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CURRAN DEVELOPMENT CO. v. SECURITY INSURANCE CO.

June 1, 1961

CURRAN DEVELOPMENT COMPANY, INC., AND DAVID H. CURRAN, PLAINTIFFS,
v.
SECURITY INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: John E. Miller, Chief Judge.

Defendant's motion for summary judgment is before the court for consideration. The action was filed March 27, 1961. On April 17, 1961, an order was entered extending until May 18, 1961, the time for defendant to answer or otherwise plead. On May 18, 1961, defendant filed its motion for summary judgment, attaching thereto a copy of the insurance policy which forms the basis of this lawsuit. Briefs have been received from the parties in support of their respective contentions, and the motion is now ready for determination.

The plaintiff, Curran Development Company, Inc., is a corporation organized under the laws of the State of Arkansas for the purpose of constructing residential properties, and Arthur L. Curran, Armeta Curran, Margie L. Curran and David H. Curran constitute all the stockholders of the corporation. David H. Curran is a director, the treasurer and the general manager of the company. The following facts are not in dispute.

Francis E. (Sam) Hall was an employee of the plaintiff corporation, and while engaged in his employment he met death on July 8, 1959. On November 3, 1960, his Administratrix filed suit in the Circuit Court of Garland County against David H. Curran, seeking damages in the total sum of $284,787.50, and alleged that David H. Curran was guilty of negligence which was a proximate cause of the death of Sam Hall.

The insurance policy in question was issued by the defendant company, and in it the defendant agreed, among other things, to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the hazards as defined in the policy. The above provision for bodily injury liability is referred to in the policy as Coverage A. It is further provided in the policy that with respect to the insurance afforded by it for bodily injury liability and for property damage liability, the company will "defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the Company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient."

The term "insured" is defined in Section III of the policy as:

    "With respect to the insurance under coverages A,
  B, and D the unqualified word `Insured' includes the
  named Insured and also includes any executive
  officer, director or stockholder thereof while acting
  within the scope of his duties as such, and any
  organization or proprietor with respect to real
  estate management for the named Insured. If the named
  Insured is a partnership, the unqualified word
  `Insured' also includes any partner therein but only
  with respect to his liability as such."

According to copies of the letters between counsel, which were attached to the complaint in the instant action, the defense of the action against David H. Curran in the Garland County Circuit Court has been tendered to the defendant company, and the company has refused to defend the action.

In the instant action the plaintiffs seek a declaratory judgment, declaring, the obligation of the defendant insurance company to assume the defense of the action filed by Selma Oliver Hall, Administratrix of the Estate of Francis E. (Sam) Hall, deceased, and likewise declaring the obligation of the defendant to pay any judgment that may be rendered against David H. Curran to the extent of the policy limits, plus costs and attorneys' fees.

In the defendant's motion for summary judgment it is contended as to the plaintiff, Curran Development Co., Inc., that no controversy exists or will exist between the plaintiff corporation and the defendant insurance company. As to the individual plaintiff, David H. Curran, defendant contends that:

(1) The acts David H. Curran was performing, which are the basis of the action by Hall's Administratrix, were not those "of an executive officer, director or stockholder," but rather he was acting merely as an electrician;

(2) That the plaintiff, David H. Curran, is excluded from coverage by reason of exclusion (j) of the policy, which reads:

"This policy does not apply: * *

    "(j) under coverages A and D, to any obligation for
  which the Insured or any carrier as his insurer may
  be held liable under any workmen's compensation,
  unemployment compensation or ...

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