U.S. Fidelity & Guar. Co. v. Miller

• Decision Date: 20 January 1931
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. MILLER.
• Court: Kentucky Court of Appeals

34 S.W.2d 938

237 Ky. 43

UNITED STATES FIDELITY & GUARANTY CO. v. MILLER.

Court of Appeals of Kentucky

January 20, 1931

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Second Division.

Action by Mrs. Ollie Miller against the United States Fidelity &amp Guaranty Company. Judgment for plaintiff, and defendant appeals.

Affirmed.

Hite H Huffaker and John R. Moreman, both of Louisville, for appellant.

Lukins & Jones, of Louisville, for appellee.

WILLIS J.

In its final analysis, the important issue involved in this case is the right of an indemnity company to revoke the waiver of a forfeiture of the indemnity because of a failure of the insured to conform to a condition contained in the contract. An abridged statement of the facts will disclose how the question arose.

Dr. E. H. Miller, of Vine Grove, Ky. owned an automobile which was maintained for the use of his family. The United States Fidelity & Guaranty Company issued to him a liability insurance contract with omnibus coverage "to any person legally operating the automobile." The contract contained a condition requiring "immediate written notice of any accident with the fullest information obtainable at the time." During the life of the contract, and while driving the automobile, Mrs. Miller met with an accident which resulted in serious injury to a child named Julia Poteet. No written notice of the accident was given to the guaranty company. Almost a year after the accident occurred, the Poteet child instituted an action against Mrs. Miller to recover damages for the personal injuries sustained in the accident. The summons in that case was served November 2, 1927, and delivered immediately to the agents of the guaranty company. The latter accepted the summons, and without reservation took charge of the defense of the action. It continued in exclusive control of the defense from early in November, 1927, until February 18, 1928, when its attorney addressed a letter to Mrs. Miller advising her that it disclaimed liability under the contract, and would no longer be responsible for the defense of the action. It was explained in the letter that the action was taken because of the failure to give notice of the accident as required by the condition contained in the contract of indemnity.

Mrs. Miller then employed competent counsel, and conducted the defense of the case at her own expense. A trial resulted in a judgment against Mrs. Miller in favor of the Poteet child for $1,000 and costs, amounting to $35. The present action was then instituted by Mrs. Miller upon the indemnity contract to compel the guaranty company to pay the judgment, together with a reasonable sum to compensate her for counsel fees incurred in the Poteet case. The circuit court directed the jury to return a verdict for Mrs. Miller for the amount of the judgment in the Poteet case and for such further sum as the jury might find from the evidence would represent the reasonable value of the services of her attorneys in defending the action for damages instituted by Julia Poteet. The jury returned a verdict accordingly, and the guaranty company has prosecuted an appeal, insisting that the failure to give notice of the accident as required by the policy entitled it to a peremptory instruction, and that the pleadings were inadequate to present the issue of waiver by the company of the condition of the policy.

A condition in an indemnity contract requiring the insured to give immediate written notice of any serious accident is reasonable and valid, and unreasonable failure to observe it constitutes a good ground for the forfeiture of the indemnity. Jefferson Realty Co. v. Employers' Liability Assur. Corp., 149 Ky. 741, 149 S.W. 1011, Southern Surety Co. of New York v. Heyburn, 234 Ky. 739, 29 S.W.2d 6. But the condition is for the benefit of the insurance company, and it is well settled that such conditions may be waived by the party for whose benefit they are made. Central Life Insurance Company v. Roberts, 165 Ky. 296, 176 S.W. 1139; Knickerbocker Ins. Company v. Norton, 96 U.S. 234, 24 L.Ed. 689; Grigsby v. Russell, 222 U.S. 149, 32 S.Ct. 58, 56 L.Ed. 133, 36 L.R.A. (N. S.) 642, Ann.Cas. 1913B, 863; Thompson v. Insurance Co., 104 U.S. 252, 26 L.Ed. 765; Hartford Life & Annuity Ins. Co. v. Unsell, 144 U.S. 439, 12 S.Ct. 671, 36 L.Ed. 496; New York Life Insurance Company v. Eggleston, 96 U.S. 572, 24 L.Ed. 841; Lechler v. Montana Life Ins. Co., 48 N.D. 644, 186 N.W. 271, 23 A.L.R. 1193; N.E. Mutual Life Insurance Company v. Springgate, 129 Ky. 627, 112 S.W. 681, 113 S.W. 824, 19 L.R.A. (N. S.) 227; U. C. Life Insurance Company v. Spinks, 119 Ky. 261, 83 S.W. 615, 84 S.W. 1160, 26 Ky. Law Rep. 1205, 69 L.R.A. 264, 7 Ann.Cas. 913. The waiver of a forfeiture for breach of such a condition may result from any words or conduct of the insurer, with knowledge of the facts which furnish the grounds of forfeiture, that show a recognition of the continued existence of the insurance. St. Paul F. & M. Ins. Co. v. Ruddy (C.C.A.) 299 F. 189, 195; Mutual Protecture League v. Walker, 163 Ky. 347, 173 S.W. 802; Citizens' N. Life Insurance Company v. Egner's Ex'r, 167 Ky. 476, 180 S.W. 778.

