American Fidelity & Cas. Co. v. Pennsylvania Cas. Co.

• Decision Date: 25 May 1950
• Docket Number: Civ. No. 691.
• Citation: 97 F. Supp. 965
• Court: U.S. District Court — Eastern District of Tennessee
• Parties: AMERICAN FIDELITY & CASUALTY CO. et al. v. PENNSYLVANIA CASUALTY CO. et al.

97 F. Supp. 965

AMERICAN FIDELITY & CASUALTY CO. et al. v. PENNSYLVANIA CASUALTY CO. et al.

Civ. No. 691.

United States District Court, E. D. Tennessee, S. D.

May 25, 1950.

Strang, Fletcher & Carriger, Chattanooga, Tenn., for plaintiffs, American Fidelity & Casualty Co. and Capital Motor Lines.

Charles A. Noone, Chattanooga, Tenn., for defendant Pennsylvania Casualty Co.

Harry J. Schaeffer, Chattanooga, Tenn., for defendants J. B. Levan and Florence Levan, d/b/a Cherokee Motor Coach Co.

DARR, Chief Judge.

This case was tried to the Court without a jury and resulted in a judgment in favor of the defendants. The plaintiffs have filed a motion for a new trial.

A full and careful examination of the perplexing questions presented results in the Court directing vacation of the judgment heretofore entered and an award as herein indicated.

For adjustment are claims paid by plaintiffs and defendants to passengers who were injured in a bus accident, on November 16, 1943, on the highway between Jasper, Tennessee, and Chattanooga, Tennessee.

On and before this date Capital Motor Lines, hereinafter called Capital, had a contract with the United States Government to transport to military induction centers persons selected in this area under the Selective Training and Service Act of 1940, 50 U.S.C.A.Appendix, § 301 et seq.

The Cherokee Motor Coach Company, hereinafter called Cherokee, as well as Capital, operated a cross-country bus service. Just prior to the date mentioned Capital had orders from the Government to transport a number of selectees from South Pittsburg, Tennessee, to Fort Oglethorpe, Georgia. On the date designated for the journey Capital found that it had no available bus. Thereupon John T. Grissom, a representative of Capital, entered into an agreement with Cherokee whereby Capital was to obtain a bus and driver from Cherokee, for which Cherokee was to receive compensation.

The arrangement as made for the use of Cherokee's bus was not in writing and did not specify who would pay the cost of, or insure, the operations, or what were otherwise the terms on which the bus was to be used. The amount of compensation was not agreed upon or mentioned, but was implied and understood by both parties to be in accordance with a general, informal arrangement, established by the customary compensation paid in other like situations. Both Cherokee and Capital were accustomed to obtain from one or the other a bus in like manner when necessary. On such previous occasions no special arrangements for insurance coverage were made.

The driver of the bus, Vincent A. Messer, was instructed by the Dispatcher for Cherokee to report to Grissom. Messer did so and was instructed by Grissom to report to a driver of Capital, to use the bus on the out trip to transport passengers who could not be accommodated on the Capital regular run, and on his return to convey the selectees from South Pittsburg.

The Cherokee bus did have some passengers on the out trip. At South Pittsburg Messer reported to a driver of Capital. Messer received instructions about picking up the selectees and also was given a regular Capital ticket indicating the number of persons to be transported and their right for passage. He was also informed that a part of his duties was to pick up more selectees in Jasper.

In accord with the instructions the selectees at South Pittsburg were placed on board the bus which proceeded to Jasper where other selectees were picked up. Thereafter the bus was continuing on its way to Chattanooga when the accident occurred.

Pennsylvania Casualty Company, a defendant, hereinafter called Pennsylvania, was insurance carrier for Cherokee. American Fidelity & Casualty Company, hereinafter called American, was insurer for Capital.

The insurance premiums on policies of both carriers were based on gross revenue.

All claims of injured persons arising out of the accident have been paid by either the plaintiffs or by the defendants. Stipulations have been entered into by the parties agreeing to these payments. There is no question as to the amount or validity of the claims paid.

The stipulations also provide that all questions as to primary insurance, excess insurance, and all the rights of the parties with respect to such matters should remain open for settlement and that none of the parties should be prejudiced by any payment of claims arising out of the accident.

The question of negligence or the cause of the accident is not raised. All parties have agreed that the accident was one in which the injured selectees were entitled to recover damages.

