Brown v. State Farm Mut. Auto. Cas. Ins. Co., 74-1865

• Decision Date: 17 January 1975
• Docket Number: No. 74-1865,74-1865
• Citation: 506 F.2d 976
• Parties: Bobby S. BROWN, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE CASUALTY INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 976

506 F.2d 976

Bobby S. BROWN, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE CASUALTY INSURANCE COMPANY Defendant-Appellee.

No. 74-1865.

United States Court of Appeals, Fifth Circuit.

Jan. 17, 1975.

Albert W. Copeland, Richard H. Gill, Montgomery, Ala., for plaintiff-appellant.

Robert C. Black, Montgomery, Ala., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Alabama.

Before GODBOLD and MORGAN, Circuit Judges, and BOOTLE, District Judge.

LEWIS R. MORGAN, Circuit Judge:

Bobby S. Brown, plaintiff in a suit against State Farm Mutual Automobile Casualty Insurance Company for breach of contract for failing or refusing to defend him under an insurance policy, appeals from a grant of summary judgment in favor of the company. We reverse and remand.

I

Cast in a light most favorable to the plaintiff, the facts are these. Brown, who had been insured by State Farm continuously since the age of 21, was involved in an automobile accident on July 17, 1967, in which one 'Melton' was injured. Brown promptly gave notice of the accident to the company whose adjustor took his statement and contacted Melton's lawyer. The adjustor, Jackson, represented to Brown that the company would 'handle the injury claim' and would do 'whatever was necessary.' A period of negotiation between the claims adjustor and Melton's attorney ensued, but no settlement was reached. Brown took no part in the settlement effort. Melton's attorney filed suit on January 15, 1968, two days before the statute of limitations would have run.

Brown was served with the complaint but thought it was merely notification that Melton was going to file suit. His testimony indicates that he felt State Farm would know of the suit or receive a copy of the papers because they had been working with Melton's attorney in an attempt to settle the case and had told the appellant not to deal with Melton. At any rate, Brown misplaced the complaint in the process of moving and subsequently could not find it even after a diligent search; he never notified State Farm of the suit papers. Default judgment was entered against Brown in the amount of $10,000 on August 23, 1968, and execution was entered on September 7, 1968.

Jackson checked with the office of the clerk of the Circuit Court of Montgomery County, Alabama, shortly after the one year statute of limitations had run and was informed that no suit had been filed against Brown. The State Farm district manager subsequently learned from Melton's attorney that suit had been filed. Jackson was again dispatched to check the records and learned of the suit and the default judgment. Jackson then contacted Brown on September 5, 1968, and obtained a tape-recorded statement documenting that the suit papers had not been forwarded by the appellant to the company. Jackson admits that he told Brown that he would try to settle the case but said he would have to 'check with Birmingham.' Appellant claims that he was told the appellee would continue to represent him. Moreover, he asserts that he was not told by Jackson of the entry of default judgment against him nor was he told to procure his own counsel. At Jackson's insistence, Brown signed a 'non-waiver,' allowing the company to continue to make efforts on the appellant's behalf without waiving any of its rights under the insurance contract.

No effort was ever made by the insurer to have the default judgment set aside, although undisputed evidence in the record indicates that default judgments in non-liquidated damage cases in the Circuit Court of Montgomery County may routinely be set aside within 30 days following the entry of such judgment upon mere application by the defaulting party to the court. On October 18, 1968, after this initial 30-day period had expired, the company sent a letter to the appellant advising him that the appellee would not defend him.

On October 31, 1968, Melton filed a garnishment against State Farm, a copy of which was served on Brown. After default was taken and garnishment was filed, State Farm tried to settle the case with Melton's attorney, but offered far less than Melton was asking. At the garnishment trial neither Melton nor Brown appeared; Melton's attorney withdrew, and the court discharged State Farm from garnishment. A second garnishment by Melton proved successful and Brown filed this action on August 1, 1973, to recover for damages proximately caused by the company's breach of its duties under the insurance contract.

The company answered Brown's complaint by asserting that the insurance policy required that the insured immediately notify the company and forward to the company every summons or other process received by him. The policy also provided 'no action shall lie against the company . . . unless as a condition precedent thereto there shall have been full compliance with all terms of the policy.' The district court entered summary judgment for State Farm, finding that since it was undisputed that Brown did not send the summons to the insurer and could offer no excuse, the insurer breached the condition precedent of the policy as a matter of law and the company's duty to defend never arose. Brown appeals.

II

In this Circuit the sufficiency of evidence for jury submission is measured by federal standards even in diversity cases. Prassel Enterprises, Inc. v. Allstate Insurance Company, 405 F.2d 616 (5th Cir. 1968); Cater v. Gordon Transport, Inc., 390 F.2d 44 (5th Cir. 1968); Planters Manufacturing Company v. Protection Mutual Insurance Company, 380 F.2d 869, 871 (5th Cir. 1967), cert. denied, 389 U.S. 930, 88 S.Ct. 293, 19 L.Ed.2d 282 (1967). Under federal law, if the evidence is of such a character that reasonable men exercising impartial judgment may differ in their conclusion, then the case should be submitted to the jury. Prassel Enterprises, Inc. v. Allstate Insurance Co., supra; Cater v. Gordon Transport, Inc., supra; Helene Curtis Industries, Inc. and Cosmair, Inc. v. Pruitt, 385 F.2d 841 (5th Cir. 1967).

The law in Alabama is that where forwarding of any demand or other process is specifically made a condition precedent to any action against the insurer, the failure to give reasonably timely notice of the receipt of such documents will release the insurer from the obligations imposed by the contract. See American Fire and Casualty Company v. Tankersley, 270 Ala. 126, 130, 116 So.2d 579 (1959). However, it is also the...