Court Opinion

ID: 9460393
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:48:57.970015+00
Date Added: 2024-06-11T17:36:35.824699
License: Public Domain

*201TIMBERS, Circuit Judge
(dissenting) :
In this diversity action, it seems to me that the majority has strained to read the standard notice provisions of this comprehensive general liability insurance policy — in the context of the undisputed relevant evidence — for all that they might be worth, rather than for the least that they have to be worth, from the point of view of bailing out this insurance company that refused to defend its insured in accordance with the terms of its policy. The result is that this plaintiff, whose leg was crushed and mangled by a bulldozer negligently maintained by the insured and used in the insured’s contracting business, has been stripped of a $78,277 judgment— admittedly through no fault of the plaintiff but because of the alleged failure of the insured to comply with the notice provisions of the policy. In view of the fact that no member of this panel of our Court is a member of the bar of the State of Vermont whose law is being applied in this diversity action, I should have thought that great weight would be given to the determination of the Chief Judge of the District of Vermont in applying here the law of Vermont whose Supreme Court in very recent decisions has made it abundantly clear that provisions of an insurance policy, including specifically the notice provisions, are to be liberally construed with respect to the insured and strictly construed with respect to the insurer. Since I believe that the majority, in substituting its interpretation of controlling Vermont law for that of the district court, has almost precisely turned about this rule of construction, I respectfully dissent.
The most critical fact in this case is that there was no real controversy with regard to notice of the occurrence of the accident having been given to the insurer as soon as practicable in accordance with clause 4(a) of the policy.1 The insurer so conceded.
The evidence was undisputed that the accident occurred on Sunday, July 30, 1967, at Hinsdale, New Hampshire. Zi-man was operating a bulldozer owned by Hodgdon on the latter’s property. Zi-man alighted from the bulldozer to inspect it. The bulldozer started backwards. It struck Ziman, leaving his lower left leg crushed and mangled. No one other than Ziman was present at the time of the accident. There were no witnesses other than Ziman. Hodgdon, who was not present at the scene of the accident, first heard about it from his sister-in-law who in turn had heard about it on the radio. As soon as he heard about it, Hodgdon went to the hospital to visit Ziman. Shortly thereafter Hodgdon reported the accident to Kenworthy, his insurance agent.2 Ken-*202worthy testified that Hodgdon had reported the accident to him and had told him all he knew about it. (Transcript, 147-48).
Thus, upon the uncontroverted evidence in the trial coui’t, each of the essential provisions of clause 4(a) of the policy regarding notice of the occurrence of the accident was fully complied with:
(1) “Written notice” of the “occurrence” of the accident was given “by . . ■ . the insured”, Hodgdon, through Kenworthy, the insurance agent, “to the company”.
(2) Such notice was “sufficient to identify the insured”, Hodgdon.
(3) Such notice included “reasonably obtainable information with respect to the time, place and circumstances thereof”, i. e., according to Kenworthy, Hodgdon told him all he knew about it.
(4) Such notice included “the [name and address] of the injured”, Zi-man.
(5) Such notice included “the [name and address] of available witnesses”, there being only one witness, Ziman.
(6) Such notice was given “as soon as practicable”, there being no claim by the company to the contrary.
On this state of the record, I think that no reasonable person could say that there was any real controversy with regard to notice of the occurrence of the accident having been given to the insurer in accordance with clause 4(a) of the policy.
The only real issue tried in the district court was whether Hodgdon, the insured, had' fully cooperated with the company. The latter complained that it could not locate the insured to obtain a. statement from him,3 and that he did not return its telephone calls or answer its letters. The entire trial was concerned with, not whether timely notice was given to the company, but whether Hodgdon had cooperated with the company, as required by clause 4(c) of the policy.4
This distinction is vital from the standpoint of understanding the applicable Vermont law and the district court’s charge to the jury, including its supplemental charge. -As the majority correctly states, under Vermont law the burden is on the insured to prove compliance with the notice of accident provision of the policy (clause 4(a)), that provision being a condition precedent, Houran v. Preferred Accident Insurance Company of New York, 109 Vt. 258, 271, 195 A. 253, 259 (1938); but the burden is on the insurer to establish noncompliance with the cooperation provision of the policy (clause 4(c)), that provision being a condition subsequent. Francis, supra, 100 Vt. at 429, 138 A. at 781; Houran, supra, 109 Vt. at 271, 195 A. at 258. A showing of material harm or prejudice to the insurer is required to *203establish noncompliance with the cooperation clause, Houran, supra, 109 Vt. at 270, 195 A. at 258; Francis, supra, 100 Vt. at 430, 138 A. at 781, but it is not required to establish compliance with the notice of accident clause. Houran, surpra, 109 Vt. at 272, 195 A. at 259.
