Gas Service Co. v. Hunt

• Decision Date: 05 September 1950
• Docket Number: No. 3998.,3998.
• Parties: GAS SERVICE CO. v. HUNT.
• Court: U.S. Court of Appeals — Tenth Circuit

183 F.2d 417 (1950)

GAS SERVICE CO. v. HUNT.

No. 3998.

United States Court of Appeals Tenth Circuit.

August 4, 1950.

Rehearing Denied September 5, 1950.

N. E. Snyder, Kansas City, Kan. (Robert D. Garver and Jerry T. Duggan, Kansas City, Mo., on the brief) for appellant.

Blake A. Williamson, Kansas City, Kan. (John J. Ziegelmeyer, James K. Cubbison, Lee Vaughan and Lee E. Weeks, all of Kansas City, Kan., on the brief) for appellees.

Before BRATTON, MURRAH and PICKETT, Circuit Judges.

BRATTON, Circuit Judge.

Rexford R. Hunt and Helen Hunt, husband and wife, sued Gas Service Company, a corporation. The action was instituted in the state court and was removed to the United States Court, the ground of removal being diversity of citizenship with the requisite amount in controversy. After removal, plaintiffs filed a pleading denominated amended petition. It was alleged in such pleading that plaintiffs owned a residence near Shawnee, Kansas, which was equipped with a gas furnace and was heated with gas furnished by defendant; that on a day specified the furnace was not in proper working condition and failed to heat the house; that defendant was requested to have one of its employees inspect and adjust the furnace; that in response to such request, an employee of defendant came to the residence, inspected the furnace, and attempted to put it in working condition; that he told plaintiff Helen Hunt the air line leading to the mixer had become clogged with lint and debris to such an extent that the burner was not obtaining sufficient oxygen, told her that he had remedied the condition, told her that he had ignited the pilot light, and told her that the furnace was in proper working condition; that the employee then left the premises; and that within twenty or thirty minutes after his departure, fire broke out in and about the furnace and damaged the building and certain of its contents. It was further alleged that the furnace was a highly complicated instrumentality and was not in proper order at the time the employee of defendant completed his inspection and left the premises. It was further alleged that the employee was negligent in failing properly to inspect the furnace, discover its condition, and make the necessary adjustments, in assuring plaintiff Helen Hunt that it was in proper working condition when he knew or should have known that it was not in such condition, in not waiting longer after making the pretended adjustments until the thermostat automatically turned gas into the furnace and then making a further inspection, and in not removing from the air line, mixer, and line leading from the mixer to the burner lint and debris which had collected therein. It was further alleged that the negligence on the part of defendant was the proximate cause of the fire. And it was further alleged that plaintiffs had suffered damages in the sum of $8,512.95, for which judgment was sought. Defendant denied negligence and pleaded contributory negligence. Defendant filed a motion for an order making parties to the action two insurance companies which had paid plaintiffs $4,698.75 under policies of insurance covering the property and had become subrogated to that extent to the rights of plaintiffs against defendant. The motion was denied. The cause was tried to a jury. The jury returned a verdict for plaintiffs in the sum of $7,202.65. And by response to a special interrogatory, the jury found that the defendant was negligent in failing to make a sufficiently thorough and complete check of the operation of the furnace mechanism to insure its safe and efficient operation. Judgment was entered for plaintiffs and defendant appealed. For convenience, continued reference will be made to the parties as they were denominated in the trial court, plaintiffs and defendant, respectively.

Error is assigned upon the action of the court in denying the motion for an order making the insurance companies parties to the suit. It is the rule in the United States courts that where an insurer pays the insured in full for a loss and becomes subrogated to all of the rights of the insured against the wrongdoer, the action against the wrongdoer to recover in tort must be maintained in the name of the insurer. United States v. Ætna Casualty & Surety Co., 338 U.S. 366, 70 S.Ct. 207; American Fidelity & Casualty Co. v. All American Bus Lines, 10 Cir., 179 F.2d 7. And it is the further rule that where the owner has been reimbursed for only part of the loss and asserts a claim against the wrongdoer for the balance in excess of the amount paid, both the insured and the insurer own portions of the substantive right against the wrongdoer and should appear in the litigation in their own names. Either may institute the action; but with certain exceptions not having material bearing here, upon timely motion of the alleged wrongdoer, the other should be joined as a party. United States v. Ætna Casualty & Surety Co., supra.

As we understand, the rule in the state courts of Kansas is different. There, where loss by fire to insured property exceeds the amount paid by the insurer under its policy, the owner may maintain the action against the wrongdoer for the full amount of the loss. Clark v. Missouri Pacific Railroad Co., 134 Kan. 769, 8 P.2d 359; Klingberg v. Atchison, Topeka & Santa Fe Railway Co., 137 Kan. 523, 21 P. 2d 405. Although it is provided by statute in that state that every action must be prosecuted in the name of the real party in interest, and although both the insured and the insurer are real parties in interest, the action may be brought in the name of the owner who will hold as trustee for the insurer in respect of such part of the amount recovered as the insurer has been compelled to pay under its policy. Grain Dealers' Nat. Mutual Fire Insurance Co. v. Missouri, Kansas & Texas Railway Co., 98 Kan. 344, 157 P. 1187; City of New York Insurance Co. v. Tice, 159 Kan. 176, 152 P.2d 836, 157 A.L.R. 1233.

Manifestly, where the insurer has reimbursed the insured for part but not all of the loss of insured property by fire and the insured still asserts a claim against the wrongdoer for the loss in excess of the amount received from the insurer, the substantive rights of the parties are the same in the United States courts and in the courts of Kansas. The insurer as subrogee of the owner has the substantive right to recover from the wrongdoer up to the amount it has been obliged to pay under its policy, and the insured has the substantive right to recover for any excess in loss for which he has not been reimbursed. The difference lies in the fact that in the United States courts the insurer must assert the claim in its own name against the wrongdoer for the loss up to the amount paid under the policy, and the insured must assert the claim in his name for the loss in excess of the amount paid by the insurer, while in the state courts of Kansas the insured may maintain the action for the entire amount, holding as trustee for the insurer the amount recovered up to the amount...