Crist v. Potomac Ins. Co.

Decision Date13 April 1966
Citation243 Or. 254,413 P.2d 407
PartiesJohn A. CRIST and Gregory M. Cutsforth, dba C N C Logging Company, Appellants, v. The POTOMAC INSURANCE COMPANY of The District of Columbia, a Stock Insurance Company, Respondent.
CourtOregon Supreme Court

C. Robert Altman, Albany, argued the cause for appellants. On the brief were Goode, Goode & Altman, Albany.

Kenneth E. Roberts, Portland, argued the cause for respondent. With him on the brief were Mautz, Souther, Spaulding, Kinsey & Williamson, and Ridgway K. Foley, Jr., Portland.


LUSK, Justice.

Plaintiffs, John A. Crist and Gregory M. Cutsforth, a partnership engaged in the logging business, were the named insured in a policy of liability insurance issued by defendant, The Potomac Insurance Company of the District of Columbia, in which Potomac agreed to 'pay on behalf of the insured all sums which the insured shall become legally obligated to pay * * * because of injury to or destruction of property, including the loss of use thereof, caused by accident.' This case had its inception in a claim against the plaintiffs, asserted by Edgar N. Roberts, the owner of a Lorane mobile shovel loader, for damages for injury to such loader alleged to have been caused by the negligence of the plaintiffs. When plaintiffs called upon Potomac to pay the loss the latter disclaimed liability. Roberts and his insurer, Aetna Casualty and Surety Company, brought an action against plaintiffs to recover their damages. Plaintiffs tendered the defense to Potomac and Potomac refused to defend. Without going to trial plaintiffs settled with Roberts and Aetna by the payment of $2,500. Plaintiffs then brought this action against Potomac to recover the amount of the settlement and the sum of $2,000 expended by them in defending against the claim. In a trial to the court without a jury the court entered findings of fact and conclusions of law and a judgment in favor of the defendant. Plaintiffs appeal.

The questions are whether Potomac was justified in refusing to defend, and, if so, whether Potomac is, nevertheless, liable to reimburse plaintiffs in the amount of the settlement.

Potomac's disclaimer of liability rests upon a clause of the policy which excludes from the coverage injury to or destruction of property 'controlled by the named insured, property in the care, custody or control of the insured or property as to which the insured for any purpose is exercising physical control.'

This court adheres to the rule that the obligation of the insurer to defend is to be determined by the allegations of the complaint filed against the insured: Isenhart v. General Casualty Co., 233 Or. 49, 54, 377 P.2d 26, and cases there cited. See, also, Jarvis et ux. v. Indemnity Ins. Co., 227 Or. 508, 517, 363 P.2d 740. We, therefore, set out the pertinent parts of the complaint filed by Roberts and Aetna against the plaintiffs.


'That at all times set forth herein, plaintiff Edgar N. Roberts was doing business under the name and style of Robert Logging Co., with his principal office in Oakridge, Lane County, Oregon. That at all times herein set forth the defendants, Al Crist and Gregg Cutsforth were doing business under the name and style of C & C Logging Co., with their principal office in Jasper, Lane County, Oregon. That at all times mentioned herein, defendant Jack M. Case, was an employee and agent of the defendants, and acting within the scope of his employment. That at all times set forth herein, plaintiff Aetna Surety and Casualty Co. was and is the duly organized corporation authorized and entered to do a general casualty and surety insurance business in the State of Oregon.


'That at all times mentioned herein, plaintiff Edgar N. Roberts, was the owner and in possession of a model MC6X6 double cab mobile Lorane shovel loader.


'That a short time prior to February 6, 1958, the defendants, Al Crist and Gregg Cutsforth, doing business as C & C Logging Co., entered into an agreement with Edgar N. Roberts whereby the plaintiff was to load and deck logs yarded by defendants on their logging operation in Lane County, Oregon, in the vicinity of Oakridge, on a per thousand basis by means of a Lorane mobile shovel loader, with an operator employed and paid by plaintiff. That the said operator provided by plaintiff was his employee and was to have the sole control, use, possession and operation of the said Lorane mobile loader, hereinafter referred to as the loader. That the said mobile loader was a double cab mobile loader with a cab for operating the loading apparatus and a cab for moving the said loader known and referred to hereafter as the truck cab.


'On or about the 6th day of February, 1958, at the daylight hour of about 2:30 p.m., in the absence of the operator provided by the plaintiff, Edgar N. Roberts, defendant Jack M. Case without any authorization, consent, or authority from plaintiff Edgar N. Roberts, or his operator, and in the absence of said operator, and without any notice through the said operator, did get into the loader cab of said mobile loader and commenced to operate the said loader in an attempt to deck logs on the defendants' logging operation.

