State Farm Mutual Automobile Ins. Co. v. Skaggs, 5655.

• Decision Date: 13 December 1957
• Docket Number: No. 5655.,5655.
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY a corporation, Appellant, v. Carl T. SKAGGS and Marianne Heltcel, an infant, by and through Willie Anita Russell, her mother and next friend, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

251 F.2d 356 (1957)

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY a corporation, Appellant, v. Carl T. SKAGGS and Marianne Heltcel, an infant, by and through Willie Anita Russell, her mother and next friend, Appellees.

No. 5655.

United States Court of Appeals Tenth Circuit.

December 13, 1957.

Clayton B. Pierce, Oklahoma City, Okl. (Pierce, Mock & Duncan, Oklahoma City, Okl., of counsel, were with him on the brief), for appellant.

Howard K. Berry, Oklahoma City, Okl. (Jack Cecil Wheeler and William A. Hennessy, Oklahoma City, Okl., were with him on the brief), for appellee.

Before PHILLIPS, MURRAH and BREITENSTEIN, Circuit Judges.

PHILLIPS, Circuit Judge.

State Farm Mutual Automobile Insurance Company¹ issued its policy of automobile liability insurance to Leon H. Heltcel.² The portions of the policy here material read as follows:

"I. Coverage A — Bodily Injury Liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of the automobile.

* * * * * *

"III. Definition of Insured. With respect to the insurance for bodily injury liability * * * the unqualified word `insured\' includes the named insured and also includes any person while using the automobile * * * provided the actual use of the automobile is by the named insured or with his permission. The insurance with respect to any person * * * other than the named insured does not apply: * * *

"(e) Under Coverage A, to any obligation for which the insured or any company as his insurer may be held liable * * * to the insured or any member of the family of the insured residing in the same household as the insured; * * *."

The policy was in full force and effect on May 9, 1953. On that date an automobile, owned by Heltcel and covered by the policy, which was being driven with Heltcel's consent by Carl T. Skaggs, and in which Heltcel was a passenger, was involved in an accident which resulted in Heltcel's death.

Marianne Heltcel, a minor daughter of Heltcel's, who, at the time of his death, resided in Texas with her mother, the divorced wife of Heltcel, instituted a statutory wrongful death action in a state court of Oklahoma. Skaggs delivered the summons in the state court action to the Insurer and requested that it defend the action. In a letter to Skaggs, dated February 12, 1954, and written by Pierce, Mock & Duncan, attorneys for the Insurer, the Insurer declined and refused to defend the state court action and disclaimed any obligation to satisfy or discharge any judgment which might be recovered against Skaggs in such action. As a reason for the Insurer's denial of liability under the policy, the letter stated:

"You are advised that the policy of insurance issued by State Farm Mutual Automobile Insurance Company to Leon H. Heltcel, * * * contains an exclusion under subdivision `E\' of the Exclusions which provides that the policy does not apply as respects the injury to or death of the insured, and it is for this reason that State Farm Mutual Automobile Insurance Company disclaims any obligations under its policy issued to Leon H. Heltcel."

Skaggs employed Jack Cecil Wheeler, a member of the Bar of the State of Oklahoma, to defend the state court action. Thereafter, on May 5, 1954, Skaggs, acting through Wheeler, notified the Insurer that Marianne Heltcel had offered to settle her claim against Skaggs for $10,000, the limit of the Insurer's liability under the policy, and demanded that the Insurer "either settle this claim or defend him (Skaggs) in the action." The Insurer again refused to defend the action and refused to settle the claim of Marianne Heltcel.

The Insurer did not at any time assume any control over the state court action.

On August 17, 1954, Marianne Heltcel recovered a judgment against Skaggs in the state court action for $16,608. Thereafter, she instituted a garnishment proceeding against the Insurer, as garnishee, in the United States District Court for the Western District of Oklahoma. In the garnishment action the Insurer asserted the defense that under the terms and conditions of its policy, it was not bound to defend the action for the death of its named insured, nor to pay any judgment for such death, for the reason that such "hazard" was specifically excluded by the terms of the policy. The garnishment action resulted in a judgment in favor of the Insurer-garnishee. On appeal from that judgment this court reversed. See Heltcel v. Skaggs, 10 Cir., 234 F.2d 66. On remand the trial court entered judgment in favor of Marianne Heltcel against the Insurer for $10,000, plus interest of $1,150 and costs of $173.66, or a total of $11,323.66. That judgment was paid by the Insurer.

Thereafter, the instant action was commenced by Skaggs against the Insurer, seeking a judgment adjudging and declaring that it was the Insurer's legal duty to satisfy and discharge the balance of the judgment in favor of Marianne Heltcel in the state court action and reimburse Skaggs for the counsel fees incurred by him in that action. By leave of court Marianne Heltcel intervened in the instant action and sought recovery of the balance due on her judgment. In its answer in the instant action the Insurer alleged that it had paid to Marianne Heltcel the amount adjudged against it in the garnishment action, namely, $10,000, together with interest and the costs, and that its refusal to defend Skaggs in the state court action and its denial of liability under the policy were...