State Farm Mut. Auto. Ins. Co. v. Taylor

• Decision Date: 06 April 1970
• Docket Number: No. 45730,45730
• Citation: 233 So.2d 805
• Court: Mississippi Supreme Court
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Hugh M. TALOR, Sr. & Hugh M. Taylor, Jr.

Page 805

233 So.2d 805

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Hugh M. TALOR, Sr. & Hugh M. Taylor, Jr.

No. 45730.

Supreme Court of Mississippi.

April 6, 1970.

Wilroy, Wilroy & Hagen, Hernando, Lipscomb, Barksdale, Steen & Caraway, Jackson, for appellant.

H. Kirk Moore, Jr., Dick R. Thomas, Nat G. Trott, Senatobia, for appellees.

ETHRIDGE, Chief Justice.

In this case, involving an employee exclusion clause, the question is whether an automobile liability insurance policy, by its own terms, makes separable employment by a partnership from employment by one of the partners. The injured employee was hired by the partnership, not by the individual owner of the insured vehicle in which he was injured. We hold that the policy itself separates employment by the partnership, and that the employee does not fall within the ambit of the exclusion clause in the individual partner's liability policy.

Hugh M. Taylor, Sr. and Hugh M. Taylor, Jr., complainants-appellees, brought this action in the Chancery Court of Tate County against State Farm Mutual Automobile Insurance Company, defendant-appellant, seeking damages for State Farm's refusal to defend a personal injury action brought against Taylor, Sr. and Jr., in the circuit court for personal injuries received by an employee of the Taylor farming partnership. The chancery court rendered a decree against State Farm for $6500, which we affirm.

I.

Taylor, Sr. and Jr., father and son, operated their respective farm lands as a unit and a partnership. State Farm issued an automobile liability policy to Taylor, Jr., covering a 1960 pickup truck which was owned by him. On September 27, 1966, the accident in question occurred. For two weeks W. L. Young had been living with his wife on the Taylor partnership property and had been working for the partnership. Taylor, Sr., who had borrowed two pieces of plywood from Hale Lumber Company, requested Taylor, Jr., to return the plywood to that company on his trip in the truck to a farm where Young had been operating a cotton picker for the partnership. The purpose of the trip was to service the cotton picker and return it to the Taylor farm. The plywood was laid on the back of the truck, and Young sat on it in order to hold it down. While Taylor, Jr., was driving the insured vehicle about a mile north of the partnership farm, Young fell or was blown from the truck and suffered severe personal injuries.

On the day after the accident, Taylor, Jr., who had an eighth-grade education, gave a written statement to a clainm agent for State Farm, in which he described the accident, stating that 'W. L. Young works for me,' and he would have paid him $6.00 for that day's work. He said that on the day of the accident 'we was (sic) not picking any cotton. W. L. had not been with us but for about two weeks but we were planning to keep him all the time * * *'

In the latter part of 1966, State Farm sent its file on this matter to W. E. Wilroy, Jr., regularly employed counsel for State Farm. Wilroy went to the scene of the accident with an adjuster and studied the file sent him. He noticed the employee exclusion clause in the policy, and discussed it with State Farm. In February 1967, Wilroy wrote Taylor, Jr., that he had been retained by State Farm 'to protect their interest and yours in the claim against you by W. L. Young * * *' Wilroy requested Taylor, Jr.'s cooperation and stated that he would be in touch with him within the next week to take his statement. In question-and-answer form, Taylor, Jr., asserted that he and his father were in partnership together in the farm business, and that Young had been 'living with us about two weeks, as a day hand.' He frequently used the first person, plural pronoun 'we,' who furnished Young a house, paid him, and directed his work. However, asked whether he considered that on the day in question Young was 'employed by you,' Taylor, Jr., answered, 'Yes, sir.' Taylor, Jr., had no attorney representing his own interest when he was giving this transcribed statement. Nevertheless he frequently stated that he and his father were in a partnership business. The chancery court was justified in concluding, as it did, that Young worked for the Taylor partnership. No representative of State Farm interviewed Taylor, Sr.

Taylor, Sr. also had in force a liability insurance policy with Central Mutual Insurance Company. Although Central advised Taylor, Sr., that it did not think it had any coverage for the accident, it furnished him with a defense in Young's lawsuit.

