Sparkman v. Highway Insurance Company, Civ. A. No. 11436.

• Decision Date: 28 March 1967
• Docket Number: Civ. A. No. 11436.
• Citation: 266 F. Supp. 197
• Parties: A. C. SPARKMAN v. HIGHWAY INSURANCE COMPANY and Robert E. Hughes.
• Court: U.S. District Court — Western District of Louisiana

266 F. Supp. 197

A. C. SPARKMAN v. HIGHWAY INSURANCE COMPANY and Robert E. Hughes.

Civ. A. No. 11436.

United States District Court W. D. Louisiana, Shreveport Division.

March 28, 1967.

COPYRIGHT MATERIAL OMITTED

Whitfield Jack, Henry A. Politz, Booth, Lockard, Jack, Pleasant & LeSage, Shreveport, La., Howard Smith and Coy Johnson, Sulphur Springs, Tex., for plaintiff.

Arthur R. Carmody, Jr., Wilkinson, Lewis, Woods & Carmody, Shreveport, La., James E. Clark, Cook, Clark, Egan, Yancey & King, Shreveport, La., for defendants.

OPINION ON THE MERITS

BEN C. DAWKINS, Jr., Chief Judge.

By this action plaintiff seeks recovery upon a judgment for $37,500.00 entered against defendant Robert E. Hughes in the United States District Court for the Eastern District of Texas. A citizen of Texas, plaintiff sues Hughes, a Louisiana citizen, and his general liability insurer, Highway Insurance Company, an Illinois corporation. Our jurisdiction rests upon 28 U.S.C. § 1332, the requisite diverse citizenship and jurisdictional amount. A cross-claim, of which we have ancillary jurisdiction, has been filed against Highway Insurance by Hughes for contractual indemnity and his attorney's fees and costs.

Hughes is engaged generally in the business of oil well deparaffining and electrical construction under the name of Hughes Electric and Oil Field Steam Cleaning Service. Highway Insurance issued to Hughes a Contractor's Comprehensive General Liability Policy (hereafter CGL). The question to be resolved is whether this CGL policy provides coverage for the accident in which plaintiff was injured.

The facts may be stated briefly. The nature of Hughes' business obviously created a need for a hoisting device which could be easily transported to and from various job sites. To fulfill this need, Hughes purchased a 1947 Chevrolet one and one-half ton truck equipped with a permanently mounted A-frame, or gin-pole and winch. Rather than being independently powered, the winch was operated through use of the truck's motor and transmission. Because of this alternate sharing of power from the engine, it was impossible concurrently to operate both the winch and the truck, i. e., if the truck was being moved, the winch could not operate, and if the winch was being operated, the truck could not be moved.

August 26, 1963, plaintiff was employed by Longwood Construction Company, which was generally engaged in oil field construction and service work. At a well site in Texas on that day, plaintiff was engaged in changing out a pump, an operation which required pulling of the rods that operated the pump at the bottom of the well. While attempting to complete the operation, a scoping cable was broken. To replace the broken cable, it was necessary to untelescope the pipe, and, not having a hoisting device to do so, plaintiff telephoned Hughes for assistance.

Hughes dispatched the 1947 Chevrolet truck and a driver, Reynolds, to the well site, approximately three miles from his office in Waskom, Texas. Upon arrival, Reynolds backed the truck up to the well, set the brakes and disengaged the transmission. He then engaged the winch and remained in the cab to operate it by manipulation of the clutch, accelerator and winch gear. Plaintiff stood behind the truck in a position from which he could direct Reynolds in handling the controls.

The winch cable was attached to the pipe, the pipe was untelescoped and lowered to the ground where repairs to the scoping cable were completed. Then the pipe was raised by the winch to be retelescoped. However, when the pipe was about to be retelescoped, it suddenly fell and struck plaintiff causing his injuries. During this operation the truck did not, and could not, move.

Plaintiff contends that the accident is covered by the CGL policy issued by Highway Insurance; Hughes joins in that contention and also urges that if there was a coverage defense available, Highway Insurance has waived that defense by its conduct during the litigation in the Texas court. Highway Insurance, on the other hand, emphatically denies such a waiver and contends that the accident is not covered by the policy because of an exclusionary clause excluding risks arising from use of "automobiles" away from the premises of the insured.

The provisions of the insurance contract pertinent to resolution of the present conflict are as follows:

"This policy does not apply: * *

(c) * * * to the ownership, maintenance, operation, use, loading or unloading of * * * (2) automobiles if the accident occurs away from such premises rented to, owned or controlled by the insured or the ways immediately adjoining * * *."

