Industrial Indemnity Company v. Aetna Casualty and Surety Company

Industrial Indemnity Company (Industrial), a California corporation, appeals a judgment by a judge without a jury denying subrogation against Aetna Life & Surety Company (Aetna), a Connecticut corporation. Hawaii law controls this diversity of citizenship case. We reverse and remand.

In the summer of 1959, Hawaiian Dredging and Construction Company (Hawaiian Dredging) and Bechtel Corporation (Bechtel) formed a joint venture to construct a cement plant in Hawaii for Hawaiian Cement Corporation (Hawaiian Cement). The Hawaiian Cement contract required the joint venture to maintain general liability insurance, including automobile insurance. The joint venture purchased a comprehensive liability policy from Industrial through B. F. Dillingham Company, Ltd., Industrial’s general agent in Hawaii. The joint venture was the named insured. Hawaiian Dredging had previously purchased an identical comprehensive policy from Aetna, through Dillingham, which was also Aetna’s Hawaiian agent.

When the Industrial policy was purchased, the joint venturers had not decided whether the joint venture itself or the individual joint venturers would supply vehicles for the cement project. It was…