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CURRAN v. SECURITY INSURANCE COMPANY

July 6, 1961

DAVID H. CURRAN, PLAINTIFF,
v.
SECURITY INSURANCE COMPANY, DEFENDANT.



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

This case is before the court on plaintiff's complaint for declaratory judgment against the defendant.

On March 27, 1961, Curran Development Company, Inc., and the present plaintiff, David H. Curran, filed their complaint against the defendant, Security Insurance Company, for a declaratory judgment, adjudging the defendant obligated under the terms of its policy to defend a suit filed against David H. Curran in the Circuit Court of Garland County, Arkansas, and to pay any judgment that might be recovered against him within the limits of said policy; that an attorney's fee be awarded against the defendant, and for all of its costs herein expended and for such other and further relief as to the court may seem just and proper.

On May 18, 1961, the defendant filed its motion for summary judgment.

On May 26, 1961, the Curran Development Company, Inc., and the present plaintiff, David H. Curran, filed their response to the motion.

In the hearing on the motion for summary judgment, it was admitted that the defendant, on April 6, 1959, issued to Curran Development Company, Inc., a manufacturers and contractors policy, No. 631423, wherein it insured Curran Development Company, Inc., together with its officers, stockholders and directors against any claim arising thereunder in the amount of $50,000 for any claim, and $100,000 for any accident. The policy was delivered and premium paid thereon for a period of one year from the date of its issuance. It was in force at all times material herein.

On the same date the defendant issued and delivered its workmen's compensation policy WC No. 503936, in favor of the Curran Development Company, Inc., and the premium thereon was paid.

On July 8, 1959, Francis E. (Sam) Hall, while in the employ of the Curran Development Company, Inc., received injuries from which he died, under circumstances that resulted in the defendant paying workmen's compensation because of the death. Said payments were and are being made under the provisions of the workmen's compensation policy, and that policy is not involved in the instant case.

On November 3, 1960, Selma Oliver Hall, Administratrix of the Estate of Francis E. (Sam) Hall, deceased, filed her suit in the State Court, Civil No. 9330, wherein the present plaintiff, David H. Curran, was named defendant and damages in the total sum of $284,787.50 were demanded by reason of the alleged negligence of the defendant, David H. Curran.

On March 10, 1961, the attorneys for the Curran Development Company, Inc., and for the present plaintiff, David H. Curran, wrote the present attorney for the defendant that David H. Curran was named as party defendant in the suit filed by Selma Oliver Hall, Administratrix, in the State Court, and was seeking a judgment against him for damages as hereinbefore stated; that at the time the letter was written Mr. Curran had not been served with summons in the case, but that in the event he was served with summons, that he expected the defendant to defend the action in the State Court in his behalf and to pay any judgment that might be rendered therein within the limits of the policy.

On March 24, 1961, the attorney for the defendant advised the attorneys for the present plaintiff, David H. Curran, that it was his client's contention "that the alleged negligent activities of Colonel Curran (David H. Curran is a retired Lt. Col.) which were a proximate cause of Mr. Hall's death, were not the duties of an executive officer so as to constitute him an insured under the policy."

In the complaint for the declaratory judgment, the then plaintiffs, in numbered paragraph 12 of the complaint alleged:

    "Plaintiff David H. Curran states that he is the
  only executive officer of Curran Development Company,
  Inc.; that he has charge of and actively participated
  in the construction of residences on property owned
  by the corporation and is the sole executive officer
  entrusted with its management and was acting within
  the scope of his duties as such at the time of the
  death of Francis E. Hall."

In the manufacturers and contractors policy, No. 631423 involved herein, the term "insured" is defined in Section III of the policy as follows:

    "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."

Under "Exclusions" appear the following:

"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 disability benefits law,
  or under any similar law;
    "(k) under coverage A, to bodily injury to or
  sickness, disease or death of any employee of the
  insured arising out of and in the course of his
  employment by the insured;"

The motion for summary judgment was disposed of on June 1, 1961, by a written opinion, sub nom. Curran Development Company, Inc., and David H. Curran v. Security Insurance Company, D.C., 194 F. Supp. 727, in which the court held that the then plaintiff, Curran Development Company, Inc., had no controversy with the defendant; that the corporation was not a party defendant in the personal injury suit pending in the state court, and that as between the then plaintiff corporation and defendant, the defendant's motion for summary judgment was granted. However, the court denied the motion of the defendant for summary judgment against the plaintiff, David H. Curran, and in the opinion denying the motion for summary judgment as against the plaintiff, David H. Curran, the court said:

    "* * * However, the question of whether an
  executive officer of a corporation is performing
  duties as such or as an employee of the corporation
  is primarily one of fact, and will depend to a great
  extent on the makeup of the corporation, the duties
  assigned to the individual officer, and naturally the
  functions actually being performed by him with the
  consent of the corporation. Therefore, since the
  status of David H. Curran is a disputed question of
  fact, the court cannot enter a summary judgment on
  this basis."

