Maryland Casualty Company v. Gordon

371 S.W.2d 460, 52 Tenn. App. 1, 1963 Tenn. App. LEXIS 90

• Court: Court of Appeals of Tennessee
• Decided: March 19, 1963
• Status: Published

Opinions

BEJACH, J.

These consolidated causes involve appeals in error by the Maryland Casualty Company from judgments against it for $3,500 in favor of Lowell Gordon, Homer K. Lovin and Paul Southerland, for $4,500 in favor of Kathleen Gordon, b/n/f Homer Lovin and Paul Southerland, and for $2,000 in favor of James Stuffel, Jr. These judgments resulted from former judgments in the Circuit Court of Hamblen County against Homer K. Lovin, which judgments had been for $5,600 in favor of Lowell Gordon, for $4,500 in favor of Kathleen Gordon, his wife, and for $2,000 in favor of James Stuffel, Jr., which suits had been defended by the Maryland Casualty Company on behalf of Paul Southerland and Homer K. Lovin. James Stuffel, Jr. had been a guest riding in the automobile of Homer K. Lovin. These suits resulted from a two car collision in which one owned and driven by Homer K. Lovin collided with one driven by Lowell Gordon, in which he and his wife, Kathleen Gordon were riding. Mr. and Mrs. Gordon, as well as James Stuffel, Jr., were injured in the accident, and the suits which resulted in the aforesaid judgments followed. Prior to the institution of the first set of suits, Paul Southerland had applied for and obtained from the Maryland Casualty Company, through the Bible Insurance Agency, a liability insurance policy with $5,000 — $10,000 and $5,000 limits which insured an automobile owned by his stepson, Homer K. Lovin, who was at that time 20 years of age, and living in the household of Paul Southerland. This automobile was the one involved in the accident out of which grew the aforesaid suits. The policy in question was issued as an Assigned Risk policy. The application discloses that Paul Southerland owned no automobile, had no driver’s license, and did not intend to drive the automobile insured under the policy to be issued. It also discloses that said automobile was to be driven principally by Homer K. Lovin, the application reciting “sixty-five per cent of the time.” In the trial of the suits filed by Lowell Gordon, his wife Kathleen Gordon, and James Stuffel, Jr., no judgment was recovered against Paul Southerland. The suit of James Stuffel, Jr. had not named him as a defendant, and in the suits of Lowell Gordon and Kathleen Gordon, nonsuits had been taken.

After recovery of the judgments by Lowell Gordon, Kathleen Gordon, and James Stuffel, Jr., executions were issued which were returned nulla tono, and said judgments became final. Suits were then filed by each of these judgment creditors, in which they joined as plaintiffs Homer K. Lovin and Paul Southerland, and in which suits they undertook to recover from the Maryland Casualty Company the amounts of said former judgments. The Maryland Casualty Company filed pleas of nil debit and non assumpsit. These causes were also consolidated and tried before circuit Court Judge John K. Todd, without the intervention of a jury. All three suits were resisted by the Maryland' Casualty Company on the ground that its policy of insurance did not obligate it to pay said judgments because its policy of insurance did not cover the judgments recovered. This defense was predicated on two grounds, one, that Paul Southerland had no insurable interest in the automobile involved, and two, that false representations had been made in the application for insurance. In addition, with reference to the suit on the judgment in favor of Lowell Gordon seeking recovery of the amount of his judgment for $5,600, the Maryland Casualty Company presented the defense that since its policy was limited to a coverage of $5,000 on any one person,' and since Lowell Gordon’s judgment for $5,600 included a recovery for hospital and medical expenses incurred on behalf of his wife, Kathleen Gordon, and his claim for loss of her society and consortium, which items had not been apportioned in the jury’s verdict, no recovery could be had against the Maryland Casualty Company for any part of that judgment. At the trial Lowell Gordon testified that the total amount of his medical and hospital expenses was $509.25 for himself, and $1,547.30 for Mrs. Gordon, making a total of $2,056.75. Also, over the objection of the Maryland Casualty Company a transcript of the testimony in the former trials was admitted in evidence. The trial judge entered a judgment in favor of plaintiffs in the Lowell Gordon suit for $3,500, only, and in the Kathleen Gordon suit and the James Stuff el, Jr. suit for the full amount of the judgments there involved, viz., $4,500 in the Kathleen Gordon suit and $2,000 in the Janies Stuff el, Jr. suit. After a motion for a new trial had been overruled, appeals in error were perfected by the Maryland Casualty Company from the judgments against it. In this Court, it has filed two assignments of error, which present the questions of whether the Maryland Casualty Company is liable for any part of the Lowell Gordon Judgment because of lack of coverage of its insurance policy.

