Case Name: UNITED STATES FIDELITY & GUARANTY CO. v. WYER
Court: United States Court of Appeals for the Tenth Circuit
Jurisdiction: United States
Decision Date: 1932-08-01
Citations: 60 F.2d 856
Docket Number: No. 616
Parties: UNITED STATES FIDELITY & GUARANTY CO. v. WYER.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 60
Pages: 856–861

Head Matter:
UNITED STATES FIDELITY & GUARANTY CO. v. WYER.
No. 616.
Circuit Court of Appeals, Tenth Circuit.
Aug. 1, 1932.
MeDERMOTT, Circuit Judge, dissenting.
A. G. Croninger and Ray MeNaughton, both of Miami, Okl., for appellant. ■
E. C. Fitzgerald and Wm. M. Thomas, both of Miami, Okl., for appellee.
Before COTTERAL, PHILLIPS, and MeDERMOTT, Circuit Judges.

Opinion:
COTTEBAL, Circuit Judge.
This suit was brought by W. H. Wyer on an automobile liability policy issued by the appellant company to J. L. Suil'ocool, superintendent of the Quapaw Indian Agency, for Willie Buffalo, an incompetent member of the Quapaw Tribe, indemnifying the latter up to $10,000 for injuries which might result from the use of a Graham-Paige coupe owned by him.
Wyer's alleged cause of action was that ho had brought a previous action against Buffalo for personal injuries sustained when his car was wrongfully driven into Wyer's conveyance; that the action was defended by the company and resulted in a judgment on April 29, 1930, for $20,000 with interest and costs, on which execution was issued and returned unsatisfied; that by virtue of Buffalo's insolvency and Wyer's inability to collect the judgment, the company, by the terms of the policy, has become liable for that judgment to the extent of $10,000.
The answer of the company alleged that its defense of the former suit was with a reservation of its rights under the policy, that although Buffalo and his chauffeur, O. Y. Jolley, drove the car and their negligence proximately caused Wyer's injuries, they willfully represented to the company that the car was not driven by them at the time of the accident but by some person unknown, Buffalo obtained $500 from the company on the representation that the car had been stolen when the accident occurred, the misrepresentations were relied upon by the company, he did not co-operate with the company in securing its rights, which was a condition of liability, and Wyer's rights to recover against the company were no greater than those of Buffalo, had he paid the judgment of Wyer.
By his reply, Wyer admitted Jolley and Buffalo drove the car at the time of the collision and their negligence was the proximate cause of Wyer's injuries, and alleged the company defended the suit, presented a. motion for a new trial and partially effected an appeal, and thereby waived any failure of cooperation by Buffalo.
A jury was waived and the cause was tried to the court. The company duly saved its rights by requests for findings, declarations of law, and a judgment in its favor. Tile court made adverse findings, and by reason of the former recovery judgment was rendered herein against the company for $10,000, interest, and costs.
The company joined with Buffalo in defending that suit. The record shows that after judgment the company filed and argued a motion for a new trial, which was overruled, secured a brief stay of the judgment and an extension of ninety days to make and serve a ease-made, but notified Suffeeool and Buffalo by letter of June 9, 1930, that for various reasons and particularly the findings of the jury it withdrew from all further part in the defense.
The company assigns two main errors for reversal, but presents only the second, which complains of the denial of its motion for judgment for want of supporting facts, and particularly because under the pleadings, admissions, and uncontroverted evidence the failure of co-operation by Buffalo in the former suit released the company from liability.
The policy recites that in consideration of the premiums and subject to the terms, limits, and conditions stated, the company insures Buffalo against property loss and liability for accidents up to $10,000, at its expense, reserves the right to settle any claim or suit, extends the insurance to other drivers of the car, agrees that it will defend suits against him whether groundless or not, that the insolvency or bankruptcy of the insured shall not release the company from damages for injury, and in ease execution is returned unsatisfied against him, an action may be maintained by an injured person against the company, under the terms of the policy.
