United States Fidelity & Guaranty Co. v. Doheny

• Decision Date: 31 December 1941
• Docket Number: No. 9668.,9668.
• Citation: 123 F.2d 746
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. DOHENY (two cases).
• Court: U.S. Court of Appeals — Ninth Circuit

123 F.2d 746 (1941)

UNITED STATES FIDELITY & GUARANTY CO. v. DOHENY (two cases).

No. 9668.

Circuit Court of Appeals, Ninth Circuit.

November 17, 1941.

Rehearing Denied December 31, 1941.

Howard Toole and W. T. Boone, both of Missoula, Mont., for appellant.

E. J. McCabe, of Great Falls, Mont., for appellee.

Before HANEY and HEALY, Circuit Judges and BOWEN, District Judge.

HEALY, Circuit Judge.

In December, 1934, Roberta and Marguerite Doheny were killed in a highway accident in Montana while riding as guests in an automobile operated for the partnership of Coverdale & Johnson. In suits in the state court for their wrongful death, appellee, as administratrix, recovered two judgments of $5,116 each against the partnership. Doheny v. Coverdale & Johnson, 104 Mont. 534, 68 P.2d 142. Appellant, which had issued a public liability policy to the partnership, participated in the defense of these actions. Writs of execution against the judgment debtor having been returned unsatisfied the present suits were brought against appellant as insurance carrier. From judgments in favor of appellee the insurer appeals.

The partnership on September 21, 1934, entered into a contract with the state of Montana for the construction of several bridges on the Augusta-Sun River road in Lewis and Clark county. "As a condition precedent to the complete execution" of that contract the partnership was required to furnish a surety bond for its faithful performance. Such bond was written at that time by appellant, the condition of its bond being that the contractor "shall in all respects faithfully perform all of the provisions of said contract, including the specifications." One provision of the specifications was that the contractor "shall carry public liability insurance to indemnify the public for injuries or damages sustained by reason of the carrying on the work. This insurance shall be in the amount of at least $10,000 for one person and a total of $20,000 for one accident. The contractor shall submit adequate evidence to the State Highway Commission that he has taken out such insurance." In forwarding the contract for execution, the commission by letter called the contractor's attention to the provision requiring the submission of evidence of the issuance of the public liability policy and stated that "preferably, this information should be conveyed in the form of a letter to this department from the insurance agent who furnishes you the policy."

A further provision of the specifications was that all things contained therein, together with notice to contractors and the contract bond, "also any and all supplemental agreements made or to be made, are hereby made a part of these specifications and contract, and are to be considered as one instrument."

On October 1, 1934, appellant issued a policy to the partnership and on the same date advised the commission by letter "we have issued contractor's public liability policy PC — 19715 for this assured, with public liability limits of ten thousand and twenty thousand and property damage one thousand." The performance bond was enclosed with and referred to in the same letter. The commission was not furnished with the original policy or a copy and was not otherwise advised as to the extent or nature of the coverage provided. While by this policy appellant undertook in general terms to settle all claims for damages on account of bodily injuries or death suffered by any person (other than an employee of the insured) by reason of and during the progress of the work, it contained an excluding rider to the effect that "this policy shall not cover loss from liability for, or any suit based on, injuries or death caused directly or indirectly by any * * * automobile * * * elsewhere than at the immediate places covered by the policy where the insured is carrying on his operations." The operations referred to were the bridges under construction, these being scattered at intervals along the highway. The nearest of the bridges was located some 12 miles distant from the place of the accident in question, which, however, was on the Augusta-Sun River road.

The death of the two young women was a consequence of the actionable negligence of an employee of the contractor who was driving the car under direction of one of the partners. The court found that on the occasion of the accident the car was being used in carrying on the work under the construction contract, which was still incomplete at the time. It declined to give effect to the exclusion provision of the policy relating to the immediate place of injury, in effect holding appellant responsible as insurer notwithstanding the exclusion.

Appellant does not seriously challenge the finding that the damages were sustained by reason of and in the course of the carrying on of the work on the project; and indeed in the light of the evidence as well as the pleadings and judgments in the state court suits it could not well do so. Its contention in respect of the evidence is that the accident was shown to have happened elsewhere than at an immediate place of the operations, hence was outside the policy coverage. The latter contention brings us to the main point in the case, the effect of the exclusion...