Commercial Standard Ins. Co. v. American Emp. Ins. Co.

• Decision Date: 06 January 1954
• Docket Number: No. 11797.,11797.
• Parties: COMMERCIAL STANDARD INS. CO. v. AMERICAN EMPLOYERS INS. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

209 F.2d 60 (1954)

COMMERCIAL STANDARD INS. CO. v. AMERICAN EMPLOYERS INS. CO.

No. 11797.

United States Court of Appeals Sixth Circuit.

January 6, 1954.

Raymond C. Stephenson, Louisville, Ky., Raymond C. Stephenson, Charles M. Allen, Louisville, Ky., on brief, for appellant.

J. W. Clements, Louisville, Ky., J. Walter Clements, Curtis & Curtis, Louisville, Ky., on brief, for appellee.

Before SIMONS, Chief Judge, and McALLISTER and MILLER, Circuit Judges.

McALLISTER, Circuit Judge.

This is a contest between two insurance companies which insured an individual against the same risk. Appellant company paid the entire loss arising therefrom, and seeks contribution from the other insurance company. The District Court held that appellant and appellee were co-insurers; that, by the terms of their policies, each became liable to the insured for that proportion of the total loss which its insurance bore to the total amount of insurance; that appellant company, in paying the insured more than that share for which it was liable — that is, the share for which appellee company was liable — became a volunteer; and that it was, therefore, not entitled to contribution.

The facts out of which the controversy arises are as follows: A. L. Dodd, doing business as Dodd Trucking Service, at Bowling Green, Kentucky, was insured by three policies of insurance; one, issued by appellant, Commercial Standard Insurance Company; and two other policies, issued by appellee, American Employers Insurance Company, to another party, who later assigned them to Dodd, the assignment having been consented to by the insurance company.

The policy issued by appellant, Commercial Standard Insurance Company, provided that it would pay, on behalf of the insured, all sums which he should be obligated to pay by reason of the liability imposed upon him by law for damages because of bodily injury sustained by any person, caused by accident, and arising out of the ownership, maintenance, or use of the insured's automobile.¹

One of the policies issued by appellee, American Employers Insurance Company, provided that it would pay, on behalf of the insured, all sums which he might be obligated to pay by reason of the liability imposed upon him by law for damages because of bodily injury, caused by accident, and arising out of the ownership or use of the insured's premises, and all operations which were necessary or incidental thereto.²

The other policy issued by the American Employers Insurance Company provided that it would pay, on behalf of the insured, all sums which he should be obligated to pay by reason of the liability imposed upon him by law for damages because of bodily injury sustained by any person, caused by accident, and arising out of the ownership, maintenance, occupation, or use of the premises for the purpose of an automobile storage garage or service station, and all operations, either on the premises or elsewhere, which were necessary and incidental thereto; and the use of any automobile for any purpose in connection with such operations.³

All three of these policies were in force on May 8, 1944. On that day, Fred Ramey went to the automobile service station, mentioned in the policies, which was being operated by Dodd, to consult with him about the purchase of a partnership interest in the business. During the course of their discussions and negotiations, a mechanic employed by Dodd was engaged in removing tires from the wheels of a truck for the purpose of changing them from wheel to wheel in order to provide for uniform wear of the tire treads. Dodd asked Ramey whether he thought one of the tires which was being removed was worth retreading. As Ramey stooped over to examine the tire, the mechanic pounded with his hammer on the metal rim of the tire and loosened a steel ring which, because of the air presure in the tire being suddenly forced against it, flew off and struck Ramey in the head, fracturing his skull. Later, Ramey sued Dodd in the Warren County Circuit Court in Kentucky, and eventually secured a judgment in the amount of $5,000, which was affirmed by the Kentucky Court of Appeals.

At the time that Ramey's suit was commenced against him, Dodd reported that fact to Mr. Taylor, the insurance agent at Bowling Green who represented both insurance companies in this case, and who had caused all three of the above mentioned policies to be issued to Dodd. Taylor notified both insurance companies of the suit. Appellee, American Employers Insurance Company, refused to defend or take any responsibility for the defense of the suit. Appellant, Commercial Standard Insurance Company, defended the suit by virtue of its policy of insurance with Dodd. After the judgment against Dodd was affirmed by the court of last resort in Kentucky, appellant, on behalf of Dodd, paid the judgment rendered against him, with interest and costs.

The first contention advanced on this appeal by the Commercial Standard Insurance Company is that the liability of American Employers Insurance Company was primary; that Commercial's liability was secondary; and that, therefore, appellant was entitled to be subrogated to Dodd's right against his primary insurer and to have the entire judgment and costs paid by appellee, American Employers Insurance Company, by virtue of its liability as such primary insurer.

Commercial's policy insured Dodd against liability for accidental injuries arising out of the maintenance of Dodd's truck. The term, maintenance, covered the changing of the tires to prevent undue wear.

The two policies of American Employers insured Dodd against liability for accidental injuries arising out of the use of the service station premises and all operations incidental to the use of such premises. These policies covered the liability for Ramey's injuries which resulted from the operations incidental to the use of the service station.

All of the above policies covered the loss in this case, although they were phrased in different language and approached the subject of the liability from a different aspect. If Commercial's policy had not been in existence, American Employers would have been liable for the entire loss; and if the latter's policies had not been in existence, Commercial Standard would have been so liable. In such a case, misty indeed are the contours that may be perceived between primary and secondary liability. In any event, here, one circumstance obviates the necessity of considering such questions and determines the issue: all of the policies of both companies provided that if the insured had "other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all * * * insurance against such loss." Where the loss of an insured is covered by several policies in different insurance companies, it is unimportant whether the coverage is specific in one policy and general in another, if the policies contain pro rata clauses providing that the liability under each policy shall be only that proportion of the total loss which the policy bears to the total amount of the policy. In such a case, unless there are other provisions in the policies otherwise specifically limiting or conditioning liability thereunder, the insurance companies are bound by what they have expressly covenanted in their policies as to their liability. In these circumstances, the insurance of none is primary or secondary; the liability is concurrent, and should be pro rated among them. The foregoing rule, which was laid down by Judge Freed in Ranallo v. Hinman Bros. Const. Co., D.C., 49 F.Supp. 920, was affirmed by this court on appeal, sub nom. Buckeye Union Casualty Co. v. Ranallo, 6 Cir., 135 F.2d 921, and is here controlling. Appellant and appellee were, therefore, co-insurers; and, in this determination, we concur with the conclusion of the District Court.

We come, then, to appellee's contention that, although both companies were co-insurers, each was liable only for a pro rata amount of the total loss by virtue of their policy contracts with the insured; that the liability of the insurance companies was several, and not joint; that neither insurer had any interest in the liability of the other insurance company, except in ascertaining the total amount of insurance, in order to fix its pro rata share of the loss based upon such total outstanding insurance; that, since each insurance company was only liable for its pro rata share, it was not legally bound to pay more than its proportion, and was not liable for the share of its co-insurer; that in any claim against it by the insured, appellant Commercial Standard Insurance Company could have paid its pro rata share of the loss and relied upon the pro rata clause in its policy; that in any action against it by the insured on its policy, appellant could have joined American Employers as a party for determination of its pro rata share; that payment to the insured by Commercial Standard of the entire loss was a payment not only of its share of the loss, but also of the share of the loss for which American Employers was liable; and that, in...