Round Rock Independent Sch. Dist. v. First National Ins. Co.

• Decision Date: 18 December 1963
• Docket Number: No. 20163.,20163.
• Citation: 324 F.2d 280
• Parties: BOUND ROCK INDEPENDENT SCHOOL DISTRICT, Appellant, v. The FIRST NATIONAL INSURANCE COMPANY OF AMERICA, American Empire Insurance Company of South Dakota, and the Assurance Company of America, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

324 F.2d 280 (1963)

BOUND ROCK INDEPENDENT SCHOOL DISTRICT, Appellant, v. The FIRST NATIONAL INSURANCE COMPANY OF AMERICA, American Empire Insurance Company of South Dakota, and the Assurance Company of America, Appellees.

No. 20163.

United States Court of Appeals Fifth Circuit.

November 1, 1963.

Rehearing Denied December 18, 1963.

Charles F. Herring, Austin, Tex., David R. Sapp, Fox & Fondren, Taylor, Tex., Herring & Werkenthin, Austin, Tex., for appellant.

Jack Sparks, Brown, Sparks & Erwin, Austin, Tex., for appellee First Nat. Ins. Co. of America.

Coleman Gay, Gay & Meyers, Austin, Tex., for appellees American Empire Ins. Co. of South Dakota and The Assurance Co. of America.

Before HUTCHESON, RIVES and GEWIN, Circuit Judges.

RIVES, Circuit Judge.

This action is by Round Rock Independent School District against three different insurance companies. The policies sued on insured Round Rock against loss by fire and other hazards, including explosion. Round Rock claimed that two of its school buildings were damaged as a result of blasting operations in the construction of a nearby highway. A blasting log introduced by the insurance companies showed 139 explosions for the period commencing January 12, 1959 and running through July 31, 1959. The school superintendent testified that the blasting "continued through the summer and into the earlier part of the school year for the '59-'60 year," which began in September 1959.

The first notice to the insurance companies was given by letters dated November 12, 1959, each reading:

"We wish to make application for explosion damages on two of our buildings listed with you as Round Rock Grammar School Building, and Round Rock High School Building.

"Considerable damage has been caused to these buildings by explosions or blastings by Ruby Construction Co. under contract to Texas Highway Department, Austin, Texas.

"Please have an adjuster visit us at your earliest convenience."

Each of the insurers conducted an investigation under a non-waiver agreement signed by Round Rock, and thereafter denied liability under its policy.

The insurance companies contended that the school buildings had not been damaged by the blasting, and further that Round Rock had failed to comply with the provisions in each of the policies requiring the insured to "give immediate notice to this Company of any loss" and "within 91 days after the loss, unless such time is extended in writing, the insured shall render to this Company a proof of loss signed and sworn to by the insured." The case was tried to a jury in the district court and submitted upon special issues. The jury found that one of the school buildings had been damaged by blasting in 1959 in the amount of $40,000.00, and the other in the amount of $16,000.00. In response to special issue No. 5, the jury found that Round Rock gave the insurance companies "immediate notice"¹ of the loss to its school buildings from blasting. In response to other special issues, the jury found that each insurance company waived the filing of a formal proof of loss.

After verdict and on motion of the insurance companies, the district court entered judgment for the defendants notwithstanding the verdict upon a finding that, "as a matter of law, the plaintiff herein failed to give the defendants and each of them notice of loss within a reasonable time as required by the policies of insurance sued on and therefore finds that as a matter of law the defendants and each of them are entitled to judgment herein."

The issues presented on this appeal are:

1. Was there substantial evidence to support the jury's finding that Round Rock gave the insurance companies immediate notice of the loss to its school buildings from blasting?

2. If not, then were the provisions requiring the insured to "give immediate notice to this Company of any loss" void as being in violation of the following part of Article 5546, Vernon's Annotated Texas Civil Statutes: "No stipulation in a contract requiring notice to be given of a claim for damages as a condition precedent to the right to sue thereon shall ever be valid unless such stipulation is reasonable. Any such stipulation fixing the time within which such notice shall be given at a less period than ninety days shall be void * * *"?

3. Was there substantial evidence to support the jury's findings as to each insurance company that it waived the filing of a formal proof of loss?

