Petition for Writ of Certiorari — Eagle Star Insurance Group v. Walker

RIE —— .

Zon <:cet MICHAEL RODAK, JR..,

JUL 19 1972

Supreme Court of the United States (

~

.... Term, 1972 i

n..€ 27110

£

EAGLE STAR INSURANCE GROUP, Garnishee, a

Petitioner, be

v. é

CARL N. WALKER, Administrator of the Estate of Norbert N. Walker, 4

deceased, ¢

and iH

THE TILLEY LAMP COMPANY, LIMITED, a corporation ;

THE TILLEY LAMP CO. (U.S. A.) LTD., a corporation ;

and A. W. THACKER, INC., a corporation,

Respondents.

Term, 1972

No.

EAGLE STAR INSURANCE GROUP, Garnishee,

Petitioner,

v.

MARY C. FLAVIN, Administratrix of the Estate of Wilbert F. Gries,

deceased,

and

THE TILLEY LAMP COMPANY, LIMITED, a corporation ;

THE TILLEY LAMP CO. (U.S. A.) LTD., a corporation;

and A. W. THACKER, INC., a corporation,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE ,

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

GEORGE M. WEIS, ;

WEIS & WEIS,

920 Grant Building,

Pittsburgh, Pennsylvania 15219,

Attorneys for Petitioner.

BATAVIA TIMES, APPELLATE COURT PRINTERS, Gy

EDWARD W. SHANNON, REPRESENTATIVE,

1701 PARKLINE DR., PITTSBURGH, PA. 15227

412-681-7463.

PAGE

Opinions Below ............. cece c cence eeececeeees 2

SEED SEI II TE PRS eR 2

Questions Presented ..............cccccceesessoces 2

ee Me WW GME nn ss cane Cacesecesadensacces 3

Reasons for Granting the Writ .................... 5

er baa wie Cinbwne aa bead adwdaebawwe aa 10

Oe le ND esis ivtnd vd caw Loser wove seavoekes 11

ED sb asa sets vied sinneaccths pbusaneunso see 13

Opinion of the Court Below ....................04.- 15

CITATIONS.

Antone v. New Amsterdam Casualty Co., 1939, 335 Pa.

RRR § PRR Ren ee nin seen en 6

Brown v. City of Pittsburgh, 409 Pa. 357, 186 A. 2d 399

DE peewee ct oek sta VENT eas aac ee I batty 9

Builders Supply Co. v. MeCabe, 366 Pa. 322, 77 A. 2d

Se CE Neko OC amit ce swe kek usecaes se ans 10

Burbage v. Boiler Engineering & Supply Co., 433 Pa.

FF Fe Fe rr rn are 10

Cameron v. Burger, 336 Pa. 229, 7 A. 29d 293 .......... 6

(ireco v. Buecciconi Engineering, 407 F. 2d 87 (1963) 3

RRIF Fe rg yee ay Ra EON cea ae ea ae eae ena 10

Hartford Accident & Indemnity Co. v. Delta & Pine

Re Sg EE Si BOE Sb chee aawedvaccoesewdedcen% 8

llome Insurance Co. v. Dick, 281 U.S. 397, 74 L. ed.

ee I a6 ck. bk Sead gn eh kan due nea die 6, 7,8

In Re: Boylan, 69 Fed. Supp. 105, affd. 157 F.2d 518... 6

Lauritzen v. Larsen, 345 U.S. 571 (1953) ............ 8

EA 8 eee 9

Peterson v. Wiggins, 230 Pa. 631 ......... Ciruuenes 9

II.

" : ‘ PAGE

Seither v. Philadelphia Traction Co., 126 Pa. 397 .... 9

Smith v. Fenner, 99 Pa. 633, 161 A. 2d 150 (1960) .... 9

Smith v. Roydhouse, Arey & Co., 244 Pa. 474 ........

Thompson v. Fox, 326 Pa. 209, 92 A. 107 (1937) ...... 9

olson v. Hodge, 441 F. 2d 123 (1969) .............,

Tozer v. Charles A. Kraus Milling Co., 181 F.2d 242

CREE: sxisbinnccemccstnnenwenss. HRLUNROLY Mitte 5

Williams v. LeBar, 14 L. Pa. 149 ..................., )

IN THE

Supreme Court of the United States

seiieriaty chee Term, 1972

EAGLE STAR INSURANCE GROUP, Garnishee, a

Petitioner,

Vv.

