Daugaard v. Hawkeye Security Insurance , 239 F.2d 351 ( 1956 )

SANBORN, Circuit Judge.

This is an appeal from a judgment dismissing the complaint of the plaintiff (appellant) in a nonjury action of which the District Court had jurisdiction because of diversity of citizenship and amount in controversy.

The case was submitted to the trial court upon an agreed statement of facts and some supplemental evidence. The plaintiff, a minor, was injured on April 3, 1952, when the. autpmobile in which he was riding collided with an Oldsmobile driven by Donald Egge, a South Dakota farmer. The collision occurred not far from Sioux Falls, South Dakota. The plaintiff sued Egge in a State court of South Dakota, and recovered a júdgment for $17,500 as damages. The car driven by Egge at the time of the accident belonged to Clifford Johansen and had been turned over by him to Egge on April 1, 1952. It had been insured by Johansen against liability for personal injury to the extent of $10,000. Johansen’s liability insurer paid that amount in partial satisfaction of the plaintiff’s judgment, leaving an unpaid balance of $7,500 and interest.

At the time of the collision on April 3, 1952, Egge had no automobile of his own. He had, however, two uncancelled automobile liability policies, each of which specifically described a motor vehicle which he had owned at the time the policy was issued, but which he had disposed of prior to the time of the accident. A policy issued on March 12,1952, by the Hawkeye Security Insurance Company (hereafter referred to as “Hawkeye”) specifically described a Dodge pickup truck, which Egge disposed of on March 27, 1952, by trading it in on another motor vehicle, which he sold prior to April 1,1952. The other liability policy, issued to Egge by the Wolverine Insurance Company (hereafter referred to as “Wolverine”) on July 8, 1951, specifically described a 1951 Buick, which Egge sold on March 4, 1952. He had, on February 20, 1952, ordered from an automobile dealer in Luverne, Minnesota, a new Buick, subject to delivery. It had not been delivered at the time of the accident.

The Wolverine policy had been procured by Egge from E. J. Pearson, of Brandon, South Dakota, who was a licensed agent for Wolverine. Pearson knew of the sale by Egge of the car described in the Wolverine policy and of Egge’s having ordered a new car. Pearson suggested to Egge that he leave the Wolverine policy in effect, rather than cancel it “short rate”, and that he transfer the policy to the new Buick when he obtained it. No Buick of the type ordered by Egge on February 20,1952, was delivered until October 4, 1952. A different model Buick was delivered to him August 1, 1952, pursuant to an order of July 31, 1952.

The Hawkeye policy .covering the Dodge pickup truck was procured by Egge from R. O. Wangsness, of Garret-son, South Dakota, a licensed agent of Hawkeye. Wangsness knew of the sale by Egge of the pickup truck described in the Hawkeye policy.

The policies in suit contained substantially similar provisions, and both were in effect on April 3, 1952, “subject to the terms, conditions and limitations contained therein.”

Upon the claim that the Hawkeye policy covered Egge’s liability to the plaintiff resulting from the collision of April 3, 1952, and that Hawkeye was therefore obligated to pay the unpaid balance of the plaintiff’s judgment, the instant action was brought against Hawkeye. By a third party complaint, Hawkeye brought Wolverine into the action as a third party defendant, asserting, in substance, that if Hawkeye were to be adjudged liable to the plaintiff, Wolverine would also be liable and should be required to pay its pro-rata share of the judgment.

Each of the defendants denied liability on the grounds that the motor vehicle described in its policy was not owned by Egge at the time of the collision and that the motor vehicle which he was then operating had been furnished for his regular use and was not within the coverage of the policy. Hawkeye in its answer asserted that the automobile was then being used by Egge in the operation of a sales agency.

By the terms of the policies in suit, the definition of “automobile” in Insuring Agreement IV includes the motor vehicle described in the policy and a “Newly Acquired Automobile—an automobile, ownership of which is acquired by the named insured who is the owner of the described automobile, if the named insured notifies the company within thirty days following the date of its delivery to him, and if either it replaces an automobile described in this policy or the company insures all automobiles owned by the named insured at such delivery date; * *

Insuring Agreement V, in pertinent part, provides:

“Use of Other Automobiles. If the named insured is an individual who owns the automobile classified as ‘pleasure and business’, * * * such insurance as is afforded by this policy for bodily injury liability, for property damage liability and for medical payments with respect to said automobile applies with respect to any other automobile, * *

The automobiles described in the policies in suit were classified as “pleasure and business.”

Subdivision (b) of Insuring Agreement V provides:

“This insuring agreement does not apply:

“(1) to any automobile owned by, hired as part of a frequent use of hired automobiles by, or furnished for regular use to the named insured or a member of his household other than a private chauffeur or domestic servant of the named insured or spouse;

******

“(3) to any accident arising out of the operation of an automobile repair shop, public garage, sales agency, service station or public parking place.

* * * * * ”

Insuring Agreement VIII reads as follows:

“Policy Period, Territory, Purposes of Use. This policy applies only to accidents which occur and to direct and accidental losses to the automobile which are sustained during the policy period [one year], while the automobile is within the United States of America, its territories or possessions, Canada or Newfoundland, or is being transported between ports thereof, and is owned, maintained and used for the purposes stated as applicable thereto in the declarations [attached to the policy].”

