Liddell v. Standard Accident Ins. Co.

• Decision Date: 27 June 1933
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: CHESTER LIDDELL v. STANDARD ACCIDENT INSURANCE COMPANY & another.

283 Mass. 340

CHESTER LIDDELL v. STANDARD ACCIDENT INSURANCE COMPANY & another.

Supreme Judicial Court of Massachusetts, Suffolk.

June 27, 1933

October 5, 1932.

Present: RUGG, C.

J., CROSBY, WAIT DONAHUE, & LUMMUS, JJ.

Insurance, Motor vehicle liability. Waiver. Estoppel. Evidence, Competency. Contract, Validity. Motor Vehicle, Registration: by dealer. Sale, Conditional.

Following the bringing of an action of tort by one injured by an automobile upon a public way of the Commonwealth, an insurance company which had issued a policy of compulsory motor vehicle liability insurance to the defendant, assumed the defence of the action after the insured had executed an agreement to the effect that the company denied that the accident in question was covered by the policy and that its acts in assuming the defence of the action should not be construed as an admission by it that the accident was so covered. The plaintiff in such action recovered judgment against the insured. In a suit in equity subsequently brought by the plaintiff under G. L (Ter. Ed.) c. 214,

Section 3 (10), to reach and apply the obligation of the insurance company under the policy to the satisfaction of the judgment, it was held that

(1) Such agreement was not invalid in itself; (2) Such agreement was not to be declared void at the insistence of the plaintiff, who stood no better with respect thereto than did the insured;

(3) By giving effect to such agreement, the plaintiff was not deprived of any right given to him as an injured third person by the laws relating to compulsory motor vehicle insurance;

(4) Such agreement properly was admitted in evidence;

(5) By reason of such agreement, the insurance company was not estopped to deny that the policy covered liability for the injuries sustained by the plaintiff.

A dealer in motor vehicles, who has sold an automobile under a contract of conditional sale and has parted with the possession and control of the automobile, may, if he desires, register it as an owner under G. L.

(Ter. Ed.) c. 90, Section 2, but it is not protected by a dealer's registration issued to him under Section 5. The dealer in the circumstances above described is not required by said c.

90 to carry a policy of compulsory motor vehicle liability insurance covering such automobile. The words "owned or controlled by him" as used in G. L. (Ter. Ed.) c. 90,

Sections 5, 34C, have the same meaning in each section.

After a dealer in motor vehicles had sold an automobile under a contract of conditional sale and had parted with possession and control of the automobile, he permitted the vendee, who had not registered the automobile, to use thereon a set of dealer's number plates issued to him under G. L. (Ter. Ed.) c. 90, Section 5. One injured by the automobile on a public way of the Commonwealth recovered judgment in an action of tort against the dealer on the ground that he, by permitting such use of his plates, contributed to the maintenance of a nuisance on the way. An insurance company, previous to such injuries, had issued to the dealer a policy of compulsory motor vehicle liability insurance covering liability for personal injuries sustained through the "operation of any or all motor vehicles . . . operated under the . . . dealers' registration and under the motor vehicle . . . registration of the Named

Assured [the dealer]." In a suit in equity under G. L. (Ter. Ed.) c. 214, Section 3 (10), by the judgment creditor to reach and apply the obligation of the insurance company to the satisfaction of his judgment, it was held, that the policy did not cover the liability imposed upon the dealer by the judgment, and that the suit could not be maintained.

BILL IN EQUITY, filed in the Supreme Judicial Court for the county of Suffolk on July 10, 1931, and afterwards amended, described in the opinion.

The suit was heard by Sanderson, J., upon an agreed statement of facts and other evidence. The single justice found that the nonwaiver agreement described in the opinion was signed by the defendant Bumford before the defendant Standard Accident Insurance Company entered upon the defence of the action by the plaintiff against Bumford. Other material facts are stated in the opinion. By order of the single justice, a final decree dismissing the bill was entered. The plaintiff and the defendant Bumford appealed.