"(b) Automobile. The word `automobile' means a land motor vehicle, trailer or semitrailer, provided: * *

(2) the following described equipment shall be deemed an automobile while towed by or carried on an automobile as above defined solely for purposes of transportation while being operated solely for locomotion, but not otherwise: if of the non-crawler type, any power crane * * *"

Before reaching the question of the coverage defense, we necessarily must resolve the issue of waiver. As noted above, Hughes contends that by its conduct in the litigation in Texas, Highway Insurance has waived any coverage defense available. He alleges the following facts to support his claim that Highway Insurance has waived this defense.

Immediately after the accident of August 26, 1963, Hughes notified his insurance agent, Stanley Willer. When plaintiff filed suit against Hughes approximately eight months later, Hughes still had not been contacted by representatives of Highway Insurance. He forwarded the suit papers to Willer, but they were returned to him with a letter from Herbert Boyland, attorney for Highway Insurance, advising that the company was denying coverage and refusing to defend the suit.

Thus Hughes was compelled to obtain counsel to file an answer to the suit, which was then pending in the Texas state court. Subsequently, Boyland, on behalf of Highway Insurance, notified Hughes that the company had decided to defend the suit after all. Hughes then discharged his own counsel.

After the state court suit was dismissed and the action was re-filed in the Texas federal district court, Hughes received a letter from Highway Insurance informing him that the attorney for the plaintiff was willing to settle for $35,000. In the letter, it was suggested that Hughes "might want to consider making some sort of offer in his own behalf" since the insurance company contended the loss was not covered under the policy.

Hughes testified that in the court-room prior to selection of the jury, Boyland asked if he would be willing to contribute $2,000 or $3,000 toward a final settlement. Hughes replied that in the first place he did not have that sum of money and further that he felt he was under no responsibility to contribute toward a settlement. Of course, he was under the impression that if he had agreed to contribute the suggested amount, the insurance company would have paid the balance.

The record reveals that soon thereafter the trial judge granted a recess to allow Boyland to contact Highway Insurance in order to secure authority permitting the entry of a consent judgment fixing liability and quantum. Having acquired such authority by telephonic consultation in Hughes' presence, Boyland returned to the courtroom and allowed judgment to be entered against Hughes individually for $37,500.00.

From these alleged facts alone, it might be possible to infer that the insurance company waived any coverage defense that may have been available. However, the record of proceedings in the federal district court conclusively shows that Hughes was at all times fully apprised of the fact that Highway Insurance steadfastly maintained that no coverage was afforded under the policy. For example, just prior to settlement the following discussion was recorded:

BY THE COURT: "The Surplus Underwriters, Incorporated general agent for Highway Insurance has heretofore taken the position, and at this time takes the position, that the injury and accident in question is not covered under any policy of insurance issued by them to the defendant, Robert E. Hughes, in his individual capacity or in any other capacity. It is also my understanding that Mr. Hughes is present in court, he has conferred with Mr. Doyle Curry, an attorney of Marshall, Texas, who has been looking into the matter.

* * * * * *

Mr. Boyland: "* * * Both parties, both the insurance company and Mr. Hughes, agree that in entering into this settlement neither one is giving up any right to make any claim or contention under the policy and that we are simply stipulating that the amount of damage that the plaintiff is entitled to recover by reason of the accident is $37,500.00. Is that correct Mr. Hughes?

Mr. Hughes: "Yes."

Under these circumstances, we conclude that Highway Insurance did not waive any possible coverage defense that might exist.

Proceeding now to the issue of coverage itself, plaintiff produced as witnesses three highly qualified insurance experts. The first, H. P. Walker, is the Executive Officer of the Casualty and Surety Division of the Louisiana Insurance Rating Commission. The other two, Daniel A. Stark and Ernest A. Merklein, are Louisiana insurance agents with considerable experience in the insurance industry.

The views of these three experts were essentially in accord and may be summarized as follows: The CGL policy generally covers losses arising out of operations and conduct of a business as distinguished from ownership, maintenance or use of an automobile. The same definition of "automobile" is used in both CGL and comprehensive automobile policies. The definition is for purposes of exclusion in the former and inclusion in the latter. As the two policies relate to automobiles, they are mutually exclusive.

When asked whether any uncertainty or ambiguity existed in the definition of "automobile"...