We will take up and dispose first of the second assignment of error, because it covers and is applicable to all three of the cases.

The second assignment of error denies liability on two grounds: (1) That Paul Southerland had no insurable interest in the automobile covered by the policy involved in this cause, and (2) That material misrepresentations were made in the application for the policy. We think neither of these grounds entitle the Maryland Casualty Company to he relieved of liability in these cases.

The contention that Paul Southerland had no insurable interest in the automobile is based on the fact that the automobile in question belonged to his stepson, a minor. The case of Cherokee Founderies, Inc. v. Imperial Assurance Co., 188 Tenn. 349, 219 S. W. (2d) 203, 9 A.L.R.(2d) 177, is cited as authority for the proposition that one who has no interest in the property insured cannot recover. In that case, a fire insurance policy on property being purchased was applied for, but no policy had been issued. The property in question was destroyed by fire before the title to it passed. The court, under those circumstances, correctly held that the prospective purchaser was not entitled to have the policy issued and recover thereon. In the instant case, on the other hand, Paul Southerland took title to the automobile which was being purchased by his stepson, because the transaction could not otherwise be handled for financing, because the stepson was a minor of the age of 20 years. Furthermore, all material facts were known to the Maryland Casualty Company before it issued its policy, same being set out in the application. Under these circumstances, as was held in Industrial Life & Health Insurance Co. v. Trinkle, 185 Tenn. 434, 206 S.W.(2d) 414, there being no collusion between the agent and the insured, and the facts which affected the coverage being known to the agent, such knowledge was imputed to the company. Other Tennessee cases to the same effect are Accident & Cas. Ins. Co. v. Lasater, 32 Tenn.App. 161, 222 S.W. (2d) 202; Maryland Cas. Co. v. McTyier, 150 Tenn. 691, 266 S.W. 767, 48 A.L.R. 1168; T. H. Hayes & Sons v. Stuyvesant Ins. Co., 194 Tenn. 35, 250 S.W. (2d) 7; Zarzour v. Southern Life Ins. Co., 46 Tenn.App. 680, 333 S.W.(2d) 14. In Zarzour v. Southern Life Ins. Co., Presiding Judge McAmis, spealdng for this Court, Eastern Section, said:

“The law is charitable enough to assume, in the absence of any showing to the contrary, that an insurance company intends to execute a valid contract in return for the premium received; and when the policy contains a condition which renders it void at its inception, and this result is known to the insurer, it will be presumed to have intended to waive the condition, and to execute a binding contract, rather than to have deceived the insured into thinking his property is insured when it is not, and to have taken his money without consideration.” Zarzour v. Southern Life Ins. Co., 46 Tenn.App. 684, 333 S.W. (2d) 16.

Prom Volume 5A, Am.Jur. — Automobile Insurance— Section 12, p. 15, we quote as follows:

“As regards the insurable interest required for automobile liability insurance, such interest is to be found in the interest that the insured has in the safety of those persons who may maintain, or the freedom from damage of property which may become the basis of, suits against him in case of their injury or destruction. The right to recover does not depend upon the insured’s being the holder in fact, of either a legal or equitable title in the automobile, but upon whether he is primarily charged at law or in equity with the liability against which the insurance was taken out. A liability policy issued to one in whose name title to a truck stood is not invalid for want of insurable interest, though another was the real owner. Moreover, an ‘omnibus’ coverage clause in an automobile liability policy covers a group of persons who may or may not have an insurable interest at the time the policy is written, if a person is within the defined group, it is sufficient that at the time of the accident such person is in a position to become legally liable for injury to others. It is to be observed, though, that if the misrepresentation is material to the risk, that the insurance is avoided — not because there is no insurable interest, but because of the misrepresentation. ’ ’

In the instant case, the legal title to the automobile insured stood in Paul Southerland, though the entire equitable interest therein belonged to his stepson, Homer K. Lovin..

