Stout v. Grain Dealers Mutual Insurance Company
| Decision Date | 14 August 1962 |
| Docket Number | No. 8604.,8604. |
| Citation | 307 F.2d 521 |
| Parties | Garland P. STOUT, Appellant, v. GRAIN DEALERS MUTUAL INSURANCE COMPANY, Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
William D. Caffrey and Perry C. Henson, Greensboro, N. C. (Jordan, Wright, Henson & Nichols, Greensboro, N. C., on the brief), for appellee.
Before SOBELOFF, Chief Judge, BELL, Circuit Judge, and LARKINS, District Judge.
This is a controversy between an insurance carrier and its insured over the former's contractual obligations to defend a tort action pending against the latter in a North Carolina State Court, and to pay any adverse judgment that may be rendered in that proceeding.
The plaintiff-insured Stout instituted this action under North Carolina General Statutes section 1-26 seeking a declaratory judgment holding defendant insurance company liable under a comprehensive dwelling policy issued to the plaintiff by defendant for the defense of the named insured and payment of any recovery secured against insured in a wrongful death action now pending in the State Court. Defendant removed the action to the United States District Court.
The facts underlying the wrongful death suit are thus: The plaintiff Stout is a resident of Greensboro in Guilford County, North Carolina. Prior to June 2, 1958 Stout and his family had been troubled by a "peeping Tom" looking in the bedroom window of a teen-aged daughter. Although Stout had alerted police several times, the prowler always disappeared by the time police arrived on the scene. Stout then set up his own device to warn of the presence of anyone outside his daughter's bedroom window. The device consisted of strings extending from a box inside the house to several points outside the house in the yard and onto an adjacent lot.
On June 2, 1958, at approximately 10:30 P.M. the warning device indicated the presence of someone outside the daughter's window. Stout took his loaded .22 caliber rifle and a flashlight with him as he went outside to investigate. He saw a man at his daughter's window and directed his flashlight beam upon him. The man started to run toward Stout and then changed his course and ran away from him. Stout called out to him to stop. When the man failed to stop, Stout fired a burst from the .22 caliber rifle in the direction of the man and continued firing until the gun was empty, a total of 15 or 16 shots. Two bullets struck the fleeing prowler in the back. The prowler ran a short distance further, collapsed and died before medical aid could reach him.
The deceased was identified as James Athanasiou, a Greek immigrant unable to speak or understand English.
Stout was indicted for murder. At the trial he was permitted to enter a plea of guilty to the offense of manslaughter and received a fine and suspended prison sentence.
Subsequently the administratrix of Athanasiou instituted suit against Stout for wrongful death in the State Court. Stout called upon the defendant Grain Dealers Mutual Insurance Co. to defend the suit under the provisions of the comprehensive dwelling insurance policy wherein plaintiff Stout was the insured and defendant the insurer. Defendant refused to defend the suit on the grounds that the death was intentionally inflicted by the insured and that the policy did not afford coverage for such an occurrence.
The parties agree that they are properly in court and that a declaratory judgment should have been rendered, but they disagree as to the proper scope of that judgment. Stout maintains that the only issues he raised were, first, whether he had complied with the conditions precedent (notice of the occurrence as soon as practicable), and second, whether the company had the obligation to defend the tort action. The insurer contends that the issue of coverage was raised specifically in its answer to the complaint of the insured and that the court did not exceed proper bounds in deciding it. Stout, however, argues that the issue of whether the killing was intentional and hence not covered by the policy was not raised by him, and that in any event that issue should be left to be determined in the tort action.
It is commonly said that the granting of declaratory relief is a matter resting in the judicial discretion of the district court. See Aetna Casualty & Surety Co. v. Quarles, 92 F.2d 321, 324 (4th Cir., 1937). But it would be difficult to envision a situation calling more clearly for the exercise of this discretion in favor of deciding the issue of coverage of an insurance policy than the instant case. The facts bring this case outside the general rule that a federal court will not entertain a declaratory judgment action when the same issue as that sought to be litigated is then pending in some other court of competent jurisdiction. See Indemnity Ins. Co. of North America v. Schriefer, 142 F.2d 851 (4th Cir., 1944); Maryland Casualty Co. v. Boyle Construction Co., 123 F.2d 558 (4th Cir. 1941). The reason is not difficult to understand. First, since there exists a genuine issue of whether the injury was intentionally or unintentionally inflicted, then until this issue is decided between the insured and the insurer, the company should not be required to defend the state tort action. Indeed it could not do so with propriety or satisfaction or fairness either to itself or the assured. The obvious conflict of interest pointed out by the District Court makes it impossible for the insurance company conscientiously to fulfill the role of defender.1
Second, if the company is not required to defend the tort action, it would not be bound by the determination of the "intentional-unintentional" question in the trial of the action in which it cannot participate. As Judge Soper explained in Farm Bureau Mut. Automobile Ins. Co. v. Hammer, 177 F.2d 793, 799-800 (4th Cir. 1949): "To hold otherwise would be to estop the Insurance Company by the acts of parties in a transaction in which it has no concern and over which it has no control, and to deprive it of its day in court to show that the transaction is foreign to the contract of insurance." In such circumstances the parties in the instant action would be free to litigate the issue of coverage irrespective of the result of the state action by the administratrix. The only just and expedient solution to a dilemma in which parties to a contract of insurance are caught when a conflict of interest arises between them is to have the issue of coverage decided in an independent suit, not...
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