Grinnell Mut. Reinsurance Co. v. Empire Fire & Marine Ins. Co.
| Decision Date | 08 December 1983 |
| Docket Number | Nos. 82-2047,82-2108,82-1918 and 82-1960,s. 82-2047 |
| Citation | 722 F.2d 1400 |
| Parties | GRINNELL MUTUAL REINSURANCE COMPANY, an Iowa corporation, Appellee, v. EMPIRE FIRE & MARINE INSURANCE COMPANY, a Nebraska corporation, Matthew Youngren, an infant, and Michael Youngren, an infant, by their Guardian John Youngren and for the heirs of decedent Judith Youngren, all residents of the State of Minnesota, and Timothy Youngren a resident of the State of Minnesota, Appellant, Sheri Emch, resident of the State of North Dakota, Appellee, Hamel Service Company, Inc., an Illinois corporation; Gilbert Culver, a resident of the State of Illinois, Excalibur Insurance Company of Minnesota, a Texas corporation, Appellant. GRINNELL MUTUAL REINSURANCE COMPANY, an Iowa corporation, Appellant, v. EMPIRE FIRE & MARINE INSURANCE COMPANY, a Nebraska corporation, Matthew Youngren, an infant, and Michael Youngren, an infant, by their Guardian John Youngren and for the heirs of decedent Judith Youngren, all residents of the State of Minnesota and Timothy Youngren a resident of the State of Minnesota, Riechmann Enterprises, Inc., a Missouri corporation, Sheri Emch, resident of the State of North Dakota, Hamel Service Company, Inc., an Illinois corporation, Gilbert Culver, a resident of the State of Illinois, Appellees, Excalibur Insurance Company of Minnesota, a Texas corporation. Matthew YOUNGREN, an infant and Michael Youngren, an infant, by their Guardian John YOUNGREN and for the heirs of decedent Judith Youngren, Appellees, v. RIECHMANN ENTERPRISES, a foreign corporation, Gilbert Culver, Appellees, Sheri Emch, Appellant, HAMEL SERVICE COMPANY, INC., a foreign corporation, v. Timothy YOUNGREN, Appellee. Matthew YOUNGREN, an infant and Michael Youngren, an infant, by their Guardian John YOUNGREN and for the heirs of decedent Judith Youngren, Appellees, v. RIECHMANN ENTERPRISES, a foreign corporation, Gilbert Culver, Appellees, Sheri Emch, Appellee, HAMEL SERVICE COMPANY, INC., a foreign corporation, Appellant, v. Timothy YOUNGREN, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Murray G. Sagsveen, argued, Zuger & Bucklin, Bismarck, N.D., for Emch in Nos. 82-1918, 82-1960.
Chapman & Chapman by Daniel J. Chapman, argued, Bismarck, N.D., for Hamel Services Co., Inc. in Nos. 82-1918, 82-1960.
Denis McGrady, Jr., argued, Gillespie, Ill., for Hamel Services Co., Inc. in Nos. 82-2047, 82-2108.
Lommen, Nelson, Sullivan & Cole, P.A., Mark N. Stageberg, argued, Thomas E. Peterson, argued, Minneapolis, Minn., Fleck, Mather, Strutz & Mayer, Steven Storslee, Bismarck, N.D., for Reichmann Enterprises and Excalibur Ins. Co. of Minnesota.
Lowell A. O'Grady, Michael J. Morley, argued, O'Grady, Morley & Morley, Ltd., Grand Forks, N.D., for Grinnell Mut. Reinsurance Co. in Nos. 82-2047, 82-2108.
Before LAY, Chief Judge, HEANEY, Circuit Judge, and RENNER, District Judge. *
Two cases are presented to us on appeal. At the trial of one case, Youngren v. Riechmann Enterprises, No. 80-42 (D.N.D. June 28, 1982), the jury determined the comparative liabilities of the drivers of the vehicles involved. The other case, Grinnell Mutual Reinsurance v. Empire Fire & Marine Insurance Co., No. 81-22 , was a declaratory action in which the district court decided the relative liabilities of the drivers' employers and insurers. For the purposes of this appeal, we will treat the cases as consolidated as we feel the trial court treated the cases below.
This suit arises out of a three-vehicle accident on July 9, 1979. A tractor-trailer unit owned by Hamel Service Company (Hamel) and driven by its employee Gilbert Culver, collided with an automobile driven by Timothy Youngren. A truck driven by Sheri Emch was also involved. As a result of this collision, one passenger in the Youngren automobile died and three were injured.
In the action to determine the liability of the drivers, the jury found Gilbert Culver 70% at fault for the accident and Sheri Emch 30% at fault. Sheri Emch appeals from this determination of her liability. Emch challenges the trial court's refusal to instruct the jury on the issue of negligent entrustment and the trial court's refusal to submit to the jury whether Culver acted willfully or wantonly. Integrated with her principal arguments are questions of whether the court properly excluded certain evidence.
