FILED. No. 17,569. United States Court of Appeals. For the Ninth Circuit JUL 1. Company, a Corporation, Appellees.

Transcription

1 No. 17,569 IN THE United States Court of Appeals For the Ninth Circuit Indemnity Insurance Company of North America, a Corporation, Appellant, vs. California Stevedore & Ballast Company, a Corporation, and Metropolitan Stevedore Company, a Corporation, Appellees. APPELLANT'S REPLY BRIEF Charles V. Barfield, Barfield, Barfield & Dryden, 111 Sutter Street, San Francisco 4, California, Herbert Chamberlin, 1650 Russ Building, San Francisco 4, California, Attorneys for Appellant. FILED JUL 1 FRANK H. SCHMIOf,

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3 4 Subject Index Page Foreword 1 1. The judgment against appellant should be reversed for the reason that the evidence established as a matter of law that the claims asserted against the insured by the shipowners and operators were not within the coverage of the policy or policies involved. (AOB ) 1 2. The judgment against appellant should be reversed for the reason that the evidence established as a matter of law that appellees were not entitled to an award of counsel fees or costs in defending against the third party complaints of the shipowners or operators. (AOB 20.) 6 Conclusion 7 Table of Authorities Cited Cases Pages American Fidelity & Cas. Co. v. Indemnity Ins. Co., D.C. Ohio 1961, 195 F. Supp American Mutual Liability Ins. Co. v. Goff, 9 Cir. 1960, 281 F. 2d 689 3, Angel v. Bullington, 1947, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed Atlantic and Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 82 S.Ct Continental Cas. Co. v. Zurich Ins. Co., 57 C. 2d (A.C. 1, 9), 17 Cal. Reptr. 12, 366 P. 2d Davis v. Aetna Life Ins. Co., 9 Cir. 1960, 279 F. 2d Gates v. General Casualty Co. of America, 9 Cir. 1941, 120 F. 2d General Ace. Fire & L. Assur. Corp. v. Independent M.A.T. Assn., 9 Cir., 232 F. 2d 439 3

4 ii Table of Authorities Cited Pages Georgia Casualty Co. v. Boyd, 9 Cir. 1919, 34 F. 2d Getlin v.' Maryland Cas. Co., 9 Cir. 1952, 196 F. 2d Gilkey v. Andrew Weir Ins. Co., 9 Cir. 1961, 291 F. 2d Guaranty Trust Co. of N.Y. v. York, 1945, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed Lewis Food Co. v. Milwaukee Ins. Co., 9 Cir. 1958, 257 F. 2d Matsuo Yoshida v. Liberty Mutual Ins. Co., 9 Cir. 1957, 240 F. 2d 824 4, 5 Merchants Fire Assur. Corp. v. Lattimore, 9 Cir. 1958, 263 F. 2d Michigan Mutual Liability Co. v. Continental Cas. Co., 7 Cir. 1961, 297 F. 2d National Fire Ins. Co. v. Corey, 9 Cir. 1958, 249 F. 2d Ritchie v. Anchor Ins. Co., 1955, 135 C.A. 2d Rubino v. Utah Canning Co., 1954, 123 C.A. 2d 18 6 Ryan Stevedoring Co. v. Pan Atlantic S.S. Corp., 1956, 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed Standard Ins. Co. of Detroit v. Winget, 9 Cir. 1952, 197 F. 2d 99 3 State Farm Mutual Auto. Ins. Co. v. Palmer, 9 Cir. 1956, 237 F. 2d United States v. Arrow Stevedoring Co., 9 Cir. 1949, 175 F. 2d United States Fidelity & G. Co. v. American F. & C. Co., 7 Cir. 1962, 299 F. 2d Wilburn Boat Co. v. Fireman's Fund Ins. Co., 1955, 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed

5 No. 17,569 IN THE United States Court of Appeals For the Ninth Circuit Indemnity Insurance Company of North America, a Corporation, Appellant, vs. California Stevedore & Ballast Company, a Corporation, and Metropolitan Stevedore Company, a Corporation, Appellees. APPELLANT'S REPLY BRIEF FOREWORD. In presenting this reply brief the appellant will adhere to subdivision headings of its opening brief. THE JUDGMENT AGAINST APPELLANT SHOULD BE RE- VERSED FOR THE REASON THAT THE EVIDENCE ESTAB- LISHED AS A MATTER OF LAW THAT THE CLAIMS AS- SERTED AGAINST THE INSURED BY THE SHIPOWNERS AND OPERATORS WERE NOT WITHIN THE COVERAGE OF THE POLICY OR POLICIES INVOLVED. (AOB ) A large part of appellee's brief is devoted to a a demonstration" that implicit in every contract for

