Guarantee Insurance Co. v. Great American Indem. Co.

• Decision Date: 20 June 1958
• Docket Number: No. 13886.,13886.
• Citation: 163 F. Supp. 320
• Parties: GUARANTEE INSURANCE COMPANY, Assignee of George Gabrelcik and Verna Gabrelcik, Plaintiff, v. GREAT AMERICAN INDEMNITY COMPANY, Defendant.
• Court: U.S. District Court — Western District of Michigan

163 F. Supp. 320

GUARANTEE INSURANCE COMPANY, Assignee of George Gabrelcik and Verna Gabrelcik, Plaintiff, v. GREAT AMERICAN INDEMNITY COMPANY, Defendant.

No. 13886.

United States District Court E. D. Michigan, S. D.

June 20, 1958.

Alexander, Cholette, Buchanan, Perkins & Conklin, Detroit, Mich., for plaintiff.

Crawford, Sweeny, Dodd & Kerr, Detroit, Mich., for defendant.

FREEMAN, District Judge.

This case involves the disputed liability of two insurance carriers for damages caused by the negligence of one John Lindsey while operating a 1951 Cadillac car in the State of Arkansas on February 14, 1952. Suit was filed in this court by Guarantee Insurance Company, assignee of George Gabrelcik and Verna Gabrelcik, as plaintiff, against Great American Indemnity Company, defendant. The cause came on for trial before the court, without a jury; proofs were submitted by stipulation, arguments made and the decision of the court was taken under advisement pending filing of briefs on the legal issues presented.

Upon trial, the following facts, pertinent to a decision of the court, were stipulated by the parties. In 1952, Fred and Elwood J. Ford, dba Fred Ford and Son, hereinafter called Ford, were automobile dealers in Detroit, Michigan. George and Verna Gabrelcik, dba West Side Motors, hereinafter called West Side, were auto dealers in San Diego, California.

Ford acquired a 1951 Cadillac automobile sometime in February, 1952. A few days prior to February 14, 1952, West Side telephoned Ford and contracted to purchase the Cadillac. Ford then made arrangements, as the agent of West Side, to have the car shipped to California by arranging for Hayes Auto Driveaway, Inc., to transport the car. Hayes' driver, John Lindsey, took possession of the car and commenced driving it to California. In the State of Arkansas, Lindsey was involved in an accident. As a result of this accident, suit was brought in the United States District Court for the Eastern District of Arkansas against Fred Ford, dba Fred Ford and Son; Hayes Auto Driveaway, Inc., and George Gabrelcik and Verna Gabrelcik, dba West Side Motors, defendants, by and on behalf of the injured persons in the other vehicle involved in the accident.

The complaint in the Arkansas suit alleged the sale of the auto by Ford to West Side, that all of the defendants were jointly and severally liable because of the arrangements made between them for transportation of the car to California and that Lindsey was the agent and employee of all the defendants. Ford and West Side answered, denying ownership of the car, each maintaining that the other was the owner.

Service of process was attempted on both Ford and West Side under the "Non-Resident Motorists Act" of Arkansas by serving the Secretary of State of Arkansas. Ark.Stats. §§ 27-341, 27-342. Both Ford and West Side moved to quash service of process on the ground that service could be had under the Act only on a "non-resident owner or his agent." As a result of these motions and after hearing testimony of witnesses and consideration of depositions previously taken, the Arkansas court held that West Side was the owner of the auto as of the time of the accident and that Ford was not the owner and was not operating the car in Arkansas. Therefore, the court granted Ford's motion to quash service of process and denied West Side's motion. The case proceeded to trial and was ultimately submitted to the jury. One defense raised by West Side during the trial and submitted to the jury was that Lindsey, the deceased driver of the car, was not an agent of West Side, but was an independent contractor. The jury returned a verdict against West Side in the amount of $75,000, upon which judgment was duly entered. Thereafter, a motion for judgment notwithstanding the verdict and in the alternative for a new trial was made and denied; an appeal was taken, but was dismissed by stipulation and judgment was eventually satisfied by Guarantee Insurance Company, plaintiff in the case at bar, as the insurer of West Side.

In its complaint in the case at bar, Guarantee Insurance Company alleges that the defendant, Great American Indemnity Company, issued a policy of insurance to Fred Ford and Son, that George and Verna Gabrelcik qualified as an "additional insured" within the terms of said policy of insurance; that, under said policy, defendant insurance company was liable for any judgment rendered against West Side and was obligated to appear and defend the law suit in Arkansas and that, as a result of Great American's failure to do so, plaintiff insurance company, as the insurer of West Side, was forced to pay the judgment of $75,000 and therefore plaintiff, as assignee of the claims of West Side against Great American, now asks judgment in that amount.

The policy of insurance issued by defendant to Ford provides:

"III. Definition of Insured

"With respect to the insurance under coverages A, B and D, the unqualified word `insured' includes the named insured and also includes * * * (2) any person while using an automobile covered by this policy, and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission. This policy does not apply:

* * * * * *

"(b) to any partner, employee, director, stockholder or additional insured with respect to any automobile owned by him, or by a member of his household other than the named insured."

As can be seen from the above, this policy does not apply to "any * * * additional insured with respect to any automobile owned by him." Thus, the key issue in this case is whether or not the automobile in question was owned by West Side. If it was so owned, then it is clear that West Side cannot qualify under the terms of the policy because of the exclusion shown above and plaintiff would have no claim for indemnity against defendant insurance company.

Defendant contends, as one of its defenses, that the judgment of the United States District Court for the Eastern District of Arkansas constitutes a bar to any claim by plaintiff in the instant case that this automobile was owned by Ford and is res adjudicata as to that question. It is the opinion of the court that defendant's contention is valid and governs the decision of this case.

Service of process in the Arkansas case was attempted on both Ford and West Side by serving the Secretary of State of Arkansas in accordance with the Arkansas "Non-Resident Motorists Act." That statute provides that service of process may be made on the "owner" of an auto by service on the Secretary of State of Arkansas, if such owner is a non-resident of the state. Both Ford and West Side filed motions in the Arkansas court to quash service of process, contending that they were not owners of the car. After lengthy consideration of the facts and law, the Arkansas court ruled that West Side was the owner and that service of process on Ford was not valid and therefore granted Ford's motion to quash. West Side and Ford were adversaries in the presentation and determination of that...