Standard Acc. Ins. Co. of Detroit, Mich. v. Winget

• Decision Date: 15 May 1952
• Docket Number: No. 13047.,13047.
• Citation: 197 F.2d 97
• Parties: STANDARD ACC. INS. CO. OF DETROIT, MICH. v. WINGET et al. WINGET v. STANDARD ACC. INS. CO. OF DETROIT, MICH.
• Court: U.S. Court of Appeals — Ninth Circuit

197 F.2d 97 (1952)

STANDARD ACC. INS. CO. OF DETROIT, MICH. v. WINGET et al. WINGET v. STANDARD ACC. INS. CO. OF DETROIT, MICH.

No. 13047.

United States Court of Appeals, Ninth Circuit.

May 15, 1952.

COPYRIGHT MATERIAL OMITTED

Fulcher & Wynn, Los Angeles, Cal., for appellant, Standard Acc. Ins. Co.

Neil D. Heily, Oxnard, Cal., for appellant, Vivian Winget.

Before MATHEWS and ORR, Circuit Judges, and YANKWICH, District Judge.

YANKWICH, District Judge.

On January 26, 1949, near Oxnard, Ventura County, California, an automobile driven by Billy Ray Towry was involved in an accident. Two persons riding in the automobile, Vivian Winget and Thomas B. Mack, sued Towry in separate actions. In what follows, we shall refer to the parties by their last names.

The two cases were consolidated for trial. On March 31, 1950, judgment was entered in favor of Winget in the sum of $32,000.00 with interest at the rate of 7 per cent from the 30th day of March, 1950, and in favor of Mack in the sum of $15,000. 00 with interest at the same rate from the same date. Both plaintiffs recovered costs.

On September 23, 1950, the present action was instituted by Winget in the same state court. The defendants were Standard Accident Insurance Company, — to be referred to as Standard, — and Mack. The Complaint alleged that neither judgment had been paid and that Towry, at the time of the accident, carried a policy with Standard which obligated it to pay the sum of $20,000.00 towards the satisfaction of the judgment. Stating that Standard refused to pay, the complaint asked that Standard deposit the principal sum of $20, 000.00 in court, together with interest, that out of this amount, the Court award the plaintiff 68.0851 per cent of the principal sum or a total of $13,617.02, and that Standard be enjoined from settling with Mack.

The cause was removed by Standard to the United States District Court for the Southern District of California on the ground of diversity of citizenship. 28 U.S. C. § 1441.

At the trial, the plaintiff was allowed to amend the complaint so as to include a demand for additional interest on the total sum of her judgment against Towry, $32,097.80. During the course of the trial, Mack settled his claim with Standard for the sum of $6,000.00. Winget's case went to the jury, which rendered a verdict in her favor in the sum of $10,000.00 on which judgment was entered.

Both Winget and Standard have appealed.

Other facts will appear further on in the discussion.

I

The Standard Appeal

We consider the Standard appeal first.

Preliminarily, it should be stated that, as the Standard policy was executed in California, it must be interpreted in accordance with California law. Ostroff v. New York Life Ins. Co., 1939, 9 Cir., 104 F.2d 986. As federal jurisdiction stems merely from diversity, 28 U.S.C. § 1332, we must apply state law. 28 U.S.C. § 1652; see, Guaranty Trust Co. v. York, 1945, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079; Angel v. Bullington, 1947, 330 U.S. 183, 192, 67 S.Ct. 657, 91 L.Ed. 832; Cohen v. Beneficial Indus. Loan Corp., 1949, 337 U.S. 541, 555-557, 69 S.Ct. 1221, 93 L.Ed. 1528.

Standard in its answer charged Towry with failure to cooperate in violation of the cooperation clause of the policy which reads:

"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."

At the trial several acts of alleged noncooperation consisting of statements given to others than Standard at the time of the accident and at the hospital were urged. At the oral argument before us, however, those were abandoned. The only lack of cooperation now charged is the fact that in a deposition taken on October 28, 1949, prior to the trial of the case in the State Court, the defendant in answer to a question put to him not by the attorney for Standard, but by opposing counsel, stated that at the time of the accident he had not been drinking. On March 16, 1950, after consultation with his own attorney he corrected the deposition, in order, as he stated to the deposition notary, "to make it appear truthful", and signed it.

In giving to his own counsel, employed by his father to assist in the trial of the case, the reasons for his denial, he stated that he had not had an opportunity to talk with counsel for the insurance company prior to the giving of the deposition, that he met his attorney, went into the office of the attorney where the deposition was taken, and they immediately started asking him questions. When they came to the question of intoxicating liquors, he was not sure in his own mind whether beer was in the category of intoxicating liquor, that he wanted to protect the insurance company as much as he could and just said, "No, he hadn't had any intoxicating liquor to drink." The attorney then advised him that it was of utmost importance to correct his deposition to make it conform to the truth.

