Didlake v. Standard Ins. Co.

• Decision Date: 22 February 1952
• Docket Number: No. 4379.,4379.
• Citation: 33 ALR 2d 941,195 F.2d 247
• Parties: DIDLAKE v. STANDARD INS. CO.
• Court: U.S. Court of Appeals — Tenth Circuit

33 ALR 2d 941, 195 F.2d 247 (1952)

DIDLAKE v. STANDARD INS. CO.

No. 4379.

United States Court of Appeals Tenth Circuit.

February 22, 1952.

James E. Grigsby, Oklahoma City, Okl., for appellant.

Duke Duvall, Oklahoma City, Okl. (Dudley, Duvall & Dudley, Oklahoma City, Okl., on the brief), for appellee.

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

PHILLIPS, Chief Judge.

On February 17, 1951, LaVelle Didlake, while a passenger in an automobile owned and being operated by William C. Jannson, suffered injuries caused by the negligence of Jannson. On April 30, 1951, she recovered a judgment against Jannson in the district court of Oklahoma County, Oklahoma, for $5,047.45.

In January, 1951, Jannson purchased the automobile, making a down payment of $80.88. He was then 19 years of age. In order to finance the deferred payments on the automobile, which he could not do himself because of his minority, he induced Earl R. Lathrop, an adult 24 years of age, falsely to assume the role of owner. Lathrop did not pay the down payment, the premium on the insurance policy hereinafter referred to, or the installment payments on the automobile as they became due. They were paid by Jannson, the true owner.

On or about February 15, 1951, Lathrop, by telephone, requested Paul W. Meade, a duly licensed policy writing agent of the Standard Insurance Company,¹ to write a policy of insurance on the automobile, covering liability for bodily injury and property damage. Lathrop represented to Meade that he was the sole owner of the automobile. Meade issued the policy at Oklahoma City, Oklahoma. Meade had no knowledge of the relationship between Lathrop and Jannson or that Jannson was the owner of the automobile and had the possession and control thereof. The declaration, which was attached to and by reference incorporated in the policy as a part thereof, contained the following agreements and representations:

"Name of insured — P. F. C. Earl R. Lathrop, Serial No. 16328626.

"Address 2592 AFRTC Tinker Field, Oklahoma City, Oklahoma.

* * * * * *

"Except with respect to bailment lease, conditional sale, mortgage or other encumbrance the named insured is the sole owner of the automobile.

* * * * * *

"By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance."

By express provision in the policy the declaration was made a part thereof.

The policy contained the following provisions:

"The company agrees * * *

"To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of the automobile.

* * * * * *

"III. Definition of Insured: With respect to the insurance for bodily injury liability and for property damage liability the unqualified word `insured' includes the named insured and also includes any person while using the automobile * * * provided the actual use of the automobile is by the named insured or with his permission."

The policy also covered in the usual form loss from theft, fire, or damage to the automobile.

At the time the policy was issued, Jannson was a minor, unmarried, in the United States Air Force, and stationed at Tinker Field, Oklahoma City, Oklahoma.

Didlake brought this action against the Insurance Company to recover upon the contract of insurance, on the theory that Jannson was covered under the omnibus clause quoted above.

By a written stipulation filed in the cause, the parties stipulated, in addition to other facts, that the representation by Lathrop that he was the owner of the automobile was false; that Jannson was the "real and actual owner" thereof; that Lathrop was merely "fronting" for Jannson, in order to enable him to secure the necessary financing of the purchase price of the automobile on a deferred payment plan; that "such false representation by Lathrop that he owned said automobile was known to be false by him when made, intended to be relied upon by Meade and the defendant by him, and was relied upon by the defendant and its agent, and upon such reliance said insurance agreement was made, and but for such false representation, such insurance agreement would not have been made."

Didlake took the deposition of Meade, the Insurance Company's agent. In the deposition, Meade testified that when he took an application for automobile liability insurance he had the applicant furnish the information covered in the declaration; that he also had to ascertain the age of the named insured; that he had instructions from the Insurance Company not to write a policy for any applicant under 21 years of age; and that if Jannson had applied for the insurance and had told him that he was a minor, 19 years of age, single, and on duty away from home, he would not have written the policy.

Mel Huntley, the secretary of the Insurance Company, by written affidavit filed in the cause, averred that the application for the insurance would have been rejected had Meade known that Jannson, a minor, 19 years of age, unmarried, and a member of the Air Force on duty at Tinker Field, was the true owner of the automobile and that Lathrop, a 24-year-old adult, was not the true owner of the automobile and had no interest therein, and that the reason it would have rejected the application is because the Insurance Company does not consider a 19-year-old minor, away from home and on duty in the Army, a desirable risk.

From a summary judgment entered in behalf of the Insurance Company, Didlake has appealed.

In United Ben. Life Ins. Co. v. Knapp, 175 Okl. 25, 51 P.2d 963, 964, the court said: "In making a contract of insurance it is the duty of the person applying for insurance, upon a risk of whatever kind, to give to the insurance company all of the necessary information concerning the risk as will be of use in estimating its character and in determining whether or not to assume it. This duty is the natural outgrowth of the nature of the insurance business. Thus arises the rule that the untruth of any material representation relied on by the insurance company in making the contract will avoid the contract, wholly irrespective of the intent, whether innocent or fraudulent, with which such misrepresentation was made." See, also, Washington Nat. Ins. Co. v. Bryant, 183 Okl. 90, 80 P. 2d 239, 242.

Here, the statement as to the ownership of the automobile was an existing fact, susceptible of exact knowledge and correct statement. Lathrop knew it was false when he made it; he intended that Meade and the Insurance Company should rely upon it; they had a right to and did rely upon it, and but for such false representation the policy would not have been issued.

Under the Oklahoma decisions, in order for a false representation to avoid a policy of insurance it must be material to the risk.²

In support of his contention that the false representation as to ownership was not material to the risk, counsel for Didlake primarily relies on Mid-States Ins. Co. v. Brandon, 340 Ill.App. 470, 92 N.E.2d 540; Kuntz v. Spence, Tex.Civ.App., 48 S.W.2d 413, and Pauli v. St. Paul-Mercury Indemnity Co., 167 Misc. 417, 4 N.Y.S.2d 41, affirmed 255 App.Div. 935, 8 N.Y.S.2d 691.

In Mid-States v. Brandon, which involved a policy of automobile insurance, insuring against public liability and property damage, the court, under facts not materially different from the facts in the instant case, held that a misrepresentation as to ownership was not material to the risk incurred with respect to liability to third persons.

In Kuntz v. Spence, Kuntz, the named insured in a policy of automobile insurance which insured against loss from theft, fire or damage to the insured automobile, and against liability to third persons for bodily injury and property damage caused by the ownership, maintenance or use of the automobile, had purchased the automobile, making a down payment of $550 and securing the balance of $844, evidenced by promissory notes, by a bill of sale which had the effect of a chattel mortgage. Under the provisions of Art. 5489,...