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Douglas Equipment Co. v. Hartford Accident & Indemnity Co.

December 29, 1970


Major and Hastings, Senior Circuit Judges, and Kiley, Circuit Judge.

Author: Major

MAJOR, Senior Circuit Judge.

This diversity action was commenced by Douglas Equipment Co., Inc. (Douglas), against Hartford Accident & Indemnity Co. (Hartford), to recover on policy No. 80C212773, a "Comprehensive General-Automobile Liability Policy," issued by Hartford effective from November 5, 1959 to November 5, 1960 (referred to as the involved policy). The only pleadings in the case are Douglas' complaint and Hartford's motion to dismiss, with numerous affidavits filed in connection with each.

Douglas was engaged in the business of trucking, including the leasing of trucks, and during the relevant period leased Mack Truck No. PT-65LT, serial No. 2333, to Federal Paperboard Company. Gerald Dibble, the latter's driver, was injured while inspecting the truck, as a result of an explosion of a compressed air tank which was a part of its equipment.

The lease agreement provided, "Lessee agrees to provide and maintain in force, a policy of public liability and property damage insurance for the account of whom it may concern with respect to liability for injuries to third persons and damage to, or loss of, property of third persons resulting from the operation of the vehicles leased hereunder. * * *" Federal Paperboard Company complied with this requirement by obtaining coverage with the American Mutual Liability Insurance Company, British and Overseas Company, Ltd., and certain underwriters of Lloyds London. (These companies are referred to as Plaintiff Insurers.)

On February 28, 1961, Dibble filed suit against Douglas in the Superior Court of Cook County, Illinois, for damages on account of personal injuries sustained while operating the leased truck. Hartford was advised of this action but refused to defend on the ground that it was not liable under the involved policy. The state court action was defended by American and resulted in a judgment in favor of Dibble in the sum of $725,000. A compromise settlement was made for the amount of $448,191.76, which was paid by Plaintiff Insurers. Even so, Douglas alleges in its complaint that it "was compelled to and did expend large sums of money for the settlement and payment of said judgment to plaintiff's damage in the amount of $448,191.76 and did also incur attorneys' fees and other costs of defense."

Hartford's motion to dismiss was predicated upon two grounds, (1) that Douglas, having paid nothing to Dibble in satisfaction of the judgment which the latter obtained, was not the real party in interest as required by Rule 17(a) of the Federal Rules of Civil Procedure, and (2) that the involved policy issued by it furnished no coverage on the leased truck operated by Dibble. It hardly appears open to question but that Plaintiff Insurers who paid the amount of the compromise settlement were the real parties in interest.

Hartford in its brief states, "Douglas Equipment Co. has no financial interest in this case, and did not bring this suit." Douglas does not deny this statement, but states, "There is no assertion that Douglas did not authorize the suit or objected to the filing of it. Douglas simply did not know when the suit was filed." More than that, Douglas on brief states, "The action is brought by Douglas in behalf of certain other insurers which paid the settlement amount and therefore is primarily a suit for contribution as well as for the recovery of those expenses incurred by Douglas."

The District Court's judgment order reads:

"There is before the court defendant's motion to dismiss (herein treated by the Court as a motion for summary judgment) and the court, having considered said motion together with the complaint, exhibits, briefs of counsel and affidavits submitted herein, is of the view that said motion should be sustained. It is therefore Ordered that defendant's motion for summary judgment be and it hereby is granted."

Thus, the court treated the motion as one for summary judgment and apparently as though the action was brought on behalf of the real parties in interest. The parties have briefed and argued the case here on that basis and we shall consider it accordingly.

Douglas on brief presents the issue for review, "Was a genuine issue of fact presented in the case at bar so that the trial judge erred in granting Defendant's motion for summary judgment?" Hartford states the contested issue, "Does the contract of insurance involved provide additional coverage for the 'Dibble' occurrence?" The broad issue as stated by Douglas is, of course, correct, but encompasses the more narrow issue as stated by Hartford.

This brings us to a consideration of the terms of the involved policy issued by Hartford to Douglas. The insurance brokerage firm of Insurance Consultants, Inc. acted as agent for Douglas in all matters of insurance. William Boehlke was in charge of the Douglas account and placed various types of insurance for it. Many of Douglas' fleets of vehicles were insured under Hartford automobile policies. In those cases the trucks were scheduled individually by serial number. That was not done as to the truck leased to Federal Paperboard Company (the employer of Dibble), as the lessee was required by the terms of the lease to provide the insurance. New vehicles were purchased and older vehicles were sold by Douglas from time to time. Boehlke as an insurance broker represented a number of insurance companies, including Hartford, and while he was not its employee he executed the involved policy on its behalf. He had been in the insurance business for twenty-six years in various capacities.

The involved policy, under the heading of "Insuring Agreements," contains four paragraphs designated as ...

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