Fidelity & Casualty Company of New York v. Griffin

• Decision Date: 05 May 1959
• Docket Number: Civ. A. No. 2496.
• Citation: 178 F. Supp. 678
• Parties: FIDELITY & CASUALTY COMPANY OF NEW YORK, Plaintiff, v. Qually GRIFFIN et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

178 F. Supp. 678

FIDELITY & CASUALTY COMPANY OF NEW YORK, Plaintiff, v.Qually GRIFFIN et al., Defendants.

Civ. A. No. 2496.

United States District Court S. D. Texas, Galveston Division.

May 5, 1959.

Vinson, Elkins, Weems & Searls, Gaius G. Gannon, Jr., Houston, Tex., for plaintiff.

Smith & Lehmann, M. A. Lehmann, and Weldon H. Berry, Houston, Tex., Sidney J. Brown, Rosenberg, Tex., and Walton S. Roberts, Richmond, Tex., for defendants.

CONNALLY, District Judge.

This is a declaratory judgment action in which the insurer seeks a determination of its duties and obligations under an automobile liability policy.Defendants are the insured, and third-partyclaimants.

Federal jurisdiction is based on diversity of citizenship, the insurer being a citizen of New York, and each of the defendants being a citizen of this State.The jurisdictional amount is sufficient.

The facts, largely without dispute, are these.The plaintiff, Fidelity & Casualty Co. of New York, issued its automobile liability policy to the defendantArthur White, the owner of the vehicle in question, and the "named insured".On July 28, 1957, the policy then being in force and effect, the insured vehicle was involved in a collision with a motor scooter ridden by two minors, Griffin and Richardson, likewise defendants here.When the investigating officers arrived at the scene of the collision, White was present.He stated that he was driving the vehicle at the time of the collision, and purported to give the details of the accident.White notified Fidelity of the collision promptly, and gave a statement to the effect that he had been operating the vehicle.White was charged with the offense of aggravated assault by reason of the collision and resulting injuries to the minors, to which charge he entered a plea of guilty.

In December, 1957, White was named defendant in an action in the State court by the minors, Griffin and Richardson, for damages resulting from this collision.White notified Fidelity of the suit, and Fidelity employed attorneys to represent him.The attorneys so employed actively undertook White's defense.

On February 28, 1958, White was required by opposing counsel in the State court proceeding to give his testimony by deposition.While en route to the appointed place, and in company with his attorney (provided by Fidelity under its policy obligation), White stated that in truth he, White, was not driving the vehicle at the time of the collision, and was not present; that in fact it had been driven, with White's permission and consent, by one Arthur Lee Felder, White's 14 year old nephew, who had no driver's license.White stated that he learned of the collision immediately (being no great distance away), and hastened to the scene.As no third persons had arrived, and as the injured parties had not yet regained consciousness, in order to protect young Felder for driving without a license (and perhaps himself for having permitted it) White assumed responsibility.

White's deposition was taken as scheduled, and on advice of his counselhe testified to the facts just stated, which he affirmed as constituting the truth.One week thereafter, Fidelity instituted this declaratory judgment proceeding.

It is the insurer's position that both White and Felder, to whom it normally would owe the obligation to defend, violated the notice provision¹ as well as the cooperation clause² of the policy.The notice provision requires not only notice that an accident has occurred, but that information as to the circumstances thereof, names of witnesses, etc., be furnished.The plaintiff contends that the notice which it received, containing false information, deliberately made, did not comply.Defendants contend that notice of the accident is enough; and that falsity in the one particular as to the driver of the insured vehicle does not vitiate the policy.

Regarding the cooperation clause, requiring cooperation of the insured, assistance in preparing for trial, effecting settlements, etc., plaintiff contends this was breached by the long-continued failure of White and Felder to come forward with the truth.The defendants, on the other hand, contend that no harm or damage was suffered by plaintiff by reason thereof, and that proof of damage is necessary before a breach of the cooperation clause relieves the insurer.

The plaintiff is clearly right in both respects.Notice of an accident containing a deliberate and willful mis-statement as to one of the circumstances of controlling importance, is no notice at all.Implicit in the contractual obligation of the assured to give notice, is the condition that the notice be honest and truthful (Hoffman v. Labutzke, 233 Wis. 365, 289 N.W. 652).

Similarly, such deceit, continued for a period of seven months following the accident, constitutes a breach of the cooperation clause.Under Texas authorities, such a breach must be substantial and material before the insurer is relieved (Universal Automobile Ins. Co. v. Culberson, Tex.Com.App., 126 Tex. 282, 86 S.W.2d 727, 87 S.W.2d 475;Century Lloyds v. Barnett, Tex.Civ.App., 259 S.W.2d 768;Automobile Underwriters' Ins. Co. v. Long, Tex.Com.App., 63 S.W. 2d 356).

I find the instant breach to have been of that nature.Conduct of the two assureds, which was designed to cause the insurer to defend the State court proceeding under a complete misapprehension of a highly important fact, can hardly be characterized as insubstantial; nor is the identity of the driver an immaterial matter.³

The instant case is to be distinguished from those where (a) a false statement of this nature is first given, but then promptly corrected (General Accident Fire & Life Assur. Corp. v. Rinnert, 5 Cir., 170 F.2d 440; Rowoltd, for Use of Flanagan v. Cook County Farmers Mutual Ins. Co., 305 Ill.App. 93, 26 N.E.2d 903;Pacific Indemnity Co. v. McDonald, 9 Cir., 107 F.2d 446, 131 A.L.R. 208), and (b) from those cases where the alleged falsity was not fraudulent, but...