John Beatty v. Employers' Liability Assurance Corp., Ltd

• Decision Date: 07 November 1933
• Parties: JOHN BEATTY v. EMPLOYERS' LIABILITY ASSURANCE CORP., LTD
• Court: Vermont Supreme Court

168 A. 919

106 Vt. 25

JOHN BEATTY v. EMPLOYERS' LIABILITY ASSURANCE CORP., LTD

Supreme Court of Vermont

November 7, 1933

October Term, 1933.

Insurance---Sufficiency of Evidence To Support Finding---"Waiver" and "Estoppel" Distinguished---Cause in Automobile Liability Policy Agreeing Not To Carry Passengers for Consideration---Effect of Breach---Right of Insurer To Waive Clause for Its Benefit---Clause Constituting Exception from Risk Insured Against---Estoppel by Insurer To Deny Non-Liability---Presumption in Support of Judgment as to Trial Court Having Drawn Permissible Inference---Sufficiency of Facts To Show Estoppel by Insurer.

1. In action on automobile liability policy, finding that insured believed that insurer intended on insured's behalf to defend action brought against him for injuries received in automobile accident and to pay judgment, held supported by evidence.

2. "Waiver" is intentional relinquishment of known right, involving act or conduct of one of parties to contract only, but does not necessarily imply that one has been misled to his prejudice or into an altered position, while "estoppel" always involves this element, may arise regardless of intent, and involves act or conduct of both parties to contract.

3. Clause in automobile liability policy, occurring among declarations which are declared to be true by insured, that automobile will not be used for carriage of passengers for consideration, is promissory warranty, and, nothing else appearing, breach of it would avoid policy during period of such use.

4. Clause in automobile liability policy that automobile will not be used for carriage of passengers for consideration being for benefit of insurer, latter may waive it, by conduct or otherwise.

5. Clause in automobile liability policy that automobile will not be used for carriage of passengers for consideration, is not condition breach of which causes forfeiture, but is exception from risk insured against.

6. Where liability insurance company, with knowledge of facts and no effective reservation of its rights under its policy takes charge of and defends action against insured, insurer is estopped to deny its liability upon ground that risk was not covered.

7. In action on automobile liability policy defended on ground that risk was not covered by policy and resulting in judgment for plaintiff, held that from facts found as to insured's belief that insurer would defend action against him, and from his failure to retain counsel, it could fairly be inferred that insured relied on insurer to defend action against him and that, in support of judgment, Supreme Court would presume that such inference was drawn by trial court.

8. Automobile liability insurance company, by proceeding to defend action brought against insured, with knowledge of its claimed nonliability under policy, and of absence of assent by insured to proposed reservation, held estopped from claiming that loss was not covered by contract of insurance.

9. Lawyer retained by insurance company to defend case on behalf of policy holder, as long as he remains in case owes complete and entire fidelity to person whom he represents, and cannot substitute interests of insurer for those of insured; and, when, in defending such case in jury trial, he injects into it fact that defendant is insured and charges him with attempting to defraud insurer, latter cannot claim that insured was not prejudiced thereby.

ACTION OF CONTRACT on automobile liability policy. Plea, general issue and special answer. Replication by plaintiff. Trial by Court at the September Term, 1932, Washington County, Davis, J., presiding. Judgment for the plaintiff. The defendant excepted. The opinion states the case.

Judgment affirmed.

Marcell Conway for the defendant.

Henry Milne, John J. Finn and J. Ward Carver for the plaintiff.

Present: POWERS, C. J., SLACK, MOULTON, THOMPSON, and GRAHAM, JJ.

OPINION

MOULTON

This is an action of contract upon a policy of liability insurance. After a trial by the court, and a finding of facts made and filed, judgment was entered for the plaintiff. The case is before us upon defendant's exceptions.