CARL N. WALKER, Administrator of the Estate of Norbert N. Walker,

deceased,

and

THE TILLEY LAMP COMPANY, LIMITED, a corporation ;

THE TILLEY LAMP CO. (U. S. A.) LTD., a corporation ;

and A. W. THACKER, INC., a corporation,

Respondents.

Ne Brn eatic Term, 1972

EAGLE STAR INSURANCE GROUP, Garnishee,

Petitioner,

v.

MARY C. FLAVIN, Administratrix of the Estate of Wilbert F. Gries,

deceased,

and

THE TILLEY LAMP COMPANY, LIMITED, a corporation ;

THF TILLEY LAMP CO. (U.S. A.) LTD., a corporation ;

and A. W. THACKER, INC., a corporation,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Petitioner prays that a writ of certiorari issue to review

the decision of the Court of Appeals for the Third Circuit

which affirmed the judgment of the District Court.

»

Opinions Below

The opinion of the Court of Appeals, presently unre.

ported, appears in the index hereto. The opinion written

by the United States District Court for the Western Dis.

trict of Pennsylvania is presently unreported and appears

in the appendix hereto.

Jurisdiction

. The judgment of the Court of Appeals was entered on

July 6, 1972.

Jurisdiction of this Court is invoked under 28 U. §, @

See. 1254(1).

Questions Presented

1. Did the luwer court abuse its discretion in refusing

to vacate a default judgment when the default was caused

by excusable neglect, a motion to vacate was promptly and

diligently filed, and meritorious legal defenses were set

forth in the motion to vacate?

2. Is it a denial of due process under the Fourteenth

Amendment to the United States Constitution for a United

States District Court to refuse to give effect to the terms

of an insurance policy issued by the Eagle Star Insurance

Company, a United Kingdom corporation to the Tilley

Lamp Company, a United Kingdom corporation, when the

insurance policy was executed in the United Kingdom, paid

for in the United Kingdom and to be performed in the

United Kingdom?

3. Did the lower court abuse its discretion in rejecting

the legal defense of satisfaction and settlement?

geet

3

Statement of the Case

The Tilley Lamp Company, Ltd., a North Irish corpora-

tion, is a manufacturer of various products, among which

is a portable kerosene heater. Its office and plant are

located at Dunmurry, Pelfast, Ireland. In addition to

sales in the United Kingdom, Tilley exports these products

to the United States and elsewhere. In their Complaints,

the Administrators of the Estates of Norbert N. Walker

and Wilbert F. Gries allege that a heater was sold to

(ries by D. Lux Sales, Incorporated of Pittsburgh, Penn-

sylvania. The heater was manufactured and designed

by Tilley and according to the plaintiffs was defectively

designed and was unreasonably dangerous to the user or

consumer. The plaintiffs further allege in their Complaints

that on or about October 1, 1967 the plaintiffs’ decedents

died as a result of asphyxiation due to carbon monoxide

poisoning caused by the Tilley kerosene heater which was

in use in a camping trailer which the plaintiffs’ decedents

were occupying.

The plaintiffs then filed the present Civil actions against

Tilley Lamp Company, Tilley Lamp (U.S. A.), and A. W.

Thacker on September 18, 1968. The suits against Tilley

Lamp (U. 8. A.) and A. W. Thacker were subsequently

dismissed and the plaintiffs proceeded on a default against

Tilley Lamp Company, Ltd. alone. Jurisdiction of the

lower court was based on diversity of citizenship and the

allegations that the amounts in controversy were in excess

of $10,000.00, exclusive of interest and costs. Judgments

were entered June 30, 1969 against Tilley Lamy Company,

Ltd. in the sum of $25,099.00 in the Gries cases and

$112,362.43 in the Walker cases.

The plaintiffs also filed separate Civil actions against

D, Ix Sales, Tne., the retailer of the lamp in question

—

4

alleging a sale of a lamp which was defectively designed

and was unreasonably dangerous to the user or consumer.

