State Automobile Mut. Ins. Co. v. York, 4441.

• Decision Date: 14 June 1939
• Docket Number: No. 4441.,4441.
• Citation: 104 F.2d 730
• Parties: STATE AUTOMOBILE MUT. INS. CO. OF COLUMBUS, OHIO, v. YORK et al.
• Court: U.S. Court of Appeals — Fourth Circuit

104 F.2d 730 (1939)

STATE AUTOMOBILE MUT. INS. CO. OF COLUMBUS, OHIO, v. YORK et al.

No. 4441.

Circuit Court of Appeals, Fourth Circuit.

June 14, 1939.

COPYRIGHT MATERIAL OMITTED

Murray Allen, of Raleigh, N. C., for appellant.

Kenneth C. Royall and Charles U. Harris, both of Raleigh, N. C., for appellee Mabel A. York.

J. C. Little, of Raleigh, N. C. (P. H. Wilson, of Raleigh, N. C., on the brief), for appellee C. V. York.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal in an action brought to recover on a liability insurance policy. Prior to instituting this action, the plaintiff, Mabel A. York, had recovered judgment against her husband, C. V. York, hereafter referred to as the insured, for the sum of $12,000 as damages on account of injuries sustained in an automobile accident. This judgment had been affirmed on appeal by the Supreme Court of North Carolina. York v. York, 212 N.C. 695, 194 S.E. 486. Having failed to collect the judgment after issuance of execution thereon, plaintiff instituted this action against insured and the State Automobile Insurance Company of Columbus, Ohio, to recover under the $10,000 policy of liability insurance which the company had issued to insured. Insured filed an answer in which he also asked recovery against the company, on the ground that in bad faith it had refused to compromise and settle the judgment obtained against him by his wife. The company denied all liability, contending that insured, by fraud and collusion with plaintiff and by failure to cooperate with the company in defense of the action instituted against him, had breached the condition of the policy as to misrepresentation and fraud and also the covenant requiring cooperation in defense of suits and claims.

Issues were submitted to the jury in accordance with the North Carolina practice; and, in response thereto, the jury found that the insured had not failed to cooperate with the company, and had not been guilty of fraud or collusion with plaintiff. They found also that the failure of the company to compromise and settle the judgment obtained by plaintiff was a breach of good faith entitling insured to recover damages in the sum of $2,300. Judgment was accordingly rendered against the company in favor of plaintiff for the full amount of the policy, $10,000 and interest, and in favor of insured for $2,300 damages, with provision that $2,000 of the latter amount be applied on the judgment which plaintiff had obtained against insured. From this judgment, the company has appealed and four questions are presented by the appeal for our consideration, viz.: (1) whether verdict should have been directed for the company on plaintiff's claim under the policy; (2) whether verdict should have been directed for the company on insured's claim for damages; (3) whether there was error in excluding the testimony of the witness Anderson as to why insured was not called upon to testify in the prior action; and (4) whether the court erred in his charge to the jury in not sufficiently stating the company's contentions.

On the first question, the contention of the company was that the evidence showed collusion, fraud and lack of co-operation on the part of the insured so conclusively that, notwithstanding that the burden rested upon the company on those issues, a verdict should have been directed in its favor. There was evidence on the part of the company showing or tending to show that insured made inconsistent written statements about the accident, that he discussed the accident with his wife and family, that he made efforts to settle his wife's claim with the insurance adjuster, that he became angry when he was inferentially charged with collusion, that he refused to sign pleadings without consulting counsel, that he did not make suggestions to counsel during the trial of the case and that he was pleased with the verdict rendered against him. As against this, there was evidence on the part of insured that he furnished to the company's representatives all the information that he had concerning the accident, that he made a written statement the day following the accident and a fuller statement some months later, that he signed and verified the pleadings prepared by the company's lawyer because he thought it his duty to cooperate in the defense although, as he advised the lawyer, some statements therein contained were not entirely accurate, that he at no time refused to give counsel for the company any information requested, that his efforts to settle the case were made at the request of the company's adjuster, that he attended the trial and was ready to testify but did not do so because not called as a witness, that he employed counsel because advised to do so by counsel for the company, that his anger at being charged with collusion arose out of natural indignation and not out of any desire not to cooperate, and that his pleasure at the verdict rendered in the case was but the natural feeling of a man whose wife had obtained a recovery which another would be required to pay and did not show or tend to show any fraud, collusion or failure to cooperate on his part.

In the absence of the evidence, to which we shall next refer, as to changes in statements made by insured and his wife and daughter as to the cause of the accident, there is little, if anything, in the testimony relied upon by the company which has any tendency to establish collusion, fraud or lack of cooperation. Taken in connection with this evidence, however, we think it was sufficient to take the case to the jury, but not sufficient to require the direction of a verdict. The evidence in the prior case showed that the tires of insured's automobile were worn smooth and that it skidded and turned over as the result of running into a sudden shower of rain which had made the pavement slick. The negligence relied on was driving with smooth tires upon a wet pavement at an excessive rate of speed. Both plaintiff and her daughter testified that insured was driving at a speed of between 55 and 60 miles an hour and that he did not slow down when approaching the wet pavement. In a statement, given about a month after the accident to a representative of the company, the daughter stated that the accident was unavoidable and said nothing about the insured not slowing down. Plaintiff gave a statement to the company's representative about two months after the accident in which she stated that the speed was not over 45 miles an hour that she could not say whether insured had reduced his speed before reaching the wet pavement or not and that she considered the accident unavoidable. The insured on the day following the accident gave a statement to the company's representative to the effect that he was driving at a speed of not over 45 miles an hour, that he slowed down to about 30 miles when he saw he was coming into the shower and that he regarded the accident as unavoidable. Later he gave a statement to the company's attorney to the effect that, before reaching the shower, he was traveling about 55 to 60 miles an hour, and that, on seeing the shower, he removed his foot from the accelerator. The discrepancy between this and his prior statement was explained by saying that in the later statement he calculated the speed on the basis of the distance which he had travelled before the accident and the time consumed in doing so.

The discrepancy in the statements made by insured himself was clearly not sufficient to establish lack of cooperation so conclusively as to justify direction of verdict for the company. Rockmiss v. New Jersey Mf'rs Fire Ins. Co., 112 N.J.L. 136, 169, A. 663; Conroy v. Commercial Casualty Ins. Co., 292 Pa. 219, 140 A. 905. It is well settled that, to relieve the insurer of liability on the ground of lack of cooperation, discrepancies in statements by the insured must be made in bad faith and must be material in nature and prejudicial in effect. Medico v. Employers' Liability Ins. Corp., 132 Me. 422, 172 A. 1; Ocean Accident & Guarantee Corp. v. Lucas, 6 Cir., 74 F.2d 115, 98 A.L.R. 1461.

The discrepancy between the statements made by the insured, however, when taken in connection with the discrepancy between the testimony and prior statements of his wife and daughter and the relationship and interest of the parties, was sufficient to carry the case to the jury on the issues of collusion and lack of cooperation. But we do not think that it established collusion or lack of cooperation so conclusively as to warrant direction of verdict for the company in the face of testimony of insured directly to the contrary. Employers' Liability Assur. Corp. v. Bodron, 5 Cir., 65 F.2d 539. The speed at which the automobile was traveling was, of course, a mere matter of opinion. Whether there was a slowing down immediately preceding the accident, was a matter likely to be confused in the excitement attending the accident. It was natural that the family should talk the matter over among themselves; and it is entirely possible that the subsequent statements as to speed and slowing down were arrived at as the truth of the matter after full consideration and reflection without any suggestion from the insured or any...