Aetna Cas. & Sur. Co. v. Fairchild

• Decision Date: 23 October 1985
• Docket Number: Civ. No. 83-1509.
• Citation: 620 F. Supp. 1245
• Parties: AETNA CASUALTY & SURETY COMPANY, a corporation, Plaintiff, v. Carl M. FAIRCHILD, John Francis Richards, Terry F. Kerr, Lana L. Kerr, and/or Carl M. Fairchild and Carl O. Fairchild, d/b/a Division I, American Universal Insurance Company and May Trucking Company, an Idaho corporation, Defendants. and Lela Robinson and Shanna Christopherson, Intervenors. GRANITE STATE INSURANCE COMPANY, a corporation, Plaintiff in Intervention, v. AETNA CASUALTY & SURETY COMPANY, a corporation, Carl M. Fairchild, John Francis Richards, and May Trucking Company, an Idaho corporation, Defendants in Intervention.
• Court: U.S. District Court — District of Idaho

620 F. Supp. 1245

AETNA CASUALTY & SURETY COMPANY, a corporation, Plaintiff, v. Carl M. FAIRCHILD, John Francis Richards, Terry F. Kerr, Lana L. Kerr, and/or Carl M. Fairchild and Carl O. Fairchild, d/b/a Division I, American Universal Insurance Company and May Trucking Company, an Idaho corporation, Defendants. and Lela Robinson and Shanna Christopherson, Intervenors.

GRANITE STATE INSURANCE COMPANY, a corporation, Plaintiff in Intervention, v. AETNA CASUALTY & SURETY COMPANY, a corporation, Carl M. Fairchild, John Francis Richards, and May Trucking Company, an Idaho corporation, Defendants in Intervention.

Civ. No. 83-1509.

United States District Court, D. Idaho.

October 23, 1985.

R.B. Kading, Jr., Howard W. Carsman, Eberle Berlin Kading Turnbow & Gillespie, Boise, Idaho, for Aetna Cas. & Sur. Co.

Gregory R. Giometti, Quane Smith Howard & Hull, Boise, Idaho, for American Universal Ins. Co.

Charles F. McDevitt, Givens McDevitt Pursley Webb & Buser, Boise, Idaho, for May Trucking Co.

John C. Hohnhorst, Hepworth Nungester & Felton, Twin Falls, Idaho, for Robinson and Christopherson.

R.B. Rock, Kirk B. Helvie, Moffatt Thomas Barrett & Blanton, Boise, Idaho, for Granite State Ins. Co.

MEMORANDUM OPINION

RYAN, District Judge.

I. INTRODUCTION

This declaratory judgment action arises from an automobile accident occurring on September 28, 1981, in Lemhi County, Idaho. The accident involved a collision between a 1973 Kenworth tractor/trailer rig and a passenger car. The truck was driven by Francis Richards, an employee of Carl M. Fairchild who was a passenger in the truck at the time of the accident. The driver of the car was killed in the accident and the passenger injured. The occupants of the car brought a personal injury suit in state court against Carl M. Fairchild and John Richards, as drivers of the vehicle, as well as May Trucking Company, an interstate motor carrier who had leased the truck from Fairchild. The state court granted summary judgment in favor of May Trucking Company holding May Trucking could not be liable for the conduct of either Richards or Fairchild at the time of the accident.

Jurisdiction is based upon diversity of citizenship. The plaintiff, Aetna Casualty & Surety Company (Aetna), as the insurance carrier for May Trucking, seeks a declaration that it is under no duty or obligation to defend the state court action on behalf of the remaining defendants, Fairchild and Richards, or to assume liability for any judgment which may be entered against those defendants. Aetna also seeks a declaration that Defendant American Universal Insurance Company (American) is obligated to defend and indemnify Fairchild and Richards in the state court action.

Plaintiffs in the state court action, Lela Robinson and Shanna Christopherson, have intervened seeking a declaration that both Aetna and American are obligated to defend and indemnify Fairchild and Richards, as well as a declaration that May Trucking is vicariously liable for the conduct of Fairchild and Richards. Intervenor Granite State Insurance Company (Granite) provides excess or umbrella coverage to May Trucking and seeks a declaration that it is not obligated to provide coverage to Fairchild, Richards or May Trucking. All parties have moved for summary judgment.

The pending motions for summary judgment raise three basic issues:

(1) If and to what extent the state court summary judgment in favor of May Trucking is binding on the parties in this action (and if not, the liability of May Trucking for the conduct of Fairchild and Richards);

(2) Whether Aetna and Granite are obligated to defend and indemnify Fairchild and Richards; and

(3) Whether American is obligated to defend and indemnify Fairchild and Richards.