'That said Jack M. Case did then and there carelessly, negligently and recklessly operate said loader in such a manner as to cause the said loader to topple over on its side on the ground damaging and wrecking said equipment in the particulars hereinafter set forth.'

The theory of this complaint is that Crist and Cutsforth, acting by their agent Case, negligently operated the loader, causing the injury and damage alleged. The complaint alleges that Case 'did get into the loader cab of said mobile loader and commence to operate the said loader,' etc., and it is the contention of the defendant that on its face the complaint discloses that the loader was at the time the accident occurred 'controlled by the named insured,' was in their 'care, custody * * * (and) control,' and was property as to which the insured were 'exercising physical control' for a purpose connected with the work in which the insured were engaged.

Plaintiffs argue that the allegation that Case was 'acting within the scope of his employment' is a mere conclusion of law and, therefore, we have, 'potentially, a case under the complaint within the coverage of the policy': Blohm et al. v. Glens Falls Ins. Co., 231 Or. 410 at 415--416, 373 P.2d 412, 414. The only authority cited by the plaintiffs for the contention that such an averment is a mere conclusion of law is 71 C.J.S. Pleading § 27b, p. 70, where it is stated:

'While it has been held that a general averment that an employee or agent was acting within the scope or apparent scope of his employment or agency is a conclusion of law, * * * it has also been held that the terms 'scope of employment' and 'course of employment' are allegations of facts or conclusions of facts.'

Cases holding both ways are cited in the notes to the text. We agree with those courts which hold that the averment is a statement of ultimate fact: Kornec v. Mike Horse Mining & Milling Co., 120 Mont. 1, 180 P.2d 252; Kuhl v. United States H. & A. Ins. Co., 112 Minn. 197, 127 N.W. 628; Gilbert v. Progressive Life Ins. Co., 79 Ga.App. 219, 53 S.E.2d 494; Southern Grocery Stores, Inc. v. Herring, 63 Ga.App. 267, 11 S.E.2d 57. As stated in Kuhl v. United States H. & A. Ins. Co., supra, 112 Minn. at 198, 127 N.W. at 628:

'The terms 'scope of employment' and 'course of employment' are now generally regarded as conclusions of fact, like 'negligence.' Under current liberal rules of pleading, the complaint contained an allegation sufficient on this point to justify the admission of evidence.'

That case was decided in 1910. The rules of pleading today are, to say the least, quite as liberal as they were 56 years ago. In Jarvis et ux. v. Indemnity Ins. Co., supra, 227 Or. at 513, 363 P.2d at 742, this court was concerned with an allegation in a complaint, in a case similar to this, that 'the plaintiffs, for a valuable consideration, hired the defendants as a commercial carrier to tow' a trailer, etc. Contrary to the position, taken in a dissent, that this allegation was to be regarded 'as the statement of a legal proposition rather than a statement of fact' (227 Or. at 551, 363 P.2d at 760) we gave effect to the allegation as a statement of ultimate fact. The allegation that plaintiffs' employee, Case, was 'acting within the scope of his employment' is no less a statement of ultimate fact.

The provision of the policy excluding from its coverage injury to property in the care, custody or control of the insured is a common one and has been frequently construed by the courts. As stated in 12 Couch on Insurance (2d ed.) § 44:426:

'The great majority of the cases support the view that the exception clause relating to property in the care, custody, or control of the insured refers to possessory handling of the property as distinguished from proprietary control. Stated differently, the concept of 'control' in an exclusion of liability as to property in the 'care, custody, or control' of the insured refers only to the physical fact of possession and does not contemplate proprietary control or ownership.'

See, also, Annotation, 62 A.L.R.2d 1242 at 1245. Illustrative cases, in point on their facts, with one possible exception to be presently noticed, and holding that the provision regarding care, custody and control of the insured, was applicable and barred recovery by the insured are: International Derrick & Equipment Co. v. Buxbaum, 240 F.2d 536 (3d Cir.), 63 A.L.R.2d 1237; Hardware Mutual Casualty Co. v. Mason-Moore-Tracy, Inc., 194 F.2d 173 (2d Cir.); S. Birch etc. Co. v. United Pacific Ins. Co., 52 Wash.2d 350, 324...

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  • Opinion of the Justices
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    ...for the proposition that the words "state control" are not synonymous with "state operation", including Crist v. Potomac Insurance Company, Or.Supr., 413 P.2d 407 (1966); Boyles v. County Court of Barbour County, W.Va.Supr., 116 W.Va. 689, 182 S.E. 868 (1935); and Crisanti v. Cremo Brewing ......
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