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

Citation314 Ky. 80,234 S.W.2d 303
PartiesAMERICAN CAS. CO. OF READING, PA., v. SHELY.
Decision Date17 November 1950
CourtUnited States State Supreme Court (Kentucky)

Davis, Boehl, Viser & Marcus, Louisville, for appellant.

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

HELM, Justice.

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 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 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 $2500 advanced by appellant toward settlement of the two suits would not be considered as an admission of coverage or liability under the policy. It was agreed that a final determination as to the rights of the parties would be made by appellant's filing a declaratory judgment action in the Fayette Circuit Court. Accordingly, this action was filed in that court. The action was submitted to the court upon the petition, exhibits, and stipulation of counsel. The court rendered a judgment declaring that appellant's policy covered the accident, and that appellant, by its action in defending the Jefferson Circuit Court suits, is estopped. From that judgment appellant appeals, urging that the accident or occurrence here involved was not covered by the insurance policy in question. Appellant says: 'The questions involved are broadly: (1) whether coverage under appellant's insurance policy extended to appellee under the facts and circumstances mentioned in the petition, and (2) whether appellant, by acts and conduct disclosed in the record, has waived the right to assert lack of coverage.'

Basically, there is no dispute about the facts of the case. The questions before the court are questions of law. To support its second position, appellant calls our attention to 29 Am.Jur., page 690, section 903, and relies upon a case cited under that sect...

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26 cases
  • Apex Mut. Ins. Co. v. Christner
    • United States
    • United States Appellate Court of Illinois
    • September 18, 1968
    ...by the insurer of all questions of policy coverage. Bourne v. Seal, 53 Ill.App.2d 155, 203 N.E.2d 12; American Casualty Co. of Reading, Pa. v. Shely, 314 Ky. 80, 234 S.W.2d 303 (1950); see De Hart v. Illinois Casualty Co., 7 Cir., 116 F.2d 685, 688. If, therefore, in spite of its doubts as ......
  • Ky. Nat. Ins. v. Empire Fire Marine Ins.
    • United States
    • Indiana Appellate Court
    • January 7, 2010
    ...addressed the effect of an insurer's decision to defend its insured for almost a year without a reservation of rights. 314 Ky. 80, 234 S.W.2d 303 (Ky. 1950). In Shely, after receiving notice of a claim under its policy, the insurer referred the defense of the case to legal counsel who inves......
  • City of Carter Lake v. Aetna Cas. and Sur. Co.
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • July 24, 1979
    ...Ins. Co., 65 F.2d 237, 240 (8th Cir. 1933); Ford Motor Co. v. Commissary, Inc., supra, 286 F.Supp. at 234-35; American Cas. Co. v. Shely, 314 Ky. 80, 234 S.W.2d 303, 305 (1950); Transamerica Ins. Group v. Chubb & Son, Inc., 16 Wash.App. 247, 554 P.2d 1080 (1976). See generally 14 Couch on I......
  • ISCO Indus., Inc. v. Fed. Ins. Co.
    • United States
    • U.S. District Court — Western District of Kentucky
    • February 28, 2022
    ...case, the loss of the right by the insured to control and manage the case is itself a prejudice. Am. Cas. Co. of Reading, Pa. v. Shely , 314 Ky. 80, 234 S.W.2d 303, 305 (1950) ; see also Hood , 405 S.W.2d at 673 (same).Both parties have cited Shely and Hood in support of their respective po......
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