Looney v. Allstate Insurance Company

• Decision Date: 04 April 1968
• Docket Number: No. 18851.,18851.
• Citation: 392 F.2d 401
• Parties: Jimmy N. LOONEY, Clinton M. Hickman, Betty Cureton, Margaret Coon, Martha Cooper and R. T. Cooper, Appellants, v. ALLSTATE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

392 F.2d 401 (1968)

Jimmy N. LOONEY, Clinton M. Hickman, Betty Cureton, Margaret Coon, Martha Cooper and R. T. Cooper, Appellants, v. ALLSTATE INSURANCE COMPANY, Appellee.

No. 18851.

United States Court of Appeals Eighth Circuit.

April 4, 1968.

Bill Penix, of Penix & Penix, Jonesboro, Ark., and Hartman Hotz, Fayetteville, Ark., for appellants.

Vincent E. Skillman, Jr., Skillman & Furrow, West Memphis, Ark., for Jimmy N. Looney.

G. D. Walker, of Frierson, Walker & Snellgrove, Jonesboro, Ark., and Seymour S. Rosenberg, Memphis, Tenn., for Clinton M. Hickman, were on the brief with Bill Penix, Jonesboro, Ark., and Hartman Hotz, Fayetteville, Ark., for Betty Cureton, Margaret Coon, Martha Cooper and R. T. Cooper.

J. C. Deacon, of Barrett, Wheatley, Smith & Deacon, Jonesboro, Ark., for appellee and filed brief.

Before VOGEL, BLACKMUN and LAY, Circuit Judges.

BLACKMUN, Circuit Judge.

Allstate Insurance Company instituted this diversity declaratory judgment action under 28 U.S.C. § 2201 against its insured, Jimmy N. Looney, and against Clinton M. Hickman, Betty Cureton, Margaret Coon, Martha Cooper and her husband, and Southern Farm Bureau Casualty Insurance Co. The case was tried to the court without a jury and on stipulated facts. Judge Young entered judgment granting Allstate the favorable declaratory relief it sought. The individual defendants appeal.

The litigation arises from a two-automobile collision near Marked Tree, Arkansas, on November 18, 1965. It concerns Allstate's coverage for Looney and its obligation to appear and defend him. One of the automobiles in the collision was a Cadillac owned by Hickman but driven by Looney and with Hickman as a passenger. The other was one driven by Mrs. Coon, with Miss Cureton and Mrs. Cooper as passengers. Hickman and the three women sustained serious personal injuries. Both vehicles were damaged.

In May 1964 Looney had a Tennessee mailing address but resided across the state line in Olive Branch, Mississippi. He was an independent truck driver and milk hauler. He applied to Allstate for comprehensive coverage on his 1962 truck-tractor which he used to pull a milk trailer. He indicated to Allstate that he would be hauling milk in Tennessee and Mississippi primarily for a named producers association and that his entire route did not extend beyond a 50 mile radius.

Looney's application was processed by Allstate's regional office. That office decided that a restrictive form of coverage would be issued. It classified the vehicle as "Class 4, Heavy Truck". The premium charged was one on file with the Tennessee Insurance Commissioner. With his application Looney signed an indorsement agreement reciting that the policy was to apply "only while the automobile is within a 50 mile radius of the limits of the city or town where the automobile is principally garaged".

The policy was issued effective May 15, 1964, for a one year term. It was in Allstate's "Illustrator" form known in the trade as the 1955 basic automobile policy.¹ Allstate employed this form for commercial coverage on vehicles larger than a pickup truck and also for assigned risk vehicles. The policy, by a check in a box on its first page, described the purpose of the truck's use as "Commercial". Another box, denominated "Pleasure and Business", was not checked. A rider referred to the insured vehicle as one "classified as `Commercial Milk Hauler'" and provided the 50 mile radius limitation "except for the occasional use of such automobile for personal, pleasure or family purposes beyond such 50 mile radius". Looney occasionally made some personal use of his truck in addition to his commercial use.

Among the contract's insuring agreements was a provision that if the insured is an individual and "owns a private passenger automobile covered by this policy, such insurance as is afforded by this policy * * * with respect to said automobile applies with respect to any other automobile", subject to conditions not pertinent here. "Private passenger automobile" was defined to mean "a private passenger, station wagon or jeep type automobile, and also includes * * * any automobile the purposes of use of which are stated in the declarations as `pleasure and business'". And in a section of the policy entitled "Conditions Applicable to All Coverages" the term "pleasure and business" was defined "as personal, pleasure, family and business use".

