Odom v. Insurance Company of State of Penn.

• Decision Date: 27 May 1970
• Docket Number: No. B--1637,B--1637
• Citation: 455 S.W.2d 195
• Parties: John C. ODOM, Administrator of the Estate of Larry Dean Koestler, Deceased, et al., Petitioner, v. The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Respondent.
• Court: Texas Supreme Court

Page 195

455 S.W.2d 195

John C. ODOM, Administrator of the Estate of Larry Dean Koestler, Deceased, et al., Petitioner, v. The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Respondent.

No. B--1637.

Supreme Court of Texas.

May 27, 1970.

Rehearing Denied July 8, 1970.

Bryan, Wilson, Olson & Stem, William M. Harman, Waco, Tom Carlile, and Lee Curtis, Killeen, for petitioner.

Strasburger, Price, Kelton, Martin & Unis, John H. Marks, Jr., Dallas, for respondent.

SMITH, Justice.

This declaratory judgment suit was filed by the Insurance Company of the State of Pennsylvania to cancel a liability insurance policy issued to Larry Dean Koestler. Cancellation was sought on the ground that the insured had made material false statements in his application for insurance. A declaratory judgment was also sought declaring that it had no obligation to defend actions brought against the administrator of Larry Dean Koestler, deceased, by William L. Hardy, for damages arising out of an automobile collision allegedly caused by the neglience of Larry Dean Koestler. A cross-action was filed by the petitioners, seeking a declaratory judgment that the insurance policy was valid and that the Respondent was, therefore, obliged to defend Larry Dean Koestler's estate from any suit by William L. Hardy, and to pay any resulting judgment in favor of Hardy against Koestler's estate.

Respondent alleged in its petition for declaratory judgment, that on or about March 26, 1965, it issued ¹ its policy of liability insurance to Larry Dean Koestler and that the policy provided that 'issuance was conditional upon the truth of certain answers given by Koestler to questions propounded to him, such answers being warranted by him to be true. The policy further provided that should such statement be false, then the * * * policy would be of no force and effect.' It was further alleged that the application for insurance contained false answers to questions inquiring whether Koestler had been convicted of a moving violation of or had been involved in an accident within the past thirty-six months. The answers ² given were in the negative when '* * * Koestler had in fact been involved in at least two motor vehicle accidents in the thirty-six months immediately preceding March 26, 1965, and had been convicted of at least five moving traffic violations.'

The declarations in the application, which were attached to and made a part of the policy, also contained a warranty, as follows:

'I hereby warrant the truth of the above statements and I declare that I have not withheld any information whatever which might tend in any way to increase the risk of the Company or influence the acceptance of this application. Additionally, I warrant that my automobile will be operated only by persons holding valid drivers' licenses. I understand that any false statement by me will constitute a breach of warranty, and cause the policy to be void as provided by the conditions of the policy. I agree that this application shall be the basis of the policy between me and the Company.'

Respondent further alleged that the policy was void from its inception and that it was under no obligation under the policy 'either to defend the above said action brought against the said John C. Odom, or otherwise.'

Defendants pleaded that George Tucker, the Respondent's agent 'was fully informed concerning the driving record of * * * Koestler and knew the facts concerning the traffic violations of which Koestler was guilty and concerning the motor vehicle collision in which Koestler had been involved. And these defendants say that such knowledge on the part of the plaintiff's agent, George Tucker, was and is imputed to the plaintiff, and therefore the plaintiff is estopped to assert as a defense to any liability on the part of plaintiff under said policy any incorrect statement concerning Koestler's driving record which may have been contained in said application for insurance.' Defendants also pleaded a general denial and demanded strict proof of the allegations contained in plaintiff's pleadings.

Although the Respondent alleged that there were bona fide disputes and controversies between the parties and sought a declaration of its rights, it, nevertheless, on October 19, 1966, moved for summary judgment on the grounds that: (1) there was no genuine issue as to any material fact, and (2) that as a matter of law the policy issued to Koestler was void 'due to the false answers given to questions propounded to him in the declarations which constituted a part of the policy.'

On November 1, 1968, the motion for summary judgment was sustained and judgment entered that 'the policy of insurance * * *, be, and it hereby is in all things declared null, void and of no force and effect from its inception date of March 26, 1965.' The Court of Civil Appeals affirmed. 441 S.W.2d 584. We affirm.

The summary judgment proof consisted of the Insurance Policy, which contained a copy of the Application for Insurance; a certified copy of Koestler's driving record; and the depositions of Tucker and Mrs. Doris Mashburn.

The pertinent provisions of the policy are as follows:

'THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA PHILADELPHIA, PA.

'Agrees with the insured, named in the declarations made a part hereof, in consideration of the payment of the premisum and in reliance upon the statements in the declarations and subject to all of the terms of this policy: * * *

'By acceptance of this policy, the insured named in Item 1 of the Declarations agrees that the statements in the Declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance.

'Changes: Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy or estop the company from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy.'

It is undisputed that in the thirty-six months immediately preceding the date of the application for insurance the Insured had been involved in at least two motor vehicle accidents, had been convicted of at least five moving traffic violations, and had had another liability insurance policy cancelled.

Tucker's deposition shows that he had previously accepted an application from Koestler for insurance with the Pioneer Insurance Company; Tucker knew that the policy, which was issued by Pioneer, had been cancelled because he himself had received a copy of the cancellation notice. Further, that he knew that Koestler had been involved in an accident in connection with a D.W.I. incident. Tucker testified that he himself had typed in the answers to the questions in the application for insurance, and then Mrs. Koestler had signed it for her husband. Tucker could not recall whether he had propounded the question on the application to Mrs. Koestler, nor whether or not she had read the application as he had completed it before she signed it. When asked if he did not see fit to make further inquiries before writing the policy through the Insurance Company, he answered that it was his understanding, after talking with Mr. Loreno, a special agent of the Insurance Company, that:

'* * * until such time that Mr. Koestler was found guilty of this charge that was entered against him in the Motor Vehicle Records, that he was not guilty of the offense and so forth, and that the answer to it was 'No' and forget about it and go on and write it and that's why I wrote the insurance.'

Tucker's deposition further shows that the particular form of the insurance policy in suit was different from 'what's used by the approved standard Texas forms' in that it appeared to be 'more of an application for insurance and a policy all combined into one sort of as a shortcut where you can use the application as the face sheet of the policy.' The policy, in fact, does reflect that the...