Before the matter came on for trial, the plaintiffs settleq

both cases with the insurance carrier for D. Lux Sales,

Inc. When the settlement was made in March of 1971, the

plaintiffs released D. Lux Sales under agreements which

have been incorporated into this record (R. 154a)

(R. 253a).

The plaintiffs then commenced the garnishment action

against the Eagle Star Insurance Company and also the

Sun Insurance Company, both United Kingdom corpora.

tions, by serving interrogatories in attachment on the

Tnsurance Commissioner of the Commonwealth of Pennsyl-

vania on April 22, 1971. Four days later, on April 26, 1971,

Eagle Star wrote to plaintiffs’ attorney from its office in

New York and advised him that they were unable to identify

the matter referred to in the Writ of Execution that had

heen served upon it (Exhibit “D” R. 248a). On April

29, 1971, plaintiffs’ attorney wrote to Eagle Star’s New

York office and referred them to answers to interrogatories

that had been filed in an unrelated case in the Middle Dis-

trict of Florida. On about May 13, 1971 the Eagle Star re-

ferred this matter to the present counsel of record. Due

to an oversight, an extension of time was not obtained

from the Court to answer the interrogatories. On May

27, 1971, the Sun Insurance Company was granted an ex-

tension in which to answer the interrogatories directed

to it. On April 30, 1971 the defendant, Tilley Lamp Com-

pany, Ltd., wrote from Northern Ireland to Eagle Star’s

agent in Shrewsbury, England advising that they had heen

notified by D. Lux of Pittsburgh that the lawsuit brought

against Tilley Lamp Company and D. Lux Sales was

settled out of court by the insurance carrier for D. Lux

Sales (Exhibit “G”" R. 250a). On or abhont May 6, 1971

5

Eagle Star in London received notice of the settlement

(Exhibit “F” R. 250a). On June 4, 1971, the plaintiffs de-

faulted the Eagle Star Insurance Company. On June 10,

1971, counsel for Eagle Star learned of the default and

on thet same date filed a motion to vacate the default

judgment. An amendment to that motion to vacate was

filed on June 15, 1971 and had attached thereto proposed

answers to the interrogatories in attachment. In its pro-

posed answers to interrogatories, Eagle Star admitted that

there was in existence an insurance contract between it

and Tilley Lamp Company that had been made in the

United Kingdom, issued in the United Kingdom and the

premium paid, in the United Kingdom, but denied that it

applied to this particular case for several valid reasons.

The matter came on for hearing before United States

District Judge Sorg and the garnishee’s motion to vacate

the default judgments was denied. Garnishee, Eagle Star

Insurance Group, appealed to the Third Cireuit Court of

Appeals which affirmed the judgment of the District Court

in a per curiam opinion.

Reasons for Granting the Writ

Eagle Star Insurance Company seeks to set aside this

default judgment under Federal Rules of Civil Procedure

55 (ec) and Rule 60(b). In construing these Rules, the

Federal Courts are of the opinion that they are to liberally

interpreted so as to provide trial on the merits wherever

possible. Jolson v. Hodge, 441 F.2d 123 (1969); Tozer v.

Charles A. Nraus Milling Co., 181 F.2d 242 (1951). The

eases generally laid down three criteria: (1) excusable

neglect; (2) a prompt and diligent effort to remove the

default; and (3) the assertion in the motion to yvaeate of

meritorious defenses,

;

é

‘

1 PRD NOR ee RIAD

SESS IGE? CTY are Ruin PHY

Perey Sr

The lower court, in failing to apply the provisions of the

insurance policy in question, violated the mandate of Home

Insurance Co. v. Dick, 281 U.S. 397, 74 L. ed. 926, 50 Sup,

Ct. 388.

Where one secures a judgment in a civil action for per.

sonal injuries and then garnishes the casualty insurance

company that insures the defendant, the rights of the

garnishor against the garnishee rise no higher than those

of the defendant in the personal injury action and the

garnishee’s liability is measured as though the defendant

itself had brought an action to recover on its policy. Antone

v. New Amsterdam Casualty Co., 1939, 335 Pa. 134. See

also, Cameron v. Burger, 336 Pa. 229, 7 A. 2d 293, and In

Re: Boylan, 69 Fed. Supp. 105, affd. 157 F. 2d 518.

