Leonardi v. Standard Acc. Ins. Co. of Detroit, Mich.

• Decision Date: 14 May 1954
• Docket Number: 22998.,No. 212,212
• Parties: LEONARDI v. STANDARD ACC. INS. CO. OF DETROIT, MICH.
• Court: U.S. Court of Appeals — Second Circuit

212 F.2d 887 (1954)

LEONARDI v. STANDARD ACC. INS. CO. OF DETROIT, MICH.

No. 212, Docket, 22998.

United States Court of Appeals, Second Circuit.

Argued March 11, 1954.

Decided May 14, 1954.

Hamlet A. Smyth, Samuel Levy, Rochester, N. Y., for plaintiff-appellee.

Winchell, Macken & Goldwater, Rochester, N. Y., for defendant-appellant; Daniel E. Macken, Rochester, N. Y., of counsel.

Before CLARK, MEDINA and HARLAN, Circuit Judges.

MEDINA, Circuit Judge.

On June 28, 1945, Frank Alloco died as a result of injuries caused by an explosion which had occurred in a dry cleaning establishment operated in Rochester, New York, by the plaintiff-appellee, Leonardi, under the name of "Ace Cleaners." Alloco was an employee of "Ace Cleaners" and was engaged in the performance of his duties at the time of the accident. Gulf Oil Corporation had sold and delivered to "Ace Cleaners" the cleaning fluid or solvent which exploded, and a certain conversation, of which there were conflicting versions, had taken place between the Gulf Oil driver and Leonardi at the time of the delivery. It subsequently developed that there was also a genuine controversy on the subject of whether Alloco's death had been caused by the negligence of Gulf Oil or Leonardi, or both, and whether the negligence of Leonardi, if any, was "primary."

At the time of the accident there were in force two policies of insurance issued by defendant-appellant Standard to Leonardi, a Standard Workmen's Compensation and Employers' Liability policy and a Manufacturers' or Contractors' Schedule Liability policy. Neither of these policies covered liabilities arising out of any contractual obligations assumed by Leonardi nor any liability by way of third-party claims against Leonardi based on negligence.

On August 1, 1945, Alloco's administrator sued Gulf Oil in the New York Supreme Court, Monroe County, alleging negligence on the part of Gulf Oil; and Gulf Oil promptly, and in accordance with the New York procedure, asserted a cross-claim against Leonardi, who was served with a third-party summons and complaint on October 10, 1945, Alloco v. Gulf Oil Corp., Sup., 59 N.Y.S.2d 515. The prayer for judgment was that Leonardi be adjudged liable over to Gulf Oil for the amount of any judgment which Alloco's administrator might recover against Gulf Oil. Gulf Oil's third-party complaint against Leonardi set forth two causes of action: (1) that Leonardi had expressly agreed to indemnify Gulf Oil against any loss or damages which it might sustain by reason of the use of the cleaning fluid by Leonardi or his employees; and (2) that the death of Alloco was due to the active and primary negligence of Leonardi and that the negligence of Gulf Oil, if any, was passive or secondary.

Leonardi requested Standard to assume the defense of the third-party action under either or both of its policies, but Standard, by a letter, dated November 12, 1945, refused.

Leonardi thereupon retained his own attorneys and the case was tried to court and jury at the May, 1946, term of the Supreme Court in Monroe County. The trial lasted several days, and much evidence was introduced tending to prove that the accident was caused by the negligence of both Gulf Oil and Leonardi, but no affirmative claim was ever made against Leonardi by Alloco's administrator, who proceeded at all times against Gulf Oil alone. There was ample evidence to support the allegation by Gulf Oil that Leonardi had made an oral agreement of indemnity. The upshot was that the trial judge withdrew from the jury's consideration the question of Leonardi's active and primary negligence, he ruled that if the jury found that the accident was caused by the negligence of Gulf Oil or of both Gulf Oil and Leonardi it might find a verdict against Gulf Oil; and he instructed the jury that the only basis upon which Gulf Oil could recover over against Leonardi on its cross-claim was that Leonardi had orally agreed to indemnify Gulf Oil, and that the controversy over whether or not such an agreement had been made was a question of fact for them to decide. Accordingly, on May 13, 1946, the jury returned a verdict in favor of Alloco's administrator against Gulf Oil and in favor of Gulf Oil against Leonardi on the cross-claim; and on June 18, 1946, a judgment in the amount of $10,150.15 was entered in favor of Alloco's administrator against Gulf Oil, and, in turn, in favor of Gulf Oil and against Leonardi for the same amount.

Appeals were thereupon duly taken by both Gulf Oil and Leonardi to the Appellate Division of the New York Supreme Court, Fourth Department. During the pendency of the appeals, the attorneys for Gulf Oil and Leonardi entered into negotiations which culminated in a settlement whereby the appeals were discontinued and dismissed, Gulf Oil and Leonardi exchanged general releases, and other litigation between Leonardi and Gulf Oil was discontinued. Leonardi paid $5,700 in cash to Gulf Oil on or about November 9, 1946, in settlement of all disputes between them. In defense of...