Yorkshire Indemnity Co. v. Roosth & Genecov Pro. Co.

• Decision Date: 03 April 1958
• Docket Number: No. 16427.,16427.
• Citation: 252 F.2d 650
• Parties: The YORKSHIRE INDEMNITY COMPANY OF NEW YORK (also known as The Yorkshire Insurance Company of New York), Appellant, v. ROOSTH & GENECOV PRODUCTION COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

252 F.2d 650 (1958)

The YORKSHIRE INDEMNITY COMPANY OF NEW YORK (also known as The Yorkshire Insurance Company of New York), Appellant, v. ROOSTH & GENECOV PRODUCTION COMPANY, Appellee.

No. 16427.

United States Court of Appeals Fifth Circuit.

February 28, 1958.

Rehearing Denied April 3, 1958.

COPYRIGHT MATERIAL OMITTED

Hobert Price and Henry W. Strasburger, Dallas, Tex., for appellant.

Chas. F. Potter and Spruiell, Lowry, Potter, Lasater & Guinn, Tyler, Tex., for appellee.

Before RIVES, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

On May 31, 1948, an oil derrick crashed in on Loren Lee White crippling him for life. Now a decade later, the litigation which saw, in the main case,¹ three state court jury trials, two sets of appeals, one successfully through the Supreme Court of Texas, the second ending in the Court of Civil Appeals, the trial below and its later appeal here of the present case seeking indemnity by the Operator from its general liability insurer, must continue on its wearisome way. For we hold that for reasons discussed, the case must be remanded for a new trial.

This aftermath growing out of Roosth & Genecov's efforts to recover the policy limits of $25,000 under the general liability policy for the $50,000 paid by it to White, presents for our consideration (1) the substantive question whether in the circumstances of this case, notice of the accident twenty-four months later was "as soon as practicable,"² and (2) procedural questions on admission and exclusion of evidence.

The accident giving rise to the tort suit, note 1, supra, occurred May 31, 1948. White, a member of the drilling crew, was in the employ of Carter-Jones Drilling Company then engaged as an independent drilling contractor in the drilling of well No. 17 for Roosth & Genecov. In the accident the derrick which belonged to Roosth & Genecov collapsed and White was severely injured. For many years it had been used on another lease as a pumping, not a drilling, derrick. Roosth & Genecov, either through agents or contractors, dismantled it at the old well site, transported it to, and then re-erected it at, the site of Well 17. The well was spudded in on a hillside of substantial slope. Preparatory to erecting the derrick, a considerable cut was made by bulldozer and a level surface provided by blading loose sand fill, but without going down to hard dirt. In re-erecting the derrick, the four original concrete foundation blocks were reused by being set on the bulldozed site. The cause celebre of the endless litigation was southeast foundation block which, admittedly, instead of being approximately 4 × 4 × 1 foot, had a thickness varying from one foot to six inches with two or more bumps, or uneven places, on the bottom.

White was hospitalized for nearly a year. The contractor was subject to the Texas Workmen's Compensation Act and its Compensation Insurer paid out an aggregate of approximately $14,000 as total permanent disability benefits, including medical hospital costs in the neighborhood of $4,000.

Roosth & Genecov knew of the accident almost immediately. Within a short time Isadore Roosth, a substantial stockholder and an executive officer of the Company, was at the scene to ascertain what had happened and, with the Contractor, to decide what had to be done to restore drilling operations. This was the sole investigation made. The sufficiency of this investigation and the validity of the conclusions drawn from it were and are the crucial points in this case. For it is undisputed that despite the spectacular proof of a derrick lying collapsed as a mass of twisted wreckage, a worker obviously injured severely, and an obvious failure (from whatever cause) of property belonging to Roosth & Genecov and for which it was responsible as the "premises" furnished to the Contractor and Contractor's employees, this spectacular accident was not reported to the Insurer. Indeed, it was not reported until about June 1, 1950, on which day citation was served on the Assured as a defendant in the tort suit instituted by White on May 20, 1950, just on the eve of the Texas two-year limitation period. Vernon's Ann.Civ.St. art. 5526. Because of this failure to report, the Insurer declined liability under the policy, but subsequently undertook the defense under a typical non-waiver agreement.

