Allegheny Airlines, Inc. v. Forth Corp.

• Decision Date: 09 November 1981
• Docket Number: No. 80-2598,80-2598
• Citation: 663 F.2d 751
• Parties: ALLEGHENY AIRLINES, INC., Plaintiff Judgment-Creditor Appellant, v. FORTH CORPORATION and John R. Barney, Jr., Administrator of the Estate of Robert W. Carey, Deceased, Defendants Judgment-Debtors, and Insurance Company of North America and Employers Mutual Liability Insurance Company of Wisconsin, Garnishee Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 751

663 F.2d 751

ALLEGHENY AIRLINES, INC., Plaintiff Judgment-Creditor Appellant, v. FORTH CORPORATION and John R. Barney, Jr., Administrator of the Estate of Robert W. Carey, Deceased Defendants Judgment-Debtors and Insurance Company of North America and Employers Mutual Liability Insurance Company of Wisconsin Garnishee Defendants-Appellees.

No. 80-2598.

United States Court of Appeals, Seventh Circuit.

Argued May 28, 1981.

Decided Nov. 9, 1981.

Walter E. Rutherford, Haight, Gardner, Poor & Havens, New York City, for plaintiff judgment-creditor appellant.

Arthur P. Kalleres, Indianapolis, Ind., Michael R. Gallagher, Cleveland, Ohio, for garnishee defendants-appellees.

Before SWYGERT and FAIRCHILD, Senior Circuit Judges, and THOMAS, Senior District Judge. ^*

DANIEL HOLCOMBE THOMAS, Senior District Judge.

The underlying case arose from a collision which occurred over Fairland, Indiana on September 9, 1969, between an Allegheny Airlines DC-9 commercial aircraft (registry Number N-988VJ) and a Piper Cherokee general aviation aircraft (Registry Number N-7374J) piloted by Robert W. Carey and owned by Forth Corporation. Both aircraft were totally destroyed in the collision and all occupants were fatally injured. ¹

Death actions were brought on behalf of the estates of the deceased occupants of the aircraft against Allegheny Airlines, the United States of America, Lee LeMay, as Administrator of the Estate of Robert W. Carey, deceased, ² and Forth Corporation. In these actions Allegheny Airlines and the United States asserted claims for indemnity and contribution against their codefendants. Subsequently, all the death actions were settled by the United States and Allegheny for $15,644,500. Allegheny funded $10,332,666.67, or 66%, and the United States funded $5,311,833.33, or 34%. Neither the Forth Corporation nor the Estate of Carey contributed anything towards the settlements.

The Insurance Company of North America (INA) had issued Aircraft Policy ANM 15 98 12 (INA policy) to Forth Corporation and it was in effect on the date of the accident. The INA policy had a $1,000,000 limit of liability, of which Carey, as pilot, was covered for $50,000 and Forth was covered for $950,000. In February 1972, INA proffered its $1,000,000 policy limits in settlement. This offer was rejected, but remained outstanding during the litigation. INA paid the sum of $4,250 to settle certain ground claims, leaving a balance remaining of the $1,000,000 policy at $995,750.

Prior to the accident, Brookside Corporation, the corporate parent of Forth Corporation, was the owner of an insurance policy issued by Employers Mutual Liability Insurance Company of Wisconsin (now known as Wausau Insurance Companies) (Wausau) entitled "Excess Umbrella Policy", policy number 1920 04 026512 (Wausau policy), with policy limits of $1,000,000, which was in full force at the time of the accident.

The claims of Allegheny Airlines and the United States for indemnity and contribution from Forth and the Estate of Carey were tried on June 14, 1976, to a jury. The jury found the United States 36 percent at fault, Allegheny 22 percent at fault, Forth Corporation 21 percent at fault and the Estate of Carey 21 percent at fault. ³

On August 17, 1976, the District Court entered judgment in the indemnity/contribution action and adjudged that Allegheny was entitled to recover from Forth, the sum of $2,169,860 and from the Estate of Carey, the sum of $2,169,860 and that the United States of America was entitled to recover from Forth the sum of $1,115,485 and from the Estate of Carey, the sum of $1,115,485. Allegheny opposed the entry of judgment on the ground that the government had not paid more than its pro rata share and was not entitled to contribution.

On September 9, 1976, INA paid to the Clerk of the District Court the sum of $995,750, which represented the funds remaining in the INA policy. The deposit was accompanied by a Notification Payment of Judgment. ⁴ Once the money was deposited in the court, the United States claimed the entire proceeds pursuant to 31 U.S.C. § 191, the federal priority statute. Since Allegheny contested the right of the government to receive any of the proceeds, the question of who was entitled to the deposited funds had to be resolved on appeal. Upon stipulation of Allegheny and the United States, the Court directed the Clerk to invest the funds in Treasury Bills pending the outcome of the appeal.

