Cromwell v. Hosbrook

• Decision Date: 03 May 1965
• Docket Number: No. 10174,10174
• Citation: 81 S.D. 324,134 N.W.2d 777
• Parties: Lawrence CROMWELL and Jack Zornes, Plaintiffs, v. Wayne HOSBROOK and Richard Berg, Defendants and Appellants, and Alled Mutual Insurance Company, a Corporation, Garnishee and Respondent.
• Court: South Dakota Supreme Court

Page 777

134 N.W.2d 777

81 S.D. 324

Lawrence CROMWELL and Jack Zornes, Plaintiffs, v. Wayne HOSBROOK and Richard Berg, Defendants and Appellants, and Alled Mutual Insurance Company, a Corporation, Garnishee and Respondent.

No. 10174.

Supreme Court of South Dakota.

May 3, 1965.

Charles Lacey, Sioux Falls, for defendants and appellants.

Woods, Fuller, Shultz & Smith, and Arlo D. Sommervold, Sioux Falls, for plaintiffs.

Davenport, Evans, Hurwitz & Smith, and Robert C. Heege, Sioux Falls, for granishee and respondent.

HOMEYER, Judge.

Plaintiffs, Cromwell and Zornes, recovered judgment against the defendants, Hosbrook and Berg, for property damages resulting from their negligence. After judgment they invoked garnishment proceedings to collect from the garnishee defendant Allied Mutual Insurance Company, under a policy of insurance it had issued to Hosbrook. The garnishee defendant denied liability and issue was taken thereon. A jury returned its verdict in favor of plaintiffs. The garnishee defendant moved for judgment n. o. v. which was granted. Defendants, Hosbrook and Berg, appeal from the order and judgment notwithstanding verdict.

The accident happened in the State of Wyoming about five miles west of Gillette on July 31, 1961. Geographically this way outside the permissible operating area stated in the policy. The policy was issued on May 9, 1961, for a period of six months with the following territorial limitation endorsement, viz:

'In consideration of the premium at which this Policy is written, it is agreed that the Policy shall be effective only while any truck specified and described therein is being operated within a radius of 75 miles of the place of principal garaging of such truck. * * * It is further agreed that the Policy shall be effective also while any truck specified and described therein is being operated within a radius of 75 miles of the base of operations of such truck, providing such operations are within the boundary of the State of South Dakota. * * *'

It also contained the following standard provision:

'22. Changes. Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy or estop the company from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy, signed by a duly authorized representative of the company.'

The prime question presented is whether the evidence will support an estoppel to deny coverage. We review the evidence in that perspective.

Oliver A. Gottschalk, owner and manager of his own insurance agency, was a licensed resident agent of Allied in South Dakota since at least May 1, 1954. Hosbrook had carried his insurance with the Gottschalk agency for about six years before the accident. Two gravel trucks were described in the policy. Hosbrook testified he knew of the territorial limitation on usage of his trucks; that on July 11, 1961, he stopped at the Gottschalk office in Brookings to tell them he was moving to Wyoming the next day and to pay his insurance account; that he had a conversation with Oliver A. Gottschalk at which his secretary, Bonnie Lee Hanson, was present; that he paid his account in full and was issued a receipt by Mrs. Hanson; that Gottschalk was told Hosbrook was going to Wyoming to haul gravel and Gottschalk told Hosbrook that he would be covered; that after the accident Hosbrook telephoned Gottschalk from Gillette, Wyoming, informing him of the accident and was told that the company would be notified; that he could not recall other details of the telephone conversation.

The deposition of Bonnie Lee Hanson, a witness for plaintiffs, was taken at Anchorage, Alaska, on January 10, 1964; a part of it was read on trial. Mrs. Hanson testified that she worked for Gottschalk about two years--until January 1962; that she had known Hosbrook for some length of time and their families were very friendly; that her husband used to work for Hosbrook; that she corroborated Hosbrook's testimony in most respects and said that 'he (Cottschalk) told him (Hosbrook) that he would automatically be covered and that all we had to do was notify Allied that he would be going to Wyoming, and that we'd take care of it for him'; that if there was any additional premium charged it would be mailed to him; that it was necessary to write to the company to extend the coverage; that she had no knowledge of such a letter being written to Allied.

Gottschalk denied that he had any conversation in which he told Hosbrook that he would be covered in his operations in Wyoming. He further testified that he first became aware of such Wyoming operation when the accident was reported; that priot to the happening of the accident he had never notified or informed Allied that Hosbrook was operating vehicles in Wyoming.

Appellants rely principally upon the recent case of Farmers Mutual Automobile Insurance Company v. Bechard, S.D., 122 N.W.2d 86. In Bechard after a detailed and extensive recitation and analyses of undisputed facts which left no doubt as to a false representation of coverage by a resident agent, this court said:

'We conclude an insurance company which in its policy has written the generally broad coverage may be estopped to defend by reason of an exclusionary clause not within the terms the insured ordered and coverage which he was led to believe was contained therein. Craig v. Nat. Casualty Co., 76 S.D. 349, 356, 78 N.W.2d 464, 468; Flanagan v. Sunshine Mut. Ins. Co., 73 S.D. 256, 260, 41 N.W.2d 761, 763. The evidence to support the granting of relief, however, should be clear and convincing. Employers' Liability [Assur.] Co. [Corp.] v. Madric, (1962) Del., 183 A.2d 182, reversing Del.Super., 174 A.2d 809; cf. Craig v. Nat. Cas. Co., supra, and Conard v. Auto-Owners Ins. [Mut.] Co. , 117 N.W.2d 53, where rule recognized.'

This is the general rule where relief is sought by reformation and is equally appropriate where the form of the action is one at law or by use of ancillary proceedings. In effect the relief sought, irrespective of the form of the action, is to reform the insurance contract to provide coverage which did not exist under the contract as written.

Enforcement of oral trusts in this state are predicated on 'clear and convincing' evidence, Kelly v. Gram, 73 S.D. 11, 38 N.W.2d 460, or 'clear, satisfactory and convincing' evidence. Scott v. Liechti, 70 S.D. 89, 15 N.W.2d 1; Krager v. Waage, 76 S.D. 395, 79 N.W.2d 286. Claims against estates for personal services rendered decedents have been categorized as necessitating proof by clear and convincing evidence, Douglas v. Beebe, 46 S.D. 559, 195 N.W. 165; Mahan v....