Kearns Coal Corp v. United States Fidelity & Guar. Co.

• Decision Date: 26 May 1941
• Docket Number: No. 167.,167.
• Citation: 118 F.2d 33
• Parties: KEARNS COAL CORPORATION v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: U.S. Court of Appeals — Second Circuit

118 F.2d 33 (1941)

KEARNS COAL CORPORATION v. UNITED STATES FIDELITY & GUARANTY CO.

No. 167.

Circuit Court of Appeals, Second Circuit.

March 3, 1941.

Writ of Certiorari Denied May 26, 1941.

Lemuel Skidmore, of New York City (Putney, Twombly & Hall and Howard F. Ordman, all of New York City, on the brief), for plaintiff-respondent.

William Dike Reed, of New York City (William J. McArthur, of New York City, on the brief), for defendant-appellant.

Before SWAN, CHASE, and CLARK, Circuit Judges.

Writ of Certiorari Denied May 26, 1941. See 61 S.Ct. 1099, 85 L.Ed. ___.

CLARK, Circuit Judge.

This action has been brought to determine the ultimate responsibility, as between two insurance companies, for damages paid for personal injuries inflicted December 31, 1933, on a child, William Pasley, by the negligent operation of a truck owned by the Newton Contracting Company, driven by George Williams, an employee of the Newton Company, and used on the day of the accident in delivering coal in New York City for plaintiff Kearns Coal Corporation. At that time there was in effect a policy of automobile liability insurance issued by defendant herein, United States Fidelity and Guaranty Company, to the Newton Company, and another like policy issued by the Travelers Insurance Company to plaintiff. Plaintiff sues herein for Travelers' benefit to recover the sum paid to settle its liability, while defendant, in turn, counterclaims for what it paid to settle the claims against the Newton Company and Williams.

These amounts became fixed as a result of a suit brought in the Supreme Court of New York in 1934 by William Pasley and his mother, Anna Pasley, to recover for the injuries and damages sustained. A first trial in 1935 resulted in plaintiffs' verdicts of $100,000, which the court set aside; on appeal the court refused to dismiss the complaint, Pasley v. Stephens Fuel Co., 249 App.Div. 806, 293 N.Y.S. 512. Meanwhile, on January 6, 1937, Williams and the Newton Company obtained their release and discontinuance of the action against them on payment of $15,000, which was advanced by defendant herein and for which it brings its counterclaim. Another trial resulted in a judgment May 12, 1937, for the Pasleys against plaintiff herein for $36,855.02, which was compromised and satisfied on July 9, 1937, by the payment of $15,000. Travelers advanced this sum to plaintiff upon the latter's agreement to prosecute this action in Travelers' behalf.

The case below was tried to the jury, which rendered a general verdict in plaintiff's favor and also answered certain special questions (hereinafter referred to) in accordance with plaintiff's contentions. Appeal from the resulting judgment for plaintiff requires a consideration of the two insurance contracts to determine the actual agreements of the insurers, and of the further questions of a claimed estoppel against defendant because it assumed defense of the state action for a time, and of the extent to which the state judgment is res judicata here.

Plaintiff's claim is predicated on that part of Section II(1) of defendant's policy, issued to "Newton Contracting Co., Inc. &/or The Hastings Pavement Co.," which reads: "The unqualified word `Assured' includes not only the Named Assured but any other person or organization while using any such automobile, including also any other person or organization responsible for the use thereof, provided the disclosed and actual use of such automobile is `Pleasure and Business,' or `Commercial,' each as defined herein, and further provided that such use is with the permission of the Named Assured. * * *" But by Item 10(b) of "Declarations," "the term `Commercial' when used is defined as the transportation or delivery and the loading and unloading of goods or merchandise in direct connection with the Assured's occupation as expressed in Item 3." And Item 3 states: "The Assured is (a) (1) Paving Contractor (2) Mfg. Paving Blocks."

The truck in question, one of those described in the policy, was being used at the time of the accident, not in connection with the contracting or paving block manufacturing business, but in the delivery of coal sold by plaintiff. Thus, according to the unequivocal definition, the use was not "Commercial" within the special meaning of the policy; and the word "Assured" in the policy is not under such circumstances to be interpreted to include other than the Named Assured. Therefore, the liability clauses of the policy operate, in connection with this accident, only for the benefit of the Newton Company, not for that of plaintiff; and the claim of the latter, in so far as it is based on the policy alone, must be denied.

