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September 13, 1971

FREY, Plaintiff

Marsh, Chief Judge.

The opinion of the court was delivered by: MARSH

MARSH, Chief Judge.

In this diversity contract case, tried to a jury, judgment was entered on the verdict in favor of the plaintiff, Vernon G. Frey, in the amount of $11,275, with interest from September 11, 1967. The defendant, Security Insurance Company of Hartford, moved for a judgment notwithstanding the verdict, and, in the alternative, for a new trial. It is our opinion that the defendant's motions should be denied.

 The defendant, Security Insurance Company of Hartford, the successor by merger to the New Amsterdam Casualty Company, was the plaintiff's liability insurance carrier.

 The operative facts in the present case may be stated as follows:

 On July 9, 1962, Samuel J. Enos of the Hampton Township Municipal Authority borrowed a backhoe and an operator, Lawrence Claus, from Frey's excavating company to dig a trench so that the main water line, running parallel to the street, could be connected with a water service line extending under a lot in Richland Township into a house inhabited by the Ulrich family. This work appears to have been performed pursuant to a long-standing informal arrangement between the Authority and Frey and was effectuated by his foreman, William C. Mathews. Frey was not present during the trenching nor did he have personal knowledge thereof.

 On December 15, 1962, six and one-half months after the water tap-in was made, the Ulrich home was destroyed by an explosion and certain members of the family were injured. News accounts attributing the cause of the explosion to an accumulation of gas came to the plaintiff's attention.

 In February, March or April of 1963, Enos met Frey, fortuitously, and informed him for the first time that his backhoe and operator had been used to dig the trench in the street which was required for the Ulrich water service connection. Enos told Frey that he had observed Claus operating the backhoe; that the Frey machine was at no time on the Ulrich property; that the trenching was performed exclusively in the street; and that the backhoe had not touched or disturbed the main gas line which ran underground parallel to the street and a couple of feet above the water service line which extended from the house to the street.

 Aware for the first time that his employee had worked in the vicinity of the Ulrich home, Frey summoned Claus and his foreman, Mathews, to discover what they knew about the work Claus had performed. Claus' story substantiated what Enos had already told Frey. Claus informed Frey that all the work had been performed in the street some distance from the Ulrich house. In addition, Claus stated that the water service line under the street and below the main gas line was turned up in front of the gas line, and he could not have operated the backhoe closer than one foot of the gas line without cutting the water line which had not been done. He denied disturbing or touching the gas line. *fn1"

 Sometime after his conversation with Enos, Frey was told that the gas company had removed a section of gas line from the vicinity of the explosion. It does not appear that he was told from what particular place this section of pipe was removed.

 Frey testified that he did not report the Ulrich explosion to the defendant company after talking to Enos and Claus because the facts established that he was not involved in causing the explosion in the Ulrich home.

 In due course the Ulrich family filed suit against the gas company for personal injuries in the state court at April Term, 1963; and Republic Insurance Company, probably as the Ulrichs' subrogee, filed suit for property damage in the state court at October Term, 1963. Eventually there were six defendants in these two cases, i.e.: the gas company, the builder of the house, the plumber who worked on the house, the excavator, and two municipal authorities. *fn2" The Hampton Township Authority was brought into the case in May, 1963, but it was not until March 6, 1964, that Frey was brought into these actions as an additional defendant. Frey learned of these lawsuits for the first time in March, 1964, when he was served with the suit papers and immediately notified the defendant company.

 The defendant, by its attorneys, appeared on behalf of plaintiff, and conducted a preliminary investigation. On or about July 13, 1964, the defendant disclaimed liability, inter alia, for the reason that Frey had failed to report the accident as soon as practicable. Thereupon, Frey employed his own counsel, made a settlement in the sum of $13,333.33, and brought suit against the defendant for this amount, plus costs, legal fees and investigation expenses -- a total of $14,633.33. Frey's share of the $10,000 settlement for the property damage was $3,333.33, plus $25.00 costs. The defendant's motion to disallow this amount was granted because property damage caused by explosion was excluded under the terms of the policy.

 The total amount recovered by the Ulrich family in the state court by way of settlement for personal injuries was $77,500. Plaintiff's share of the settlement for personal injuries was $10,000, plus $25.00 costs. Thus, it was never legally determined which of the seven defendants ...

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