Maryland Cas. Co. v. Baker

• Decision Date: 18 March 1947
• Citation: 200 S.W.2d 757,304 Ky. 296
• Parties: MARYLAND CASUALTY CO. et al. v. BAKER.
• Court: Kentucky Court of Appeals

200 S.W.2d 757

304 Ky. 296

MARYLAND CASUALTY CO. et al. v. BAKER.

Court of Appeals of Kentucky

March 18, 1947

Appeal from Circuit Court, Boyd County; Watt M. Prichard, Judge.

Action by Sue Baker against the Maryland Casualty Company and the American Fidelity & Casualty Company to recover the amount of a judgment in favor of the plaintiff against taxicab operator to whom the defendants had issued policies. From a judgment in favor of the plaintiff, the defendants appeal.

Judgment affirmed.

Caldwell & Gray and Clyde Levi, all of Ashland, and Keenon & Odear, of Lexington, for appellants.

Diederich & Lycan, of Ashland, for appellee.

DAWSON Justice.

This appeal is from a judgment against Maryland Casualty Company and American Fidelity & Casualty Company (hereinafter referred to as Maryland and American) in a joint action against both companies as insurers of John Pelphrey, the operator of a licensed taxicab business in the City of Ashland.

Prior to the institution of this action appellee had obtained a judgment against Pelphrey in the amount of $1,257.95, for damages resulting from the actions of one of Pelphrey's drivers. This judgment was not satisfied by Pelphrey, hence this action against the insurance companies.

Both appellants disclaim any liability, but there is a controversy between them as to whose policy was in effect on the date of the injuries to appellee, Maryland claiming that its policy had been canceled prior to that date, and American insisting that its policy had not become effective.

The facts as stipulated show that on August 5, 1941, the appellee arrived at Ashland by rail just after midnight. She lived at Russell, approximately five miles north of Ashland, and since the busses were not running engaged a taxi owned by Pelphrey to take her home. The driver of the taxi was drinking and on the way to Russell he stopped and, according to appellee insulted her and tore her clothing. Thereafter she brought suit against Pelphrey and obtained the judgment for $1,257.95, which includes $7.95 compensatory and $1,250 punitive damages.

Maryland had issued a policy to Pelphrey on April 12, 1941. When he became delinquent in the payment of the premiums, Maryland on July 20, 1941, gave him written notice of its intention to cancel the policy. A copy of that notice was delivered to the clerk of the City of Ashland, and on the 31st day of July 1941, to the Division of Motor Transportation of Kentucky. This notice must be given at least fifteen days prior to the date of cancellation. KRS 281.080. K.S. § 2739L-11, in effect in 1941, is to the same effect. The notice given by Maryland to the Director of Motor Transportation stated that its policy would be canceled as of August 16, 1941.

On July 30, 1941 Pelphrey executed a release of the Maryland policy and delivered it to that company. Whatever the effect of this release by Pelphrey as between him and Maryland, it certainly did not abrogate the fifteen day provision of the statute, or affect the rights of the public. From this statement of the facts it is entirely clear that Maryland had not completed the process of cancellation, and its policy was in full force and effect on August 5, 1941 the date appellee sustained the injuries complained of.

On July 25, 1941, after Pelphrey had received Maryland's notice of its intention to cancel its policy, he applied to a local representative of American for the insurance he was required to carry in order to retain his permit to operate his taxicabs (KRS 281.460). The local agent telephoned the branch manager of American at Lexington and asked for authority to accept the application. He received a wire saying that the application was acceptable. Formal written application to American was made on July 28, 1941, and this was mailed by the local agent to the branch manager, with a letter stating that the premium would be paid upon delivery of the policy. The branch manager forwarded the written application and the letter from the local agent to the home office of the American, which executed its policy as of July 31, 1941, and mailed it to the branch manager at Lexington for delivery. About that time the clerk of the City of Ashland, being on notice that Maryland was in the process of canceling its policy, requested Pelphrey to furnish proof that his taxicabs were covered by insurance, and on August 4, 1941, the local agent of American advised the clerk that Pelphrey's cabs were insured by his company until further notice. This advice was in the form of a letter, copy of which was sent to the branch manager at Lexington with the request that the policy be forwarded at once.

On August 7, 1941, the branch manager forwarded the policy to the local agent advising him not to deliver the policy to Pelphrey, or a copy of it to the City of Ashland, until the premium was paid. This letter further stated that as soon as payment was received a copy of the policy would be filed with the Division of Motor Transportation. After this policy had been mailed to the local agent at Ashland the incident of which appellee complains was reported, both to the local agent and to the branch manager of American. The branch manager thereupon directed the local agent not to make delivery of the policy or file a copy with the City of Ashland. Notwithstanding this the local agent made delivery of the original policy to Pelphrey and collected the stipulated premium. Upon being informed of this fact the branch manager advised the local agent by letter dated August 12, 1941, that the policy was to be canceled effective August 16, 1941. This letter is as follows: 'This will confirm our telephone conversation as of this morning at which time it was decided that the present policy which has been issued to John Pelphrey is to be cancelled today effective August 16, 1941, and you will find attached copy of cancellation notice. In the event Mr. Pelphrey wishes us to issue him another policy dated August 16th, and I understand he does, you are to forward me promptly check covering the initial deposit of $48.00 less brokerage of 10%, plus earned premium under the above policy for which we will accept $15.00 although according to the short rate cancellation table it should be $21.00. As soon as the original policy has been cancelled we will have to take them up and I would thank you to return them to this office along with the other enclosures.'

On that same date the branch manager wrote Pelphrey that its policy 'is hereby cancelled from noon of August 16, 1941'. A copy of this letter was sent to the clerk of the City of Ashland.

On August 14, 1941, the local agent of American wrote its branch manager as follows:

'We are in receipt of your letter of August 12th confirming telephone conversation. We contacted Mr. Pelphrey and he agreed that the above designated policy may be cancelled with the understanding that you are to issue another policy dated August 16th, covering his two taxicabs. He has paid us the additional premium of $15.00.

'We are enclosing our check for $56.70, which plus our ten percent commission makes a total of $63.00, the amount Mr. Pelphrey has paid us.

'Please issue this

...