II. FACTS

The following facts are not in dispute. May Trucking is a corporation headquartered in Payette, Idaho, which is engaged in the interstate carriage of cargo for hire. May Trucking holds interstate transportational certification from the United States Interstate Commerce Commission (ICC). On May 26, 1981, May Trucking entered into a lease agreement entitled, "Owner/Operator Contract" with Carl M. Fairchild whereby May Trucking leased a 1973 Kenworth tractor and alloy trailer owned by Fairchild. The lease agreement generally provided May Trucking with the exclusive use, possession and control of Fairchild's truck. Fairchild and his employees were authorized to operate the rig in exchange for which Fairchild would share in the fees or commissions earned from such operations. This lease agreement remained in effect during all times relevant to this action.

In late September 1981, Fairchild drove the truck from May Trucking's business premises in Payette, Idaho, to his parents' home in Stevensville, Montana. According to Fairchild, the purpose for taking the truck to Stevensville was to perform repairs on the truck's engine. Fairchild informed May Trucking that this was the reason for removing the truck from Payette.

Fairchild's father, Carl A. Fairchild, was the owner of a business known as Division One, located in Stevensville, Montana. Division One engaged in the business of shipping precut log homes. Apparently in exchange for the repairs completed on the truck by his father, Fairchild and an employee, John Francis Richards, used the 1973 Kenworth to transport a precut log home from Alpine, Montana, to Ketchum, Idaho, on behalf of Division One.

After completing delivery of the logs, Fairchild and Richards, with Fairchild driving, began the return trip to Stevensville on State Highway 93. At a point north of Challis, Idaho, the parties changed drivers. At a point near Ellis, Idaho, the truck collided with a car driven by Russell Robinson. As a result of the collision, Robinson died and Shanna Christopherson, a passenger in the car, was injured. The accident occurred on September 28, 1981. At the time of the accident, the 1973 Kenworth carried the identification placards of May Trucking.

At the time of the accident, Aetna had in effect a trucker's policy of insurance issued to May Trucking and Granite had in effect an umbrella liability policy issued to May Trucking providing coverage in excess of that afforded by the Aetna policy.

Carl M. Fairchild was the named insured in a liability insurance policy issued by American, bearing effective dates May 13, 1981, to May 13, 1982. On September 28, 1981, neither the 1973 Kenworth tractor nor the flatbed trailer involved in the accident was listed as a covered auto under the American policy. On October 19, 1981, Fairchild's father requested American add the 1973 Kenworth to the policy. Fairchild's father, Carl A. Fairchild, did not inform American of the accident which had occurred on September 28, 1981, involving the 1973 Kenworth. Pursuant to Carl A. Fairchild's request and upon his representations that Division One was a certified interstate motor carrier, American added the 1973 Kenworth truck to the policy and issued public liability endorsements to comply with the insurance requirements of the ICC regulations. Neither Carl M. Fairchild nor Carl A. Fairchild ever notified American of the occurrence of the accident on September 28, 1981. There is no dispute, however, that Carl M. Fairchild was aware of the accident since he was a passenger in the truck when it occurred and was arrested while driving the vehicle shortly afterward.

For a considerable time after the accident, Fairchild and Richards maintained that they had not been involved in any accident on September 28, 1981. In fact, Richards' defense to criminal charges brought as a result of the accident was that he had not been involved in any such accident. Richards was subsequently convicted by a jury of involuntary manslaughter stemming from the September 28, 1981, accident.

III. COLLATERAL ESTOPPEL EFFECT OF THE STATE COURT SUMMARY JUDGMENT

The collateral estoppel effect of a state court judgment in a subsequent diversity action brought in federal court is generally determined by the law of the state in which the judgment is entered. See 18 C. Wright, A. Miller and E. Cooper, Federal Practice and Procedure: Jurisdiction § 4472 (1981). Idaho has adopted the Restatement (Second) of Judgments' definition of collateral estoppel (issue preclusion). Carpenter v. Double R Cattle Company, Inc., 105 Idaho 320, 669 P.2d 643 (Ct.App.1983); see also Aldape v. Akins, 105 Idaho 254, 668 P.2d 130 (Ct.App.1983).

The Restatement (Second) of Judgments § 27 (1980) provides:

Issue Preclusion — General Rule

When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.

The court finds that the summary judgment entered in the state court is not a "final judgment," and therefore, the summary judgment granted by the state court is not binding on the parties in this action.

Rule 54(b) of the Idaho Rules of Civil Procedure provides that the entry of partial summary judgment will be a final judgment only when expressly so certified by the trial court. In the absence of such certification, the entry of partial summary judgment does not terminate the action as to any of the claims or parties and leaves the decision open to revision at any time before the entry of judgment adjudicating all claims of all parties. Idaho R.Civ.P. 54(b). Because the state court decision remains subject to revision and does not terminate those claims which are the subject of the summary judgment, entry of the partial summary judgment does not constitute final judgment for purposes of collateral estoppel.

In Dawson v. Mead, 98 Idaho 1, 557 P.2d 595 (1976), the Idaho Supreme Court held that an order granting partial summary judgment is not a final judgment for purposes of res judicata because such a ruling, if uncertified, is subject to later revision...