INSURANCE CO. OF NO. AMER. v. Northwestern Nat. Ins. Co.

• Decision Date: 28 February 1973
• Docket Number: Civ. A. No. 35071.
• Citation: 371 F. Supp. 550
• Parties: INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, Plaintiff, v. NORTHWESTERN NATIONAL INSURANCE COMPANY, a Wisconsin corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

371 F. Supp. 550

INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, Plaintiff, v. NORTHWESTERN NATIONAL INSURANCE COMPANY, a Wisconsin corporation, Defendant.

Civ. A. No. 35071.

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

February 28, 1973.

G. Cameron Buchanan, Detroit, Mich., for plaintiff.

Harold F. Klute, Niles, Mich., for defendant.

MEMORANDUM OPINION

Facts

PHILIP PRATT, District Judge.

This action is for Declaratory Judgment brought by Insurance Company of North America (I.N.A.) against Northwestern National Insurance Company (Northwestern) which arose as a result of the destruction of a certain crane owned by L. W. Connelly & Sons, Inc. (Connelly). Jurisdiction is based on diversity of citizenship.

At the time of the loss to the crane, both I.N.A. and Northwestern had liability policies in effect insuring Precast Schokbeton, Inc. (Precast), a firm now known as Cork Street, Inc. Precast had secured the services of the Connelly crane for use at a construction project in Ann Arbor, Michigan. The suit was instituted for Declaratory Judgment to construe the two policies and to determine the liability of each party under the contracts for the damage to the Connelly crane.

The case is now before the Court by agreement of the parties for decision on the basis of pleadings, briefs, stipulation of facts and two depositions. Set out below is the stipulation of facts.

Stipulation of Facts

"It is hereby stipulated by and between the parties by their respective counsel that this Honorable Court may accept the Statement hereinafter agreed upon by all parties involved as a true Statement of Facts, binding on each of the parties and on the basis of the same a decision may be made and a Judgment entered thereon — determining which insurer was the insurer covering the damaged property at the time of the loss and liable for damages, the amount of which is not in dispute being One Hundred Thousand and no/100 ($100,000.00) plus interest and costs.

"The Stipulation designates the language of the insurance contracts, each insurer deems pertinent but the entire policies are attached, made a part of this Stipulation, and any part may be used by the Court in making a determination of the issue presented by this Stipulation.

"Jeffress-Dyer, Inc., a Michigan Corporation, contracted with the Board of Regents of the University of Michigan for the construction of a multi-story parking garage in Ann Arbor, Michigan. Thereafter Jeffress-Dyer, Inc., subcontracted a part of the work to Precast Schokbeton, Inc., now known as Cork Street, a Michigan Corporation, as per copy of the contract attached and marked `Exhibit A' for greater particularity.

"The work of Cork Street required the use of a crane in erecting pillars on the construction project. For years under verbal contracts L. W. Connelly & Sons, Inc., furnished cranes to Cork Street on an agreed hourly charge for crane and operator.

"L. W. Connelly & Sons, Inc., furnished a crane and operator to Cork Street for the duration of Cork Street's work on the Jeffress-Dyer — University of Michigan contract for the agreed hourly charge.

"Work for each day ceased at 4:30 P.M. The fee was forty and no/100 ($40.00) Dollars per hour while the crane was in use. At the end of each day Cork Street signed a memo disclosing the hours that the crane was in operation on a form described as `rental contract', a copy of which is attached hereto and marked `Exhibit B'.

"On May 19, 1966 after work hours, due to a series of disputed causes, the pillars previously erected by Cork Street fell, struck and damaged the Connelly crane.

"The loss occurred during the coverage period of each of the insurers, Insurance Company of North America and Northwestern National Insurance Company, with both policies having been written by the same Agency.

"The Insurance Company of North America policy under `Insuring Agreements' provides, (Page 1 of Policy):

"`II. Property Damage Liability

TO PAY on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by an occurrence.'

