Motorists Mut. Ins. Co. v. Johnson

• Decision Date: 14 July 1966
• Docket Number: No. 19476,19476
• Citation: 139 Ind.App. 622,8 Ind.Dec. 687,218 N.E.2d 712
• Parties: MOTORISTS MUTUAL INSURANCE COMPANY, Appellant, v. Ella JOHNSON, Administratrix of the Estate of James Johnson, Appellee.
• Court: Indiana Appellate Court

Page 712

218 N.E.2d 712

139 Ind.App. 622

MOTORISTS MUTUAL INSURANCE COMPANY, Appellant, v. Ella JOHNSON, Administratrix of the Estate of James Johnson Appellee.

No. 19476.

Appellate Court of Indiana, In Banc.

July 14, 1966.

Rehearing Denied Sept. 28, 1966.

[139 INDAPP 624]

Emerson Boyd, Robert C. Riddell, Indianapolis (Locke, Reynolds, Boyd & Weisell, Indianapolis, Christian, White, Waltz & Klotz, Noblesville, of counsel), for appellant.

Addison M. Dowling, Indianapolis, Russell I. Richardson, Lebanon, Frank W. Campbell, Noblesville (Stewart & Richardson, Lebanon, Campbell, Campbell, [139 INDAPP 625] Malan & Kyle, Noblesville, Albert Ewbank, Indianapolis, of counsel), for appellee.

WICKENS, Presiding Justice. ¹

Two separate trials involve the parties and matters here. Appellee first brought a suit for wrongful death of her decedent and recovered a judgment against William Farley and William Gammon. Allegations in that complaint are that Farley owned a motor vehicle and Gammon was operating it with Farley's knowledge and consent, when he carelessly struck and killed the decedent. Judgment was against both of these defendants.

The second action was a suit by appellee against appellant, an insurance company. In it appellee, among other statements, charged that appellant insured Farley and his automobile for public liability as provided for in a certain insurance policy; that appellee had obtained the judgment against Gammon and Farley, as mentioned, which judgment was unpaid despite demand for payment made on the insurer; that appellant became and was legally obligated to pay the liability of the insured not exceeding $15,000. Also, appellee alleged that insurer had provided the attorneys who appeared in the first action for Farley, but had refused to so appear for and defend Gammon.

By answer in the second suit appellant, insurer, admitted the insurance contract but asserted that coverage was voided as to Farley by his certain acts set forth, which conduct amounted to failure to cooperate and violation of policy terms. As to Gammon the special answer alleged that he failed to tender his defense thus giving insurer no cause or opportunity to defend him, and, therefore, no protection was extended to him by the policy.

A re sume of the facts shows that Gammon was operating the motor vehicle owned by Farley which was insured by appellant[139 INDAPP 626] at the time appellee's decedent was struck and killed. Insurer was promptly informed of the accident and conducted an investigation. Farley reported to his insurer that his vehicle was being used without his permission. Gammon, by a statement taken a few days after the accident, told the insurer that he did have the permission of Farley to use the vehicle.

Nearly two years later the suit was commenced by appellee against Farley and Gammon. The deposition of Gammon was taken after that and again Gammon asserted, now under oath, that he was operating the motor vehicle with express permission of Farley, the owner. Thereafter, no appearance having been entered for Gammon in this suit, the insurer wrote Gammon advising him that he was not entitled to representation by it and that if he did not employ counsel, judgment might be rendered against him. Thereafter Gammon was represented by personal counsel in the proceedings.

When the trial of the original action began, Farley at first failed to appear, although he had been informed of the trial date by three separate letters from the attorneys engaged for him by the insurer. But, before the trial was concluded, Farley appeared in response to a subpoena issued at the request of plaintiff-appellee. Then the attorneys engaged by the insurer undertook his defense subject to the provisions of a written reservation of rights by insurer. On the witness stand Farley changed his story and testified that Gammon did have his permission to use the vehicle at the time of the accident.

Both actions were tried by juries and in each the appellee recovered a general judgment.

No appeal was taken from the first judgment and there is no question of the finality of said judgment against Gammon and Farley. The appeal here is confined to the second cause of action and the decision entered therein against insurer. It questions the sufficiency of the evidence to sustain the verdict, whether the verdict is contrary to law, and certain instructions given over appellant's objection, and the refusal of the [139 INDAPP 627] court to give certain other instructions tendered by appellant. As to whether the verdict is contrary to law or is not sustained by sufficient evidence, we must arrive at a proper understanding of the questions raised by appellant.

