Aetna Cas. & Sur. Co. v. Simpson

• Decision Date: 28 October 1957
• Docket Number: No. 5-1305,5-1305
• Citation: 306 S.W.2d 117,228 Ark. 157
• Parties: The AETNA CASUALTY & SURETY CO., Appellant, v. Mary SIMPSON et al., Appellees.
• Court: Arkansas Supreme Court

Page 117

306 S.W.2d 117

228 Ark. 157

The AETNA CASUALTY & SURETY CO., Appellant, v. Mary SIMPSON et al., Appellees.

No. 5-1305.

Supreme Court of Arkansas.

Oct. 28, 1957.

Armstrong, McCadden, Allen, Braden & Goodman, Memphis, Tenn., Barrett, Wheatley, Smith & Deacon, Jonesboro, Mehaffy, Smith & Williams, and John T. Williams and Robert V. Light, Little Rock, for appellant.

Rieves & Smith and Henry S. Wilson, West Memphis, for appellees.

Pope, Pratt & Shamburger, Little Rock, amici curiae.

ROBINSON, Justice.

The appellees, Mary Simpson, Dorothy Lagos, and Gary Lagos, a minor, by his next friend, Dorothy Lagos, obtained small judgments against James E. Knight, Jr., for damages sustained by appellees when involved in an automobile collision. An automobile occupied by appellees had collided with an automobile owned by James E. Knight, Jr. and operated by James E. Knight, Sr. The judgments against James E. Knight, Jr. were not satisfied, and in an attempt to enforce the judgments, appellees filed this suit against the appellant herein, The Aetna Casualty & Surety Company, the carrier of James E. Knight, Jr.'s liability insurance. The appellant insurance company filed an answer alleging:

'Defendant for further answer avers that its insurance policy referred to in the complaint and exhibited thereto provides under the heading 'Conditions', as follows:

"9. Assistance and Cooperation of the Insured Coverages A, B and D

"The insured shall cooperate with the Company and, upon the Company's request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.

"* * *

"11. Action Against Company Coverages A, B and D

"No action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all the terms of this policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company.'

'For further answer defendant avers that its insured, James E. Knight, Jr., as well as James E. Knight, Sr., breached the above conditions. Immediately following said accident giving rise to the complaint in said cause No. 5471, defendant undertook to investigate said accident, including the facts and circumstances under which the automobile in question was being used at the time of the accident. In the course of this investigation, James E. Knight, Jr. and James E. Knight, Sr. made deliberate, false and highly material representations of fact concerning the use to which the insured automobile was being put at the time of the accident. These false statements of fact were also made to representatives of plaintiffs with the intention on the part of James E. Knight, Jr. and James E. Knight, Sr. of aiding plaintiffs in procuring a settlement or recovery from defendant and with the further intention of providing coverage for James E. Knight, Sr. under the Omnibus provision of said policy.

'Upon defendant's discovery of the above false and deliberate representations of fact, it immediately gave notice to James E. Knight, Jr. that further defense would be provided under full reservation of rights and without waiver of any of the rights of the defendant under the provisions of said policy. Also upon the discovery of said false representations, defendant gave immediate notice to James E. Knight, Sr. that no coverage or defense would be provided him under the terms of said policy.

'Therefore, defendant avers that James E. Knight, Jr. and James E. Knight, Sr. breached the conditions of said policy, as above set out, and that defendant was greatly prejudiced thereby, and that under the terms and provisions of said policy the defendant was not obligated to pay any judgments rendered against either James E. Knight, Jr. or James E. Knight, Sr., and, therefore, defendant is not liable to the plaintiffs in this cause.'

The appellees, plaintiffs in circuit court, demurred to the answer. The trial court sustained the demurrer. The appellant, defendant in circuit court, stood on the answer and refused to plead further. Whereupon, the court entered judgments for the plaintiffs. The defendant insurance company has appealed.

