General Casualty & Surety Co. v. Kierstead

• Decision Date: 08 November 1933
• Docket Number: No. 9715.,9715.
• Parties: GENERAL CASUALTY & SURETY CO. v. KIERSTEAD.
• Court: U.S. Court of Appeals — Eighth Circuit

67 F.2d 523 (1933)

GENERAL CASUALTY & SURETY CO. v. KIERSTEAD.

No. 9715.

Circuit Court of Appeals, Eighth Circuit.

November 8, 1933.

George L. De Lacy, of Omaha, Neb. (J. A. C. Kennedy and Yale C. Holland, both of Omaha, Neb., on the brief), for appellant.

M. S. McDuffee, of Norfolk, Neb. (Thomas I. Purcell, of Colorado Springs, Colo., on the brief), for appellee.

Before GARDNER and VAN VALKENBURGH, Circuit Judges, and DEWEY, District Judge.

GARDNER, Circuit Judge.

Appellant, defendant below, issued to one F. L. Michaels, Jr., its automobile liability policy, by which it agreed to insure Michaels against the liability imposed by law upon him for damages on account of bodily injury suffered by any person as a result of the use of insured's automobile, and to pay and satisfy judgments finally establishing insured's liability in actions defended by the company, subject to limitations as to amount not here important, and subject to the condition, among others, that: "The Assured shall not interfere in any negotiation for settlement, nor in any legal proceeding, but, whenever requested by the Company, and at the Company's expense, the Assured shall aid in securing information and evidence and the attendance of witnesses, and shall cooperate with the Company (except in a pecuniary way) in all matters which the Company deems necessary in the defense of any suit or in the prosecution of any appeal."

While this policy was in full force and effect, the insured, Michaels, had an automobile accident while driving the car covered by the insurance policy, inflicting personal injuries upon the appellee, G. E. Kierstead. Kierstead thereupon sued the insured for damages on account of his personal injuries, claiming that his injuries resulted from the negligence of the insured in operating the automobile. The attorneys for the appellant undertook the defense of the action, which resulted in a judgment in favor of Kierstead and against insured for $6,660. The judgment not having been paid, execution was issued against Michaels and returned unsatisfied, and thereupon appellee brought the present action based upon a provision of the policy to the effect that: "The insolvency or bankruptcy of the named Assured shall not release the Company from payment of damage sustained or loss occasioned during the life of the policy, and if execution against the named Assured in an action for damages is returned unsatisfied because of such insolvency or bankruptcy, the injured, or his personal representative in case of death, may maintain an action against the Company for the amount of judgment obtained not exceeding the limits of the policy."

The appellant defended the instant suit on the ground that there was a breach of a condition vitiating the policy, in that the insured had failed, neglected, and refused to co-operate with the insurance company in the defense of the action brought by Kierstead, it being alleged that he refused to furnish information concerning witnesses and the details of the accident; that he refused to answer correspondence and wires sent to him; that he purposely refused to advise defendant of his whereabouts; and that he refused willfully and purposely to attend the trial, although requested so to do.

At the close of all the testimony, the court directed a verdict in favor of the plaintiff and against the defendant for the amount claimed, together with interest and attorney fees.

To avoid confusion, we shall now refer to the parties as they were designated in the court below.

From the judgment entered on this verdict, defendant has appealed. The action of the court in directing a verdict in favor of the plaintiff is the sole error relied upon.

