State Farm Mut. Automobile Ins. Co. v. Mackechnie

• Decision Date: 19 September 1940
• Docket Number: No. 11693.,11693.
• Citation: 114 F.2d 728
• Parties: STATE FARM MUT. AUTOMOBILE INS. CO. v. MACKECHNIE.
• Court: U.S. Court of Appeals — Eighth Circuit

114 F.2d 728 (1940)

STATE FARM MUT. AUTOMOBILE INS. CO. v. MACKECHNIE.

No. 11693.

Circuit Court of Appeals, Eighth Circuit.

September 19, 1940.

COPYRIGHT MATERIAL OMITTED

F. B. Baylor and George Healey, both of Lincoln, Neb. (G. T. Tou Velle, of Lincoln, Neb., on the brief), for appellant.

P. E. Boslaugh, of Hastings, Neb., and Walter D. James, of McCook, Neb. (Charles H. Yost, of Fremont, Neb., on the brief), for appellee.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal by defendant from a judgment holding it liable to plaintiff under an indemnity insurance policy issued by defendant on account of damages suffered by plaintiff as a result of an automobile accident. It will be convenient to refer to the parties as they were designated in the lower court.

On April 19, 1936, plaintiff sustained personal injuries while riding as a passenger in a 1928 Studebaker bus near Denton, Texas. At the time, she was a member and assistant director of the Midland College Choir, an unincorporated association of students and teachers in the music department of Midland College of Fremont, Nebraska. Oscar Lyders was director of the Midland College Choir, which selected its own officers, including a president, secretary and treasurer. The Studebaker bus had a seating capacity of twenty-five passengers, and was purchased by Lyders for the specific purpose of transporting and conveying on concert tours the Midland College Choir. When the accident occurred, John Lyman was driving the bus. The college and the choir paid Lyders for the use of the bus at the rate of 20¢ per mile, and out of the amount thus paid to him, Lyders paid all expenses of operation, including compensation to Lyman at the rate of 4 cents per mile. Plaintiff, following the accident, sued Lyders and Lyman in the District Court of Dodge County, Nebraska, to recover damages for her injuries, and on April 30, 1937, recovered judgment against each of them in the sum of $6,888.35. The cause of action was based upon alleged negligence in maintenance and operation of the Studebaker bus. On appeal, the Supreme Court of Nebraska affirmed this judgment. Mackechnie v. Lyders, 134 Neb. 682, 279 N.W. 328. Plaintiff then caused execution to issue upon the judgment, which was returned unsatisfied on May 27, 1937, whereupon she commenced garnishment proceedings under the Nebraska statute against the defendants Lyders and Lyman in the District Court of Dodge County, Nebraska and against defendant here, State Farm Mutual Automobile Insurance Company. The insurance company, in the garnishment proceedings, denied indebtedness to Lyders and Lyman, and upon its answer the court remitted plaintiff to the statutory remedy of bringing action for unsatisfactory disclosure. Secs. 20-1026 to 20-1030, Comp.Stat.Neb. 1929.

Plaintiff then instituted this action against the insurance company to recover upon a policy of automobile public liability insurance issued by defendant to Midland College Choir, but which plaintiff maintained contained provisions and endorsements insuring others. She also claimed the right to maintain the action by virtue of the provisions of the statutes of Nebraska providing for garnishment in aid of execution. Sec. 20-1030, Comp.Stat.Neb. 1929. The action was tried to the court without a jury, no request having been made by either party for a jury trial, and the lower court found all of the issues in favor of plaintiff, concluding as a matter of law that: "The combined effect of the school bus endorsement attached to the policy, the omnibus clause of the policy, and the insolvency clause of the policy was to give plaintiff, a teacher riding in the Studebaker bus described in the policy, a right of action upon the policy to enforce payment of her unsatisfied judgment against Oscar Lyders, the owner of the bus, and John Lyman, the driver of the said bus." The court also held that while the assured named in the policy was Midland College Choir, the policy was a valid contract insuring Lyders personally because the officers or members of an unincorporated association making a contract in its name are personally bound by its terms and the contract is binding upon the other party who is estopped after receiving value under it to deny liability. The court also held that the omnibus clause of the policy constituted John Lyman an assured and that none of the exclusions of the policy invoked by defendant operated to bar recovery. The court entered judgment against the defendant for the full amount of plaintiff's judgment, plus costs and an attorney fee.

