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COUNTY OF WYOMING v. ERIE LACKAWANNA RY. CO.

June 18, 1973

COUNTY OF WYOMING, NEW YORK, Plaintiff,
v.
ERIE LACKAWANNA RAILWAY COMPANY et al., Defendants


Curtin, District Judge.


The opinion of the court was delivered by: CURTIN

CURTIN, District Judge.

In this action the plaintiff County of Wyoming [hereinafter referred to as Wyoming] seeks a declaration of its rights under certain insurance policies issued by defendants Aetna Casualty & Surety Company [hereinafter referred to as Aetna), Hartford Accident and Indemnity Company [hereinafter referred to as Hartford], and Insurance Company of North America [hereinafter referred to as INA]. The policies are the following: (1) Comprehensive Liability Policy Number 15 AL 119506 CM issued by Aetna [hereinafter referred to as the Aetna policy]. (2) Casualty Insurance Policy Number 32 C 699326 issued by Hartford [hereinafter referred to as Hartford policy X]. (3) Casualty Insurance Policy Number 32 C 698992 issued by Hartford [hereinafter referred to as Hartford policy II], and (4) Contractors' Catastrophe Liability Policy Number XBC 1 18 15 issued by INA [hereinafter referred to as the INA policy]. Aetna has moved for summary judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure.

 The facts giving rise to the dispute between Wyoming and the insurance companies are as follows. *fn1" On July 14, 1969 at the intersection of the track of the defendant Erie Lackawanna Railway Company [hereinafter referred to as Erie Lackawanna] and County Road 38 in the Town of Genesee Falls, there occurred a collision between an Erie Lackawanna train and a road paving machine owned by the defendant Midland Asphalt Corporation [hereinafter referred to as Midland]. At the time of the accident, County Road 38 was being resurfaced by a Wyoming highway crew under the supervision of Leon Cook, who was employed by Wyoming as a foreman. The road paving machine and its operator, Donnel Werth, had been hired for the operation under an oral contract between Wyoming and Midland and were subject to Cook's instructions and directions. *fn2" Loaded at the front with gravel from a Wyoming dump truck which it pushed as it moved along, the road paving machine emitted asphalt from the back. As the machine started to cross the track, Werth looked at the crossing signal lights and saw that they were not flashing. Thereafter he did not look at them again or check down the track, *fn3" for he was watching the back of the machine in order to stop the asphalt near the edge of the track. He knew that Cook had sent men down the track in both directions to watch for approaching trains. While the machine was on the track, one of the sentries signaled Cook that a train was coming, and Cook in turn signaled Werth, who jumped from the machine. The train struck the machine but not the dump truck, which had already cleared the track *fn4" under its own power on Cook's instruction. As a result of the accident, Erie Lackawanna commenced against Wyoming and Midland a suit in which Midland filed two cross-claims against Wyoming and a counterclaim against the railroad. Erie Lackawanna Railway Co. v. County of Wyoming, New York, Civil No. 1969-361. Suits by three members of the crew of the train against the railroad, Wyoming and Midland followed. Tomicki v. Erie Lackawanna Railroad Co., Civil No. 1970-332; Barnett v. Erie Lackawanna Railroad Co., Civil No. 1970-333.

 The complaint cites 28 U.S.C. §§ 1332 and 2201 as the bases for the court's jurisdiction in this matter. Before proceeding to the merits, two questions relating to these statutory provisions must be disposed of.

 On the face of the complaint, there does not exist the complete diversity of citizenship required for federal jurisdiction under 28 U.S.C. § 1332. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L. Ed. 435 (1806). The plaintiff Wyoming and defendants Midland, Tomicki, Barnett and Oyer are all residents of New York for purposes of 28 U.S.C. § 1332. Complete diversity may be achieved, however, by dropping the aforementioned defendants from the action.

 It is settled that, in the exercise of its "inherent powers . . . to perfect federal jurisdiction," a court may drop nondiverse parties and allow an action to proceed in their absence. Kerr v. Compagnie De Ultramar, 250 F.2d 860, 864 (2d Cir. 1958). This may be done, however, only if the court, after considering the factors set forth in Rule 19(b) of the Federal Rules of Civil Procedure, determines that the nondiverse parties are not "indispensable." See Jett v. Phillips & Associates, 439 F.2d 987, 990 (10th Cir. 1971); Kerr v. Compagnie De Ultramar, supra, 250 F.2d at 863. The decision whether parties are indispensable is a practical one which "can only be determined in the context of particular litigation." Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118, 88 S. Ct. 733, 742, 19 L. Ed. 2d 936 (1968).

 In the instant case, there is no reason why a determination of the rights and obligations existing under the various insurance policies cannot be fully made in the absence of the injured members of the crew of the Erie Lackawanna train, Tomicki, Barnett and Oyer. *fn5" Nor will the interests of the three individuals be prejudiced if they are dropped. *fn6" At least one other court has held that an injured person is not a required party in an action to determine the coverage of an insurance policy, see Allstate Insurance Co. v. Philip Leasing Co., 214 F. Supp. 273, 276 (D.S.D. 1963), and, although there is a decision to the contrary, see United States Fidelity & Guaranty Co. v. Ditoro, 206 F. Supp. 528, 532-533 (M.D. Pa. 1962), "[given] the Supreme Court's decision in the Provident Tradesmens case [ supra ], it is unlikely that the injured party would be declared indispensable under Rule 19(b) today." 7 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1619, at 193 (1972).

