Riviera Beach Vol. F. Co., Inc. v. FIDELITY & C. CO. OF NY

• Decision Date: 10 January 1975
• Docket Number: Civ. A. No. N-74-360.
• Citation: 388 F. Supp. 1114
• Parties: The RIVIERA BEACH VOLUNTEER FIRE COMPANY, INC., a Maryland Corporation v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK, a New York Corporation.
• Court: U.S. District Court — District of Maryland

388 F. Supp. 1114

The RIVIERA BEACH VOLUNTEER FIRE COMPANY, INC., a Maryland Corporation v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK, a New York Corporation.

Civ. A. No. N-74-360.

United States District Court, D. Maryland.

January 10, 1975.

T. Joseph Touhey, Glen Burnie, Md., for plaintiff.

Wilbur D. Preston, Jr., and William B. Whiteford, Baltimore, Md., for defendant.

NORTHROP, Chief Judge.

This action for a declaratory judgment involves the construction of an insurance contract and, specifically, the scope of the defendant insurance company's duty to provide a legal defense under that contract. The plaintiff, The Riviera Beach Volunteer Fire Company, Inc. (hereinafter "Riviera Beach"), a corporation organized under the laws of the State of Maryland, initiated this action on March 7, 1974, in the Circuit Court for Anne Arundel County, Maryland, requesting that Court to determine the rights and liabilities of the parties under a contract of insurance between them, pursuant to the provisions of the Uniform Declaratory Judgments Act, Md.Ann.Code, Cts. & Jud.Proc. Art., §§ 3-401 to 3-415 (1974).¹ The defendant, The Fidelity and Casualty Company of New York (hereinafter "Fidelity"), a corporation organized under the laws of the State of New York with its principal place of business in that state, subsequently removed the case to this Court, pursuant to 28 U.S.C. § 1441.

Inasmuch as there is diversity of citizenship between the parties, and the amount in controversy exceeds the sum of $10,000, this case was properly removable, and this Court has jurisdiction under 28 U.S.C. §§ 1332(a), 2201, and 2202. The case is now before this Court for decision, on an agreed statement of facts, on the parties' cross-motions for summary judgment.

STIPULATED FACTS

Plaintiff, Riviera Beach, is actively engaged in the business of a volunteer fire company, with headquarters in Riviera Beach, Anne Arundel County, Maryland. On November 12, 1969, it entered into a contract of casualty insurance, policy number ABA 5572451, with the defendant through Stump, Harvey & Company, Inc., the defendant's authorized agent in Baltimore, Maryland. The plaintiff having paid the indicated annual premiums pursuant to the terms of the policy, the policy remained in full force and effect from the date of its issuance until July, 1973.

Pursuant to a covenant of that policy, the defendant contracted and agreed, inter alia, to defend any suit against the insured with respect to such insurance as was afforded by the policy for bodily injury liability and property damage liability. Thus, Part II of the policy provided in pertinent part as follows:

II Defense, Settlement, Supplementary Payments. With respect to such insurance as is afforded by this policy for bodily injury liability and for property damage liability, the company shall:

(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient; . . ..

On April 9, 1970, while responding to an emergency fire call, one of the plaintiff's fire engines, covered under the aforementioned policy, overturned while making a right hand turn at the intersection of Hog Neck and Fort Smallwood Roads in Anne Arundel County, Maryland. As a direct result of that accident, one passenger, Anne Arundel County firefighter John Balcer, was killed, and the driver, Charles W. Wareheim, Jr., and the other passengers, volunteer firefighters Joseph Sank, David McDevitt and Michael O'Connor, suffered serious bodily injuries.

At the time of the accident, Wareheim, the driver of the fire engine, was a full-time paid employee of the Anne Arundel County Fire Department, assigned in his regular duties to the Riviera Beach Volunteer Fire Company to serve as engineman and resident professional firefighter. Although Wareheim also served as a volunteer firefighter with Riviera Beach, it is acknowledged that at the time of the accident he was on duty and was being compensated for his employment activities by Anne Arundel County.

Subsequent to the accident, all of the injured firefighters and the Estate of John Balcer filed Workmen's Compensation claims with Anne Arundel County for injuries and/or death sustained during the course of their employment,² and in each case medical and/or compensation benefits have been paid, or are still being paid, to the claimants by Employers of Wassau, the County's compensation carrier.