6 doing stevedoring work aboard ship is an implied warranty that the work will be done in a workmanlike manner, thereby indemnifying the shipowner or operator against its breach. That doctrine was not in dispute in the trial court. It is not in dispute in this court. Appellees are in error in supposing that the doctrine was created by the decision of the Court in Ryan Stevedoring Co. v. Supreme Pan Atlantic S.S. Corp., 1956, 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed The doctrine was recognized by this court several years before the Ryan decision in United States v. Arrow Stevedoring Co., 9 Cir. 1949, 175 F. 2d 329. Its last appearance in the Supreme Court was in Atlantic and Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 82 S.Ct. 780, decided April 2, While the origin and development of the doctrine may be of interest historically or in an abstract way, the doctrine itself has no importance or significance so far as the determinative question on this appeal is concerned. The determinative question here, as in the trial court, is whether the policies of liability insurance issued by appellant to appellees and upon which the action is based, extended coverage against the claims asserted by the appellees. That question must be answered by the insurance law of California. The law is thoroughly settled that in a diversity case such as this involving insurance law a federal court is in effect merely another court of the state in which it sits, and its decision must be according to the law of that state, here California. (Wilburn Boat Co. v. Fireman's Fund his. Co., 1955, 348 U.S. 310, ,

7 75 S.Ct. 368, (6), 99 L.Ed. 337; Angel v. Bullington, 1947, 330 U.S. 183, 187, 67 S.Ct. 657, 91 L.Ed. 832, 835 ; Guaranty Trust Co. of NY. v. York, 1945, 326 U.S. 99, , 65 S.Ct. 1464, 89 L.Ed ) Over the years this court has uniformly followed and applied the law thus prescribed by the Supreme Court, where insurance law was involved. (Georgia Casualty Co. v. Boyd, 9 Cir. 1919, 34 F. 2d 116, (2) ; Gates v. General Casualty Co. of America, 9 Cir. 1941, 120 P. 2d 925, (1) ; Getlin v. Maryland Cos. Co., 9 Cir. 1952, 196 F. 2d 249, 259 (1, 2) ; Standard Ins. Co. of Detroit v. Winget, 9 Cir. 1952, 197 F. 2d 99 (1) ; General Ace. Fire & L. Assur. Corp. v. Independent M.A.T. Assn., 9 Cir. 232 F. 2d 439 (1) ; State Farm Mutual Auto. Ifis. Co. v. Palmer, 9 Cir. 1956, 237 F. 2d 887, 891 (1) ; National Fire Ins. Co. v. Corey, 9 Cir. 1958, 249 F. 2d 388, 393 (2) ; Lewis Food Co. v. Milwaukee Ins. Co., 9 Cir. 1958, 257 F. 2d 515, 530 (5) ; Merchants Fire Assur. Corp. v. Lattimore, 9 Cir. 1958, 263 F. 2d 232, 239 (4) ; Davis v. Aetna Life Ins. Co., 9 Cir. 1960, 279 F. 2d 304, 307 (1) ; American Mutual Liability Ins. Co. v. Goff, 9 Cir. 1960, 281 F. 2d 689, 691 (fn 2) ; Gilkey v. Andrew Weir Ins. Co., 9 Cir. 1961, 291 F. 2d 132, 136 (3-5).) Out of the numerous cases just cited only the Goff case (281 F. 2d 689) and the Lattimore case (263 F. 2d 236) were cited in appellant's opening brief in support of the rule which all (AOB 14.) the foregoing cases reflect. Appellees brush them aside with the statement that "it needs only be added that the cases cited by appellant deal with property liability policies".

8 (BA 34.) Appellees are mistaken. The Goff case involved a policy of malpractice insurance and the death of a patient due to the negligence of a drug-addicted doctor. The policy there was not a property liability policy. The cases above collected clearly show that the rule stated applies equally to bodily injury liability policies and property liability policies. At page 4 of their brief the appellees advocate a rule that an insurance policy should be interpreted against an insurer upon a consideration of a detached part thereof rather than upon a consideration of the policy in its entirety. That is not the California law. The cases cited at pages 14 and 15 of appellant's opening brief, including the recent case of Continental Cas. Co. v. Zurich Ins. Co., 57 C. 2d (A.C. 1, 9) (7), 17 Cal Reptr. 12, 366 P. 2d 455, are to the effect that an insurer is entitled to have its policy fairly interpreted and its integrity respected upon a consideration of the entire policy. Included in the cases thus cited was the decision of this court in Matsuo Yoshida v. Liberty Mutual Ins. Co., 9 Cir. 1957, 240 F. 2d 824, upholding the defense of noncoverage under a bodily injury liability policy. Commencing at page 826 it was there said (citations omitted) : "(1-3) This Court has recognized and adhered to the well-settled rule of construction that where ambiguity or uncertainty exists in an insurance contract, such ambiguity or uncertainty will be resolved adversely to the insurer. The rule has particular application where exclusions are involved. However, the rule is not without limitation. Some actual or apparent ambiguity must be present be-

