Brief for the Respondents in Opposition — Kearns Coal Corp. v. United States Fidelity & Guaranty Co.

TREAT RR ee ST SEN APNE LL RIE EES TIA TE ODN BO ERE OLE LIER. Ei ES RIT IES at

i

IN THE

Supreme Court of the United Stare

Octroser Term—1940

No. 953

KEARNS COAL CORPORATION,

Petitioner,

against

UNITED STATES FIDELITY & GUARANTY

COMPANY,

Respondent.

RESPONDENT'S BRIEF IN OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI TO THE UNITED STATES

CIRCUIT COURT OF APPEALS FOR THE

SECOND CIRCUIT

Wim Dire Reep,

Wiuums J. McArruvr,

Counsel for Respondent.

New York, May Ist, 1941.

a —————————— ESS

LLRELELME LL BS IE LNIN GLEE LA LEL OAT LEE LIE LILA AEST RY FIG —————————

TABLE OF CONTENTS

PAGE

ROMP 5s ccs enw eunins bundy in oes. ha 1

CQramatiomn. Priaetad sik ok sick iva svika cos hee 2

Soa UNNNN ON TNE no veo kd oes aa i 2

Points:

I. No principle is involved or issue presented

which this Court should review er pass upon.. 10

II. According to plaintiff’s contentions and the

conceded evidence, the Kearns Coal Corpora-

tion was not an ‘‘additional assured’’ under the

defendant's pONOP i556. ici eee 11

III. The Circuit Court of Appeals and the District

Judge properly applied the New York law

necessitating a showing of prejudice before

an estoppel could arise against the defendant. 14

IV. Petitioner has failed to show facts sufficient to

entitle it to claim an estoppel................ 16

Conclusion

ee Blind Sell eth ed eh eh OE a ee et a ee ee

ii

TaBLE or CaseEs

PAGES

Baker vy. Union Mutual Life Ins. Co. of Maine, 43

ie BES CASE CSUADERTRAARAN GALA ROWAN A Seu E MRED 15

Bakker vy. Aetna Life Ins. Co., 264 N. Y. 150, 151, 152... 12

Baidwin vy. Abraham, 57 App. Div. 67; affd. 171

eG MEE ais cok ASHES EKER AYRE EN RA SRD 22

Bambauer v. Schleider, et al., 176 App. Div. 562 at

US eee mere Pee Sewer pe eT CET rte ree re 19

Brown v. Bedell, 232 App. Div. 158; 249 N. Y. 8. 277.. 18

Brustein v. New Amsterdam Casualiy Co., 255 N. Y.

SREY SRE GEE oot ae ar Or 12

Burdo v. Metropolitan Life Insurance Co., 254 App.

Bae; BB, BOs Oe. TIO BT. OOS ko isis cawesnscs 23

DCCC SCV, Ta Wa Fan CRO AOE V5 oh awe ees cer ecens 16

De Wolf v. Williams, 69 N. Y. 621, 622 ............. 24

Draper v. Oswego County Fire Relief Ass’n, 190 N. Y.

ee EO Se Re ee rete Pee Eee 15

Empire Mfg. Co. v. Moers, 27 App. Div. 464, 467 .... 16

Fidelity and Casualty Co. of New York v. Stewart

Dry Goods Co., 208 Ky. 429; 271 S. W. 444 ....... 17

Forsyth v. Hammond, 166 U. 8. 506, 514; 17 S. Ct 665,

RE Fk, es Aen ea Red 1 RENE ES CO Oe 10

Glen Falls Portland Cement Co., 162 N. Y. 399, 405;

Gi Se hah oc hak Ke chccapnas cad enene se eye 15

Guenther v. Ridway Co., 159 App. Div. 74, 77, 143

Re ee Se Se ra err ore eee on ere ee 18

Horowitz v. Daily Mirror, Inc., 144 Mise. 99; affd.

Ot Ns FIN Oe Kia cea save eRe REAR teak Osh wes 22

Joseph Gordon, Inc. v. Massachusetts Bonding and Ins.

CO., ae tay he SOAs 126 He BOO bk ni vivessievce 17

Kitsap County Transport Co, v. Pacific Coast Cas. Co.,

ee OR | eso rere 15

Knapp v. Smith, 27 N. Y. 277, 281, 282 ............. 24

Knauss, Inc. v. Indemnity Ins. Co., 270 N. Y. 211, 216;

Es A so a hs gd eee Rea oso ke os 15

Lavine v. Indemnity Ins. Co., 260 N. Y. 399, 407... .12, 14

Magnum Import Co. v. Coty, 262 U. S. 159, 163; 43

S. Ct. 531, 67 L. Ed. 922

iii

PAGE

Makiesky v. National Guardian Life Ins. Co., 174 Minn.

ORS AAO IR Wi OE. cs occ atndcacahi awe cea ceas 15, 16, 17

Mason-Henry Press v. Aetna Life Ins. Co., 211 N. Y.

WP Be Bee Oe eked ke cei et pee 17

Matter of Katz v. Kadans & Co., 232 N. Y. 420........ 23

Merritt v. Driggs, 87 N.Y. GBA 6. 2. occ, 19

New York Central & H. R. R. Co. v. Kinney, 260 U. S.

on; O28. Ct. 123, 67 bs. Mi 908. oo os oc 10

Pasley et al. v. Kearns Coal Corporation, 249 App.

Ms ME Se acntiy beh peLiWeIS yeh 20

Rhodes v. Ocean Accident & Guarantee Corp., Ltd.,

239 App. Div. 92, 95; 266 N. Y. S. 92, affirmed 264

Wis: Rv MONS Gk OM MR es eee cv i kc 15

Roche v. Nason, 185 N. Y. 128, 185.................., 25

Stapleton v. Butensky, 188 App. Div. 237 ........... 22

Sweet v. Tuttle, 14 N. Y. as oe ES ee eet 24

Ulm v. Western Union Telegraph Co., 258 App. Div.

