EMPLOYERS'LIABILITY A. CORP. v. Youghiogheny & O. Coal Co.

• Decision Date: 07 July 1954
• Docket Number: No. 14989.,14989.
• Parties: EMPLOYERS' LIABILITY ASSUR. CORP., Limited v. YOUGHIOGHENY & OHIO COAL CO.
• Court: U.S. Court of Appeals — Eighth Circuit

214 F.2d 418 (1954)

EMPLOYERS' LIABILITY ASSUR. CORP., Limited v. YOUGHIOGHENY & OHIO COAL CO.

No. 14989.

United States Court of Appeals, Eighth Circuit.

July 7, 1954.

Reginald Ames, St. Paul, Minn. (Cummins, Cummins, Hammond & Ames, St. Paul, Minn., on the brief), for appellant.

Mandt Torrison, St. Paul, Minn. (Bundlie, Kelley, Finley & Maun, St. Paul, Minn., on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

This is an action upon a liability insurance policy to recover damages alleged to be within the coverage of the policy. The defense is that the accident causing the damages involved was not covered by the policy because it was excluded by Exclusions (a) and (d) thereof, and that there was no duty resting on the appellant to defend the action brought against the plaintiff to recover such damages.

Jurisdiction of the Federal Court is based upon diversity of citizenship of the parties and the amount involved.

The plaintiff, Youghiogheny and Ohio Coal Company, hereinafter referred to as the Coal Company, is an Ohio corporation with its principal place of business at the city of Cleveland. It is authorized to do business in the states of Wisconsin and Minnesota. The defendant-appellant is a corporation organized under the laws of Great Britain. The insurance policy involved was issued in Ohio and is, therefore, an Ohio contract, and it must be construed by the laws of that state. American Law Institute, Restatement of Conflict of Laws, § 346; Matusek Academy of Music, Inc., v. National Surety Corporation, 7 Cir., 210 F.2d 333. And the Ohio courts hold that a contract of insurance is made in the state where the last act is done which is necessary to complete the contract and bind the insured and the insurer. Equitable Life Ins. Co. of Iowa v. Gerwick, 50 Ohio App. 277, 197 N.E. 923, 926.

The alleged negligence occurred in Wisconsin and, insofar as the law of torts is involved, the law of the place where the tort occurred is controlling. Jonathan Woodner Co. v. Mather, D.C. Cir., 210 F.2d 868, 872.

The insurance company on December 31, 1948, made and delivered to the plaintiff coal company its Manufacturers' and Contractors' Liability policy covering the coal company's premises and operations at Superior, Wisconsin, as a coal, fuel, oil or wood dealer for a period of one year. So far as material here the insurance company agreed:

"I. Coverage A — Bodily Insured Liability

"To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law for damages, including damages for care and loss of services, because of bodily injury, including death at any time resulting therefrom sustained by any person or persons, caused by accident and arising out of the hazards hereinafter defined."

"II. Defense, Settlement, Supplementary Payments. It is further agreed that as respects insurance afforded by this policy the Company shall

"(a) defend in his name and behalf any suit against the Insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; . . ."

"Definition of Hazards

"Division 1. Premises — Operations

"The ownership, maintenance or use of the premises, and all operations during the policy period which are necessary or incidental thereto."

"Exclusions

"This policy does not apply:

"(a) under Division 1 of Definition of Hazards, to . . . vehicles of any kind other than hand trucks, push carts and bicycles, or the loading or unloading thereof, while away from the premises, unless specifically declared and described in this policy and premiums charged therefor; . . .

* * * * * *

"(d) under Divisions 1 and 4 of the Definition of Hazards, to liability with respect to which insurance is or can be afforded under Division 3 of the Definition of Hazards; or to operations on or from other premises which are owned, rented or controlled by the Insured;"

"Definition of Hazards * * *

"Division 3. Products

"The handling or use of or the existence of any condition in goods or products manufactured, sold, handled or distributed by the named Insured, if the accident occurs after the Insured has relinquished possession thereof to others and away from premises owned, rented or controlled by the Insured; and operations covered under Divisions 1 and 4 of the Definition of Hazards, other than pick-up and delivery and the existence of tools, uninstalled equipment and abandoned or unused materials, if the accident occurs after such operations have been completed or abandoned at the place of occurrence thereof and away from such premises."