Certain fundamentals stand out in a case of this kind where an injured person seeks recovery on a judgment he has obtained against an insured person and therefore is proceeding directly against an insurance company. In general, the injured person is in the legal shoes of the insured. If the insured has violated the policy requirements, the injured person would be precluded from recovery against the insurance company. But, if the insurer waived a condition precedent on the part of an insured, such condition is waived so far as the right of the injured person to recover from the insurer is involved. Likewise, if an insurer is estopped to assert a certain defense to an action by the insured, estoppel precludes use of such defense against the injured person. 7 Am.Jur.2d, Automobile Insurance, § 225, pp. 574, 575; 8 Appleman Ins. L. & P. § 4811, p. 164 et seq.

The policy had usual provisions requiring the cooperation of an insured person with respect to claims. The provisions we believe pertinant are:

'* * * The insured shall cooperate with the company and, upon the company's request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. * * *'

'* * * In the event of an occurrence or accident, written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the occurence or accident, the names and addresses of the injured and of available witnesses.'

'* * * If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.'

[139 INDAPP 628] Policy provisions of this nature have sometimes been declared to be conditions precedent of liability on the part of the insurer. Compliance is essential in the absence of a sufficient excuse or a waiver in order to permit a recovery on the policy. Lomont v. State Farm Mut. Auto. Ins. Co. (1958), 128 Ind.App. 645, 652, 151 N.E.2d 701.

A technical or inconsequential lack of cooperation has often been held insufficient to void the policy and the lack of cooperation to be sufficient must be in some substantial and material respect. Non-cooperation must be material. Prejudice must be shown by insurer. 7 Am.Jur.2d, Automobile Insurance, §§ 176, 181, pp. 508, 509, 517. See also 60 A.L.R.2d 1138, 1150.

Considering the situation here as it concerns Farley, the named insured, failure of cooperation in a very material way is demonstrated. We think it hardly necessary to belabor that point. We hold that Farley failed to comply with his contractual obligations to appellant. DeRosa v. Aetna Insurance Company, 346 F.2d 245, 247, 248 (7 Cir. 1965); Potomac Ins. Co. v. Stanley, 281 F.2d 775, 779, 780, 781 (7 Cir. 1960).

Whether Farley told the truth when he first reported that Gammon did not have his permission or whether his sworn testimony at the trial to the effect that Gammon did have permission is true, at one time or the other he misled the company to its disadvantage in a very essential matter.

We are in complete agreement with those authorities which hold that there is a breach of the cooperation clause where the insured intentionally furnishes false information of a material nature either before or at the trial. Elliott v. Metropolitan Casualty Ins. Co. of New York (10 Cir. 1957), 250 F.2d 680, 683, 66 A.L.R.2d 1231, 1235, 1236, cert. den. 356 U.S. 932, 78 S.Ct. 774, 2 L.Ed.2d 762; Ocean Accident & Guarantee Corporation v. Lucas (6 Cir. 1934), 74 F.2d 115, 117, 98 A.L.R. 1461 1464; Salonen v. Paanenen [139 INDAPP 629] (1947), 320 Mass. 568, 571, 71 N.E.2d 227, 230; Quisenberry v. Kartsonis (Mo.1956), 297 S.W.2d 450, 453; Sutera v. Provident Ins. Co. (1961), 67 N.J.Super. 554, 562, 171 A.2d 340, 345.

We then must consider whether appellant-insurance company became, under the contract of insurance, liable for the judgment against Gammon. If a driver operates an auto with the permission of the insured person named in the policy, the driver then becomes an 'insured' under the provisions of the policy.

The policy in question provides:

'* * * (T)he unqualified word 'insured' includes the named insured * * * any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by or with the permission of a named insured. * * *'

The provision quoted is from the commonly called 'omnibus clause' of the policy. To some extent it has statutory origin. Acts 1935, ch. 162, § 177, p. 588, § 39--4309 Burns' 1965 Replacement.

For a recent detailed discussion of Omnibus Clause--Consent, see 4 A.L.R.3d 10 et seq.

It is said that this statute was enacted for the protection of the injured third party and the insured and not for the protection of the insurer. Barker v. Sumney, 185 F.Supp. 298, 301 (N.D.Ind.1960).

'The purpose of the omnibus clause has generally been recognized as being a liberalizing one. Thus, it...