We have reviewed the record of the jury trial and find no prejudicial error in the court's instructions or rulings on evidentiary issues. We, therefore, affirm the jury's verdict on the comparative fault of Emch at 30% and Culver at 70%.
We now turn to the more complex issue of the coverage and liability of Excalibur, Riechmann, Grinnell, and Hamel.
At the time of the accident, Hamel's tractor-trailer unit was on a three-year lease to Riechmann Enterprises, Inc. (Riechmann), an interstate motor carrier. On the day of the accident, Culver had finished driving a load of steel for Riechmann to Beulah, North Dakota. On arriving in Beulah, Hamel, through Culver, made arrangements to "trip lease" 1 a load for Bee Line Transport originating in Baker, Montana. The profits of this trip were to be divided solely between Hamel and Culver. The accident occurred during the run from Beulah to Baker during which time the truck was empty. Riechmann's Interstate Commerce Commission permit number was displayed on the side of the truck at all times concerned.
Hamel and Riechmann had an agreement that Hamel could trip lease the truck when it was not being used by Riechmann. According to testimony at the trial, documents containing the terms of the trip lease would be signed by the driver "on behalf of Riechmann." Unless Riechmann had arranged for the load, Riechmann received no compensation. There is a question whether the parties had agreed that Riechmann's permit was to be displayed during this trip lease. Such a permit number is required to be displayed at all times and Hamel did not have one of its own. Therefore, the use of Riechmann's number was necessary at least until Culver had reached Baker when Bee Line's number, allegedly, could have been placed on the truck. We can thus infer that Hamel's use of Riechmann's permit was an implied condition of the contract.
At the commencement of the trial on the Youngren claims, Riechmann's insurer, Excalibur Insurance Company of Minnesota (Excalibur), paid a settlement of $250,000 for the wrongful death claim and a total of $50,000 for the three personal injury claims (a subrogation claim of Farmers Insurance Group and the claim of a third passenger in the Youngren car are pending).
The district court held that at the time of the accident, Grinnell Mutual Reinsurance Company (Grinnell) insured Culver and Hamel for the July 9th collision. In an amended order, the court held further that Riechmann was also liable under the ICC regulations regulating long-haul trucking operations. The court then held that Riechmann and Excalibur were not entitled to recover their costs and expenses from Hamel for defending Culver in the underlying action.
Excalibur, Riechmann, Grinnell, and Hamel each appeal from the district court's order. The essential issues presented on these appeals are: (1) whether the Grinnell garage liability policy issued to Hamel provides coverage for the accident; (2) if so, whether Excalibur or Grinnell provided the primary coverage; and (3) whether Riechmann is entitled to indemnity from Hamel. All parties agree that Illinois law controls.
On March 13, 1975, Hamel applied to Grinnell for a "garage liability" policy. The policy was in effect at the time of the accident. The relevant portion of the policy covers bodily injury or property damage "caused by an occurrence and arising out of garage operations, including only the automobile hazard for which insurance is afforded as indicated in the schedule." An automobile hazard is defined, inter alia, as "the ownership, maintenance or use of any automobile owned by the named insured while furnished for the use of any person."
Grinnell contends that the phrase "arising out of garage operations" modifies the automobile hazards to which the policy applies; that is, unless an automobile hazard arose out of "garage operations," it is not covered. Although Grinnell's argument has force, this court is bound to follow the substantive law of Illinois in interpreting the insurance contracts. Fidelity Union Trust Company v. Field, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109 (1940); see Six Companies of California v. Joint Highway District Number 13, 311 U.S. 180, 61 S.Ct. 186, 85 L.Ed. 114 (1940). In Associated Indemnity Company v. Insurance Company of North America, 68 Ill.App.3d 807, 25 Ill.Dec. 258, 386 N.E.2d 529 (1979), the Illinois court was faced with language almost identical to that in the instant case. The court in Associated held that the language referring to injuries arising "out of garage operations, including only the automobile hazard for which insurance is afforded" was ambiguous. Id. at 817-18, 25 Ill.Dec. at 266, 386 N.E.2d at 537. The court observed that the clause could be read either to require that the injury arose out of both operations of a garage and the defined automobile hazard, or to require only that the injury arose out of a defined automobile hazard. The Associated court adopted the latter interpretation because Illinois law holds that an insurance policy's ambiguity is ordinarily to be resolved in favor of coverage. Id.
Grinnell's attempts to distinguish Associated are unpersuasive. We find that under Illinois law the policy language is ambiguous and, therefore, should be read to cover Hamel for the July 9th accident. 2
Grinnell argues that the vehicle in question was excluded from the policy at the time of the accident. The relevant portion of the Grinnell policy reads:
This insurance does not apply, under the Garage...
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