United States District Court, Southern District of Illinois, N.D
May 19, 1958
THE AMERICAN INSURANCE COMPANY OF NEWARK, NEW JERSEY, A CORPORATION, PLAINTIFF,
NORTH SIDE METAL, INC., A CORPORATION, HARRY BROWN AND ELLIS BROWN, DOING BUSINESS AS NORTH SIDE METAL COMPANY, PETER PEAT, H. KEITH CADY, ADMINISTRATOR OF THE ESTATE OF CAROLINE N. CADY, DECEASED, WARD A. HARDING, ADMINISTRATOR OF THE ESTATE OF FLORENCE M. HARDING, DECEASED, AND KAREN LOU MULVANEY, DEFENDANTS.
The opinion of the court was delivered by: Mercer, District Judge.
Plaintiff filed its complaint for declaratory judgment and
evidence has been heard. The evidence discloses that plaintiff
is a New Jersey corporation and defendants are residents of
the State of Illinois, and the amount in controversy is in
excess of Three Thousand Dollars.
The defendant, North Side Metal, Inc., purchased a 1955 Ford
Dump Truck on July 30, 1955 from Dana Huddleson Ford Company,
Champaign, Illinois, and owned said vehicle on January 3,
1957. Thereafter, on April 27, 1956, plaintiff issued its
policy of insurance to North Side Metal, Inc., for a period of
one year, the said policy being admitted into evidence as
Plaintiff's Exhibit A. This policy schedules the motor
vehicles insured under the terms of said policy but the 1955
Ford dump truck was not scheduled. Thereafter, on June 14,
1956, plaintiff issued its policy to Harry Brown and Ellis
Brown, doing business as North Side Metal Company, for a
period of one year, said policy being admitted into evidence
as Plaintiff's Exhibit D. This policy schedules certain
vehicles but the 1955 Ford dump truck was not scheduled.
On January 3, 1957, the defendant, Peter Peat, was employed
by North Side Metal, Inc., and while acting in the scope of
his employment was operating the 1955 Ford dump truck upon
Route 150, approximately twelve miles east of Peoria,
Illinois, about 7:30 o'clock A.M., when said motor vehicle
collided with a motor vehicle operated by the defendant, Karen
Lou Mulvaney, and occupied by Caroline N. Cady, deceased, and
Florence M. Harding, deceased. As a result of said collision
the defendant, Karen Lou Mulvaney, was injured and she and the
defendant administrators have made claims for the personal
injuries and wrongful deaths.
As a result of the above occurrence, the defendants, North
Side Metal, Inc., Harry Brown and Ellis Brown, doing business
as North Side Metal Company, and Peter Peat, have demanded
protection, defense in the event of litigation, and payment of
any settlement or judgment
which may be rendered against defendants under the policies
heretofore described. Plaintiff has denied liability under
either policy and seeks a summary judgment declaring the
rights of the parties under the policies of insurance.
The defendants contend that it had relied upon plaintiff
company and its agents, in consideration of defendants'
payment of premiums and promise to pay any premiums which
might be required to be paid, to insure defendants as against
any bodily injury liability, or property damage liability, or
any other liability which might arise. Defendants further
contend that defendants were covered as to all the vehicles
owned by the defendants and that the policy (Exhibit D) was,
in fact, the type of policy known and designated as a "fleet"
policy covering any and all vehicles owned by the defendant,
North Side Metal, Inc.
The principal question to be determined therefore, is
whether or not the policy issued June 14, 1956, being Exhibit
D, was a fleet policy. This policy is designated as a
comprehensive automobile policy. A schedule of automobiles is
attached to the policy listing four vehicles, none of which is
the 1955 Ford dump truck involved in the accident. Attached to
the policy is a change of automobile endorsement dated
December 21, 1956 wherein a 1957 Ford Fairlane is added and a
1955 Ford Fairlane, one of the four vehicles listed in the
original schedule, is eliminated. Coverages A and B of the
insuring agreements provide for bodily injury liability and
property damage liability "caused by accident and arising out
of the ownership, maintenance, or use of any automobile."
Paragraph 2 of Conditions provides as follows:
"The Company shall be permitted to inspect the
insured automobiles and to examine and audit the
insureds' books and records at any time during
the policy period and any extension thereof and
with three years after the final termination of
this policy, as far as they relate to the premium
bases or the subject matter of this insurance."
The above-quoted Coverages A and B and Paragraph 2 of
Conditions are quoted for the reason that defendants rely on
the language contained therein as establishing proof that the
policy is a "fleet" policy.