9 fore the rule comes into play. Where there is no ambiguity, there is nothing to be construed. And a court cannot and should not do violence to the plain terms of a contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract. As stated by the California Supreme Court in Continental Cas. Co. v. Phoenix Construction Co., supra (46 Cal. 2d 423, 296 P. 2d 806) 'An insurance company has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected.' " No comment on the Matsua Yoshida case appears in appellees' brief. It was demonstrated in appellant's opening brief (AOB 15-16) that reasonable interpretation and fair consideration of each policy involved in its entirety would prompt a logical conclusion that the parties to the insurance contract intended to exclude coverage for bodily injury sustained by employees of the insureds entitled to workmen's compensation. Eleven cases were there cited in support of that conclusion. (AOB ) None has been challenged, answered, or differentiated in the brief for appellees. Others may be added. (United States Fidelity & G. Co. v. American F. & C. Co. 7 Cir. 1962, 299 P. 2d 215; Michigan Mutual Liability Co. v. Continental Cas. Co. 7 Cir. 1961, 297 F. 2d 208 ; American Fidelity & Cas. Co. v. Indemnity Ins. Co. D.C. Ohio 1961, 195 P. Supp. 648.)

10 It was also demonstrated in appellant's opening brief (AOB 18-20) that under California insurance law an implied warranty is not regarded as an obligation assumed by contract but is regarded as one imposed by law. (Ritchie v. Anchor Ins. Co. 1955, 135 C.A. 2d 245, 256 (13).) Appellees do not cite any California insurance case to the contrary. The general rule in California is along the line of the Ritchie case. (Rubino v. Utah Canning Co. 1954, 123 C.A. 2d 18, 21 (2).) The same rule has often been applied elsewhere to hold an insurance company liable. (AOB 19.) Here the appellees are asking the court to disregard the rule in order to hold appellant liable although the California law requires a holding of nonliability. Moreover, appellees are forced to further extremes. They seek to capitalize on the fact that certain claims were settled. (B.A ) They fail to inform the court, however, that such claims were settled without prejudice to the remaining claims now before this court. (TR , 245.) 2. THE JUDGMENT AGAINST APPELLANT SHOULD BE RE- VERSED FOR THE REASON THAT THE EVIDENCE ESTAB- LISHED AS A MATTER OF LAW THAT APPELLEES WERE NOT ENTITLED TO AN AWARD OF COUNSEL FEES OR COSTS IN DEFENDING AGAINST THE THIRD PARTY COM- PLAINTS OF THE SHIPOWNERS OR OPERATORS. (AOB 20.) If the court agrees with the position of the appellant as outlined in the preceding subdivision, the award of counsel fees and costs will fail for lack of basis. Additional arguments under this subdivision are therefore not indicated.

11 CONCLUSION. Appellant respectfully submits that the judgment against it is not a just one. Each policy it issued excluded coverage for bodily injury to an employee of the insured compensable under any workmen's compensation laws. Bodily injury to employees of an insured occurred for which the employees received workmen's compensation from the insured employer. Because of the payment of such workmen's compensation the insured was entitled to a lien on and recovery from any judgment for bodily injury obtained by any employee against a shipowner or operator. Each policy provided that the appellant as insurer was to be subrogated to all the insured's rights of recovery against "any person". Injured employees of the insured obtained judgments against shipowners or operators and the insured had a lien thereon for workmen's compensation payments. In turn, shipowners asserted rights of indemnity over against insureds. In the adjustment of these claims the injured employee of insured received or was entitled to receive the amount of his judgment less the amount of workmen's compensation paid by the employer. In the judgment herein, and in the face of policies excluding coverage for bodily injury to employees of the insured, the entire financial burden of the employers of the injured employees has been shifted to appellant. They were rquired to pay the entire amount of judgments in favor of employees of the insured or the entire amount for which claims were settled. Although the insured were entitled to receive and did receive reimbursment

12 8 for workmen's compensation payments to employees, the insureds simply pocket such sums. The appellant has been required to foot the entire bill in a case which is plainly one of nonliability. It has been required to pay the full amount of every claim for bodily injury asserted by an employee of its insured against a shipowner or operator and for which the insured has become liable through indemnity over. allowed any recoupment made by its It was not even insured. For the reasons stated in its opening brief and herein supplemented appellant respectfully submits that a miscarriage of justice occurred in the trial court and that the judgment against appellant should be reversed with directions to the lower court to enter judgment in its favor. Dated, San Francisco, California, June 25, Charles V. Barfield, Barfield, Barfield & Dryden, Herbert Chamberlin, Attorneys for Appellant.