Thurston National Insurance Co. v. Zurich Insurance Co.

Citation296 F. Supp. 619
Decision Date10 January 1969
Docket NumberCiv. No. 67-510.
PartiesTHURSTON NATIONAL INSURANCE COMPANY, a corporation, Plaintiff, v. ZURICH INSURANCE COMPANY, a corporation, Defendant.
CourtUnited States District Courts. 10th Circuit. Western District of Oklahoma

B. J. Cooper, of Rinehart, Morrison & Cooper, Oklahoma City, Okl., for plaintiff.

Ben L. Burdick and Andrew M. Coats, of Crowe, Dunlevy, Thweatt, Swinford, Johnson & Burdick, Oklahoma City, Okl., for defendant.

MEMORANDUM OPINION

DAUGHERTY, District Judge.

This is an action under 28 U.S.C.A. § 2201 et seq., seeking a judgment declaring the rights of the parties. The source of the litigation is an explosion and fire which occurred at Sinclair Oil & Gas Co. Plant No. 13 near Seminole, Oklahoma, while Sinclair was loading liquified petroleum gas into a trailer tank owned by Merle Moss and operated, pursuant to agreement with Moss, by Russell Wooldridge. Wooldridge supplied his own tractor unit to pull the trailer tank. As a result of the fire and explosion, Wooldridge was injured and his tractor unit as well as the trailer tank were damaged. Sinclair was insured by Defendant Zurich and Moss was insured by Plaintiff Thurston. Wooldridge sued Sinclair, an employee of Sinclair, and Moss for his personal injuries and damages to his tractor, seeking a judgment in excess of $195,000. This suit was settled by Sinclair for the sum of $29,387.25; $28,000 for Wooldridge's personal injuries and $1,387.25 for damages to the tractor unit. In so doing, Sinclair expended $10,817.80 for attorney's fees and costs.

Prior to settlement of the Wooldridge suit, Sinclair made demand on Thurston to defend Wooldridge's suit and Thurston offered only to defend that part of the suit relating to the claims of negligence respecting the Moss trailer tank insured by it. Sinclair declined the Thurston offer and proceeded alone. On a similar demand by Sinclair, Zurich likewise declined to defend, contending that it was not required to do so because Thurston was obligated for this defense under the terms of its policy. After the Wooldridge suit was settled, Sinclair sued Thurston in the District Court of Oklahoma County, Oklahoma, and recovered a judgment for the following amounts:

                             Attorney's fees and costs of Sinclair in defending the
                               Wooldridge action                                         $10,817.80
                             Personal injuries of Wooldridge (to Thurston policy
                               limits)                                                    10,000.00
                             Property damage to Wooldridge tractor unit (within
                                policy limits)                                             1,387.25
                                                                                         __________
                                                       Total Judgment                    $22,205.05
                

The present suit seeks a judgment declaring the obligations of the parties with respect to this judgment.

Plaintiff claims that Defendant is either the primary insurer of Sinclair or, in the alternative, that Defendant and Plaintiff are co-insurers and should bear the amount of this judgment in proportion to the respective amounts of the policy limits of each. Plaintiff's policy limit is $10,000/$20,000/$10,000 and Defendant's policy limit is $100,000/$200,000/$100,000.

Defendant claims that it is not liable to the Plaintiff because its policy does not cover the Wooldridge accident, and even if it does cover the accident, the Plaintiff's policy limits must be exhausted first, and the costs of defending the Wooldridge action are wholly those of Plaintiff. For the purpose of its Motion for Summary Judgment only, Defendant assumes that its policy covered the accident, thus restricting the issues to be considered by the Court to (1) whether Plaintiff is entitled to indemnification from Defendant for the Sinclair costs of defending the Wooldridge action and (2) whether personal injury and property damage elements of the judgment obtained by Sinclair are to be prorated between the parties in accordance with their respective policy limits. The parties have stipulated by letters filed herein that there are no genuine issues of material facts herein except whether the accident is covered by the Zurich policy. This fact issue is not material to the disposition of the case.

Both insurance policies contain an identical clause relating to the insurer's obligation to defend suits against its insured.1 In the suit between Sinclair and Thurston, the District Court for Oklahoma County, Oklahoma, found that Sinclair was an insured within the terms of the Thurston policy.2 As a consequence, Thurston was held obligated to Sinclair for the defense of the Wooldridge action and for recoverable damages within the policy limits.

Plaintiff first contends that it is subrogated to the rights of Sinclair against Zurich for the costs of defense of the Wooldridge suit. The matter of subrogation is controlled by Thurston's contractual undertakings in this respect.3 Sinclair's costs in defending the Wooldridge suit were not contemplated by the subrogation clause and Thurston, therefore, cannot assert a right in subrogation to Sinclair's rights, if any, against Zurich for these costs. Outside the Thurston policy, Zurich cannot be required to contribute to such costs of defense.4 As there is no right of contribution and as Sinclair's rights, if any, against Zurich are excluded from the subrogation clause, it follows that Thurston may not recover any of Sinclair's costs of defense of the Wooldridge suit from Zurich.

As to the other branch of the suit, Plaintiff contends that since both the Zurich and Thurston policies have "excess insurance" clauses, they should be ignored and the personal injury and property damage elements of Sinclair's judgment should be borne in proportion by each insurer. The Zurich provision is a straight excess insurance clause.5 The Thurston clause is more complex. It provides for prorating losses in some cases and for excess insurance in other cases.6 The situations in which the excess insurance provision applies are those involving "temporary substitute automobiles" and "other automobiles." These are defined by the policy7 and are not here involved. Thus, as neither of the classes of vehicles mentioned in the final proviso of Thurston's other insurance clause were involved in the fire and explosion, the excess insurance portion of such clause does not apply. The portion of the other insurance clause which does apply is that relating to prorated liability.

Having concluded that Thurston's excess insurance clause does not apply to Wooldridge's damages included in Sinclair's judgment, it is clear that Plaintiff has no grounds on which to urge proration of the loss. Where one insurance policy provides only for prorated liability and the other for excess insurance, the latter policy will be in excess of the policy limits of the former and proration is not in order. Fireman's Fund Ins. Co. v. Underwriters Ins. Co., 389 F.2d 767 (10 Cir. 1968).

It follows that Defendant Zurich Insurance Company's Motion for Summary Judgment should be granted and Plaintiff Thurston National Insurance Company's Motion for Summary Judgment should be denied.

Counsel for Defendant Zurich Insurance Company are directed to prepare for submission to the Court within fifteen (15) days from the date hereof an appropriate judgment consistent with the opinions expressed herein.

On Motion to Alter or Amend Judgment

Plaintiff Thurston National Insurance Company (Thurston) has filed herein its Motion to Alter or Amend Judgment, and/or for New Trial. The Court, in its Memorandum Opinion of October 29, 1968, determined that with respect to Defendant Zurich Insurance Company (Zurich), Plaintiff Thurston was the primary insurer of Sinclair Oil & Gas Company (Sinclair), who is not here a party, and was responsible to Sinclair for the costs of defense of an action brought against Sinclair and certain damages arising therefrom. Plaintiff Thurston now seeks to avoid these determinations of the Court on two grounds: First, that the butane trailer was not being used in the business or occupation of Merle Moss, d/b/a Moss Gas Company (Moss), who was the named insured of Thurston, but was being used by Sinclair for loading purposes and thereby Thurston's policy became excess coverage to Zurich, and Second, that the Court did not apply the doctrine of equitable...

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