Kessler v. Pennsylvania Nat. Mut. Cas. Ins. Co.

Citation531 F.2d 248
Decision Date05 May 1976
Docket NumberNo. 74--2021,74--2021
PartiesWalter KESSLER and Carrie Kessler, Plaintiffs, and Joseph G. Kennelly, Jr., d/b/a Joseph G. Kennelly Moving & Storage Company and Reliance Insurance Company, a Foreign Corporation, Intervenors-Plaintiffs-Appellants, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, a Foreign Corporation, Defendant/Counter-Plaintiff-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 248

531 F.2d 248
Walter KESSLER and Carrie Kessler, Plaintiffs,
Joseph G. Kennelly, Jr., d/b/a Joseph G. Kennelly Moving &
Storage Company and Reliance Insurance Company, a
Foreign Corporation,
Foreign Corporation, Defendant/Counter-Plaintiff-Appellee.
No. 74--2021.
United States Court of Appeals,
Fifth Circuit.
May 5, 1976.
Rehearing Denied June 17, 1976.

Page 249

Daniel J. Sullivan, Coral Gables, Fla., for intervenors-plaintiffs-appellants.

Robert H. Crary, Jeanne Heyward, Miami, Fla., for Penn. Nat.

Michael P. McGuire, Coral Gables, Fla., for Kessler.

Appeal from the United States District Court for the Southern District of Florida.

Before BROWN, Chief Judge, WISDOM

JOHN R. BROWN, Chief Judge:

A multi-party, multi-claim, multi-court Donnybrook 1 in which all have at one time or another lashed out against each for all or any part they could get, this Tinker-to-Evers-to-Chance 2 ended when our suitors were put out by an infield fly. 3 In more traditional terms, the victims of a Florida indefensible criminally negligent vehicle collision sued in the state courts of Florida all of those within reach of any potential liability which soon triggered the inevitable claims, cross-claims, indemnifications and counter-suits among the supposed insurers of the Florida certificated carriers and the owners or operators of the rig at fault. As they hopefully tag end in this Kilkenney

Page 250

fair 4 the District Judge held against one of the insurers and its assured--who must have been joined to give the insurer a more attractive cloak--and in favor of the victorious other insurer for what, at most, was attorney fees in its successfully maintaining the defense that its policy did not cover the occurrence.

Finding that the Judge's hunch, see Hutcheson, J., The Function of The 'Hunch' In Judicial Decision, 25 Ga.B.J. 127 (Nov.1962), on Florida law became an Erie-fact about the time he ruled on his own, we affirm on the basic claim but reverse as to the counter-claim of its not-so-friendly rival insurer for attorneys fees. 5

In The Beginning

The genesis of our problem starts, of course, with the collision of February 18, 1971 between a tractor rig owned by Fargo, driven by one of its employees, but under lease-contract to Kennelly, when it crossed the center line on the highway to Punta Gorda more than 50 miles from Miami and crashed into the Kessler-Vollmer car. Nothing would have engaged the eight Judges, 6 state and federal, without this event. But the complications which beset us occurred much earlier.

Fargo, a household carrier certificated by the Florida Public Utility Commission (PUC) with geographical authority limited to specified Miami area of Dade County, entered into a contract with Kennelly which had wider PUC operating authority by which Fargo's equipment would in effect be leased to Kennelly with Fargo supplying the driver. As to be expected among knowledgeable businessmen, this relationship and the contract posed legitimate insurance problems complicated, as also to be expected, by the overriding demands of Florida law and PUC regulations to assure protection to the public and property owners.

For the movement occasioning this accident Fargo could not haul the shipment under its own certificate so it used Kennelly's operating authority, relying on the interrelation agreement 7 with Fargo's equipment

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being driven by its since convicted employee.

Fargo's Lay-Off On Underwriters

Fargo had earlier obtained a liability policy from Penn with Penn filing the required certificate of insurance with PUC. 8 But the policy contained a 50-mile radius endorsement. 9 National, which is now a much relieved and innocent bystander, subsequently issued 10 a liability policy to Fargo

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with substantially similar 50-mile radius limitation.


The result was that Fargo was in that unusual, and enviable, position of having two insurers for the same liability. This may account for the fact that Fargo is presumably happy with all that has occurred and is neither a party or a supplicant to this appeal.

