United States Fidelity and Guaranty Company v. Rowe
|United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
|249 F. Supp. 993
|08 February 1966
|4745.,Civ. A. No. 4871
|UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff, v. John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Jerry Rowe, an infant, Lloyd G. Rowe, Dallas Eugene Hodge, an infant, William E. Hodge, individually and t/a Powhatan Marina, Miles S. Brooks and Frank C. Carr, t/a Williamsburg Sporting Goods and Hobby Shop, Miles S. Brooks, Frank C. Carr, Defendants, and Harry H. Kanter and H. Lee Kanter, t/a Kanter & Kanter, Intervenors. John H. ROWE, Jr., Administrator of the Estate of Larry Mitchell Rowe, Deceased, John H. Rowe, Jr., Jerry Rowe, Under 21 years through his father and next friend, John H. Rowe, Jr., Lloyd G. Rowe, Plaintiffs, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant.
Baird, Crenshaw & Ware and Philip E. Landrum, Norfolk, Va., for United States Fidelity & Guaranty Co.
Kelsey & Rabinowitz, Norfolk, Va., for John H. Rowe and others.
Paul M. Lipkin, Norfolk, Va., for Kanter & Kanter and Dallas Eugene Hodge, and William E. Hodge, t/a Powhatan Marina.
Carneal, Smith & Anderson, Williamsburg, Va., Sutton & Causey, West Point, Va., for Brooks & Carr, t/a Williamsburg, Sporting Goods, etc.
H. Lee Kanter, Norfolk, Va., guardian ad litem for Dallas Eugene Hodge.
These consolidated actions involve the determination of the liability, if any, of the liability insurer of several judgment debtors whose personal liability has previously been adjudicated by this Court. Such personal liability arose from a motorboat accident which occurred on July 3, 1960, in the waters of Powhatan Creek which empties into the James River near Williamsburg, Virginia. This accident involved two outboard motorboats, one of which was owned by Miles S. Brooks and Frank Carr, trading as Williamsburg Sporting Goods and Hobby Shop. The boat had been placed by Brooks and Carr at the Powhatan Marina, a sole proprietorship owned by William E. Hodge, for the purposes of demonstration and sale. The boat was approximately 16 feet in length and was powered by a 75 horsepower outboard motor. At the time of the accident the boat was being operated by Dallas E. Hodge, the fourteen year old son of William E. Hodge, and the passengers were Larry Mitchell Rowe, John H. Rowe, Jr., Jerry Rowe and Lloyd G. Rowe. The other boat was operated by Ellen C. Burkhardt (now Mrs. Charles G. Rosson) whose interest is not involved in the present actions.
The accident resulted in serious injuries to the Rowes, with the resultant death of Larry Mitchell Rowe, and a libel was filed in their behalf on July 13, 1961. In due time the trial was conducted by District Judge Butzner who delivered his findings of fact and conclusions of law on July 25, 1963, in which he ruled that (1) the accident occurred approximately ¼ of a mile from the Powhatan Marina; (2) the accident was caused by the concurrent negligence of young Hodge and Mrs. Burkhardt (now Rosson); (3) Dallas Hodge was acting within the scope of his employment, and thus William Hodge was liable for the negligence of his son; (4) there was no partnership or joint venture between William E. Hodge and the partnership of Brooks and Carr; (5) the Rowes were not passengers for hire within the meaning of 46 C.F.R. 24.10-3 and, therefore, Dallas Hodge was not required to have an operator's license; (6) since Dallas Hodge was a competent operator and his negligence was without the privity or knowledge of Brooks and Carr, the latter were entitled to limit their liability, pursuant to 46 U.S.C. § 183, to $600.00, the value of their wrecked boat. Separate judgments in the combined amount of $93,250.001 were entered on August 23, 1963, in favor of the Rowes against the Hodges, Mr. and Mrs. Rosson, and Brooks and Carr, subject to the limitation of liability in favor of Brooks and Carr.
On appeal the Court of Appeals affirmed in part but reversed as to the limitation of liability granted to Brooks and Carr. Rowe v. Brooks, 329 F.2d 35 (4 Cir., 1964). The appellate court held that Brooks and Carr and William Hodge were in a joint venture and that the Rowes were "passengers for hire" on the Brooks and Carr boat. This conclusion was reached by use of the analogous automobile cases holding that prospective purchasers are "passengers" as distinguished from "guests" in regard to so-called "host-guest" statutes. Since the Rowes were passengers for hire, they were required to be piloted by a licensed operator under 46 C.F.R. 157.30-30. Finding that Brooks and Carr were charged with knowledge that Dallas Hodge was not a proper operator under these circumstances, the Court of Appeals held that Brooks and Carr were not free from negligence and thus were not entitled to limit their liability.