In view of this applicable Vermont law and the state of the trial record indicating that the only real issue was whether Hodgdon had adequately cooperated with the insurer, I think the jury’s question to the court át 2:50 P.M. can be taken to refer to the cooperation issue and nothing else:
“Does the defendant have to show material damage and prejudice? Could we have some examples of what these would be if the answer is ‘yes’? The jurors are unclear as to prejudice and material damage as they apply to this case, as there was little or no testimony in this regard. Signed, John Barnett, Foreman.”
In responding to this question, the trial judge obviously directed his supplemental instruction to the cooperation issue and nothing else:
“The Court will repeat this part of its prior instructions on this point when the Court stated that it instructs you that (384) before there can be a breach of duty to cooperate, the failure on the part of the insured must be material and substantial, and the presence or absence of harm and prejudice is normally determinative of whether there has been a substantial shortage in the insured’s duty to his insurance carrier.
The burden of proof is on the defendant to show that he has been harmed by the insured’s failure to cooperate. So, the answer is ‘yes’.
Now prejudice in this context means harm or damage in some significant way. It means deprived of an advantage which otherwise it might have had. The requirement of cooperation on the part of the insured in supplying information is for the purpose of enabling the insurance carrier to make an early investigation while the evidence is available. So the burden is on the defendant to show that by reason of lack of cooperation in the context of this case, that it has been unable to procure evidence which was otherwise not available to it.”
Indeed, if we read the charge as a whole and in the context of the uncon-troverted state of the record that there simply was no issue with regard to the notice of the occurrence of the accident having been given to the insurer in accordance with clause 4(a) of the policy, then the distinctions drawn by the majority between the burdens of proof which the trial judge is said to have charged with respect to the notice clause and the cooperation clause become harmless at worst.
In the last analysis, what is here involved is simply this: That an insurer can avoid its liability when it has not been informed of the occurrence of an accident is the law of Vermont and certainly is reasonable; but to say, when it has had reasonable notice of the occurrence and therefore the opportunity to investigate, that an insurer can avoid responsibility by asserting that the original information was scant, even when there is no showing of harm or prejudice, is certainly unjust and contrary to the law of Vermont.
The experienced trial judge below, in charging the jury as he did in the context of the undisputed relevant evidence which established that there was no real controversy with regard to notice of the occurrence of the accident having been given to the insurer, did so in accordance with the public policy of the State of Vermont with respect to the construction of policies of insurance:
“It is a fundamental rule that a policy of insurance must be construed liberally in respect to the person insured and strictly with respect to the insurer.” Valente, Guardian v. Com*204mercial Insurance Company, 126 Vt. 455, 459, 236 A.2d 241, 243 (1967).
And this applies specifically to notice provisions of policies of insurance:
“Generally speaking, provisions for the giving of notice of loss . to an insurer will be liberally construed in favor of the insured, and a substantial compliance therewith, as distinguished from a strict compliance, will suffice.” (quoting from 44 Am.Jur.2d Insurance § 1482). Stonewall Insurance Company v. Moorby, 130 Vt. 562, 566-67, 298 A.2d 826, 829 (1972).
Finally, having in mind that this is a diversity action where we are reviewing the application of the law of Vermont by the Chief Judge of the District of Vermont in charging a jury regarding the provisions of an insurance policy in the context of a trial record that for all practical purposes was devoid of any issue of notice of the occurrence of the accident having been given to the insurer, I cannot say that the majority’s analysis of the charge in light of the record is an unreasonable one. I do suggest, however, with the utmost deference, that this would be an appropriate case in which to exercise the commendable restraint so well expressed just a few years ago in a like situation:
“In a case like this one, where a question of state law must be determined in a diversity case, great weight should be given the determination of a district judge sitting in that state. A court of appeals should not reverse the considered judgment of the district court on the law of its state unless it believes it to be clearly wrong.6 E. g., Bernhardt v. Polygraphic Co., 350 U.S. 198, 204-205, 76 S.Ct. 273, 100 L.Ed. 199 (1956); People of State of California v. United States, 235 F.2d 647, 653-654 (9 Cir. 1956); Mitton v. Granite State Fire Ins. Co., 196 F.2d 988, 992 (10 Cir. 1952).
Lomartira v. American Automobile Insurance Co., 371 F.2d 550, 554 (2 Cir. 1967) (Lumbard, Ch. J.).
A fortiori, “[t]hat is the case here.”5
I would affirm the judgment of the district court in all respects.