J. F. Daly, for the plaintiff.

D.

H. Fulton, for the defendant Bumford.

G. B. Rowell, (C.

F. Albert with him,) for the defendant Standard Accident Insurance Company.

RUGG, C.J. The plaintiff was injured by an automobile on a public way in this Commonwealth. Liability for his injuries thus received has been established against the defendant Bumford (hereafter called the defendant) by verdict of a jury and a decision of this court reported in 275 Mass. 346, under the name of Liddell v. Middlesex Motor Co. The declaration on which the plaintiff prevailed in that action alleged that the automobile was being operated negligently and was unlawfully on the highway because not duly registered, and that the defendant unlawfully and without right loaned for use on it registration plates issued to him. The contention that the defendant was liable was based upon proof of a nuisance on the highway for which the defendant was legally responsible. The defendant Standard Accident Insurance Company (hereafter called the insurer) insured the defendant with respect to certain motor vehicles. The insurer through its attorneys defended the original action brought by the plaintiff, but refused to satisfy the execution issued in his favor. After observance of the requisite preliminaries, this suit was brought under G. L. (Ter. Ed.) c. 175, Sections 112, 113, and c. 214, Section 3 (10), to reach and apply, to the satisfaction of that execution, the interest of the defendant in the policy of insurance. The case was heard upon a statement of agreed facts and other facts found by the single justice. He ruled that there was no obligation on the part of the insurer which could be reached and applied in favor of the plaintiff. A decree was entered dismissing the bill, from which the plaintiff and the defendant appealed.

The facts material to the liability of the insurer under the policy are these The defendant, a dealer in motor vehicles, sold the automobile involved in the accident to one Fee under a conditional sale agreement, and at the time of the accident the automobile had not been paid for in full. The defendant turned over to Fee for use on the automobile a set of dealer's plates issued to him in accordance with St. 1923, c. 464, Section 2, now G. L. (Ter. Ed.) c. 90, Section 5. These plates were on the automobile at the time of the accident. The automobile was turned over to Fee at the time of the conditional sale and never thereafter came into the control of the defendant, unless as matter of law on the other facts held to be under his control. At the time of the injury to the plaintiff, the automobile was being operated by the wife of Fee, not upon any business of the defendant or by his actual consent. The automobile was kept in the defendant's garage and used in his business. Fee was employed by the defendant as an automobile salesman.

The plaintiff alleged in his bill that the insurer prepared and presented the defence of the original action against the defendant and by its attorneys acted for him throughout that litigation and filed no disclaimer of liability. The insurer by its answer admitted this allegation but averred that all such acts were done under a nonwaiver agreement signed by the defendant to the effect that it denied that the accident then in issue was covered by its policy of insurance and that all its acts in connection with the claim and litigation arising out of the accident should not be construed as an admission by the insurer that the accident was covered by its policy. Evidence of such agreement was received at the trial subject to exception. This allegation of the bill was designed to fix liability on the insurer upon the principle stated in Lunt v. Aetna Life Ins. Co. 261 Mass. 469 , 472-473 and Daly v. Employers Liability Assurance Corp. Ltd. 269 Mass. 1 , to the effect that "where an insurance company takes control of the proceedings in an action brought against the assured, it is thereby estopped to say that the liability claimed is not within the terms of the contract." That rule was quoted with approval in Daly v. Employers Liability Assurance Corp. Ltd. 269 Mass. 1 , but it was there intimated that the insurer could avoid such estoppel by notifying the assured that it disclaimed liability under the policy, or that by continuing the defence it would not waive its defences to any action on the policy. A course of conduct by an insurer which might otherwise constitute an admission of liability or waiver of rights is not to be so construed when taken pursuant to an agreement that it shall not have that effect. French v. Hartford Life & Annuity Ins. Co. 169 Mass. 510 , 511. Urbaniak v. Firemen's Ins. Co....