Float-Away Door Co. v. Continental Casualty Co.

Decision Date03 March 1967
Docket NumberNo. 22879.,22879.
Citation372 F.2d 701
PartiesFLOAT-AWAY DOOR COMPANY and National Surety Company, Appellants, v. CONTINENTAL CASUALTY COMPANY, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

C. B. Rogers, T. J. Long, Edward E. Dorsey, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for appellant, Float-Away Door Co.

Ben L. Weinberg, Jr., William Louis Spearman, Long, Weinberg & Ansley, Atlanta, Ga., for appellant, National Surety Corp.

Charles A. Moye, Jr., Gambrell, Harlan, Russell & Moye, Atlanta, Ga., for appellee; E. Smythe Gambrell, Harold N. Hill, Jr., Floyd E. Siefferman, Jr., Atlanta, Ga., of counsel.

Before RIVES, BELL and THORNBERRY, Circuit Judges.

RIVES, Circuit Judge:

This appeal is from the denial of appellants' and the grant of appellee's motion for summary judgment in a declaratory judgment action concerning the coverage of two liability insurance policies.1 The material facts may be summarized as follows:

Dance had contracted with Float-Away to transport a shipment of doors from Float-Away's plant in Atlanta, Georgia, to Universal Manufacturing Company (Universal) in Ohio. Dance left one of its trailers at Float-Away's plant where it was loaded by Float-Away, picked up by Dance and inspected and sealed at Dance's Atlanta terminal, and transported to Cincinnati, Ohio. In Cincinnati, Dance turned the trailer over to another carrier which transported it to the premises of Universal in Camden, Ohio. There, in the course of the unloading operation, Barrett, an employee of Universal, was injured when some of the doors fell from the trailer. Barrett filed suit against Float-Away and Dance, alleging that both parties had been negligent in the loading and inspection of the trailer. Float-Away and Dance then called upon Continental to defend them in that suit, claiming that both were covered under Continental's policy. Continental acknowledged that its policy covered Dance, but refused to defend Float-Away, denying that Float-Away was an additional insured within contemplation of the omnibus clause in Continental's policy. Thereupon, Float-Away and National Surety filed this suit for a declaratory judgment that Barrett's claim against Float-Away came within the coverage of Continental's policy. Both parties moved for summary judgment. The district court sustained Continental's motion for summary judgment, ruling that Float-Away was not an additional insured under the policy which Continental had issued to Dance. Several months later, Barrett's personal injury action went to trial with Float-Away being defended by National Surety and Dance being defended by Continental. After a full day's trial the action was compromised on the basis of a consent judgment for $175,000.00. Continental has paid into court $87,500.00 on behalf of Dance. This appeal involves only the remaining $87,500.00 which National Surety claims that it does not owe on behalf of Float-Away.

Three principal questions are presented:

I. Is Float-Away an additional insured within the meaning of the omnibus clause in the policy that Continental issued to Dance?
II. If Float-Away is an additional insured under Dance\'s policy, do the employee-workmen\'s compensation exclusions in that policy exclude coverage?
III. If Float-Away is covered by Dance\'s policy, is that coverage primary when considered in conjunction with Float-Away\'s policy with National Surety?

Preliminarily we discuss briefly the choice of law problem with regard to the interpretation of the insurance policy. The conflict of laws rules to be applied by the federal district court in a diversity case must conform to those prevailing in the courts of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 1941, 313 U.S. 487, 496, 61 S. Ct. 1020, 85 L.Ed. 1477; Van Dusen v. Barrack, 1964, 376 U.S. 612, 628, 84 S.Ct. 805, 11 L.Ed.2d 945. Georgia appears to adopt the law of the place of making with respect to matters of contract interpretation, but views the place of making as where the contract is delivered, not where it is executed. Pink v. AAA Highway Express, Inc., 1941, 191 Ga. 502, 13 S.E.2d 337, 344, 137 A.L.R. 934, aff'd, 1941, 314 U.S. 201, 62 S.Ct. 241, 86 L. Ed. 152; see also, The Scotland, 1881, 105 U.S. 24, 29, 26 L.Ed. 1001; 16 Am. Jur.2d, Conflict of Laws § 11. It is unclear from the record and the briefs, however, where Continental's policy was delivered. The policy was apparently executed in Illinois, and Dance's principal place of business is in Kentucky. So far as appears, however, neither the law of Illinois nor Kentucky is dispositive of the issues presented here. There is no applicable foreign statute in either State, and the applicable case law is not shown to differ materially in the two States. This Court recently described the Georgia conflict of laws rule as follows:

"Where there is no applicable foreign statute, the Georgia courts then go through a two-step process. First, in the absence of pleading and proof of `foreign law,\' the Georgia courts presume that `the common law\' is in effect in the foreign state. Second, in determining what this `presumed\' common law is, the Georgia courts rather than looking to the foreign case law, look to `the common law\' as illumined by Georgia decisions."

