United Fire & Casualty Co. v. Gravette

• Decision Date: 18 November 1998
• Docket Number: No. 98-1921,98-1921
• Citation: 182 F.3d 649
• Parties: (8th Cir. 1999) United Fire & Casualty Company, Appellee, v. Eddie Gravette; Eddie Gravette, doing business as Southwest Sanitation, Defendants. Douglas DeMerritt; Tyler Dale DeMerritt; Mirah Dawn DeMerritt, minors, Sherrie Ellen Barnett, Defendants-Appellants. Geraldine DeMerritt; Southwest City, Mo., a municipality, Defendants
• Court: U.S. Court of Appeals — Eighth Circuit

Page 649

182 F.3d 649 (8th Cir. 1999)

United Fire & Casualty Company, Appellee, v. Eddie Gravette; Eddie Gravette, doing business as Southwest Sanitation, Defendants.

Douglas DeMerritt; Tyler Dale DeMerritt; Mirah Dawn DeMerritt, minors, Sherrie Ellen Barnett, Defendants-Appellants.

Geraldine DeMerritt; Southwest City, Mo., a municipality, Defendants.

No. 98-1921

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

November 18, 1998, Submitted

July 2, 1999, Filed

Rehearing and Rehearing En Banc Denied Aug. 18, 1999.

Thomas W. Millington Springfield, Missouri, argued, for Appellant.

Peter B. Sloan, Kansas City, Missouri, argued (Robert S. Bruer of Kansas City, Missouri, on the brief), for Appellee.

Before McMILLIAN, WOLLMAN¹ and HANSEN, Circuit Judges.

McMILLIAN, Circuit Judge.

Appellants, the survivors of Douglas DeMerritt, appeal from a final order entered in the United States District Court² for the Western District of Missouri granting summary judgment in favor of appellee, United Fire & Casualty Co. (United Fire) on its declaratory judgment action. United Fire & Casualty Co. v. Gravette, No. 97-5039-CV-SW-3 (W.D. Mo. Mar. 4, 1998). The district court found that the policy was not ambiguous and that coverage was excluded by the employee exclusion. See slip op. at 3. For reversal, appellants argue that the district court erred in finding that none of the exceptions to the employee exclusion applied and that the policy covered Joyce Gravette but not Eddie Gravette. For the reasons discussed below, we affirm the order of the district court.

JURISDICTION

The district court had subject matter jurisdiction under 28 U.S.C. 1332(a) (diversity of citizenship). The notice of appeal was timely filed under Fed. R. App. P. 4(a), and this court has appellate jurisdiction under 28 U.S.C. 1291.

FACTS

On June 5, 1995, Eddie Gravette, who had a contract with Southwest City for trash pickup, and Douglas DeMerritt were picking up residential trash in Southwest City, Missouri. DeMerritt was employed as a pick-up man by Eddie Gravette's unincorporated business, Southwest Sanitation. Eddie Gravette was driving the garbage truck and accidentally ran over DeMerritt, fatally injuring him.

In December 1995, appellants filed a wrongful death action in state court against Eddie Gravette, Eddie & Joyce Gravette doing business as Southwest Sanitation, and the city of Southwest City. Joyce Gravette is Eddie Gravette's mother. Appellants claimed that Eddie Gravette was not the sole owner of Southwest Sanitation and instead was doing business with his mother, Joyce Gravette. They alleged that Eddie Gravette had been negligent in the operation of the garbage truck. They later amended their petition to add a negligence claim against the city of Southwest City, alleging vicarious liability for the negligence of Eddie Gravette.

United Fire is an insurance company incorporated in Iowa. It issued a commercial automobile liability policy to Eddie and Joyce Gravette doing business as Southwest Sanitation, effective from October 15, 1994, through October 15, 1995. The policy provided in part that United Fire will pay damages for injuries incurred as a result of an accident "resulting from the ownership, maintenance or use of a covered" motor vehicle. Section B(4) of the policy provided that coverage will not apply to any bodily injuries suffered by employees arising out of and in the course of their employment. That section further provided that the exclusion will not apply to domestic employees or liability assumed by the insured under an "insured contract." The policy does not define the term "domestic employee." The policy does define the term "insured contract" to include the term "sidetrack agreement," but does not further define "sidetrack agreement." The policy also defined "insured contract" to include

that part of any contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another to pay for "bodily injury" or "property damage" to a third party or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

United Fire believed that appellants' claim against Eddie Gravette fell squarely within the employee exclusion because it was undisputed that at the time of the accident DeMerritt was an employee of Southwest Sanitation and sustained his fatal injuries in the course of his employment. However, United Fire believed that Joyce Gravette was in a different position. According to the policy declaration, Eddie and Joyce Gravette were partners in Southwest Sanitation. Appellants also described Eddie and Joyce Gravette in their wrongful death complaint as doing business together as Southwest Sanitation. However, Eddie Gravette in his answer denied that Joyce Gravette was doing business with him as Southwest Sanitation and stated that he was the sole owner and operator of Southwest Sanitation. The garbage truck was owned by Joyce Gravette.

