Hertz Corporation v. Ralph M. Parsons Company

• Citation: 419 F.2d 783
• Decision Date: 20 November 1969
• Docket Number: No. 27438.,27438.
• Parties: The HERTZ CORPORATION, Plaintiff-Appellee-Cross Appellant, v. RALPH M. PARSONS COMPANY, Defendant-Appellant-Cross Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

419 F.2d 783 (1969)

The HERTZ CORPORATION, Plaintiff-Appellee-Cross Appellant, v. RALPH M. PARSONS COMPANY, Defendant-Appellant-Cross Appellee.

No. 27438.

United States Court of Appeals Fifth Circuit.

November 20, 1969.

Monroe E. McDonald of Sanders, McEwan, Schwarz & Mims, Orlando, Fla., for appellant Ralph M. Parsons Co.

W. David Rogers, Jr., Leon H. Handley of Gurney, Gurney & Handley, Orlando, Fla., for appellee.

Before TUTTLE, WISDOM and BELL, Circuit Judges.

BELL, Circuit Judge:

This is a diversity action brought by the Hertz Corporation seeking indemnification for its payment of judgments rendered against the negligent driver of an automobile rented from Hertz, the driver's employer, and Hertz as joint tortfeasors. Parsons Company, the defendant-appellant, was the employer of the deceased driver of the rented car. Parsons appeals from the grant of a motion for summary judgment in favor of Hertz, 292 F.Supp. 108.¹ We affirm in part and reverse in part.

Nugent, a New York employee of Parsons, flew to Orlando, Florida, en route to Cape Kennedy for Parsons. He rented an automobile from Hertz in Orlando in order to complete the trip to Cape Kennedy where he had a Parsons business appointment. His airplane ticket was purchased by Parsons and the automobile was rented on a credit card supplied the employee by Parsons. The charge was later paid by Parsons. The rented automobile, being driven by Nugent, negligently collided with another vehicle between Orlando and Cape Kennedy. Two of the passengers in the other automobile were killed and four were seriously injured. Nugent was also killed. Suits were filed against Hertz, Parsons, and the estate of Nugent. Judgments ensued after trial in the aggregate amount of $610,000 against Hertz under Florida's dangerous instrumentality doctrine, against Parsons under respondeat superior, and against the estate of Nugent, the driver. Hertz settled the judgments by payment of $550,000 and then sought indemnification from Parsons in the district court.

At the time of the accident Hertz had a public liability insurance policy with a wholly owned subsidiary, Atlantic National Insurance Company (ANICO), covering any person to whom a car has been rented and any employer of such renter, as well as Hertz itself. This policy was referred to in the form rental agreement signed by Nugent only in general terms: "Renter participates in the benefits of an automobile public liability and property damage insurance policy subject to the terms, conditions, limitations and restrictions thereof * * *." It developed that the limits of liability under the policy were fixed at $950,000 for Hertz and $300,000 for the other insureds.

Hertz originally sought indemnification for the entire amount of $550,000 paid in settlement of the death and personal injury judgments. The district court, however, limited the amount in controversy to the sum by which the settlement exceeded the $300,000 policy limit applicable to Nugent and Parsons, his employer, and less a $20,000 payment to Hertz by Nugent's insurance carrier,² or $230,000.

After the accident but several months before the trial, wherein the judgments were rendered, ANICO was merged with Hertz, and Hertz thereby succeeded to the insuring obligations of ANICO with reference to Parsons. Hertz and ANICO together paid only $65,000 of the settlement cost with the balance, aside from the $20,000 payment from Nugent's carrier, being paid under re-insurance agreements with All State Insurance Company and certain underwriters (Unnamed) at Lloyds of London. Parsons had liability coverage in the amount of $25,000 with Fireman's Fund Insurance Company and excess coverage with certain underwriters at Lloyds (also unnamed). This was over and above the Hertz-ANICO coverage. It is thus apparent that Hertz is proceeding for itself in part and for insurance underwriters in part and that the real defendants are Parsons' underwriters.

By way of a defense to the claim for indemnity, Parsons plead waiver and estoppel based on allegations of conflict of interest and bad faith on the part of Hertz in the defense of the accident litigation. This defense, as distilled, rests on the fact of the difference in insurance coverage as between Hertz and Parsons and the contention that Hertz, although owing Parsons a defense under the insurance coverage, controlled the litigation in such a way as to set up Parsons for the indemnity claim. It is alleged that Parsons was never apprised of the possibility under the Florida law that it might be called on to indemnify Hertz. Moreover, it is urged, Parsons was not advised or represented in a manner so as to avoid the possibility of indemnity.

This defense was rejected by the district court. The rejection came through treating the defense as being in the nature of a claim against counsel for Hertz-ANICO in the accident litigation rather than against Hertz. The court indicated that such claim as Parsons might have against counsel in this regard was not a defense in the present action.

Summary judgment was rendered for Hertz in the amount of $230,000 and this appeal followed. Two issues are presented: One, whether, aside from the defense based on conflict of interest and bad faith, Parsons was due to indemnify Hertz; two, whether the court erred in rejecting the defense based on conflict of interest and bad faith. We...