Pennsylvania T. & F. Mut. Cas. Ins. Co. v. Thornton

• Decision Date: 20 May 1957
• Docket Number: No. 7374.,7374.
• Citation: 244 F.2d 823
• Parties: PENNSYLVANIA THRESHERMEN & FARMERS' MUTUAL CASUALTY INSURANCE COMPANY, Appellant, v. Mrs. Myrtle Louise THORNTON, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

244 F.2d 823 (1957)

PENNSYLVANIA THRESHERMEN & FARMERS' MUTUAL CASUALTY INSURANCE COMPANY, Appellant, v. Mrs. Myrtle Louise THORNTON, Appellee.

No. 7374.

United States Court of Appeals Fourth Circuit.

Argued April 2, 1957.

Decided May 20, 1957.

Hoover C. Blanton, Columbia, S. C. (Thomas B. Whaley, and Whaley & McCutchen, Columbia, S. C., on brief), for appellant.

John Gregg, McMaster, Columbia, S. C., for appellee.

Before PARKER, Chief Judge, and SOPER and SOBELOFF, Circuit Judges.

SOBELOFF, Circuit Judge.

A casualty insurance company appeals from a judgment obtained against it under an automobile liability policy. The suit was brought by Myrtle Louise Thornton, who, in an earlier action, had recovered judgment against Walter B. Sturgeon, the person insured, for injuries sustained by her in a collision between Sturgeon's automobile and the one in which she was taking a number of children to school. As it was not possible to get satisfaction of her judgment on execution, the sheriff making a return of "nulla bona," she brought this suit against the insurer.

The first issue raised by the insurer is that Sturgeon failed to comply with a condition of the policy¹ by not forwarding to the company the summons with which he was served in Mrs. Thornton's suit; and that, if he did forward the summons as he claims, this was done too late. Additionally, waiver and estoppel are asserted by the plaintiff to meet this defense. A second defense interposed by the insurer is that as the plaintiff's recovery against the policyholder was for punitive as well as actual damages, there is no liability upon the policy. The nature of these defenses will become clearer from a recital of the facts.

The collision out of which this litigation arose occurred on October 9, 1953. The plaintiff's lawyer promptly wrote the Harper Insurance Agency, which had sold Sturgeon his policy, advising it of the accident and inviting discussion of his client's claim with a view to settlement. Again on March 18, 1954 he wrote to the defendant's insurance adjustor, but efforts to settle the claim failed and the plaintiff sued Sturgeon in the Court of Common Pleas of Richland County, South Carolina. The summons and complaint were served on Sturgeon on June 11, 1954, while he was a prisoner serving a short term in the State Penitentiary of South Carolina. Under the prevailing practice in that Court his answer was due within twenty days of the summons, so that, counting from June 11, 1954, answer was required to be filed by July 1. He was released from custody on June 29, 1954, and testified that on July 2, within three days after his release, and on the twenty-first day after service upon him, he took the summons and complaint to the office of the Harper Insurance Agency and left it with one of its employees.

For more than three months thereafter the insurance company took no action. According to its testimony, it remained inactive during this period because it never received the summons from Sturgeon. It claimed that Sturgeon's first communication was a phone call to the Harper Agency on October 11, 1954, to inquire about the suit, when he told of having previously delivered the paper to the Agency. On that same day Harper notified the Company's adjustor, who contacted Sturgeon the next day and procured a non-waiver agreement and a signed statement of the accident. By this agreement the Company undertook, with Sturgeon's consent, to conduct the defense of the pending suit, upon the understanding that this should not be construed as a waiver of the Company's right, if in fact it had such right, later to deny liability and withdraw from the case.

Ten days later, on October 22, 1954, the insurance company filed a special appearance on behalf of Sturgeon, seeking to set aside the service of process made upon him, on the asserted ground that the Court was without jurisdiction because service upon a prisoner by a specially appointed deputy sheriff was invalid. See Section 10-436, 1952 Code of South Carolina. It did not, however, then file a plea or ask leave of Court to do so, or seek consent of the plaintiff's counsel so to do. At that time no default judgment had yet been taken against Sturgeon; judgment by default was not awarded the plaintiff till December 1, 1954.

When the motion to set aside the service of summons came on for hearing on January 24, 1955, it was denied. This action was appealed to the Supreme Court of South Carolina and affirmed. Thornton v. Sturgeon, 227 S.C. 294, 87 S.E.2d 821. In the meantime, while the insurance company was prosecuting its motion to set aside the service, and making no effort to open the default and plead to the merits, the case was referred to a master, who took testimony, reported his findings and recommended judgment for $10,000 for actual and punitive damages. The Court gave judgment accordingly.

It was not until February 5, 1955, after the challenge to the service was denied, and after judgment had been made final, that the insurance company moved for the first time to open up the default and sought permission to file a responsive pleading. This effort proved unsuccessful, the Common Pleas Court holding that making no effort to file an answer till February 5, 1955 constituted inexcusable delay.

The present action was commenced on July 27, 1955, also in the Court of Common Pleas for Richland County, and was removed to the U. S. District Court. Verdict and judgment there were for $5,000, the limit of the policy.

I.

The requirement in a policy that the insured shall "immediately" turn over to his insurance company any summons or complaint served on him has been interpreted by the courts to mean, not instantaneously, but within a reasonable time. What is reasonable is, of course, a fact question, to be determined in each case according to the surrounding circumstances. Kravat v. Indemnity Ins. Co. of N. A., 6 Cir., 152 F.2d 336; Young v. Travelers Ins. Co., 5 Cir., 119 F.2d 877; Zauderer v. Continental Casualty Co., 2 Cir., 140 F.2d 211; Callaway v. Central Surety and Ins. Corp., 5 Cir., 107 F.2d 761; and LaSage v. Utilities Ins. Co., 5 Cir., 131 F.2d 536.

We must assume, as the jury evidently found, that the papers were in fact delivered on July 2, 1954, after the expiration of the twenty day period within which a defendant is required to plead. The plaintiff contends that a lapse of twenty-one days between service on Sturgeon and delivery of the papers to the insurer was not an unreasonable time. The fact that Sturgeon was in prison till June 29 and turned the papers over to the insurer within three days after his release, is pointed to by the plaintiff as showing the reasonableness of the delay. In opposition to this, the company argues that even in prison Sturgeon might have arranged for the delivery of the papers earlier. The point is fairly arguable and was properly presented by the District Court to the jury for decision. The insurer insists that on the twenty-first day after service the defendant in the suit was, under the rules of the Court, already in default, and that this is itself sufficient to make the delay an unreasonable one as a matter of law. We do not think such decisive significance can be ascribed to this circumstance. Not prejudice to the insurer, but unreasonable delay by the insured, is the test. The question of prejudice has been held immaterial in cases of unreasonable delay. Free v. United Life & Accident Insurance Co., 178 S.C. 317, 182 S.E. 754. Likewise, prejudice is immaterial where delay by the insured is deemed in fact not unreasonable, even though because of default in pleading, the defense of the suit may be made more burdensome. By way of illustration, if it were shown that the insured became ill and unconscious on the day he was served and remained so for twenty-one days or longer, it could not be contended that he had released the insurer by not turning over the papers during his disability.

II.

It is to be noted, however, that the delay of a single day beyond the normal time for pleading cannot be said to have been a serious factor in this case; or at all events, it need not have been a matter of...