 Whether Midland is an indispensable party is a slightly more difficult problem. It appears that a judgment rendered in Midland's absence will adequately protect the interests of Wyoming and the insurance companies. *fn7" The question is whether Midland's interests will be so prejudiced by a judgment rendered in its absence that the action should not proceed without it. Wyoming and Midland may both be insured persons under a given insurance policy with fixed limits of liability. In the event that judgment were rendered against each of them in the actions brought by Erie Lackawanna and the crewmen of the train, it is possible that the insurance fund would be exhausted by claims against Wyoming before Midland had had the opportunity to assert its interest in the fund. *fn8" See Provident Tradesmens Bank & Trust Co. v. Patterson, supra, 390 U.S. at 114-115, 88 S. Ct. 733. The possibility of prejudice to Midland is more theoretical than actual, however, for the estimate of damages suffered by the injured persons is far less than the aggregate coverage under the various insurance policies. In any event, Midland's interest in the insurance fund could be protected by a provision in the judgment requiring that no payments be made under a policy until Midland had had an opportunity to present its claims against the fund. Id. at 115, 88 S. Ct. 733.

 Turning to the second jurisdictional problem, a court may in its discretion decline to entertain an action for a declaratory judgment under 28 U.S.C. § 2201. Sears, Roebuck and Co. v. Zurich Insurance Co., 422 F.2d 587, 588 (7th Cir. 1970); Lebowich v. O'Connor, 309 F.2d 111, 112 (2d Cir. 1962). The question of an insurance company's duty to defend an insured is of course a controversy ripe for declaratory relief. Sears, Roebuck and Co. v. Zurich Insurance Co., supra, 422 F.2d at 589. Cf. Crowley's Milk Co. v. American Mutual Liability Insurance Co., 426 F.2d 752 (2d Cir. 1970). Some courts have held, however, that a court should decline to entertain an action for declaratory relief where there is a dispute among insurance companies over which of them is to provide a defense and one company has assumed responsibility for rendering a defense. See, e.g., Farmers Elevator Mutual Insurance Co. v. Carl J. Austad & Sons, Inc., 366 F.2d 555, 557 (8th Cir. 1966). On the other hand, a company's reluctant assumption of the task of providing a defense which it claims should be some other company's burden places the insured in "an undesirable position." Universal Underwriters Insurance Co. v. Wagner, 367 F.2d 866, 871 (8th Cir. 1966), and under some circumstances may present a potential conflict of interest between the insured and the insurer. Rexco Industries, Inc. v. Commercial Insurance Co. of Newark, New Jersey, 326 F. Supp. 958, 959 (D.P.R. 1971).

 The court believes that it should exercise its discretion in favor of entertaining the instant action. Implicit in Crowley's Milk Co. v. American Mutual Liability Insurance Co., supra, is an approval of a district court's willingness to resolve disputes over coverage under various insurance policies. Furthermore, all of the cases arising out of the accident in question are pending in federal court, and a determination of the instant action should expedite resolution of the other actions.

 Turning to the merits of the case, it is first necessary to describe the relevant provisions of the various insurance policies. Definitions of terms and exclusions and other restrictions on applicable provisions will be referred to only to the extent that they are necessary to an understanding of the provisions.

 The Aetna policy provides comprehensive automobile liability and comprehensive general liability coverage to insured persons as defined therein. The automobile liability coverage applies to damages "caused by an occurrence and arising out of the ownership, maintenance or use, including loading and unloading, of any automobile," but excludes "property damage to . . . property rented to" insured persons. The general liability coverage applies simply to damages "caused by an occurrence" with several exclusions, including, first, "property damage to . . . property . . . rented to" insured persons and, second, damages "arising out of the ownership, maintenance, operation, use, loading or unloading of (1) any automobile . . . owned or operated by or rented or loaned to the named insured." For purposes of the policy, the term automobile means "a land motor vehicle, trailer or semi-trailer designed for travel on public roads, (including any machinery or apparatus attached thereto), but does not include mobile equipment." Mobile equipment, in turn, is defined as "a land vehicle (including any machinery or apparatus attached thereto), whether or not self-propelled, . . . designed or maintained for the sole purpose of affording mobility to equipment of the following types forming an integral part of or permanently attached to such vehicle: . . . graders, scrapers, rollers and other road construction or repair equipment."

 Persons insured under the automobile portion of the Aetna policy include (1) the named insured, Wyoming, (2) "any other person while using an owned automobile or a hired automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission" and (3) "any other person or organization but only with respect to his or its liability because of acts or omissions of" the foregoing insured persons. A hired automobile is defined as "an automobile not owned by the named insured which is used under contract in behalf of, or loaned to, the named insured."

 A printed provision of the general liability portion of the Aetna policy includes as persons insured not only the ...


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