United Pacific Ins. Co. v. Ohio Casualty Ins. Co.

• Decision Date: 11 February 1949
• Docket Number: No. 11799.,11799.
• Citation: 172 F.2d 836
• Parties: UNITED PACIFIC INS. CO. v. OHIO CASUALTY INS. CO. et al.
• Court: U.S. Court of Appeals — Ninth Circuit

172 F.2d 836 (1949)

UNITED PACIFIC INS. CO. v. OHIO CASUALTY INS. CO. et al.

No. 11799.

United States Court of Appeals Ninth Circuit.

February 11, 1949.

COPYRIGHT MATERIAL OMITTED

Harry E. Sackett, of Los Angeles, Cal., and Raymond G. Brown, of Portland, Or., and Frank J. Creede, of San Francisco, Cal., for appellant.

Harry D. Parker, Richard E. Reese, and Raymond G. Stanbury, all of Los Angeles, Cal., for appellee Ohio Casualty Ins. Co.

Before STEPHENS, HEALY, and BONE, Circuit Judges.

BONE, Circuit Judge.

On January 16, 1946, one Floyd Gilbert (named as appellee) was an agent, servant and employee of R. H. McKeon and George B. Page, a California partnership doing business as (dba) "Pacific Laundry and Dry Cleaners," hereafter called Pacific.

On the said date Gilbert was driving a truck for and on the business of Pacific, and while so engaged negligently caused physical injuries and property damage to Echols and his son (named as appellees). The parties to this appeal concede the negligence of Gilbert and his personal liability therefor is not questioned.

On the said date George B. Page, above mentioned, was also the owner of, and doing business as (dba) "Mission Linen and Towel Supply Company," hereafter called Mission. This concern was a California enterprise.¹

Echols and son brought an action in a California state court to recover damages for injuries to person and property sustained by reason of the negligence of Gilbert. In that state action they named as defendants Pacific, Mission and Gilbert. Gilbert was not in California and service of process upon him could not be made. (It also appears that he was in Nebraska when the instant suit was begun and he was not served with process therein.)

In the instant case neither Page individually nor Mission, nor McKeon and Page dba Pacific, nor Floyd Gilbert answered or otherwise pleaded. Claimants Echols and son filed an answer claiming compensation from one or both of the insurance companies and praying for general relief. By reason of this posture of the case the sole issue confronting us on this appeal narrows to the controversy between appellee, "The Ohio Casualty Insurance Company," a corporation, (hereafter called Ohio) and appellant, "United Pacific Insurance Company," a corporation (hereafter called United).

R. H. McKeon, George B. Page, Robert Echols and Beverly Echols are natural citizens of the State of California. Ohio is a citizen of the State of Ohio. United is a citizen of the State of Washington. At all times here material both of these insurance companies were duly licensed by the State of California to engage in the general business of insuring persons in that State against liability imposed upon them as a result of automobile accidents. Diversity of citizenship is present and the amount in controversy exceeds $3,000 exclusive of interest and costs.

The issue presented concerns the nature and extent of the liabilities, inter se, of the two above named insurance companies under two certain policies of automobile liability insurance issued by them. The policy issued by Ohio covered Pacific, the other policy issued by United covered Mission. Both policies were in force and effect at all times material to this case,² and while both policies were issued on what is known in the insurance business as a comprehensive liability form, they differ insofar as extended coverage — insurance to persons other than owners or named assureds — is concerned.

The United policy covering Mission and George B. Page named as assured therein "George B. Page, individually and doing business as (dba) Mission." (The policy covered certain other outside business and partnership activities of Page not material to this case.) As drawn, the policy admittedly covered a certain truck owned by and registered in the name of Page. About a year prior to the Echols' accident Page had leased or rented this truck to Pacific to be used by Pacific in its business operations. It is agreed that Gilbert was driving this truck on the business of Pacific when his negligence caused the Echols' accident.

With reference to the Echols' accident, United concedes that its policy issued to and covering Mission also insured Gilbert personally under its "extended coverage." The parties agree that the truck so being used by Pacific was used with the permission of Page, its owner.³

The "named assured" in the Ohio policy covering Pacific were "R. H. McKeon and George B. Page, doing business as (dba) Pacific." (The policy covered other operations not material to the issue here.) Certain provisions of this policy will be referred to later.

