Travelers Insurance Co. v. American Fidelity & Cas. Co.

• Decision Date: 30 June 1958
• Docket Number: Civ. No. 2784.
• Citation: 164 F. Supp. 393
• Parties: TRAVELERS INSURANCE COMPANY, Plaintiff, v. AMERICAN FIDELITY & CASUALTY CO., Defendant and Third Party Plaintiff (The TEXAS COMPANY and George R. Gilbert, Third Party Defendants).
• Court: U.S. District Court — District of Minnesota

164 F. Supp. 393

TRAVELERS INSURANCE COMPANY, Plaintiff, v. AMERICAN FIDELITY & CASUALTY CO., Defendant and Third Party Plaintiff (The TEXAS COMPANY and George R. Gilbert, Third Party Defendants).

Civ. No. 2784.

United States District Court D. Minnesota Third Division.

June 30, 1958.

COPYRIGHT MATERIAL OMITTED

Thomas J. Spence, St. Paul, Minn., Kenneth W. Green, Minneapolis, Minn., for plaintiff.

Mordaunt, Walstad & Madsen, by J. H. Mordaunt, Minneapolis, Minn., for defendant and third party plaintiff.

Thomas J. Spence, St. Paul, Minn., for third party defendants.

DONOVAN, District Judge.

This civil case set for hearing and tried at the November 1957 Term was submitted for decision on April 10, 1958. Plaintiff's brief was long past due, delaying consideration of this case.

Travelers Insurance Company (hereinafter referred to as Travelers) brought the action, as subrogee of The Texas Company (hereinafter referred to as Texas) and George R. Gilbert, to enforce as additional insureds, an automobile indemnity policy issued to Charles and Elias Hildenbrand, doing business as the Advance Express Company (hereinafter referred to as Advance), by American Fidelity & Casualty Company (hereinafter referred to as American). Texas and Gilbert were made third party defendants at the instance of American.

A recital of the undisputed facts may be helpful. Advance maintains its principal office at Milwaukee, Wisconsin, and carries on a freight transport business in Illinois, Wisconsin and Minnesota. It has a freight terminal in St. Paul, Minnesota, where Benedict Schneider is employed to make pick-up and delivery of freight in the area of Minneapolis and St. Paul.

On October 10, 1949, Schneider was directed to make delivery, by tractor and semi-trailer covered by American's policy, of certain freight consigned to Texas, at the latter's St. Paul freight receiving yard.

Upon arrival at the yard, Schneider was directed by Gilbert (employed as a warehouseman by Texas) to back the semi-trailer on a driveway for unloading. In the process of unloading, Schneider sustained severe injuries through the negligence of Gilbert. Schneider collected benefits under the Minnesota Workmen's Compensation Act, M.S.A. § 176.01 et seq., and subsequently sued Texas and Gilbert in a Minnesota District Court where he recovered a judgment. Schneider v. Texas Company, 244 Minn. 131, 69 N.W.2d 329. American was tendered the defense of this common law action and tender was refused.

Under the terms of a comprehensive, general liability policy of insurance issued to Texas, Travelers satisfied the judgment, and in this action seeks reimbursement from American. Travelers contends that American's policy covered the injury to Schneider; that under the applicable law of Wisconsin (hereinafter referred to as § 204.30)¹, American's policy is deemed to contain an omnibus coverage provision extending coverage to persons operating or using the insured vehicle with the permission of the named insured and to persons rendered liable by reason of such permissive operation or use, hence that Texas and Gilbert are additional insureds under that policy; that, as between Travelers and American, the latter was the "primary" insurer charged with the duty under its policy to defend and indemnify Texas and Gilbert for any judgment rendered against them; and that Travelers, having defended and satisfied Schneider's judgment, is entitled to recover the amounts expended in defense of Schneider's suit and in satisfaction of the judgment.

American contends that its policy is governed by Minnesota law which does not compel omnibus coverage, and that no liability could arise under the circumstances of this case because: (a) by the terms of its policy American undertook to defend and indemnify only the named insured; (b) Schneider's injuries did not come under policy coverage in that they did not arise "by reason of the ownership, maintenance or use" of the insured vehicle; and (c) the policy expressly excludes coverage for liability to any employee of the named insured.

1. What Law Governs American's Policy?

American's policy is a "rewrite" of a policy issued in 1937 to Advance by the Central Surety & Insurance Corporation of Kansas City (hereinafter referred to as Central). The Central policy was solicited in Milwaukee by the State Insurance Underwriters, Inc., of Milwaukee (hereinafter referred to as State.) When American was licensed to conduct the business of insurance in Wisconsin in 1939, it issued the policy here involved to Advance. Where or by whom this policy was solicited does not appear, but, in absence of a contrary showing, the court presumes American's policy, like Central's, was solicited in Milwaukee by State. Both policies were provided by the Chicago office of Markel Service, Inc. American's policy provided that the insurer would not become bound until the policy was countersigned by an authorized representative of the insurer. The policy was countersigned at Milwaukee by Elmer H. Kambe, an official of State, as the duly authorized representative of American, and delivered in that city to the insured.

