groundless, false or fraudulent." The law, in general, imposes upon the insurer a duty to defend any legal action against its insured. Since Clark Transfer and Trans Country were both "insured persons" under both policies as either the named insured or covered under the "omnibus" or "Truckmen's endorsement" clauses, both carriers had a duty to defend both Clark Transfer and Trans Country.
One line of cases holds that the duty to defend is a personal duty owed by the insurer to his insured and that where more than one company insures a party, all who insure owe that duty to defend, without any right of subrogation or contribution. Thus, each insurer would bear its own costs without right of contribution. United States Fidelity and Guaranty Co. v. Tri-State Insurance Co., 285 F.2d 579 (10th Cir. 1960), holds that the excess carrier cannot recover fees and costs from the primary carrier even where there is a wrongful refusal on the part of the primary carrier to defend. Inferentially, at least, the Fifth Circuit so held in American Fidelity and Casualty Co. v. Pennsylvania Threshermen and Farmers' Mutual Casualty Ins. Co., 280 F.2d 453, 459-460, n. 11 (5th Cir. 1960). This circuit in the case of Continental Casualty Co. v. Curtis Publishing Co., 94 F.2d 710 (3rd Cir. 1938), denied recovery for counsel fees and costs incurred by the excess carrier of Curtis against the primary carrier (the owner's vehicle carrier).
Other courts have held to the contrary, especially where there is a demand by the excess carrier to the primary carrier to take over the defense. E.g., American Surety Co. of New York v. Canal Insurance Co., 258 F.2d 934 (4th Cir. 1958). In United States Fidelity & Guaranty Co. v. Millers Mutual Fire Ins. Co. of Texas, 396 F.2d 569, 573, 573 n. 4 (8th Cir. 1968), where the question was reserved for the lower court, the court noted that Minnesota had a rule of "no contribution," California had a rule of contribution, and Missouri allowed complete indemnity in some cases and pro rata contribution in others. In Crowley's Milk Co. v. American Mutual Liability Insurance Co., 313 F. Supp. 502 (E.D.N.Y. 1969), Judge Dooling, without deciding the issue of costs and fees, discussed the split in the various courts and expressed preference for the view permitting recovery of costs and counsel fees where there has been a demand by the excess carrier upon the primary carrier to defend. The decided cases are all based on diversity of citizenship and, therefore, follow state law. Consequently, the split of authorities is not among the circuit courts, but rather the various state courts.
In the present case, because of the facts, recovery for counsel fees and costs will be denied. Both insurance carriers, at least for purposes of the present case, concede that the driver was negligent and proximately caused the death of the injured party. Based on this concession and to some extent the substantial settlement figure, it is probable that there never was any substantial possibility of a defense on the merits or an ultimate judicial finding of non-liability. This being so, and the maximum coverage of the primary carrier, General Fire being only $25,000.00, it would have been readily apparent to Allstate that Allstate should protect its own interests by extensive investigation and employment of counsel, with the strong possibility that it would eventually have to pay the major portion of any settlement or judgment. It seems clear that irrespective of any activity on the part of General Fire, Allstate would have incurred most, if not all, of the expenses and fees it presently claims. It is not insignificant to note that Allstate claims its costs and counsel fees are approximately $50,000.00. Although the amount of damages is not presently before me, it is obvious that in a case of apparent liability, no reasonable insurance company would expend $50,000.00 in fees and investigative costs where its maximum coverage is only $25,000.00.
Neither the facts nor the complaint assert that any of the taxable record costs were paid by Allstate, so that no decision need be made as to whether it might be able to recover such of those costs it paid,
which would present a somewhat different situation than reimbursement for the investigative costs, counsel fee, and the non-record costs.
I conclude as to the costs and counsel fees, irrespective of whether the case of Continental Casualty Co. v. Curtis Publishing Co., 94 F.2d 710 (3rd Cir. 1938), is controlling on the issues, that under the facts of this case, Allstate is not entitled to reimbursement from General Fire for any of the investigative costs, counsel fees, or other non-record costs it incurred in the defense and settlement of the cases.
