Travelers Indemnity Co. v. National Indemnity Co.

• Decision Date: 29 June 1961
• Docket Number: No. 16670.,16670.
• Citation: 292 F.2d 214
• Parties: TRAVELERS INDEMNITY COMPANY, a Corporation, Appellant, v. NATIONAL INDEMNITY COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

292 F.2d 214 (1961)

TRAVELERS INDEMNITY COMPANY, a Corporation, Appellant, v. NATIONAL INDEMNITY COMPANY et al., Appellees.

No. 16670.

United States Court of Appeals Eighth Circuit.

June 29, 1961.

COPYRIGHT MATERIAL OMITTED

Benjamin M. Kail, St. Paul, Minn., Thomas J. Spence, St. Paul, Minn., on the brief, for appellant.

Irvin E. Schermer, of Schermer & Gensler, Minneapolis, Minn., for appellee, National Indemnity Co.

Frank X. Cronan, Minneapolis, Minn., Harold J. Carroll, Minneapolis, Minn., on brief, for appellee, Casualty Underwriters, Inc.

William L. Devitt, of Allen & Courtney, St. Paul, Minn., for appellee, Melvin J. Ryan, etc.

Charles T. Hvass, Minneapolis, Minn., for appellees, Richie Scott Olson, Lead Supplies, Inc., and George V. Thomas. Joseph L. Bard, Minneapolis, Minn., on brief for Lead Supplies, Inc., Walter E. Riordan, Minneapolis, Minn., on brief for appellee, George V. Thomas.

Before JOHNSEN, Chief Judge, and WOODROUGH and MATTHES, Circuit Judges.

MATTHES, Circuit Judge.

This declaratory judgment action was instituted in the United States District Court by National Indemnity Company (National) against Lead Supplies, Inc. (Lead Supplies), Melvin J. Ryan, Richie Scott Olson, Casualty Underwriters, Inc. (Casualty), George V. Thomas and Travelers Indemnity Company (Travelers) for the purpose of securing a declaration of the rights and liabilities of the parties by reason of the issuance of certain insurance policies by National, Casualty and Travelers. Diversity of citizenship and proper amount involved establish jurisdiction.

The litigation was precipitated when defendant Thomas was injured on June 3, 1958, as the result of a collision between his automobile and a certain 1954 Auto Car tractor and a Fruehauf trailer which were owned by defendant Ryan and operated by defendant Olson, the latter being at the time an employee of defendant Lead Supplies.

Ryan was engaged in business as a trucker, also leasing tractors and trailers to others. On December 17, 1957, Ryan leased to Lead Supplies a Mack tractor and a Fruehauf trailer. Later an Auto Car tractor was substituted for the Mack tractor. The written lease was effective for a period of one year subject to cancellation privileges; Lead Supplies was to furnish and pay the driver of the tractor, Ryan was to maintain the tractor and trailer and receive 20 cents for each mile they were operated. There was a provision in the instrument reading: "Property damage, public liability and cargo insurance carried by Lead Supplies, Inc."

As of December 18, 1957, National issued its "Combination Automobile Policy" to Ryan, effective for one year, on a 1950 Mack tractor and a 1950 Fruehauf trailer which on its face provided coverage for bodily injury liability with limits of $100,000 for each person and $300,000 for each accident, and property damage liability with limits of $10,000 for each accident. However, a "contingent liability endorsement" was attached to this policy which National claims exempts it from liability for the injuries sustained by Thomas.

Under date of January 25, 1958, Casualty issued a "standard combined automobile policy" effective for one year to Lead Supplies covering six passenger automobiles. Attached to this policy and a part thereof was a "hired automobiles" endorsement which was a subject of controversy in the trial.

Under date of November 7, 1957, Travelers issued a "comprehensive liability policy" effective for one year to Ryan, providing coverage for a fleet of tractors and trailers, including the Mack and Auto Car tractors, to which further reference will be made.

