Employers Cas. Co. v. Tilley

• Decision Date: 13 June 1973
• Docket Number: No. B--3667,B--3667
• Citation: 496 S.W.2d 552
• Parties: EMPLOYERS CASUALTY COMPANY, Petitioner, v. Joe TILLEY et al., Respondents.
• Court: Texas Supreme Court

Page 552

496 S.W.2d 552

EMPLOYERS CASUALTY COMPANY, Petitioner, v. Joe TILLEY et al., Respondents.

No. B--3667.

Supreme Court of Texas.

June 13, 1973.

Rehearing Denied July 25, 1973.

Fuller, Fuller & McPherson, James S. Fuller, Port Arthur, for petitioner.

Orgain, Bell & Tucker, Lawrence Louis Germer and John G. Tucker, Beaumont, for respondents.

DANIEL, Justice.

This is a declaratory judgment action filed on January 22, 1971, by Employers Casualty Company, the insurer, against 'Joe Tilley, d/b/a Joe's Rental Tools and/or Oil City Casing Crews, Joe's Rental Tools Company, a corporation,' the insured, seeking a determination that a policy violation by the insured (late notice) relieved the insurer of any obligation to defend a personal injury suit instituted by Douglas Starky against the insured on September 19, 1969. Tilley and the corporations named above will be referred to collectively as 'Tilley'.

Prior to filing the instant suit, Employers on October 6, 1969, secured a standard non-waiver agreement from Tilley and engaged an attorney to represent Tilley as his attorney in the Starky personal injury suit. For a period of nearly 18 months, the attorney not only performed such services for Tilley in defending against Starky, but he also performed services for Employers which were adverse to Tilley on the question of coverage. Tilley claimed that he had no knowledge of the Starky accident which occurred on November 25, 1967, until he was sued on September 19, 1969. This was his excuse for not notifying Employers before the suit was filed.

Knowing of Tilley's contention, the attorney did not advise him of the apparent conflict of interest between Tilley and Employers. Instead, he continued to act as Tilley's attorney while actively working against him in developing evidence for Employers on the coverage question. Such evidence subsequently became the basis for this suit, filed by another attorney for Employers against Tilley, seeking to deny coverage on the grounds of late notice. Tilley filed a cross-action, alleging among other things waiver and estoppel.

Both parties moved for a summary judgment. The trial court denied Employers' motion and granted Tilley's, rendering a judgment that (1) the policy is in full force and effect and that Employers is obligated to defend Tilley in the Starky suit, and (2) that Employers must pay any judgment entered against Tilley in the Starky suit up to the limits of its policy. Evidently upon the authority of Firemen's Insurance Company of Newark v. Burch, 442 S.W.2d 331 (Tex.1968), the Court of Civil Appeals reformed by striking out the latter portion of the judgment, (2) above. It then affirmed the trial court's judgment as reformed. 484 S.W.2d 802. We disagree with the reasons stated for the affirmance; but for other reasons hereinafter explained, we affirm the judgment of the Court of Civil Appeals.

Douglas Starky (whose name is also frequently spelled 'Starke' in various briefs and pleadings) was an employee of Prudential Drilling Company at the time of his injury on a Prudential well site on November 25, 1967. Tilley, as an independent contractor was furnishing tools and employees for the lifting of casing pipe off a Prudential platform. Starky had tied the 'catline' to a casing pipe immediately prior to the pipe slipping and falling upon him, causing injuries which subsequently resulted in the loss of his right arm. It was Tilley's equipment and crew which were lifting the pipe after it had been supposedly secured to the catline by Starky. Grady Fore was Tilley's foreman in charge of the Tilley crew and operating the lift at the time the pipe slipped. He said the accident was due to the manner in which Starky tied the catline to the pipe rather than to the manner in which he lifted the pipe. It is undisputed that Fore knew of the occurrence, but it is disputed as to whether he or anyone else told Tilley of the accident or whether Tilley had actual notice of it before Starky filed suit against Tilley on September 19, 1969.

Employers concedes its coverage and duty to defend Tilley, unless as now contended in this suit, Tilley had actual or imputed knowledge of the accident when or soon after it occurred. If so, Employers contends that Tilley has lost coverage for failure to comply with the following provision of the policy:

'4. INSURED'S DUTIES IN THE EVENT OF OCCURRENCE, CLAIM OR SUIT: (a) In the event of an occurrence, written notice, containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.'

