Gilkey v. Andrew Weir Insurance Company

• Decision Date: 05 May 1961
• Docket Number: No. 17026.,17026.
• Parties: David R. GILKEY, Charles Gilkey, David Satre, Jesse Lewis and Claude Verrall, d/b/a Chapman Manufacturing Company, a Partnership, and General Insurance Company of America, a Corporation, Appellants, v. ANDREW WEIR INSURANCE COMPANY, Ltd., British Commercial Insurance Company, Ltd., City General Insurance Company, Ltd., Saskatchewan Government Insurance Office, and John Fawcett, individually and as the representative of Underwriters at Lloyd's, London, England, subscribing certificates L.M. 2109 and L.M. 2110, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

291 F.2d 132 (1961)

David R. GILKEY, Charles Gilkey, David Satre, Jesse Lewis and Claude Verrall, d/b/a Chapman Manufacturing Company, a Partnership, and General Insurance Company of America, a Corporation, Appellants, v. ANDREW WEIR INSURANCE COMPANY, Ltd., British Commercial Insurance Company, Ltd., City General Insurance Company, Ltd., Saskatchewan Government Insurance Office, and John Fawcett, individually and as the representative of Underwriters at Lloyd's, London, England, subscribing certificates L.M. 2109 and L.M. 2110, Appellees.

No. 17026.

United States Court of Appeals Ninth Circuit.

March 30, 1961.

Rehearing Denied May 5, 1961.

Philip S. Brooke, Spokane, Wash., for appellant; Hamblen, Gilbert & Brooke, Spokane, Wash., of counsel.

Benjamin H. Kizer, Spokane, Wash., for appellee; Graves, Kizer & Gaiser, Spokane, Wash. (Kizer, Gaiser, Stoeve, Layman & Powell, Spokane, Wash., on rehearing), of counsel.

Before POPE, HAMLEY and MERRILL, Circuit Judges.

MERRILL, Circuit Judge.

Two insurance companies, each having insured the same risk, here litigate the question as to which is obliged to assume the liability of the insured for damages resulting from an automobile accident. Jurisdiction is conferred by diversity of citizenship.

Ellis, the owner of a truck, leased the truck to Chapman Manufacturing Company of Corvallis, Oregon. By the terms of his lease Ellis agreed to furnish the truck, a driver and public liability insurance in the sum of $50,000. The insurance was secured by Ellis through Colonial Insurance Company of California as primary insurer with liability limited to $10,000 and appellees (hereinafter referred to as "Lloyds") as secondary insurers with their (Lloyds') combined total liability limited to $40,000.

At the time of the accident Chapman had its own comprehensive liability policy issued by appellant General Insurance Company of America which insured Chapman's operations against public liability with a limitation of $100,000.

On July 29, 1953, a collision occurred in the State of Washington between the rented truck, operated by the driver who had been supplied by the owner, and another truck. As a result, the operator of the other truck was killed. In an action brought by the administratrix of his estate, judgment against Chapman was entered in the sum of $51,904. Chapman had notified all insurers of the commencement of the action and had called upon them to defend. General Insurance Company was the only one to respond. Judgment was satisfied by General and it sought recoupment from the other insurers. Colonial responded in the sum of $10,000, and this action was brought against Lloyds for the balance.

The district court decided in favor of Lloyds. It ruled that while Lloyds had insured only Chapman, General had also insured the driver. It concluded that should judgment be rendered against Lloyds, Lloyds could, by proceeding against the driver for his negligence, recover its loss from General. To preclude such circuity of action judgment was rendered against General.

General asserts that this was error for the reason that it had not insured the driver. The applicable omnibus clause of General's policy reads as follows:

"III. Definition of `Insured\'":

"The unqualified word `Insured,\' whenever used, includes not only the named insured but also * * * (3) any person while using an automobile owned or hired by the named insured * * * provided the actual use is with the permission of the named insured * * *. The insurance with respect to any person or organization other than the named insured does not apply:

"(a) to the owner of a non-owned automobile or to * * * any employee of such owner with respect to such automobile * * *."

The district court ruled that subparagraph (a) was wholly inconsistent with the specification of "any person" in the main body of paragraph III; that an ambiguity thus was created which should be resolved in favor of coverage.

In this we feel the court erred. We regard subparagraph (a) as no more than a limitation upon the liability clause preceding it. "Any person" is not to include the owner or an employee of an owner of a car not owned by the insured.

The driver, then, was not insured by General and circuity of action is avoided. It thus becomes necessary to ascertain the respective obligations of Lloyds and General under their respective policies.

Lloyds first points to the fact that throughout its policies frequent references are made to the "Primary Insurers," thus making it clear that its liabilities are to be secondary to any primary insurance. It asserts that General is a "primary insurer" since its policy places upon it obligations characteristic of primary insurers. This contention is without merit. The words "Primary Insurers," as used in Lloyds' policies, are expressly stated to have reference to Colonial Insurance Company. General is nowhere mentioned. The respective liabilities of the parties must then be determined in the light of their respective general clauses with reference to "other insurance."

Lloyds, as secondary insurer to Colonial, incorporated provisions of Colonial's policy. Among these was the condition:

"Other Insurance. If the insured * * * carries other insurance against loss covered by this policy, whether or not valid or collectible, this policy becomes excess over and above such other insurance."

General's policy included the following:

"Other Insurance. If at the time of an occurrence there is any other insurance available to the insured (in this or any other carrier) there shall be no insurance afforded hereunder as respects such occurrence except that if the applicable limit of liability of this policy is in excess of the applicable limit provided by the other insurance available to the insured this policy shall afford excess insurance over and above such other insurance in an amount sufficient to afford the insured a combined limit of liability equal to the applicable limit of liability afforded by this policy. It is further provided that with respect to loss arising out of the operation, maintenance or use of any non-owned automobile the applicable insurance afforded by this policy shall be excess over and above such other available

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