Travelers Mut. Casualty Co. v. Herman

• Decision Date: 06 January 1941
• Docket Number: No. 11761.,11761.
• Citation: 116 F.2d 151
• Parties: TRAVELERS MUT. CASUALTY CO. v. HERMAN.
• Court: U.S. Court of Appeals — Eighth Circuit

116 F.2d 151 (1940)

TRAVELERS MUT. CASUALTY CO. v. HERMAN.

No. 11761.

Circuit Court of Appeals, Eighth Circuit.

December 12, 1940.

As Corrected on Denial of Rehearing January 6, 1941.

Bryce Crawford, Jr., of Omaha, Neb. (Daniel J. Gross and Gross & Crawford, all of Omaha, Neb., on the brief), for appellant.

Howard A. Jones, of Topeka, Kan. (J. E. Addington, of Topeka, Kan., and John C. Mullen, of Omaha, Neb., on the brief), for appellee.

Before SANBORN and THOMAS, Circuit Judges, and DEWEY, District Judge.

DEWEY, District Judge.

The trial court found that a reimbursement clause as between an insurer and insured was invalid under the laws of Kansas.¹

The record discloses that Mabel C. Herman of Fremont, Nebraska, as a part of her business owned and caused to be operated tractors and semi-trailers to haul petroleum products in the States of Kansas and Nebraska.

On September 3, 1937, the appellant, Travelers Mutual Casualty Company, issued to her a policy of automobile liability insurance. At that time Section 66-1,128, General Statutes of Kansas 1935, provided that: "No certificate or license shall be issued by the public service commission to any `public motor carrier of property,' `public motor carrier of passengers,' `contract motor carrier of property or passengers' or `private motor carrier of property,' until and after such applicant shall have filed with, and the same has been approved by, the public service commission, a liability insurance policy in some insurance company or association authorized to transact business in this state, in such reasonable sum as the commission may deem necessary to adequately protect the interests of the public with due regard to the number of persons and amount of property involved, which liability insurance shall bind the obligors thereunder to pay compensation for injuries to persons and loss of or damage to property resulting from the negligent operation of such carrier. No other or additional bonds or licenses than those prescribed in this act shall be required of any motor carrier by any city or town or other agency of the state."

And the Kansas State Corporation Commission for administrative purposes in enforcing this section adopted Rule 24 requiring to be attached to all such policies the following endorsement:

"It is understood and agreed that the policy to which this endorsement is attached is written in pursuance of and such policy shall fulfill the insurance requirements of Section 66-1,128, General Statutes of Kansas 1935, or as may be hereafter amended, and the rules and regulations of the State Corporation Commission adopted thereunder with respect to liability for injuries to persons (except employees of the assured injured in the course of their employment) and for damage to property (except Cargo) * * *.

"It is further understood and agreed that the Company waives a description of the motor vehicles, trailers or semi-trailers insured hereunder and the policy is hereby amended and extended so as to cover any and all motor vehicles, trailers and semi-trailers operated or used by the Assured pursuant to the certificate, permit or license issued by the State Corporation Commission of Kansas.

"Nothing contained in the policy or any endorsement thereon, nor the violation of any of the provisions thereof by the Assured, shall relieve the Company from liability thereunder. * * *"

This insurance policy with such an endorsement attached was filed with the Kansas State Corporation Commission. The policy described and specified only one "tractor and semi-trailer unit" and the premium rate was based on liability of this unit. But the above waiver of description endorsement authorized by the above statute made the policy an elastic coverage policy embracing any and all units operated by the carrier.

The policy also contained a reimbursement endorsement, providing, among other agreements, that

"* * * the Company shall be reimbursed by the Assured for any and all loss, costs, or expenses paid or incurred by the Company and which the Company would not be obliged to pay under the provisions of the policy independently of any statutory provision of this policy and/or any endorsement thereto.

"Nothing herein contained shall be held to vary, waive, alter or extend any of the terms, conditions, agreements, statements or declarations of the undermentioned Policy other than as above stated."

It was not long after this policy was issued that both the coverage endorsement and the reimbursement agreement became highly important. On September 23, 1937, the insured, appellee, was operating a leased truck, not the one described in the policy or any other policy issued by appellant, in the State of Kansas when an accident occurred. Liability insurance was carried on the leased truck by another company but it became insolvent and an injured party sued and recovered judgment against this appellant and it was required to and did pay out the sum of $3,677.42. Thereafter this suit was brought against the insured, Mabel C. Herman, to recover under the reimbursement clause in the policy the amount so paid.

At the close of the evidence the trial court determined the reimbursement clause to be invalid, directed a verdict and entered judgment for the insured. The Insurance Company feeling aggrieved thereat has appealed to this court.

The case was tried, the court found and it is agreed here that the laws of Kansas control the disposition of the case, and we will so consider it.

There is no contention or claim that the reimbursement clause should not be read and considered as a part of the entire contract of insurance or that the parties were mislead by any fraud or overreaching or did not understand and fully agree to its provisions.

But it is the contention of the appellee that the reimbursement endorsement above referred to is void for the reason that it violates the terms of Section 66-1,128, General Statutes of Kansas 1935, and is in direct conflict with the statutory endorsement above set forth required by the Commission. Also, that if the reimbursement clause is valid and forms a part of the contract, then the contract is not a liability insurance policy as required by the State of Kansas but is merely a bond which creates between the appellant, Insurance Company, and its assured the relation of principal and surety; and that such a contract would not meet the requirements of the Kansas statutes and the rules and regulations and orders of the Kansas Corporation Commission made pursuant thereto.

The Kansas sta...