Employers Mutual Casualty Co. v. MFA Mutual Ins. Co.

• Decision Date: 12 October 1967
• Docket Number: No. 9293.,9293.
• Citation: 384 F.2d 111
• Parties: EMPLOYERS MUTUAL CASUALTY COMPANY, a corporation, Appellant, v. MFA MUTUAL INSURANCE COMPANY, a corporation, Peggy Offill and William E. Anderson, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

384 F.2d 111 (1967)

EMPLOYERS MUTUAL CASUALTY COMPANY, a corporation, Appellant, v. MFA MUTUAL INSURANCE COMPANY, a corporation, Peggy Offill and William E. Anderson, Appellees.

No. 9293.

United States Court of Appeals Tenth Circuit.

October 12, 1967.

Edwin Dudley Smith, Topeka, Kan. (David H. Fisher and Donald Patterson, of Fisher, Patterson, Sayler & Summers, Topeka, Kan., were with him on the brief), for appellant.

Lawrence J. Nelson, Topeka, Kan., (Harold E. Doherty and James E. Benfer, of Doherty & Benfer, Topeka, Kan., were with him on the brief), for appellees.

Before PHILLIPS, LEWIS and HILL, Circuit Judges.

LEWIS, Circuit Judge.

On June 13, 1965, William E. Anderson was involved in a collision in Lawrence, Kansas while driving a 1965 Dodge "demonstrator" automobile owned by Shortman Motor Company of Topeka, Kansas. Anderson had earlier that day delivered his own 1964 Dodge automobile to a Shortman Motor Company salesman for the purpose of having it serviced and the salesman had in turn loaned Anderson the demonstrator for use without charge as a temporary means of transportation. The demonstrator was insured by appellant Employers Mutual under a $200,000 liability policy¹ that contained an omnibus endorsement providing limited coverage² for any person other than Shortman and its agents who used the automobile with and in the scope of Shortman's permission,

"but only if no other valid and collectible automobile liability insurance, either primary or excess, with limits of liability at least equal to the minimum limits specified by the financial responsibility law of the state in which the automobile is principally garaged, is available to such person * * *."

The endorsement further provided that for such other person:

"(i) the applicable limit of the company\'s liability shall be the amount by which (1) the applicable minimum limit of liability for bodily injury or property damage specified in the financial responsibility law of the state in which the automobile is principally garaged exceeds (2) the sum of the applicable limits of liability under all other valid and collectible insurance available to the insured, and

"(ii) the insurance under this policy shall not apply to any loss with respect to which the insured has other valid and collectible insurance unless the total amount of the loss exceeds the sum of the limits of liability of all other policies affording such other insurance and the company shall then be liable, subject to clause (i) foregoing, only for the excess."

Anderson's 1964 Dodge was insured by appellee MFA under a $25,000 liability policy that contained an endorsement entitled "Drive Other Cars-Broad Form." This endorsement provided in pertinent part:

"The insurance afforded by this policy for Bodily Injury and Property Damage Liability Coverages with respect to the described automobile applies with respect to any other automobile, subject to the following provisions:

* * * * * *

"4. Other Insurance. The insurance afforded under the endorsement shall be excess insurance over any other valid and collectible insurance for Bodily Injury or for Property Damage Liability available to the insured."

Peggy Offill was injured in the subject collision and brought an action for damages against Anderson in the District Court of Douglas County, Kansas where she obtained a judgment for $10,000. MFA defended the suit after Employers Mutual refused to do so and incurred expenses of $2160 over and above the amount of the judgment. MFA then instituted this diversity action³ against Employers Mutual, Peggy Offill and William Anderson for a declaratory judgment to determine the nature and extent of coverage afforded Anderson under the two respective policies. Upon motions for summary judgment by both sides, the District Court concluded that both insurance companies stood on an equal footing in connection with their respective "other insurance" clauses and that equity thus required equal division of the judgment and expenses in the Offill-Anderson litigation. Judgment was entered accordingly. Employers Mutual appeals urging that the existence of MFA's admitted coverage, either primary or excess, operated to withdraw any coverage by Employers Mutual under the express terms of its insurance contract with Shortman Motor Company.

The conclusions of the District Court were premised upon, among other things, two critical determinations concerning the Employers Mutual policy. The first was that it would have provided Anderson with full primary coverage up to $200,000 but for the existence of the MFA policy and the second was that its "other insurance" provision, like that of MFA's, was in the nature of an "excess clause." We consider both of these determinations to be erroneous.

As we read the omnibus endorsement in appellant's policy, and there is nothing elsewhere in the policy or in the record to aid in interpretation, primary coverage of persons in the class and status of Anderson was expressly limited to "the applicable minimum limit of liability for bodily injury or property damage specified in the financial responsibility law of the state in which the automobile is principally garaged." The State of Kansas requires that after an accident occurs the persons involved, at the direction of the vehicle department of the state highway commission, shall provide either proof of automobile liability insurance or a deposit of security. Minimum limits in effect at the time of the subject accident are specified as follows:

"Such security shall be in such form and in such amount as the department may require, but in no case in excess of the limits specified in section 8 8-729 in reference to the acceptable limits of a policy or bond." Kan.Stats.Ann. 8-726(c).

* * * * * *

"No policy or bond shall be effective under section 7 8-728 of this act * * * unless such policy or bond is subject, if the accident has resulted in bodily injury or death, to a limit, exclusive of interest and costs, of not less than five thousand dollars ($5,000) because of bodily injury to, or death of, one person in any one accident and, subject to said limit for one person, to a limit of not less than ten thousand dollars ($10,000) because of bodily injury to, or death of, two or more persons in any one accident, and if the accident has resulted in injury to, or destruction of property to a limit of not less than one thousand dollars ($1,000) because of injury to, or destruction of, property of others in any one accident." Kan.Stats.Ann. 8-729(a).

Aside from any consideration of other insurance, therefore, we deem the intent and purpose of Employers Mutual, as reflected in the cited policy provisions and in the recitation that limited coverage was provided in consideration of a reduced premium on the policy, were to provide permissive users like Anderson only with insurance sufficient to meet the $5,000 minimum. Any liability in excess of this amount would have had to come from elsewhere, including the permissive user himself if he did not happen to have adequate excess coverage. The primary coverage of up to $200,000 was applicable solely to Shortman Motor Company, its officers, stockholders, employees and members of their households, and the record is clear that Anderson did not fall into any of these categories.

So,...