Budget Rent-A-Car Corporation of America v. Fein, 5 Cir. 1965, 342 F.2d 509, 513.2

Thus we find that little or no practical help toward the solution of the questions presented is afforded by the choice of law to be applied in the interpretation of the insurance policy, other than to be remitted to a consideration of the common law.

Preliminarily also, we consider the applicability of the familiar general rule that an insurance policy is to be construed liberally in favor of the insured. The rationale of that rule has been variously stated. See 29 Am.Jur., Insurance § 259, pp. 643, 644; 44 C.J.S. Insurance § 297, pp. 1174, 1175; 13 Appleman, Insurance Law & Practice § 7482, p. 202. Georgia has adopted this principle where the terms of the policy are not clear and unambiguous.3

If National Surety were not in this suit, certainly the above-discussed rule would apply. We are called upon to construe an insurance policy and, in so doing, we do not feel compelled to observe the coverage extended Float-Away by other insurers.4

Though neither party has cited authority to support its particular position as to the effect of National Surety being a movant in this case, we have noted several cases where courts have not abandoned the liberal construction rule even though an insurance company was the party seeking relief against another insurance company.5

We are also mindful of the desirability, as a matter of public policy, to protect the injured party and to construe the policy in such a manner so that those who are injured are not abandoned without compensation.6 In construing an omnibus clause, the New Jersey Supreme Court stated, correctly we think, that it is "settled doctrine that such an insurance contract is to be liberally construed for the protection, not only of the named insured and those within its omnibus clause, but also the innocent plaintiff who was injured by the negligent operation of the insured automobile." Eggerding v. Bicknell, 20 N.J. 106, 118 A.2d 820.

There are cases which point to a more constrained interpretation of the insurance policy where the party seeking relief against the insurer is not an insured. Cook v. Kozell, 176 Ohio St. 332, 199 N.E. 2d 566, involved a suit by an insured party and its insurance company against the insurance company of an automobile dealer, whose customer, while driving a recently delivered car, hit the injured party. The plaintiffs sought a recovery on the grounds that the policy of the automobile dealer covered the negligent driver. The plaintiffs asked for a liberal construction against the insurer but the Ohio court refused, noting:

"First, the plaintiff was not a party to the contract of insurance and therefore, was not in a position to urge, as one of the parties, that the contract be construed strictly against the other party. Second, the construction urged by the plaintiff would have been a disadvantage to both parties to the contract. It would have made Continental the insurer liable for damages for which its named insured was not liable and for a hazard not covered by the policy, and the Euclid Ford Company the automobile dealer has no interest in covering the purchaser of an automobile for liability for property damage which such purchaser causes through his negligent operation of the automobile after the company has delivered it to him. This could only result in higher insurance premiums for the Euclid Ford Company. An insured gets the coverage he pays for, and, if the coverage is to be increased beyond that which he needs or for which the policy provides, the premiums will necessarily be increased. Therefore, the plaintiff who is not a party to the contract is not in a position to urge a construction of the contract which would be detrimental to both parties to the contract."

Though not bound by the Ohio court's reasoning, we do distinguish the Cook decision from the case now before us. Float-Away was an insured at least during the time it used Dance's trailer. It is not a stranger to the policy, but a possible third-party beneficiary within the meaning of the omnibus clause. American Fidelity & Casualty Co. v. St. Paul-Mercury Indemnity Co., 5 Cir. 1957, 248 F.2d 509; 13 Appleman, Insurance Law & Practice § 4354, pp. 243, 244. Second, the Ohio court first concluded that the driver of the automobile was not an insured and that the hazard was not covered by the policy; and, then, determined therefore that the injured party had no standing to seek a liberal construction. We are not confronted with an obvious case involving uninsurability as was the Ohio court.

Our attention is called to another case, Esfeld Trucking, Inc. v....

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