The policy also provides it is subject to certain conditions, one of them being that immediate written notice of an accident with fullest information obtainable must be given to the company, another that the company reserves the right to settle any claim or suit, and others that, when requested by the company, "the assured shall aid in securing information, evidence and the attendance of witnesses in effecting settlements and in defending suits," and that "the assured shall at all times render to the company ail reason-aide co-operation and assistance." By an amendment, authorized by the policy, the insurance extended to other drivers of the ear was withdrawn.
The first question presented is whether, as appellee insists, there were findings of fact by the trial court in this case that bar consideration of the error assigned. The findings were that Buffalo was insolvent, had no property subject to execution, appellant assumed the defense of the former suit, and Buffalo and his counsel co-operated in the defense of that suit.
It is thoroughly settled that in a trial where a jury is waived the findings of fact upon conflicting evidence are conclusive on appeal. But the facts were not disputed in this case that Buffalo and Jolley represented to the company that they were not in the car when the accident occurred, both so testified in the former ease and Buffalo in this, and Buffalo obtained $500 from the company for theft of the ear. It is true he and his attorneys assisted in the defense, and both he and Jol-ley testified for the company. And the adjuster of .the company testified Buffalo's cooperation was 100 per cent. But that was a conclusion, drawn from the fact that Buffalo did not collude with the plaintiff and joined with his attorney in an effort to defeat the action. .Buffalo's misrepresentation of the facts respecting the accident stood adjudicated in the former suit, and Wyer admitted it. All the evidence was one way on the subject of co-operation, in that respect. Only a question of law was therefore involved as to whether upon the undisputed facts there was co-o.peration as required by the insurance contract; and it is reviewable in this court. White v. United States (C. C. A.) 48 F.(2d) 178; Larabee Flour Mills Co. v. Carignano (C. C. A.) 49 F.(2d) 151.
Wyer was not a party to the insurance contract. By the terms of the policy, he had only the right of Buffalo to recover, in case of his insolvency or bankruptcy and an execution unsatisfied against him, if the latter would have had that right on paying the judgment. Clements v. Preferred Accident Insurance Co. (C. C. A.) 41 F.(2d) 470, 76 A. L. R. 17; Metropolitan Casualty Insurance Co. v. Colthurst (C. C. A.) 36 F.(2d) 559; Royal Indemnity Co. v. Morris (C. C. A.) 37 F.(2d) 90; Hermance v. Globe Indemnity Co., 221 App. Div. 394, 223 N. Y. S. 93; Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271, 160 N. E. 367, 72 A. L. R. 1443; Weatherwax v. Royal Indemnity Company, 250 N. Y. 281, 165 N. E. 293; Seltzer v. Indemnity Co., 252 N. Y. 330, 169 N. E. 403.
This brings us to the main question,- and that is, whether Buffalo rendered such co-operation to the company as to meet that condition to its liability. The company asserts that the condition in the policy bound-Buffalo to report a fair and truthful account to enable the company to determine whether there was a defense to the damage' suit and bring to its aid the material facts without misrepresentation or concealment, and his violation of that duty absolved the company from liability. WyeFs contention is that the company was bound to show the failure of co-operation affected the judgment in the damage suit, and as there was no such show--ing, its liability was established.
Tire controversy has been before the courts. In Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271, 160 N. E. 367, 369, 72 A. L. R. 1443, the assured declined to assist in the defense of the damáge suit. By the state law, in ease of the insolvency of the assured, suit was authorized by an injured person "under the terms of the policy." The defense was, a condition of the policy was breached. The court (opinion by Chief Justice Cardozo, now Associate Justice of the United States Supreme Court) ruled: "Cooperation does not mean that the assured is to combine with the insurer to present a sham defense. Co-operation does mean that there shall be a fair and frank" disclosure of information reasonably demanded by the insurer to enable it to determine whether there is a genuine defense." It was contended the default should be condoned as there was no evidence that the co-operation of the insured would have defeated or diminished the claim for damages, but it was held: "For all that appears, the insurer would be no better off if the assured had kept its covenant, and made disclosure full and free. The argument misconceives the effect of a refusal. Cooperation with the insurer is one of the-conditions of the policy. When the condition was broken, the policy was at an end, if the insurer so elected. The ease is not one of the breach of a mere covenant, where the consequences may vary with fluctuations of the damage. There has been a failure to fulfill a condition upon which obligation is dependent."
