Rowe v. United States Fidelity and Guaranty Company

• Decision Date: 28 February 1967
• Docket Number: No. 10794-10796.,10794-10796.
• Citation: 375 F.2d 215
• Parties: John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Jerry Rowe, an infant, and Lloyd G. Rowe, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Jerry Rowe, an infant, and Lloyd G. Rowe, Appellees. Dallas Eugene HODGE, an infant, William E. Hodge, individually and t/a Powhatan Marina, and Harry H. Kanter and H. Lee Kanter, t/a Kanter & Kanter, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

375 F.2d 215 (1967)

John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Jerry Rowe, an infant, and Lloyd G. Rowe, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.

UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellant, v. John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Jerry Rowe, an infant, and Lloyd G. Rowe, Appellees.

Dallas Eugene HODGE, an infant, William E. Hodge, individually and t/a Powhatan Marina, and Harry H. Kanter and H. Lee Kanter, t/a Kanter & Kanter, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Appellee.

Nos. 10794-10796.

United States Court of Appeals Fourth Circuit.

Argued January 13, 1967.

Decided February 28, 1967.

Sidney H. Kelsey, Norfolk, Va. (Kelsey & Rabinowitz, Norfolk, Va., on brief), for John H. Rowe, Jr., and others.

Paul M. Lipkin, Norfolk, Va. (Goldblatt & Lipkin, Norfolk, Va., on brief), for Dallas Eugene Hodge and others.

Guilford D. Ware, Norfolk, Va. (Baird, Crenshaw & Ware, Norfolk, Va., on brief), for United States Fidelity & Guaranty Co.

Before HAYNSWORTH, Chief Judge, and BELL and WINTER, Circuit Judges.

WINTER, Circuit Judge:

In Rowe v. Brooks, 329 F.2d 35 (4 Cir. 1964), we affirmed judgments, aggregating $93,250.00, against Dallas E. Hodge, an infant, William E. Hodge, his father, Miles S. Brooks and Frank Carr, co-partners, trading as Williamsburg Sporting Goods and Hobby Shop, and Mr. and Mrs. Charles C. Rosson. The judgments were obtained for personal injuries to Jerry Rowe, an infant, to Lloyd G. Rowe, his father, and for the death of Larry M. Rowe, another son of Lloyd G. Rowe, as the result of a collision of two motorboats, one operated by the Hodge son, in which the Rowes were passengers, and the other operated by Mrs. Rosson, in the waters of Powhatan Creek, which empties into the James River near Williamsburg, Virginia. From the proof it was established that the motorboat operated by the Hodge son was owned by Brooks and Carr, who, by oral agreement with the Hodge father, who operated a marina, had given him custody of the boat for purpose of sale and agreed to pay him a commission for his services if he were successful in effecting a sale. The accident occurred while the Hodge son was demonstrating the boat to the Rowes, who were prospective purchasers. H. Lee Kanter, Esq. and Messrs. Kanter, Kanter & Sachs, attorneys-at-law, represented the Hodges at the original trial and in the appeal to this Court.

In Rowe v. Brooks, supra, we also reversed a judgment limiting the liability of Brooks and Carr to the stipulated value of the motorboat. Reversal proceeded from our determination that the Hodge son should have had a federal license to operate the boat, that he had no such license and, in fact could not have obtained one because he was under age, that the watercraft was rendered unseaworthy because it was being operated by one who was statutorily incompetent, and that Brooks and Carr were in privity with, or had knowledge of, the unseaworthiness.

United States Fidelity and Guaranty Company (U. S. F. & G.) had issued a policy of comprehensive general-automobile liability policy to Brooks and Carr (the "Brooks-Carr policy") which, by endorsement, was made applicable to watercraft under certain circumstances with maximum coverage of $50,000.00. U. S. F. & G. had also issued a comprehensive general liability policy to the Hodge father (the "Hodge policy"), with maximum coverage of $50,000.00. Both policies were in effect on July 3, 1960, the date of the collision between the two motorboats.

After we affirmed the judgments for damages, efforts at collection obviously ensued and additional litigation, from which the current appeals proceed, was instituted to determine the liability, if any, of U. S. F. & G. on either of its policies, and the duty, if any, of U. S. F. & G. to defend the Hodges under either of its policies. U. S. F. & G. had refused to defend the Hodges under either policy and they had engaged the services of H. Lee Kanter, Esq. and his colleagues. Messrs. Kanter & Kanter intervened in this litigation and asserted their claim for professional services.