The action of Clark Transfer, Inc. v. Trans Country Van Lines, Inc., Civil Action 69-2252, seeks, by way of subrogation, recovery by Allstate against Trans Country and its insurer, General Fire. Clark Transfer's claim is based on the contention (a) the operator of the vehicle was the servant of Trans Country, (b) the vehicle was under the exclusive control of Trans Country, and (c) Trans Country is liable as the common carrier for the negligence of the driver both under the law and by the express terms of the lease.
The action assumes that the settlement was paid by Allstate on behalf of Clark Transfer. It is not necessary to decide whether Allstate paid on behalf of Clark Transfer or on behalf of Trans Country under its omnibus insured clause as an excess carrier. Even if plaintiff's argument is accepted that the payment was made by Clark Transfer, its right to indemnity or contribution is expressly barred by the terms of the lease wherein Clark Transfer agrees to indemnify Trans Country against any loss or damages resulting from the negligence, incompetence or dishonesty of the driver.
Counsel for plaintiff argues that the indemnification clause is ambiguous and repugnant to the legal duty of the lessee as a common carrier to be responsible to the public for negligent injury caused by the truck driver. This legal duty was expressly provided for in the lease. The only ambiguity in the indemnification clause of the lease is because plaintiff claims that it means something less than what it clearly states.
That Trans Country could not contract away its future tort liability, especially such as is statutorily imposed on Trans Country as a common carrier, needs no citation of authority. However, there is no legal or policy reason that would prohibit Trans Country from obtaining an indemnifying agreement from the party who is supplying the equipment and the driver. Kramer v. American Fidelity and Casualty Company of Richmond, Virginia, supra, n.2. If anything, such an agreement gives additional security to the public. As between the parties the indemnification agreement is perfectly valid, but as between the respective insurance carriers, it will not change their liabilities. Judgment will be entered in favor of defendant in Civil Action 69-2252.
CONCLUSIONS OF LAW
1. This court has jurisdiction over the parties and the subject matter of the actions.
2. The action for a declaratory judgment is appropriate, and the parties in Civil Action 69-698 are entitled to a declaratory judgment.
3. General Fire was the primary insurer and Allstate the excess insurer against liability arising out of the operation of the tractor-trailer under lease dated March 29, 1968 between Clark Transfer, as lessor, and Trans Country, as lessee.
4. General Fire is obligated to reimburse Allstate up to the maximum coverage afforded by General Fire ($25,000) for the settlement negotiated by Allstate, provided the settlement in excess of $25,000 was fair and reasonable.
5. Allstate is not entitled to recover from General Fire for any non-record costs, or any legal fees, Allstate incurred in investigating, defending and settling the claims arising out of the operation of the tractor-trailer under the aforesaid lease.
6. Clark Transfer is barred by reason of the indemnification clause in the aforesaid lease, from recovering from Trans Country.
AND NOW, this 31st day of August, 1972, in Civil Action No. 69-698 it is ORDERED that a declaratory judgment be entered, and it is hereby ADJUDGED that the defendant, General Fire and Casualty Company was the primary insurer responsible for paying the amount of the negotiated settlement in Civil Action No. 69-1500, Eastern District of Pennsylvania and Civil Action No. 69c309, Eastern District of New York up to the maximum limit of the coverage extended by General Fire and Casualty Company on Policy NA 004484 with the named insured Trans Country Van Lines, Inc., and as such is liable to reimburse the plaintiff, Allstate Insurance Company to said maximum limit of coverage of said policy, provided settlement to that amount was fair and reasonable. Allstate Insurance Company is not entitled to any reimbursement by way of contribution, indemnity, subrogation or otherwise for non-record costs and fees it has incurred in investigating, defending or negotiating the settlement in either or both of the aforesaid civil actions.
In Civil Action No. 69-2252, judgment is hereby directed to be entered in favor of the defendant, Trans Country Van Lines, Inc., and against the plaintiff, Clark Transfer, Inc.