Journal Pub. Co. v. General Cas. Co.

• Decision Date: 11 February 1954
• Docket Number: No. 13427.,13427.
• Parties: JOURNAL PUB. CO. v. GENERAL CAS. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

210 F.2d 202 (1954)

JOURNAL PUB. CO. v. GENERAL CAS. CO.

No. 13427.

United States Court of Appeals Ninth Circuit.

January 15, 1954.

Rehearing Denied February 11, 1954.

Robert A. Leedy, Barzee, Leedy & Keane, Portland, Or., for appellant.

Robert T. Mautz, Wilbur, Mautz, Souther & Spaulding, Portland, Or., for appellee.

Before HEALY and POPE, Circuit Judges, and LEMMON, District Judge.

POPE, Circuit Judge.

The appellant brought an action against the appellee in the Circuit Court of the State of Oregon to recover damages on account of the failure of the appellee, here called General, to reimburse appellant, here called Journal, for its cost of defense and settlement of a certain action for personal injuries brought against Journal by one Perton who sustained injuries as a result of an automobile collision for which an employee of Journal was alleged to have been responsible. Prior to the date of Perton's injuries, General had issued to Journal two policies of liability insurance. General disclaimed any responsibility under its policies to defend or settle the Perton suit. Journal's action for reimbursement was removed to the court below where General had judgment.

The case was tried upon an agreed statement of facts contained in a pretrial order and upon evidence received on behalf of the plaintiff. From the agreed statement it appears that General had issued to Journal a liability policy here referred to as the "blanket" policy, whereby General agreed to pay all sums which Journal should be obligated to pay by reason of liability imposed by law for damages because of bodily injuries sustained or alleged to have been sustained by any person or persons, and to defend on behalf of Journal any suit against it alleging such bodily injury. The blanket policy however provided that it should not apply to bodily injuries "sustained by any person while engaged in the employment * * of the insured." The other liability policy, here referred to as the "employers'" policy, insures Journal against liability imposed by law in excess of the sum of $5000 for injuries "sustained by any employee or employees of the insured."

Perton's complaint alleged that on the 23d day of March, 1946, Journal "employed plaintiff as one of its carriers of its papers", and that thereafter and on March 30, 1946, in order to familiarize Perton with his route, the defendant Journal directed its district manager to drive Perton along the route and inform him of his duties in connection with his said employment. The parties in their agreed statement construed this to be an allegation that at the time of Perton's injuries he was an employee of Journal. When service in the Perton action was made upon Journal, it forwarded the complaint and summons to General and requested that it undertake the defense of the action. General thereupon undertook the defense and engaged an attorney for that purpose who prepared, verified and filed an answer to the complaint on behalf of Journal. The answer admitted "that on March 23, 1946, this defendant employed plaintiff to carry its papers over a route including Aurora, Oregon", and that the district manager on March 30, 1946, the day of the accident, conveyed Perton along that route; and it denied that Perton was employed to carry newspapers in the particular area where the accident occurred. This answer was filed on June 12, 1947. On June 30, 1947, General wrote to Journal stating: "The complaint alleges and is brought upon the theory that the plaintiff was an employee at the time the accident occurred. The blanket policy with you does not provide for injuries to an employee. The coverage for actions by an employee is by virtue of our policy No. describing the employers' policy. Under endorsement No. 1 of that policy the Company is only liable for any sum in excess of $5000. * * * We are therefore tendering the defense of the above entitled action to you." Journal immediately protested that as a matter of fact Perton was not an employee; that his work of distributing newspapers was that of an independent contractor; that in any event at the time of the accident neither Perton nor the driver were on duty, but because General persisted in its position that it was not under any obligation to defend, Journal undertook the defense of the action. The case was ultimately compromised and settled by the payment of $3000, $2000 of which was contributed by Journal and $1000 by General under an agreement between them that such contributions were made without prejudice to the rights or claims of the parties under such policies.