Under Minnesota law the pertinent statutory law of the place where an insurance policy is issued becomes a part of the contract of insurance. Anderson v. State Farm Mutual Automobile Ins. Co., 222 Minn. 428, 24 N.W.2d 836; Onstad v. State Mutual Life Assur. Co., 226 Minn. 60, 32 N.W.2d 185. Where the place of issuance is a sister state, so much of these statutes as in the determination of the forum provide substantive rights, as opposed to matters of remedy or procedure, will be enforced in Minnesota when not contrary to its public policy. Kertson v. Johnson, 185 Minn. 591, 242 N.W. 329, 85 A.L.R. 1; Anderson v. State Farm Mutual Automobile Ins. Co., supra.

American's policy was issued in Wisconsin. In that state the last act necessary to the creation of an enforceable contract was performed by way of countersignature. Onstad v. State Mut. Life Assur. Co., supra; Combined Insurance Co. of America v. Bode, 247 Minn. 458, 77 N.W.2d 533. Under the authorities heretofore cited, Wisconsin law governs both the construction of the policy and the determination of the extent of the insurer's obligation under the policy.

Manifestly, Wisconsin Statute § 204.30(3) creates substantive rights in the additional insureds and substantive obligations or liabilities in the insurer. Policies issued or delivered in Wisconsin are deemed to contain the omnibus coverage provision required by the statute whether actually written therein or not. Stone v. Inter-State Exchange, 200 Wis. 585, 229 N.W. 26; Drewek v. Milwaukee Automobile Ins. Co., 207 Wis. 445, 240 N.W. 881; Zippel v. Country Gardens, Inc., 262 Wis. 567, 55 N.W.2d 903. Although Minnesota law does not require automobile insurance policies issued in this state to contain an omnibus coverage provision, Wolf v. Employers Mutual Liability Ins. Co., D.C.Minn., 40 F.Supp. 635, it recognizes such provision as valid and enforceable. Peterson v. Maloney, 181 Minn. 437, 232 N.W. 790; Schultz v. Krosch, 204 Minn. 585, 284 N.W. 782.

In support of American's contention that Minnesota law controls its obligations under the policy, it argues that:

(a) The law of the place of the accident determines the rights, duties and liabilities of the parties.² This view confuses the conflict of laws rule pertaining to liability for tort with that pertaining to obligation under contract, the latter of which has been applied here. Anderson v. State Farm Mutual Automobile Ins. Co., supra; Levy v. Daniels' U-Drive Auto Renting Co., 108 Conn. 333, 143 A. 163, 61 A.L.R. 846; General Accident Fire & Life Assur. Corp. v. Ganser, 2 Misc.2d 18, 150 N.Y.S.2d 705; New Amsterdam Casualty Co. v. Stecker, 1 A.D.2d 629, 152 N.Y.S.2d 879; Restatement of Conflict of Laws, § 346.

(b) Since the policy contemplated performance in several states, it should be presumed that the parties intended the law of the place of performance to control their contract with the result that Minnesota law governs occurrences in Minnesota, Wisconsin law occurrences in Wisconsin, and so on. The intention of the parties as to which law shall govern their contract is, ordinarily, decisive, the conflict of laws rules in this regard being, for the most part, presumptions employed where a clear expression of intention is lacking. Thomson-Houston Electric Co. v. Palmer, 52 Minn. 174, 53 N.W. 1137; Mueller v. Ober, 172 Minn. 349, 215 N.W. 781. However, the power of the parties to choose the governing law is not without limits. That chosen must be the law of a place which has a substantial connection with the contract, and in exercising their choice, the parties must act in good faith and without an intent to evade the law. Thomson-Houston Electric Co. v. Palmer, supra; Combined Ins. Co. of America v. Bode, supra. This latter limitation looms large in contracts of insurance, for as stated in Onstad v. State Mut. Life Assur. Co., supra 226 Minn. 60, 32 N.W.2d 187:

"Defendant accepted the statutory terms on which it could conduct its insurance business in this state. It maintains an office in Minnesota and solicits business in this state. The insured was so solicited. The company could not make an insurance contract in this state contrary to its public policy, as announced in our statutes * * *. Those statutes became a condition of doing business here and a part of any contract of insurance made by defendant in Minnesota. When an insurance company comes into Minnesota to do business, agrees to abide by its laws, and, while exercising that privilege, solicits business therein, it will not be allowed to evade our laws by a statement in the contract which, in effect, attempts to provide that the contract shall be deemed to be made in another state. (Citing cases.)

"The facts in this case show that even though defendant may not have intended to be bound by the laws of Minnesota, it, in

...