As has been observed, it is the contention of the defendant that insured committed a breach of the condition of the policy requiring him to co-operate with the defendant in the defense of the original action. The condition of the policy requiring co-operation by the insured is in the nature of a condition precedent to liability on the company's part for the loss growing out of a claim with the disposition of which the insured's co-operation is demanded. In order that the insured may be entitled to recover, he must substantially have performed all the material conditions of the contract which are made conditions precedent to any liability on the part of the insurance company. The right of the injured party to proceed against the insurer is dependent upon the provisions of the insurance contract. He can acquire no greater right thereunder than that existing in favor of the insured. In other words, if the conduct of the insured has been such as to bar him from right of recovery under the contract, then the injured party is likewise precluded from recovery. Royal Indemnity Co. v. Morris (C. C. A. 8) 37 F.(2d) 90; Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271, 160 N. E. 367, 369, 72 A. L. R. 1443; Seltzer v. Indemnity Ins. Co. of North America, 252 N. Y. 330, 169 N. E. 403; United States Fidelity & Guaranty Co. v. Williams, 148 Md. 289, 129 A. 660; Francis v. London Guarantee & Accident Co., 100 Vt. 425, 138 A. 780; United States Casualty Co. v. Breese, 21 Ohio App. 521, 153 N. E. 206; Bachhuber v. Boosalis, 200 Wis. 574, 229 N. W. 117.

In Coleman v. New Amsterdam Casualty Co., supra, the Court of Appeals of New York, in an opinion by Chief Justice Cardozo, now Mr. Justice Cardozo of the Supreme Court, in discussing the effect of a New York statute similar in its provisions to the provision contained in the indemnity policy in the instant case, said: "The effect of the statute is to give to the injured claimant a cause of action against an insurer for the same relief that would be due to a solvent principal seeking indemnity and reimbursement after the judgment had been satisfied. The cause of action is no less but also it is no greater. Assured and claimant must abide by the conditions of the contract."

It seems to be well established, both in reason and on authority, that the injured person must stand in the shoes of the insured, and can only recover when the insured has substantially complied with the conditions of the policy, or when compliance therewith has been waived. It is, therefore, necessary to consider whether the insured failed to comply with the provision of the policy requiring him to co-operate in the defense of the action against him.

The defense is an affirmative one pleaded by the defendant, and the burden of proof was upon it. Francis v. London Guarantee & Accident Co., 100 Vt. 425, 138 A. 780; Cowell v. Employers' Indemnity Corp., 326 Mo. 1103, 34 S.W.(2d) 705; Conroy v. Commercial Casualty Ins. Co., 292 Pa. 219, 140 A. 905; United States Fidelity & Guaranty Co. v. Remond, 221 Ala. 349, 129 So. 15. The insured was not required "to combine with the insurer to present a sham defense." In the words of Justice Cardozo in Coleman v. New Amsterdam Casualty Co., supra: "Co-operation does mean that there shall be a fair and frank disclosure of information reasonably demanded by the insurer to enable it to determine whether there is a genuine defense."

The accident happened on May 29, 1928, near Colorado Springs, Colo. On June 2, 1928, the insured went to the law office of Young & Meikle, in Colorado Springs, who had been retained by the surety company to represent him in the action brought by Kierstead. At that conference with one of the company's lawyers, he made full report as to the facts of the accident. The material parts of this signed, written statement, prepared by one of the company's lawyers, reads as follows:

"Frank Lewis Michaels, Jr., Gilder Hotel, Roswell, N. M. at present. 206 Wallace Ave., Covington, Ky.

"F. L. M. Jr., was driving at time of accident.

"F. L. M. Jr., was age 25.

"Accident happened May 29, 1928, at 2 p. m.

"Accident happened 1½ to 2 miles north of Fountain, on Pueblo Road.

"Chrysler Coupe 72 — License No. Ky. — Kenton 1233 — Motor No. 200921 Chassis C. H. 813P.

"Going north exceeding 50 miles per hour. Was driving in middle of road and having come over slight rise or hill saw Buick Sedan approaching on his, Buick's, right side of road, about 300 yards ahead. At this place in road there are three well defined tracks in sand about 6 and 8 inches deep — like this (here appears a rough diagram). Tried to steer car to right and could not reach right hand side of road until collision occurred. Struck Buick, cars coming together, about half of my car striking his left half front. Was out of city limits on state road. Cars stopped instantly at time of accident. Going from Roswell, N. M. to Denver, Colo. State law 35 miles per hour. * * *

"Assured went to home of G. C. Davis, 314 West Cheyenne Road, Colorado Springs. Statement made to C. G. Mims, Colorado Springs, Colo. * * *

"There was man riding with assured at time of accident — name or extent of injuries, if any,...