Set Mi WO Ms We OW hoe sesso dee 23

United States v. Johnston, 268 U.S. 220, 227; 45 S. Ct.

Vance, Insurance (1930), DS SO cries cinccins 15, 17

New York Rules of Civil Practice, Rule 129........... 18

New York Civil Practice Act, Section 305 ............ 18

a : ere Feet ee

IN THE

Supreme Court of the United States

OctToser Term—1940

No. 953

KEARNS COAL CORPORATION,

Petitioner,

against

UNITED STATES FIDELITY & GUARANTY

COMPANY,

Respondent.

BRIEF IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

Statement

This brief is filed by respondent in opposition to a peti-

tion by the plaintiff, Kearns Coal Corporation, for a writ

of certiorari to the United States Circuit Court of Appeals

for the Second Circuit. Petitioner seeks a review in this

Court of a judgment of said Circuit Court of Appeals en-

tered in the above entitled action on April 3, 1941, which

reversed a judgment of the District Court of the United

States for the Southern District of New York, in favor of

the plaintiff in the sum of $18,300.50 and directed a dis-

missal of the complaint.

2

The opinion of the District Court is printed at page 437

of the record. The unanimous opinion of the Cireuit Court

of Appeals for the Second Circuit, written by Cuiark, Cir-

cuit Judge, in which Circuit Judges Swan and CuaseE con-

curred is printed at pages 444-452 of the record and is

reported in 118 F. (2d) 33.

Questions Presented

1. Was the plaintiff-petitioner an ‘‘additional assured’’

within the terms of the policy of the United States Fidelity

& Guaranty Company, without relying on an estoppel to

fall within such definition?

2. As a matter of law under the New York decisions,

must prejudice to an assured be established before an

estoppel may arise against an insurance company which

withdraws from the defense of an assured at a time and

under the circumstances where the insured is left with an

adequate opportunity to defend the action?

3. Under all of the circumstances in this case, has the

Kearns Coal Corporation presented facts sufficient to en-

title it to make any claim of estoppel?

No question of constitutional or statutory construction

is involved. No conflict between the different Circuits of

the United States Courts is presented.

Statement of Facts

The United States Fidelity and Guaranty Company, a

liability insurance company, on the 30th day of August,

1933, delivered to the Newton Contracting Company, Inc.,

its policy of insurance No. A-822487, wherein said Newton

3

Contracting Company, Inc., and/or Hastings Pavement Co.,

were named as assured (ff. 11, 35-37, Ex. 1, R. 326).

While this policy was in force, a certain Mack truck

described therein, after making deliveries of coal to plain-

tiff’s customers and while being driven back to the garage

on the 3lst day of December, 1933, collided with a sled

on which one William Pasley, eleven years old, was riding,

causing him serious injuries. Thereafter, on the 5th day of

January, 1934, William Pasley, by Anna Pasley, his guard-

ian ad litem, and Anna Pasley, individually, commenced an

action against the Kearns Coal Corporation, the Newton

Contracting Company and others.

The Kearns Coal Corporation, in turn, had its own

policy of automobile liability insurance with the Travelers

Insurance Company, in which it was a named assured. That

policy had a ‘‘Hired Automobiles Endorsement’? thereon

for which the plaintiff paid $1,500 as an estimated advance

insurance premium covering automobiles hired by the

Kearns Coal Corporation. This policy was taken out on

June 27th, 1933 (Ex. I, R. 413).

The defendant denied any liability to the plaintiff be-

cause of provisions, conditions and exclusions contained in

the insurance policy issued by the defendant to its assured,

Newton Contracting Company, all of which are referred to

at length in the following points. Primarily, defendant con-

tended that plaintiff did not come within the definition of

an ‘‘additional assured’’ as defined in defendant’s poliey.

Defendant’s answer also set up the fact that at the time of

the accident to the Pasley boy, the described automobile

was rented to the plaintiff by the Newton Contracting Com-

pany, and the defendant’s policy excluded any liability

‘‘while any disclosed automobile is rented to others.”’

CEES EEE EIS LOVES! PUI NTT LEE OLE LE LOA ELOISE AY A ROR TTR LEER, EEA NOE AEE

4

When this accident occurred, the Kearns Coal Corpora-

tion at once realized the obligations and liabilities of the

Travelers Insurance Company to defend it and be respon-

sible for any judgment which might be obtained in the

Pasley action. On the very day that the accident to the

Pasley boy occurred, the Kearns Coal Corporation by A. J.

Pagano, office manager, wrote a letter reporting the acci-

dent to H. Waltemade, Inc., the insurance broker through

whom Kearns Coal Corporation obtained the policy in the

Travelers (Ex. O, R. 417). This letter of December 31,

1933, was promptly forwarded to the Travelers (Ex. S,

R. 423).

Henry Waltemade wrote to the Travelers Insurance

Company on January 2nd, 1934, referring to the Kearns

Coal Corporation’s insurance Policy No. FA-7482553 and

asked the company to ‘‘give same your immediate atten-

tion and acknowledge receipt of this report.’’

The summons in the case of Pasley v. Kearns Coal

Corporation, et al. was served January 5th, 1934 on the

Kearns Coal Corporation. It was promptly sent by letter

to and received by the Travelers Insurance Company (Ex.

T, R. 424).

When Alexander Campbell, a Claim Department em-

ployee of the Travelers received a second letter from

Henry Waltemade, dated January 8, he telephoned Mr.

Pagano of the Kearns Coal Corporation ‘‘sometime after’’

and told him that in his opinion the Kearns Coal Corpora-

tion was entitled to protection under another policy of

insurance (ff. 765-766).

On being pressed further as to what he said, Camp-

bell answered:

Rae Cis . . ~ . R >a PON y » ROP BC a ORE PE TO RS eg Bete paren erent |

5

‘Well, I told Mr. Pagano that there was other

protection in addition to ours available to them * * *

and I suggested to Mr. Pagano that it would be to

their best interests to refer the summons to the

owner of the automobile’’ (ff. 767-768).

