Pacific Employers Ins. Co. v. Hartford Acc. & Ind. Co.

• Decision Date: 27 March 1956
• Docket Number: No. 14254.,14254.
• Citation: 228 F.2d 365
• Parties: PACIFIC EMPLOYERS INSURANCE COMPANY, a Corporation, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a Corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

228 F.2d 365 (1955)

PACIFIC EMPLOYERS INSURANCE COMPANY, a Corporation, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a Corporation, Appellee.

No. 14254.

United States Court of Appeals Ninth Circuit.

November 16, 1955.

Rehearing Denied March 27, 1956.

COPYRIGHT MATERIAL OMITTED

Moss, Lyon & Dunn, Los Angeles, Cal., for appellant.

James V. Brewer, Los Angeles, Cal., for appellee.

Before STEPHENS and FEE, Circuit Judges, and WIIG, District Judge.

WIIG, District Judge.

Pacific Employers Insurance Company (Pacific) appeals from an adverse judgment in an action for declaratory relief brought against it by Hartford Accident and Indemnity Company (Hartford). The respective liabilities of the two companies under their policies of insurance because of injuries to one Richard D. Carter presented a controversy within the jurisdiction of the United States District Court under 28 U.S.C.A. §§ 1332 and 1391.

Minnesota Mining and Manufacturing Company (Mining Company) entered into written contract with the Wm. P. Neil Company (Neil) whereby Neil was to construct a roofing granules plant on Mining Company property in Riverside County, California. As part of its cost-plus contract, Neil was required to prepare the site for an electric power substation on the property. The substation was to be built by the California Electric Power Company (Electric Company) under a separate agreement with Mining Company. An easement in gross was granted by Mining Company to Electric Company to enter the premises and construct the substation.

The site of the power substation was on a hill which Neil had leveled and on which had been constructed a retaining wall. Neil was filling in behind this wall with decomposed granite in order to bring the ground level up to the wall level. In this work, Neil used two dump trucks belonging to Mining Company. The trucks were backed parallel to the retaining wall where the backfilling was going on. Neil's flagman would signal to the truck driver the point at which to dump the load onto the fill.

When Neil had nearly completed the backfilling operations, Electric Company personnel entered the leveled site below the wall to begin laying concrete foundations for the substation. On November 18, 1947, a large rock dumped from one of the trucks rolled over the retaining wall and injured Carter, an employee of Electric Company, who was working below. Carter brought an action against the Mining Company, Neil and others in the state court of California on November 16, 1948.

As required by agreement with Mining Company, Neil had taken out two policies of insurance, each in the amount of $50,000. The policy with Pacific was for "public liability" and the policy with Hartford was for "automobile public liability."¹ While the Carter action was still pending in the state court, Hartford, on March 18, 1950, brought the action for declaratory relief against Pacific to determine their respective liabilities in regard to the policies covering Neil.² Thereafter, in January 1951, the Carter action was settled by Hartford and Pacific, each paying one-half of $22,320 under an agreement preserving the rights of each in the declaratory relief action.

At the trial, Pacific claimed the entire loss should fall to Hartford, urging two principal grounds:

(1) The Pacific policy does not apply to the Carter accident because of an exclusion clause relating to automobiles on property not owned, rented or controlled by the insured, Neil;

(2) Even if the Pacific policy provides "coverage" to Neil, there is no liability as against Hartford, whose insurance is primary while Pacific's is only secondary.

The trial court rejected each of these contentions, holding that both insurers were equally liable on their policies and were coinsurers of Neil relating to the Carter accident.

Hartford does not dispute its liability under its policy, which offered coverage broad enough to include the Carter accident.³ Its position is that the Pacific policy also provided "coverage" to the risk involved, making each an equal insurer of Neil with respect to Carter's claim.

An exclusion of the Pacific policy provided that "This policy does not apply: * * * to * * * (1) automobiles while away from premises owned, rented or controlled by the Insured * * *." Neil, the insured, did not own or rent the area, and the question narrows to its "control" of the premises. On this issue the trial court found that Neil, as general contractor for the entire project, had "general control of the premises" owned by Mining Company, so that the exclusion in the Pacific policy did not come into effect.