This, in substance, was the version of the conversations given at the trial by Towry and his counsel, over Standard's objections. The trial in the state court began on March 28, 1950.

It does not appear that the deposition was used at the trial for any purpose and the question of intoxication did not enter into the determination of the cases in the state court. At the trial, Winget's attorney sought to eliminate a cause of action charging intoxication. On objection by the counsel for the defendant, the court allowed the cause of action to remain. However, there was no evidence offered that Towry was, in fact, under the influence of liquor. The evidence in the record in the present case shows that over a period of several hours, Towry consumed five or six bottles of beer.

The trial court in the case before us allowed Towry and others to explain the circumstances under which he made the change in his testimony over Standard's objection. These have already been given in summary. Standard urges error in these rulings, as also in the denial of a motion for a directed verdict based upon the claim that lack of cooperation appeared affirmatively. Rule 50(a), Rules of Civil Procedure, 28 U.S.C. A motion for a directed verdict may only be granted when a verdict the other way would have to be set aside by the court. Gunning v. Cooley, 1930, 281 U.S. 90, 94-95, 50 S.Ct. 231, 74 L.Ed. 720; Galloway v. United States, 1943, 319 U.S. 372, 395-396, 63 S.Ct. 1077, 87 L.Ed. 1458.¹

The same conditions must exist to warrant the granting of a judgment notwithstanding the verdict even where the court reserves ruling on the motion for a directed verdict. Boulter v. Commercial Standard Ins. Co., 1949, 9 Cir., 175 F.2d 763, 768. So, from whatever standpoint the matter be considered, the problem resolves itself into the question, "Was the misstatement in the depositon, corrected before the trial, a failure to cooperate?", which, as a matter of law, entitled Standard to insist on the exclusion of any explanation of the action and made it imperative on the court to direct a verdict or, declining to do so, to grant judgment notwithstanding the verdict when the jury returned a verdict for the plaintiff.

The trial court took the view that the question was one of fact for the jury. Under appropriate instructions, which were not objected to, Rule 51, Federal Rules of Civil Procedure, it placed the matter before them. The following two excerpts from the charge are characteristic:

"The insured must tell his insurer the complete truth concerning the accident and he must stick to this truthful version throughout the proceedings. He must not embarrass or cripple his insurer in its defense of a civil suit against him by switching from one version to another. Nothing is more dangerous to an insurer than an insured who deliberately falsifies the facts."

"If you find that the said Billy Ray Towry did fail to cooperate with the defendant as such term has been defined to you, in these instructions, you may not speculate as to what might have been the final outcome of the actions against him in the event he had not been guilty of such failure."

Later the court made a finding reciting that the issue had been submitted to the jury who had determined that Towry had cooperated.

As we read the California cases, concealment and misrepresentation which violate the cooperation clause must be (a) willful, and (b) of a character which either injures the insured, or are such that the court may infer injury either from the nature of the misrepresentation or concealment, or from the duration of the period during which an admittedly false statement of facts was kept before the insurer. Purefoy v. Pacific Automobile Indemnity Exchange, 1935, 5 Cal.2d 81, 53 P.2d 155; Valladao v. Fireman's Fund Indemnity Co., 1939, 13 Cal.2d 322, 89 P.2d 643; Margellini v. Pacific Automobile Ins. Co., 1939, 33 Cal.App.2d 93, 91 P.2d 136; Wright v. Farmers Automobile Inter-Ins. Exchange, 1940, 39 Cal.App.2d 70, 102 P.2d 352; Porter v. Employer's Liability Assurance Co., Ltd., 1940, 40 Cal.App.2d 502, 104 P.2d 1087; Home Indemnity Co. of New York v. Standard Acc. & Ins. Co. of Detroit, 1948, 9 Cir., 167 F.2d 919.

Earlier California cases made a showing of injury from non-cooperation a condition precedent to a successful defense on that ground. Panhans v. Associated Indemnity Corporation, 1935, 8 Cal.App.2d 532, 47 P.2d 791; Wormington v. Associated Indemnity Corporation, 1936, 13 Cal. App.2d 321, 324-325, 56 P.2d 1254. Later California cases, especially Purefoy v. Pacific Automobile Indemnity Exchange, 1935, 5 Cal.2d 81, 53 P.2d 155, and Valladao v. Fireman's Fund Indemnity Co., 1939, 13 Cal.2d 322, 89 P.2d 643, indicate that the question is still open. But it is to be noted that in every one of the cases cited, including the decision of this court, in which non-cooperation because of falsification was...