The Fargo-Kennelly Agreement

The 'Independent Contractors Agreement' between Kennelly and Fargo, after reciting that Kennelly was a certificated intrastate household carrier in Florida and that Fargo is engaged in the business in connection with which it owns or has at its disposal motor vehicle equipment and employees competent and qualified drivers, set forth a number of obligations. Although it described the relationship as 'independent contractor' 11 with the drivers to be supplied and all expenses paid by Fargo 12 the contract recognized that operations under it were for Kennelly as the certificated carrier. 13 Presumably this was a Florida adaptation to the similar lease of vehicles owner driven or otherwise, in the interstate system. 14

The contract did have an indemnity agreement running from Fargo to Kennelly but it was limited 15 and was geared into

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the correlative insurance provisions by which Fargo agreed to supply 'Bob Tail' liability insurance, 16 and a certificate of insurance 17 but the principal insurance was to be supplied by Kennelly for the benefit of Fargo as well, the only limitation being that it would be 'excess' over 'over and above any valid and collectible insurance carried by 'Fargo.' 18 Notable was the absence in Fargo's insurance obligation to provide contractual indemnity insurance to underwrite Fargo's indemnity commitment in para. 4--(i) (see note 15, supra).

Litigation Sets In

With all of these potential defendants it was not surprising that litigation broke out on all fronts.

The Kessler-Vollmer State Court Suit

On August 13, 1971 the Kessler-Vollmers filed a damage suit for the accident in the Florida state court against, Fargo, National, its insurer, Kennelly and Reliance, its insurer, 19 together with some additional defendants. 20 The state trial judge acting with a good deal of administrative wisdom severed out the damage claim. Oddly enough National was joined as a party defendant but Penn was not. As we shall see later in the course of our juridical over-the-road journey, see United Services Automobile Association v. Russom, 5 Cir., 1957, 241 F.2d 296 at 298, the absence of Penn led the Federal Judge to reject Penn's plea of stare decisis, res judicata, collateral estoppel or the like.

The state trial judge ruled in favor of National because the accident took place beyond the 50-mile radius limitation (see note 10, supra) and entered a final judgment to that effect on January 18, 1973. 21 The Kesslers on February 8, 1973 (see App. 72--75) by stipulation and release settled their claim against Kennelly and Reliance by a dismissal with prejudice, the stipulation

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and release expressly providing, however, that the settlement would not 'affect the cross-claim presently pending (by them) against National, the rig driver and Fargo. 22 Oddly, there was no express reservation against Penn, presumably because it had not yet entered the litigious scene. 23

Kesslers-Vollmers being unhappy with the judgment letting National out on the 50-mile radius coverage defense appealed this judgment to the Florida District Court of Appeals.

Another Day Another Court

On April 9, 1973 Kesslers, but not Vollmers filed in the Federal District Court a declaratory suit against Penn to effectuate payment of the $100,000 settlement between Kesslers and Fargo (see note 23, supra) in the hopes of getting some blood out of the turnip, see U.S. v. Carmichael, 5 Cir., 1974, 497 F.2d 36, 39. True to form this case soon got snarled up by Kennelly and Reliance ranging on the side, of all things, the damage claimant Kesslers. 24 Within a month (August 20, 1973) Penn counterclaimed against Kennelly and Reliance asserting that Kennelly and Reliance had the primary coverage.

The Federal Trial Judge, unimpressed by Penn's plea of stare decisis on a state trial judgment as the Erie-indicator, cf. Ford Motor Company v. Mathis, 5 Cir., 1963, 322 F.2d 267, 269 an dunwilling at Penn's urging to postpone consideration of the 50-mile coverage question in the Penn policy (see note 9, supra) pending the soon-to-come authoritative decision of the Florida District Court of Appeals, proceeded on his own to interpret and uphold, 25 the validity of the 50-mile exclusion (see note 9, supra) and in doing so held in favor of Penn and against the Kesslers, but still holding off until another day the struggle which confronts us between Penn and Kennelly-Reliance.

Thus, the Kesslers so far had failed in both forums on substantially the same Florida issue of the 50-mile exclusion. For some reason not yet disclosed no appeal was taken from this October 25 judgment so it became for the parties and for all time the law of the Medes and Persians which altereth not.

As for the intramural contest between Fargo's supposed insurers the battle continued to rage. Penn moved for summary judgment against Kennelly and Reliance and on March 14, 1974 the Federal District Judge granted it 26 in favor of Penn against Kennelly and Reliance and granted Penn's counterclaim against Kennelly and Reliance for all sums, including suit costs, attorney fees and the payment of any judgment that issued from the suit, and held Kennelly and Reliance primarily liable. On March 28, 1974 Kennelly and Reliance filed a motion for relief relying on F.R.Civ.P. 60(b), a move which had built-in obstacles. 27

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Thereafter Kennelly-Reliance filed a timely appeal in a case which we might not otherwise have ever had to wrestle with had the District Judge used a little partience while awaiting what had to be a decisive decision on a purely Florida question from the lips of the District Court of Appeals.

The Fog Lifts The Erie Beacon Burns Brightly


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