American Fidelity & Casualty Co. v. Greyhound Corp.

• Decision Date: 25 June 1956
• Docket Number: No. 15757.,15757.
• Citation: 232 F.2d 89
• Parties: AMERICAN FIDELITY and CASUALTY COMPANY, Inc., Appellant, v. The GREYHOUND CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

232 F.2d 89 (1956)

AMERICAN FIDELITY and CASUALTY COMPANY, Inc., Appellant, v. The GREYHOUND CORPORATION, Appellee.

No. 15757.

United States Court of Appeals Fifth Circuit.

April 12, 1956.

Rehearing Denied June 25, 1956.

Herschel E. Smith, Cecyl L. Pickle, and Knight, Smith, Underwood & Peters, Miami, Fla., for appellant.

Willis H. Flick, T. J. Blackwell, Blackwell, Walker & Gray, Miami, Fla., for appellee.

Before TUTTLE, CAMERON and JONES, Circuit Judges.

TUTTLE, Circuit Judge.

This appeal arises out of litigation also discussed in Greyhound Corp. v. Excess Insurance Co., 5 Cir., argued the same day. 233 F.2d 630. The Excess Insurance Co. originated the proceedings by bringing an action against Greyhound, alleging that it had entered into a contract of insurance with Greyhound insuring Greyhound against loss from liability in excess of certain stated amounts; that Greyhound had contended that Excess was liable for damages arising out of a personal injury action against Greyhound, reported in Florida Greyhound Lines, Inc., v. Jones, Fla., 60 So.2d 396; and that there is no liability on its part for the loss thus suffered by Greyhound because Greyhound failed to give timely notice to Excess of the Joneses' claims of liability, as is required by the policy. The complaint sought declaratory relief that Excess was not liable to Greyhound for any amount based upon the judgments in the Jones case, and injunctive relief against Greyhound's instituting any action to recover such sums.

Greyhound answered, denying that it had been guilty of any breach of duty in the premises, and alleging that all conditions entitling it to recover against Excess had been performed. It also alleged that Excess had been in no manner harmed or prejudiced by Greyhound's acts or failures to act. In addition, it brought a third-party action against the Markel Service, Inc. and the appellant American Fidelity and Casualty Co., Inc. Its complaint in the third-party action alleged that, upon being served with process in the Jones case, it gave proper notice of the suit to Markel and American Fidelity and Casualty, its primary carriers; that the defense of the action thereupon passed into the hands of the third-party defendants; that although the ad damnum clauses in the Jones case were raised (thereby increasing the possibility of a recovery in excess of the amount covered by the primary policy), the third-party defendants failed to notify either Greyhound or Excess of this amendment, although it knew of the existence of excess coverage under the contract of insurance entered into between these two last-named parties; that Greyhound was guilty of no breach of duty in the premises; and that, if Excess' liability was discharged by its not receiving notice of the amendment of the ad damnum clauses in the Jones case, then the third-party defendants breached a duty owed to Greyhound to settle the Jones case, because although there was no defense to it, the third-party defendants refused to settle, but proceeded to trial, incurring liability on Greyhound's part to the Joneses for damages which they recovered in excess of the limits of the primary policy, which Excess refuses to pay. Later Greyhound amended its third-party complaint to allege, inter alia, that the third-party defendants were guilty of bad faith and negligence in conducting the settlement negotiations in the Jones case.

Subsequently the trial court granted motions for summary judgment made by Excess and Markel, and from the first of these judgments Greyhound appealed in Greyhound Corp. v. Excess Insurance Co., 5 Cir., supra. After answer by American, denying all the allegations of the amended third-party complaint, the claim of Greyhound against American went to trial, resulting in a judgment entered on a jury verdict for Greyhound. This is the judgment from which American appeals here.

American has assigned several specifications of error, but in the view which we take of the case, only two questions need be considered: (1) whether American's objections to its being impleaded into the case were properly overruled; (2) whether the court correctly instructed the jury regarding American's duty to Greyhound while conducting settlement negotiations in the Jones case. If the first question is answered in the negative, then the entire action against American must be dismissed. City of Philadelphia, to Use of Warner Co. v. National Surety Corp., 3 Cir., 140 F.2d 805. If only the second question is answered in the negative, Greyhound's suit against American cannot be dismissed, but must be remanded for a new trial.

With regard to the first question, the applicable provision is set forth in Fed. Rules Civ.Proc. rule 14(a), 28 U.S.C.A.:

"Before the service of his answer a defendant may move ex parte or, after the service of his answer, on notice to the plaintiff, for leave as a third-party plaintiff to serve a summons and complaint upon a person not a party to the action who is or may be liable to him for all or part of the plaintiff\'s claim against him."

American contends that impleader should not have been allowed in this case because the third-party complaint does not allege that American is liable to Greyhound for any part of the claim which Excess asserted against Greyhound. The objection, we think, places too restrictive a meaning on the words "all or part of the plaintiff's claim", in the Rule.

The complaint filed by Excess in effect alleged a breach of contract by Greyhound in failing to comply with a provision in the policy that

"Upon the occurrence of any accident which may involve liability on the part of the company, the assured shall give immediate written notice thereof with the fullest information obtainable at the time to the company at 99 John Street, New York, New York. The assured shall give like notice with particulars of any claim made on account of such accident. If any suit is brought against the assured to enforce such claim, the assured shall immediately forward to the company copies of every summons or other process that may be served upon the assured."

Greyhound asserted in defense that "immediate written notice" means notice within a reasonable time, which depends upon all the circumstances of the case, including its own knowledge or lack of knowledge of the seriousness of the claim. The third-party complaint filed by Greyhound against American alleged, in addition to negligence and bad faith in the conduct of settlement negotiations with the Joneses, that American, although it knew of the excess coverage, failed to notify either Greyhound or the excess carrier of the possibility that excess would be involved, until three weeks before trial; and this, although there was growing evidence as time went by that the limits of the primary policy would be exceeded. The position assumed by Greyhound was therefore, first, that it acted with due diligence in giving notice of the Jones suit to Excess, considering the knowledge with which it had been provided by American; and second, that if it failed so to act, this failure was due to American's negligence or bad faith...