The opinion of the court was delivered by: SHERIDAN
In this action tried to the court without a jury, the issue is which of the insurance policies issued by the respective parties provided coverage on a vehicle involved in an accident in which Mr. and Mrs. John P. Loftus sustained personal injuries resulting in their deaths.
Mr. Loftus purchased a Ford Mustang from Linden Motors, Inc., a Ford agency. On October 29, 1965, Loftus returned the Mustang to Linden for service. William G. Barnhart, president of Linden, informed Loftus the service could not be completed on that date and offered to lend him a company-owned demonstrator. At first Loftus declined the offer, but during the evening of October 29, he decided to drive to Montrose, Pennsylvania, and borrowed a 1966 company-owned Ford from Barnhart, who was his next door neighbor. While enroute to Montrose, the Ford, driven by Loftus, collided with a truck. Mrs. Loftus died later the same day from injuries received in the accident. Mr. Loftus was rendered unconscious and remained unconscious until his death on May 2, 1967.
The Mustang was covered by a standard family automobile policy issued to Loftus by plaintiff, United States Fidelity and Guaranty Company (Fidelity). It insured against bodily injury liability to the extent of $50,000 for each person and $100,000 for each accident. The Ford was covered by a policy issued to Linden by defendant, Liberty Mutual Insurance Company (Liberty).
The administratrix of the estate of Mrs. Loftus brought a wrongful death and survival action in this court, asserting that negligence of Mr. Loftus caused the accident. The guardian of the estate of Mr. Loftus turned the complaint over to Fidelity to defend and to pay any judgment in accordance with its policy. Fidelity in turn requested Liberty to defend on the ground that its policy provided primary coverage. Liberty refused and Fidelity undertook the defense. The action was settled for $25,200 which Fidelity paid, together with $2,256.80 in counsel fees and costs. Fidelity brought this action against Liberty, contending that Liberty was the primary insurer covering Loftus, that the Fidelity policy was only secondary or excess, and that Liberty should have defended and paid the settlement. The parties agree that the settlement and attorney's fees are fair and reasonable.
The Liberty policy contained the following standard provisions:
(a) The ownership, maintenance or use of any automobile for the purpose of garage operations, and the occasional use for other business purposes and the use for non-business purposes of any automobile owned by or in charge of the named insured and used principally in garage operations, and
(b) The ownership, maintenance or use of any automobile owned by the named insured while furnished for the use of (i) the named insured, a partner therein, an executive officer thereof or, if a resident of the same household, the spouse of any of them, or (ii) any other person or organization to whom the named insured furnishes automobiles for their regular use.
Persons Insured. Each of the following is an insured under Part I, except as provided below:
(3) With respect to the Automobile Hazard:
(a) any person while using, with the permission of the named insured, an automobile to which the insurance applies under paragraph 1(a) or 2 of the Automobile Hazards, provided such person's actual operation or (if he is not operating) his ...