Fireman's Fund Insurance Co. v. Wilburn Boat Co.

• Decision Date: 23 March 1962
• Docket Number: No. 18722.,18722.
• Citation: 300 F.2d 631
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Appellant, v. WILBURN BOAT COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

300 F.2d 631 (1962)

FIREMAN'S FUND INSURANCE COMPANY, Appellant, v. WILBURN BOAT COMPANY et al., Appellees.

No. 18722.

United States Court of Appeals Fifth Circuit.

March 23, 1962.

COPYRIGHT MATERIAL OMITTED

Edward B. Hayes, Chicago, Ill., Joe A. Keith, Sherman, Tex., Warren C. Ingersoll, Chicago, Ill., for appellant.

Hobert Price, Dallas, Tex., T. G. Schirmeyer, Houston Tex., Gullett & Gullett, Denison, Tex., for appellees.

Before TUTTLE, Chief Judge, and HUTCHESON and JONES, Circuit Judges.

TUTTLE, Chief Judge.

This is the third appearance of this case in this Court. It has been tried three times in the trial court and has been once to the Supreme Court of the United States. On the first trial it appeared that the plaintiffs, Wilburn Boat Company, conceded that specific warranties contained in the policy of marine insurance sued on against use for other than private pleasure, against pledge and against sale, had been violated. The trial judge thereupon held that the contract should be interpreted under general maritime law requiring literal performance of warranties and that this rule could not be affected by state law. This Court affirmed in 5 Cir., 201 F.2d 833.

The Supreme Court, 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337, reversed the decision of this Court and of the trial court and held that state laws should be applied in the field of marine insurance, at least "where entrenched federal precedent is lacking," with respect to a specific issue. The Court determined that there was no such entrenched federal precedent as to the effect to be accorded the warranties.

The second trial and appeal are without significance in light of the fact that the case was finally heard and decided on the merits by the district court without the intervention of a jury and a new record completely made as the basis of the appeal that is now before us. The district court concluded that the insurance policy was a Texas contract and that under the Texas law the defenses relied on by the insurance company were not available to it. The court entered a judgment in favor of the plaintiffs.

The defenses asserted by the insurance company were many. They are all urged here on the assumption that the basic findings of evidentiary facts by the trial court can be accepted as true, although the insurer does attack some of the inferences drawn by the trial court from the admitted facts. To place the issues in focus, it is necessary to set out the facts as found by the district court. Before doing so, however, a short explanatory statement will help in understanding the court's findings.

It is not questioned that there were at least three plain breaches of warranty and some eight or nine untrue or false (these terms are used without implying whether they were or were not fraudulent) statements made or facts concealed. These misstatements are of several kinds:

(1) Actual misrepresentations made to the company when the policy was obtained or when the coverage was increased, and which were thus susceptible of being acted on by the company; (2) Statements made on a form submitted to the Wilburn brothers after the coverage had been increased, in order to justify the increase, but which statements may not actually have been acted upon before the loss of the boat. These statements were on a form called an "application" form in the court's findings of fact. This form was not submitted to the insurance company as a part of an application for the policy or for increase in coverage, but as a source of information sought by the company.

The court's findings of fact are:

"At all times pertinent hereto Glenn, Frank and Henry Wilburn, and each of them, were residents and citizens of Denison, Grayson County, Texas and the H. H. Cleaveland Agency of Rock Island, Illinois, hereinafter referred to as Cleaveland Agency, was a duly authorized agent of the Defendant and was engaged in the writing of insurance, including marine insurance, for the Defendant. On May 22, 1947, the Defendant issued through the Cleaveland Agency its marine hull policy No. YA-28579, the policy in question herein, to Robert D. Marshall, a resident of Rock Island, Illinois, and John Shuler, a resident of Des Moines, Iowa, the then owners of the Wanderer, the yacht or vessel herein question, under the terms of which the Wanderer was insured in the amount of $10,000.00 from loss by fire. At the time such policy of insurance was issued the Wanderer was located in waters at or near Greenville, Mississippi. The policy contained a provision to the effect that it was warranted by the Assured, or the owners of the vessel, that the vessel would be used for private pleasure purposes during the term of the policy and would not be hired or chartered unless permission to do so was granted by indorsement to the policy. Among the conditions of the policy was a provision to the effect that the insurance extended by the policy shall be void in case the policy or the interest insured thereby should be sold, assigned, transferred or pledged without the previous consent of the Defendant. Another pertinent provision of the policy was:

"`This Entire Policy Shall Be void if the assured has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject matter thereof, or, in case of any fraud or false swearing by the Assured touching any matter relating to this insurance or the subject matter thereof; whether before or after loss.\'

"In June 1948 and for sometime prior thereto and at all other times pertinent hereto the Defendant had a permit to do and was doing business in the State of Texas.