There is a second reason why this is so. Section IV(b) of defendant's policy excludes any obligation of the issuer "under any of the above Agreements while any disclosed automobile is rented to others." To avoid the effect of this provision, as well as liability on the counterclaim considered below, plaintiff maintained that it did not have "custody, control, and management" of the truck at the time of the accident, and the jury so found, both by its general verdict and in answer to a specific question. The reasonableness of the finding is not here material. Had plaintiff had control of the truck, it would necessarily have followed under the testimony that the truck was rented, and all liability under the policy was excluded; but if plaintiff's contention and the jury's finding are to control, then plaintiff was not "using" or "responsible for the use" of the truck so as to come within the definition of an unnamed Assured quoted above from Section II(1) of the policy. Plaintiff certainly was not a gratuitous bailee. It was either using the truck under an agreed rental or else hiring the Newton Company to undertake deliveries on its behalf, with control over the truck's operation and responsibility for its use. In neither event can plaintiff's recovery be maintained on the policy issued by defendant.

Defendant relies on still another defense based on a "concurrent insurance" clause in its policy which restricts the "Named Assured" to only proportionate coverage where there is concurrent insurance, but also provides that "If any other Assured has valid and collectible insurance against a loss also covered by this Policy, such other Assured shall not be insured under this Policy." Plaintiff, in turn, relies on like provisions in the Travelers policy, including, too, an additional clause on a rider for "Hired Automobiles" limiting the insurance therein given, when its named assured (plaintiff) is entitled to other coverage, to "excess insurance over and above the amount of such valid and collectible insurance." These clauses, as the precedents show, afford excellent opportunity for circular reasoning: if or since Fidelity is not bound, Travelers is; and vice versa. In view of what we have held above, we need not decide this troublesome issue further than to say that of the several theories extant two at least favor the defendant: one that the policy date controls and defendant's policy, being later in date, though seemingly a renewal of some earlier policy, covers only what the Travelers policy did not cover; and the other that, since protection of the named assured was the chief purpose of each contract, each insurer should bear primary responsibility for losses of his named assured and only secondary responsibility, after primary funds have failed, for other losses. New Amsterdam Casualty Co. v. Hartford Accident & Ind. Co., 6 Cir., 108 F.2d 653; Michigan Alkali Co. v. Bankers Ind. Ins. Co., 2 Cir., 103 F.2d 345; Gutner v. Switzerland General Ins. Co. of Zurich, 2 Cir., 32 F.2d 700; but see Continental Cas. Co. v. Curtis Pub. Co., 3 Cir., 94 F.2d 710; Commercial Cas. Ins. Co. v. Hartford Acc. & Ind. Co., 190 Minn. 528, 252 N.W. 434, rehearing 190 Minn. 528, 253 N.W. 888; Maryland Cas. Co. v. Bankers' Ind. Ins. Co., 51 Ohio App. 323, 200 N.E. 849.

Plaintiff contends, however, that defendant is estopped to deny its ultimate liability because it assumed the defense of the Pasley suit on plaintiff's behalf. When this suit was brought, plaintiff forwarded the summons served upon it to Travelers, which declined to defend, and then, at Travelers' suggestion, sent it to defendant, which also declined. Twice again Travelers, and once again defendant, returned the summons. But on February 6, 1934, when defendant received the summons a third time with a letter from Travelers stating that the last extension of time to answer would expire February 12, it yielded, filed a notice of appearance for plaintiff, and remained in charge of the defense for about eight months. During this time a pre-trial examination was had of plaintiff's president, Mr. George Kearns, in which he testified that he had supervision of the truck at the time of the accident. This testimony led to a final disclaimer of liability and withdrawal by defendant on October 24, 1934, after which Travelers took up the defense and continued it throughout the two trials and until final judgment. Plaintiff claims particular prejudice because defendant's lawyer did not advise Kearns of his legal rights with reference to the question of supervision of the truck and did not object to the questions on the examination as calling only for a conclusion of the witness. The issue was also submitted to the jury below. The jury found expressly that defendant had knowledge of all the circumstances relative to the custody and control of the truck and the conditions of the Travelers policy at the time it assumed the defense, and that plaintiff was prejudiced and its position adversely affected by the defense. We think, however, that under the conditions here present this did not form an issue of fact for the jury.

Traditionally for an estoppel we should look for an admission or representation by one person designed and effective to influence the conduct of another, to...