The evidence discloses that the plaintiff company started to
do business with defendant on June 14, 1951 when the first
policy, similar to the one in question herein, was issued.
Renewals were made each year. The 1955 Ford dump truck was
purchased July 30, 1955, approximately eleven and one-half
months prior to the renewal date of June 14, 1956.
There is considerable conflict in the testimony on the
question of verbal notice given by defendants to the local
agents of the plaintiff. Campbell Evans was the local agent of
plaintiff company, doing business in Champaign, Illinois. He
handled the business in connection with the comprehensive
liability policy referred to as the fleet policy, Exhibit
D.H.R. Breese & Company, also a Champaign, Illinois agent of
the plaintiff company, handled the business in connection with
the policy, Exhibit A. Defendants testified that oral notice
was given to Evans that the 1955 Ford dump truck was to be
included in the fleet policy. This is denied by Evans. In
resolving the question of the credibility of the conflicting
testimony, the Court is impressed with evidence introduced as
Plaintiff's Exhibits B, C, H, and I. These exhibits disclose
that on October 23, 1956, approximately two months before the
accident above referred to, North Side Metal Co., Inc., by
Ellis Brown, Manager, wrote a letter to Evans and a letter to
Breese & Company, the letters being identical and reading as
"We are preparing an insurance register and in
order to complete this we would appreciate your
sending us a list of policies currently in force,
giving the policy number, company, dates,
premium, property covered and loss clause if
known, and what, if any balance may be due."
Both Campbell K. Evans and Breese & Company answered these
letters two days later on October 25, 1956. Full information
was given and in answer to the inquiry as to property covered,
the same vehicles were listed as are listed in the respective
policies. In the Evans reply letter concerning the "fleet"
policy is the following:
"They will be up for renewal June 14, 1957. If
any of the above four items are not to be on the
policy please advise and we will have them taken
off, and likewise if there is any other vehicle
to be added let us know and we will put them on."
These letters tend to corroborate Evans' testimony denying
that he had notice to include the 1955 Ford dump truck. The
reply letter of Mr. Evans was notice to Brown that the 1955
Ford dump truck was not included. Brown took no action to have
the Ford truck included, although some action was taken to add
one automobile and to eliminate one automobile on December 21,
1956 in the change of automobile endorsement above referred
to. This was done approximately two months after the reply
letter of Evans was received and twelve days before the date
of the accident. It does not appear to the Court that Brown
acted as a reasonably prudent business man should act in his
failure, after notice, to take affirmative action in having
the 1955 Ford dump truck added to the so-called fleet policy.
No citation of authority is needed to support the
proposition that in the absence of a provision for the
extension of coverage of an automobile liability or indemnity
to automobiles other than those described in the policy, the
insurer does not cover the insureds' liability resulting from
the use of such other automobile. In recent years certain
provisions have been included into automobile liability and
indemnity policies intending to provide coverage, under
specified conditions, for vehicles not described in the policy
without the necessity of first securing the insurer's approval
to the change or addition. The provisions are known as the
replacement provision and the blanket or fleet provision and
are generally found in the so-called "automatic insurance"
clause under which coverage is extended automatically to newly
acquired automobiles. The "blanket" or "fleet" provision deals
with vehicles added to the already insured vehicles. The
"automatic insurance" clause requires notice of the
acquisition of a new automobile to be given the insurer within
a specified time after delivery, the period generally being
either ten or thirty days. An examination of the policy
involved herein, which defendants contend is a fleet policy,
does not disclose any automatic insurance clause and for this
reason the Court is of the opinion that said policy can not be
designated as a "fleet" policy. The quoted part of the policy
above set forth does not enlarge the policy covering certain
scheduled vehicles into a fleet policy. The fact that
Paragraph 2 of Conditions provides for inspection, examination
and audit, does not make the policy a fleet policy but refers
only to scheduled vehicles. Another circumstance that
negatives the claim that the policy involved is a fleet policy
is the fact that other vehicles owned by the defendants were
insured under a different policy, the one heretofore referred
The plaintiff also claims no liability for the reason there
is a disparity of names of the insureds, the policy having
been issued to Harry Brown and Ellis Brown, doing business as
North Side Metal Co., but this contention is without merit.
The plaintiff company knew, or should have known, the legal
status of the defendants and any disparity of names would not
invalidate the policies.
It is the opinion of the Court that the issues herein be
found in favor of the plaintiff and against the defendants. An
Order consistent with these findings of fact and conclusions
of law shall be prepared and presented to the Court. It is
further Ordered that a preliminary injunction restraining
defendants from instituting
any action at law to recover damages on account of the
occurrence of January 3, 1957, be and the same is hereby
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