Transport Insurance Co. v. Manufacturers Cas. Ins. Co.

• Decision Date: 14 February 1964
• Docket Number: No. J 62 C 10.,J 62 C 10.
• Citation: 226 F. Supp. 251
• Parties: TRANSPORT INSURANCE COMPANY, Plaintiff, v. MANUFACTURERS CASUALTY INSURANCE COMPANY, Pacific National Fire Insurance Company, and American Surety Company, Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

226 F. Supp. 251

TRANSPORT INSURANCE COMPANY, Plaintiff, v. MANUFACTURERS CASUALTY INSURANCE COMPANY, Pacific National Fire Insurance Company, and American Surety Company, Defendants.

No. J 62 C 10.

United States District Court E. D. Arkansas, Jonesboro Division.

February 14, 1964.

COPYRIGHT MATERIAL OMITTED

Reid & Burge, Gardner & Steinsiek, Blytheville, Ark., for plaintiff.

Kirsch, Cathey & Brown, Paragould, Ark., for defendants.

YOUNG, District Judge.

Plaintiff instituted this diversity action against defendants to recover a sum which plaintiff alleges is due from defendants under a policy of liability insurance issued by Manufacturers Casualty Insurance Company to Tommy Russell. Defendant Pacific National Insurance Company (formerly Pacific National Fire Insurance Co.) has succeeded to the policy liabilities of Manufacturers. Plaintiff is the liability insurance carrier for Superior Forwarding Company (hereinafter referred to as Superior).

On July 19, 1957, Paul Sikes was injured while unloading a truck operated by Fred Russell, owned by Tommy Russell and leased by Tommy Russell to Superior. Suit was instituted by Sikes against Superior and Fred Russell in state court, where a judgment was entered in favor of Sikes against Superior and Fred Russell, and, on appeal, was affirmed by the Arkansas Supreme Court in the case of Superior Forwarding Co. v. Sikes, 233 Ark. 932, 349 S.W.2d 818 (1961). Transport Insurance Co., plaintiff in the case at bar, conducted the defense in the state court action and satisfied the judgment rendered against Superior and Fred Russell.

Plaintiff's theory of the action which it now brings is based on an implied right of indemnity against defendants, that is, plaintiff contends that since Superior was held vicariously liable in the state court action for the tortious conduct of Fred Russell, Superior is entitled to recover by way of indemnity as against Fred Russell, and therefore plaintiff, as subrogee of Superior, is entitled to the same right of recovery against the insurer of Fred Russell. Prickett v. Hawkeye-Security Ins. Co., 282 F.2d 294, 83 A.L.R.2d 1224 (10th Cir. 1960). Pacific Employers Ins. Co. v. Hartford, 228 F.2d 365 (9th Cir. 1955). Defendants strongly resist any right of recovery by plaintiff and contend that the provisions of the respective policies bar any recovery by plaintiff. Defendants further argue that the terms of the lease contract between Superior and Tommy Russell preclude the relief sought.

It is settled law in Arkansas that a principal who has been held vicariously liable to a third person for the tortious conduct of its agent has a cause of action against the agent for the damages occasioned by such conduct. It follows that the principal's insurer, as subrogee of the principal, is entitled to indemnity against the agent or its insurer. Cf. Home Ins. Co. v. Lack, 196 Ark. 888, 892, 120 S.W.2d 355, 357 (1938); St. Louis, Ark., & Tex. R. R. v. Fire Ass'n, 55 Ark. 163, 174, 18 S.W. 43, 46 (1891). See also Davis, Rights and Liabilities in the Insurance Relationship — A Partial Survey, 5 Ark.L.Rev. 24, 40 and 41 (1950) (citing cases). 27 Am. Jur. Indemnity §§ 18 and 19 (1940). Therefore, plaintiff is entitled to bring the instant action.

This case was tried to the court and the issues which the parties have raised are as follows: (1) the effect to be given the state court action and the factual determination made therein insofar as relevant to the case at bar; (2) the status of Fred Russell at the time of the Sikes injury; (3) the effect of the liability insurance policy issued to Tommy Russell; (4) the effect of the liability insurance policy issued to Superior; and (5) the effect to be given the lease contract executed by Tommy Russell and Superior. In this opinion, the Court will deal with these issues in the order mentioned.

I

Plaintiff contends that the recital of facts in the opinion of the Arkansas Supreme Court in the case of Superior Forwarding Co. v. Sikes, supra, is binding in the case at bar. The Court so ruled at the trial of the instant case, and defendants concede in their brief the correctness of this ruling if "* * * the recital of facts * * * are all inclusive with respect to the factual situation involved * * *." Defendants argue that the state court action established that Tommy Russell was not liable as a principal for Fred Russell. Defendants have further raised the question of whether or not the Sikes injury occurred through the operation of the truck leased to Superior.