While Employers alleges that Tilley had actual notice of the 'occurrence' soon after the accident in 1967, its motion for summary judgment was based solely upon undisputed proof that Tilley's foreman, Grady Fore, was present and had knowledge of the occurrence on November 25, 1967; its contention that this knowledge was imputed to Tilley; and that failure of Tilley to give notice for 20 months was, as a matter of law, a breach of the notice provisions of the policy. Tilley raised a disputed issue of fact concerning Fore's responsibilities and authority as an employee of Tilley; proved that the attorney selected by Employers, while representing Tilley in the personal injury case, developed the adverse evidence about Fore's knowledge; and asserted that this and other adverse conduct created a waiver and estoppel against Employers as a matter of law. Under such circumstances, the trial court properly overruled Employers' motion for summary judgment.

Tilley's motion for summary judgment contained the following allegations:

1. Neither Joe Tilley nor any officer of any of the defendant corporations were ever aware of the accident in question until suit was filed.

2. Even if Joe Tilley or someone authorized to act for him had been aware of the accident, no reasonable person would ever have believed that suit would be filed; that any claim would be made; or that any liability could exist against Tilley.

3. Employers Casualty assumed the defense of the suit filed by Starky and continued same for a period of a year and a half. This action constitutes a waiver or estoppel and precludes the company from denying coverage. The non-waiver agreement does not prevent an estoppel for the following reasons:

(a) The non-waiver agreement is a broad from which is not limited to late notice and is therefore void and unenforceable.

(b) Even if the non-waiver agreement does in fact protect the company from waiving any rights it has, the agreement does not purport to prevent an estoppel from operating against the company.

4. Even after the non-waiver agreement was signed, the company requested that Joe Tilley, at his own expense, furnish his employees for statements. This conduct waives the non-waiver agreement and waives the right to rely upon any policy defense.

5. During the period that Employers Casualty purported to offer a defense to Tilley, the company without any warning or notice to Tilley of any conflict of interests committed the following acts in breach of their fiduciary duty through its agents and attorneys:

(a) The attorney engaged by Employers to represent Tilley took a statement from Tilley's foreman to establish that Tilley had notice through the foreman of the accident.

(b) The attorney took four other statements from Tilley employees seeking to establish that they had informed Tilley of the accident, knowing at the time that this was contrary to Tilley's position.

(c) The same attorney briefed the legal question of late notice for Employers without advising Tilley of his actions or his findings.

(d) The attorney interviewed two other persons at the request of Employers to establish the late notice defense now asserted by Employers against Tilley.

(e) The attorney, over a period of a year and one-half wrote numerous letters and engaged in numerous oral conversations with the insurance company pertaining to developing its coverage defense, suggesting additional investigation, and advising as to the legal possibilities of establishing such defense.

6. All of the aforesaid action was taken although Tilley was never advised by the attorney or Employers that there was any conflict of interest; or that the attorney was acting for Employers and against Tilley with regard to the question of late notice; or that the statements which were taken were going to effect (sic) the coverage question as opposed to being simply a preparation of the defense of the liability suit; or that he needed a lawyer to protect him; or that the attorney would not be representing him fully.

The factual allegations, as distinguished from the conclusions, in 3 through 6 above were adequately supported by undisputed summary judgment proof. In appealing the trial court's judgment in favor of Tilley, Employers assigned three points of error in the Court of Civil Appeals:

1. Error of trial court in overruling its motion for summary judgment because the proof established as a matter of law that Tilley's supervisor had notice of the accident which was notice to 'the corporate defendant,' which constituted a breach of the policy.

2. Conduct of an attorney employed by Employers to represent defendants in the original suit could not, as a matter of law, constitute a waiver or estoppel to assert its policy defense of late notice.

3. The trial court erred in granting Tilley's motion for summary judgment for the reason that the summary judgment proof at most only raised a fact issue on the question of waiver or estoppel by appellant to assert its policy defense of late notice.

The Court of Civil Appeals held that Employers failed to assign as error all of the grounds asserted by Tilley in his motion for summary judgment, any one of...