In August, 1949, while the policy was in effect, the coal company at its premises in Superior, Wisconsin, accepted, prepared for loading and then loaded with coal a Pere Marquette freight car. The court found that the preparation for and the loading operation were all acts necessary and incidental to the use of the insured premises as a place for conducting its business as a coal dealer.

After the car was loaded it was delivered to the Great Northern Railway Company, and on the 29th of August, 1949, the loaded car was "spotted" on a siding at Princeton, Minnesota; and one Burnett, an employee of the consignee of the car, attempted to open one of the sliding doors of the car, and while he was attempting to do so, "the door of the car left its moorings and crashed down upon him injuring him severely."

Thereafter, in August, 1950, Burnett brought an action in the state court of Minnesota against the Great Northern Railway Company, the Pere Marquette Railway Company, the Chesapeake & Ohio Railway Company, and the coal company for personal injuries so received by him in the sum of $110,000, claiming that his injuries were the proximate result of the negligence of the defendants. The particular acts of negligence attributed to the coal company in Burnett's complaint were:

"That said coal company carelessly and negligently accepted said railroad freight car from its co-defendants without making a thorough inspection as to the condition of said car, prior to loading the same.

"That said coal company knew, or in the exercise of reasonable or ordinary care should have known, that said railroad freight car was in bad order and unfit for the transportation of coal. * * *

"That said coal company knew, or in the exercise of reasonable or ordinary care should have known that in the type of car furnished it by its co-defendants there is required to be erected and securely fastened a false door, so as to prevent the bulk coal from pressing against the outside sliding doors of said car.

"That said defendant coal company carelessly and negligently failed and neglected, either to install the false door or sheeting between the outside door and the bulk coal proper, or carelessly and negligently failed and neglected to properly secure said false door or sheeting so that said bulk coal would not bear its weight, in whole or in part, directly against the outside of the sliding door of said car."

The coal company promptly tendered the defense of the action to the insurance company. The defense was declined on the ground that Burnett's injuries were not covered by the policy because the accident alleged in his complaint was covered by Exclusions (a) and (d) thereof, supra. Attorneys for the coal company accordingly undertook its defense. During the course of the trial, upon advice of counsel, the case was settled for $45,000, of which amount the coal company contributed the sum of $7,500. The coal company incurred an expense in the defense of that action in the amount of $4,825.57, making its total expense the sum of $12,325.57, for recovery of which this action was brought. The defendant here conceded in the trial court that its liability would have been covered by the policy except for the two exclusionary clauses (a) and (d) thereof.

On this appeal the insurer contends that the court erred in finding and entering judgment for the coal company for two reasons only:

1. The accident to Burnett was not covered by the policy because of Exclusions (a) and (d); and

2. There was no duty resting on appellant to defend the action brought by Burnett against the coal company; and, therefore, it is not liable to reimburse the plaintiff coal company for attorneys' fees, costs and expenses in the trial of the Burnett case.

The second contention may be disposed of briefly. We, therefore, consider it first.

The policy provided "that as respects insurance afforded by this policy the Company shall

"(a) defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent. * * *"

To support its refusal to defend the Burnett suit the appellant relies upon the decision of the Supreme Court of Minnesota in Lyman Lumber & Coal Co. v. Travelers Ins. Co., 206 Minn. 494, 289 N.W. 40. We need not decide whether the cited case is consistent with the decision of that court in Butler Bros. v. American Fidelity Co., 120 Minn. 157, 139 N.W. 355, 44 L.R.A.,N.S., 609, because on this point the law of Ohio is controlling since the policy here is an Ohio contract. Kansas City Life Ins. Co. v. Wells, 8 Cir., 133 F.2d 224. The precise question presented here was decided by the Supreme Court of Ohio in Bloom-Rosenblum-Kline Co. v. Union Indemnity Co., 121 Ohio St. 220, 167 N.E. 884, 886. In the cited case an automobile liability policy was involved. The suit against the insured was an action for damages caused by an automobile neither owned by the insured nor covered by the policy; but the provision of the policy was the same as that in the present case. The insured gave notice to the insurer of the commencement of the suit, and the insurer refused to defend. The insured defended, won the case, and sued the...