The district judge held (United States Fidelity and Guaranty Company v. Rowe, 249 F.Supp. 993 (E.D.Va.1966)), that under the Brooks-Carr policy U. S. F. & G. was liable to the Rowes, but had no contractual obligation to defend the Hodges, and that under the Hodge policy U. S. F. & G. had no liability to the Rowes and no contractual obligation to defend the Hodges. The Hodges appeal from the determination that there was no obligation on U. S. F. & G. to defend them under either the Brooks-Carr or the Hodge policies. The Rowes appeal from the determination that U. S. F. & G. was not obligated to pay the judgments under the Hodge policy, and U. S. F. & G. appeals from the determination that it was liable to the Rowes under the Brooks-Carr policy. We must decide whether U. S. F. & G. was liable to the Rowes under the Brooks-Carr policy or, alternatively, whether it was estopped to deny such liability, whether U. S. F. & G. was liable to the Rowes under the Hodge policy or, alternatively, whether it was estopped to deny such liability, and whether the Hodges were entitled to be defended by U. S. F. & G. under either policy. We think the district judge correctly adjudged the rights of the parties, and we affirm.

Brooks-Carr Policy

A. — Coverage:

By the terms of the Brooks-Carr policy, U. S. F. & G. agreed, up to the limits of liability of the policy, "To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident." An exclusion in the policy stated that liability for bodily injury including death should not exist in regard "* * * to the ownership, maintenance, operation, use, loading or unloading of (1) watercraft if the accident occurs away from the premises owned by, rented to or controlled by the Named Insured * * *." This exclusion, however, was modified by an endorsement to the policy which provided that the exclusion "* * * referring to watercraft shall not apply to any accident due to the ownership, maintenance or use of any watercraft classified in the Declarations." The declarations referred to private outboard motorboats exceeding 10 h. p., a classification which included the motorboat operated by the Hodge son. This endorsement, in turn, contained other pertinent language because it stated, too, "It is understood and agreed that this policy excludesd coverage for boats while used to carry passengers for a charge or while rented to others." (emphasis supplied) When these provisions are considered together, insurance coverage under the policy extended to bodily injury or death to the Rowes unless they were "passengers for a charge."

It is not disputed that the Rowes paid no cash consideration or other present consideration of value for the demonstration ride afforded them in the motorboat. The Hodges, Brooks and Carr hoped that the Rowes would purchase the boat, in which event the proceeds of sale would be compensation to them but, of course, at least by reason of the accident, as well as destruction of the boat, no sale was ever consummated.

U. S. F. & G. contends that in Rowe v. Brooks, supra, we decided that the Rowes were passengers for compensation, and thus we have already decided that the Rowes were "passengers for a charge" so as to exclude them from coverage. U. S. F. & G. relies on the literal language of our opinion in Rowe v. Brooks, supra, as well as the automobile passenger cases cited therein, holding, under the guest statutes of many jurisdictions, that a passenger for a demonstration ride with the prospect of a future sale was not a guest, but was a passenger for a consideration. U. S. F. & G. also argues that because coverage for carrying "passengers for a charge" demands a higher premium, that term is to be construed strictly against coverage, unless it is shown that the premium was demanded and paid. Michaelson v. Simula, 264 Mich. 457, 250 N.W. 264 (1933); Orcutt v. Erie Indemnity Company, 114 Pa.Super. 493, 174 A. 625 (1934); Neilson v. American Mutual Liability Insurance Co. of Boston, 111 N.J.L. 345, 168 A. 436 (1933). Concededly, in this case, no such premium was paid and, therefore, so the argument runs, the general rule that ambiguities in the insurance policy are to be construed against the insurer is inapplicable.

The district judge carefully analyzed and discussed the automobile cases referred to in our opinion and cited to him in the insurance litigation and, while he did not find them conclusive, he was of the view that no court had ever held that a prospective purchaser of a boat or vehicle was to be regarded as a "passenger for a charge" within the meaning of an insurance policy. He was of the view, also, that the cases dealing with guest statutes are not controlling upon the status of a party who was a prospective purchaser of a boat or automobile in regard to the construction of an insurance policy. That the precise point in issue here has not been previously decided, we are in accord, and we are content to refer to the discussion of the authorities arising under guest statutes contained in the district judge's opinion. Id., 249 F.Supp., at 996-1000. To this collection of decisions, we would add only Houston Fire & Casualty Ins. Co. v. Ivens, 338 F.2d 452 (5 Cir. 1964). We are even more strongly in accord with the statement of the district judge that authorities under the guest statutes of various states are not controlling upon the status of an alleged guest in regard to the construction of an insurance policy, and we do not consider that what we decided in Rowe v. Brooks, supra, determines what must be decided in this case.

In Rowe v. Brooks, supra, we were concerned with the...