The facts as found are as follows: On the 7th of June, 1929, the defendant issued a policy of automobile liability insurance to the plaintiff, which contained the following: "Agreement I (a) To settle or to defend in the manner hereinafter set forth against claims resulting from the liability imposed upon the Assured by law on account of bodily injuries, including death at any time resulting therefrom, covered by this policy and accidentally sustained by any person or persons except those excluded thereunder. (b) To pay and satisfy judgments rendered against the Assured in legal proceedings defended by the Corporation and to protect the Assured against the levy of execution issued against the Assured upon the same, all subject to the limit expressed in item 5 of the Declaration. (c) To pay * * * all costs taxed against the Assured in any such proceedings; and all interest accruing before or after entry of judgment and up to the date of payment by the Corporation of its share of any judgment." "Agreement III. To defend as in this policy provided in the name and on behalf of the Assured any suits or other proceedings alleging such injuries and demanding damages on account thereof which may at any time be instituted against the Assured on account of such injuries, although such suits, proceedings, allegations, and demands are wholly groundless, false or fraudulent." "Agreement V. This policy covers, except as provided in Agreement VI. (a) Bodily injuries, including death at any time resulting therefrom, accidentally sustained by any person or persons, other than em- ployees engaged in operating or caring for the automobiles covered, as a result of the ownership, maintenance, operation, or use of any of the automobiles enumerated and described * * *." "Agreement VI. This policy shall not cover: (a) When any of the said automobiles are being * * * (4) used for renting or livery use or the carrying of passengers for a consideration. Condition J. The named Assured by the acceptance of this policy declares the several statements in the Declarations hereby made a part hereof to be true, and this policy is issued upon such statements * * * Declarations. Item 7. None of the automobiles herein described is or will be rented to others or used to carry passengers for a consideration during the period of this policy."

On the 21st of September, 1929, the plaintiff left his home in Graniteville, Vermont, driving the automobile covered by the policy. With him was his mother, Mary Beatty, and their destination was Eustis, Canada. At Craftsbury, Vermont, an accident took place and Mrs. Beatty was injured. Before leaving home, the plaintiff and his mother made an agreement that the former would furnish, and drive his automobile, and the latter would pay the expense of the trip. In pursuance of this agreement, Mrs. Beatty purchased ten gallons of gasoline and two quarts of oil shortly after they started. This was the only occasion on which the plaintiff carried a passenger under such an arrangement.

On the 2nd of February, 1932, Mary Beatty brought suit against the plaintiff, alleging that her injuries were caused by the negligent operation of the latter's automobile. After service of the writ, the plaintiff gave notice to the defendant herein, and it employed an attorney-at-law, to investigate the claim and conduct the defense. The plaintiff informed the attorney as to the agreement with his mother, and the purchase of gasoline and oil by her.

On the 26th of March, 1932, the attorney wrote to the plaintiff herein, calling attention to the provisions of the policy which stated that it should not cover when the automobile was being used for carrying passengers for a consideration, and stating that his clients (referring thus to the defendant herein) considered that the plaintiff had violated the provisions and warranties of the policy in transporting his mother for some compensation. He suggested that the plaintiff should call at his office and "sign an agreement to the effect that my clients will not waive any rights they may have by reason of your having violated the terms of your policy in the event that I proceed to defend this case as their attorney." The letter went on to say "If you believe that the arrangement between you and your mother was not a violation of the terms of your policy and my clients are liable for the defense of your case and payment of judgment, then I will defend this suit for you on behalf of the Employer's Liability Assurance Corporation, Ltd., under a reservation of my client's rights leaving the final action of coverage to be determined after the trial of the pending case. The trial of the pending case of your mother against yourself may be determined if the arrangement between you and your mother amounted to a violation on your part of the terms of your policy. I would appreciate your arranging to enter into such an agreement with me, but under the circumstances whether or not you agree with it, I propose to defend this suit under those conditions. If it shall appear, after a judgment, that your mother was carried as a passenger for a consideration, then I believe the case will not be covered by your policy, and we will not be obliged to pay any judgment that may be rendered. The case will be defended to the best of my ability and you are at liberty, if you see fit, to associate counsel with me in the defense of the case at your own expense." The plaintiff wrote in reply, on the 7th of April, saying that "I do not consider that I violated the terms of my insurance policy and that I expect that you will defend...