But is is insisted, on behalf of the Maryland Casualty Company that in the instant case Paul Southerland did misrepresent the facts, in that he stated that his stepson would operate the vehicle insured approximately sixty-five per cent of the time, without disclosing that the stepson in question was the actual owner, so that the registered owner would have no right to control the use of the automobile by his stepson. The case of Didlake v. Standard Ins. Co., 195 F.(2d) 247, 33 A.L.R. (2d) 941, and the case of Employers Liability Assur. Corp. v. Maguire, 65 Pa.Dist & Co. R. 231, are cited in support of this contention. In Didlake v. Standard Ins. Co., the court reached its conclusion by reasoning: (1) That insurors are entitled to assume that the major use of the insured car will be by the named insured, and (2) That the age and driving habits of the owner and named insured and whether he possesses normal mental and physical faculties are facts which should be, and are, considered by an insurance company in determining whether it will assume risk to be covered in the policy. Aside from the fact that the cases cited are not Tennessee cases, we think the facts of the instant case are easily distinguished. In the instant case, the insurance company had notice that the named insured had no driver’s license and would not drive the automobile at all. The fact that the minor stepson was paying for the car we consider relatively unimportant. The representation that Homer K. Lovin would drive the automobile in question sixty-five percent of the time was not a misrepresentation, even if he drove same 100 per cent of the time ; and, there is no showing in these cases that some other person or persons, with the consent of Homer K. Lovin, did not drive his automobile as much as thirty-five per cent of the time.

There is a further reason why the Maryland Casualty Company should be held liable under its policy in the instant case. It accepted notice of the accident of October 8, 1961, in which Lowell Gordon, Kathleen Gordon, and James Stuffel, Jr., were injured, investigated it, and defended the lawsuits brought as a result of same, without any reservation of rights against either the named insured, Paul Southerland, or Homer K. Lovin who was also insured under the omnibus clause of the policy. Wé think the insurance company under these circumstances should be estopped to deny coverage after the insured have been cast in the suit so defended.

From 29A Am.Jur. — Insurance—Sec. 491, pages 600, 601, we quote as follows:

“There is a conflict of authority as to whether the fact that the liability or indemnity defends the insured in an action not within the coverage of the policy constitutes an estoppel, a waiver, or an admission or assumption of liability as to the injured person so that the insuror thereby becomes bound to pay the injured person the amount of the judgment recovered against the insured, up to the limit of liability under the policy, without regard to whether such conduct would give the insured a right of action . against the insuror in case the latter did not pay the judgment or reimburse the insured if he paid the judgment. The majority of the courts which have passed on this question hold that the insuror by such conduct renders itself liable to the injured person if it has not seasonably preserved its rights under a notice or agreement.”

On the same subject, 29A Am.Jur. — Insurance—Sec. 1465, p. 577, says:

“The general rule supported by the great weight of authority is that if a liability insuror, with knowledge of a ground of forfeiture or noncoverage under the policy, assumes and conducts the defense of an action brought against the insured, without disclaiming liability and giving notice of its reservation of rights, it is thereafter precluded in an action upon the policy from setting up such ground of forfeiture or noncoverage. In other words, the insuror’s unconditional defense of an action brought against its insured, constitutes a waiver of the terms of the policy and an estoppel of the insured to assert such grounds.”

Counsel for the Maryland Casualty Company undertake to make a further objection that since Paul Southerland, the named insured, did not give his consent to the use of his name as plaintiff in the actions here involved, the other plaintiffs should be held to be without standing in these causes of action. We think this contention is without merit. It is true Paul Southerland testified that he had not given permission for the use of his name as plaintiff. He did not, however, make any objection to his name having been so used. We think this should be held to constitute a ratification by him, and eliminate this objection on the part of the Maryland Casualty Company.

Appellant’s second assignment of error will be overruled, with the result that the judgment for $4,500 in favor of Kathleen Gordon, Homer K. Lovin, and Paul Southerland, and the judgment for $2,000 in favor of James Stuff el, Jr., will be affirmed.

