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Berger v. United States Fidelity & Guaranty Co.

argued: July 14, 1987.

JAMES M. BERGER, APPELLANT IN 86-5863
v.
UNITED STATES FIDELITY & GUARANTY COMPANY, A CORPORATION OF THE STATE OF MARYLAND, APPELLANT IN 86-5864 AND FITCHBURG MUTUAL INSURANCE COMPANY, A CORPORATION OF MASSACHUSETTS, APPELLEE



On Appeal from the United States District Court for the District of New Jersey, D.C. Civil No. 86-5121.

Higginbotham, Becker and Hunter, Circuit Judges.

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

These appeals are from grants of summary judgment in a declaratory judgment action arising out of an insurance coverage dispute between James M. Berger, an injured guest in a motor vehicle accident, and two carriers issuing policies to the owner of the vehicle in which Berger was riding and to the owner's business. The appeals involve questions about four different insurance policies: homeowner's, personal auto, business auto, and comprehensive general liability policies. We must first decide whether the district court properly granted partial summary judgment in favor of Fitchburg Mutual Insurance Company on the ground that an automobile exclusion in its homeowner's policy precluded recovery. Second, we must consider whether the district court properly granted partial summary judgment in favor of Berger against United States Fidelity & Guaranty Company (USF&G), holding that payments under a personal auto policy do not apply toward the maximum pay-out of a business auto policy issued by USF&G, even though the business auto policy contains a clause limiting the aggregate payout from "two or more policies" of the insured. Third, we must review the district court's grant of partial summary judgment in favor of USF&G on the ground that the exclusion in USF&G's comprehensive general liability policy for auto accidents of insureds in the course of their employment applies in this case. Fourth, we must decide whether a clause limiting liability in the USF&G business auto policy applies to the USF&G comprehensive general liability policy negotiated at the same time between the same parties.

We affirm the judgment in favor of Fitchburg because we agree with the district court's holding that the homeowner's policy does not apply to this accident. Turning to the claims against USF&G, we affirm the district court's determination that because the insured was not the same legal entity in both the personal and the business insurance policies, payments from one policy cannot count toward the maximum pay-out of the other. However, we reverse the district court's declaration as to the applicability of the exclusion in the comprehensive general liability policy, because we find that genuine factual disputes exist about whether the driver acted within the scope of his employment and about whether the work on the vehicle constituted rebuilding or mere maintenance. Finally, we reject USF&G's argument that its business auto and comprehensive general liability policies, each of which contain integration clauses, were intended to be read together, and that the limiting term in the business auto policy controls recovery under the separate comprehensive general liability policy. We therefore affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

This case arose out of an automobile collision on November 4, 1982. Plaintiff-appellant James Berger was a passenger in a rebuilt 1966 Plymouth Barracuda operated by Berger's friend Craig J. Buffington (Craig) and owned by Craig F. Buffington (Mr. Buffington), Craig's father. The collision occurred when the Buffington vehicle crossed over into on-coming traffic and hit another car head-on. Because the seat belts had not been reinstalled in the car during the rebuilding, Berger crashed through the front passenger door and sustained a obtain stem injury which has significantly reduced his cognitive functioning. Berger has incurred large medical expenses and faces additional large medical expenses in the future, as well as a huge projected loss of future earnings and earning power. Mr. Buffington purchased the Barracuda in 1968 but did no work on it until approximately one month before the accident. Actually, Craig did most of the worm on the premises of Atco Pump and Equipment Company, a general partnership between Mr. Buffington and Wolfgang Schmitter, outside Atco's normal business hours but using Atco's tools and equipment. Mr. Buffington made frequent inspections of the work. At the time of the collision, in addition to the missing seat belts, the speedometer was not connected. Berger testified at trial that Craig had told him that Mr. Buffington had asked Craig to pick up a part for Atco Pump on the evening of the accident, an allegation that the Buffingtons vigorously dined.

Berger instituted suit in New Jersey state court, alleging that the Buffingtons were negligent in rebuilding the Barracuda. Berger also charged Mr. Buffington with negligent entrustment of the vehicle to Craig. Berger settled with all defendants on the underlying tort claims, but disagreements remained as to the applicability of certain insurance policies: (1) a homeowner's police issued by Fitchburg to Mr. Buffington; (2) a personal auto policy issued by USF&G to Mr. Buffington with $15,000 to $30,000 coverage; 3) a business auto policy issued by USF&G to Atco Pump with $100,000 in coverage which included a "two or more policies" clause limiting recovery to the maximum pay-out under any one policy; and (4) a comprehensive general liability policy issued to Atco Pump by USF&G with $100,000 in coverage.

The settlement provided that USF&G would pay $15,000 to Berger from there personal auto policy and $84,000 from the business auto policy. The parties further agreed to enter into a declaratory judgment action in New Jersey state court to determine the applicability of the USF&G comprehensive general liability police and the validity of the "two or more policies" set-off provision of the USF&G business auto policy. A driver of one of the other vehicles involved in the accident, who is also a claimant under the USF&G policies, collected $16,000 from USF&G, of which $15,000 was paid pursuant to the personal auto policy and $1,000 pursuant to the business auto policy. USF&G has thus paid a total of $115,000 to Berger and the other claimant, although it claims that its total fund of insurance available for all claims regarding the accident is only $100,000.

Berger also included Fitchburg in the declaratory judgment action, seeking to establish a right to recovery under the Fitchburg homeowner's policy on the theory that, if USF&G's general liability policy did not apply, the Buffingtons would be afforded coverage under the homeowner's policy or, in the alternative, that Mr. Buffington would be afforded coverage for his alleged negligent entrustment of the vehicle.

Defendants removed the action to the district court for the District of New Jersey because of diversity of citizenship. On cross motions for summary judgment, the district court granted Fitchburg's motion, determining that the homeowner's policy issued by it excluded coverage for the collision. The court granted Berger's motion in part, determining that the "two or more policies" clause in the business auto policy issued by USF&G did not apply to the personal auto policy coverage issued by USF&G. The court granted USF&G's motion in part, determining that the comprehensive general liability policy issued to Atco Pump excluded coverage for the collision. Because it found that USF&G's comprehensive general liability policy did not apply, the district court did not reach the question whether the "two or more policies" clause of USF&G's business auto policy applied to the general comprehensive liability policy. Under the terms of the court's order, Berger received another $15,000 under the business auto policy.

Berger has appealed from the portion of the district court's ruling determining that the Fitchburg homeowner's policy and USF&G's comprehensive general policy contained valid exclusions from coverage. USF&G has cross-appealed from the court's determination that the "two or more policies" clause in the business auto policy did not apply to the personal auto policy coverage. It also argues that, even if the exclusion in the general liability policy did not apply, Berger is prohibited from any further recovery from USF&G because of the "two or more policies" clause in the business auto policy.

II. THE FITCHBURG HOMEOWNER POLICY

The Fitchburg homeowners policy contains an exclusion for injuries arising out of the ownership, operation or maintenance of an auto owned or operated by an insured. The policy contains the following exclusion:

Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily injury or property damage:

e. arising out of the ownership, maintenance, use loading ...


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