The original agreement between Mining Company and Neil indicates that Neil was to be responsible for the management and supervision of the entire project, subject only to certain rights reserved to Mining Company as to selection, inspection and performance of the work. Neil assumed full responsibility for performance of the work in all respects; for checking all material and labor entering the work; for the protection of the work; for providing danger signals and warnings; for the safety of equipment used; for the correctness of all measurements; and for keeping the work, streets, alleys and ground free from rubbish. Under these provisions, Neil maintained guards to keep unauthorized persons out of the construction area, and the evidence shows that Mining Company's resident engineer represented his company primarily to inspect the work done by Neil, not to supervise.

The word "control" has no strict or technical definition which necessarily excludes all others. Black's Law Dictionary (4th Ed.), p. 399, defines "control" as "Power or authority to manage, direct, superintend, restrict, regulate, direct, govern, administer, or oversee." It is said in Rose v. Union Gas & Oil Co., 6 Cir., 1924, 297 F. 16, 18, "The word `control' does not import an absolute or even qualified ownership. On the contrary it is synonymous with superintendence, management, or authority to direct, restrict or regulate." Accord, L. L. Jarrell Construction Co. v. Columbia Casualty Co., D.C.S.D.Ala.1955, 130 F.Supp. 436; J. G. Speirs & Co. v. Underwriters at Lloyd's, 1948, 84 Cal.App.2d 603, 191 P. 2d 124. These definitions lead us to accept the conclusion reached by the trial court, that Neil had such control of the premises that the exclusion in Pacific's policy did not come into effect.

Pacific also contends that the easement granted to Electric Company was separate and independent from Mining Company's agreement with Neil; that Neil had no control over Electric Company's operations, and that the easement acted to give control of the substation site to Electric Company rather than Neil. The trial court found that the easement, which was recorded, allowed Electric Company to construct, maintain, operate, inspect, repair, replace and remove electric lines on the premises, but was not such a right as would destroy the control of the premises by Neil; nor was it ever exercised or intended to be exercised on the portion of the premises where the backfilling operation was in progress.

The granting of the easement to Electric Company did not divest Mining Company of the incidents of ownership over the premises, and Mining Company could make any reasonable use of the land so long as it was not clearly inconsistent with the easement. City of Pasadena v. California-Michigan Land & Water Co., 1941, 17 Cal.2d 576, 110 P.2d 983, 133 A.L.R. 1186; Langazo v. San Joaquin Light & Power Corp., 1939, 32 Cal. App.2d 678, 90 P.2d 825; Dierssen v. McCormack, 1938, 28 Cal.App.2d 164, 82 P. 2d 212. The transfer of control over the premises to Neil is consistent with the granting of the easement to Electric Company. While it may be true that Electric Company was acting independently of Neil in beginning its work, until such time as Neil had completed filling in behind the retaining wall it still was responsible for the management and control of the site. The easement did not lessen that control.

In addition, the area where Neil's crew was working, behind the retaining wall, was exclusively within Neil's control, and the accident occurred because of the dumping operations there. The authorities cited by Pacific on this point do not alter the trial court's finding, which we accept. The conclusion that Neil controlled the premises means that both policies covered Neil's liability for the Carter accident.

It is contended by Pacific that the Hartford policy afforded primary insurance while the Pacific policy gave only secondary insurance, making Hartford primarily liable for payment up to the amount of its policy limits.⁴

Under the terms of its policy, Pacific agreed to pay all sums Neil, a corporation, might be obligated to pay by reason of liability imposed by law on Neil arising out of claims for personal injury and property damage. Hartford's policy insured Neil and "any person while using an owned automobile or a hired automobile * * *." There is no question that Neil's corporate liability was covered by both policies and that it had double insurance.⁵ Pacific urges, however, that Hartford's policy, in addition to insuring Neil, also insured the truck driver and the flagman, who were two of the five employees found to be guilty of negligence in connection with the Carter accident.⁶

Pacific's theory is that where two insurers cover a given risk, but one policy provides extended coverage so as to insure the ultimately liable individuals, while the other covers only the named insured, whose liability is vicarious, and the named insured has a right of recovery over against the persons primarily or ultimately liable, then the insurer of the named insured is subrogated to the rights of the named insured and has a right of recovery against those ultimately liable and against the insurer providing extended coverage.

Explained in terms of the present controversy, Pacific argues that while both policies cover...