1 and 2. The rule by which the court is governed in ruling on a motion for judgment n. o. v. was well stated in United States v. Bryan, 5 Cir. 1959, 265 F.2d 698, 699:

"On a motion for directed verdict, the evidence must be viewed in the light most favorable to the party opposing the motion, giving him the benefit of every favorable inference which may be fairly drawn. Atlantic Greyhound Corp. v. Crowder, 5 Cir., 177 F.2d 633. Whenever the evidence is such that fair-minded men might draw differing inferences therefrom and might reasonably disagree as to what the verdict should be, the motion must be denied.

American Fidelity and Cas. Co. v. Drexler, 5 Cir., 220 F.2d 930."

With that rule in mind, we proceed to state the evidence in its light most favorable to Round Rock. The blasting on the highway began in January 1959 and continued throughout the summer and into the early fall. According to the expert testimony, "when the concussion occurs, that is when the crack appears," though "there is delayed cracking as an after-effect; the secondary cracks might occur weeks after the initial cracking has been done. But this particular type of blasting crack, it occurs simultaneously with the blasting, whenever that was. * * * The secondary cracks might appear weeks later, or perhaps months later." Under date of February 9, 1959, the school superintendent wrote a letter to the highway contractor in which he stated: "We feel that your attention should be called to the fact that the extra heavy blasting is causing damage to our school buildings. It would be appreciated if we could have information as to responsibility in case we sustain too great injury. Yours very truly, Noel Grisham, Superintendent, Round Rock Independent School District."

The school superintendent admitted that by that date, February 9, 1959, he observed "slight damage," but explained the letter as follows: "We were more anxious to be sure that we did not find ourselves negligent in caring for the Round Rock School properties, and to be precautious. It was a matter of being precautions more than anything."

The school superintendent admitted that as early as February 18, 1959 he had written a letter about the explosion damage to Attorney Tom Reavley. That letter is not in evidence, but Mr. Reavley's reply is dated February 18, 1959, and reads as follows:

"I have your letter about the damage to two of the school buildings caused by blasting in the construction on the nearby highway.

"Their liability would depend upon whether or not they were negligent in using their dynamite in the way that they did under the circumstances. I certainly think that every reasonable attempt should be made to get reimbursement for the school district.

"You will need to get all the information that is available including your exact damages, any damage to adjacent Round Rock buildings, either at the same time or at an earlier time, and where the contractors were and the manner in which they set these charges off — if this information can be obtained (possibly from some people working on the job).

"Let me know if I can help you.\'

That letter also the school superintendent explained "as a precautionary measure."

The school superintendent further admitted that Attorney Reavley's letter was discussed at the school board meeting of March 12, 1959, and his testimony continued:

"Q. So both the school board and you had knowledge of this damage at least by the March 12, 1959, school board meeting?

"A. Yes, but we had no intention of making claim on the minor hairline cracking or the small cracking we saw.

"Q. You didn\'t see fit at that time to notify the insurance companies of the damage?

"A. No, we didn\'t intend at that time to make a claim on small damage.

"Q. But it was sufficiently important for you to write both the contractor and the attorney for advice?

"A. As a precautionary measure in case we did sustain a damage beyond the minor stage.

"Q. Now, in May of 1959 you were aware, were you not, of damage to your office caused by a crack and by plaster coming out of the crack?

"A. Yes.

"Q. You knew of that at that time?

"A. Yes.

"Q. Did you think that was also a minor damage?

"A. We were willing to sustain that damage without making claim against the insurance company.

"Q. Well, you did not make claim against the insurance companies until your November 12, 1959, letter to them.

"A. Yes. This was the damage that we had not perceived any time prior to the fall."

The President of the School Board testified that a number of inspections or examinations of the damages to the buildings were made in and prior to May 1959, that he was away during the summer, and that when he returned in the fall he found the damages much more extensive.

The jury's findings on special issues 11-A and 11-B are as follows:

"SPECIAL ISSUE NO. 11-A.

"On what date, if any, do you find from a preponderance of the evidence that the Board of Trustees of Round Rock Independent School District concluded that blasting was causing damage to its high school and elementary school buildings?

"Answer by stating the date you so find, if any.

"Answer: September 10, 1959

"SPECIAL ISSUE NO. 11-B.

"On what date, if any, do you find from a preponderance of the evidence that the Board of Trustees of Round Rock Independent School District by the use of reasonable diligence should have concluded that blasting was causing damage to its high school and elementary school buildings?

"Answer by stating the date you so find, if any.

"Answer: May 14, 1959."

Round...