Lynchburg Cotton Mill Co. v. Travelers' Ins. Co. of Hartford, Conn.

• Decision Date: 14 December 1906
• Docket Number: 654.
• Citation: 149 F. 954
• Parties: LYNCHBURG COTTON MILL CO. v. TRAVELERS' INS. CO. OF HARTFORD, CONN.
• Court: U.S. Court of Appeals — Fourth Circuit

149 F. 954

LYNCHBURG COTTON MILL CO. v. TRAVELERS' INS. CO. OF HARTFORD, CONN.

No. 654.

United States Court of Appeals, Fourth Circuit.

December 14, 1906

On the 18th day of April, 1902, Fitzhugh Stanley, an employe of the Lynchburg Cotton Mill Company, was injured in the course of his employment; and on the 21st of April, 1903, he recovered a judgment for damages on account thereof, in the circuit court of Campbell county, against the cotton mill company for $5,000 and costs, which judgment was subsequently affirmed by the Supreme Court of Appeals of Virginia in March, 1904. At the time of the accident to Stanley, the plaintiff in error had an employer's liability policy issued by the defendant in error for an amount not to exceed $2,500 for injury to any one person; and in said policy the insurance company undertook to defend at its own expense, and in the name and on behalf of the assured, any suits for damages covered by its policy. The present suit was instituted by the plaintiff in error herein, in the corporation court of the city of Lynchburg, to recover from the defendant in error herein the sum of $2,732.93, being the amount claimed under the accident policy aforesaid as their liability on the judgment recovered by said Stanley. The case was by appropriate proceedings removed from the corporation court of Lynchburg to the United States Circuit Court for the Western District of Virginia. Upon the docketing of the same in the latter court the defendant pleaded nonassumpsit, and issue was joined thereon, and subsequently filed its special plea in writing setting up in bar of the plaintiff's right of recovery the 30 days' limitation within which suit should be brought, as prescribed by clause 14 of the policy sued on. To this special plea the plaintiff replied setting forth certain correspondence had by and between it and the defendant company and its representatives, looking to an adjustment of the controversy, and whereby, as claimed by the plaintiff, the benefits of clause 14 of the policy were waived, and that in any event such compromise was not abandoned by the defendant until the 16th day of September 1904, a period of less than 30 days before the institution of this suit. To this replication the defendant filed its rejoinder, likewise setting forth a letter from defendant's counsel to the plaintiff, dated the 16th of August, 1904, whereby the defendant insisted that the negotiations looking to a compromise ended on the date of said letter of the 16th of August, and that the failure of the plaintiff to institute its action within 30 days from that date, said suit not having been commenced until the 10th day of October, 1904, barred a recovery, and the said defendant, on account thereof, craved judgment against the plaintiff. Upon the issues thus joined a jury was impaneled and after the conclusion of all the evidence the court, on motion of the defendant, instructed a verdict in its favor, to which action of the court, as well as to sundry rulings made pending the trial, upon the admission and exclusion of evidence, exceptions were duly taken by the plaintiff, and this writ of error sued out to this court. A preliminary motion was submitted to this court involving the technical question of the sufficiency of the bill of exceptions certifying the evidence in the case, and that motion at a previous term of the court was in an oral opinion decided in favor of the defendant, the two circuit judges concurring therein, and the writer dissenting. The evidence, therefore, so far as contained in said bill of exceptions, is eliminated, and the case is now before the court solely upon the propriety of the rulings of the lower court upon the questions raised by the pleadings, and upon the admission and rejection of evidence pending the trial, and the entry of judgment for the defendant.

Randolph Harrison and A. R. Long, for plaintiff in error.

Robert H. Talley and J. T. Coleman (Cabell, Talley & Cabell and Caskie & Coleman, on the brief), for defendant in error.

Before GOFF and PRITCHARD, Circuit Judges, and WADDILL, District judge.

WADDILL District Judge (after stating facts as above).

Ten bills of exceptions were taken to the action of the lower court respecting the admission and exclusion of evidence, and one, the eleventh, to the direction by the court of a verdict for the defendant. The 10 bills of exception and assignments of error based thereon relate to the efforts on the part of the plaintiff to introduce certain correspondence between the plaintiff and certain of the representatives of the defendant company, or between agents and representatives of the respective companies, regarding the claim in suit, after the 16th of August, 1904, the day on which the defendant in its rejoinder to the special plea claims to have terminated the efforts at adjustment. The court in its rulings as set forth in bills of exception from 1 to 8, inclusive, as shown by the able and elaborate opinion of the learned judge of the court below (140 F. 718), was controlled largely by its view of the effect of the effort at compromise upon the fourteenth clause of the policy sued on; the court's view being that what had been done operated only to suspend the clause in question during the period of such efforts at adjustment, which, as averred by the defendant, terminated on the 16th day of August, 1904, and that suit should have been instituted on the policy within 30 days from that time, and that inasmuch as the correspondence and evidence sought to be introduced, as shown by said eight bills of exception, related to efforts at adjustment after the 16th day of August, such correspondence could not be introduced; it not appearing that those claiming to act for the company had authority to waive any of the conditions or provisions of the policy as shown by the sixteenth clause thereof. It is as to the first ruling of the court, and as a consequence of which its subsequent rulings were made, that we shall first pass. Section 14 of the policy of insurance is as follows:

'14. No action shall lie against the company as respects any loss under this policy unless it shall be brought by the assured himself to reimburse him for loss actually sustained and paid by him in satisfaction of a judgment after trial of the issue. No such action shall lie unless brought within the period within which a claimant might sue the assured for damages unless at the expiry of such period there is such an action pending against the assured, in which case an action may be brought against the company by the assured within thirty days after final judgment has been rendered and satisfied as above. The company does not prejudice by this clause any defenses to such action which it may be entitled to make under this policy.'

The plaintiff in error satisfied the judgment against it on the 15th day of April, 1904, and under the strict terms of clause 14 suit should have been instituted thereon within 30 days from that time, but by reason of the correspondence of the parties this period was confessedly extended from the 15th of May, 1904, until the 16th day of August, 1904; and the effect of the decision of the lower court is that what occurred operated to suspend said clause to the 16th day of August, 1904, when it was again revived and became operative for a period of 30 days, thereby requiring suit to be instituted within 30 days from the 16th of August, 1904. In this view we are unable to concur, believing that the same is neither supported by reason or authority. Clause 14 was a limitation prescribed by the contracting parties in the interest of the insurer, and which should be construed most favorably for the insured. Holladay's Adm'r v. Phoenix Ins. Co., 7 U.S.App. 325, 51 F. 715, 2 C.C.A. 463; Cotten v. Fidelity & Casualty Co. (C.C.) 41 F. 506; 2 May on Insurance (3d Ed.) Sec. 478; 2 Wood on Fire Insurance (2d Ed.) 120.

The insurer had the right to insist on the enforcement of this special limitation, but upon departing therefrom, certainly in the absence of express stipulation to the contrary, what was done operated, not as a suspension of the clause, but a waiver...