McGettrick v. Fidelity & Casualty Co. of New York

• Decision Date: 12 March 1959
• Docket Number: No. 154,Docket 25237.,154
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Donald McGETTRICK, Plaintiff-Appellee, v. FIDELITY & CASUALTY COMPANY OF NEW YORK, Defendant-Appellant.

264 F.2d 883 (1959)

Donald McGETTRICK, Plaintiff-Appellee, v. FIDELITY & CASUALTY COMPANY OF NEW YORK, Defendant-Appellant.

No. 154, Docket 25237.

United States Court of Appeals Second Circuit.

Argued February 6, 1959.

Decided March 12, 1959.

Frederic W. Allen, of Edmunds, Austin & Wick, Burlington, Vt., for defendant-appellant.

James J. McNamara, of McNamara & Larrow, Burlington, Vt., for plaintiff-appellee.

Before CLARK, Chief Judge, MADDEN, Judge, United States Court of Claims,^* and HINCKS, Circuit Judge.

MADDEN, Judge.

The plaintiff brought this action in the United States District Court for the District of Vermont seeking to have the defendant declared legally obligated¹ to defend the plaintiff in a suit brought by one Arthur North against the plaintiff, and further seeking damages from the defendant because of its failure to defend the plaintiff in that suit. Upon the verdict of a jury, the District Court rendered a judgment for the plaintiff in the amount of $4,500. The defendant has appealed.

The defendant, on August 25, 1955 issued an "Owner's, Landlord's and Tenant's Public Liability Policy" to Ira E. Yandow and Donald McGettrick, doing business as the Essex Restaurant. The policy, among other things, protected Yandow and McGettrick against liability to other persons for injuries occurring in their restaurant. It contained, among numerous other provisions, the following ones pertinent to this litigation.

"1. Coverage A — Bodily Injury Liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of the premises for the purposes stated in the declarations, or operations necessary or incidental thereto.

"II. Defense, Settlement, Supplementary Payments. As respects the insurance afforded by other terms of this policy the company shall

"(a) defend any suit against the insured alleging such injury, sickness, disease, death, or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;

"(b) pay all premiums on bonds to release attachments for an amount not in excess of the applicable limit of liability of this policy, all premiums on appeal bonds required in any such defended suit, but without any obligation to apply for or furnish any such bonds."

It also contained the following definition.

"2. Assault and Battery. Assault and battery shall be demed an accident unless committed by or at the direction of the insured."

On January 16, 1956, while the policy was in effect, there was a fracas in the Essex Restaurant. As a consequence of that incident, one Arthur North employed a lawyer and directed him to bring a civil suit against McGettrick for assault and battery. North's lawyer wrote to McGettrick, advising him of North's claim. McGettrick turned the letter over to his insurance agent, who gave it to an adjuster for the defendant insurance company. The adjuster obtained written statements from McGettrick and Yandow. He learned from North's lawyer that North was claiming that McGettrick had committed an assault and battery upon him. The adjuster thereupon advised McGettrick that the insurance company would not defend the threatened suit by North because the policy did not cover the situation. This statement was repeated to Mr. MacCausland, a lawyer whom McGettrick had employed.

North brought his suit for assault and battery alleging damages of $5,000 and McGettrick was obliged to furnish a bail bond to avoid being held on a "body writ." He would not have been obliged to furnish the bond if the insurance company had undertaken to defend the suit.

McGettrick's attorney, in preparing to defend North's suit, obtained statements from twelve or more witnesses of the restaurant incident tending to show that McGettrick's battery of North was committed in self-defense. He discussed these statements with the insurance company's adjuster, but did not show them to him, though requested to do so. He persuaded North's attorney to agree to accept $1,000 instead of the $5,000 named in the suit. He advised the insurance adjuster of this fact, and the insurance adjuster finally settled the North claim for $400, in order to reduce the expense of defending a possible action against the insurance company.

McGettrick thereupon brought the instant suit against the defendant insurance company. The District Judge instructed the jury that, when the claim of North was brought to the attention of the insurance company, it was under a duty to make a reasonably careful investigation to determine whether McGettrick, in the fracas in the restaurant, was guilty of an assault and battery, or acted in self-defense and had therefore not committed an assault and battery; that if the insurance company did not make such an investigation it failed to act in good faith when it disclaimed coverage; that if the insurance company failed to make the required investigation, and if the jury found that McGettrick did act in self-defense, then the incident was covered by the insurance policy and the company was legally obligated to defend McGettrick against the North claim, and to compensate him in damages for its failure to do so.

The insurance company, the appellant, asserts that since North's suit was for an assault and battery by McGettrick and since the definition in the policy, hereinabove quoted, said that an assault and battery committed by the insured was not covered by the policy, that ended the matter and left the company free of responsibility. It says, in effect, that the statement in the claim made, or in the suit filed, by the third person claiming to have suffered injury for which the insured is responsible, determines whether the claim is covered by the policy or not.

The language of the policy itself does not support the appellant's contention. It says that assault and battery shall be deemed an accident (and therefore covered by the policy) unless committed by or at the direction of the insured. It would be impossible to make a stronger inferential statement that an incident alleged to be an assault and battery committed by the insured, but which was not an assault and battery at all, because what was done was done in self-defense, is within the definition of an accident and is therefore, covered by the policy. The language of the policy says nothing about statement of claims, or allegations in pleadings filed in lawsuits. It would seem, therefore, that it must have reference to objective facts.

Liability policies commonly contain a promise to defend any suit against the insured alleging injury covered by the policy even if the suit is groundless, false or fraudulent. When insurance companies have sought to disclaim responsibility for the defense of such suits by showing that in fact the injury resulted from a cause excluded from coverage by the policy, the courts have held them to their express bargain to defend such suits. See 50 A.L.R.2d 458 for an extensive note on the entire subject of an insurer's duty to defend actions against the insured. Beginning at page 463 is a discussion, with numerous citations, of the duty to defend groundless suits if the allegations in the suits are such as to place them within the coverage of the policies.

In holding that there is such a...