Kelly v. Phoenix Assurance Company of New York

• Decision Date: 17 January 1964
• Docket Number: Civ. No. 12279.
• Citation: 225 F. Supp. 562
• Parties: Clarence L. KELLY v. PHOENIX ASSURANCE COMPANY OF NEW YORK, a body corporate.
• Court: U.S. District Court — District of Maryland

225 F. Supp. 562

Clarence L. KELLY v. PHOENIX ASSURANCE COMPANY OF NEW YORK, a body corporate.

Civ. No. 12279.

United States District Court D. Maryland.

January 17, 1964.

Benjamin C. Howard and Robert L. Karwacki, Baltimore, for plaintiff.

F. Gray Goudy and Herbert Burgunder, Jr., Baltimore, for defendant.

THOMSEN, Chief Judge.

This action for a declaratory judgment calls upon the court to decide at this time whether defendant (Phoenix) is obligated to defend plaintiff (Kelly) in an action brought against Kelly in the Superior Court of Baltimore City by his employer, Tomke Aluminum Company, Inc. (Tomke), in which Tomke seeks indemnity from Kelly for damages it has paid Herbert S. Feldman (Feldman) as the result of an accident at Tomke's plant in Baltimore. The contest is really between Tomke's liability carrier (U. S. Fire) and Phoenix.

Phoenix issued an automobile liability policy in the State of Georgia to London Iron and Metal Company (London), a partnership engaged in buying and selling scrap metal, with its principal place of business in Atlanta. The policy covered a fleet of motor vehicles and trailers of various types. It contained a customary loading and unloading clause, and an omnibus clause covering an additional insured while using "an owned automobile or a hired automobile", as defined in the policy.¹

The first question to be decided in this case is whether the tractor-trailer involved in the accident was "a hired automobile". A related question is whether Feldman was an employee of London, in which event an injury to him would be excluded from coverage under the automobile liability policy.

The second question is whether there had been a breach of the "Limitations of Use Endorsement" attached to the policy.

In the course of its business London bought aluminum dross from the Bonnell Company, in Newnan, Georgia, and sold it to Tomke, in Baltimore. London entered into the following arrangement with Feldman, who owned two tractors and several trailers and was engaged in the hauling business in a modest way. Feldman agreed to keep two of his trailers available for London's use, one to be stationed at all times under a chute in the Bonnell plant; one of the trailers was to replace the other as it became full, and Feldman contracted to haul the trailers loaded with aluminum dross to Tomke's plant in Baltimore.² Feldman issued a bill of lading for each trip, and was paid a flat sum, which varied depending upon whether he hauled a full load, a partial load, or no load for London on the return trip. Feldman sometimes hauled produce for others on the return trip south.

On May 28, 1958, during the policy period, while Feldman was at Tomke's plant in Baltimore, having delivered a load of aluminum dross, and while, it is alleged, metal forms or dies were being loaded onto Feldman's trailer by Kelly, to be hauled south for London, Feldman was injured. In a second amended declaration which Feldman filed in a Maryland State Court against Kelly, Tomke, and United Iron and Metal Co. (United), of which Tomke is a subsidiary, Feldman alleged that he was injured by the negligence of the defendants therein when he was struck by the claw of a crane, operated and controlled by Kelly as the agent, servant or employee of Tomke, which was used in loading the trailer. Phoenix contends that the injury was not caused by the operation of the crane nor indeed by the loading operation.³ Neither side produced Kelly as a witness in the present case.

U. S. Fire undertook the investigation of the accident and the defense of its insured, Tomke and United, by G. C. A. Anderson, Esq., of Baltimore. On behalf of Kelly, U. S. Fire notified Phoenix of the accident and called on it to defend Kelly. Phoenix denied coverage. The U. S. Fire policy did not contain an omnibus clause covering Kelly, but U. S. Fire engaged Benjamin C. Howard, Esq., to represent Kelly in the Feldman suit.

Before that suit came to trial, U. S. Fire settled Feldman's claim for $142,000, and the attorney it had employed to represent Tomke and Kelly, together with the attorney for Feldman, appeared before a judge in the Superior Court of Baltimore City and consented to the entry of a judgment in the amount of $142,000 against all defendants. The Court said:

"This judgment is against all the defendants jointly and severally, but only on the question of the plaintiff's rights against the defendants. Nothing done here today in any way goes to any question as to claim of liability for contribution or otherwise on any rights, duties or obligations of any of the defendants, whether original or third party, as against each other. Accordingly, it is ordered by the Court pursuant to this Court's general powers and the Maryland Rules, including, but not by way of limitation, Rule 315(e) 3, that the judgment entered herein shall not be construed or constitute any finding or adjudication with respect to the respective rights, duties, obligations or liabilities of the several defendants, whether original or third party, between themselves or any of them with respect to the claim asserted in the third party complaint filed herein or the answers thereto or otherwise."

Kelly did not consent to the settlement or to the entry of the judgment against him.

Shortly thereafter U. S. Fire, in the name of Tomke, through Anderson as its attorney, filed an action against Kelly in the Superior Court of Baltimore City alleging that the injury to Feldman had been caused by the active negligence of Kelly and claiming indemnity from Kelly. The present declaratory judgment action was then filed by Howard, as attorney for Kelly, against Phoenix, claiming that under the facts set out above Kelly was an additional insured under the policy issued to London by Phoenix, in view of the loading and unloading clause contained in that policy, and that Phoenix is obligated to defend and indemnify him in the action brought against him by Tomke.

The omnibus clause in the Phoenix policy granted coverage to an additional insured only while using "an owned automobile or a hired automobile", as defined in the policy. Feldman's tractor-trailer, the vehicle which it is claimed was being loaded at the time of the accident, was not listed among the "owned automobiles" in the schedule attached to the policy. Indeed, it is agreed that it was not owned by...