Commercial Union Ins. Co. of New York v. Security General Ins. Co.

• Court: Alabama Supreme Court
• Writing for the Court: HARWOOD; LIVINGSTON
• Citation: Commercial Union Ins. Co. of New York v. Security General Ins. Co., 211 So.2d 477, 282 Ala. 344 (Ala. 1968)
• Decision Date: 06 June 1968
• Docket Number: 6 Div. 444
• Parties: COMMERCIAL UNION INSURANCE COMPANY OF NEW YORK v. SECURITY GENERAL INSURANCE COMPANY et al.

Page 477

211 So.2d 477

282 Ala. 344

COMMERCIAL UNION INSURANCE COMPANY OF NEW YORK v. SECURITY GENERAL INSURANCE COMPANY et al.

6 Div. 444.

Supreme Court of Alabama.

June 6, 1968.

Robt. E. Parsons, Jack J. Hall, Baker, McDaniel & Hall, Birmingham, for appellant.

Brown, Pointer, Williams & Heaps, Birmingham, for appellee.

HARWOOD, Justice.

The Commercial Union Insurance Company brought a bill for declaratory judgment against the Security General Insurance Company and others seeking to have a policy of automobile liability insurance issued by Security General to John Sissons covering Sissons' 1964 Oldsmobile automobile, declared to be the primary policy responsible for claims growing out of an automobile accident in Pratt County, Kansas, on 6 September 1964.

Commercial Union, the appellant, also afforded liability coverage to Sissons' father by virtue of its having issued a fleet policy to the father's employer.

It is undisputed that if General Security's policy was in force at the time of the accident then Commercial Union's liability would be secondary, and Security General's would be primary.

It appears that on 6 September 1964, the Oldsmobile was being driven by Sissons' father, with Sissons' permission, on a public highway in Pratt County, Kansas. The Oldsmobile veered to the left and collided head-on with an automobile with a camper trailer attached which was owned and operated by Lawrence M. Nolen. Mr. Nolen's wife and mother were passengers in his automobile, and suffered injuries. Mr. Nolen's automobile and camper trailer were also damaged. Claims for damages for personal injuries were made by Nolen's wife and mother, and Mr. Nolen also claimed damages for injuries to his automobile and camper trailer. The Travelers Insurance Company, which carried collision insurance on Mr. Nolen's vehicle, paid the damages to Nolen's vehicle, and as Nolen's subrogee made claim for the damages so paid.

Arnold T. Larsen, Claims Manager for Commercial Union's regional claims office in Kansas City, Missouri, as a witness for Commercial Union, testified that he supervised the investigation and settlement of the Nolen claims and the Traveler's claim.

He first telephoned and then wrote Security General on 12 January 1965, requesting Security General to assume investigation and settlement of the claims to the limits of their policy.

On 14 January 1965, Security General wrote Larsen that Sissons had no policy in force on the date of the accident; that prior to the accident Security General had canceled Sissons' policy. The letter further stated:

'We were not aware of the fact that Mr. Sissons had moved or departed from the State of Alabama and the City of Birmingham. Our first knowledge of his whereabouts being other than Birmingham was subsequent to this accident having occurred.'

To this letter Larsen replied on 3 February 1965, calling attention to the fact that Security General had written a notice of cancellation to Sissons stating that the reason for cancellation was that he had moved from the Birmingham area. (This notice of cancellation was mailed to Sissons on 17 August 1964). Larsen called attention to the inconsistency resulting from Security General's assertion that it had no knowledge that Sissons had moved from the Birmingham area until after the accident, and their prior efforts to cancel the policy in August 1964 on this very ground.

After Security General's denial of coverage, Commercial Union proceeded to investigate, negotiate, and settle the Nolen and Traveler's claims, the responsibility of James Sissons in causing the accident being clear.

Mary Nolen's claim was settled for $1500.00, Marjory Nolen's for $15,000.00, and Traveler's original claim for $8000.00 was settled for $5,500.00.

Mr. Larsen testified that from his investigation of the claims, the amounts paid in settlement were reasonable, as was the adjuster's bill for $392.30. Canceled checks in payment of these claims were received in evidence.

After hearing the evidence, the trial court found that the policy issued by Security General had been issued in reliance upon certain oral and written misrepresentations made by Sissons in his application for the policy; that the matter represented by Sissons increased the risk of loss under said policy; that said representations were false and were relied upon by Security General to its prejudice, and the knowledge of truth of the matter misrepresented would have reasonably influenced Security General in accepting the risk insured against by it.

