Before CHASE, CLARK, and FRANK, Circuit Judges.
This is an action by an insurance company for a declaratory judgment of non-liability under one of its policies. The plaintiff having obtained the relief it sought, an appeal has been taken by the insured and a damage-claimant of the latter. The issue is primarily one as to the extent of coverage of the policy under the circumstances disclosed. It is a "Dealers, Garage or Service Station Liability Policy" of the Protective Indemnity Company, a former subsidiary now merged with plaintiff, issued on December 22, 1944, to defendant-appellant Charles Ostop, who operated the Servall Garage in Hartford, Connecticut. These are the salient facts:
On December 20, 1945, defendant Arvin LaBier, an employee of Ostop, was on his way to work in a Ford automobile of disputed ownership when he struck and injured defendant-appellant Alfred Grasso. Grasso thereupon sued Ostop and LaBier in the Superior Court for Hartford County, alleging that Ostop owned the car and that LaBier was his "agent, servant or employee" acting within the scope of his employment. The company's counsel defended the suit. This proceeding ended in a mistrial. In a second trial the case was about to go to the jury when a settlement of $6,200 was agreed upon and the usual stipulation with releases was executed, under date of February 2, 1949, being signed by Grasso, with his attorney Henry C. Stone as a witness. When Mr. Stone came to get the check from the company he told the latter's counsel that he had found on record in the Hartford Town Clerk's Office a conditional bill of sale which showed that Ostop had conveyed the offending Ford to LaBier on July 30, 1945. The company declined to deliver the check, notwithstanding Mr. Stone's protestations that the sale was unimportant in the tort action, since it had been made simply to "raise money" and was therefore a chattel mortgage, with ownership of the car still in Ostop. The company nevertheless obtained the grant of motions for a mistrial and for withdrawal by counsel, and did then withdraw from the case. Ostop obtained new counsel and on May 11, 1949, a judgment for the agreed $6,200 was entered in the Superior Court.
Meanwhile, on March 16, 1949, the company instituted this action in the court below praying for a declaration of non-liability for Grasso's injury and an injunction restraining the three defendants Grasso, Ostop, and LaBier from suing for indemnification under the policy. The court entered a judgment for the plaintiff which it then set aside on defendants' motion to permit of the submission of newly discovered evidence as to the ownership of the Ford. But it found the new evidence still unhelpfully disputatious, and so re-entered its former judgment granting the plaintiff the relief sought. Defendants Grasso and Ostop alone appealed.
The policy in question appears about as involved as such contracts have a way of appearing; but as we read it, in agreement with the district judge, it covers claims for accidents by cars owned by the insured Ostop quite broadly and generally, but does not cover those from cars owned and driven by employees except while on the business of the garage. This appears to follow both from the language of the policy and its structure and arrangement.The schedule of coverage on its face shows under the title "Operations" and the heading "1. Automobile Dealer, Automobile Repair Shop" an estimated annual remuneration for employees of $3,300, followed first by the insurance rates per$100 based thereon and then by "Estimated Advance Premiums" of $74.18 for "Coverage A Bodily Injury Liability" and $16.30 for "Coverage B Property Damage Liability." Later insertions show "Employees End." and "Customers End." - each in the amounts of $8.94 and $2.76 for Coverage A and B respectively. Thus, the main part of the total premium of $134.81 for the year covered the insured's own liability as operator of an automobile repair shop. This is particularly defined in the body of the policy and shows broad coverage against liability for accidents on the garage premises and adjoining public ways and all operations necessary and incidental to the repair of cars as well as "the ownership, maintenance or use of any automobile for any purpose in connection with the above defined opeations, and also for pleasure use."
When we come to the "Endorsement" for "Additional Interests," however, the situation is somewhat different. We shall refer to that for employees, omitting for our present purposes the endorsement for customers, though that contains like restrictions to those we shall discuss. By the "Employees End." the insurance of the policy for Bodily Injury Liability and for Property Damage Liability is extended:
"1. To any employee of the named insured, as insured, provided:
"(a) the insurance applies only to such employee of the named insured engaged in operations classified as 'automobile dealer or repair shop,' whose remuneration is included in the entire remuneration upon which premium for the policy is based; and
"(b) the insurance applies to any such employee while using, for such business operations or for pleasure purposes, any automobile covered under such classification. * * *
"3. The insurance does not apply
"(a) unless the actual use of the automobile is with the permission of the named insured;
"(b) under paragraph (1) with respect to any automobile owned by any such employee, or by a member of his family other than the named insured; * * *"
The limitations here stated, particularly that of 3(b), seem therefore rather clearly to exclude liability for acts of an employee in his own car when not on company business. The policy also contains usual provisions, requiring the company to defend in the name of the insured and the insured to co-operate with the company in defense, the latter being stated as one ...