State Farm Mut. Auto. Ins. Co. v. Mossey

• Decision Date: 15 April 1952
• Docket Number: No. 10500.,10500.
• Citation: 195 F.2d 56
• Parties: STATE FARM MUT. AUTO. INS. CO. v. MOSSEY et al.
• Court: U.S. Court of Appeals — Seventh Circuit

195 F.2d 56 (1952)

STATE FARM MUT. AUTO. INS. CO. v. MOSSEY et al.

No. 10500.

United States Court of Appeals Seventh Circuit.

January 30, 1952.

Rehearing Denied April 15, 1952.

Louis L. Anderson, South Bend, Ind., for appellant.

Aaron H. Huguenard, William F. McInerny, South Bend, Ind., for appellees.

Before MAJOR, Chief Judge, and KERNER and DUFFY, Circuit Judges.

KERNER, Circuit Judge.

This appeal by Charles DuBois is from a judgment or decree declaring that a certain insurance policy issued by appellee to one Mossey was null and void, and that neither Mossey nor appellant DuBois is entitled to recover from appellee because of the issuance of the policy.

Appellee, an Illinois corporation, filed its complaint under the Declaratory Judgments Act, 28 U.S.C.A. § 2201, against Clifford Mossey and Charles DuBois, residents and citizens of Indiana, praying that the court declare the rights of the parties and decree that the policy in suit is null and void, and that neither Mossey nor appellant DuBois is entitled to recover from appellee the amount of the policy or any part thereof, on the ground that it was procured by fraud.

The case was tried by the court without a jury. The trial judge found that on August 18, 1948, defendant Mossey applied to appellee for a policy of automobile insurance which provided that appellee would pay on Mossey's behalf all sums up to $10,000 which Mossey should become legally obliged to pay as damages for bodily injury sustained by any person, caused by accident and arising out of the ownership or use of a certain automobile; that at the time Mossey applied for the insurance appellee's agent asked Mossey his age, and Mossey then falsely represented that he was born on March 25, 1923, and was then, August 18, 1948, 25 years of age, when in fact he was 20 years of age; that Mossey's representation as to his age was a material misrepresentation and was made to induce appellee to issue the policy; that appellee relied on Mossey's representation and believed that he had correctly represented his age, and on August 18, 1948, issued the policy as applied for by Mossey, but that it would not have accepted Mossey's application or issued the policy had it known his true age; that appellee did not learn of Mossey's true and correct age until February 20, 1950, when Mossey for the first time told appellee's agent that he was born on March 25, 1928.

On August 24, 1948, Mossey, while operating his automobile in South Bend, Indiana, collided with appellant DuBois, and DuBois sustained injuries for which he seeks damages from Mossey in excess of $10,000 in an action filed October 11, 1949, in an Indiana State Court; when Mossey was served with summons in that suit he demanded that appellee furnish him a defense and pay any judgment that might be entered against him within the limits provided for by the terms of the policy; appellee employed counsel and is now defending that action, but after it learned Mossey's true age, Mossey, on March 2, 1950, executed an agreement which provides that any action taken by appellee in defending appellant's suit against Mossey should not be construed as a waiver of appellee's rights to deny liability under the policy. Based on these findings, the court concluded that appellee had not waived its right to have the policy declared null and void, nor was it estopped from denying liability on the policy, and that Mossey's misrepresentation as to his age was a misrepresentation of fact as to the risk to be assumed by appellee, hence the policy was null and void and neither of defendants was entitled to recover from appellee.

Before an action may be entertained under the Declaratory Judgments Act, the controversy must be justiciable. A declaration of nonliability is within the ambit of justiciability, Maryland Casualty Co. v. Hubbard, D.C., 22 F.Supp. 697, 699. Because in Indiana (§ 39-3005 Burns' Ind. St.) an injured person may not join an insurer in an action against the insured, or proceed directly against the insurer before he has obtained a judgment against the insured, appellant contends that since he has not yet obtained a judgment against Mossey, no justiciable or actual controversy exists between the parties warranting relief under the Declaratory Judgments Act. Unfortunately for appellant this identical question has been decided adversely to appellant in a case where, as here, the injured person sued the insured. While that suit was pending and before it had proceeded to judgment, the insurer filed its complaint in which it sought a decree that it was not liable to defend the insured or to indemnify him if the injured person recovered. The court held that an actual controversy existed and that the complaint stated a cause of action. Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 61 S.Ct. 510, 85 L.Ed. 826.

Appellant next contends that on proper realignment of the parties there would be no diversity of citizenship and the court would lack jurisdiction. The argument is that Mossey is a necessary party to the action, and since he failed to defend the present action, and has signed an agreement with appellee that it did not waive any rights or defenses which it might have, and has accepted the return of the premium paid for the policy, Mossey's interests coincide with the interests of appellee, and thus it is claimed there was no justiciable controversy between appellee and Mossey, and he should have been realigned as a party plaintiff and the complaint should have been dismissed.

In support of his contention appellant cites, among other cases, State Farm Mutual Automobile Ins. Co. v. Hugee, 4 Cir., 115 F.2d 298, 132 A.L.R. 188; Maryland Casualty Co. v. Boyle Construction Co., 4 Cir., 123 F.2d 558; and Till v. Hartford Accident & Indemnity Co., 10 Cir., 124 F. 2d 405.

In the Hugee case the policy covered a truck of the insured while being operated for commercial purposes. An accident occurred between the insured truck and a bus, and both the insured and the insurer contended that at the time of the accident the truck was being operated by the driver of the truck for purposes purely personal to himself. In the Boyle case, again the insured and the insurer contended there was no liability to the injured person because his claim was subject to the provisions of the Workmen's Compensation Act, and in the Till case the policy insured not only the named insured but also any other person while using the automobile, provided the actual use was with the permission of the named insured, and both the insurer and the insured were mutually interested in obtaining a judgment that the driver was not operating the automobile on behalf of the insured or with her consent. It is clear that in these cases there was no controversy as to the liability of the insurance companies to the persons insured. In fact the insurance company in each case admitted it was obligated to defend any suit brought against the insured. They involved the question whether the injured person was entitled to recover against the insured, and it was clear that the interests of the insured and the insurer were the same. Hence we believe they are inapplicable for the reason that here appellee claims that regardless of whether Mossey is liable to appellant, the injured person, appellee is not obligated to defend Mossey and is not obligated to pay any judgment which may be rendered against him. In this state of the record we perceive no error in the court's refusal to align Mossey with appellee.

Appellant admits that an insurer may maintain an equitable action to rescind or cancel a contract of insurance because of false representations made by the insured to induce its...