On this appeal, defendant contends in substance that: (1) The policy No. 4011607 lapsed and was never reinstated; (2) application No. 4025858 effected an executory contract of insurance wherein Midland College (not Midland College Choir) was the assured; (3) defendant is not liable for an injury sustained by an employee of the assured, Midland College.

In considering the issues, it will be necessary to state the facts in some detail. Under date August 26, 1935, defendant issued its combination motor vehicle policy No. 4011607 upon the 1928 Studebaker bus. The named assured in this policy was "Midland College Choir." Lyders paid the premium, which carried the policy to February 26, 1936. On February 17, 1936, in response to a notice that another premium would soon be due, Lyders wrote the defendant, advising that the Studebaker bus was in a repair shop and until it was decided what was to be done with it, he would permit the policy to lapse, but as soon as it was repaired he would pay the premium. On February 26, 1936, defendant wrote Lyders in response to his letter of February 17, as follows:

"This is in reply to your recent letter informing us that the Studebaker School Bus insured under the above numbered policy (No. 4011607-Nebraska) is in the process of being repaired. We have accordingly suspended the insurance under this policy.

"We shall be glad to place the insurance under policy No. 4011607-Nebraska in force upon receipt of the required premium and we trust that when the 1928 Studebaker Bus is operated again, we will receive a remittance for reinstatement of the liability and property damage coverages."

On April 7, 1936, Lyders delivered to Herman Engel, the agent of the defendant, at Fremont, Nebraska, his check for $28.00, and advised him at the time that the check was to pay for a reinstatement of the insurance and to fulfill the requirements of defendant's letter of February 26, 1936. Engel forwarded this check to the state agent of the defendant in Nebraska, who in turn forwarded it to defendant's home office in Bloomington, Illinois, with the following letter:

"State Farm Mutual Ins. Company "Bloomington, Illinois "Gentlemen "In Re: Policy #4011607-Neb. — "Midland College Choir, Fremont "Nebraska.

"Enclosed herewith is a check for $28.00 signed by Oscar Lyders which is in payment of premium call for like amount which was due February 26, 1936.

"We are requesting that Mr. Engel secure a new application and school bus inspection report and as soon as they papers are received, will immediately forward to your office.

"Yours truly "E. A. Tyler, Ins. Director "By (Signed V. R. Hoover)"

Defendant cashed the check on April 21, 1936. On April 20, 1936, the home office of defendant was notified by telegram that plaintiff had sustained injury. In this telegram reference was made to the policy of insurance issued to Midland College Choir. Subsequent to April 19, 1936, defendant wrote letters to Lyders referring to Policy No. 4011607, and asked him to cancel the policy voluntarily because it was an unusual risk. Defendant was notified of the commencement of the action against Lyders and Lyman in the Nebraska State court, and employed attorneys to conduct the defense and the appeal, after notice that it did not waive the right to deny liability under any policy issued to "Midland College." It did not make any reference in its notice of non-waiver to the policy issued to Midland College Choir.

Lyders delivered to Engel, on April 7, 1936, an application later given No. 4025858. On this application, Lyders wrote, before delivery, after the printed words, "Name of applicant," the words, "Midland College by Oscar Lyders."

It is to be observed that the letter of February 26, 1936, above set forth, contains a definite offer to reinstate Policy 4011607. Defendant, in this letter, states that it will "be glad to place the insurance under policy No. 4011607-Nebraska in force upon receipt of the required premium and we trust that when the 1928 Studebaker Bus is operated again, we will receive a remittance for reinstatement of the liability and property coverages." While an offer must be so definite in its terms, or require such definite terms in its acceptance, that the promises and performances of each party are reasonably certain (Restatement of Law of Contracts, Sec. 32; Pennsylvania Lumberman's Mutual Fire Ins. Co. v. Meyer, 2 Cir., 126 F. 352), we are of the view that this letter plainly offered to reinstate the policy. Defendant was not referring to insurance in general, but to "the insurance under policy No. 4011607-Nebraska in force upon receipt of the required premium." The letter expresses defendant's hope that it would receive remittance "for reinstatement of the liability and property damage coverages." It notified Lyders of the suspension of the insurance "under this policy." No other contract or policy of insurance was referred to and there was no coverage under the policy except liability and property damage. The lower court properly construed the letter as an offer to reinstate on payment of the premium. Williston, Contracts, Rev.Ed., Sec. 26; Restatement Law of Contracts, Sec. 25.

According to the terms of the offer, all that the insured was required to do to accept it, was to pay the premium. This, Lyders, the owner of the bus and...