In the present cases, the plaintiffs are subject to all of

the defenses that the Eagle Star Insurance Company has

against the Tilley Lamp Company. One of those defenses

is that the policy of insurance did not cover the plaintiff's

claim since it was not brought in a United Kingdom Court.

Memorandum No. 2 in the insurance policy running from

Eagle Star to Tilley provides:

“It is hereby understood and agreed notwithstanding

anything herein contained to the contrary, that the

indemnity provided by this policy is extended to apply

to the sale overseas of products manufactured and/or

sold by the insured.

Provided always that :—

(b) All claims arising by reason of this extension shall

be dealt with within the jurisdiction of the United

Kingdom Courts only.”

The lower court fails to recognize the fact that the policy

of insurance in this case was a foreign contract of insurance

made in the United Kingdom between two citizens of the

a

7

United Kingdom. The policy was issued, delivered and

paid for in the United Kingdom. This is not the case of

a foreign insurance company entering into a contract with

a citizen of Pennsylvania or issuing a policy of insurance

to a citizen of Pennsylvania or accepting payment for a

policy by a citizen of Pennsylvania. The policy in ques-

tion, therefore, does not come under the provisions of the

Act of 1921, May 7, 1921, of the Commonwealth of Penn-

sylvania P. L. 682, Article ITI, Sec. 301, 40 P.S. See. 421,

“which deals with the requisites for foreign insurance com-

panies to do business in the State, and the Act of 1921, May

17, P. L. 789, Article I], Sec. 210, as amended, 40 P.S. See.

48, relating to service of process upon the Insurance Com-

missioner”, as is set forth,in the Opinion of the court below.

The lower court by applying the above mentioned statutory

law of the State of Pennsylvania to this foreign contract

has enlarged its terms and thus has violated the due process

clause of the Fourteenth Amendment.

The situation before this Court is very similar to that

contained in Home Insurance Co. v. Dick, supra. In that

case, a contract had been executed in Mexico insuring a

noat against fire loss and the risk had been reinsured by

New York corporations which were brought into the suit

by garnishment. The policy contained a clause requiring

suit to be instituted within one year after loss. This clause

was valid by the Mexican Commercial Code. Texas, which

was the forum and place of residence of an assignee of the

policy, nad a statute which prohibited stipulations fixing

time of suit at less than two years and declared: “And no

stipulation, contract, or agreement for any shorter limita-

tion in which to sue shall ever be valid in this state.” This

statute was applied by the Texas courts but the decision

was reserved by the Supreme Court of the United States

as violating the due process clause of the Fourteenth

Amendment.

—

8

In the case of Lauritzen v. Larsen, 345 U. 8. 571 (1958),

the Supreme Court reversed the lower court by

the Jones Act in a conflicts of law situation. In that cage

a Danish seaman who was temporarily in New York joined

the crew of a Danish vessel. He signed a contract which

in essence provided that if he was injured he would be

bound by Danish law on the subject. While the ship was

in Havana, he was injured. He then sued the ship’s owner

in the Federal District Court in New York for damages

under the Jones Act. The defendant did business within

the State of New York. The lower court held the Jones

Act was applicable. The Supreme Court in reversing the

lower court stated at pp. 590, 591:

“We have held it a denial of due process of law when

a state of the Union attempts to draw into control of

its law otherwise foreign controversies, on slight eon-

nections, because it is a forum state. Hartford Accident

& Indemnity Co. v. Delta & Pine Land Co., 292 U. §.

143; Home Insurance Co. v. Dick, 281 U.S. 397. The

purpose of a conflict-of-laws doctrine is to assure that

a case will he treated in the same way under the appro-

priate law regardless of the fortuitous circumstances

which often determine the forum.”

The Court also refused to accept the terms of the insur-

ance policy therein that they excluded a design defect when

there was, in fact, a finding in the original action of design

defect.

The plaintiffs filed a wrongful death and survival action

against D. Lux Sales, Inc. as a result of the same accident

giving rise to the suits against Tilley Lamp Company, Ltd.

