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United States Fire Insurance Co. v. Barker Car Rental

December 17, 1997

UNITED STATES FIRE INSURANCE COMPANY, PLAINTIFF-APPELLANT,

v.

BARKER CAR RENTAL, DOING BUSINESS AS NATIONAL CAR RENTAL, ESTATE OF BADER ALKHUAINI, ESTATE OF BARRY L. LAWRENCE, ET AL., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division.

No. 94 C 1336--Sarah Evans Barker, Chief Judge.

Before RIPPLE, MANION and KANNE, Circuit Judges.

RIPPLE, Circuit Judge.

SUBMITTED NOVEMBER 6, 1997 *fn1

DECIDED DECEMBER 17, 1997

United States Fire Insurance Company ("U.S. Fire") filed a complaint for interpleader and declaratory judgment in the United States District Court for the Southern District of Indiana. It sought a determination of its contractual rights and obligations under three insurance policies for claims arising out of a November 26, 1993, motor vehicle accident. Specifically, U.S. Fire sought a determination that its deposit of certain funds with the district court satisfied its obligations under a Business Auto Policy issued to Barker Car Rental ("Barker") and that neither its First nor Second Excess Policy issued to Barker was implicated by the accident which involved Bader Alkhuaini, who had rented one of Barker's vehicles. On cross-motions for summary judgment, the district court held that U.S. Fire had satisfied its obligations under the Business Auto Policy and that the Second Excess Policy was not implicated. However, the district court held that Alkhuaini was partially covered under the First Excess Policy. U.S. Fire now appeals the district court's decision with respect to its liability under the First Excess Policy. For the reasons set forth in the following opinion, we reverse the judgment of the district court and remand for further proceedings.

I. BACKGROUND

A.

On November 24, 1993, Bader Alkhuaini, a citizen of Kuwait, rented a 1993 Pontiac from Barker in Huntington, West Virginia. The car rented to Alkhuaini was licensed in Illinois and carried Illinois plates. In the rental agreement signed by Alkhuaini, Barker agreed to provide liability insurance for Alkhuaini. Two days later, Alkhuaini was driving in Brown County, Indiana, and was involved in an accident with Barry and Verna Lawrence, Kimberly Creech and David Davies. Alkhuaini and Barry Lawrence died as a result of the accident. The others sustained personal injuries and property damage.

At the time of the accident, Barker held three insurance policies issued by U.S. Fire: a Business Auto Policy, a First Excess Policy and a Second Excess Policy. All three policies were negotiated and delivered at Barker's principal place of business in Bloomington, Illinois.

On September 9, 1994, U.S. Fire filed this interpleader and declaratory judgment action in the United States District Court for the Southern District of Indiana to determine its obligations under these three insurance policies. Barker, Alkhuaini's Estate, Barry Lawrence's Estate, Verna Lawrence, Creech and Davies were all named as defendants in this action. *fn2 Transamerica Insurance Group, the Lawrences' insurer, and Old Dominion Insurance, Creech's insurer, were also included as defendants in this action because each had paid its insured as a result of the accident.

In Count I of its complaint, U.S. Fire sought interpleader and declaratory judgment as to the Business Auto Policy. Specifically, U.S. Fire admitted that Alkhuaini was covered by that policy. It deposited with the district court the remaining funds available under that policy for equitable distribution among the various claimants. *fn3 U.S. Fire also sought a declaration that its obligation under the Business Auto Policy to defend and indemnify Alkhuaini with respect to any claims or lawsuits arising out of the accident was extinguished by the deposit of those funds with the district court. In Counts II and III of its complaint, U.S. Fire requested declaratory relief as to the First and Second Excess Policies. U.S. Fire contended that Alkhuaini did not qualify as an insured under either policy and that it had no obligation to defend or indemnify Alkhuaini under those policies for any claim or lawsuit arising out of the November 26, 1993, motor vehicle accident.

Three of the defendants filed cross-claims against U.S. Fire. Both Transamerica and Old Dominion had paid their insureds for their property damage and therefore sought to enforce their subrogated interests. The Lawrence Estate and Mrs. Lawrence had filed a separate action for personal injury and wrongful death; this action was consolidated as a cross-claim for purposes of judicial economy. All three defendants agreed to stay prosecution of their cross-claims pending resolution of the coverage issues in U.S. Fire's complaint for interpleader and declaratory judgment. *fn4

On February 20, 1996, U.S. Fire filed a motion for summary judgment in its action for interpleader and declaratory judgment. A few days later, the Lawrences and Transamerica ...


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