Indemnity Ins. Co. of North America v. Kellas

• Decision Date: 18 June 1948
• Docket Number: Civ. A. No. 7402.
• Citation: 80 F. Supp. 497
• Parties: INDEMNITY INS. CO. OF NORTH AMERICA v. KELLAS et al.
• Court: U.S. District Court — District of Massachusetts

80 F. Supp. 497

INDEMNITY INS. CO. OF NORTH AMERICA v. KELLAS et al.

Civ. A. No. 7402.

United States District Court D. Massachusetts.

June 18, 1948.

James P. Moriarty, of Springfield, Mass., for plaintiff.

Harvey & Mulcare and Nathaniel M. Harvey, all of Springfield, Mass., for defendant Willys-Overland Motors, Inc.

Cohen, Bernkoff, Grauman & Goodman and A. H. Grauman, all of Boston, Mass., for defendants Ednamarie Kellas and Ruth Kellas.

WYZANSKI, District Judge.

This case is before me on a motion to dismiss filed by defendants Ednamarie and Ruth Kellas.

A Pennsylvania insurance company filed a complaint under the Federal Declaratory Judgments Act, 28 U.S.C.A. §§ 2201, 2202, and named as defendants an Ohio manufacturer and three Massachusetts citizens, Ednamarie, Ruth and Junior Kellas. The essence of the case is that the plaintiff insurance company is suing both its beneficiary (the manufacturer) and third parties for a declaration that an automobile accident involving the third parties and now at issue in a state court proceeding is not covered by the company's policy and that the company is under no duty to defend a third party in the state court action or to pay the damages flowing from the accident.

As appears from the complaint, the Pennsylvania insurance company issued a conventional automobile liability insurance policy to an Ohio manufacturer. The company agreed to defend the named insured even against groundless suits. It also agreed conditionally to pay on behalf of "the insured" as that term is defined in the policy all sums which the insured shall become obligated to pay by reason of the liability imposed upon it by law and arising out of the ownership, maintenance or use of any automobile. The policy defined "the insured" as including not only the named insured but also any person using the named insured's car "with the permission of the named insured." And the condition of the company's agreement to pay any "insured" person's liability was that in the event of an accident "written notice shall be given by or on behalf of the insured to the company" and that "the insured shall co-operate with the company."

June 19, 1947 Junior while operating one of the manufacturer's cars was in an automobile accident in which Ednamarie and Ruth claim they were injured through his negligence. They brought an action in the Connecticut Superior Court against the manufacturer and Junior. Therein they alleged that Junior was operating the manufacturer's car with its permission.

The insurance company alleges that Junior was operating without the manufacturer's consent and that therefore he was not an insured; and that if he was an insured, he failed to give notice of the accident and he "by refusing to give" the insurance company "a signed statement of facts concerning said accident and by refusing to furnish any other information or assistance in the preparation of the defense in his behalf" "has not cooperated with" the insurance company.

Further the complaint alleges that Junior, Ednamarie and Ruth claim that the insurer is liable for any judgments rendered in Connecticut against either Junior or the manufacturer. It then asserts that if Ednamarie and Ruth secure judgments against Junior, "it will inevitably follow that they will proceed to obtain satisfaction thereof by this * * * insurer, on the ground that * * * Junior was an `insured' within the terms of said policy." And the complaint avers that if judgments in favor of Ednamarie and Ruth are rendered in Connecticut they "may institute actions against" the insurer "for the purpose of subjecting said policy to the payment of their judgments, which actions would not be removable to the United States District Court, and there might, therefore, be two actions pending in different courts seeking to determine the liability of this plaintiff and the construction of this policy."

On the basis of these allegations the complaint seeks a declaratory judgment declaring that at the time of the accident Junior was not operating the automobile with the consent, permission or knowledge of the manufacturer, that Junior has failed to give the stipulated notice and cooperation, and is, therefore, not entitled to indemnity and protection, that the insurance company is under no duty to defend Junior or to assume any liability for the acts of Junior, and that the policy does not cover the damages which resulted from the collision.

Defendants Ednamarie and Ruth move to dismiss the complaint on the alternative grounds that this Court lacks jurisdiction and that in its discretion this Court should not exercise jurisdiction.

The first ground cannot be maintained in view of Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826. There suit under the Declaratory judgments Act was instituted in the federal district court by an insurance company which had issued a conventional liability policy to cover liabilities for injuries caused by automobiles "hired by the insured." One defendant was the named insured whose views, so far as appears, did not differ from those of the insurer. See Maryland Casualty Co. v. Pacific Coal & Oil Co., 6 Cir., 111 F.2d 214, 215, last paragraph. Another defendant was the driver of an automobile which at least had belonged if it did not still belong to the insured. The remaining defendants were those who had been injured by the driver and who were prosecuting actions in state courts against the named insured on the theory that the driver was acting for the named insured. The insurance company sought a declaration against all the defendants to the effect that the driver was driving a car which at the time of the accident was not hired by the insured but had been sold to the driver by the insured on a conditional sales contract. Jurisdiction to issue a declaratory judgment was upheld. Cf. Connecticut Indemnity Co. v. Lee, 1 Cir., 168 P.2d 420. In short the fact that the named insured and the insurer agree that their policy does not cover a particular driver does not automatically defeat a federal district court's jurisdiction to determine coverage of the policy in a case where third parties are concerned. Its only effect is to require the federal court to align both the insurer and the named beneficiary as plaintiffs in determining whether all the plaintiffs are citizens of states other than the states of which any of the defendants are citizens and in concluding whether there is diversity jurisdiction. American Fidelity & Casualty Co. v. Service Oil Co., 4 Cir., 164 F.2d 478; State Farm Mut. Auto. Ins. Co. v. Hugee, 4 Cir., 115 F.2d 298, 300, 301, 132 A.L.R. 188.

Though this Court has jurisdiction of the controversy, there remains the question whether the Court should in its discretion decline to hear the controversy. It is settled that a federal court may under certain circumstances decline as a matter of discretion to hear a suit for a declaratory judgment. Brillhart v. Excess Insurance Co., 316 U.S. 491, 494, 495, 62 S.Ct. 1173, 86 L.Ed. 1620. But it has been held that this discretion is abused if the sole ground for withholding federal declaratory relief is that there is pending in a state court a prior action which does not raise all the issues raised in the federal suit. Maryland Casualty Co. v. United Corporation, 1 Cir., 111 F.2d 443, 446; Maryland Casualty Co. v. Consumers Finance Service, Inc., 3 Cir., 101 F.2d 514, 515, 516.

Obedient to the rule laid down in these last two cases, I must first inquire whether the Connecticut case will dispose of all the issues which are raised in the present federal declaratory judgment case. I am persuaded that the answer is in the affirmative.

In the Connecticut case Ednamarie and Ruth claim that Junior was driving with the authority of the manufacturer, Junior was negligent, and his negligence caused damage to them. An analysis will reveal that that Connecticut case cannot be adjudicated without putting to repose the issue...