On December 10, 1976, Allegheny noticed an appeal and on November 1, 1978, this Court reversed the District Court's judgment and remanded Allegheny's claim for contribution and indemnification to the District Court with instructions to enter judgment in favor of Allegheny against Forth in the amount of $6,570,690, and to order the INA policy proceeds which were deposited in the Registry of the District Court paid to Allegheny to the exclusion of the government in partial satisfaction of its judgment against Forth and the Estate of Carey. This Order became final on or about February 1, 1979.

On March 16, 1979, pursuant to the remand of this Court, the District Court ordered that Allegheny was entitled to recover $6,570,690 from Forth and the Estate of Carey and further ordered that the effective date of the judgment should be August 17, 1976. Pursuant to this judgment on or about March 28, 1979, the Clerk of the District Court paid Allegheny $995,750, plus the interest that had accrued thereon.

On or about August 16, 1979, Allegheny moved for summary judgment against INA alleging that INA owed interest on the entire $6,570,690 judgment from August 17, 1976. Allegheny also moved for summary judgment against Wausau alleging that Wausau wrongfully denied coverage to Forth under the excess umbrella policy and that Wausau owed Allegheny $1,000,000 plus interest on the entire judgment. Both INA and Wausau filed cross-motions for summary judgment.

On October 14, 1980, the District Court denied both of Allegheny's motions for summary judgment and granted both INA's and Wausau's cross-motions for summary judgment. The District Court ruled that INA was required to pay interest on the face amount of the policy up until the time it deposited said sum in court, but that Allegheny was barred from collecting the interest by accord and satisfaction, waiver, laches and binding election. The District Court also held that Forth was a named insured under the Wausau policy and as such came under the exclusionary clause for aircraft owned by the named insured and therefore, there was no coverage under the Wausau policy. Allegheny thereafter filed notice of appeal. We affirm the District Court on its interpretation of the Wausau policy, but reverse its decision on the INA policy for reasons herein given.

The issues before this Court with respect to the INA action are:

1. Whether INA is obligated to pay interest on the entire amount of judgment rendered against its insureds:

2. If so, whether INA's obligation for interest ceased when the policy limits were paid; and

3. Whether the actions of Allegheny constituted accord and satisfaction, waiver, estoppel and/or laches so as to bar Allegheny from recovery of such interest.

The issues before this Court with respect to the Wausau action are:

1. Whether the Forth Corporation, identified in the policy as an "additional insured", was a "named insured" and therefore not entitled to coverage under a clause which excluded coverage for "aircraft owned by the named insured"; and

2. Whether the District Court properly granted summary judgment based on the language of the Wausau policy.

The District Court held that INA was only required to pay interest on the face amount of the policy, and then determined that the actions of Allegheny barred it from recovery of any interest which would have accrued.

The INA policy period ran from January 1, 1969, to January 1, 1970. Paragraph 28(b) of the policy provided in part: "As respects such insurance as is afforded by the other terms of this policy ... the company shall:

(b) pay ... all interest accruing after the entry of judgment until the company has paid, tendered or deposited in court, such part of such judgment as does not exceed the limit of the company's liability thereon....

The company agrees to pay the amounts incurred under this insuring agreement, except settlement of claims and suits, in addition to the applicable limit of liability of this policy."

Although INA paid into the court registry $995,750 on September 9, 1976, the payment did not include interest on the judgment from the date of entry of judgment of August 17, 1976. The District Court found that paragraph 28(b) obligated INA to pay interest on the portion of judgment covered by the applicable limit of liability of the INA policy from the date of judgment until September 9, 1976, when the principal balance was deposited into the Court. This interest, based on the Indiana statutory rate of eight percent (8%), was computed by the Court to be $5,111.06. After determining that INA was liable for interest on the policy limits, the Court then determined that Allegheny's conduct barred it from recovery of this interest. In barring Allegheny from recovery, the Court relied on the equitable defenses of accord and satisfaction, estoppel, waiver, laches and binding election.

Allegheny contends that the position taken by the District Court is erroneous because it is contrary to the interpretation given to the interest clause by the casualty insurers' trade association, the National Bureau of Casualty Underwriters, and is contrary to the position adopted by the vast majority of jurisdictions. INA alleges that it was not a member of the National Bureau and that its comments are not applicable to the INA policy. INA further contends that the INA policy contains phrases of limitation which set the maximum bounds for the clauses within the INA policy and contains clear and unambiguous terms...