Forfeitures are not favored by the law, and the courts manifest a readiness to accept as sufficient to accomplish the purpose any circumstance that indicates an election or intent to waive a forfeiture. Knickerbocker Ins. Co. v. Norton, 96 U.S. 241, 24 L.Ed. 689. There can be no doubt that the acceptance of the summons in the Poteet case, and the assumption of responsibility for the defense of that action, was a recognition of the continued existence of the insurance, and a waiver of the right to forfeit the indemnity contract for failure of the insured to give notice of the accident. The action of the guaranty company in that respect was taken at a time when it had complete knowledge of the failure of the insured to give notice of the accident. Nevertheless, it elected to recognize the continuing validity of the insurance, and took charge of the litigation.

Waiver is the intentional relinquishment of a known right, or such conduct as warrants an inference of such surrender, and it is not essential to its application that prejudice result to the party in whose favor the waiver operates. Sheldon v. Horton, 43 N.Y. 93, 3 Am.Rep. 669; Morgan v. Home Ins. Co., 216 Ky. 589, 288 S.W. 321; Currie v. Casualty Co., 147 Iowa 281, 126 N.W. 164, 140 Am.St.Rep. 300; Central Life Ins. Co. v. Roberts, 165 Ky. 296, 176 S.W. 1139; Roberts v. American National Assurance Co. (Mo. App.) 220 S.W. 996; Schuetz v. International Harvester Co., 167 Iowa 634, 149 N.W. 855; Hemmings v. Home Mutual Ins. Co., 199 Iowa 1311, 203 N.W. 818; Trippe v. Provident Fund Society, 140 N.Y. 23, 35 N.E. 316, 22 L.R.A. 432, 37 Am.St.Rep. 529; Wandell v. Mystic Toilers, 130 Iowa 639, 105 N.W. 448; Titus v. Glens Falls Ins. Co., 81 N.Y. 410.

It is argued, however, that the doctrine of waiver is but another name for estoppel and, since Mrs. Miller was not prejudiced by the short delay occasioned by the action of the insurance company, the latter was free to change its position and return to her the defense of the case. Some courts have employed expressions indicating such a conception of the two doctrines, and have used the words as synonymous or as convertible terms. Globe Mutual Life Ins. Co. v. Wolff, 95 U.S. 326, 24 L.Ed. 387; Williams v. Neely (C.C.A.) 134 F. 1, 69 L.R.A. 232; Lewin v. Telluride Iron Co. (C.C.A.) 272 F. 590; Lyman v. Littleton, 50 N.H. 42. But a careful examination of the cases will disclose the inaccuracy of the assumption; and this court has expressly rejected that contention. Morgan v. Home Ins. Co., 216 Ky. 592, 288 S.W. 321; Limerick v. Home Ins. Co., 150 Ky. 827, 150 S.W. 978, 44 L.R.A. (N. S.) 371. The subject was quite fully considered by this court in Central Life Insurance Company v. Roberts, 165 Ky. 296, 176 S.W. 1139, where the distinctions between waiver and estoppel were compared and contrasted in an extensive quotation from a familiar text-book. 40 Cyc. 255.

Although the doctrines are sometimes carelessly confused, the distinction between them is clear, and the rule is firmly established that to constitute a waiver of a forfeiture it is not necessary that the facts should present the essential elements of an estoppel.

It is equally settled that a waiver, once made, is irrevocable, even in the absence of any consideration therefor, or of any charge of position by the party in whose favor the waiver operates. In Central Life Insurance Company v. Roberts, 165 Ky. at page 303, 176 S.W. 1139, 1142, an opinion of the Court of Appeals of New York was quoted to the effect that "waiver seems to be a 'technical doctrine, introduced and applied by courts for the purpose of defeating forfeitures,"' and, when made, it cannot be revoked. Kiernan v. Dutchess County Mutual Ins. Co., 150 N.Y. 190, 44 N.E. 698. The decisions are in substantial harmony upon that subject. N.E. Life Ins. Co. v. Springgate, 129 Ky. 627, 112 S.W. 681, 113 S.W. 824, 19 L.R.A. (N. S.) 227; Brink v. Hanover Fire Ins. Co., 80 N.Y. 108; Lee v. Casualty Co., 90 Conn. 202, 96 A. 952; Benninghoff v. Agricultural Ins. Co., 93 N.Y. 495; Gilbert v. Globe & R. Fire Ins. Co., 91 Or. 59, 174 P. 1161, 178 P. 358, 3 A.L.R. 205.

The waiver of a ground of forfeiture by treating the contract thereafter as...