Aetna Casualty and Surety Company v. Hase

• Decision Date: 05 March 1968
• Docket Number: No. 18857.,18857.
• Citation: 390 F.2d 151
• Parties: The AETNA CASUALTY AND SURETY COMPANY, Appellant, v. Herbert H. HASE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

390 F.2d 151 (1968)

The AETNA CASUALTY AND SURETY COMPANY, Appellant, v. Herbert H. HASE, Appellee.

No. 18857.

United States Court of Appeals Eighth Circuit.

March 5, 1968.

F. Douglas O'Leary of Moser, Marsalek, Carpenter, Cleary & Jaeckel, St. Louis, Mo., for appellant; M. E. Stokes, St. Louis, Mo., on the brief.

Charles E. Gray, St. Louis, Mo., for appellee; C. Marshall Friedman, St. Louis, Mo., on the brief.

Before VAN OOSTERHOUT, Chief Judge, MATTHES, Circuit Judge, and HARRIS, Chief District Judge.

VAN OOSTERHOUT, Chief Judge.

This is a timely appeal by defendant The Aetna Casualty and Surety Company (Aetna) from a judgment for $45,000 entered against it in favor of plaintiff Herbert H. Hase. Hase had obtained a judgment in the Circuit Court of St. Louis against Wright City Display Manufacturing Company (Display) in the same amount in a common law action based upon negligence. Hase in the present suit, based upon diversity jurisdiction, seeks enforcement of the state judgment against Aetna on the basis that such risk is insured by a comprehensive liability insurance policy issued by Aetna to Display which was in effect at the time of the accident. It is undisputed that Display gave Aetna timely notice of the state court suit and requested Aetna to defend it, which it refused to do. The complicated factual background of this litigation is fairly set out in Chief Judge Harper's opinion reported at D.C., 266 F.Supp. 952.

The present case was tried to Judge Harper without a jury. No error is here asserted with respect to a number of issues raised in and rejected by the trial court. Hence, such issues require no consideration here.

The defense relied upon by Aetna on this appeal is that the injury to Hase here involved is excluded from coverage by its policy issued Display by exclusions (d) and (f), which read:

"This policy does not apply:

* * * * * *

(d) under Coverage A and C, to any obligation for which the Insured of any carrier as his insurer may be held liable under any workmen\'s compensation, unemployment compensation or disability benefits law, or under any similar law.

* * * * * *

(f) under Coverage C, except with respect to liability assumed by the Insured under a contract as defined herein, to bodily injury to or sickness, disease or death of any employee of the Insured arising out of and in the course of his employment by the Insured; * * *."

Aetna contends that Hase is a statutory employee of Display under § 287.040, R.S. Mo., and that as such is covered by Display by workmen's compensation and hence the policy exclusions just quoted foreclose coverage for the injury suffered by Hase involved in this litigation. The trial court upheld Aetna's contention that Hase is a statutory employee of Display. Pp. 258 to 260 of 266 F.Supp. Neither the record upon which the court's fact findings on this issue are based nor the record upon which the state court judgment was entered is before us. Inasmuch as we hold for reasons hereinafter set out that Aetna is collaterally estopped from asserting its policy exclusion defense, it is unnecessary for us to determine whether the trial court rightly determined the statutory employee issue.

The trial court upheld Hase's contention that Aetna was collaterally estopped by the state court judgment from disclaiming policy coverage. We agree and affirm upon such basis. The trial court in upholding Hase's contention, states:

"Nevertheless, Aetna may be bound by such action because of its contractual relationship to Display. Since Aetna was given notice and a reasonable opportunity to defend the action in the Circuit Court of the City of St. Louis, Display may be said to have vouched in Aetna. Moore\'s Federal Practice, Vol. 1-B, § 0.405(9), page 744, states:

`Likewise, under the modern concept of vouching in, a vouchee who refuses to defend is concluded by the judgment against the voucher as to all issues that were adjudged, including the nature of the plaintiff\'s claim; and the vouchee\'s defenses in an action over by the defendant, or in a suit on the unsatisfied judgment by the plaintiff, are limited to denial of notice and opportunity to defend, of the alleged warranty or obligation to reimburse the voucher, and that the claim against the voucher is within the coverage of the vouchee\'s obligation. As to coverage, if the judgment against the voucher adjudicates the nature of the claim against him, as usually it will, the judgment is normally conclusive as to the nature of the claim for the purpose of determining whether it is within the coverage of the vouchee\'s obligation.\' (Emphasis added.)