After the disposition of the motion for summary judgment, there was left the claim of the plaintiff, David H. Curran, on the complaint filed, as hereinbefore stated, on March 27, 1961, against the defendant for a declaratory judgment.

The trial was held on June 30, 1961, and at the conclusion of the trial, the case was submitted and taken under advisement. Prior to the trial of the claim of David H. Curran on the merits, the attorneys for the parties had submitted rather extensive briefs, and the attorney for the defendant submitted to the court an additional memorandum brief. The briefs together with all of the testimony and exhibits thereto, have been considered, and the case is now ready for final disposition.

David H. Curran, often referred to as Colonel Curran, had worked for approximately 14 years as an engineer for an electric company in Kansas City, Missouri. He was a former member of the Air Force, for several years, including service in Washington, D.C. Following his retirement from the Air Force, he was reemployed for approximately two years by the electric company in Kansas City, Missouri. He left the employment of that company, and he and his wife, Margie L. Curran, returned to their home in Brighton, Colorado. Prior to 1959, the plaintiff and his wife became interested in developing property for residential purposes in Hot Springs, Arkansas. The plaintiff located a tract of 15 acres lying along the south shores of Lake Hamilton. He contacted his father, Arthur L. Curran, who was engaged in a similar business in the City of Denver, Colorado. As a result of a conference with his father, a partnership was formed, composed of Arthur L. Curran, and wife, Armeda Curran, the plaintiff, David H. Curran, and wife, Margie L. Curran. The partnership purchased the tract of land and plaintiff, acting for the partnership, began developing it for residences. While the first residence was being built with labor paid by the hour by the plaintiff, who, being an electrician and a skilled workman, not only supervised the construction of the residence but actively worked as a laborer, he, for the benefit of the partnership, applied to J.B. Ezell & Co., local soliciting agents of the defendant for a manufacturers and contractors liability policy of insurance. The local agents did not have the authority to write such policy, and contacted the general agents, Anderson & Newell, of Little Rock, Arkansas, who, after a full inquiry into the affairs of the partnership and the manner and means by which it expected to develop the land, issued a binder. About that time and while the first residence was being built, Arthur L. Curran and wife, the father and mother of plaintiff, visited the plaintiff and his wife in Hot Springs, Arkansas, and after viewing the property and the progress that was being made by the plaintiff, the four of them decided to form a corporation to conduct the business that had been started by the partnership. The Articles of Incorporation were executed April 23, 1959, and provides that the Board of Directors shall adopt the By-Laws for the regulation and management of the affairs of the corporation not inconsistent with the laws of the State of Arkansas or the Articles of Incorporation. The nature of the business of the corporation is stated in the Articles, as follows:

    "To carry on the primary business in which the
  corporation intends to initially engage; to employ
  engineers, architects, builders and contractors for
  the purpose of or in connection with the
  construction, erecting, altering, repairing,
  improving or doing any other work in connection with
  any houses or residences, or structures of every kind
  and description whatsoever; and to manufacture, buy,
  sell, purchase, distribute, and deal in any and all
  kinds of building materials, building supplies, or
  products of any and every kind or character, and to
  do any and all things necessary and proper to effect
  such purpose. And also, to engage in any commercial,
  industrial and agricultural enterprise calculated or
  designed to be profitable to this corporation and in
  conformity with the laws of the State of Arkansas,
  and to generally engage in, do, and

  perform, any enterprise, act or vocation that a
  natural person might, could do, or perform."

Article IV of the By-Laws provides:

    "The business and affairs of the Corporation shall
  be managed by a Board of Three Directors, * * *."

Section 8 of Article V provides:

    "The General Manager shall have the authority and
  exercise such powers as may from time to time be
  conferred upon ...

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