Indemnity Ins. Co. v. Schriefer

• Decision Date: 11 May 1944
• Docket Number: No. 5228.,5228.
• Parties: INDEMNITY INS. CO. OF NORTH AMERICA v. SCHRIEFER et al.
• Court: U.S. Court of Appeals — Fourth Circuit

142 F.2d 851 (1944)

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

No. 5228.

Circuit Court of Appeals, Fourth Circuit.

May 11, 1944.

Wendell D. Allen, of Baltimore, Md. (Alexander Gordon, III, Francis B. Burch, and Armstrong, Machen, Allen & Eney, all of Baltimore, Md., on the brief), for appellant.

Eben J. D. Cross and Helen Elizabeth Brown, Asst. City Sol., both of Baltimore, Md. (Philip S. Ball, Michael J. Manley, Charles H. Dorn, and Simon E. Sobeloff, City Solicitor, all of Baltimore, Md., on the brief), for appellees.

Before PARKER, SOPER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal from an order dismissing a suit by an automobile indemnity insurance company to obtain a declaratory judgment to the effect that there was no liability, under one of the policies that it had issued, for damages that might be recovered against the insured on account of a claim which was then being sued on in a state court. The dismissal was granted, in the exercise of the court's discretion, on the authority of our decision in Maryland Casualty Co. v. Boyle Construction Co., 4 Cir., 123 F.2d 558, without prejudice, however, to the right of the company to bring another action for declaratory relief either during the further progress of the damage suit in the state court or following the rendition of a judgment therein, if the company should deem such action necessary or desirable for the protection of its interests. We think that the discretion of the court was properly exercised.

Insured under the policy here in controversy were the City of Baltimore and a Mrs. Bauernfeind, who owned a truck which she rented to the city along with the services of a driver, one Bivens, under a contract similar to that before this court in Malisfski v. Indemnity Ins. Co., 4 Cir., 135 F.2d 910. While the truck was being driven by Bivens in the service of the city, it was in collision with a street car of the Baltimore Transit Company, resulting in the death of one Schriefer, an employee of the city who was riding in the truck. Suit to recover damages on account of his death was commenced by his administratrix in a Maryland state court against Mrs. Bauernfeind, Bivens and the Transit Company. Mrs. Bauernfeind called upon the insurance company to defend the action in her behalf, under a clause of the policy providing that the company would defend any suit against an insured arising out of the operation of the truck, even though "groundless, false or fraudulent"; and the company, after securing a non-waiver agreement to protect its rights, undertook the defense of the action and concedes here that it is bound to make such defense. One of the grounds of Mrs. Bauernfeind's defense was that Bivens was to be deemed the employee of the city and not her employee at the time of the fatal accident. Bivens himself was not served with process.

After the damage suit had been begun in the state court, the insurance company commenced this action in the court below to obtain a declaratory judgment to the effect that it was not liable under its policy for the damages claimed. Named as defendants were the plaintiffs and defendants in the action in the state court and the City of Baltimore, which had made workmen's compensation payments on account of the death of Schriefer, its employee, and under the law of Maryland was entitled to reimbursement therefor from any recovery had from a third person for causing his death. Liability under the policy was denied on the grounds (1) that Bivens while operating the truck was not an employee of Mrs. Bauernfeind but of the city, and (2) that, since Schriefer was an employee of the city, liability for his injury or death were expressly excluded under the terms of the policy. The provisions of the policy relied on were as follows:

"Definition of `Insured'. Except where specifically stated to the contrary, the unqualified word `insured' wherever used in coverages A and B in other parts of this policy, when applicable to such coverages, includes not only the named insured but also any person while using the automobile and any person or organization legally responsible for the use thereof, provided the declared and actual use of the automobile is `pleasure and business' or `commercial', each as defined herein, and provided further the actual use is with the permission of the named insured. The provisions of this paragraph do not apply: * * *

"(d) to any employee of an insured with respect to any action brought against said employee because of bodily injury to or death of another employee of the same insured injured in the course of such employment in an accident arising out of the maintenance or use of the automobile in the business of such insured.

* * * * *

"This policy does not apply:

* * * * *

"(e) to bodily injury to or death of any employee of the insured while engaged in the business, other than domestic employment, of the insured, or while engaged in the operation, maintenance or repair of the automobile; or to any obligation for which the insured may be held liable under any workmen's compensation law:".

The damage suit instituted in the state court was one entirely between citizens of the State of Maryland with respect to tort liability, governed by the law of that state, for an automobile collision which had occurred within the state. To have sustained the suit for declaratory judgment would have been to drag this essentially local litigation into the federal courts and to defeat the jurisdiction of the state courts over it merely because one of the parties to the litigation happened to have indemnity insurance in a foreign insurance company. There might have been justification for this, if there had been a real...