Hinton v. Carmody

I dissent. At some time during the negotiations, respondent should have given notice to appellant that it disclaimed liability on a specific ground of non-liability under the policy. To the contrary, as shown in the record by a letter from the general office of the company in San Francisco, on January 8, 1934, to its adjuster Morrissey, it stated:

"Since they have not sued the named insured we consider it unwise to mention the fact to plaintiff's attorney that a judgment against anyone else is probably uncollectible, because they of course would get wise and join the named insured."

From this, it is manifest that there was not only no notice, but concealment of the fact on the part of respondent that the car was not borrowed by the Carmodys from one of the named assureds in the policy, as an intended defense.

At the very beginning of a seventy-five page note following the decision in Malley v. American Indemnity Corp., 297 Pa. 216,146 A. 571, 81 A.L.R. 1322, commencing on page 1326, it is stated:

"Stated in broad general terms, a liability insurer by assuming and conducting the defense of an action brought against the assured where with knowledge of facts taking the accident, injury, etc., outside the coverage of the policy, — and without disclaiming liability and giving notice of its reservation of rights, — is thereafter precluded in an action upon the policy from setting up the defense of noncoverage, it is held by the great weight of authority."

Then follows a long list of cases from many Federal and state courts, some of which I have examined. For instance, in Tozer v.Ocean Accident Guarantee Corp., 94 Minn. 478, 103 N.W. 509, that court said:

"At that time appellant was furnished all the information with reference to the accident, and, as required by the terms of the policy, three courses of action were open to it: It might have taken the position that there was no right of indemnity, even if respondent was liable; it might have taken charge of the litigation, and conducted it to a termination, for the benefit of respondent, provided he were given to understand that appellant did not consider itself bound by such conduct and liable under the terms of the policy; or appellant might have considered that there was a possible liability of indemnity, and preferred to take charge of the litigation, rather than turn it over to respondent. . . .

"While it may be that the acts of appellant were not such as to constitute a waiver, strictly speaking, yet there was at least an election of positions; and, having pursued a course of action consistent with its liability, such conduct ripened into an equitable estoppel, . . . Appellant comes within the rule that a person is precluded from taking, merely because his interests may change, a position inconsistent with the one previously assumed by him, and to the prejudice of a third person."

To the same effect is Peterson v. Maloney, 181 Minn. 437,232 N.W. 790. (See also cases therein cited.) Cf. Bowen v.Cote, 69 F.2d 136.

The conclusion is irresistible that respondent waived, or is estopped by, its course of conduct in this case and by not giving notice to the injured party, or the assured, of its real defense in the principal action, later to resort thereto.

The coverage in the bond is to the amount of ten thousand dollars, which of course is not sufficient to cover the amount of the judgment against the principal defendant. Appellant is entitled to that sum, together with interest at the rate of six per cent per annum from June 16, 1934, the date of the judgment in the original action, until paid, and his costs in this proceeding in the trial court and on appeal.

MILLARD, C.J., concurs with HOLCOMB, J.