In June, 1970, all of the volunteer firemen involved in the accident, Wareheim, and Dorothy Balcer, the surviving widow of John F. Balcer, instituted law actions in the Circuit Court for Anne Arundel County (Case Nos. C-3008/60/83 and C-4996) seeking damages respectively for personal injuries and/or wrongful death against Plotkin's, Inc. (hereinafter "Plotkin's"), a Maryland corporation, on the allegation of negligence that on April 6, 1970, prior to the fatal mishap, its agents, servants or employees negligently and carelessly installed new left rear tires on the ill-fated fire engine, resulting in a mechanical malfunction of the tires and of the fire engine and causing the injuries to the claimants and the death of John F. Balcer.

In October, 1971, pursuant to a Motion and Suggestion for Removal by counsel for Plotkin's, those cases were removed from the Circuit Court for Anne Arundel County to the Circuit Court for Howard County, and were consolidated there for trial.

On or about January 10, 1972, Plotkin's negotiated an out-of-court settlement of Wareheim's personal injury claim, and after the payment of settlement monies, secured from him a general release of all his claims for injuries arising out of the accident. That release was not a joint release, however, and almost contemporaneously with the negotiation of that settlement, Plotkin's filed third party claims against Wareheim in each of the pending actions,³ alleging that he was liable for the damages sustained by the various plaintiffs because of the negligent manner in which he had operated the fire engine at the time of the accident. Plotkin's did not file any third party claims against Riviera Beach.

Although the remaining plaintiffs in the consolidated cases pending in the Circuit Court for Howard County subsequently filed amended declarations in those actions, none of them amended their declarations to include Wareheim as a codefendant with Plotkin's.⁴ Thus, Wareheim's continuing presence in those cases was based solely upon the third party claims by Plotkin's, and was not due to any action filed against him by any of the original party plaintiffs.

In November, 1972, Fidelity initiated Case No. 6068 in the Circuit Court for Howard County, in the name of Riviera Beach "to its own use and to the use of The Fidelity and Casualty Company of New York," against Plotkin's to recover the sums which had been paid out under the policy for the repair of the damaged fire engine. That action was based upon a theory of negligence similar to that of the other previously pending law actions against Plotkin's, and it was consolidated with them for trial. Although that action was brought in the name of Riviera Beach, it was filed by Fidelity's attorneys pursuant to the provisions of the insurance policy, and without the knowledge or approval of any member of the Board of Directors of Riviera Beach.

As in the previous law actions, Plotkin's filed a general issue plea denying the asserted liability and a further third party claim against Wareheim, alleging that he was liable for the damages sustained by the plaintiff due to his negligent operation of the plaintiff's fire engine. Additionally, Plotkin's simultaneously filed a counterclaim against Riviera Beach alleging that Wareheim had been acting as its "agent, servant or employee" at the time of the accident and, therefore, that it was liable for the injuries and damages sustained by the plaintiffs in the previously pending personal injury/wrongful death actions.

Pursuant to its obligations under Part II of the insurance contract, Fidelity undertook to defend Riviera Beach against the allegations of the counterclaim, and its attorneys filed a plea thereto. At no time, however, did it offer or undertake to defend or provide counsel for Wareheim, who was named in the counterclaim as the agent of Riviera Beach.

On December 31, 1971, following the filing of the third party claims against Wareheim in the personal injury and/or wrongful death actions, Wareheim, by his attorney at that time, Robert J. Callanan, Esquire, mailed copies of all of the then pending third party claims to Fidelity with the request that it provide him with counsel and undertake his defense as an agent of Riviera Beach in accordance with the terms of its insurance contract. Wareheim also sought legal assistance and defense through his employer, the Anne Arundel County Fire Department, which denied any liability to provide legal assistance to him.

On January 6, 1972, Fidelity, through its agents, servants and employees, The Underwriters Adjusting Company, acknowledged and formally denied Wareheim's request for legal assistance and defense. The adjusting company maintained that although Wareheim would be considered a person operating the insured vehicle with the permission of the named insured, he was not an insured under the policy with respect to the subject claims because of the inclusion in the policy of the so-called "fellow employee exclusion," which provided in pertinent part that "the insurance with respect to any person or organization other than the named insured . . . does not apply: . . . (2) to any employee with respect to injury to . . . or death of another employee of the same employer injured in the course of such employment in an accident arising out of the maintenance or use of...