The first specification of error relates to the court's refusal to remand the case to the State court. The facts relating to the removal are these: Journal is an Oregon corporation and General a corporation of the State of Washington. The original complaint was for the recovery of $2000 (the amount contributed to the settlement by Journal), and the further sum of $330, alleged to have been Journal's cost of defense and settlement of the action. Under Oregon statutes and decisions¹ the plaintiff in such a suit is entitled to recover reasonable attorney's fees provided settlement is not made within six months from the date proof of loss is filed or from the day of commencement of the action where proof of loss is not required. The Oregon rule is that in a case of this kind where such proof of loss is not required, plaintiff may file a supplemental complaint after the six months period has expired and thereby allege the accrual of the right to attorney's fees. Walker v. Fireman's Fund Ins. Co., 114 Or. 545, 234 P. 542. Here, after the six months had expired, plaintiff filed a so-called amended complaint adding to the amounts for which it sought recovery the sum of $750 alleged to be reasonable attorney's fees. Upon the theory that thus the amount in controversy had been increased above the jurisdictional minimum, the cause was removed to the court below. Motion to remand was denied.

Appellant asserts that since the action at the time it was commenced was not one which could have been instituted in or removed to the federal court because the right to attorneys' fees had not then accrued, the defendant had no right of removal at the time the so-called amended complaint was filed. As stated in Great Northern Ry. Co. v. Alexander, 246 U.S. 276, 280, 38 S.Ct. 237, 239, 62 L.Ed. 713: "* * * that a case not removable when commenced may afterwards become removable is settled by Ayers v. Watson, 113 U.S. 594, 5 S.Ct. 641, 28 L.Ed. 1093; Martin's Administrator v. Baltimore & Ohio R. Co., 151 U.S. 673, 688, 691, 14 S.Ct. 533, 38 L. Ed. 311; Powers v. Chesapeake & Ohio Ry. Co., 169 U.S. 92, 18 S.Ct. 264, 42 L. Ed. 673, and Fritzlen v. Boatmen's Bank, 212 U.S. 364, 29 S.Ct. 366, 53 L. Ed. 551." We think that the principles invoked to sustain the second petition for removal in Powers v. Chesapeake, etc., supra, require us to hold that the trial court properly denied the motion to remand. Cf. Sink v. Mutual Life Insurance Co. of New York, D.C., 56 F. Supp. 306, and Fleetwood v. Milwaukee Mechanics Ins. Co., D.C., 87 F.Supp. 353.

It is contended by appellant that apart from all other considerations General is estopped to deny its obligation to defend the Perton action because initially it actually did undertake the defense of that action and did cause an answer to be verified and filed on behalf of Journal. Journal says that the filing of this answer prejudiced it in that once the answer was filed there was a waiver of the rights which Journal might otherwise have had to make appropriate motions against the complaint, such as motions to make the complaint more definite and certain; to strike matter therefrom, or to move on other grounds. It also asserts prejudice arising out of the admission in the answer that Perton was employed by Journal.

After Journal had taken over the defense of the Perton action, it filed an amended answer in which the admission of employment was omitted. Had the case gone to trial, we have no doubt but that the original answer could have been offered in evidence in support of Perton's allegation of employment. However, the case never reached trial and the trial court has found that Journal "suffered no prejudice in the Perton action by any act or conduct on the part of the defendant."

Our attention has not been called to any respect in which the complaint might have been altered to Journal's advantage as a result of any motion on its part and we are unable to perceive any respect in which any prejudice could have been suffered in consequence of the filing of that answer. In our view this finding of the court is sustained by the record.

The principal contention of the appellant is that Perton was not in fact an employee of Journal and was not injured in the course of any employment for it. Hence it is said his claim and action was within the coverage of the blanket policy and not within the exclusion thereof relating to actions by employees.

General's position, on the other hand, is that whether it, as an insurer, was under a duty to defend an action for damages, was governed by the allegations of the complaint in the action; that since the complaint filed by Perton alleged that he was at the time of the injury in the employment of Journal, it followed that the obligation to defend did not arise, and that the fact that whether Perton was or was not such an employee is not an issue in this case and is wholly immaterial.

In reply to that contention Journal says that an allegation such as this which is ascertainably false should not in logic or in justice afford the insurer a basis to escape liability. It argues that proof of the employment was not essential to recovery; that although the Oregon Guest statute, § 115-1001, O.C. L.A., requires a guest to prove "gross negligence or intoxication or his reckless disregard of the rights of others", yet under the doctrine of Albrecht v....