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Hawkeye-Security Insurance Co. v. Schulte

May 2, 1962

HAWKEYE-SECURITY INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
JOHN SCHULTE, SR., AND JOHN SCHULTE, JR., DEFENDANTS-APPELLEES, JOSEPH GINLEY, DEFENDANT-APPELLANT.



Author: Hastings

Before HASTINGS, Chief Judge, and DUFFY and KILEY, Circuit Judges.

HASTINGS, Chief Judge.

On September 26, 1954, an automobile collision occurred between a 1946 DeSoto owned by John Schulte, Sr., driven by John Schulte, Jr., and a motor vehicle operated by Joseph Ginley. After the accident, Ginley instituted an action in the Circuit Court of Cook County, Illinois claiming damages as a result of the collision. The two Schultes were named as defendants therein.

Hawkeye-Security Insurance Company issued its policy of automobile liability insurance on January 27, 1954 in the usual form insuring John Schulte, Sr.*fn1 from the ownership, maintenance or use of a certain described 1950 Riviera Tudor automobile. On March 20, 1954, the policy was amended by endorsement to indlude the c946 DeSoto involved in the above accident. By a separate endorsement under the same date, the additional coverage of the DeSoto was limited in its application as therein set out.

Demand was made by John Schulte, Jr. that said insurance carrier defend him in the state court action filed by Ginley.

While Ginley's state court action was pending awaiting trial, Hawkeye-Security Insurance Company, appellee herein, filed the instant action for declaratory judgment in the district court on October 9, 1956. Named as defendants therein were John Schulte, Sr., John Schulte, Jr., and Joseph Ginley, sole appellant herein. These are the same parties involved in the foregoing accident and state court litigation.

By its complaint, appellee sought a declaration that under the terms and conditions of its policy as amended by the above described endorsements, it had no obligation to John Schulte, Jr., arising out of said accident involved in the pending state court suit. It also sought to enjoin the three defendants from proceeding further in the state court action pending determination of this proceeding.

The requested injunction was granted on the day the complaint was filed.

The theory of appellee's complaint for declaratory judgment is that by the express terms of the two endorsements on its policy extending coverage to the 1946 DeSoto its obligation was limited to the operation of such car by the named insured and did not extend to John Schulte, Jr.

On March 28, 1961, after proper service of process, rule to answer and notice of default, defendants, John Schulte, Sr. and John Schulte, Jr., were defaulted. They make no complaint of such default and do not appeal from the judgment subsequently entered thereon.

Defendant Joseph Ginley, however, filed a timely answer to the complaint. By this answer, inter alia, he admitted that appellee amended its policy of insurance to include the 1946 DeSoto, "but has no knowledge of any limitations, terms or conditions of said additional coverage and demands strict proof thereof." He further denied that policy coverage was limited to automobiles driven by John Schulte, Sr., and that appellee owed no policy obligation to John Schulte, Jr.

Appellee moved for a default judgment against defendants, John Schulte, Sr. and John Schulte, Jr. After consideration of briefs filed thereon by appellee (Hawkeye) and appellant (Ginley), the district court entered a decree on July 10, 1961 declaring the two Schultes to be in default; that appellee was not obligated to defend them in the state court action; that appellee was not obligated to pay any judgment that might be rendered therein against them in such action; that appellee was not obligated to pay any damages on their behalf sustained by Ginley in the September 26, 1954 accident.

The district court further decreed:

"5. That the defendant, Joseph Ginley, is a nominal party, joined herein only for the purpose of restraining all the parties to the suit pending in the Illinois Circuit Court ...


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