"On or about June 4, 1948, and at a time when the coverage of the insurance policy in question had been extended to May 22, 1949, Glenn, Frank and Henry Wilburn purchased the Wanderer from Robert D. Marshall and John Shuler for a consideration of $9,000.00. As a result of this purchase each of said Wilburns owned an undivided one-third interest in the boat. At that time the Wanderer was still located on waters at or near Greenville, Mississippi. It was the intention of the Wilburns to move said boat from its mooring in Greenville, Mississippi, to Lake Texoma, a large inland lake located near Denison, Texas, with part of said lake being located in Texas and the remainder thereof located in the State of Oklahoma. The Wilburns moved the boat by water from Greenville, Mississippi, up the Mississippi River to the Red River and then up the Red River to the Lake Texoma Dam near Denison, Texas. The boat was then moved overland around the dam and launched on Lake Texoma in July or August 1948 after certain changes and repairs were made to the boat. After the boat was launched on Lake Texoma it was taken to the Texoma Boat and Dock Company, a boat repair business located in Texas on Lake Texoma, where additional extensive repairs and remodeling were performed on the boat. At the time the Wilburns purchased the boat they intended to use it for the carrying of passengers for hire on Lake Texoma. Emphasis added.

"For sometime prior to June 4, 1948, and at all pertinent times subsequent thereto R. L. McKinney of Denison, Texas, owned and operated an insurance agency in Denison, Texas, under the name of R. L. McKinney Agency, writing insurance of various types for various insurance companies he represented. McKinney prior to June 4, 1948, had written various types of insurance for the Wilburns. The Defendant never at any time prior to June 4, 1948, authorized McKinney to solicit or write insurance of any kind for it. At or about the time the Wilburns purchased the Wanderer Frank Wilburn contacted R. L. McKinney in Denison, Texas, and requested McKinney to obtain for himself and his brothers insurance coverage on the Wanderer. McKinney, who was not authorized to write on behalf of any of the companies he represented the marine insurance the Wilburns desired on the Wanderer, made a telephone call to a representative of the Cleaveland Agency in Rock Island, Illinois. In this telephone conversation McKinney advised the Cleaveland Agency representative, namely, one J. B. White, that he, McKinney, was an insurance agent in Denison, Texas, and was acting as agent for Frank and Henry Wilburn who had purchased the Wanderer; that he, McKinney, had no facilities for writing the hull coverage desired and requested White to arrange with the Defendant to continue its coverage of the Wanderer while the boat was being moved from Greenville, Mississippi, to Lake Texoma. Representatives of the Cleaveland Agency then contacted the Chicago office of the Defendant and made known to the Defendant the request made by McKinney for the transfer of the coverage of the Wanderer to the Wilburns. The Defendant, through its Chicago office, agreed to transfer the coverage of the policy in question to the Wilburns, and on June 8, 1948, the Cleaveland Agency wired McKinney at Denison, Texas, to the effect that the Defendant was binding the Wanderer with full marine perils coverage and that indorsements would follow. Thereafter, the Defendant issued an indorsement to the policy in question showing that the name of the assured, effective June 8, 1948, was changed from Robert D. Marshall and John Shuler to Frank and Henry Wilburn. This indorsement was transmitted by the Defendant to the Cleaveland Agency who, in turn, forwarded same by mail to McKinney in Denison, Texas.

"The premium for the coverage extended the Wilburns on the Wanderer, as aforesaid, was the sum of $419.56. The Wilburns paid this premium by issuing their check drawn on a Denison, Texas, bank payable to the Cleaveland Agency, which check they, in turn, delivered to McKinney who, in turn, transmitted it to the Cleaveland Agency. The Cleaveland Agency then caused the check to be presented for payment, and same was paid by the Denison, Texas, bank upon which it was drawn. By letter dated August 6, 1948, McKinney requested the Cleaveland Agency to

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