Beam v. State Farm Mutual Automobile Insurance Co.

• Decision Date: 13 August 1959
• Docket Number: No. 13696.,13696.
• Parties: Ida Mae BEAM, Pearl Cabble, William Thompson, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

269 F.2d 151 (1959)

Ida Mae BEAM, Pearl Cabble, William Thompson, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 13696.

United States Court of Appeals Sixth Circuit.

August 13, 1959.

Julius Leibson, Louisville, Ky., Wilton R. Long, Jr., Louisville, Ky., on brief, for appellants.

John L. Bennett, Louisville, Ky., Edward J. Hogan, Louisville, Ky., on brief, for appellee.

Before ALLEN, MARIS and MILLER, Circuit Judges.

SHACKELFORD MILLER, Jr., Circuit Judge.

On June 2, 1956, the appellants were injured in an automobile accident involving an automobile driven by the appellant Ida Mae Beam and one being operated by William Carrier. Carrier was protected against liability at the time under a casualty insurance policy issued by the appellee State Farm Mutual Automobile Insurance Company.

In state court actions filed by the appellants in the Jefferson Circuit Court in Louisville, Kentucky, they recovered judgments against Carrier for damages arising out of the accident in the amounts of $3,075, $2,050, and $535, respectively. No appeal was prosecuted by the defendant Carrier from any of these judgments, which thereafter became final. No portion of the judgments was paid. Executions issued under the judgments against Carrier were returned "no property found." Demand for payment to the extent of the limit of liability coverage afforded by appellee's insurance policy was made upon the appellee insurer and rejected by it. This action was thereupon filed in the Jefferson Circuit Court of Kentucky against the appellee insurer to compel it to pay these judgments in accordance with its policy provisions. The action was removed by the appellee to the United States District Court where it was heard by the District Judge without a jury. Since the Court did not have jurisdiction over the claims of the appellants Pearl Cabble and William Thompson because of the insufficiency of the amounts involved, it was stipulated that the judgment in the action of the appellant Ida Mae Beam would be applied to and adjudicate the claims of the other two appellants.

Appellee pleaded as a defense to the action that at the time of trial, as well as at the time of the entry of the judgments, the policy of insurance issued by it to Carrier was invalid and not in force or effect by reason of the wilful violation on the part of Carrier, the insured, of the terms and covenants of the policy which required the insured to cooperate with the insurer in the defense of any action filed against the insured. The District Judge sustained this defense of the appellee and dismissed the action, from which judgment this appeal was taken.

The following facts are to be considered in determining the validity of this defense. Carrier promptly reported the accident to the appellee and took a copy of the police report of the accident to appellee's local office. Appellee investigated the accident and obtained from Carrier a longhand statement about it. Carrier told appellee's representative that he could not afford to miss work, but that he would go to court if the appellee would pay his expenses and lost wages. However, the appellee never offered to do so.

By letter of July 31, 1956, addressed to Carrier at his Louisville address, the appellee advised Carrier of the name and location of his Louisville office of its attorney, who would defend the tort actions filed in the state court against him, and requested him to comply with any requests made by said attorney and to keep appellee advised of any change of address.

On September 5, 1956, the attorney wrote Carrier requesting him to be in his office on September 11 in compliance with a request by the appellants' counsel to take Carrier's pretrial deposition. Carrier did not appear. On September 13, 1956, the attorney again wrote Carrier stating that he had not heard from Carrier in response to the previous letter and requested Carrier to telephone him for the purpose of arranging a date for the taking of the deposition by counsel for the appellants. On September 24, 1956, Carrier's wife wrote the attorney that, although these letters had been received, Carrier was working in Campbellsville, Kentucky, and would not be home for two weeks, and that as soon as he returned she would have him call the attorney.

On November 19, 1956, the attorney wrote Carrier advising him that the cases had been set for trial on January 21, 1957, and that he would remind Carrier of that date again in the meantime. However, the evidence does not show that Carrier received this letter.

