American Casualty Co. of Reading, Pa., v. Shely

• Court: United States State Supreme Court (Kentucky)
• Writing for the Court: HELM
• Citation: 314 Ky. 80,234 S.W.2d 303
• Parties: AMERICAN CAS. CO. OF READING, PA., v. SHELY.
• Decision Date: 17 November 1950

Page 303

234 S.W.2d 303 314 Ky. 80 AMERICAN CAS. CO. OF READING, PA.,
v.
SHELY. Court of Appeals of Kentucky. Nov. 17, 1950.

[314 KY 80] Davis, Boehl, Viser & Marcus, Louisville, for appellant.

John L. Davis and Stoll, Keenon & Park, all of Lexington, for appellee.

HELM, Justice.

[314 KY 81] On April 1, 1947, appellant, American Casualty Company of Reading, Pennsylvania, issued to appellee, R. S. Shely, doing business as the Shely Construction Company, a comprehensive liability insurance policy for the period April 1, 1947 to April 1, 1948. On or about September 28, 1946, appellee, a general contractor, entered into an agreement with the Louisville Gas and Electric Company whereby appellee agreed to construct an underground conduit system on the west side of Sixth Street, between Walnut and Broadway, in Louisville. The construction work was completed about June 1, 1947. On September 12, 1947, during the course of a rain storm, a tree on Sixth Street near Broadway blew over, falling on an automobile and resulting in the death of its driver, Joseph F. Steinmetz, and damage to the automobile.

On February 20, 1948, actions were filed in the Jefferson Circuit Court to recover for the death of the driver, and damage to the automobile. The defendants there were the Louisville Gas and Electric Company, City of Louisville, and appellee. The petitions in each case, filed as exhibits in this case, alleged that the defendants were negligent in causing or allowing roots from the tree located near Sixth and Broadway to be cut while constructing and digging a ditch along the street, thereby causing the tree to be in a weakened and dangerous condition. Upon receiving notice of the accident, appellee gave to appellant due and timely notice, in accordance with the provisions of the insurance policy filed with the petition. Upon receiving notice, appellant referred the defense of the actions in Jefferson County to its legal counsel in Louisville, who proceeded to investigate the case. Louisville counsel for appellant made an investigation beginning February 26, 1948 and continuing off and on until November 21, 1949, the date the suits were settled. They filed demurrers on behalf of appellant on April 23, 1948; filed answers in May, 1948, and attended the taking of

Page 304

depositions on behalf of appellee in August, 1948.

In December, 1948, appellant notified appellee that its policy did not cover this action. On January 31, 1949, appellant gave written notice, by registered mail, to appellee that the suits were not covered under the insurance policy, and that any action theretofore taken or thereafter to be taken by appellant in defense of [314 KY 82] the suits was in full reservation of all its rights under the policy. On February 7, 1949, counsel for appellee wrote appellant's counsel stating that since appellant had undertaken the defense of the two law suits without prior notice to appellee of its disclaimer of liability, it was his position that it would be precluded on the grounds of waiver and estoppel from thereafter avoiding liability under the policy.

The two suits were assigned for trial on November 21, 1949. On that date the suits were settled, the parties entering into an agreement reciting their controversy concerning the coverage, as to whether the appellant was estopped to assert noncoverage, and that...