When this employee, Campbell, made these statements

to the manager of his company’s assured, the Kearns Coal

Corporation, he had never even seen the policy of the

Newton Contracting Company, the owner of the automobile

(f. 770). Evidently, upon the insistence of Campbell, the

Pasley summons served on Kearns Coal Corporation was

sent to the Newton Contracting Company, and, by it,

forwarded to the United States Fidelity and Guaranty

Company.

We have a letter, dated January 16, 1934, from the

defendant to its agent, the County Agencies Inc. (Ex. 23,

R. 377), and a letter from the County Agencies Inc., to

the Kearns Coal Corporation returning the summons in

the Pasley action (Ex. 24, R. 377). The letter written by

this agent of the United States Fidelity and Guaranty

Company which returned the summons to the Kearns Coal

Corporation states as the reason for its return that no

coverage was afforded to the plaintiff (Ex. 24, R. 377).

On January 23, 1934, Henry Waltemade, Inc., on be-

half of the Kearns Coal Corporation for the second time

forwarded the summons in the action of Pasley v. Kearns

Coal Corporation, et al. to the Travelers Insurance Com-

pany with a letter, dated January 23, 1934. This letter

asked the Travelers to give the matter their ‘‘immediate

attention’? but that company failed to appear (Ex. U, R.

425).

Once again, and finally for the third time, the sum-

mons in the action of William Pasley, an infant, et al. v.

6

Kearns Coal Corporation, et al. was forwarded to the

Travelers Insurance Company by Henry Waltemade, Inc.

(Ex. V, R. 426).

And again, the Travelers Insurance Company refused

to appear for its named assured, and so refusing, for-

warded the summons served on the Kearns Coal Corpora-

tion to this defendant. In their letter of February 6, 1934,

the Travelers’ manager wrote that ‘‘the plaintiff’s at-

torney states that he wi!l not grant any further extension

of time for Kearns to appear after February 12, 1934’’

(Ex. 27, R. 382, f. 1147).

The danger of a default by the Kearns Coal Corpora-

tion in filing its notice of appearance and answer became

imminent. The Travelers Insurance Company had re-

fused three times to accept the summons sent to it by its

insurance policy holder, the Kearns Coal Corporation. Mr.

Campbell of the Travelers assured a representative of the

Fidelity Company that the Travelers insurance policy did

not cover the Kearns Coal Corporation in this particular

case (ff. 765-766). No copy of this Travelers policy was for-

warded to the company’s representative (ff. 398-399, 413).

Thereupon, under the pressure of a possible default being

taken against the defendant, Kearns Coal Corporation, the

Fidelity Company designated the attorneys, Jenkins, Dim-

mick and Finnegan, who appeared in the Pasley action

and served an answer to the plaintiffs’ complaint on its

behalf (answer of defendant Kearns Coal Corporation veri-

fied February 21, 1934, Ex. 5, R. 334).

These attorneys took over the defense of the Kearns

Coal Corporation and exercised all professional care and

skill for a period of approximately eight months, from the

filing of its answer on February 21, 1934, to October 24,

7

1934. It then returned the papers in the Pasley case to

the Kearns Coal Corporation and disclaimed any liability

to that corporation under its policy of insurance No, A

822487 which it had issued to the Newton Contracting Com-

pany. During this period of eight months and later, both

insurance companies conducted investigations as to the

occurrence of the accident (ff. 817-822). An examina-

tion before trial of the presidents of the Kearns Coal Cor-

poration and Newton Contracting Company and the driver

of the motor truck at the time of the accident was held

pursuant to an order of a justice of the New York Supreme

Court (ff. 1195-1196, 1217, Ex. E, R. 399, 406).

Ray L. Walker, superintendent of the Claim Depart-

ment of the United States Fidelity and Guaranty Company,

read the testimony taken before trial of Messrs. Kearns,

Brown and Williams, and ordered a new investigation (f.

817). On the basis of a new statement made by A. J.

Pagano, dated October 15, 1934 (Ex. K, R. 415-416), the

testimony of the above witnesses, the reinvestigation of

the case and upon the opinion of counsel for the Fidelity

Company, Mr. Walker ordered this final disclaimer of

liability (ff. 816-837, Ex. 9, R. 346-347).

The Travelers received the papers in the Pasley action

which were returned to the Kearns Coal Corporation by the

defendant and referred the defense in said action to E. C.

Sherwood, attorney, at 100 East 42nd Street, New York,

N. Y. At this time Mr. Sherwood was substituted as attor-

ney for the Kearns Coal Corporation and took over its

defense in the Pasley action. The Fidelity Company had

designated the firm of Jenkins, Dimmick and Finnegan,

attorneys, which appeared in the Pasley action on behalf of

the co-defendants Newton Contracting Company and George

Pn eT ee, Brae

8

Williams. While the action was still pending, the Fidelity

Company settled the Pasley claims as against these two

defendants for the total sum of $15,000. This settlement

was duly authorized by Honorable Luoyp Cuurcu, Justice

of the New York Supreme Court, on January 6th, 1937

(Ex. G, R. 409-411).

E. C. Sherwood, as attorney for the remaining defend-

ant, Kearns Coal Corporation, then amended its answer by

setting forth as a separate, distinct and partial defense in

mitigation of damages that there had been paid on behalf

of the defendants Newton Contracting Company and

George Williams to the plaintiff William Pasley, an infant,

and to Anna Pasley, individually, the total sum of $15,000

on account of the injuries and damages sustained by reason

of the accident for which their action was still pending

against the Kearns Coal Corporation (Ex. H, R. 412).

The Pasley action was first tried in March, 1935. Ver-

dicts were rendered in favor of the plaintiffs which were set

aside by the Trial Judge. Upon that first trial, however,

the defendant Kearns Coal Corporation moved for a dis-

missal of the complaint and for the direction of a verdict

in its favor. This motion was denied by the Trial Justice

on the 22nd day of May, 1935 (Ex. R, R. 421-422).