With respect to the asserted liability of Hawkeye under its policy, the trial judge in his memorandum opinion said:

“Several issues and contentions by the various parties are presented by the pleadings and are covered by the briefs submitted. However, following the oral argument, these issues were narrowed considerably. It was conceded by counsel for the plaintiff that in order for there to be any coverage under either of the insurance policies here involved, and as a basis for plaintiff’s right of recovery herein, Donald Egge must have been the owner of an automobile as such ‘automobile’ is defined under the policies in question. Such an automobile, the ownership of which must have been in Donald Egge at the time of the accident must either be the ‘described automobile’, or, under IV (4) a ‘newly acquired automobile’. It is undisputed that Egge sold the 1951 Buick described in the Wolverine policy on March 4,1952, and that on or about March 31, 1952, sold the pickup truck described in the Hawk-eye policy. It was likewise conceded during ■ the oral argument that Egge’s newly acquired automobile, if any there was, must have replaced the automobile described in the policy of insurance, and would not be just an additional automobile. It was likewise conceded by plaintiff’s counsel that the ‘new car order’, a copy of which is attached to the agreed statement of facts, was intended to replace the 1951 Buick described in the Wolverine policy, and that because it did not replace the pickup truck described in the Hawk-eye policy, that at the time of the collision Egge was not the owner of an ‘automobile’ such as is required under the terms of the Hawkeye policy to render that company liable in this action. Therefore, judgment herein will be in favor of the Hawk-eye and against the plaintiff.”

With respect to the asserted liability of Wolverine to the plaintiff under its policy, the trial judge ruled that Egge, at the time of the collision, did not have a-“newly, acquired automobile” within the-meaning of the policy, and that, since he had sold the Buick automobile described in the policy, Wolverine was not liable to the plaintiff.

Counsel for the plaintiff do not concede upon this a,ppeal that Egge, at the time of the collision, must have been the owner of an “automobile” as defined in the policies in suit in order to have coverage. It is now contended on behalf of the plaintiff that, since Egge owned the automobiles described in the policies at the time they were issued, and since Insuring Agreement V covered the use of other automobiles not owned, and since the policies contained no provision that a sale of the “described automobile” should terminate or suspend that coverage, it must be held that the liability of Egge to the plaintiff, due to Egge’s use of the Johansen car, was covered by the policies in suit.

The defendants argue that the plaintiff should be held to be bound by the concession of his counsel at the trial, that to be within the coverage of the policies Egge must have owned an “automobile” at the time of the collision. We think an erroneous concession as to the coverage of a policy of insurance which is before a trial court for interpretation should not be held to bind a litigant. The question of coverage under the policies in suit, which were South Dakota contracts, was a question of South Dakota law, and not an issue of fact. If the trial court, in reliance upon the concession of counsel for the plaintiff, misconceived or misapplied the applicable law, the judgment should, we think, nevertheless be vacated.

We agree with the trial court that Egge, at the time of the collision, did not own an “automobile” within the meaning of either policy. That being so, Egge was not at that time covered by Insuring Agreement V of either of the policies in suit, since he was not “an individual who owns the automobile classified as ‘pleasure and business’ ”, and there was no insurance afforded by the policy “with respect to said automobile” and therefore none applicable “to any other automobile.” Insuring Agreement VIII, requiring that the automobile insured be “owned, maintained and used” for stated purposes, and limiting coverage territorially, inferentially supports the conclusion that coverage under Insuring Agreement V expired when ownership ended.

Concededly, this conclusion is not contrary to any pertinent decision of any court of South Dakota. The plaintiff finds some support in Freeport Motor Casualty Co. v. Tharp, 338 Ill.App. 593, 88 N.E.2d 499, 500, for his construction of the policies. It was held in that case that retention of ownership of the automobile described in a liability policy similar to those in suit was unnecessary to protection under the “use of other automobiles” provision. The opinion in that case is not persuasive. The court seems to have treated a rather obvious limitation of coverage as a provision for forfeiture. Its decision is based in part upon the fact that the automobile described in the policy had broken down, been withdrawn from service and sold for junk, and that the policy provided coverage for the “ ‘Temporary use of Substitute Automobile.’ ” The Tharp case was affirmed by the Supreme Court of Illinois on procedural grounds, and not on the merits. 406 Ill. 295, 94 N.E.2d 139.

The conclusion of the District Court that ownership of an insured automobile at the time of the accident was a prerequisite to coverage under Insuring Agreement V is supported by Campbell v. Aetna Casualty & Surety Co., 4 Cir., 211 F.2d 732, 735-736, and Byrd v. American Guarantee & Liability Ins. Co., D.C.E.D. Va., 89 F.Supp. 158, 159-160.

The burden of demonstrating that the trial court misconstrued the South Dakota policies in suit is upon the appellant. He has been unable to show that the conclusion reached by that court is contrary to any rule of local or general law or to the plain terms of the policies or that they were reasonably susceptible to a construction more favorable to the insured.

The attitude of this Court toward acceptance of the considered and not demonstrably erroneous views of a trial judge with respect to doubtful questions of the local law has been repeatedly stated by this Court. See Buder v. Becker, 8 Cir., 185 F.2d 311, 315; Mogis v. Lyman-Richey Sand & Gravel Corp., 8 Cir., 189 F.2d 130, 134; Citizens Insurance Co. of New Jersey v. Foxbilt, Inc., 8 Cir., 226 F.2d 641, 643.

The judgment appealed from is affirmed.