanks had been sold by Service Welding F. O. B. destination and consigned to Gulf Refining Company, at its bulk plant in Knoxville, Tennessee. The truck loaded with the tanks left Louisville on the morning of February 10, 1955, and arrived at Gulf's bulk station in Knoxville late in the same afternoon. Gulf's employees had gone home for the day. About 7 o'clock in the morning on February 11, 1955, Service Welding's driver, a Mr. Bell, drove the truck into the yard of Gulf's bulk station in Knoxville and delivered his load and gave the bill of lading therefor to Gulf's terminal superintendent. Thereupon the unloading went forward by Gulf's employees, one of whom was Mr. John B. Acuff. In the course of the unloading and after the chains had been removed or loosened, Mr. Acuff climbed upon the bed of the trailer and moved one tank for the purpose of inspection, whereupon other tanks began to slide or fall toward him, pushing him slightly. In stepping back to avoid the danger, his foot became enmeshed in a hole in the truck bed and he could not immediately get his foot out of the hole. He leaned far backward to avoid the oncoming tanks, finally twisting his foot out of the hole. His body position, when his foot was released, resulted in his falling from the back of the truck. Mr. Acuff received serious injuries in this accident. Mr. Bell, the driver, called Mr. Greer, President of Service Welding, on the day of the accident, reporting the accident and telling him how it occurred.

On Febuary 15, 1955, Mr. Hemstreet, the Division Manager for Gulf Refining Company, wrote to Service Welding a detailed recitation of all events happening at the time of the accident.

On February 15, 1955, Service Welding gave notice to Great American concerning the accident. Thereupon Great American made a thorough investigation of the circumstances and events relative to the accident and the extent of the injuries to Mr. Acuff.

On January 31, 1956, John B. Acuff instituted suit against Service Welding in the United States District Court at Louisville in which he sought judgment in the sum of $100,000.¹ Service Welding promptly notified Great American of Mr. Acuff's suit, transmitting to Great American copies of the summons and complaint. Great American took up the defense for Service Welding by filing an answer and preparing for trial by further investigation and by discovery methods. The negligence charged in Mr. Acuff's complaint was the maintaining and using of the defective trailer, particularizing that the truck was defective in that it had large holes in the bottom of the bed causing the tanks to roll or fall and that one of the holes became a trap in which Mr. Acuff's foot was caught.

On August 22, 1956, Mr. Acuff interposed a motion seeking to file an amended complaint. The motion was allowed on September 16th. The amended complaint adopted by reference the allegations made in the original complaint and charged further as an element of negligence the improper loading of the trailer on Service Welding's premises in Louisville.

After receiving a copy of the amended complaint, Service Welding concluded that there might be liability under Michigan Mutual's policy. On August 29, 1956, Service Welding's personal counsel gave written notice to Michigan Mutual of the Acuff accident and forwarded a copy of the amended complaint. Prior to the letter and on August 27, 1956, Mr. Greer talked on the telephone with a representative of Michigan Mutual pertaining to the coverage under its policy. This was the first notice Michigan Mutual had concerning the Acuff accident, the law suit in Louisville, and the law suit in Knoxville. Michigan Mutual did not otherwise have knowledge of the accident or of the law suits.

Michigan Mutual declined to defend the law suit or indemnify Service Welding on two grounds: (1) That the policy in question provides no coverage for the alleged accident out of which the litigation grew and (2) Service Welding's breach of the "Notice of Accident" and "Notice of Claim or Suit" conditions of Michigan Mutual's policy.

After negotiations and on November 12, 1956, Mr. Acuff's suit was fully settled by the payment of $30,000. Great American paid the sum of $25,000, the limit of its liability under its policy, and Service Welding paid $5,000. Notice had been given to Michigan Mutual of the settlement with the request that it pay its proportionate share. This request was declined by Michigan Mutual.

Thereafter, the law suit here under consideration was instituted in a state court and removed to federal court. The case seeks a judicial declaration requiring Michigan Mutual to pay its pro rata share of the amount paid in the settlement and for the expenses.

Michigan Mutual made defense by filing a motion for summary judgment.

All the facts were stipulated, including by reference the entire record in the Acuff case and a number of affidavits and letters. The stipulation reveals that the parties agreed that the settlement was provident.

The questions in the court below and now for decision here are (1) whether the proper notices of the accident and of the law suits were given to Michigan Mutual and (2) whether the policy covered the injuries for which the settlement was made.

The Michigan Mutual policy contained provisions requiring the insured to give notice of an accident "as soon as practical" and to give notice of a law suit "immediately." The District Judge was of the opinion that, under Kentucky law, the notice given by Service Welding to Michigan Mutual of the accident was as soon as practical. The District Judge pointed out the Kentucky law to be as announced in the case of Southern Surety Co. of New York v. Heyburn, 234 Ky. 739, 29 S.W.2d 6, to the effect that notice is sufficient to fix liability on the insured "* * * when there has been such an occurrence or accident as would lead the ordinarily prudent and reasonable man to believe that it might give rise to a claim for damages." Under the same reasoning, the District Judge concluded that the notice of the Acuff suits was not required because the negligence charged did not indicate liability within the coverage of Michigan Mutual's policy. In addition to the Heyburn case, the District Judge cited: Southeastern Telephone Co. v. Fidelity & Casualty Co. of New York, 272 Ky. 82, 113 S.W.2d 871; 18 A.L.R.2d 478; Dunn v. Travelers Indemnity Co., 123 F.2d 710 (C.A. 5); Greyhound Corp. v. Excess Insurance Co. of America, 233 F.2d 630 (C.A. 5).

Considering the history of the subject matter out of which arises this case, which we have heretofore detailed in some length, and the authorities, we are in accord with the findings and conclusions of the District Judge concerning the notice requirements of the policy, not only for the reasons assigned by the District Judge but for the reasons that will hereinafter appear.

We now reach the principal question in the case, that is, did the Michigan Mutual policy cover the accident resulting in Mr. Acuff's injuries.

It does not require the citation of authorities to sustain the principle that an insurance policy must be considered as a whole in determining what it purports to cover.

The provision of the Michigan Mutual policy relative to the hazards covered, so far as this investigation is concerned, is found in Item 7 of the Declarations and is as follows:

"Item 7. Description of Hazards. (a) Premises — Operations. All Premises and Operations Tank Building-metal-shop Clerical Office Employees N. O. C."

By the Insuring Agreements of its policy, Michigan Mutual contracted, "subject to the limits of liability, exclusions, conditions and other terms of this policy:

* * * * * *

"To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of liability imposed upon him by law * * * for damages * * * because of bodily injury * * * sustained by any person or persons and caused by accident."²

Exclusion (a) of the policy expressly provides:

"EXCLUSIONS

"This policy does not apply: (a) * * * to the ownership, maintenance or use, including loading or unloading, of * * * automobiles while away from such premises or the ways immediately adjoining, * * *."

In this case there is no difference in construing the policy to cover "Operations" only on Service Welding's premises and an interpretation that it is not so limited whereby Exclusion (a) applies. We will proceed with the decision in this case in the manner as presented by the parties, to-wit: Exclusion (a) does apply.

There is scant persuasive...