Since management of the Assured knew of the occurrence and there were no physical obstacles or other circumstances which interfered with the communication of that knowledge to the Insurer, this was not, in fact, notice "as soon as practicable." Such provisions, note 2, supra, for notice are valid in Texas. The Assured now recognizes that when in 1948 it chose not to make the report, in order then to avoid the breach of the policy, it must show that, first, it made a full, complete and fair investigation of all of the facts and surrounding circumstances, and then, on the basis of that investigation reasonably concluded³ that "* * * the occurrence was of such a nature as that it could not reasonably be expected to result in any claim or liability * * *," Texas Glass & Paint Co. v. Fidelity & Deposit Co. of Maryland, 244 S.W. 113, 115 (Tex.Com.App. opinion adopted).

The Assured also recognizes that with no effort ever having been made to contact either White or the Contractor's Compensation Insurer, the investigation was, as we held in Dunn, note 3, supra, incomplete and inadequate, and to overcome this, it would have to establish that had inquiry been made of them, each would have stated that no claim would be asserted against Roosth & Genecov.

This meant, of course, that the Assured had to establish that through the rosyhued lenses of May 1948, it did not reasonably see that which the 1955 bifocals, prescribed by a succession of juries, made so plain: (1) there was liability in fact against Roosth & Genecov; (2) White and the Compensation Insurer not only intended to assert a claim — they asserted one — and got satisfaction.

To establish what the Assured had been held liable for, the Insurer, after adverse rulings, made proffer of the jury's special issue verdict and the portion of the opinion of the Court of Civil Appeals summarizing⁴ these findings of negligence. In view of our disposition of the case, we need not pass on the correctness of these rulings. Even though these proffers were excluded below, the jury, from extended examination and cross examination of the witnesses, readily understood that in the tort suit it had been contended that Roosth & Genecov were negligent in using a faulty foundation block, in erecting the derrick on an improper fill of loose sand, and in furnishing a defective, rusty derrick.

The Assured sought to establish the sufficiency of the investigation through Isadore Roosth, the one who made it. The investigation was superficial indeed. He could recall the name of only one person, his own lease pumper, who had been an actual eyewitness. He talked to the Contractor's toolpusher, whose name he knew, who likewise arrived after the accident. He talked to several unidentified workers at the site, but he was unable to state whether any had been actual eyewitnesses or were merely members of the next tour (shift) repeating what had been told to them. From these he was told that this is what happened: they were coming out of the hole with drill pipe; with over 3,000 feet of it suspended, the clutch slipped causing the pipe to drop suddenly; the driller put the brakes on quickly, instead of gradually, thus throwing the full weight of the falling pipe on the derrick; the derrick collapsed from this undue strain. He made no minute examination of the derrick since it was a mass of twisted wreckage. Neither then nor the next day when the wreckage was dragged a short distance away exposing at least the southeast foundation block, did he examine this block or the fill. He never sought to interview White, but at least once he discussed the occurrence briefly with the Contractor's representative who told him "The man was being taken care of by their insurance company and there wasn't anything for me to worry about that. * * * They told me that the man was being taken care of by their coverage, by their insurance coverage * * * workmen's compensation * * *."⁵

Of course he never called in any experts to obtain an opinion as to the real cause of the derrick collapse, and had he made inquiry from any of the men at the well as to the foundation blocks, he could have received no information since the foundations were in place on the ground and had been prior to the time the drilling Contractor commenced operations. He categorically acknowledged that if a Contractor's employee is injured, the Compensation Insurer can assert a claim against his company, and that in his experience in the East Texas oil field, a serious injury is likely to result in lawsuits.⁶

What little strength this had as a prudent investigation, it had none at all on whether, had White or the Compensation Carrier been contacted, each would have disavowed a purpose to assert a claim. It was at this stage that all became topsy-turvy. Old allies were now in the position of hostile antagonists. And old and fearsome adversaries became welcome confederates for, to establish this, he who had recently been the lion in the street now became the star witness. White's successful trial counsel as a witness for the Assured testified along these lines: he was initially retained by White more than a year after the accident; his employment concerned recovery of maximum workmen's compensation benefits; he did not have in mind any common law third party damage suits. In the negotiations with the Compensation Insurer terminating successfully sometime in the spring of 1950 in a total permanent settlement, the claims adjuster expressed the opinion that neither White nor the Compensation Insurer, as subrogee, had any common law third party claim. As White's attorney he...