Fireman's Fund Insurance Company v. Dunlap

• Citation: 317 F.2d 443
• Decision Date: 02 May 1963
• Docket Number: No. 8770.,8770.
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Appellant, v. C. K. DUNLAP, Katherine Dunlap, Mack Smith, Jr., Andrew Franklin Smith, Erlie G. Williamson, Addie Williamson, Lenneau Williamson as Administrator of the Estate of Earl Williamson, H. H. Sanders, individually and as Administrator of the Estate of H. C. Sanders, and Olive Sanders, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

317 F.2d 443 (1963)

FIREMAN'S FUND INSURANCE COMPANY, Appellant, v. C. K. DUNLAP, Katherine Dunlap, Mack Smith, Jr., Andrew Franklin Smith, Erlie G. Williamson, Addie Williamson, Lenneau Williamson as Administrator of the Estate of Earl Williamson, H. H. Sanders, individually and as Administrator of the Estate of H. C. Sanders, and Olive Sanders, Appellees.

No. 8770.

United States Court of Appeals Fourth Circuit.

Argued January 11, 1963.

Decided May 2, 1963.

David W. Robinson, II, Columbia, S. C. (J. Means McFadden, Robinson, McFadden

& Moore, Columbia, S.C., Albert L. James, Jr., and Paulling & James, Darlington, S. C., on brief), for appellant.

Derrick Kenneth Baker, Darlington, S. C. (James P. Mozingo, III, Darlington, S. C., on brief), for appellees.

Before HAYNSWORTH and BOREMAN, Circuit Judges, and LEWIS, District Judge.

LEWIS, District Judge.

This is an action for declaratory judgment brought by Fireman's Fund Insurance Company alleging that it has no duty under an automobile liability insurance policy to defend or pay judgments obtained in any actions arising out of the deaths of Earl Williamson and H. C. Sanders.¹ Both Sanders and Williamson were killed when struck on October 14, 1961 by an automobile owned by the insured, C. K. Dunlap and Katherine Dunlap. Fireman's Fund Insurance Company alleges that it has no obligation under the policy because the automobile was being used at the time without permission of its insured C. K. Dunlap.

Named as defendants are the insured C. K. and Katherine Dunlap, Andrew Franklin Smith, the driver of the vehicle at the time Sanders and Williamson were killed, his father Mack Smith, Jr., and the parents and administrators of the estates of Earl Williamson and H. C. Sanders. All of the defendants are residents and citizens of the State of South Carolina, and the only basis for jurisdiction is diversity of citizenship, the plaintiff being a corporation organized and existing under the laws of the State of California.

The defendants Sanders and Williamson contend there is no controversy between plaintiff Fireman's Fund Insurance Company and defendant C. K. Dunlap, and that therefore C. K. Dunlap should be realigned as a party plaintiff and the action dismissed for lack of jurisdiction.

The District Court, having considered the matter upon the pleadings and discovery depositions, found as a fact that there was no controversy between Fireman's Fund Insurance Company and its insured C. K. Dunlap, and realigned the parties and dismissed the action for lack of jurisdiction on the ground that there was no diversity of citizenship among the parties.

We must affirm unless the District Court's findings are clearly erroneous.²

It is clear from an examination of the record that the sole ground on which the insurance company denies liability is that the automobile in question was being used at the time without the permission of C. K. Dunlap. With this Dunlap agrees. He also filed a cross-claim against Sanders and Williamson seeking a declaration that he was under no liability to them because the automobile was being used without his permission. In fact, Dunlap and the investigators for the insurance carrier have fully cooperated in their endeavor to establish this defense both prior and subsequent to the filing of this suit in the District Court.

The insurance carrier, however, contends: Agreement between the Dunlaps and the company on this factual question does not mean that they are in accord on the company's duty to defend or indemnify. — They (Dunlaps) demand a defense whether or not they are liable or coverage exists. — The company claims it has no such duty, even if the Dunlaps are liable, if the facts fail to bring the claim within the coverage; — and that such "controversy" is sufficient to sustain the jurisdiction of the District Court.

The necessary prerequisite for jurisdiction in cases for declaratory judgment is the existence of an "actual controversy"³ between the parties, and here none exists.

The only possible ground of jurisdiction in this case is diversity of citizenship; and, when the parties are realigned in accordance with their respective interests, the Dunlaps must be aligned with the plaintiff and the necessary diversity of citizenship is destroyed as all of the defendants are citizens of the same state as the Dunlaps. The rule, in a similar situation, was thus stated in Helm v. Zarecor, 222 U.S. 32, 32 S.Ct. 10, 56 L.Ed. 77. See also State Farm Mutual Automobile Insurance Company v. Hugee, 4 Cir., 115 F.2d 298, 132 A.L.R. 188.

Here the appellant insurance carrier, in its pleading, makes the Dunlaps parties defendant, alleging there is a controversy over the company's duty to defend and indemnify them in the anticipated Sanders and Williamson suits. But that contention is without merit. The terms of the contract between the insurance carrier and the Dunlaps...