The pendency of the Echols' suit led to a controversy between United and Ohio and terminated in this suit. As indicated above it concerned the nature and extent of the liability of each (in the Echols' matter) to the assured named in the above noted policies of liability insurance. The real issue between them which caused the controversy was whether the Ohio policy insuring Pacific also extended to and provided personal insurance for Gilbert, the employee of Pacific who was negligent while driving a truck owned by Page.

The appeal in this case is from the declaratory judgment entered in an action brought by United against Ohio and the other named appellees to settle this controversy. United, as plaintiff, prayed for a declaratory judgment that its policy of automobile liability and property damage insurance sold to and covering Mission does not apply to and cover the Echols' accident; also that the policy issued by Ohio be declared to apply to and cover said accident to the exclusion of the insurance afforded by United. The prayer was also for such other relief, both general and special, as to the court seemed just and proper.

In its answer Ohio prayed that the court deny the relief sought by United; that it declare that United's policy does apply to and cover said accident and that Ohio's policy does not apply and cover the accident; also that any liability arising from the accident on the part of Pacific, named as assured in Ohio's policy, does not (in any event) apply to said accident until, and only until after the limits of United's policy are reached. Ohio further prayed that United be required to defend (and to pay any judgment recovered in) the then pending Echols' action in the state court. Ohio also prayed for general and specific relief. The scope of the relief it sought is further indicated by our later comments on its position at trial and on this appeal.

As we view the record, the pleadings in this action reveal a clearly expressed desire on the part of both United and Ohio to end their controversy by having the court fully settle and adjudicate the aforesaid issue between them and they made that desire fully evident in the prayers and at trial. They wanted this decision to declare the rights and obligations of both respecting their liability for Gilbert's negligence under the "coverage" afforded by their respective policies. We agree with the trial court that the pleadings embraced and presented this ultimate and controlling issue and that it was not only fully and adequately presented by the pleadings and proof but was also well and properly within the competent authority of the court to decide. The parties themselves indicated that this was their understanding of the purpose of the suit.⁴

Ohio concedes that its policy imposes joint-liability with United in the Echols' suit because it was an insurer of Pacific which was sued and became liable, (under the doctrine of imputed negligence) as the employer of Gilbert. (See footnote 2.)

The theory of Ohio is that if the negligence of Gilbert caused a loss to Pacific which in turn caused a loss to Ohio due to its liability to defend Pacific in the Echols' suit, then Ohio would be entitled to a declaratory judgment establishing the primary and ultimate liability of Gilbert for the Echols' claim and further authorizing Ohio to recoup its loss from Gilbert, an assured of United, and thereafter the liability would ultimately fall on United.⁵

On this postulate Ohio urged that in order that the entire controversy be finally ended by an adjudication of rights and liabilities, the judgment of the court should declare and establish (1) the primary and ultimate liability of Gilbert for the Echols' accident, (2) that United is obligated, within the limits of its policy, to respond to and satisfy any judgment which may be rendered against its insured Gilbert in connection with said accident, and is also obligated, within the limits of its policy, to reimburse Ohio for all expenditures, reasonably and necessarily made, or to be made by Ohio to or on behalf of Echols and his son, or in satisfaction of any judgment in the Echols' case or in a compromise settlement of the Echols' claim.

Ohio contends that the recoupment rule announced in the cases cited in Footnote 5 would also apply where a reasonable and necessary settlement is made; that due to their joint-liability status under their policies United and Ohio settled the Echols' suit (see details footnote 2); and while an employer making such a settlement could not rely upon a judgment against Echols to prove that this settlement was reasonable and necessary, see L. J. Dowell, Inc., v. United Pacific Casualty Co., 191 Wash. 666, 72 P.2d 296, 306, 307, pars. 16-18, nevertheless a later judgment against Gilbert to provide such proof should not be necessary as a condition precedent to the establishment of United's liability since all of the essential facts establishing Gilbert's negligence were stipulated by United and a judgment against Gilbert could establish nothing more in that regard and would be an idle act. In short, Ohio would have it that by their voluntary act of settlement of the Echols' claim both companies recognized and established the ultimate fact of Gilbert's negligence, and United admitted the reasonableness and necessity of the...