. Clause 4(a) of the policy is set fortli in full in footnote 4 of the majority opinion.

. The uncontroverted trial testimony by Hodgdon regarding his reporting the occurrence of the accident was as follows (Transcript, 62-63):
“Q. But, you say that after you learned of the accident and the injuries of Mr. Zi-man, that you started out for the insurance company and go ahead and tell us in your own words what happened.
A. I was in the hardware store and I see Kenworthy walking by, and I met him on the sidewalk and walked down with him; went to the office, and I told him a man had been hurt; told him Mr. Ziman’s name. He wrote it on a piece of paper and said, ‘Don’t worry about it, I will take care of it, and if things develop, you are all covered.’ That is about the extent of it.
Q. And he filled out a paper for you?
A. He wrote on a piece of, you know regular scratch paper, on a regular pad.
Q. He wrote the information down?
A. Right.
Q. Now, at that time did you tell him whether or not you knew anything about the accident? What did you tell him about that?
A. Well, I told him it had happened, but I didn’t know how it had happened. There was no way of knowing because I wasn’t there. I don’t know whether he got hurt by my dozer or by his. I don’t know.
Q. You told this to Mr. Kenworthy?
A. Yes.
Q. Did Mr. Kenworthy ask you if there were any witnesses to the accident?
*202A. I don’t remember if lie did. There was none that I know of. The only one that was there was Mr. Ziman. He was tiie only one there.
Q. He was the only one there as far as you could learn from checking into it?
A. Yes.
Q. And, had Mr. Kenworthy been the man you had bought the policy from and done business with right along up to that time?
A. He is the only one, yes.”

. The Vermont Supreme Court has made it very clear that this is what the cooperation clause of the policy is all about:
“Under the cooperation clause of the policy, it was the duty of [the insured], in good faith to aid and assist the company in its defense of the . . . suit. The very first obligation he was under was to give defendant’s counsel a full and truthful account of the circumstances leading up to and attending the accident .... This he did not do.” Francis v. London Guarantee & Accident Company, 100 Vt. 425, 430, 138 A. 780, 781 (1927). ■

. Clause 4(c) is set forth in full in footnote 5 of the majority opinion.

. Not infrequently, no member of the panel of a court of appeals is a member of the bar of the state whose law is in question. That is the case here.”

. Chief Judge Holden, the trial judge below, aside from having been a member of the Vermont bar for some 35 years, has the unique distinction in the federal judicial system of having served, prior to his appointment to the District Court of Vermont, for many years as a Vermont state court judge, including distinguished service as a Superior Judge and as Associate Justice and Chief Justice of the Vermont Supreme Court.