Commercial Standard Insurance Company v. Readnour

• Decision Date: 28 December 1956
• Docket Number: No. 5382.,5382.
• Citation: 241 F.2d 14,79 ALR 2d 1036
• Parties: COMMERCIAL STANDARD INSURANCE COMPANY, a corporation, Appellant, v. Marjorie READNOUR, Burnis Auvern Nichols, Loyd Dick Smith, L. D. Nichols, W. O. (Sam) Thompson and Raymond McClendon, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

79 ALR 2d 1036, 241 F.2d 14 (1956)

COMMERCIAL STANDARD INSURANCE COMPANY, a corporation, Appellant, v. Marjorie READNOUR, Burnis Auvern Nichols, Loyd Dick Smith, L. D. Nichols, W. O. (Sam) Thompson and Raymond McClendon, Appellees.

No. 5382.

United States Court of Appeals, Tenth Circuit.

December 28, 1956.

Duke Duvall, Oklahoma City, Okl. (Dudley, Duvall & Dudley, Oklahoma City, Okl., were with him on the brief), for appellant.

James Z. Barker, Clinton, Okl. (Arney & Barker and Max Cook, Clinton, Okl., were with him on the brief), for appellees.

Before BRATTON, Chief Judge, and MURRAH and LEWIS, Circuit Judges.

LEWIS, Circuit Judge.

This is an appeal from the judgment of the United States District Court for the Western District of Oklahoma holding that appellant, Commercial Standard Insurance Company, a corporation,¹ was obligated to defend a suit filed in the State Court of Custer County, Oklahoma, in which appellees Readnour and Smith appear as plaintiff and defendant respectively.

In its amended complaint, filed under the Federal Declaratory Judgments Act, 28 U.S.C. § 2201, the company alleged that it had issued a policy of public liability automobile insurance to Nellie Armstrong as the named insured and defining the insured as including the named insured and also "any person while using the automobile or any person legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission."

The policy further provided:

"The insured shall cooperate with the company and, upon the company\'s request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of the accident."

On December 10, 1954, Nellie Armstrong, the named insured, granted permissive use of the automobile to her grandson, appellee Loyd Dick Smith. While Smith and appellee Marjorie Readnour were the sole occupants of the car an accident occurred which gave rise to the State Court claims of Readnour against Smith. The other appellees also made claims against Smith as a result of the same accident.

On December 14, 1954, Smith gave a statement to the insurance company in which he said that he had received a severe blow on the head as a result of the accident in question and could not remember who was driving the car at the time of the accident. On December 19th he signed a further statement in which he asserted that his memory had returned and that he now well knew all the details of the accident (which he set forth) and that Marjorie Readnour had been driving the car at the time of the accident.

During the progress of discovery procedures in the Oklahoma State Court case Readnour and Smith each swore under oath that the other was driving the automobile involved. The instant case was then filed, the company asserting that its named insured had expressly limited the permissive use of the automobile to Smith and that as a consequence it should not be required to defend the action pending in the state court because (a) if Readnour were driving she was not an "insured", and (b) if Smith were driving he had breached the cooperation clause of the insurance policy by falsely representing to the company the facts of the accident.

The matter was tried to the court sitting with a jury. Readnour and Smith each testified that the other was driving. Each offered supporting evidence. At the conclusion of the testimony the trial court submitted a single interrogatory to the jury:

"Who was driving the automobile at the time of the accident on December 10, 1954, in which Marjorie Readnour was injured: Loyd Dick Smith or Marjorie Readnour?"

The jury answered: "Loyd Dick Smith."

When the jury's verdict was returned counsel for the company moved for favorable judgment as a matter of law upon the ground that the jury's verdict, while determining that Smith was an "insured" under the policy, established conclusively that the cooperation clause had been breached as Smith had falsely represented to the company the most fundamental fact of the accident — namely, who was driving the car at the time of the accident. This motion was denied. Subsequently, the company requested the court to enter a finding of fact that Smith had breached the cooperation clause and offered in evidence, for the first time, the December 19th statement given by Smith to the company. Objection to the offer upon the ground of...