The insurance carrier for both the Williamsburg Sporting Goods and Hobby Shop and the Powhatan Marina, under separate policies, is the United States Fidelity and Guaranty Company (hereinafter referred to as U. S. F. & G.). U. S. F. & G. had assumed the defense of the Rowes' suit against Brooks and Carr without a reservation of rights but had not defended the Hodges. The respective policies were in effect at the time of the accident. After the decision of the Court of Appeals in Rowe v. Brooks, supra, U. S. F. & G. filed in the Newport News Division of this Court a "complaint for interpleader and declaratory relief pursuant to Rule 22 FRCP" seeking a determination of its liability, if any, under the circumstances here involved. Soon thereafter the Rowes instituted a civil action in the Norfolk Division of this Court seeking judgment against U. S. F. & G. for the full amount of coverage on both liability policies. By agreement of all parties this Court transferred the U. S. F. & G. declaratory judgment action to the Norfolk Division and consolidated the two actions for trial pursuant to F.R.Civ.P. 42(a) since the immediate controversy in both suits pertained to the policy coverages. The law firm of Kanter & Kanter was permitted to intervene as a defendant in the declaratory judgment action and to file a counterclaim therein against U. S. F. & G. for $12,500.00 in legal fees and $292.48 in costs allegedly incurred in defending the Rowes' suit against the Hodges which U. S. F. & G. had declined to defend. These matters are now before the Court on the motions of all parties for summary judgment, there being no genuine issue of fact presented.
There are two primary questions in regard to this policy: (1) Did the holding of the Court of Appeals that the Rowes were "passengers for hire" place the Rowes within the policy exclusion in regard to "boats while used to carry passengers for a charge or while rented to others"? (2) Did U. S. F. & G. have a duty to defend the Hodges under the Brooks and Carr policy?
(1) The Policy Exclusion.
Under the terms of the insuring agreement U. S. F. & G. agreed:
"To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident."
The basic policy included a standard exclusion in regard to watercraft if the accident occurred away from the insured's premises. However, the effect of this exclusion was removed by endorsement number 5 which provided that the above exclusion would not apply to any accident due to the ownership, maintenance or use of any watercraft classified in the policy declarations. The declarations enumerated private boats with outboard motors exceeding ten horsepower. However, in endorsement number 6 it was stated that:
"It is understood and agreed that this policy excluded2 coverage for boats while used to carry passengers for a charge or while rented to others."
It is the effect of endorsement number 6 which is in dispute at present. Counsel for U. S. F. & G. argue that the Rowes are to be regarded as "passengers for a charge" within the exclusion on the basis of the Court of Appeals having held the Rowes to be "passengers for hire." To the contrary, counsel for the Rowes contend that the exclusion would not apply in the absence of payment of a cash consideration in fact by the Rowes.
There is no question that the Rowes were "passengers for hire" as this status was awarded them by the Court of Appeals on the basis of their position as prospective purchasers of the boat. 329 F.2d 35, 44 (4 Cir., 1964). The issue rather revolves around whether the terms "passengers for hire" and "passengers for a charge" are synonymous in an insurance coverage context.
At the commencement of the discussion of this issue, it is noteworthy that no case directly in point has been submitted by counsel, nor uncovered by the independent research of the Court. However, several authorities which bear upon the subject deserve consideration.
Two fairly recent opinions of the Virginia Supreme Court of Appeals dealing with "payment" by an automobile passenger are of some significance. In Dickerson v. Miller, 196 Va. 659, 85 S.E. 2d 275 (1955), the Court found that the occupant had the status of a passenger as opposed to a mere guest where the driver was transporting the occupant to her home in consideration of the occupant having worked late as an employee of the driver at his place of business. The court stated (196 Va. 662, 85 S.E.2d 277):
"With respect to `payment' it is not necessary that the operator of the vehicle receive actual cash in return for the transportation supplied, since services or other benefits given by the occupant, if regarded by the parties as consideration inducing the offer of transportation, may be sufficient to entitle the occupant to the status of a paying passenger, as distinguished from a guest passenger." (Emphasis added)
Similarly, the Supreme Court of Appeals of Virginia in Richardson...
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