"See also, B. Roth Tool Co. v. New Amsterdam Casualty Co., 161 F. 709 (C.A. 8), and Row v. Cape Girardeau Foundry Co., 141 S.W.2d 113 (Mo. App.)" 266 F.Supp. 952, 960.

Aetna's comprehensive liability policy extends broad coverage. The provision with respect to the duty to defend reads:

"With respect to such insurance as is afforded by this policy, the Company shall:

"(a) defend any suit against the Insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; * * *."

When, as here, the policy provision for defense is broad, 7A Appleman Ins. L. & P. § 4682 thus states the applicable rule:

"Accordingly, the insurer is bound to defend the insured against suits alleging facts and circumstances covered by the policy, even though such suits are groundless, false, or fraudulent. Or, to put it another way, the insurer must defend any action where, if liability is established, the insurer would be liable."

It is undisputed that Display made a proper and timely demand upon Aetna to defend the state court suit, that Aetna was properly vouched in and that Aetna refused to defend.

Hase relies on the doctrine of collateral estoppel (issue preclusion) to bind Aetna by the state court judgment and the judgment appealed from is based upon the adoption of such theory. Broad res judicata (claim preclusion) does not apply because the cause of action in the state court is not the identical cause of action as the one before us here. The state action is based upon tort while the present action is based upon the insurance contract.

Collateral estoppel operates when the second suit is between the same parties but the cause of action is different. Such is the situation here. The rule of collateral estoppel which applies to our present situation is stated by the Springfield Court of Appeals in Drennen v. Wren, Mo.App., 416 S.W.2d 229, 234, as follows:

"Where an indemnitor had notice of the suit against the indemnitee and has been afforded the opportunity to appear and defend, the judgment against the indemnitee, if obtained without fraud or collusion, is conclusive against the indemnitor in respect to all questions and facts therein determined, provided they were necessary to the result of the first suit."

To like effect, see London Guarantee & Accident Co. v. Strait Scale Co., 322 Mo. 502, 15 S.W.2d 766, 770, 64 A.L.R. 936; 46 C.J.S. Insurance § 1251; 30A Am. Jur. Judgments § 421.

The trial court made the following findings on the issue here pertinent:

"Under policy No. 51 AL 5048 Aetna agreed to indemnify Display for any common law liability. The judgment in the Circuit Court of the City of St. Louis held that Display was liable to Hase at common law. Aetna is bound by that judgment as determining the nature of Hase\'s claim against Display and hence the policy coverage. Aetna cannot now contend, for purposes of policy coverage, that the nature of Hase\'s claim against Display was not at common law but was within the workmen\'s compensation laws." 266 F.Supp. 952, 960.

Such finding is supported by the record. Generally the duty to defend is determined by the allegations of the petition. State Farm Mut. Auto. Ins. Co. v. Bonwell, 8 Cir., 248 F.2d 862, 868; Mistele v. Ogle, Mo., 293 S.W.2d 330, 334; Inter-State Oil Co. v. Equity Mut. Ins. Co., Mo. App., 183 S.W.2d 328, 332; 7A Appleman Ins. L. & P. §§ 4682-83.

The state court petition seeks damages for common law negligence and contains no allegations which can fairly be construed as asserting plaintiff to be a statutory employee of Display. On the contrary, the petition is designed to and does negative such a relationship. The amended petition bringing in Display as a defendant states that defendant entered into a contract with co-defendants Laclede Gateway Company and O'Fallon Investment Co., owners of the land, to have constructed a building for the benefit and profit of each of such defendants, and that Display had contracted with various contractors to...