Saint Paul Mercury Indem. Co. v. Valdosta Milling Co.

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: HUTCHESON, , and BORAH and TUTTLE, Circuit
• Citation: Saint Paul Mercury Indem. Co. v. Valdosta Milling Co., 253 F.2d 667 (5th Cir. 1958)
• Decision Date: 16 May 1958
• Docket Number: No. 16713.,16713.
• Parties: SAINT PAUL MERCURY INDEMNITY COMPANY, Appellant, v. VALDOSTA MILLING COMPANY, Appellee.

253 F.2d 667 (1958)

SAINT PAUL MERCURY INDEMNITY COMPANY, Appellant, v. VALDOSTA MILLING COMPANY, Appellee.

No. 16713.

United States Court of Appeals Fifth Circuit.

April 7, 1958.

Rehearing Denied May 16, 1958.

Francis P. Conroy, Delbridge L. Gibbs, Jacksonville, Fla., Marks, Gray, Yates & Conroy, Jacksonville, Fla., of counsel, for appellant.

Olin E. Watts, W. A. Hamilton, John F. Corrigan, Jacksonville, Fla., Jennings, Watts, Clarke & Hamilton, Jacksonville, Fla., of counsel, for appellee.

Before HUTCHESON, Chief Judge, and BORAH and TUTTLE, Circuit Judges.

HUTCHESON, Chief Judge.

This appeal from a judgment entered in favor of plaintiff on facts,¹ as to which it is stipulated and agreed that there is no dispute, and on motions for summary judgment filed by both parties, presents a single question for our decision. This question is whether the district judge was right in holding: that when the insured notified the defendant insurer that a default judgment had been entered against it, in a pending suit concerning matters covered by the policy, and requested the defendant to move to set aside the default judgment and otherwise defend the insured therein, defendant became and was obligated under the policy terms to do so; and that in failing so to do, it breached and violated the terms of the insurance policy and became and was obligated to repay plaintiff the moneys it had put out in defending the suit.

Setting out in its brief the policy provisions² on which it relies and invoking the generally recognized principle that compliance with "the notice of accident" condition is a prime requisite of suit, appellant insists that under the undisputed, indeed admitted, facts, plaintiff breached the conditions of its contract and is not entitled to recover.

Appellee, taking its stand upon the facts as the district judge stated them and on the firm ground that the defendant breached paragraph 9(b), Section II of the insuring agreement,³ points to the uncontested findings showing that plaintiff was not guilty of either negligence or laches in not earlier learning of the pendency of the suit or of the entry therein of the default judgment against it.

So pointing, it insists that the record establishes, as matter of law, defendant's breach and its consequent liability to plaintiff to repay it the expenses it had incurred in procuring the setting aside of the default judgment.

We find ourselves in complete agreement with this view. The defendant, after plaintiff had obtained a reversal of the default judgment, itself recognizing that plaintiff was not in default under the policy, undertook to and did defend the suit and thus, by its own construction of the controlling policy provisions, affirmed that plaintiff had not breached the conditions of the policy and had not released appellant from its obligation to defend the suit. Furthermore, the slightest reflection on the undisputed facts demonstrates at once, we think, the soundness of the judgment appealed from and the underlying fallacy in defendant's attack upon it. This fallacy has its seat in the unfounded assumption that upon the entry of the default judgment, the suit was no longer pending and the obligation of the insured to defend against it on plaintiff's behalf was at an end.

The rendition of the default judgment did not bring the suit to an end. It was still a pending suit, and, under the plain terms of the contract, it became the insured's duty to defend plaintiff against the claim asserted in it when and after plaintiff, without fault in not having, and therefore in not giving, earlier notice, notified defendant of the pendency and condition of the suit.

We think, in short, that the whole defense turns on a quibble as to the pendency of the suit, and that nothing in Heilig v. Continental Cas. Co., 280 Ill.App. 142, on which defendant's main reliance seems to be placed, supports it. A reading of that case, and particularly of the quotation from it in appellant's brief,⁴ plainly shows that the decision there turned on facts entirely different from those controlling here. If, however, we are mistaken in this view and the court did intend to hold that, because the notice did not reach the company until the default judgment had been entered, there was no pending suit for the insurer to defend, and, therefore, no obligation to defend by undertaking to set the judgment aside, we must decline to follow its teachings as contrary to the general controlling principle that, as long as the judgment is not final, the suit still pends, and the obligation to defend the insured as to it still exists.

The judgment was right. It is affirmed.

1 These, as stated and found by the district judge in the judgment, are:

"(a) Defendant, under its products liability insurance policy No. 1302442, agreed to pay on behalf of plaintiff all sums which plaintiff should become obligated to pay by reason of the liability imposed upon it by law for damages on account of the handling, use or condition of plaintiff's products, and agreed to defend in plaintiff's name and on its...