Bruce v. Travelers Insurance Company

• Decision Date: 20 April 1959
• Docket Number: No. 17508.,17508.
• Citation: 266 F.2d 781
• Parties: Jack J. BRUCE, Appellant, v. TRAVELERS INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

266 F.2d 781 (1959)

Jack J. BRUCE, Appellant, v. TRAVELERS INSURANCE COMPANY, Appellee.

No. 17508.

United States Court of Appeals Fifth Circuit.

April 20, 1959.

COPYRIGHT MATERIAL OMITTED

William R. Tete, Lake Charles, La., for appellant.

John A. Hickman, Lawes, Cavanaugh, Hickman & Brame, Lake Charles, La., for appellee.

Before RIVES, JONES and WISDOM, Circuit Judges.

WISDOM, Circuit Judge.

There are two aspects to the question at issue on this appeal: (1) What is an "executive officer", as that term is used in a public liability insurance policy covering a large oil company and its executive officers? (2) Is the question a matter for the court to decide on a motion for summary judgment or for a jury to decide after a trial?

Jack Bruce, plaintiff-appellant, was employed as a roughneck by the Gulf Drilling and Well Service. Bruce's employer, was engaged in reworking an oil well for Gulf Refining Co. (Gulf), a company unrelated to Bruce's employer, when Bruce was injured as the result of negligence on the part of a Gulf employee, H. J. Collins.

It is conceded that Bruce is entitled to recover from Gulf under the Louisiana Workmen's Compensation Law. LSA-R.S. 23:1061. As the employee of an independent contractor, he is barred from recovering damages from Gulf in tort.¹ Travelers Insurance Company carries a public liability insurance policy on Gulf that also provides extended coverage for "any executive officer, director or stockholder * * * while acting within the scope of his duties". Bruce brought suit for personal injuries against Travelers, under the Louisiana Direct Action Statute, as the insurer of Collins. LSA-R.S. 22:655. The theory of the complaint is that Collins was an executive officer of Gulf, since he was "invested with the general conduct and control of the business of Gulf Refining" at the well location.

Travelers filed a motion for a summary judgment, and introduced affidavits, depositions, and Gulf's charter and by-laws to show that Collins was not an executive officer of Gulf. The plaintiff offered no counter-affidavits or depositions, taking the position that he was entitled to have the jury determine whether Collins was an executive officer.

The trial judge found that the Gulf area superintendent assigned Collins to work as a drilling foreman (a "tool pusher" or "ramrod", in the jargon of the oil industry), and that Collins was at all times under the supervision of the area superintendent. Collins' job, the trial judge stated, consisted "primarily in seeing that the contractor performed his duties, as outlined in the contract, to insure that the equipment furnished on location by Gulf Refining Company was not misused or damaged, and to see that the contractor exercised all necessary precautions to control the well". Collins was never elected or chosen by the Board of Directors of Gulf as an officer with any term of office, powers or duties, or salary fixed by the Board. On these findings the trial judge held:

"We reach the inescapable conclusion that Collins was not an executive officer. If a jury were to hold otherwise I would, under the law, feel it my duty to set the verdict aside, because there is no issue of fact to be submitted to a jury on the decisive issue of coverage."

The court granted the motion for a summary judgment and dismissed the complaint. We affirm.

I.

Paragraph 26 of Gulf's by-laws specifically names the officers of Gulf and provides that the officers must be elected by the board of directors. It reads:

"The officers of the corporation shall be chosen by the directors and shall be a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer, a comptroller and a general counsel. The board of directors may also choose one or more assistant secretaries, assistant treasurers and assistant comptrollers. Two or more offices may be held by the same person, except that where the offices of president and secretary are held by the same person, such person shall not hold any other office."

Paragraph 28 provides that the Board of Directors may appoint such "other officers" as it shall deem necessary. They hold office for such terms and exercise such powers as the Board determines. Paragraph 32 of the by-laws provides that the president of the corporation shall be the "chief executive officer" of the corporation.

This language is free from ambiguity. The intention of these provisions of the by-laws is clearly to allow the corporation to determine for itself what persons shall be officers and how they shall be chosen. In this case such intention does not conflict with any statute nor does the denomination of certain persons as officers cut across any statutory use of the term "officers" having a broad frame of reference.

No court in this part of the world can ignore the common knowledge that a large oil company having thousands of employees and representatives has hundreds of employees and representatives in positions of great responsibility. But tool pushers, ramrods, supervisors, drilling superintendents, area superintendents, or other employees having responsible duties are not officers, under the unambiguous by-laws of Gulf Refining Company. Nor can it be said a tool pusher or a ramrod or a supervisor at a well location functions in an executive capacity, as "executive officer" is understood in the ordinary acceptance of the term. The term implies some sort of managerial responsibility for the affairs of the corporation generally and it imports a close connection with the board of directors and high officers of the company. Insurance policies should be construed liberally, but the words of a policy must be given the meaning they ordinarily bear. "No strained or unusual construction should be given to any of the terms of a policy of insurance, in favor of the insurer or of the insured". Empire Life Insurance Co. v. Gee, 1912, 178 Ala. 492, 60 So. 90, 92. Or, we add, in favor of a third party claimant.

The distinction between an agent or employee and an officer is not determined by the nature of the work performed, but by the nature of the relationship of the particular individual to the corporation. The principle is well stated in 13 American Jurisprudence, par. 866, p. 854:

"The relationship of a person to a corporation, whether as officer or as agent or employee, is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist. * * * One distinction between officers and agents or employees of a corporation lies in the manner of their creation. An office is created usually by the charter or by-laws of the corporation, while an agency or employment is created usually by the officers. A further distinction may thus be drawn between an officer and an employee of a private corporation in that the latter is subordinate to the officers and under their control and direction."

Many cases have applied this principle. Thus, in Vardeman v. Penn Mutual Life Ins. Co., 1906, 125 Ga. 117, 54 S.E. 66, 67 the court held: "One distinction between officers and agents of a corporation lies in the manner of their creation. An officer is created by the charter of the corporation, and the officer is elected by the directors or the stockholders. An agency is usually created by the officers, or one or more of them, and the agent is appointed by the same authority. It is clear that the two terms officers and agents are by no means interchangeable." In Cosgriff v. Duluth Firemen's Relief Ass'n, 1951, 233 Minn. 233, 46 N.W.2d 250, the court held that even a trustee of a firemen's relief association was not an executive officer. Rosenblum v. N. Y. Central R. R. Co., 1948, 162 Pa. Super. 276, 57 A.2d 690, 691 was a suit for specific performance to compel the New York Central to transfer land on a contract signed by a land agent for the railroad. Written authority was required for contracts in the name of the corporation, except contracts signed by executive officers. The Court held that the land agent was not an executive officer and pointed out that "the executive officers of a corporation are officers of the entity, and not officials merely of the business conducted by the corporation".

The cases to the contrary are cases in which public policy has impelled courts to give a broad interpretation to a state workmen's compensation act or to some other statute charging a corporation with liability for the acts of its officers. The California and Arkansas compensation laws, in the cases cited by appellant, use the term "executive or managing officer". In Horst Co. v. Industrial Accident Commission of California, 1920, 184 Cal. 180, 193 P. 105, 109, 16 A.L.R. 611, however, the California court observed that the terms "executive officer" and "managing officer" are not synonymous; that an "executive officer" is elected in accordance with the charter or by-laws; that the statute initially used the term "executive officers" but was amended by adding "managing officer, and has not specified that the officer shall be an elective one * * * so that it is clear *...