United States Fidelity & Guar. Co. v. Virginia Eng. Co.

• Decision Date: 25 May 1954
• Docket Number: No. 6750.,6750.
• Citation: 213 F.2d 109
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. VIRGINIA ENGINEERING CO., Inc.
• Court: U.S. Court of Appeals — Fourth Circuit

213 F.2d 109 (1954)

UNITED STATES FIDELITY & GUARANTY CO. v. VIRGINIA ENGINEERING CO., Inc.

No. 6750.

United States Court of Appeals, Fourth Circuit.

Argued April 14, 1954.

Decided May 25, 1954.

W. F. Hazen, Richmond, Va., and William E. Allaun, Jr., Newport News, Va. (Blake, Taylor and Hazen, Richmond, Va., and Newman, Allaun & Downing, Newport News, Va., on the brief), for appellant.

E. Sclater Montague, Hampton, Va. (Montague, Ferguson, Holt & Cumming, Hampton, Va., and Canada, Russell, Turner & Alexander, Memphis, Tenn., on the brief), for appellee.

Before PARKER, Chief Judge, DOBIE, Circuit Judge, and HAYES, District Judge.

PARKER, Chief Judge.

This is an appeal from a judgment for plaintiff on a policy of liability insurance. The plaintiff is the Virginia Engineering Company which had been engaged in constructing under contract a manufacturing plant for the International Harvester Company near Memphis, Tennessee. The defendant is the United States Fidelity & Guaranty Company, which had issued a policy of general liability insurance to the Engineering Company in which it agreed to pay on behalf of that company all sums that the latter might become obligated to pay by reason of liability imposed upon it by law on account of death or personal injury due to accident. The action was brought by the Engineering Company to recover from the Guaranty Company the sum of $43,966.53 with interest, being the amount of a judgment for personal injuries recovered by one Sartin against the Engineering Company and the Harvester Company, paid by the latter company under threat of execution, and deducted by it from moneys due the Engineering Company under the construction contract, which provided that the Engineering Company should indemnify and save the Harvester Company harmless from all claims of this character. The Guaranty Company defended on the ground that the payment of the judgment by the Harvester Company extinguished all liability thereunder and that the reimbursement exacted of the Engineering Company was in discharge of a liability assumed by contract and not covered by the Guaranty Company's policy. The case was heard by the judge without a jury; and, from judgment in favor of the Engineering Company, the Guaranty Company has appealed.

The facts out of which the claim of Sartin arose are that he was not an employee of the Engineering Company, but of a building contractor engaged in constructing houses on the premises of the Harvester Company. He was injured by coming in contact with a high voltage electrical current carried by wires maintained by the Engineering Company, which had negligently failed to provide proper safeguards against the danger thus presented. He sued both the Engineering Company and the Harvester Company and recovery was had against both. Recovery against the Harvester Company was sustained on the theory that it rested under the nondelegable duty to Sartin as an invitee on its premises, of seeing that proper preventive measures were taken to guard against the danger of the high voltage current, even though this and the wires that carried it were under the control of the Engineering Company, an independent contractor. See International Harvester Co. v. Sartain, 32 Tenn.App. 425, 222 S.W. 2d 854, 864-868.

The provision of the policy upon which plaintiff relies obligates the company:

"* * * To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law, or assumed by him under contract as defined herein, for damages, including damages for care and loss of services, because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person or persons and caused by accident."

Among the exclusion clauses of the policy is the following:

"This policy does not apply:

"(a) to liability assumed by the insured under any contract or agreement not defined herein;

"(3) Definitions (a) Contract. The word `contract\' shall mean a warranty of goods or products or, if in writing, a lease of premises, easement agreement, agreement required by municipal ordinance, sidetrack agreement, or elevator or escalator maintenance agreement."

The Guaranty Company contends that the liability of the Engineering Company which is the basis of the action here is an assumed liability within the meaning of the foregoing exclusion clause because of the indemnity provision of the contract between the Engineering Company and the Harvester Company, which is as follows:

"1. The Contractor agrees to protect, indemnify and save harmless the International Harvester Company, its servants, agents and employees, from and against any and all claims, demands, damages, suits, losses, costs, attorney fees, liability, awards, judgments and expenses of whatsoever nature for damage to property or for injury, including death, to any person or persons, including the servants, agents and employees of the parties hereto, resulting from or in any way growing out of the acts or omissions of the Contractor, the Contractor\'s agents, servants, or employees, or of any sub-contractor or sub-contractor\'s agents, servants, or employees."

"2. The Contractor shall provide, during the progress of his work, every and all safeguards and protection against accidents, injury and damage to persons and property, and shall be solely responsible for all loss, damage or injury to any work, materials, or property, and any injury or death to any person whomsoever, whether workman or otherwise, where such loss, damage, injury or death occurs on or about said structure or premises or elsewhere in connection with or as a result of the construction of the work, * * *".

After the Tennessee courts had affirmed the judgment in favor of Sartin against the Engineering Company and the Harvester Company, the Guaranty Company offered to pay one-half of the judgment if the Harvester Company would pay the other half, but this the Harvester Company refused to do. Counsel for Sartin then threatened to issue execution against the Harvester Company; and, to prevent this, that company, having theretofore withheld from payments due the Engineering Company under the construction contract a sufficient amount to pay this and certain other judgments, paid this judgment and charged the amount thereof against the payment so withheld. The right of the Harvester Company to do this was sustained in a suit instituted by the Engineering Company to recover the balance due under the contract. In that suit the right of setoff was asserted under the indemnity provision of the contract as well as because primary responsibility for the injury rested with the Engineering Company. The court found with the Harvester Company on the first of these grounds and did not find it necessary to consider the second ground.

We agree with the District Judge that the liability of the Engineering Company for the injuries sustained by Sartin was one imposed by law within the coverage clause of the policy and not merely one assumed under contract within the meaning of the exclusion clause. The Engineering Company was entering into a construction contract in which liabilities of this sort might be incurred as a result of negligence on the part of its agents and servants; and the purpose of the insurance policy was to protect against liability arising from such negligence. The indemnity clause in the construction contract did not assume liability with respect to any claim for which the Engineering Company would not itself be liable at law, but merely undertook to protect the Harvester Company against liability for which the Engineering Company was responsible. To construe the exclusion clause to relieve the Guaranty Company of liability for such claims would be to write into the policy a restriction which it does not contain and which, we think, could not have been within the contemplation of the parties. It is not reasonable to suppose that, when the insured was taking insurance to protect against liability imposed by law, it was intended to exclude coverage of claims for which the law imposed liability on the insured, merely because insured had agreed to protect another against secondary liability on account of such claims.

The Guaranty Company properly admits that it would be liable under its policy if Sartin had obtained and enforced judgment against the Engineering Company alone or, having obtained judgment against both the Engineering Company and the Harvester Company, had by legal process collected it from the Engineering Company; but the fact that judgment was obtained against the Harvester Company in addition to the Engineering Company can make no difference, for the primary liability established by the judgment was that of the Engineering Company and there can be no question but that, upon payment of the judgment, the Harvester Company, being only secondarily liable, had the right to recover against the Engineering Company for any amount paid thereunder. The liability of the Engineering Company established by...