These suits were then settled and the plaintiffs entered into

an agreement with I). Lux Sales, Ine. and their insurer

providing that in consideration of the payment of the set-

tlement, Carl N. Walker “. . . agrees to release, remise,

quick claim, settle and forever discharge the said D. Lux

9

Sales, Inc. from any and all claims, actions and demands

arising by virtue of the decease of Norbert N. Walker on or

about October 1, 1967.”

The common law rule in Pennsylvania is that the release

of one tort-feasor is a release of all tort-feasors in all cases

even though a release reserved the right against another.

The rule applied whether the liability of the tort-feasors

was joint, several or successive. Thompson v. Foz, 326 Pa.

209, 92 A. 107 (1937); Smith v. Fenner, 99 Pa. 633, 161 A.

2d 150 (1960); see also, Brown v. City of Pittsburgh, 409

Pa. 357, 186 A. 2d 399 (1962).

The Court set forth the rule in Thompson v. Foz, supra,

at pages 212 and 213 as follows:

“For the same injury, however, an injured party can

have but one satisfaction and the receipt of such satis-

faction, either as payment of a judgment recovered or

consideration for a release executed by him, from a

person liable for such injury, necessarily works a

release of all others liable for the same no any | and

revents any further proceeding against them: Peter-

oss v. Wiggins, 230 Pa. 631; Smith v. Roydhouse, Arey

& Co., 244 Pa. 474; Mason v. Lavine, 302 Pa. 472. This

is true even though it was intended, or the release

expressly stipulated, that the other wrongdoers should

not thereby be released: Seither v. Philadelphia Trac-

tron Co., 125 Pa. 397; Williams v. LeBar, 14 L. Pa. 149.

Nor is it material whether the tort-feasors involved

committed a joint tort or concurrent or successive

torts, because the principle which underlies the rule is

that the injured person is given a legal remedy only to

obtain compensation for the damage done to him, and

when that compensation has been received from any of

the wrongdoers, his right to further remedy is at an

end.”

The only variation on this rule since the ruling in Thomp-

son v. lox, supra, is the passage of the Uniform Contribu-

tion Among Tort-Feasors Act in the State of Pennsylvania.

a

10

The Act provides an exception to the common law rule only

in the case of joint tort-feasors. In the present case, Tilley

Lamp is a manufacturer who would be held primarily liable

and D. Lux would be a dealer in a position of secondary

liability whether the plaintiff recovers on a theory of negli-

gence in manufacture and/or design or strict liability under

Section 402A of the Restatement of Torts 2d, Greco »,

Bucciconi Engineering, 407 F. 2d 87 (1969) 3 Cir.; Burbage

v. Boiler Engineering & Supply Co., 433 Pa. 319, 249 A. 24

563 (1969) ; Builders Supply Co. v. McCabe, 366 Pa. 322, 77

A. 2d 368 (1951).

In the present case, therefore, the plaintiff has received

satisfaction, released all tort-feasors and is, therefore,

barred from asserting any claim against Eagle Star Insur-

ance Company as garnishee since his claim against Tilley

Lamp Company is barred.

Conclusion

For these reasons, it is respectfully submitted that a writ

of certiorari should be issued to review the judgment of

the Court of Appeals that the default should not be opened.

Respectfully submitted,

GEORGE M. WEIS,

WEIS & WEIS,

920 Grant Building,

Pittsburgh, Pennsylvania 15219,

Attorney for Petitioner

—

11

Opinion of the Court

(Filed July 6, 1972.)

UNITED STATES COURT OF APPEALS

For THe Tuirp Circuit

No. 71-1752

CARL N. WALKER, Administrator of the Estate of

NORBERT N. WALKER, Deceased,

v

THE TILLEY LAMP COMPANY, LIMITED, a corpora.

tion; THE TILLEY LAMP CO. (U. S. A.) LTD., a

corporation; and A. W. THACKER, INC., a corpora.

tion.

AppEAL OF MaGLe Star INsuRANCE Group, GARNISHEE

No. 71-1753

MARY C. FLAVIN, Administratrix of the Estate of

WILBERT F. GRIES, Deceased,

a

v.

