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Continental Casualty Co. v. American Fidelity & Casualty Co.

March 4, 1960

CONTINENTAL CASUALTY COMPANY, A CORPORATION, PLAINTIFF-APPELLEE.
v.
AMERICAN FIDELITY & CASUALTY COMPANY, A CORPORATION, DEFENDANT-APPELLANT. CONTINENTAL CASUALTY COMPANY, A CORPORATION, PLAINTIFF-CROSS-APPELLANT, V. AMERICAN FIDELITY AND CASUALTY COMPANY, A CORPORATION, DEFENDANT-CROSS-APPELLEE.



Author: Hastings

Before HASTINGS, Chief Judge, and KNOCH and CASTLE, Circuit Judges.

HASTINGS, Chief Judge.

This is a diversity action brought by plaintiff, Continental Casualty Company (Continental), against defendant, American Fidelity and Casualty Company (American). Continental seeks reimbursement for judgments it paid in certain personal injury actions which it defended, alleging that the legal obligation to defend and to pay was that of American. After the issues were closed and certain interrogatories were answered, both parties filed motions for summary judgment supported by appropriate affidavits.

The district court denied American's motion for summary judgment and granted that of Continental and entered judgment in favor of Continental (plaintiff) against American in the sum of $21,050, that being the amount it paid in satisfaction of the personal injury judgments, and in addition the sum of $2,377.90 it expended for attorney's fees in the personal injury actions, a total of $23,427.90. This judgment is the subject of appeal No. 12779 by American. The district court denied Continental's claim for interest at the rate of 5% per annum from March 17, 1955, the date the personal injury judgments were paid, to the date of judgment below. This denial of interest is the subject of Continental's cross-appeal No. 12780. We shall consider both appeals together.

This litigation arises out of an automobile accident on April 8, 1952 in Fulton County, Illinois. Frank L. Moon, Lawson G. Shryack and Leslie Cameron each received personal injuries in that accident. On April 2, 1954 suits were filed by the three injured persons in the Circuit Court of Fulton County, Illinois, against Southwest Freight Lines, Inc., T. A. Kirchner and Carl Page, each plaintiff demanding damages in the amount of $50,000.

On March 28, 1952 Continental issued a motor vehicle liability insurance policy insuring Southwest Freight Lines, Inc., with limits of $100,000 for injury to one person, $200,000 for injuries resulting from one accident and $100,000 for property damage. This policy provided coverage from February 29, 1952. On March 19, 1952 American issued a motor vehicle liability insurance policy insuring T. A. Kirchner, specifically covering a tractor and trailer owned by him. American's policy provided limits of liability of $15,000 for injury to one person, $75,000 for injuries resulting from one accident and $5,000 for property damage. Each of these policies was in full force and effect on April 8, 1952, the date of the accident in question.

After the suits were filed in the state court, American was requested to defend but refused, claiming that its policy provided no coverage for the defendants arising out of such accident. Thereafter, Continental defended these actions, claiming at all times that it was the duty of American under its policy to provide primary coverage to the defendants in the Fulton County suits to the extent of the limits of its policy and contending further that the insurance coverage provided in Continental's policy was limited to excess insurance over and above the amount of the limits in American's policy.

Subsequently, Continental negotiated a compromise settlement of the three personal injury claims; and on March 17, 1955, after a hearing in the state court, agreed judgments were entered against the defendants and in favor of each plaintiff as follows: Moon, $10,050; Shryack, $7,500; and Cameron, $3,500. On the same day Continental paid the respective amounts in full, and the judgments were recorded as satisfied. Continental also paid its attorneys the sum of $2,377.90 for their services in those actions. It is the recovery of these sums from American that Continental seeks in the case at bar.

The pertinent facts surrounding the automobile accident above referred to establish the following situation at the time the accident occurred. Kirchner owned the tractor-trailer outfit insured by American. Kirchner leased this equipment to Southwest Freight Lines, Inc. (Southwest) under a written single trip lease providing for a trip starting at St. Louis, Missouri, on April 7, 1952 and completing delivery to a consignee in Davenport, Iowa, not later than April 8, 1952. The lease provided in part:

"It is understood by the parties that the lessee [Southwest] shall procure in its name P.L. and P.D. and cargo insurance as may be required by the law, and this insurance shall expire at the time of delivery of the load covered by this lease.

"It is further understood by the parties that the lessee shall exercise absolute control of the vehicle subject thereto, and shall exercise due care in the use of said vehicle(s) and shall at the expiration of the term of this lease, yield said vehicle to the lessor [Kirchner] without further notice. This lease will terminate when lessor has completed delivery of load covered by this lease."

Kirchner was directed by Southwest to pick up the cargo in East St. Louis and went there for that purpose. Kirchner employed Page as the driver of the equipment and accompanied Page on this trip. Immediately prior to the collision Page was attempting to turn the tractortrailer around on the highway. Kirchner was outside with a flashlight directing Page in this operation. The automobile driven by Moon came along the highway and collided with the tractor-trailer with resulting injuries to the three occupants of the Moon car.

American, on behalf of Kirchner, contends at this point that Southwest was solely responsible for the accident under the terms of its trip lease and that Southwest was in control of the Kirchner vehicle and had direction of it. We do not agree. We are in accord with the finding of the district court that Kirchner was in control of his own equipment, that Page was his employee and that Southwest had merely engaged Kirchner to deliver the cargo to its destination. We hold that the relationship existing between Kirchner and Southwest is not such as will excuse Kirchner from liability for this accident. There is nothing here to indicate that American has no liability for the alleged negligence of Kirchner and Page.

American next contends that, in the alternative, the two insurance carriers should share pro rata in the payment of the judgments in Fulton County and that Continental's coverage was not excess insurance. It is undisputed that American had no excess coverage provision in its policy. The central issue before us in this appeal is whether Continental's policy ...


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