At the time Looney applied to Allstate he also owned a 1963 Ford passenger automobile which he regarded as his family car. The Ford was insured by Southern. Southern's policy covered Looney while he was driving another automobile. The monetary amount of Southern's coverage, however, was less than Allstate's.

The term of the Allstate contract was extended in due course to May 15, 1966. The policy thus was in effect at the time the November 1965 accident occurred. The site of the accident was beyond the 50 mile radius specified in the Allstate policy.

Looney gave notice of the accident to both Southern and Allstate. Southern determined that its policy afforded the terms of its coverage to Looney while he was driving the Hickman automobile. It undertook a routine investigation. Looney's report to Allstate was by telephone to its Memphis claims office on November 22. The report was taken by a clerk who completed a form from the information furnished by Looney. She confirmed Looney's coverages and the coverage card reflected the contract as an "Illustrator" policy. The report was referred to a claims supervisor.

Written statements were then taken from Looney and Hickman. The supervisor requested, as a part of usual administrative routine, that Allstate's clerical employees file an SR-21 form with the State of Arkansas. This is one required by the Arkansas Motor Vehicle Safety Responsibility Act, Ark.Stat.Ann. Title 75, Chapter 14, and, specifically, by §§ 75-1419 (Repl.1957 and 1967 Supp.).² The form was dated December 6, 1965, was filed by Allstate on December 8, and was finally accepted as refiled on January 6, 1966. It named Hickman and Looney as the Cadillac's owner and operator, respectively; gave the date and place of the accident and the Allstate policy number; and also gave notice that the policy was in effect on the date of the accident and applied to Looney as operator. At that time no coverage question was detected by Allstate and no notice of reservation of rights was given to Looney.

Hickman made claim that his Cadillac be repaired under the collision coverages of Looney's policies with Allstate and Southern. Allstate assumed that its policy extended this protection and that, with dual coverage, it and Southern should share the collision loss equally. It agreed with Southern and Hickman on a loss figure and paid half ($687.50) of the amount to Looney and Hickman by draft dated January 27, 1966.

On January 25, 1966, Miss Cureton sued Hickman and Looney in federal court in the Eastern District of Arkansas for $500,000. Service was effected and notice thereof received by both Allstate and Southern. The two companies jointly employed the attorneys who represent Allstate on this appeal. These attorneys filed a timely answer for Looney³ and communicated with Hickman's lawyer about his plans to file pleadings for Hickman. Allstate, by letter, advised Looney that the coverage under its policy was less than the amount claimed in the Cureton suit and that it was his privilege to have a personal attorney at his own expense.

On February 3, 1966, Mrs. Coon and Mr. and Mrs. Cooper sued Hickman and Looney in the same court for damages aggregating $250,000. Service was effected and notice given to Allstate and Southern. They asked the same lawyers to provide the defense to this second suit. Again Allstate advised Looney by letter of its coverage limits. On February 7 Allstate wrote Mrs. Coon's attorney concerning salvage bids for her automobile.

Under Allstate's claims procedure, a duplicate of the file is referred to the regional claims office whenever a supervisor evaluates exposure in excess of a prescribed dollar amount. Such an evaluation was made for the claims against Looney. Consequently, on February 15 a copy of the file went to the regional office in Jackson, Mississippi. On February 17 a claims analyst in that office advised Memphis that the coverage provided by Looney's policy would not apply while he was driving Hickman's automobile. A Memphis supervisor immediately called the insurers' attorneys. Their reaction was that the exclusion seemed applicable and they recommended to Allstate that a reservation of rights letter be sent to Looney. Allstate issued such a letter on February 17. On or about February 21 Allstate gave notice to Southern of the coverage question. It was agreed that this presented a conflict of interests and it was decided that Southern would secure other counsel. Southern employed another lawyer to represent the interest of its insured in the defense of both cases. The first attorneys furnished complete information to a newly retained lawyer. He filed a timely pleading on behalf of Looney in the second case.

On February 22 oral notice of the coverage problem in the Allstate policy was given to the attorneys for Miss Cureton, Mrs. Coon, the Coopers, and Hickman. Two days later Hickman filed his answer in both suits and a $250,000 cross-complaint against Looney. The attorneys first retained withdrew as counsel for Looney in the Cureton suit. The attorney employed by Southern has since represented Looney's interests in both cases.

On March 1 Allstate wrote Looney disclaiming and denying all liability or obligation to him or to others under the Allstate policy. On March 11 it wrote Southern to the effect that the Allstate policy provided no coverage for the Hickman vehicle and that Allstate should be reimbursed to the extent of its $687.50 payment when Southern settled Hickman's collision loss.

In July Allstate's attorneys made inquiry as...