We take up now the first assignment of error, which applies only to the Lowell H. Gordon judgment for $3,500. This assignment presents a more serious question. Plaintiff in error, the Maryland Casualty Company, contends by this assignment of error that it cannot be held liable for any part of the judgment of $5,600 in favor of Lowell Gordon. Its contention is that “Where a wife is awarded judgment of $4,500 against an insured whose policy has limits of 5/10/5, and where a husband brings an action based on the same accident for Ms own injuries, property damage, plus Ms wife’s medical bills, and for loss of consortium, and is awarded a judgment of $5,600 (later reduced- to $3,500 as regards insuror), which does not show allocation of the elements making up the judgment, neither judgment creditors of insured nor insured himself can, in a subsequent suit, compel the insuror to pay the husband’s judgment, because there is no evidence to show how much of the husband’s judgment is for his own losses, and how much is for his wife’s medical bills and loss of consortium; and, accordingly, that it is not shown whether or not the insurance company would be required to pay more than the limit of $5,000 for injury to any one person.

In support of this proposition, counsel for plaintiff in error cite Yancey v. Utilities Insurance Co., 23 Tenn. App. 663, 137 S. W. (2d) 318, and Morris v. Western States Mutual Auto Ins. Co., 268 F. (2d) 790 (7th Cir. 1959). The case of Morris v. Western States Mutual Auto Ins. Co., involved an application in the Federal Court of Tennessee law, based on the decision in Yancey v. Utilities Ins. Co. The Yancey case involved facts very closely analogous to those involved in the instant case. In that case, Yancey had a 5/10/5 policy and was sued by William A. Bowden and Sybil Bowden, his wife. Sybil Bowden got a judgment of $7,500, of which the insurance company paid $5,000. William A. Bowden, suing for his own injuries, plus his wife’s medical bills and loss of her services, recovered a judgment of $2,500, which judgment did not, however, indicate the elements which constituted same. The insurance company, as stated, paid $5,000 of Mrs. Bowden’s judgment, but refused to pay any part of Mr. Bowden’s $2,500 judgment. In that case, Yancey undertook to introduce in evidence the hill of exceptions, containing the testimony of William A. Bowden, for the purpose of showing the amount of expenses incurred by him in the way of doctor’s bill, hospital expense, loss of services, etc., sued for in the second count of the declaration, but the Chancellor in the Yancey case against the insurance company, sustained an objection and excluded this evidence. From the opinion of the Court of Appeals, by Senter, J., we quote as follows:

“Regardless of whether this evidence was competent, it does show an effort upon the part of the defendant, Insurance Company, to have the record afford some evidence on the question of how much of the jury verdict of $2,500 was intended to cover the matters sued for in the second count of the declaration, so as to afford some basis for arriving at the proper amount of the jury verdict for which the defendant would be liable in the William A. Bowden case. This effort was resisted by the solicitor for complainant. We think that it is clear from the record that complainant did not want any evidence in the record that would afford a basis for apportioning the jury verdict between the first and second counts of the declaration in the William A. Bowden suit.

“We are further of the opinion that the $5,000 paid by the defendant insurance company on the judgment obtained by Mrs. Sybil N. Bowden was the full limit of its liability on account of any injuries sustained by her and recovered by her in her suit, including all consequential damages resulting therefrom. This was the full amount of the coverage of the policy as to the injuries and all consequential damages resulting therefrom, sustained by Mrs. Sybil N. Bowden, under the specific and unambiguous provisions of the policy contract as hereinbefore quoted and referred to on that subject.

“We are further of the opinion that the burden of proof was upon the complainant to show by proof, if it could, how much, if any, of the jury verdict and the judgment thereon was for the personal injuries sustained by him, since the liability of the insuror as to William A. Bowden would be limited to the amount allowed for the personal injuries sustained by him, and any consequential damages resulting from his injuries, but not for consequential damages, including the items contained in the second count as to his wife, resulting from the injuries sustained by her, since these items could only be recovered under the coverage of the policy in the verdict for the wife.

