Casualty Reciprocal Exchange v. Wallace, 6 Div. 278

• Decision Date: 25 August 1966
• Docket Number: 6 Div. 278
• Parties: CASUALTY RECIPROCAL EXCHANGE v. Robert O. WALLACE et al.
• Court: Alabama Supreme Court

Page 861

189 So.2d 861

280 Ala. 61

CASUALTY RECIPROCAL EXCHANGE v. Robert O. WALLACE et al.

6 Div. 278.

Supreme Court of Alabama.

Aug. 25, 1966.

Rehearing Denied Sept. 22, 1966.

W. J. Sullivan, Jr., and Sadler, Sadler, Sullivan & Sharp, Birmingham, for appellant.

Rives, Peterson, Pettus & Conway, and Edgar M. Elliott, Birmingham, for appellee Grace Bright.

MERRILL, Justice.

This is an appeal by Casualty Reciprocal Exchange, an automobile liability insurance company, from an adverse decree in a suit by it for declaratory judgment holding that a policy of liability insurance issued by it to Marvin E. Wallace affords coverage to Robert O. Wallace for an occurrence on July 21, 1963.

The bill alleges that on the above date the insurer had in full force and effect a policy of automobile liability insurance issued to Marvin E. Wallace, the father of Robert O. Wallace, describing the insured vehicle, a 1958 Dodge automobile; that on said date Robert drove an MG automobile, owned by Mrs. Elizabeth Parker, to the Green Valley Country Club in the community of Hoover, Jefferson County, Alabama, parked it on the parking lot regularly provided by the Country Club for the use of its members, left it unattended and thereafter the MG rolled from the lot down an embankment onto the concrete deck of the swimming pool of the Country Club, injuring Mrs. Grace B. Bright who was sitting in a chair upon the deck; and as a result of this occurrence, Mrs. Bright has filed suit at law for damages against Robert and the Green Valley Country Club. After the institution of the present action for declaratory judgment, Bob I. Bright, the husband of Grace, filed a suit at law for damages for the 'loss of services,' medical expenses, etc., suffered and incurred by him as a result of the injuries of his wife. It was stipulated by all of the parties that the decree of the declaratory judgment suit would be binding upon the said parties with regard to Bright's suit.

The complainant insurer joined as parties respondent Robert O. Wallace, Mr. and Mrs. Bright, and Green Valley Country Club. Robert failed to appear in the cause and suffered a decree pro confesso to be rendered against him. As for the Brights and Green Valley, the chancellor decreed that the insurance policy in question does afford coverage to Robert for the occurrence on July 21, 1963; that the insurer is liable to pay to the extent of its coverage under the policy any judgment rendered against Robert in the suits at law filed by Mr. and Mrs. Bright; and that because of the decree pro confesso, the insurer is under no duty to defend Robert O. Wallace in such suits at law.

Robert's connection with the policy of insurance involved arises from the language therein whereby the insurer bound itself to 'pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of: A. bodily injury * * * sustained by any person; * * * arising out of the ownership, maintenance or use of the owned automobile (a 1958 Dodge) or any non-owned automobile, * * *.' It defined an 'insured,' in connection with a non-owned automobile, as 'any relative,' and stated that 'relative' meant 'a relative of the named insured who is a resident of the same household.'

The chancellor found that at the time of the accident for which coverage is sought to be denied, Robert O. Wallace was a resident of his father's household.

The coverage afforded to a relative is with respect to a 'non-owned automobile,' which the policy says means 'an automobile * * * not owned by or furnished for the regular use of either the named insured or any relative, * * *.'

The MG was owned by Mrs. Elizabeth Parker who worked at an establishment with Mrs. Mary Wallace, the mother of Robert and wife of Marvin. Robert's regular employment was that of an automobile mechanic. The MG was in a state of disrepair, and Mrs. Parker prevailed upon Robert to repair it at his home for a much smaller charge than that made by regular automobile repairmen.

The chancellor found that the MG was furnished to Robert to repair--not for his regular use--and that he did not in fact regularly use the vehicle.

In affording coverage to a relative with respect to a non-owned automobile, the policy restricts it as follows: 'provided his actual operation of (if he is not operating) the other actual use thereof is with the permission, or reasonably believed to be with the permission, of the owner and is within the scope of such permission.'

On the day of the accident, the Wallace family car was unavailable. Robert's sister, Sharon, wanted to go swimming at the Club, so Robert consented to drive her there in the MG. It was shortly thereafter that Mrs. Bright was injured when the MG rolled upon her from the parking lot. All concerned agree that Mrs. Parker made no statement as to whether Robert could or could not use the automobile.

The court found that Robert 'reasonably believed' his use of the automobile on the occasion in question was with Mrs. Parker's permission.

The appellant argues through assignments of error 12 and 13 that the court erred in failing to hold that the Brights' rights under the policy are derivative only, and can rise no higher or greater than Robert Wallace's rights under the policy. The appellant says that since a decree pro confesso was taken against Robert, the insured, then Mr. and Mrs. Bright, the tort claimants, can have no rights under the policy because their rights must be derived from Robert. The final effect of appellant's argument is that a decree pro confesso rendered against an insured in a declaratory judgment suit brought by the insurer cuts off all rights of the injured parties. We think this argument is manifestly unsound, and appellant cites us to no apt case in support of it. There is authority in the opposite direction. In Hawkeye-Security Insurance Company v. Schulte, 7 Cir., 302 F.2d 174, the court was faced with a situation similar to the one at bar. We quote a portion of that opinion as follows:

'Appellee argues that through the default of John Schulte, Jr. and John Schulte, Sr. the allegations of the complaint are to be taken as true. This argument assumes that they were the only parties entitled to contest the allegations of the complaint. Since appellant was a proper party, the default of these two defendants may not preclude appellant's right in this respect. See Vale v. Bonnett, 89 U.S.App.D.C. 116, 191 F.2d 334 (1951); New York Casualty Co. v. Lewellen, 8 Cir., 184 F.2d 891 (1950).

'Appellee voluntarily brought appellant into this litigation as a party defendant. Appellant, being a proper party to an actual controversy with appellee, should be heard to assert any proper defense raised by his answer to the complaint. The district court erred in dismissing appellant from this suit.'

In the instant declaratory judgment suit, the Brights had the right to defend. It was no concern of theirs whether Robert Wallace defaulted or not. They (the Brights) were called to litigate. Because another respondent failed to appear cannot affect their right to resist the suit. Could the chancellor decree 'coverage' for the Brights and at the same time hold that because of the decree pro confesso, the insurer did not have to defend Robert Wallace in suits at law? We think so since such a holding does not do violence to the 'derivative rights' theory. The final decree does in fact hold that Robert is covered by the policy. As for the decree pro confesso rendered against Robert, the court had no alternative but to...