Defendant Kearns Coal Corporation thereupon appealed

from that part of the order of Justice Cuurcu which denied

its motions for the dismissal of the complaint and for the

direction of a verdict in its favor. This appeal was argued

by counsel for the defendant Kearns Coal Corporation

urging that it was entitled to a dismissal of the complaint

and the direction of a verdict in its favor. The Appellate

Division, First Judicial Department, on January 22, 1937,

unanimously ordered that the order of Justice Lioyp

9

Cuvrcn so far as appealed from be affirmed, and held in

effect that a question of fact was presented for the jury

(Ex. Q, f. 1258, reported 249 App. Div. 806).

Finally, the Pasley action was again tried, from May 3

to May 7, 1937. A verdict was rendered therein for the

plaintiff William Pasley, an infant, for the sum of $30,000

and for the plaintiff Anna Pasley for the sum of $6,600, as

evidenced by. the final judgment entered on May 12, 1937

(Ex. 5, R. 339).

This judgment adjudicated and determined that at the

time of the occurrence of the accident in the underlying

action the motor vehicle of the Newton Contracting Com-

pany, Inc., was operated and controlled by the Kearns Coal

Corporation, its agents, servants or employees.

The Kearns Coal Corporation and the Travelers In-

surance Company, more than three years after the Pasley

action was started, entered into an agreement, on July 6,

1937, under which the insurance company advanced $15,000

to Kearns, its named assured. The receipt of this sum was

acknowledged by the Kearns Coal Corporation for the sole

purpose of enabling it to settle and satisfy the judgment

of May 12th, 1937, which had been rendered in favor of the

Pasleys against the Kearns Coal Corporation (Ex. 18, R.

362-366). The money so paid by the Travelers Insurance

Company to the Kearns Coal Corporation was used in

settlement and satisfaction of the Pasley judgment. A

satisfaction of the judgment was duly filed on July 13, 1937,

and the Pasley action was closed on the records of the

Supreme Court, County of Bronx. For the amount so paid

in satisfaction of the said judgment this action was brought.

SO at ich

RNs

Yb Vial coils

10

POINT I

No principle is involved or issue presented which

this Court should review or pass upon.

Whether the petitioner in this action, a retail coal dealer

doing business in the County of Bronx, City and State of

New York, has made out any right to claim coverage under

the policy of insurance issued by the defendant on the

automobile of its assured, the Newton Contracting Com-

pany, is not a question of great public concern.

According to the petitioner, a review by this Court is

requested herein to determine whether on the complicated

facts of this case and the voluminous record herein, peti-

tioner has established a right to recover against the re-

spondent (Petition, p. 11).

This Court will not grant a writ of certiorari to review

evidence and discuss specific facts,’ nor was discretionary

jurisdiction conferred upon the Supreme Court merely to

settle matters of private interest,’ or to give the party de-

feated in the Court below another hearing.*

Furthermore on the merits herein, certiorari must be

denied for the reason that the Circuit Court of Appeals

for the Second Circuit achieved a correct result in this

action.

1 United States v. Johnston, 268 U. S. 220, 227, 45 S. Ct. 496, 69 L. Ed.

925; New York Central § H. R. R. Co. v. Kinney, 260 U. 8. 340, 346, 43 8. Ct.

122, 67 L. Ed. 294.

2 Forsyth v. Hammond, 166 U. S. 506, 514, 17 8S. Ct. 665, 41 L. Ed. 1095.

8 Magnum Import Co. v. Coty, 262 U. 8. 159, 163; 43 8. Ct. 531, 67 L.

Ed. 922.

11

POINT Il

According to plaintiff’s contentions and the con-

ceded evidence, the Kearns Coal Corporation was not

an “additional assured” under the defendant’s policy.

The plaintiff, not being named in the defendant’s policy,

must first show that it was an ‘additional assured”? within

the ‘‘omnibus clause’’ of the defendant’s policy before it

can bring any action thereon. This clause (Section II,

(1)) reads:

‘‘The unqualified word ‘Assured’ includes not

only the Named Assured, but any other person or

organization while using any such automobile, in-

cluding also any other person or organization re-

sponsible for the use thereof, provided the disclosed

and actual use of such automobile is ‘Pleasure and

Business,’ or ‘Commercial,’ each as defined herein,

and further provided that such use is with the per-

mission of the Named Assured. * * *”

By Item 10 (b) of ‘‘Declarations,’’ ‘‘the term ‘Com-

mercial’ when used is defined as the transportation or

delivery and the loading and unloading of goods or mer-

chandise in direct connection with the Assured’s occupa-

tion as expressed in Item 3.’? And Item 3 states: ‘‘The

Assured is (a) (1) Paving Contractor (2) Mfg. Paving

Blocks.’’ (See defendant’s policy, Plaintiff’s Exhibit : &

R. 326.)

It is conceded that the truck in question was being

used on the day of the accident, not in connection with

the business of a paving contractor or manufacturer of

paving blocks, but in the delivery of coal sold by plaintiff.

12

Thus, according to the unequivocal definition, the use was

not ‘‘Commercial’’ within the special meaning of the policy

and hence plaintiff does not fall within the definition of an

‘‘additional assured’’ thereof.

The purpose and scope of the extended omnibus clause

(Section II, (1)) is to afford coverage under the policy

where one, other than the owner, is ‘‘using’’ or is ‘‘re-

sponsible for the use’’ of the car belonging to the owner.

By judicial definition the coverage afforded thereunder is

aimed ‘‘to protect the public against operation of the car

by others than the owners * * *.”’

Brustein v. New Amsterdam Casualty Co., 255

N. Y. 137, 142;

Bakker v. Aetna Life Ins. Co., 264 N. Y. 150,

151, 152;

Lavine v. Indemnity Ins. Co., 260 N. Y. 399, 407.

But if the plaintiff’s claims are to control, namely, that

the truck at the time of the accident was being used and

operated by Newton Contracting Company, and not the

Kearns Coal Corporation, then plaintiff has argued itself

outside of the ‘‘omnibus clause’’ and consequently out of

the policy sued upon.