THE TILLEY LAMP COMPANY, LIMITED, a corpora

tion; THE TILLEY LAMP CO. (U. S. A.) LTD., a

corporation; and A. W. THACKER, INC., a corpora-

tion.

APPEAL OF MaGLeE Star INsuRANCE Group, GARNISHEE

AppeaL From THE United States District Court

For THE WeEsTERN District or PENNSYLVANIA

Argued June 9, 1972.

Before: Hastie, Gibbons and M. Rosenn, Circuit

Judges.

12

Opinion of the Court.

Per Curiam:

This appeal challenges as an abuse of discretion the re.

fusal of the trial judge to vacate a default entered against

a garnishee as a result of its failure for 43 days to answer

Interrogatories in Attachment despite the requirement of

law that answer be filed within twenty days.

Rule 55(¢c), Federal Rules of Civil Procedure, under

which appellant sought relief, authorizes a District Court

“(flor good cause shown . . . [to] set aside entry of a de.

fault”. Moreover, as the court below observed in this case,

trial of the merits of a claim is preferable to disposition

by default. However, on the present record we cannot say

that the District Court acted arbitrarily or unfairly in re-

fusing to vacate the default.

The judgment entered pursuant to default will be af.

firmed.

To the Clerk:

Please file the foregoing opinion.

13

Judgment

UNITED STATES COURT OF APPEALS

For THe Tuirp Crmcurr

No. 71-1752

CARL N. WALKER, Administrator of the Estate of

NORBERT N. WALKER, Deceased,

vs.

THE TILLEY LAMP COMPANY, LIMITED a corpora-

tion, THE TILLEY LAMP CO. (U. S. A.) LTD. a

corporation, and A. W. THACKER COMPANY, INC.,

a corporation,

EAGLE STAR INSURANCE GROUP, garnishee,

Appellant.

(D. C. Mise. No. 5077)

No. 71-1753

MARY C. FLAVIN, Administratrix of the Estate of

WILBERT F. GRIES, Deceased,

vs.

THE TILLEY LAMP COMPANY, LIMITED, a corpora-

tion, THE TILLEY LAMP CO. (U. S. A.) LTD., a

corporation and A. W. THACKER COMPANY, INC.

a corporation,

EAGLE STAR INSURANCE GROUP, garnishee,

; Appellant

(D. C. Mise. No. 5078)

On AppeEaLs From tHE Unirep District Court

or THE WESTERN District oF PENNSYLVANIA

Present: Hastie, Gibbons and Rosenn, Circuit Judges

SEY ots Olin eee te

14

Judgment

These causes came on to be heard on the records from

the United States District Court for the Western District

of Pennsylvania and were argued by counsel.

On consideration whereof, it is now here ordered and

adjudged by this Court that the judgments of the said Dis.

trict Court filed July 4, 1971, be, and the same are hereby

affirmed, with costs taxed against appellant.

ATTEST:

THOMAS P. QUINN,

Clerk

July 6, 1972.

15

Opinion of the Court Below

IN THE

DISTRICT COURT OF THE UNITED STATES

For THE WESTERN District or PENNSYLVANIA

CARL N. WALKER, Administrator of the Estate of

NORBERT N. WALKER, Deceased,

Plaintiff,

vs.

THE TILLEY LAMP COMPANY, LIMITED, a corpora-

tion; THE TILLEY LAMP Co. (U. 8. A.) LTD., a

corporation; and A. W. THACKER COMPANY, INC.,

a corporation, .

Defendants

Mise. No. 5077

(Civil No. 68-1084)

ORDER.

Anp Now, to-wit, this 8th day of July, 1971, this matter

having come before the court upon motion of garnishee,

Eagle Star Insurance Co., Ltd. (Eagle Star), to vacate a

default judgment entered for failure of Eagle Star to

answer Interrogatories in Attachment, and after considera- ;

tion of extensive arguments and briefs of counsel as well =

as a review of the record at Civil Action No. 68-1084, the

court finds the following:

16

‘Opimion of the Court Below.