“In this view of the case, we are of the opinion that the complainant having failed to show by proof the amount of the judgment in favor of William A. Bowden that would be within the coverage as to him, there can be no recovery in the present suit against the defendant, Utilities Insurance Company. Any recovery would necessarily have to be the result of conjecture, speculation, or guess, and this is certainly not permissible under the settled rule against speculative judgments.

“We are therefore constrained to hold that the learned Chancellor was in error in decreeing a judgment in favor of complainant under the facts as shown by the record in this case.

“It results that the decree of the chancellor is reversed and the suit dismissed.” Yancey v. Utilities Insurance Co., 23 Tenn. App. 675-676, 137 S. W. (2d) 326.

In the case at bar, Lowell Cordon, as plaintiff, showed by his own testimony, and by the transcript of the record in the former trial, that a total of $509.25 had been paid by him for hospital and medical expenses for himself, and $1,547.30 of similar expenses for his wife, Mrs. Kathleen G-ordon, making a total of $2,056.45. This amount might be treated as the maximum amount of hospital and medical expenses which could have been included in the jury’s verdict of $5,600. When this amount is subtracted from $5,600, it leaves $3,543.55. The trial judge, considering that evidence, reduced the Maryland Casualty Company’s liability on account of that judgment to $3,500, which is $43.55 less than the net amount remaining after deducting all hospital and medical expenses from the $5,600 judgment. In the case at bar this testimony was admitted in evidence, whereas in the Yancey case it was excluded. Assuming that it was properly admitted in evidence, we would be disposed to hold that, with this reduction in the amount of the Lowell Gordon judgment, the Maryland Casualty Company had received all consideration to which it could be entitled, except for the fact that the Lowell Gordon suit sought also a recovery for loss of consortium of his wife, Mrs. Kathleen Gordon. Unless we are to consider the additional deduction of $43.55, plus the difference of $500 between the $4,500 verdict in favor of Mrs. Gordon and the $5,000 limit of the policy as to her, as covering any amount which the jury might have returned for loss of ■consortium, no reduction was made on account of that item in Lowell Gordon’s recovery against Homer K. Lovin. -We are, therefore, left in the position of having to speculate as to what, if any, amount was included in the jury’s verdict for loss of consortium, and as is stated in the above quoted portion of this Court’s opinion in Yancey v. Utilities Ins. Co., neither this Court, the lower court, nor the jury trying the suit of Lowell Gordon against Homer K. Lovin, could he permitted to do. With the burden on the plaintiffs to show that the Maryland Casualty Company is not being required to pay more than $5,000 for injuries to any one person, we can not say that they have carried this burden in the instant case.

We, therefore, feel constrained to hold, on authority of Yancey v. Utilities Insurance Co., 23 Tenn. App. 663, 137 S. W. (2d) 318, that plaintiff in error’s first assignment of error, which is applicable exclusively to the case of Maryland Casualty Company v. Lowell Gordon, Homer K. Lovin, and Paul Southerland, is well taken, and must be sustained.

The net result is that the judgment of the Circuit Court of Hamblen County in the case of Maryland Casualty Company, Plaintiff in Error, v. Lowell Gordon, Homer K. Lovin and Paul Southerland, Defendants in Error, will he reversed, and that case dismissed; and that the judgments of the Circuit Court of Hamblen County in the cases of Maryland Casualty, Plaintiff in Error v. Kathleen Gordon, b/n/f Homer K. Lovin and Paul Southerland, Defendants in Error, and Maryland Casualty Company, Plaintiff in Error v. James Stuffel, Jr., Defendant in Error, will be affirmed. Judgment will be entered in this court in favor of Kathleen Gordon b/n/f, Homer. K. Lovin and Paul Southerland against the Maryland Casualty Company for $4,500, together with, interest thereon from the date of overruling of the motion for a new trial in that case, and in favor of James Stuffel, Jr. for $2,000, with interest from the date of overruling of the motion for a new trial in that case. The judgment of the lower court denying recovery of the 25% penalty will be affirmed.

The costs of the cause will be adjudged three-fourths against Maryland Casualty Company and its surety on the appeal bond, and one-fourth against the appellee, Lowell Cordon.

Avery, (P. J., W. S.), concurs in part. Carney, J., concurs.