On the other hand, if plaintiff were to assume the con-

verse position, that it did have control of the truck, then

recovery under the policy must still be denied.

Section IV (b) of the defendant’s policy contained the

further exclusion of liability ‘‘under any of the above

agreements while any disclosed automobile is rented to

others.”’

13

Control of the truck in the Kearns Coal Corporation, in

addition to the admitted fact that plaintiff paid the sum of

$30.00 a day (complaint, paragraph XI, R. 6) for the use

thereof, would clearly constitute a ‘‘renting.’’ This was so

charged by Judge Burke in the present action, to which

counsel for plaintiff did not except, nor request the Court

to charge otherwise (ff. 929, 931). The petitioner is then

guilty of a violation of the ‘‘renting’’ provision, in which

event, recovery under the policy is excluded.

Furthermore, should plaintiff take the position that it

did have control of the truck it would necessarily follow

that its contention that answers were given on the ex-

amination before trial by Mr. Kearns under a ‘‘misunder-

standing of the law,’’ as to control would be without merit.

This Court will also note that Section II (1) is further

expressly limited by Section V, Condition ‘‘D”’ excluding

‘‘any other assured’’ where it has other ‘‘valid and col-

lectible insurance against a loss also covered by this policy.’’

It is conceded that the Kearns Coal Corporation had

a policy of insurance with the Travelers Insurance Com-

pany, which was issued prior to the defendant’s policy,

and in which the Kearns Coal Corporation was ‘‘a named

assured’’ (see Defendant’s Exhibit I, p. 413). For all of

these reasons, the plaintiff failed to show that it came

within the definition of an additional assured in the policy

of the respondent.

FS ROS TOME Fare ee P RT

DDH Biche 9B PEROT PAIR TEI SE

EES RR eee De

14

POINT Ill

The Circuit Court of Appeals and the District Judge

properly applied the New York law necessitating a

showing of prejudice before an estoppel could arise

against the defendant.

The District Judge in the present action charged the

jury:

‘‘Before the jury may find that the defendant is

estopped from asserting Section IV, which excludes

any liability while the disclosed automobile is rented

to others, they must first find that the plaintiff suf-

fered actual prejudice as a result of the defendant’s

conduct”’ (f. 953).

This ruling was reaffirmed by the Circuit Court of Appeals,

which specifically cited the principle of Lavine v. Indemnity

Insurance Co., of North America (260 N. Y. 399, 183 N. KE.

897, reversing 234 App. Div. 906, 254 N. Y. S. 1000, 142

Mise. 422, 254 N. Y. S. 804), as controlling. In this case,

according to the facts as found by the Trial Judge sitting

without a jury, the defendant for a period of months con-

strued the policy to cover the liability in question. It re-

ceived notice of the accident from the assured shortly after

the accident happened. It investigated the accident, ob-

tained affidavits from parties, and learned of the facts

constituting a defense to the action. Further, the defend-

ant without reservation or qualification assumed the de-

fense of the action by getting an extension of time to an-

swer (see 142 Misc. 422, 426). The Court of Appeals

reversed the judgment in favor of the plaintiff and held

specifically :

15

‘‘We are unable to agree with the conclusion reached

by the Trial Term that the defendant by its con-

duct had waived the defense now insisted upon and

estopped itself from urging such defense. The de-

fendant’s conduct did not in any way prejudice the

plaintiff (Weatherwax v. Royal Indemnity, 250 N.

Y. 281; Gerka v. Fidelity and Casualty Co., 251 N.

2”

The Lavine case illustrates the universal rule which

requires a showing of prejudice before an equitable es-

toppel can arise.*

The New York Court of Appeals decided the Lavine

case at a time subsequent to all of the cases cited by peti-

tioner. It constitutes the latest and most authoritative

ruling ky the New York Court of Appeals, on the question

of estoppel. The decision reveals (p. 402) that substan-

tially all of the arguments and cases now cited by petitioner

were expressly urged upon the Court’s attention in the

Lavine case, and, notwithstanding, the Court held that a

showing of prejudice was necessary. It is respectfully

submitted that the general rule as applied in the Lavine

case should be followed and certiorari be denied here.

4 Knauss, Inc. v. Indemnity Ins. Co., 270 N. Y. 211, 216, 200 N. E. 791;

Draper v. Oswego County Fire Relief Ass’n, 190 N. Y. 12, 16, 82 N. W. 755;

Baker v. Union Mutual Life Ins. Co., of Maine, 43 N. Y. 284; Rhodes v. Ocean

Accident § Guarantee Corp., Ltd., 239 App. Div. 92, 95, 266 N. Y. 8. 92, af-

firmed 264 N. Y. 437; 191 N. E. 502; Glen Falls Portland Cement Co., 162

N. Y. 399, 405, 56 N. E. 897; Kitsap County Transport Co. v. Pacific Coast

Cas. Co., 67 Wash. 297, 121 P. 457; Makiesky v. National Guardian Life Ins.

Co., 174 Minn. 554; 219 N. W. 864; Vance, Insurance (1930), p. 518.

— |

16

POINT IV

Petitioner has failed to show facts sufficient to en-

title it to claim an estoppel.

Having established that petitioner was not an ‘‘addi-

tional assured’’ under the policy issued by the respondent

(Point I, supra), it must necessarily follow that petitioner

is not one who is entitled to any standing in Court to assert

an estoppel against the Fidelity Company. Since the peti-

tioner does not come within the policy as a named assured,

nor as an ‘‘additional assured,’’ the Kearns Coal Corpora-

tion was consequently a stranger to the policy issued by the

defendant. A stranger may not assert an estoppel against

one who owed him no pre-existing duty to act or not to act

in any prescribed manner.®

Moreover, the petitioner has not contended at any time

during the present litigation that it was in ignorance of

the true facts which here constitute a defense to plain-

tiff’s action on defendant’s policy. John J. Kearns, the

president of the Kearns Coal Corporation, was also the

secretary of the Newton Contracting Company (ff. 562, 579,

599-601). The petitioner had the fullest knowledge con-

cerning the use and operation of the truck at the time of the

accident (ff. 302, 757; Defendant’s Exhibits K and 4, pp.