Norbert N. Walker, plaintiff’s decedent herein, and Wij.

bert F. Gries, plaintiff’s decedent in a companion case at

Mise. No. 5078 (Civil Action No. 68-1085) died October 1,

1967, in McKean County, Pennsylvania, as a result of the

inhalation of toxic fumes from a defective kerosene heater

manufactured by defendant, The Tilley Lamp Company,

Ltd. (Tilley). At the time of this occurrence, Tilley was

covered by a liability insurance policy issued by garnishee,

Eagle Star, a company registered to do business in the

Commonwealth of Pennsylvania.

Plaintiff’s complaint against Tilley was filed September

18, 1968. Service of the complaint was made upon Tilley

on September 24, 1968. On October 4, 1968, Eagle Star

received notice. Eagle Star, however, failed to enter an

appearance, contact plaintiff’s counsel, or in any other

manner participate in this litigation. A default was en-

tered December 12, 1968 against Tillev for failure to file

an answer or plead. A non-jury trial on the aforesaid

claims was held January 6, 1969, before the undersigned

District Judge, and judgments were entered June 30, 1969,

and October 1, 1969.

_

Plaintiff’s counsel, unaware of Tilley’s insurance cover-

age, initiated an investigation to determine the existence

of possible assets of the defendant. Although Attachment

Execution was filed in this court naming the local distri-

butor of Tilley products as garnishee and Attachment

Execution proceedings were filed in the Court of Common

Pleas, Cuyahoga County, Ohio, naming local distributors

in the Cleveland area as garnishees no assets were found.

Tn the course of their investigation, plaintiff’s counsel dis-

_

17

Opinion of the Court Below.

eovered evidence of insurance and the probable iden-

tity of the insurance carrier by securing a copy of answers

to interrogatories filed by Tilley in an action filed in the

U.S. District Court for the Middle District of Florida.

On April 21, 1971, plaintiff’s counsel filed a praecipe for

writ of attachment execution naming Eagle Star as gar-

nishee and also filed interrogatories in attachment direct-

ed to the garnishee. The interrogatories were endorsed

with a notice to answer within twenty (20) days from the

date of service, according to the applicable Rule of court.

Service of the Writ of Execution and Interrogatories was

made upon the Insurance Commissioner of Pennsylvania,

agent for the garnishee, on April 22, 1971, and a copy was

received by certified mail by Eagle Star at its United

States Office, 75 Maiden Lane, New York, New York on

April 23, 1971. On April 26, 1971, Eagle Star wrote an

inquiry to plaintiff’s counsel concerning the matter. On

April 29, 1971, plaintiff’s counsel answered the inquiry,

setting forth inter alia Eagle Star’s policy number and the

dates of coverage. Eagle Star made no further attempt

to contact plaintiff’s counsel.

Although the twenty (20) day time limitation for an-

swering interrogatories in attachment expired May 13,

1971, plaintiff did not enter a default until June 4, 1971,

forty-three (43) days after service. On June 10, 1971,

garnishee filed its motion to vacate this judgment pursuant

to Rules 55 (¢) and 60 (hb) of the Federal Rules of Civil

Procedure.

A motion to vacate a default judgment is an appeal to

the equitable powers of the court. The criteria to be con-

18

Opinion of the Court Below.

sidered by this court are: (1) Was the default caused by

excusable neglect on the part of the garnishee? (2) Did

counsel for defendant act promptly and diligently in filing

the motion upon learning of the entry of the default judg.

ment? and (3) Has garnishee set forth a potential meri-

torious defense to plaintiff’s action? Nicholson v. Allied

Chemical Corp., 200 F. Supp. 206 (KE. D. Pa. 1961).

The court recognizes the general principle that motions

to vacate default judgments must be liberally interpreted,

and matters involving large sums should ordinarily not

be determined on judgment by default if it can be reason-

ably avoided. However, in the instant case, this court finds

that Fagle Star has failed to justify the vacating of the

default judgment entered.

Of the three requisites above set forth to establish good

cause for the vacating of a default judgment Eagle Star

has met only the second. Counsel for the garnishee has,

in fact, acted with promptness and diligence in filing the

instant motion upon learning of the default.