After trial Judge Nordbye, to whom the case was tried, filed a memorandum opinion, not officially published. The court determined that because of the contingent liability endorsement, National was not required to respond for the injuries and damages sustained by Thomas; that Casualty's policy issued to Lead Supplies covered the tractor-trailer unit involved in the Thomas collision, and that Travelers was liable under the policy it had issued to Ryan. The court did not, however, undertake to adjudicate and determine the liabilities as between Casualty and Travelers. Subsequently the court was advised that Thomas had obtained a judgment making it necessary that a determination be made of the liabilities of Casualty and Travelers, i. e., whether they were liable on a pro rata basis or whether the policy issued by Casualty afforded only excess coverage or protection. This phase of the case received Judge Nordbye's careful consideration and he prepared and filed another memorandum opinion setting forth his reasons for concluding that Casualty's policy provided only excess insurance and coverage over the coverage afforded by the policy issued by Travelers.¹ Findings of fact and conclusions of law were subsequently filed and formal judgment was entered adjudicating that:

(1) None of the defendants was entitled to reformation of the policy issued by National to Ryan;

(2) National's policy did not cover the liability of Ryan, Lead Supplies or Olson to Thomas for the injuries and damages he sustained in the June 3, 1958 accident;

(3) The liability of Lead Supplies, Olson and Ryan to Thomas was covered by the policy issued by Travelers to Ryan;

(4) The liability of Ryan to Thomas for his injuries and damages was not covered by the policy issued by Casualty to Lead Supplies;

(5) The liability of Lead Supplies and Olson to Thomas was covered by Casualty's policy as excess insurance over the coverage provided them by the Travelers policy;

(6) As respects the liability of Lead Supplies, Olson and Ryan to Thomas, Travelers was directed to satisfy the judgment of Thomas to the extent of the limits of its policy without contribution by Casualty; after exhaustion of the limits of the coverage of the policy issued by Travelers, Casualty was obligated to make excess payment required to satisfy the remaining liability of Lead Supplies and Olson in connection with said accident and within the limits of the policy issued by Casualty.

On this appeal, taken only by Travelers, there are presented for our consideration and resolution three basic points which, in summary are: (1) National's policy should be reformed so as to afford coverage allegedly intended and for the purposes sought by the insured; (2) Casualty's policy with the "hired automobiles" endorsement attached, afforded coverage to the vehicles involved in the Thomas collision and Casualty should pay the whole or a pro rata share of the loss; (3) under the agreement, understanding and pattern of insurance dealings between Ryan and Travelers, it was not the intent of Ryan and Travelers to insure leased vehicles and Travelers' policy affords no coverage. These issues as well as numerous contentions of the parties in support and in opposition thereto are fully expanded in the many briefs that have been filed. There is unanimity among appellees on the issue of Travelers' liability, all of whom agree that the court's judgment in that respect should be affirmed.

National's Liability

It is clear that the exposure of National under the conventional automobile policy which it issued to Ryan was materially narrowed by the contingent liability endorsement attached thereto, which reads:

"It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability and Property Damage Liability applies subject to the following provisions:

"1. such insurance only applies to the named insured. In this instance, Ryan.

"2. such insurance does not apply during such time as the named insured is operating, maintaining or using the automobile for or on behalf of any person or organization.

"3. such insurance does not apply during such time as the named insured is acting as an agent or employee of any person or organization.

"4. such insurance does not apply during such time as the automobile is used for transporting goods or merchandise.

"All other terms, conditions and agreements of the policy shall remain unchanged."

Since it was conceded that at the time of the collision with Thomas the tractor involved was being used for the purpose of transporting goods for Lead Supplies, the court concluded that the policy afforded protection to none of the parties insofar as the Thomas incident was concerned because of the provisions of § 4 of the contingent liability endorsement, supra. No one disputes the correctness of the trial court's interpretation of the effect of the endorsement. The question that was litigated and which is pursued on appeal, is whether the policy as issued expressed the real agreement between the parties thereto and afforded the coverage intended and for the purposes sought by the insured. In short, Travelers contends that Lead Supplies intended to procure comprehensive insurance on the leased vehicles, pursuant to provisions of the lease, but that the National policy, as issued, furnished only limited coverage to Ryan. This contention cannot be fully understood and appreciated without further elaboration of the facts and circumstances surrounding the application for and issuance of the policy.

At the time the lease agreement was made, Lead Supplies requested one Marvin E. Lestor, an insurance agent who had been servicing Lead Supplies' insurance needs since 1947 or 1948, to obtain liability insurance affording coverage on the leased equipment. On December 18, 1957, Lestor contacted Jessie Farquharson, an employee of Midway Insurance Agency, and requested that insurance be issued to cover the equipment in question. Jessie was not licensed as an agent or broker by any company, and Midway was not a licensed agent of National. As noted by Judge Nordbye, we find a rather sharp conflict in the testimony as to the type of insurance Lestor requested Jessie to obtain. According to Lestor, he gave Jessie full information and advised her he desired insurance for Lead Supplies during the time the leased...