By letter of January 7, 1957, the attorney requested Carrier to appear on January 9, 1957, and to give his pretrial deposition, as requested by appellants' counsel. In this letter he also asked Carrier to come to his office a half hour before the time for giving his deposition so that the attorney could talk to him about the case. The letter also asked Carrier to call the attorney upon its receipt and confirm the arrangements. Carrier did not do so and did not appear for the deposition.

By letter of January 15, 1957, the attorney wrote Carrier that he had heard nothing from him, advised him that the cases were set for trial on January 21, 1957, asked him to be at the attorney's office prior to the start of the trial and to notify the attorney of the receipt of the letter. This letter closed with the following statement, "It has been difficult in staying in touch with you about this accident and I must remind you that your liability carrier is entitled to your co-operation under the provisions of your policy, and if you fail to do so, you may inadvertently prejudice your own protection."

On January 18, 1957, the attorney sent telegrams addressed to Carrier at his Louisville address and at Campbellsville, Kentucky, which stated that the tort actions in the Jefferson Circuit Court were set for trial on January 21, 1957, that Carrier had not answered the attorney's letters and that it was imperative that Carrier be present at the trial and at the attorney's office prior thereto in order to be able to properly defend these suits against him.

Carrier was working out of town in Campbellsville, Kentucky, starting some time in September, 1956. For a while he would come to Louisville on Friday night but return to Campbellsville about Saturday noon. Later on he lived in Louisville, but did not get home from Campbellsville until 6:30 or 7:00 P. M. and left Louisville to return to Campbellsville before daylight in the morning. Carrier admitted receiving the letters and telegram herein above referred to, except the letter of November 19, 1956. He testified that it was so late when he got in, the attorney's office was closed, which prevented him from contacting the attorney. He knew that the trial was set for January 21, 1957, but did not attend the trial because he had to work that day. No subpoena had been issued for him. Carrier stated that he would have attended the trial if he had received a subpoena, but that he was afraid he would get fired if he attended the trial without being subpoenaed.

When the cases were called for trial appellee's attorney moved for a continuance on the ground of Carrier's absence. The trial judge overruled the motion on the ground that it was not grounds for a continuance where the defendant had not been subpoenaed under the circumstances shown to exist in the case. Appellee's attorney then proceeded to try the case and defended the tort actions all the way to verdict and judgment. Thereafter, appellee's counsel filed and argued a motion for a new trial on behalf of Carrier.

On February 7, 1957, after the motion for a new trial had been taken under submission by the Court, appellee's counsel wrote Carrier by registered mail advising him of the result of the trial and also making the following statement, "As attorney for your insurance carrier, State Farm Mutual Automobile Insurance Company of Bloomington, Illinois, this is to advise you that due to your failure to cooperate with us in the defense of these suits and to appear at the trial of the cases, your insurance carrier is handling these cases now under a strict reservation of their rights and we have filed a motion and ground for new trial in each of the cases and the motion is now under submission before Judge L. Lyne Smith, Judge, Second Division, Jefferson Circuit Court, and if you so desire, you may employ your own counsel to assist us at this time or to take whatever action your personal counsel deems necessary and advisable to protect your rights."

There is no dispute between the parties about the well established rule in Kentucky, which is the applicable law in this case, that the breach by the insured of a condition subsequent in an insurance policy may be relied on as a defense to an action brought by the injured person against the insurer. Jefferson Realty Co. v. Employers' Liability Assurance Corp., 149 Ky. 741, 149 S.W. 1011; Kentucky Farm Bureau Mutual Insurance Co. v. Miles, Ky., 267 S.W.2d 928. Applying this rule of law to the facts in this case, the District Judge ruled that Carrier, by his failure to cooperate in the defense of the action by giving his deposition or by attending the trial and by his failure to respond to any of the letters or requests of the insurer's attorneys to appear for depositions and trial, breached the conditions subsequent of the cooperation clause of his policy and thereby...