The acts and omissions of FKagle Star, however, from the

very beginning of the case, have demonstrated a conscious

disregard for the process of this court. Since October 4,

1968, when Eagle Star received notice of this claim and

long prior to the entry of a default judgment against its

insured, the carrier had ample time to engage in whatever

discovery was indicated, contact plaintiff’s counsel, parti-

cipate in and/or control the defense to the principal action,

and otherwise protect its interests under the terms of its

poliey, but chose not to do so. The same evasive attitude

is reflected in Eagle Star’s failure, when joined as garni-

—

19

Opinion of the Court Below.

shee in the attachment execution proceedings, in the face

of actual notice, to refer this matter to counsel until a date

subsequent to May 13, 1971, the expiration date of the

time allotted to answer interrogatories in attachment.

Such unexplained disregard for legal process does not

constitute excusable neglect.

Furthermore, Eagle Star has failed to set forth a sub-

stantive defense on which it would be likely to prevail if

the default judgment were vacated. The two basic de-

fenses set forth by Eagle Star are: (1) Lack of notice, and

(2) Absence of coverage. This court is of the opinion

that under the circumstances Eagle Star had been afforded

reasonable notice. There is no indication in the record

that Tilley had any notice of the accident prior to service

of the complaint upon it, and Eagle Star received notice

of suit within ten (10) days of service of the complaint

upon its insured. Anent the absence-of-coverage issue,

Memorandum No. 2 of the insurance contract between

Eagle Star and Tilley reads as follows:

It 1s Heresy UnpErstoop anp AcreEp notwithstanding

anything herein contained to the contrary, that the

indemnity provided by this Policy is extended to apply

to the sale overseas of products manufactured and/or

sold by the Insured.

Provipep ALways T'Hat :—

(b) all claims arising by reason of this extension

shall be dealt within the jurisdiction of the United

Kingdom Courts only... .*

* Although the term “indemnity” is employed in this Memorandum,

upon a review of the terms and provisions of the policy, the court

interprets the same as a liability contract and not an indemnity con-

tract.

a

20

Opinion of the Court Below.

The court viewed Clause (b) under Memorandum No, 2

above set forth, upon which garnishee relies to exclude

coverage, as ambiguous, and, being part of an insurance

contract, a contract of adhesion, which must be interpreted

most strongly against the insurer, the clause does not

necessarily refer to claims instituted by anyone not an

immediate party to the insurance contract. The plaintiff

herein not being an immediate party to the contract is not

relegated to the courts of the United Kingdom under the

terms of the policy. On the other hand, although it is

recognized that, as a general rule, the rights of a judgment

creditor rise no higher than those of the insured against

the insurer garnishee, nevertheless, a procedural require-

ment in a contract of insurance that an injured resident of

the Commonwealth of Pennsylvania must present his claim

to a court of the United Kingdom is unreasonably restric-

tive and contrary to the Act of 1921, May 7, 1921, of the

Commonwealth of Pennsylvania, P.L. 682, Article II,

§ 301, 40 P.S. § 421, “which deals with the requisites for

foreign insurance companies to do business in the State,

and the Act of 1921, May 17, P. L. 789, Article IT, § 210, as

amended, 40 P.S. § 48, relating to service of process upon

the Insurance Commissioner.” Consolidated Sun Ray, Inc.

v. Steel Insurance Company, 190 F. Supp. 171 (E. D. Pa.

1961). Neither the coverage of the accident giving rise to

plaintiff's claim nor his right of garnishment is barred by

a contractual arrangement which is inconsistent with con-

trolling statutory law.

Now, therefore, the motion of Eagle Star Insurance

Company, Ltd., garnishee, to vacate judgment entered

against said garnishee on June 4, 1971, for failure to an-

swer interrogatories in attachment is hereby dismissed.

re

21

Opinion of the Court Below

It is further ordered that the Order of Court dated

June 14, 1971, restraining plaintiff from executing upon

the said judgment be and the same is hereby vacated.

HERBERT P. SORG, D. J

Dated: July 8, 1971.

ee: Jerry B. Landis, Esquire

2004 Lawyers Bldg., Pgh., Pa. 15219

Weis & Weis, Esquires

920 Grant Bldg., Pgh., Pa. 15219

Robert A. Cohen, Esquire

1008 Law & Finance Bldg., Pgh., Pa. 15219