Dempster Bros., Inc. v. U.S. Fidelity & Guaranty Co.

• Decision Date: 20 November 1964
• Citation: 388 S.W.2d 153,54 Tenn.App. 65
• Court: Tennessee Court of Appeals
• Parties: DEMPSTER BROTHERS, INC., Plaintiff in Error. v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant in Error.

Page 153

388 S.W.2d 153

54 Tenn.App. 65

DEMPSTER BROTHERS, INC., Plaintiff in Error. v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant in Error.

Court of Appeals of Tennessee, Eastern Section.

Nov. 20, 1964.

Certiorari Denied by Supreme Court March 2, 1965.

Anderson & Snepp, Knoxville, for plaintiff in error.

Hodges, Doughty & Carson, Knoxville, for defendant in error.

McAMIS, Presiding Judge.

Dempster Brothers, Incorporated, appeals from a judgment dismissing its suit against United States Fidelity & Guaranty Company for the recovery of attorney's fees and costs totaling $9,048.32 which it incurred in the defense of two death claims instituted against it in the State of Florida. The Circuit Judge, sitting without a jury, filed a Memorandum Opinion in which he followed First National Bank in Bristol v. South Carolina Ins. Co., 207 Tenn. 520, 341 S.W.2d 569, to hold that the insurer's duty to defend was dependent upon whether the complaints in the Florida suits showed upon their face a state of facts obligating it to defend and that the two complaints failed to allege such facts.

The two Florida actions against Dempster grew out of the fall of an airplane owned by N. M. Ulsch & Sons, Incorporated, Dempster's distributor in the State of Florida, during an attempted flight from Jacksonville, Florida, to Knoxville, Tennessee.

Ulsch & Sons had sold certain Dempster equipment to Waste Control of Florida and the purpose of the flight was to enable Waste Control to take delivery of the equipment at the Dempster plant in Knoxville. John Flether, President of Waste Control, and Earl Taylor, one of its employees, were aboard the plane. Both were killed in the crash and their respective personal representatives brought actions in the state court at Jacksonville against Dempster, Ulsch and the estate of Harold W. Ivens, an employee of Ulsch, who was the pilot on the trip. Both actions were based upon alleged negligent operation of the plane.

At the time of the crash, Dempster held what is titled a 'Comprehensive General--Automobile Liability Policy' in the defendant United States Fidelity & Guaranty Company which, under certain conditions, obligated it to pay on behalf of Dempster all sums for which Dempster should become liable for personal injuries or death caused by accident and to defend actions brought to enforce such liability. When notified of the Florida actions, U. S. F. & G. Co. declined to defend, at first, upon the ground that actions growing out of airplane accidents were excluded and, later, upon the ground that the complaints in the Florida suits failed to allege that Ulsch stood in the relation of an independent contractor to Dempster, invoking in its special plea the following exclusion:

'The policy does not apply:

'(U)nder Coverages A and C, except with respect to operations performed by independent contractors and except with respect to liability assumed by the Insured under a contract as defined herein, to the ownership, maintenance, operation, use, loading or unloading of (1) watercraft * * * or (2) aircraft.'

The Circuit Judge held inept the exclusionary reference to 'aircraft' and we do not understand that defendant now seeks to avoid liability on the ground that injuries growing out of airplane accidents are per se excluded. Its present insistence is that the Florida complaints failed to allege that Ulsch was an independent contractor of Dempster and that, regardless of the actual facts, in the absence of such allegation, it was under no duty to defend, but if, contrary to its insistence, the court in determining its contractual duty, can go behind the allegations of the complaints Ulsch, in fact, was not an independent contractor for Dempster but a vendee of the equipment which Dempster manufactured and sold.

As we read the opinion in First National Bank in Bristol v. South Carolina Ins. Co., 207 Tenn. 520, 341 S.W.2d 569, supra, the policy of insurance was one insuring against liability arising out of the operation of an automobile. It expressly excluded from coverage actions against the insured by his employees. An examination of the transcript reveals that the declaration in the case which the insurer declined to defend was predicated on the charge that the plaintiff was a minor illegally employed by the insured and that such employment in violation of law was the proximate cause of the plaintiff's injuries. The action was not based upon the negligent operation of the automobile covered by the policy. As pointed out in the opinion, it thus clearly appeared that the action was within the policy exclusion. The cases of South Knoxville Buick Co. v. Empire State Surety Co., 126 Tenn. 402, 150 S.W. 92; Fulton Co. v. Mass. Bonding & Ins. Co., 138 Tenn. 278, 197 S.W. 866; American Indemnity Co. v. Sears, etc., Co., 6 Cir., 195 F.2d 353 and Clinchfield R. Co. v. United States Fidelity & G. Co., D.C., 160 F.Supp. 337, cited in the opinion, can not be said to stand for the rule that the allegations of the complaint in all cases and under all circumstances conclusively govern the duty to defend.

In American Indemnity Co. v. Sears, etc. the Court expressly stated that it could assume 'without decision' that the allegations of the complaint control. Since none of these cases held the allegations of the complaint controlling in all cases and the action under consideration was based upon illegal employment, a field of liability entirely outside the scope of the policy, we cannot believe the Supreme Court intended to lay down the rule that the allegations of the complaint are, under all circumstances, to control the duty to defend.

Generally, as in this case, the policy contains a separate provision requiring the insurer to defend actions within the coverage even though groundless. It may be that the general rule, referred to by the Circuit Judge, that the allegations of the complaint control the duty to defend originated from cases where the allegations of the complaint brought the action within the coverage and the insurer, rather than the insured, sought to go behind the complaint and show that, in fact, the basis of the suit was beyond the scope of the policy. To permit the insurer to go behind the allegations of the complaint would tend to relieve the insurer of the duty of defending groundless actions in derogation of the duty imposed by the policy.

To apply the same rule to the insured would seem to violate the principal that in construing and applying insurance policies the apparent object and intent of the parties must be kept in mind. The purpose of the insured in this case under defendant's policy was to obtain protection against the expense of defending suits, whether meritorious or groundless,...