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BRUNNER v. MCCULLOUGH

April 24, 1963

Albert Frederick BRUNNER
v.
William A. McCULLOUGH, Jr. v. AMERICAN MOTORISTS INSURANCE COMPANY and American Hardware Mutual Insurance Company



The opinion of the court was delivered by: WOOD

The only unresolved question in this motor vehicle case is the extent, if any, of the third-party defendants' insurance coverage of the defendant, William A. McCullough, Jr. The plaintiff's action has been settled, and the defendant voluntarily dismissed his counterclaim. Only the third-party action of William A. McCullough, Jr., hereinafter referred to as 'McCullough,' and the cross-claim between the insurance companies are at issue.

All of the parties have waived a jury trial and extensive findings of fact and conclusions of law.

 When this accident occurred, McCullough was President of Transmissions & Conveyors, Inc., which was then on the verge of bankruptcy, and at the same time he was employed as a salesman by Rodney Davis Gear Company. Both of these companies were original defendants but were subsequently dismissed because of lack of diversity of citizenship, leaving McCullough as the sole defendant.

 Rodney Davis Gear Company, hereinafter referred to as 'Davis,' was insured by American Motorists Insurance Company and Transmissions & Conveyors, Inc., hereinafter referred to as 'T. & C.,' was insured by the American Hardware Mutual Insurance Company. When both employers were dismissed from this action, their insurers refused to defend McCullough and he filed his third-party action naming them as defendants.

 One of the reasons McCullough was denied coverage was because he was driving an automobile owned and titled in his wife's name. Another reason alleged by the insurance companies is that these policies were intended to protect the employer on principles of respondeat superior and not the individual employee. McCullough argues that both policies covered him at the time of this accident and that he was serving both employers. Immediately prior to the accident McCullough had completed a call in Lansdale on a prospective customer of Davis, and he was on his way to Hatboro, via Willow Grove, in an attempt to recover a debt owing by the Hull Corporation to T. & C. He planned on having his lunch in Willow Grove, but before he ever left Lansdale the accident occurred.

 American Motorists acknowledged that McCullough was operating his wife's car on Davis' business and his negligence caused the accident. As a result of this determination, American Motorists negotiated a settlement of.$ 4190.00 with the plaintiff. Now, this company seeks contribution or indemnity via a cross-claim against American Hardware Mutual alleging that its policy alone covered both McCullough and T. & C. American Hardware argues that McCullough was still operating within the scope of Davis' employment.

 McCullough employed an attorney to represent him during his defense of the plaintiff's action. It has been agreed by all parties that the fair value of these legal services is $ 400.00 and he seeks to recover this amount in his third-party action.

 This unusual set of facts presents a problem of policy interpretation which we feel is dispositive of the entire matter without considering the agency question.

 A. AMERICAN MOTORISTS INSURANCE POLICY

 The applicable portions of the American Motorists policy provide coverage to persons while they are using a hired automobile with the permission of the named insured. *fn1" A hired automobile includes within its definition a loaned vehicle. *fn2" The officers of the Davis company recognized this automobile to be a loaned vehicle by their continued acquiescence in McCullough's use of the car on company business. They ratified this arrangement by paying McCullough eight cents a mile for his expenses.

 We, therefore, conclude that the American Motorists policy covered McCullough at the time of this accident.

 B. AMERICAN HARDWARE MUTUAL'S POLICY

 The American Hardware policy contains an 'employer's non-ownership liability endorsement,' which reads as follows:

 'It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability and for Property Damage Liability applies with respect to non-owned ...


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