United Fire investigated the underlying facts and decided that DeMerritt was employed by Southwest Sanitation and Eddie Gravette but not by Joyce Gravette. Thus, United Fire decided that the employee exclusion would not apply to Joyce Gravette and agreed to defend Joyce Gravette without a reservation of rights. United Fire also offered to defend Eddie Gravette with a reservation of rights; however, Eddie Gravette refused the offer.

Subsequently, appellants voluntarily dismissed Joyce Gravette without prejudice from their wrongful death action in state court. Eddie Gravette agreed to arbitration of the wrongful death action. One of the issues to be determined was the nature of the business relationship, if any, between Eddie and Joyce Gravette. However, neither Joyce Gravette nor Southwest City agreed to arbitration and neither participated nor presented any evidence in the arbitration proceeding. The arbitrator found in favor of appellants and against Eddie Gravette doing business as Southwest Sanitation and awarded appellants damages in the amount of $ 631,881.45. The arbitrator also found that Joyce Gravette was engaged in a partnership or joint venture or both with Eddie Gravette in the operation of Southwest Sanitation. In October 1997 the state court affirmed the award of the arbitrator and entered judgment against Eddie Gravette doing business as Southwest Sanitation. No judgment was entered against Joyce Gravette because she was no longer a party to the wrongful death action.

In April 1997 United Fire filed this action for declaratory judgment against appellants, Eddie Gravette, Eddie Gravette doing business as Southwest Sanitation, and the city of Southwest City, to determine whether the policy covered Eddie Gravette and moved for summary judgment. Appellants and Eddie Gravette asserted that Joyce Gravette was the partner of Eddie Gravette. Appellants filed a motion for summary judgment, contending Eddie Gravette was covered either under the policy or because his partner, Joyce Gravette, was covered because United Fire had agreed to defend her without a reservation of rights in the wrongful death action in state court.

The district court decided that although Joyce Gravette was not an indispensable party in the declaratory judgment action, it would not decide whether the policy covered Eddie Gravette without also deciding whether the policy covered Joyce Gravette and required United Fire either to add Joyce Gravette to the declaratory judgment action or file an unconditional declaration that Joyce Gravette would receive a defense and coverage. Thereafter, United Fire, in compliance with the district court's order, filed an amended declaration stating that it would provide both a defense and coverage for Joyce Gravette for the wrongful death claim.

The district court granted summary judgment in favor of United Fire and denied appellants' motion for summary judgment. The district court found that the policy was not ambiguous and that coverage was excluded by the employee exclusion because it was not disputed that DeMerritt was an employee of Eddie Gravette at the time of the accident and that the accident occurred during and in the scope of that employment. See slip op. at 3. The district court rejected appellants' argument that three possible exceptions to the employee exclusion applied: "domestic employee," "sidetrack agreement," or "insured contract." Appellants argued that the term "domestic employee" was ambiguous, the policy did not define the term "domestic employee," and that DeMerritt may have been a "domestic employee," and thus not excluded from coverage, because he was neither an alien nor a foreign national. The district court found that appellants' interpretation of the term "domestic employee" was not reasonable and therefore not ambiguous. See id. at 4-5. The district court further found that the word "domestic" reasonably referred to the type of employment, that is, one who performs services of a household nature in or about a private home, and not the employee's nationality. See id. at 5.

Next, the district court rejected appellants' argument that the contract between Southwest Sanitation and Southwest City was a "sidetrack agreement" within the meaning of the insured contract exception. The district court found that the term "sidetrack agreement" was not ambiguous and was a term of art within the railroad industry, referring to a contract governing the "construction, maintenance, use and removal of certain spur lines and sidings." The trash hauling contract had nothing to do with railroads or spur lines. See id. at 5-6.

Finally, the district court rejected appellants' argument that the trash hauling contract was an "insured contract" because the policy definition of "insured contract" included indemnification agreements. The trash hauling contract...