U.S. Fire Ins. Co. v. Hodges

• Decision Date: 30 May 1963
• Docket Number: Nos. 6,6 Div. 932,s. 6
• Citation: 275 Ala. 243,154 So.2d 3
• Parties: UNITED STATES FIRE INS. CO. v. Virginia Ann HODGES, pro ami. LITITZ MUTUAL INS. CO. et al. v. Virginia Ann HODGES et al. Div. 932,-A.
• Court: Alabama Supreme Court

Page 3

154 So.2d 3

275 Ala. 243

UNITED STATES FIRE INS. CO. v. Virginia Ann HODGES, pro ami.

LITITZ MUTUAL INS. CO. et al. v. Virginia Ann HODGES et al.

Nos. 6 Div. 932, 6 Div. 932-A.

Supreme Court of Alabama.

May 30, 1963.

Chas. A. Stewart, Huie, Fernambucq & Stewart, Birmingham, for appellant.

Mead, Norman & Fitzpatrick, Birmingham, for cross-appellants.

Waldrop Windham and Higgins, Windham, Perdue & Johnson, Birmingham, for Virginia Ann Hodges.

Cabaniss & Johnston and Drayton T. Scott, Birmingham, for Auto Electric and Ed J. Hodges.

Wm. M. Acker, Jr., Smyer, White, Reid & Acker, Birmingham, for mayfield.

MERRILL, Justice.

This appeal with cross-assignments of error is from a decree in a declaratory judgment proceeding in equity determining the rights of parties and insurance companies arising out of an accident in which appellee Mayfield was run over and seriously injured by a motor boat driven by Virginia (Jennie) Hodges.

On May 26, 1960, Mayfield was in the water of Bluff Creek, a tributary of the Warrior River, teaching his son how to ski. His wife was driving his boat, which was sitting still in the water. Mayfield and his son were behind the boat with their heads sticking out of the water. Jennie Hodges, age 17, and daughter of Ed Hodges, was driving a 16-foot inboard motor boat up Bluff Creek. She was pulling a young boy, Richard Yielding, on skis, and two other Yielding children were in her boat. Her boat ran over Mayfield and the propeller seriously injured his back, and he was in the hospital a long time.

On October 12th, Mayfield sued Jennie Hodges, her father, Ed Hodges, and her father's company, Auto Electric & Carburetor Co., Inc. (hereinafter called Auto Electric) for $350,000.

This caused the filing of the bill for declaratory judgment by Virginia Hodges against U. S. Fire Ins. Co. (hereinafter called U. S. Fire), Lititz Mutual Ins. Co. and Implement Dealers Mutual Ins. Co. (known as the Jefferson Mutuals), Auto Electric & Carburetor Co., Ed Hodges and W. T. Mayfield, Jr.

The controversy here arises out of the proper interpretation and application of three policies of insurance. The first policy is what we call the dealers policy. It was issued to Auto Electric and provided coverage for all of the boats which the Marine Division of Auto Electric had for either sale or demonstration. The second policy was the boat policy issued by U. S. Fire and was issued to cover just such an accident as did occur. The big question as to the boat policy is whether coverage is limited to $10,000. The third policy was the homeowners policy covering Hodges, his wife and Junnie, and was issued by Jufferson Mutuals.

The trial court held that Jennie Hodges was entitled to the protection and coverage of the dealers policy issued by U. S. Fire and the boat policy issued by U. S. Fire, and the homeowners policy issued by Jefferson Mutuals, and was also entitled to the benefit of the medical payment provisions of each of the policies, if Mayfield's medical expenses were recoverable; that U. S. Fire and Jefferson Mutuals are obligated to defend the action at law by Mayfield for the benefit of all the named insureds in their policies; that the rider on the boat policy, limiting liability to $10,000, was not applicable; that the primary insurer is U. S. Fire, and Jefferson Mutuals is the secondary insurer; that the insurer of the excess, if any, is U. S. Fire under its dealers policy.

Applications for rehearing were denied, U. S. Fire appealed and Jefferson Mutuals cross-appealed.

Appellant, under proper assignments of error, makes four major contentions which will be considered seriatim. Judge Giles wrote a full and comprehensive opinion, and the opinion, findings of fact and the decree covers 30 transcript pages. Since the parties are already familiar with what was there found and held, we are trying to limit this opinion to only such facts and holdings as to make it understandable to a stranger to the case.