On March 5, 1967, W. L. Young filed in the Circuit Court of Tate County a declaration against Taylor, Jr. and Sr., seeking $100,000 damages for his personal injuries received in the September 1966 accident. The declaration charged that plaintiff was employed 'by the defendants herein,' and that they were 'the owners and co-operators of a farm in Tate County * * * the defendants are owners and operators of farm trucks, a mechanical cotton picker * * *' etc. Plaintiff was employed by Taylor, Sr. and Jr., to operate farm machinery and tools 'belonging to said defendants on their farm.' The declaration averred that on the day in question plaintiff was making the trip for the purpose of 'returning to the defendants' farm a mechanical cotton picker,' which plaintiff had been using for 'the benefit of defendants'; that the accident happened as a result of negligently excessive speed, placing plaintiff in a perilous situation, and not furnishing him a safe place and conveyance in which to work. $The next regular term of the circuit court began on April 24, 1967. By letter dated April 21, 1967, and received by Taylor, Jr., on April 24, the day court began, he was advised by State Farm that its investigation revealed that Young was employed by Taylor, Jr., and was in the course of his employment, and that, because of the employee exclusion clause, its policy did not protect him from Young's claim and it would not furnish a defense of the lawsuit. On the same day, Taylor, Jr., very much perturbed, contacted Dick R. Thomas, an attorney, and employed Thomas to represent him in the suit for a fee of $2500. Thomas secured a continuance until the next regular term of court in October 1967, when there was a trial with a jury verdict and judgment of $5,000 against Taylor, Sr. and Jr., complainants herein, in favor of plaintiff Young. There was no appeal from that judgment and it became final.

In February 1968, Taylor, Sr. and Jr., filed the present suit in the Chancery Court of Tate County against State Farm. The bill of complaint outlined the above facts and sought recovery of the $5,000 judgment rendered in favor of Young against complainants, together with $2,500 for attorneys' fees incurred by Taylor, Jr., in defending the circuit court action. The bill charged that State Farm wrongfully refused to defendant the action. (Central was dismissed as a defendant, because it had settled for $1,000 the claim of Taylor, Sr.) The chancery court rendered a decree in favor of complainants-appellees in the amount of $6,500, consisting of $4,000 for the circuit court judgment and $2,500 for attorneys' fees incurred by Taylor, Jr.

II.

The State Farm policy contains a typical employee exclusion clause:

This insurance does not apply under:

(h) coverage A, (1) to bodily injury to any employee of the insured arising out of and in the course of (i) domestic employment by the insured, if benefits therefor are in whole or in part either payable or required to be provided under any workmen's compensation law, or (ii) other employment by the insured; * * *

The chancery court found that Young was an employee of the partnership; and that the policy was ambiguous as to whether an employee of a partnership was also the personal employee of a member of the partnership for the purpose of the exclusion clause. Referring to rules of interpretation, the court held that construing alternative interpretations of the policy favorably to the insured, the exclusion clause did not deprive Taylor, Jr., of coverage under the State Farm policy; and that State Farm had the duty to defend Young's suit against Taylor, Jr., and had erroneously refused to do so.

The right of the insurer to exclusive control over litigation against its insured is accompanied by a correlative requirement that the insurer defend the insured against all actions brought against him on the allegation of facts and circumstances covered by the policy, even though such suits may be groundless, false or fraudulent. 14 Couch on Insurance 2d § 51:32 (1965). The traditional test is that the obligation of a liability insurer is to be determined by the allegations of the complaint or declaration. Ibid., § 51:40; United States Fidelity & Guaranty Co. v. Yazoo Cooperage Co., 157 Miss. 27, 127 So. 579 (1930); Commercial Casualty Ins. Co. v. Tri-State Transit Co., 190 Miss. 560, 1 So.2d 221, 133 A.L.R. 1510 (1941). Moreover, a divergence may exist between the facts as alleged in the petition and the actual facts as they are known to or reasonably ascertainable by the insurer, in which latter case the insurer has a duty to defend, notwithstanding a policy exclusion as to employees. Mavar Shrimp & Oyster Co. v. United States Fidelity & Guaranty Co., 187 So.2d 871 (Miss.1966); 14 Couch on Insurance 2d § 51:47 (1965); see also 44 Am.Jur.2d Insurance §§ 1535-1543 (1969).

The State Farm policy contained a defense clause, in 'Insuring Agreement I-The Owned Automobile':

In consideration of the premium paid and in reliance upon the declarations made a part hereof, agrees with the named insured, subject to the provisions of the policy:

(1) To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of (A) bodily injury...