415, 417). The plaintiff was expressly and promptly in-

formed that defendant’s policy did not cover the Kearns

Coal Corporation. The party petitioning for estoppel must

present its claim in entire good faith. But, when its officers

knew all of the facts, the petitioner cannot honestly claim

5 Deery v. Cray, 72 U. 8. 795, 803; Empire Mfg. Co. v. Moers, 27 App.

Div. 464, 467; Averill v. Wilson, 4 Barb. 180, 190; Makiesky v. National Guard-

tan Life Ins. Co., 174 Minn. 554, 219 N. W. 864.

17

that the insurer’s representations misled it. Consequently

it may not assert an estoppel.®

The respondent unequivocally advised petitioner that it

was not covered by the policy issued to the Newton Con-

tracting Company. It twice returned the summons and

complaint to Kearns with the explicit statement that peti-

tioner was not covered (Plaintiff’s Exhibits 23, 24, 26,

pp. 375-382). Upon the failure of the Travelers Insurance

Company to defend, a default was imminent (f. 1147). Not

only would this have constituted irreparable damage to

plaintiff, but such default, with the admission of liability

implicit therein, would have embarrassed and hampered the

proper defense of the Newton Contracting Company, the

owner of the truck. Under these unusual circumstances,

the fact that the defendant yielded after the Travelers

Insurance Company had three times refused to accept the

summons which the petitioner had forwarded to it, cannot

be construed as an admission or representation of lia-

bility by the defendant or the “‘free’’ adoption of a con-

tract.?

The petitioner wholly failed to show that it was preju-

diced by the appearance of the defendant ‘in its behalf,

prior to the time of disclaimer. There was no question of

fact which properly could have been submitted to a jury

to support any finding of prejudice,

The only prejudice claimed by the plaintiff in respect to

the Pasley action was the alleged improper handling of the

examination before trial of the Kearns Coal Corporation

6 Vance Insurance (1930),

174 Minn. 554; 219 N. W. 864.

7 Mason-Henry Press y. Aetna Life Ins. Co., 211 N. Y. 489, 105 N. BE.

826; Joseph Gordon, Inc. v. Massachusetts Bonding and Ins. Co., 229 N. Y.

424, 128 N. E. 204; Fidelity and Casualty Co. of New York v. Stewart Dry

Goods Co., 208 Ky. 429, 271 S. W. 444.

518-524; Makiesky v. National Life Ins. Co.,

18

by John J. Kearns, its president. The motion for an ex-

amination before trial had been opposed by Vincent F.

O’Rourke, one of the designated attorneys, and his filed

affidavit in opposition thereto is part of Defendant’s Ex-

hibit F (R. 402). The examination proceeded on direction

of Mr. Justice Wasservocen. of the Supreme Court, who

decided that the plaintiffs were entitled to a pre-trial ex-

amination as to Items 1 and 2 of the notice which related

to the question of operation and control of the truck at

the time of the accident (ff. 504-505, 1195, 1217). The an-

swer prepared by Mr. O’Rourke denied operation and con-

trol on the part of the Kearns Coal Corporation (ff. 457,

989, 990, 1003, 1004, R. 335).

Mr. Kearns was not called to testify to any questions

of law. If the direct questions as to supervision and con-

trol asked of him, improperly included conclusions of law

as petitioner contends, the answers thereto would have been

incompetent. This being so, regardless of what answers Mr.

Kearns made on the examination before trial, the New York

law expressly and explicitly states that such answers must

be excluded at the time of the trial and not upon the ex-

amination itself.

New York Rules of Civil Practice, Rule 129;

New York Civil Practice Act, Section 305.

These two sections have been judicially construed to

mean that any objections to incompetent questions upon an

examination before trial must only be made upon the trial

and not upon the examination.

Guenther v. Ridgway Co., 159 App. Div. 74, 77, 143,

N. Y. S. 961;

Brown v. Bedell, 232 App. Div. 158, 249 N. Y. S. 277.

19

With the right to object at the trial to whatever incompe-

tent questions were asked of Mr. Kearns upon the pre-trial

examination, the petitioner cannot rightfully claim that its

position was ‘‘adversely affected’? by the conduct of the

attorney, Mr. O’Rourke, upon the examination before trial.

If the attorney, who was later designated by the Travelers

Insurance Company to act for the petitioner, failed to

object to such questions upon the second Pasley trial, then

the prejudice lies in his omission. If the trial justice during

that trial improperly allowed any incompetent questions

then the petitioner’s remedy was on appeal.

If any error was committed by the Trial Court in that

action in the New York Supreme Court, it cannot now be

attacked collaterally in this honorable Court. It is well

established under the New York law that a failure of the

Trial Court to rule on incompetent questions at the trial

on objections and exceptions then taken, even for the first

time, constitutes reversible error.

Bambauer v. Schleider, et al., 176 App. Div., 562 at

564-565.

An objection to a question calling for the conclusions

of the witness would be an objection not to form, but to

the competency of a lay witness to express an opinion and

therefore such objection was properly reserved for the

trial.

Merritt v. Briggs, 57 N. Y. 651.

In any event, there is no foundation in this record to

support the arguments of counsel for petitioner, that Mr.

Kearns misunderstood the meaning of the questions as to

*“supervision and control.’? The present trial took place

shortly less than six years since the attorneys for the de-

fendant withdrew as counsel for the Kearns Coal Corpora-

20

tion. During this time it had its own attorneys to advise it

on what actually constituted control. Yet Mr. Kearns on

this trial, in answer to a question asked by Mr. Skidmore

as to what he meant by an answer given upon the examina-

tion that George Williams was driving the automobile

truck under his supervision answered:

‘‘T understood by that question that Mr. Weltz was

asking me whether or not the truck worked for me

that day, and whether it was under my control for the

nine days—for the nine hours which constituted a

days’ work at that time’’ (ff. 583, 593).