Under `EXCLUSIONS' (Page 3):

"`This policy does not apply:

* * * * * *

(e) to injury or destruction of (1) property owned or occupied by or rented to the insured, or (2) . . . property used by the insured, or (3) . . . (iii) . . . property in the care, custody, or control of the insured or property as to which the insured for any purpose is exercising physical control.'¹

"The Northwestern National Insurance Company policy under `CONDITIONS'

"`3. It is expressly agreed that this insurance shall not cover to the extent of any other insurance whether prior, simultaneous or subsequent hereto in date, and by whomsoever effected, directly or indirectly covering the same property, and this Company shall be liable for loss or damage only for the excess value beyond the amount of such other insurance.'

and under the COVERAGE AGREEMENT BY ENDORSEMENT:

"`It is understood and agreed that the attached is substituted for the multigraphed form which now forms part of this policy: —

CONTRACTORS EQUIPMENT FLOATER

This policy covers the legal and/or assumed liability of the assured, in respect of loss or damage to rented items of contractors equipment belonging to others, subject to a limit of liability of not exceeding $150,000. any one item and not exceeding $300,000. in any one loss, disaster or casualty involving more than one item.'"

Before proceeding with a discussion of the evidence presented in the two depositions, I.N.A.'s objection to consideration of further evidence should be noted. I.N.A. takes the position that the parties had agreed that the Court will make its decision on the basis of this statement of facts without further evidence. Northwestern, conversely, argues that the stipulation was not intended to be and clearly is not fully dispositive of the factual issues in the case. While still asserting its objection to further evidence, I.N.A. has agreed to participate in the depositions of two Precast employees, William F. Daily, the person in charge of erecting the columns and pillars, and Robert A. Matthews, president of Precast.

To resolve this question, the Court must bear in mind the duty it is asked to perform — namely, determine liability for this loss. The issue of liability in this case turns on an interpretation of the contractual relationship between Precast and Connelly. The facts presented in the stipulation, however, relate few details of this relationship. Essentially the stipulation is limited to stating that Connelly furnished a crane with operator to Precast under a verbal agreement for a fee of $40 per hour.

The Court, therefore, concludes that the stipulation by itself presents insufficient facts for the Court to decide this controversy and will consider the aforementioned depositional evidence. Additionally, due process considerations would require any waiver of rights by Northwestern to be explicit.

Precast had a standing verbal agreement with Connelly under which Connelly would furnish cranes at a predetermined hourly rate, depending upon the size of the crane ordered. Accordingly, whenever Precast needed a crane in the Detroit area, Connelly was informed that a crane of a certain capacity was needed. Connelly would deliver a crane to the construction site with a two man crew consisting of an operator and oiler.

Since the boom was unassembled when delivered to the site, Precast Ironworkers, whose union had jurisdiction for boom assembly, assembled the boom under the direction of the operator. The operator and oiler were Connelly employees with their wages, employment taxes, and workmen's compensation insurance paid by Connelly.

In the instant case, Connelly was engaged to provide a crane needed by Precast to lift 20 ton concrete columns and singles into place for the East Medical Center Parking Structure at the University of Michigan under a subcontract from Jeffress-Dyer, Inc. Precast, being responsible for the erection project, directed the emplacement procedure and determined the order in which the columns were to be erected. Although acting under the general supervision of Precast, the crane operator was responsible for deciding how each lift was to be made and for controlling all the instruments and levers in the crane necessary to make a lift. In this respect, Connelly, by its employees, retained physical control over the equipment at all times.

At the end of each work day, Precast would execute a document, designated "Rental Contract" and supplied by Connelly, to record the number of hours the crane had been in use that day. Before leaving the site, the operator would secure the crane for the night.

Under the terms of the Precast-Connelly agreement, Connelly was entirely responsible for service and maintenance on the crane. Additionally, Connelly had the right to furnish any crane adequate to perform the job. The agreement further gave Connelly the right to substitute cranes at projects in progress or to remove a crane from the construction site at night or on weekends to perform other jobs. Finally, each party had the right to terminate the arrangement at will.

Conclusions of Law

It is important to note at the outset that only the rights and liabilities of I. N.A. and Northwestern, vis-a-vis each other, can be determined in this Declaratory Judgment action.² The Court does not, and indeed cannot, here make binding conclusions with respect to other parties. Specifically, no determination is made as to any ultimate liability of either I.N.A. or Northwestern to the insured arising from this loss to the Connelly crane.

Two insurance contracts providing liability coverage to Precast have been submitted to the Court for interpretation and construction. The I.N.A. policy is a general liability contract covering any liability which the insured might incur...