In Buckner v. Buckner (Wis.) 241 N. W. 342, 344, it was said that "co-operation" was defined almost universally as in the Coleman Case. It was further held: "This is not to say that any slight error in the statement of facts or failure to disclose some collateral fact will necessarily be held to amount to a breach of the contract, but the withholding of information, the making of untruthful statements, and the concealing of necessarily relevant and material facts can have but one purpose, and that is to. help the claimant rather than the insurer."
There are other cases sustaining the principle. Rohlf v. Great American Mutual Indemnity Co., 27 Ohio App. 208, 161 N. E. 232; Clements v. Preferred Accident Ins. Co., supra.
The contention of Wyer has support in the authorities. Huddy, Cyc. Auto Law (9th Ed.) 297, 298, a,nd the cases cited. In. some of those cases, it was held the insurer must show the non eo-operation of the insured affected the judgment for damages. In others, it was held necessary to show substantial prejudice to tbe rights of the insurer, it may be said that test was met, in that the company was deprived of contesting the issue of negligence on the facts.
But we are impressed that non co-operation as shown in this ease was of itself a well-founded defense. It was sufficient for the reason, if for no other, that eo-operation was stipulated in the contract to be a condition to liability.
It is also insisted the company waived the condition by defending the suit after it learned of the non co-operation of Buffalo.
The undisputed testimony is that on the representation of Buffalo and Jolley that the car had been stolen and 1hey had not driven it at the time of the collision, the company undertook to join in the defense of the suit with a reservation of all its rights. This it was entitled to do upon an understanding, express or implied, with the insured. Fidelity & Casualty Co. v. Stewart Dry Goods Co., 208 Ky. 429, 271 S. W. 444, 43 A. L. R. 318; Gordon v. Massachusetts Bonding & Insurance Co., 229 N. Y. 424, 128 N. E. 204; Ford Hospital v. Fidelity & Casualty Co., 106 Neb. 311, 183 N. W. 656; Sargent Mfg. Co. v. Travelers' Ins. Co., 165 Mich. 87, 130 N. W. 211, 34 L. R. A. (N. S.) 491; Seltzer v. Indemnity Company, supra; Hermance v. Globe Indemnity Co., supra.
But the insurer must not know of the breach of the policy when conducting the defense. Miller v. Union Ind. Co., 209 App. Div. 455, 204 N. Y. S. 730; Francis v. London Guarantee & Accident Co., 100 Vt. 425, 138 A. 780; New Jersey F. & P. G. Ins. Co. v. McGillis (C. C. A.) 42 F.(2d) 789.
In this ease the company had only the information imparled by Wyer's evidence. Neither Buffalo nor Jolley has ever recanted his account. The withdrawal from the case, by letter of June 9, 1930, was timely. There was no evidence to show the agents of the company theretofore believed there was misrepresentation by Buffalo. We conclude the steps leading to an appeal were taken within the reserved rights of the company and constituted no waiver of the defense. Meyers v. Continental Cas. Co. (C. C. A.) 12 F.(2d) 52; Rohlf v. Great American Mutual Indemnity Co., supra; Commercial Casualty Ins. Co. v. Fruin Colnon Contracting Co. (C. C. A.) 32 F.(2d) 425; Hermance v. Globe Indemnity Co., supra.
The facts differ materially from those shown in New Jersey F. & P. G. Ins. Co. v. McGillis (C. C. A.) 42 F.(2d) 789, cited by appellee. There the company was fully apprised of the facts. Besides, it had taken from McGillis his right to defend or settle the action.
In our opinion, the judgment was erroneously rendered for appellee. It is accordingly reversed, and the cause is remanded to the District Court with direction for further proceedings consistent with this opinion.
Reversed.