The court further found that Sissons removed his insured automobile permanently from the principle place it was to be garaged as set out in the policy without notifying Security General of such removal. The court also found that the policy of insurance issued to John Sissons by Security General was not in effect and afforded no coverage to Sissons at the time of the accident in Pratt County, Kansas.

Accordingly the court ordered, adjudged, and decreed that Commercial Union Insurance Company be denied the relief prayed for in its complaint as amended, i.e., that Security General be declared and adjudged primarily liable for the damage arising from the Kansas accident.

The evidence presented below tends to show that for two or three years John Sissons had been well acquainted with Joe A. Cooper, Jr., who during the good part of their acquaintanceship was an agent for the State Farm Insurance Company. Cooper had written two or more policies on Sissons' automobiles during this acquaintanceship.

Cooper had also written a tenant home owner's policy for Sissons during the time he was connected with State Farm and also a $50,000.00 life insurance policy. In connection with the life insurance policy, Cooper testified that a background and credit check was obtained on Sissons. Cooper considered Sissons a desirable insurance risk.

Later Cooper became an agent for Security General. He had previously written a liability policy for Sissons on a 1964 Oldsmobile automobile. When the policy on the Oldsmobile was about to expire, Cooper solicited Sissons to insure his Oldsmobile with Security General, even though the premiums for the Security General policy would be somewhat higher.

In this connection Cooper on 21 April 1964, had Sissons execute an application for automobile insurance with Security General. One of the blank spaces in the application form provides for 'Driver's license number' and in this space appear the numbers 2512383. Also on this application Sissons indicated he had received no driver's citations within the past five years.

For Security General, Joe A. Cooper, Jr., testified that he went with Security General about March 1964, and immediately began taking Sissons' various policies of insurance out of State Farm and putting them with Security General. He knew the State Farm policy on Sissons' 1964 Oldsmobile was expiring and he solicited Sissons to insure this automobile with Security General. He took an application to Sissons' office which he had largely filled out from data in his possession relative to Sissons' prior policies with State Farm. In connection with the driver's license number, Cooper testified that he asked Sissons for his Alabama driver's license number and Sissons got a driver's license from his billfold and gave him a number which he wrote in the application. Cooper did not see the driver's license.

Upon the execution of the application, Sissons paid a premium due under the policy of some.$127.20. Within due time Security General issued the Family Combination Automobile policy to Sissons pursuant to the application.

The home office of Security General in Winston-Salem, North Carolina, requested through a reporting agency that a motor vehicle report be obtained on Sissons. On 20 May 1964, they were informed that there was no record of an Alabama driver's license being issued to John Sissons. They then wrote to Cooper inquiring about this and were advised by Cooper that the driver's license number appearing on the application was correct.

Cooper testified that he gave this information after a telephone conversation with Sissons. He further testified that in this telephone conversation or at the time the application was made, Sissons informed him that Mrs. Sissons did not have an Alabama driver's license but did have one from Arkansas, and Cooper requested that she proceed to obtain one. Security General's home office then wrote Cooper requesting Sissons' middle name, and being furnished this information they requested a second motor vehicle report on June 16, 1964, and on June 19, 1964, were again informed that there was no record of an Alabama driver's license being issued to Sissons. On June 26, 1964, the underwriting department of Security General again advised Cooper that there was no record that Sissons had an Alabama driver's license and asked him to again check with Sissons.

Cooper was unable to locate Sissons and learned he had left Birmingham. Informing the home office of this development, he recommended cancellation of the policy.

On June 28, 1964 the policy records were transferred to a new agent Robert Stevens.

On August 14, 1964 the underwriting department of Security General requested cancellation of the policy indicating such action was on request of the District Sales Manager (Mr. Cooper). Thereafter on August 17, 1964, Joe M. Helms of the underwriting department of Security General mailed a letter to Mr. Sissons at his Birmingham address informing him:

'Because you have left our area of operation, we can no longer give you the personal attention you deserve. Our experience shows you will get better service if we terminate our policy and let you obtain insurance from the company serving your new area.

'Your policy is, then, cancelled effective 12:01 A.M., on the date above shown (August 26, 1964).

'Please understand that this termination will not have an unfavorable effect on your insurance...