Mr. Kearns there reiterated on this trial his statement

that the truck was under his control. His following answer

that he understood by control ‘‘where Williams was to take

and deliver his load of coal,’? does not reveal any gross

misunderstanding of what is legally meant by control but

rather is consistent therewith (ff. 594, 595).

On cross examination Mr. Kearns testified that he was

a witness at the second Pasley trial, and that he probably

did tell the jury in that case just what he meant by the

answers he made on the examination before trial (f. 596).

This was substantially the view taken by the justice who

presided on that trial when he said: ‘‘If the conclusion is

not right, the witness (Mr. Kearns) is still available to

elicit the facts, if the facts differ’’ (f. 557). This same

witness, John J. Kearns, on the first Pasley trial testified

that he understood every answer that he gave upon the

pre-trial examination. (See record on appeal, p 302, f. 906,

in the case of Pasley, et al. v. Kearns Coal Corporation,

249 App. Div. 806.)

No motion was ever made by petitioner during the 214

years which elapsed between defendant’s disclaimer of

SRS TOPOL EH LOIRE MOT ak SOE, PIP Ra R Py ae

21

liability and the second trial in the Pasley action, to cor-

rect any of the answers given by Mr. Kearns. Nor was

leave ever requested to have the examination before trial

re-opened for the purpose of taking additional testimony.

It cannot be said that upon the examination before trial

Mr. O’Rourke should have advised the Kearns Coal Cor-

poration that it did not have control of the truck. If Mr.

O’Rourke had done this, he would then have been sub-

ject to the criticism that he was laying a foundation for a

disclaimer under the defendant’s policy in respect to the

provisions of the omnibus clause. If Mr. Kearns had tes-

tified upon that examination that he was not in control

then, as already demonstrated in Point IT, supra, the Kearns

Coal Corporation would not have been “‘using’’ or ‘‘re-

sponsible for the use’’ of the truck. In consequence it

would definitely have been excluded as an additional as-

sured under the defendant’s policy. This, too, would have

have necessitated a disclaimer of liability by the defendant.

Petitioner’s contention that as a matter of law the

Kearns Coal Corporation did not have control of the truck

is incorrect and Mr. O’Rourke as an attorney could not

have ethically given any such advice. The order of the

Appellate Division, First Judicial Department which un-

animously affirmed the refusal of the Trial Court to dis-

miss the Pasley’s complaint as to the Kearns Coal Corpora-

tion completely vindicated Mr. O’Rourke’s action in not

advising petitioner that it was not in control (see 249 App.

Div. 406). The petitioner here cannot possibly contend

that as a matter of law Kearns was not in control, when

the New York Appellate Division has held squarely that

the Kearns Coal Corporation, could properly be found

under the facts in this ease to have been in control.

22

Alfred J. Pagano, office manager and chief clerk of the

Kearns Coal Corporation, testified that when the coal com-

pany’s business was more than their own trucks could

handle ‘‘we had to hire outside trucks. In most cases it

was this particular truck ewned by the Newton Contract-

ing Company’’ (f. 134).

The truck came to its place of business at seven o’clock

in the morning. ‘‘Mr. Williams was told what to load, that

is, in sizes of coal, and the man—and he went down the yard

and he loaded them, pulled up to the scale, it was weighed,

tickets were made out, sent out for delivery’? (f. 140).

George Williams’ duties were more than that of a chauf-

feur. When he went out on the truck with the workmen,

it was Williams who was charged with personal responsi-

bility. He made the delivery in accordance with his orders.

He collected the money due for the coal and gave a receipt

therefor when the ticket was marked for C. O. D. delivery

(ff. 253-256, 302, 1021, Exs. 6 and 7).

When Williams received the ticket for the last load at

about four or a little after in the afternoon of December

31st, Pagano told him ‘‘to come to work the next morning

at seven o’clock.’? After making this last delivery of coal,

Williams started for the garage. Even though the work

sometimes required a quarter or a half hour overtime, it

was customary only to charge for nine hours (ff. 151, 289,

311).

Signs about three feet high and six feet long reading

‘*Kearns Coal Corporation, Bronx, N. Y.’’? were on each

side of the truck. Prima facie, the Kearns Coal Corpora-

tion was responsible for the damages caused, on this ad-

mitted fact.’ Directly after the accident happened, Wil-

8 Baldwin v. Abraham, 57 App. Div. 67; affd. 171 N. Y. 677; Stapleton v.

Butensky, 188 App. Div. 237; Horowitz v. Daily Mirror Inc., 144 Mise. 99,

affd. 237 App. Div. 876.

pms

23

liams notified Mr. Pagano first by telephone. And, the

next morning Williams went back to Mr. Pagano with the

same truck and worked again for the Kearns Coal Corpora-

tion (ff. 302-304, 1247) as he was directed prior to the ac-

cident by them (f. 151).

It cannot be argued seriously by petitioner that the

status of Williams’ employment changed on the stroke of

five o’clock, especially on the evidence herein that there

was ice and snow on the streets which made the pavement

slippery and much delayed the progress of the truck (ff.

314, 1251).

Under all of the New York authorities where one has

an accident while on his way home from the place where

he had made his last call or last delivery for the day in

the business of another, it has been held that at the time of

“the accident such employee was still engaged in the per-

formance of the duties for which he was employed.

Burdo v. Metropolitan Life Insurance Co., 254

App. Div. 26, 28; affd. 279 N. Y. 648 ;

Ulm v. Western Union Telegraph Co., 258 App.

Div. 776; affd. 282 N. Y. 645 ;

Matter of Katz v. Kadans & Co., 232 N. Y. 420.

These particular facts distinguish the case at bar from

the cases cited by petitioner on pages 21 to 23 of his

brief. In this case we have the affirmative testimony of Mr.

