Mountain States Mut. Cas. Co. v. American Cas. Co., 9801
| Decision Date | 16 July 1959 |
| Docket Number | No. 9801,9801 |
| Citation | 135 Mont. 475,342 P.2d 748 |
| Parties | MOUNTAIN STATES MUTUAL CASUALTY COMPANY, a Corporation, Respondent and Cross-Appellant, v. AMERICAN CASUALTY COMPANY, Appellant and Cross-Respondent. |
| Court | Montana Supreme Court |
Coleman, Lamey & Crowley, Billings, for appellant. Cale J. Crowley, Billings, argued orally.
John C. Sheehy, Billings, argued orally, for respondent.
This is an appeal and cross-appeal from a judgment of the district court of Yellowstone County, in which judgment the appellant American Casualty Company obtained judgment against the appellee Mountain States Mutual Casualty Company for $4,444.44, plus interest and costs. The Mountain States Casualty Company will hereinafter be called Mountain States. Mountain States was plaintiff below. The American Casualty Company, defendant below, will be referred to as American.
The appeal poses a double question involving primary and secondary liability as between two automobile casualty insurers as parties named above. The questions are:
(1) As a matter of fact, was the offending vehicle being used on loan, gratis, or was it hired; and,
(2) As a conclusion of law, assuming the offending vehicle was not hired, must the limits of the primary policy be exhausted in full and not pro rata before recourse to the excess coverage of the secondary policy?
Only one accident occurred. Each insurer insists the other is primarily liable. Both have appealed. The plaintiff company, referred to as Mountain States, refused to accept defense, refused to pay judgments resulting from actions on claims it refused to defend, sued the other company for declaratory judgment and partially lost.
The defendant company, referred to as American, accepted defense, reimbursed its named insured for the judgments its named insured paid, took written assignment and subrogation against the other company, cross complained as subrogee for reimbursement to the full amount of the judgments paid, which amounted to a total of $10,000, and partially won, securing judgment for the aforementioned $4,444.44.
The Mountain States' named insured was a truck sales and servicing corporation called McBee Diamond T, Inc., which we shall call merely McBee. This corporation owned the truck at fault in the accident. The corporation and the truck were insured by Mountain States under a general garage liability policy, with limits of $20,000 for each person injured, $40,000 for each accident and $5,000 property damage. The policy excluded hired automobiles but included those not hired. Automobiles included trucks. The 'other insurance' clause in this policy applied pro rata.
McBee's Vice President and Manager, Eilert J. Olsen, gave permission for use of the offending truck. McBee was a closeheld family corporation, the officers, directors and stockholders being Olsen, his father-in-law and his brother-in-law. The truck was not Olsen's personal property nor was it in his personal custody. Olsen's testimony at the hearing, that the truck was hired was completely impeached by his earlier signed statement that the truck was loaned, gratis. Olsen explained this discrepancy by saying he gave the signed statement at a time before he understood the importance, insurance-wise, of the difference between loaning and hiring.
The American's named insured was the Hilands Golf Club, located near Billings, hereafter called Hilands Club. Coverage of this policy extended to Hilands Club employee, Torval Peck, who was driving the truck in connection with work on the club grounds, and also to the club's then grounds superintendent, Mavor S. Boyd, under whose supervision Peck was temporarily working as a carpenter. Hilands Club was insured under a general liability policy, with limits, as above of $25,000/$50,000/$5,000. The 'other insurance' clause in this policy was excess coverage, not pro rata coverage.
The aforementioned Boyd was the club official who dealt with McBee corporation through Olsen. Like Olsen, Boyd testified that the truck was hired and was not being used on a gratis loan; also, like Olsen, Boyd was completely impeached by a statement he had signed for an American Casualty Company claim adjuster the day after the collision. This statement recited that the truck was being used by the golf club on a gratis loan. Boyd likewise explained that at the time he signed this statement he too was ignorant of the importance in the difference, insurance-wise, between loaning and hiring. But according to the testimony of American's trial counsel, who took the stand to impeach Boyd, Boyd had volunteered to this counsel at a time early in the litigation that Boyd had changed his story from loaning to hiring because Olsen had asked him to change it.
The accident occurred April 24, 1950. The facts of the accident need not detain us. Boyd, Peck and Olsen were acting within the scope of their employment, the policies were in full force on the named insureds and Peck, as an employee of Hilands Club, driving McBee's truck, was at fault. The driver of the car struck by the truck and the driver's wife, his passenger, were injured, sued Hilands Club and each recovered a $5,000 consent judgment against the Hilands Club. The $10,000 total in judgments is well within the Mountain States policy limits.
American then reimbursed Hilands Club and took subrogation assignment of Hilands Club's cause against Mountain States for failure to defend Hilands Club and cross complained in the action for declaratory judgment. The district court found that the truck was on loan. This finding, if sustained on appeal, makes Mountain States the primary insurer, up to its policy limits and, under the other insurance provisions of both policies, makes American's policy excess coverage applicable only after Mountain States' coverage is fully exhausted. Brief for Mountain States so concedes and counsel for Mountain States so admitted during argument.
To avoid liability Mountain States must establish that the truck was hired, not loaned. As plaintiff, Mountain States has this burden, also as appellant. It is no more than fair to say that counsel for Mountain States informed the court the signed statements, which impeach his witnesses Olsen and Boyd, took him completely by surprise.
The action for declaratory judgment was heard on June 18, 1956, a little more than six years after the accident. By then McBee had been sold and the purchasers also had gone out of business. Boyd, no longer grounds superintendent for Hilands, was brought back from Florida to testify, a fact which lends credence to counsel's plea of surprise when Boyd was faced with the statement Boyd signed the day following the accident. Olsen's signed statement is dated September 5, 1950. It says 'the truck in question was loaned by me * * * gratuitously and without charge for rental or otherwise, to the Hiland Golf Club through the person of its grounds superintendent Mr. Mavor S. Boyd * * * in consideration of personal favors previously performed by Mr. Boyd for me with equipment of the Hilands Golf Club but there was no other consideration given'. Emphasis supplied.
The record shows that on August 11, 1950, Olsen personally collected a check for $126.50 from Hilands Golf Club on a personal bill he himself made up and submitted in person for '253 Lengths of Used 6" tile at .50 cents each' and then changed to show as a billing for Both bills bore Boyd's 'OK'. Olsen endorsed the club's check to a local paint store in payment of what Olsen said was his own personal $29 paint bill. He added that he gave the $97.50 to the McBee stockholders. As stated, these would be Olsen and Olsen's in-laws.
Additionally the record shows that under date of May 18, 1950, the McBee corporation had billed Hilands Club in...
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