It is appellant's contention that the answer states a valid defense; that neither the statutes nor the policy of insurance makes the insurance company liable as a matter of law when the facts alleged in the answer are assumed to be true, as they must be in testing the demurrer.

Act No. 347 of the 1953 Acts of the General Assembly is the 'Motor Vehicle Safety Responsibility Act'. It appears in Arkansas Statutes as §§ 75-1401 to 75-1493, inclusive. Appellees rely on Section 75-1466, which is paragraph (f)(1) of Section 66 of the Act. It provides:

'The liability of the insurance carrier with respect to the insurance required by this act [our italics] [§ 75-1401--s 75-1493] shall become absolute whenever injury or damage covered by said motor-vehicle liability [policy] occurs; said policy may not be cancelled or annulled as to such liability by any agreement between the insurance carrier and the insured after the occurrence of the injury or damage; no statement made by the insured or on his behalf and no violation of said policy shall defeat or void said policy.'

Appellees also rely on Item 5 of the policy. It provides 'Such insurance as is afforded by this policy for bodily injury liability or property damage liability with respect to any automobile owned by the named Insured shall comply with the provisions of the motor financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of the automobile during the policy period, to the extent of the coverage and limits of liability required by such law, but in no event in excess of the limits of liability stated in this policy. The Insured agrees to reimburse the Company for any payment made by the Company which it would not have been obligated to make under the terms of this policy except for the agreement contained in this paragraph.' [Our italics.]

The appellees maintain that the statute when considered in connection with the provisions of the policy precludes the insurance company from asserting a defense of non-cooperation on the part of the insured.

There is no Arkansas statute which required Knight, the insured, to carry insurance prior to the collision. The Arkansas financial responsibility law is applicable only after a mishap had occurred. It is then that an automobile owner or operator must establish his financial responsibility. The Financial Responsibility Act is rather long, containing 95 sections, but it is clear that the Act does not apply to an owner or driver who has not been involved in an accident for which he may be liable in damages.

Section 24 of the Act provides:

'The provisions of this act, requiring deposit of security and suspensions for failure to deposit security, subject to certain exemptions, shall apply to the driver and owner of any vehicle of a type subject to registration under the motor-vehicle laws of this State which is in any manner involved in an accident within this State, which accident has resulted in bodily injury to or death of any person or damage to the property of any one person in excess of $100.'

'Section 43. Application of Article V. The provisions of this act requiring the deposit of proof of financial responsibility for the future, subject to certain exemptions, shall apply with respect to persons who have been convicted of or forfeited bail for certain offenses under motor-vehicle laws or who have failed to pay judgments upon causes of action arising out of ownership, maintenance or use of vehicles of a type subject to registration under the laws of this State.'

Section 63 is as follows:

'Certificate of insurance as proof. Proof of financial responsibility for the future may be furnished by filing with the department the written certificate of any insurance carrier duly authorized to do business in this State certifying that there is in effect a motor-vehicle liability policy for the benefit of the person required to furnish proof of financial responsibility. Such certificate shall give the effective date of such motor-vehicle liability policy, which date shall be the same as the effective date of the certificate [our italics], and shall designate by explicit description or by appropriate reference all vehicles covered thereby, unless the policy is issued to a person who is not the owner of a motor vehicle.'

If a person becomes subject to the provisions of the Act as provided by Section 43, on accout of his failure to satisfy a judgment, as in the case at bar, then he must furnish proof of 'financial responsibility'. One method of doing this is set out in Section 63 of the Act. It provides for filing with the Department of Revenues a written certificate of an insurance carrier certifying that there is a policy of insurance in effect for the benefit of the person required to furnish proof of financial responsibility.

Section 66, par. (a) of the Act provides:

"Motor-vehicle liability policy' defined.

'a. Certification. A 'motor-vehicle liability policy' as said term is used in this act shall mean an 'owner's policy' or an 'operator's policy' of liability insurance certified as provided in Section 63 or Section 64 as proof of financial responsibility for the future, and issued, except as otherwise provided in Section 64, by an insurance carrier duly authorized to transact business...