The Court was of the opinion at the trial of the case at bar, and is now, that it was not established in the state court action whether Tommy Russell was liable as a principal for Fred Russell at the time of the Sikes injury; or, stated conversely, whether at that time Fred Russell was acting also as an employee for Tommy Russell within the scope of his employment. Hence, plaintiff was permitted, over defendants' objection, to offer testimony to establish that at the time of the Sikes injury Fred Russell was acting not only within his employment with Superior but also as an employee for Tommy Russell.

Defendants urge that the state court action established that Tommy Russell was not liable as a principal for Fred Russell since "* * * that liability was asserted by Sikes in the state court, challenged in behalf of Tommy Russell by demurrer which was sustained and, ultimately, an order was made which discharged Tommy Russell from the Sikes litigation."

In Superior Forwarding Co. v. Sikes, 233 Ark. at 938, 349 S.W.2d at 821, Judge Robinson observed as follows with regard to the demurrer filed by Tommy Russell and sustained in the lower court:

"* * * the court merely sustained the demurrer. There was no final order dismissing the complaint as to Tommy Russell, but appellee did file an amended and substituted complaint in which Tommy Russell was not made a party defendant. In the circumstances the original complaint ceased to be a part of the record." (Citations omitted.)

Accordingly, the Arkansas Supreme Court declined to pass upon the merits of this question.

In the state court action, all allegations of negligence in the complaint filed by Sikes against both Superior and Fred Russell were alleged acts of omission or commission on the part of Fred Russell or Tommy Russell. From a careful reading of the Arkansas Supreme Court opinion, the conclusion is compelling that Superior's liability was vicarious, with Fred Russell being the active tortfeasor.

Defendants' contention that the Sikes injury did not occur through the operation of the truck leased to Superior appears to be without merit in view of the fact that defendants admit in their brief that "* * * if the description of facts in the Sikes opinion is conclusive, the present accident is shown to have arisen in connection with truck operations * * *." Defendants have attempted to distinguish the cases relied on by plaintiff in support of its position that the Sikes injury did occur through the operation of the truck. E. g., see Bond Stores, Inc. v. Am. Fid. & Cas. Co., 133 N.Y.S. 2d 297 (N.Y.1954); Wagman v. Am. Fid. & Cas. Co., 304 N.Y. 490, 109 N.E. 2d 592 (1952); Owens v. Ocean Accident & Guarantee Corp., 194 Ark. 817, 109 S.W.2d 928 (1937). However, a discussion of these cases is unnecessary since the description of facts in the Sikes opinion conclusively determines that the Sikes injury occurred in connection with the operation of the truck. In the Sikes opinion, the Arkansas Supreme Court observed that the jury could have found "* * * that Russell was negligent in the manner of unloading the equipment and that as a result of such negligence Sikes was injured. * * * He (Hayden) testified that Fred Russell drove the truck forward, thereby removing the support from the end of the planks, and that the crate fell on Sikes * * *." Superior Forwarding Co. v. Sikes, 233 Ark. at 935, 349 S.W.2d at 820.

It is the view of this Court that the facts as determined in the state court action are conclusive and are binding on the parties in the instant case. Both Superior and Fred Russell were parties to the state court litigation. Plaintiff's rights are derivative from Superior and defendants' rights are measured by those of Fred Russell. It is clear that the state court action determined that the Sikes injury occurred through the operation of the truck, and that the negligent actor or primary responsible party for the accident and resulting injuries was Fred Russell, the truck driver, and that the liability of Superior, plaintiff's insured, was vicarious due to its relationship with Fred Russell.

II

At the time of the Sikes injury, the truck involved in the mishap was operated by Fred Russell who was acting within the scope of his employment with Tommy Russell as the driver of the leased vehicle which was then being used not only for the furtherance and benefit of Tommy Russell's business, but equally for the furtherance and benefit of Superior's trucking operations. From the findings of the state court, it is conclusive that Superior was a principal of Fred Russell, and it is the view of this Court that it is established by a preponderance of the evidence that at the time of the Sikes injury Fred Russell was acting as an employee of Tommy Russell within the scope of his employment.

Although Fred Russell was engaged in Superior's trucking operations, he was a regular employee of Tommy Russell. His wages were paid by Tommy Russell, he drove a truck owned by Tommy Russell, he was subject to the control of Tommy Russell, and at the time of the Sikes injury, he was operating the truck with the permission of Tommy Russell and in furtherance of the truck leasing business in which Tommy Russell was engaged.

It is elementary that a person may be the servant of two masters, not joint employers, at one time as to one act, if the service to one does not involve abandonment of the service to the other....