Simmons Refining Co. v. Royal-Globe Ins. Co., ROYAL-GLOBE
| Decision Date | 26 October 1976 |
| Docket Number | No. 76-1276,ROYAL-GLOBE,76-1276 |
| Citation | 543 F.2d 1195 |
| Parties | SIMMONS REFINING COMPANY, Third-Party Plaintiff-Appellant, v.INSURANCE COMPANY, Third-Party Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Sheldon Davidson, Chicago, Ill., for plaintiff-appellant.
Robert L. Kiesler, Chicago, Ill., for defendant-appellee.
Before HASTINGS, Senior Circuit Judge, and PELL and WOOD, Circuit Judges.
Simmons Refining Company, third-party plaintiff (Simmons), and its insurer, Royal-Globe Insurance Company, third-party defendant (Royal-Globe), filed cross-motions for summary judgment on the questions of duty to defend and duty to indemnify raised by the third-party action. Supporting and opposing memoranda were filed by both parties in the federal district court. 1 The trial court denied the motion of Simmons and granted the motion of Royal-Globe, holding that Royal-Globe was under no duty to defend or indemnify. Summary judgment for Royal-Globe was accordingly entered, from which Simmons now appeals.
The underlying cause of action was filed on October 23, 1974, by Carlin Gold Mining Company (Carlin), a Delaware corporation, against Simmons. In substance, it was alleged that Simmons had converted by purchase about 5,000 troy ounces of gold previously stolen from Carlin. Damages in the amount of $503,154.04 were sought.
It was alleged in Count I of the complaint that during a period from January 1971 to March 1974, certain named employees of Carlin conspired to steal large quantities of gold in various stages of refinement. It was further alleged that during this period the conspirators transmitted the stolen gold to one Paul Norboe. Norboe was a gold dealer, licensed by the Secretary of the United States Treasury, and he, in turn, sold the gold to Simmons. There was no allegation of scienter, merely that Simmons became liable to Carlin on the ground of conversion.
Count II of the complaint incorporated by reference the allegations of Count I. In addition, it was alleged that at the time Simmons bought the gold from Norboe, Simmons knew or had reason to know that the gold had been stolen and that Norboe had no right to sell or dispose of it. By way of answer to the complaint, Simmons admitted that it had from time to time received shipments of gold from Norboe, but denied that it had known the source of the gold. Simmons specifically denied that it had known or had reason to know that the gold was stolen property and that Norboe had no right to sell or dispose of it.
Shortly after the inception of Carlin's suit, Simmons notified Royal-Globe, its primary insurance carrier, of the lawsuit and requested Royal-Globe to assume Simmons' legal defense under the policies and admit liability coverage up to a maximum of $50,000, as provided in the policies.
On February 16th of 1971, 1972, 1973 and 1974, Royal-Globe had issued to Simmons substantially identical one-year comprehensive general liability policies. The policies stated in the Coverage, Part I, that Royal-Globe promised: (1) to defend any lawsuit against the insured seeking damages on account of property damage (as that term is defined in the policy) even if any of the allegations of the suit are groundless, false, or fraudulent, and (2) to pay on behalf of Simmons all sums which the insured shall become legally obligated to pay as damages because of property damage caused by an occurrence.
On August 1, 1975, pursuant to leave of court, Simmons filed the instant third-party complaint against Royal-Globe. A month later, Royal-Globe answered, denying liability under the subject insurance policies and asserting three affirmative defenses. These defenses were taken from the language of the policies:
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