Appellant's first contention is that it should not be required to provide protection and coverage under the dealers policy because that policy had no omnibus clause. It provided that 'it is specifically warranted and agreed that the assured or a competent employee of assured will be, at all times, in charge of any vessel being navigated hereunder.' It argues that at the time of the accident, the boat did not have a competent employee in charge of it because Jennie was not an employee of Auto Electric. She had never been paid a salary by them and she was using the boat for personal pleasure. It agreed that Jennie was a competent boat-handler and she was a champion water-skier, but denied that she was covered by the dealers policy.

Appellees answer that Jennie had demonstrated boats for her father and Auto Electric on many occasions, that this particular boat was up for sale and Auto Electric was willing to sell it to any customer who presented himself, and that the boat had been moved to the Hodges dock on Bluff Creek with Hodges' knowledge and the knowledge of Auto Electric.

A corporation in its relations to the public is represented and can act only through its duly authorized servants, agents or employees. Trans-America Ins. Co. v. Wilson, 262 Ala. 532, 80 So.2d 253; Martin v. Anniston Foundry Co., 259 Ala. 633, 68 So.2d 323.

Contracts of insurance are liberally construed in favor of the assured and, if doubtful, such contracts are construed against the insurer. Cherokee Life Ins. Co. v. Brannum, 203 Ala. 145, 82 So. 175; McKee v. Exchange Ins. Ass'n, 270 Ala. 518, 120 So.2d 690.

It is sufficient to say that there was sufficient evidence both as to the 'assured' or 'a competent employee' being in charge of the boat to authorize the lower court to hold that appellant is obliged to defend Auto Electric and Jennie Hodges under the policy in view of the allegations of the original complaint that Auto Electric was liable because of the negligence of Jennie Hodges, a 'servant and agent' of Auto Electric. As to who was actually in charge of the boat or whether Jennie was an employee are questions to be finally determined by a jury in the main case. But the trial court's ruling in this declaratory judgment suit was correct under the evidence presented.

Appellant's second contention is that the court erred in not limiting the liability under the boat policy issued by U. S. Fire to $10,000 in accordance with the provisions of a rider attached to the policy which limited the liability to that amount when the boat was engaged in water skiing. The question presented here involves the validity and effectiveness of an oral contract for insurance between Ed Hodges and Sevier, the general agent of U. S. Fire.

Hodges told the general agent that he was going to take the boat, which was later involved in the accident, out of stock and use it on the Warrior River at Bluff Creek for family use for water skiing, for demonstrations and other purposes and was doubtful if Auto Electric had enough insurance to cover such uses. Sevier agreed and suggested coverage of $10,000 and $20,000. Hodges said anything less than $100,000 would be inadequate. Sevier then quoted him a premium rate of $75 and Sevier testified that he told them (Auto Electric through Ed Hodges) that 'they had coverage as of that time, they were bound as of that time,' which was May 23, 1960.

Sevier ordered the policy from Atlanta. It was sent to Birmingham and delivered to Sevier on May 27th. The next morning as Sevier was inspecting and countersigning the policy, he was notified of the accident. Therefore, the loss occurred under the oral binder.

The policy did contain the rider limiting liability involving skiing to $10,000, under a company rule one month old, but Sevier had never heard of such a rule, had quoted a premium rate for coverage without any limitation, which had been accepted, and when the policy was delivered to Auto Electric on June 2, 1960, Sevier told Hodges that the rider did not alter coverage of $100,000 because it only applied where a water skier being towed by the insured boat was injured. Sevier had consulted with the state agent of U. S. Fire before agreeing to issue the policy and again after the accident and before delivering the policy to Auto Electric.

The power to make oral contracts of insurance as well as agreements to insure is sustained in this state. Liverpool & London & Globe Ins. Co. v. McCree, 210 Ala. 559, 98 So. 880, and cases there cited.

In that case we also said, in referring to the stipulations of a policy to be subsequently written up and delivered, that it will be presumed, in the absence of stipulations to the contrary, that the parties contemplated such form of policy containing such conditions and limitations as are usual in such cases for the insurer to issue at the time or in policies previously used by the parties.

Appellant contends that the coverage on the boat policy was limited to that to which their ordinary policies were limited.

We quote from two sections of Couch On Insurance 2d, § 14:16, p. 592, and § 14:17, p. 594:

'* * * A parol contract of, or for, insurance, in the absence of special...