Kearns that as part of the agreement or contract of hiring,

and in consideration of the sum of $30 per day, the Newton

Contracting Company was to surrender control of the truck

to the Kearns Coal Corporation (ff. 458, 470, 475, 519, 520,

521, 531-533). Counsel for petitioner are careful not to

allege that such questions asked on the pre-trial examina-

24

tion were improper. (See p. 7 of petitioner’s brief.) Nor

can it be denied that such questions were proper since they

concerned the terms of an oral contract of hiring and were

clearly a question of fact, which was determined adversely

to the Kearns Coal Corporation in the Pasley action. There

was therefore in the ease at bar clearly a new relationship

between Williams and Kearns Coal Corporation, since,

by agreement, command had been surrendered to the

petitioner.

It is a complete answer to the charge of a failure to

object to questions on the examination before trial that

appropriate objections were actually made upon the sec-

ond Pasley trial as shown by the record. The learned

Trial Court on that Pasley trial did pass upon the compe-

tency and relevancy of all of the questions which counsel

in this action has sought to prove to be prejudicial. Some

of the objections were sustained, and others were over-

ruled (ff. 513, 520-533).

Another complete answer to plaintiff’s contention of

prejudice is that the rule excluding opinion evidence is

subject to exceptions. A common exception thereto is the

rule that a lay witness may state an opinion or a conclu-

sion where the witness has knowledge of the facts upon

which the conclusion is derived. Merely because a con-

clusion of fact may also have a legal significance would not

necessarily make the opinion incompetent.

Sweet v. Tuttle, 14 N. Y. 465, 471;

De Wolf v. Williams, 69 N. Y. 621, 622;

Knapp v. Smith, 27 N. Y. 277, 281, 282.

Mr. Kearns was examined before trial in the Pasley

action in the presence of Ross Brown, president of the

Newton Contracting Company, and George Williams, the

25

driver of the truck at the time of the accident (ff. 573-574).

In his double capacity as president of the Kearns Coal

Corporation (ff. 578-579) and as secretary of the Newton

Contracting Company (ff. 620-621), Mr. Kearns was cer-

tainly qualified to testify as to which of the two companies

was in control of the motor truck at the time of the accident.

Also, Mr. Kearns testified that he talked over and dis-

cussed all of the facts in the Pasley case with Ross Brown

about the 3rd of January, 1934 (f. 600). The Court’s order

provided for the examination to be held on March 9, 1934,

Kearns knew prior to the examination before trial that

‘‘the idea of the examination’? was to sce ‘who was in

supervision of the truck when the accident happened.’’

He says that to the best of his knowledge and belief he

told the truth on that examination. He swore before a

notary public that the answers given by him were true.

He read his deposition over very carefully and knew that

it was to be used on the Pasley trial (ff. 569, 570, 596, 600,

611-613). For all of these reasons the Kearns Coal Cor-

poration was not prejudiced in the Palsey action. Its presi-

dent on being examined before trial told the whole truth.

Petitioner, nevertheless, states that its main conten-

tion is not that Mr. O’Rourke, was negligent, but that he

deliberately failed to protect the Kearns Coal Corporation.

It is charged against this member of the bar that he was

willing to lay a foundation for a subsequent disclaimer

by his client, the defendant in this action. This charge is

baseless. In making it, petitioner’s counsel disregards

the evidence on this record that both Mr. Kearns and Mr.

Brown reaffirmed on the trial the truth of their testimony

on the pre-trial examination (ff. 596, 693). The fact is

also referred to in this record that Mr. Brown testified

in the Pasley trial that ‘‘they timed the hiring from the

PGE ETI VEN LE EVE LPT IIE FINDER SSMS OLS OSE TENE TNE RE RE tae TERS ra i

26

time that the truck got to Kearns to the time it returned

to the garage’’ (f. 694).

Petitioner argues that the admissions which Mr.

Kearns made on his examination before trial were a de-

ciding factor in persuading the Trial Judge on the second

trial of the Pasley action to deny the motions to dismiss

the complaint. How can the petitioner fairly argue what

the record in the underlying case would disclose when,

by plaintiff’s objections, that record when offered by

defendant, both in parts and as a whole, was excluded by

the District Court in the case at bar? We do not know

what was in the mind of the Judge but we do know that

the printed reeord of the second Pasley trial does not dis-

close any of the prejudice claimed by petitioner. A party

may not profit on an appeal by an erroneous ruling which

he himself induced the Court below to render.

Roche v. Nason, 185 N. Y. 128; Bartuert, J., at

page 135.

Petitioner’s counsel in their brief erroneously state

at pages 29-30 that the issuance by defendant of a certificate

of insurance to Stephens Fuel Co., another retail coal

dealer, indicated a knowledge that the trucks of the New-

ton Contracting Company were to be used to carry coal.

No inference of any such purpose can be drawn from the

issuance of a certificate of insurance. Such a paper is

merely a statement that an insured, such as the Newton

Contracting Company, has protected itself with automo-

bile liability insurance. No charge is made for furnishing

this information, and the so-called certificate of insurance

extends no coverage whatever to anyone. It has no more

effect than if the insurance company wrote e letter advising

27

the inquirer that the Newton Contracting

Company or

any other company had insured its trucks,

In this case the Newton Contracting Company, which

was engaged in business as a paving contractor may have

had a contract to pave the coal yard, the ramps or drive-

ways of the Stephens Fuel Co. The certificate of insurance

was informative only as to the contractor’s automobile

insurance coverage. That is what the defendant, as under-

writers, would assume from such an inquiry. There is no

evidence in the case, nor can it be assumed from such a

certificate, that coal was carried by the Newton Contracting

Co., for the Stephens Fuel Co.

CONCLUSION

For the foregoing reasons the petition for a writ

of certiorari to the United States Circuit Court of Ap-

peals for the Second Circuit should be denied.

Respectfully submitted,

Witum Dice Rerp,

Counsel for Respondent.

Witu1am Dice Rezp,

Wim J. McArruvr,

Of Counsel.

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