County Court, Number 114, March Term 1967, Mellinger v. Furlong. Sometime thereafter, the United States petitioned this Court requesting the substitution of the United States as a party defendant, the dismissal of Furlong as a defendant, and the removal of the action to this Court. This was done by order of The Honorable John P. Fullam on December 18, 1969 in Mellinger v. United States and Mellinger, Civil Action No. 68-257. The petition before Judge Fullam was vigorously opposed by Mellinger and the Harleysville Insurance Company, Furlong's liability carrier. Subsequently, counsel for Harleysville entered his appearance in this Court for the defense of the United States with the agreement that this would be done without prejudice to any and all rights Harleysville might have for reimbursement and/or indemnity regarding legal costs, expenses and payment of any settlement or judgment. The case was called for trial before The Honorable Harold K. Wood and was settled during trial for the sum of $8,500.00.
In the instant action Harleysville seeks recovery of the $8,500.00 settlement it paid to the Mellingers, together with interest, costs and reasonable attorneys' fees, for the defense of the United States in said action.
The defendant, United States, argues that it is an insured under the policy issued by Harleysville to postal employee, Marvin Furlong, and as such, Harleysville is legally liable for the settlement paid by it on behalf of the United States in the Federal Tort Claims Action and is, therefore, barred from indemnification in this action. The plaintiff, Harleysville, argues that it is insulated from any liability in view of the fact that the United States acted to substitute itself as a defendant and removed the case from the Chester County Court. The plaintiff relies on Gipson v. Shelley, 219 F. Supp. 915 (E.D. Tenn. 1963) and McCrary v. United States, 235 F. Supp. 33 (E.D. Tenn. 1964). The plaintiff also contends that the provision in the insurance policy which gives the insurance company the power to investigate and settle suits on behalf of the insured and the power granted to the Attorney General, pursuant to 28 U.S.C. § 2679(e), to settle or compromise Federal Tort Claims creates a conflict in the management of the litigation and, therefore, the United States must bear the loss alone when it acts to substitute and remove as it did in this case. The plaintiff, Harleysville, also claims that it is relieved of liability by virtue of 28 U.S.C. § 2679(b), which provides:
The remedy by suit against the United States as provided by section 1346(b) of this title for damage to property or for personal injury, including death, resulting from the operation by any employee of the Government of any motor vehicle while acting within the scope of his office or employment, shall hereafter be exclusive of any other civil action or proceeding by reason of the same subject matter against the employee or his estate whose act or omission gave rise to the claim.