Hardberger & Smylie v. Employers Mut. L. Ins. Co. of Wis.

• Decision Date: 12 July 1971
• Docket Number: No. 559-70.,559-70.
• Parties: HARDBERGER AND SMYLIE, a Co-partnership, and William H. Rabe, Plaintiffs-Appellants, v. EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

444 F.2d 1318 (1971)

HARDBERGER AND SMYLIE, a Co-partnership, and William H. Rabe, Plaintiffs-Appellants, v. EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, Defendant-Appellee.

No. 559-70.

United States Court of Appeals, Tenth Circuit.

July 12, 1971.

Harry R. Palmer, Jr., Oklahoma City, Okl., for appellants.

Burton J. Johnson, Oklahoma City, Okl., for appellee.

Before LEWIS, Chief Judge, and HOLLOWAY and BARRETT, Circuit Judges.

BARRETT, Circuit Judge.

This appeal is taken from Summary Judgment granted on motion of defendant-appellee, Employers Mutual Liability Insurance Company, hereinafter called Mutual. This case was initiated on a Complaint for Declaratory Judgment by plaintiffs-appellants, Hardberger and Smylie, a co-partnership, hereinafter called Partners, and William H. Rabe, an employee of Partners, hereinafter called Rabe. The trial court, upon consideration of the pleadings, certain depositions and admissions of the parties, determined that there was no genuine issue as to any material fact and that, as a matter of law, Mutual had no obligations to defend or indemnify the appellants under the subject automobile public liability insurance contract.

On January 17, 1968, V. J. Jones Construction Company, hereinafter called Jones Construction, owned a semi-trailer, hereinafter called trailer, insured by Mutual for bodily injury and property damages. On that date Jones Construction leased a truck-tractor, hereinafter called tractor, from Partners together with the Partners' driver, Rabe, to pull a trailer owned by Jones Construction to a particular location in Beaver County, Oklahoma, load up a ditching machine and deliver it to another specific location. The tractor and Rabe were leased for this specific purpose at an hourly rate of $9.00. Rabe was directed by Jones Construction in the use of the tractor. Rabe proceeded to attach the tractor to the trailer, under the direction of a Jones Construction employee who accompanied him. After leaving the Jones Construction property and while passing a filling station, Rabe was instructed by the Jones Construction employee to pull into the station in order to air up a left rear tire to the trailer. The filling station operator, Devo Oquin, proceeded to fill the tire following instructions from the Jones Construction employee. The tire exploded, injuring Oquin.

Prior to this action, Jones Construction entered into a settlement with Oquin by Covenant Not to Sue for $3,750.00 which released Jones Construction, its agents, etc. Appellants, Partners and Rabe, were not specifically named in the Covenant. Following this settlement, Oquin filed suit for damages against Partners and Rabe in the District Court of Beaver County, Oklahoma. Partners and Rabe requested defense and indemnity by Jones Construction which was denied. That denial generated this action in the nature of declaratory judgment to determine rights and liabilities under the liability policy issued by Mutual to Jones Construction. Diversity of citizenship and amount in controversy established jurisdiction in the United States District Court for the Western District of Oklahoma.

The policy issued by Mutual, the insurer, to Jones Construction, the named insured, provided liability coverage for property damage and bodily injury to which the insurance applies, caused by an occurrence arising out of "the ownership, maintenance or use" of any automobile. It defined "persons insured" as the named insured and any other person or organization but only with respect to his or its liability because of acts or omissions of the insured. The policy contained an exclusionary or limiting clause which provided that no person or organization, other than the named insured, would be considered insured with respect to:

"(2) a trailer while used with any motor vehicle owned or hired by such person or organization and not covered by like insurance in the company."

The lower court's judgment was basically anchored to the case of Pennsylvania Threshermen and Farmers Mutual Casualty Insurance Company v. Hartford Accident and Indemnity Company v. Drake, 310 F.2d 618 (4th Cir. 1962) where the court interpreted similar policy language with particular reference to the verb "used". The trial court in the case at bar ruled that the fair and practical construction of the Mutual policy is that when the Partners attached their hired tractor to the Jones Construction trailer for the purpose of the trip and started towing it for the ultimate purpose of hauling Jones Construction equipment, the Partners were "using" the combined vehicles under the terms of the exclusion. The court found that the filling station stop on the trip was casual; that it did not constitute a cessation of the trailer being used with the tractor; and that the Mutual policy did not provide coverage for the appellants. We concur with the trial court judgment that the Mutual policy did not provide coverage for the Partners. We do not concur in the court's judgment that the Mutual policy did not provide coverage for Rabe, based upon the same limitation provision which the court found applicable to Partners.

We observe that this litigation may have been avoided had Mutual more adequately defined the terms "ownership, maintenance and use". Even so, we do not believe that there is any ambiguity in construction.

The contract must be construed, if possible, by application of the substantive law of the State of Oklahoma. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under the law of Oklahoma, contracts of insurance are to be liberally construed in favor of the objects to be accomplished. Conditions and provisions will be construed against the insurer who proposed and prepared the policy. American Motorists Insurance Co. v. Biggs, 380 P.2d 950 (Okl.1963). The intention of the parties to a contract must be deduced from the entire agreement and every part must be construed together. Simmons v. Fariss, 289 P.2d 372 (Okl.1955). The views of a Federal District Court in interpreting local law carries extraordinary persuasive force on appeal. Hamblin v. Mountain States Telephone & Telegraph Company, 271 F.2d 562 (10th Cir. 1959).

The trial court leaned heavily on the law applied in Pennsylvania Threshermen & Farmers Mutual Casualty Insurance Co. v. Hartford Accident and Indemnity Co. v. Drake, supra, and Maryland Casualty Co. v. Cross, 112 F.2d 58 (5th Cir. 1940), cert. denied 311 U.S. 701, 61 S.Ct. 141, 85 L.Ed. 455 (1940), for its finding that:

"The fair and practical construction of the Employers Mutual Liability Insurance policy is that when the plaintiffs attached their hired tractor to a trailer of V. J. Jones Construction Company for the purpose of a trip and started towing it for the ultimate purpose of hauling equipment for V. J. Jones Construction Company, that plaintiffs were using the combined vehicles under the terms of the exceptions stated in the Employers Mutual Liability Insurance Company. These exceptions are to exclude coverage to the plaintiffs under such conditions, even though a casual stop on the trip may have been made. This casual

...