Both policies of insurance have the general coverage usually found in automobile liability policies. Particularly for consideration is the following clause in the policy issued by Pennsylvania to Cherokee:

"III Definition of `Insured'

"The unqualified word `insured' whereever used in coverages A and B and in other parts of this policy, when applicable to such coverages, includes the named insured and, except where specifically stated to the contrary, also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is with the permission of the named insured * * *";

and the following provisions in the Hired Car and Gross Receipts Endorsement of the policy issued by American to Capital:

"1. In consideration of a premium paid by the Assured after being computed at a rate of $3.46 per one hundred dollars of Gross Receipts, it is hereby understood and agreed that the protection afforded by the policy to which this endorsement is attached is extended to cover all equipment owned and hired by the named Assured for the purposes set forth in Statement VIII, when such owned and hired equipment is being operated in the interest of the named Assured.

* * * * * *

"4. It is further understood and agreed, subject to the conditions of the previous paragraph, that should any other like, valid and collectible insurance issued in the name of the owner or lessor or in favor of the named Assured herein, exist, this policy becomes excess over and above such valid and collectible insurance."

The plaintiffs contend that the bus was being operated by Cherokee as an independent contractor and therefore full liability is upon Cherokee and its insurer. Plaintiffs further contend that if Capital is liable under any theory, the liability would only extend to the excess over and above Pennsylvania's insurance.

The defendants contend that Capital hired the bus and driver from Cherokee and that both were under the direction and control of Capital. That under such circumstances Cherokee would not be liable and neither would Pennsylvania under the terms of its policy contract. The defendants claim that American is liable to the extent of its coverage to Capital under the Hired Car Endorsement clause of its policy.

The plaintiffs' motion for a new trial specifies numerous grounds which fall into two general groups and raise essentially two questions.

First, it is urged that the Court erred in holding that Cherokee was not liable to the passengers on the bus for the injuries sustained; that Cherokee was not responsible for the acts of the bus driver; and that Cherokee was not using the bus under an independent contract with Capital so as to relieve Capital of responsibility.

These grounds of the motion are without merit.

The contract of carriage was made with Capital and that company issued tickets to the passengers. Capital had a permit to service the town of South Pittsburg and Cherokee had no such permit. The bus was rented by Capital from Cherokee for Capital's use on the particular trip. Capital was, therefore, undoubtedly liable to the passengers. Cherokee could not lawfully operate the bus on this trip. Johnson Transfer & Freight Lines v. American National Fire Insurance Co., 168 Tenn. 514, 522, 79 S.W.2d 587, 99 A.L.R. 277.

The bus driver, though employed generally by Cherokee, was the servant of Capital for this trip. Denton v. Yazoo, & Mississippi Valley R. Co., 284 U.S. 305, 52 S.Ct. 141, 76 L.Ed. 310; Gaston v. Sharpe, 179 Tenn. 609, 168 S.W.2d 784.

As the obligation to transport the passengers was upon Capital, Cherokee could not be an independent contractor. The obligations of a common carrier to its passengers are non-delegable. Venuto v. Robinson, 3 Cir., 118 F.2d 679, certiorari denied C. A. Ross v. Venuto, 314 U.S. 627, 62 S. Ct. 58, 86 L.Ed. 504; Jenkins v. General Cab Co., 175 Tenn. 409, 135 S.W.2d 448; Hodges v. Johnson, D.C., 52 F.Supp. 488.

The second ground of the motion is that the Court erred in ruling that Capital was not operating the bus with the permission of Cherokee and was, therefore, not an additional insured under the policy issued by Pennsylvania.

This involves an interpretation of the definition of the word "insured" as contained in paragraph III of the policy agreements in the Pennsylvania policy, quoted supra.

Upon a re-examination of these provisions and of the controlling authorities, the Court is of the opinion that this ground of the motion should be sustained.

The question turns upon the meaning of the phrase "with the permission of the named insured".

Permission in such a case is treated as being "consent, expressed or implied". Traders & General Insurance Co. v. Powell, 8 Cir., 177 F.2d 660, 663.

In Stovall v. New York Indemnity Co., 157 Tenn. 301, 8 S.W.2d 473, 477, 72 A.L. R. 1368, the Supreme Court of Tennessee said, "It is our opinion that the words, `providing such use or operation is with the permission of the named assured,' were intended to exclude from the protection of the policy a person who should take the automobile and use it without permission or authority in the first instance."

It is insisted by the defendants that the word "permission" does not contemplate a "contract", and that permissive use is not intended to mean a use under...