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American Ins. Co. v. Rural Mut. Cas. Ins. Co.

Supreme Court of Wisconsin
Nov 1, 1960
105 N.W.2d 798 (Wis. 1960)


October 4, 1960 —

November 1, 1960.

APPEAL from a judgment of the circuit court for Dane county: EDWIN M. WILKIE, Circuit Judge. Affirmed.

For the appellant there were briefs by Roberts, Boardman, Suhr, Bjork Curry of Madison, and oral argument by Walter M. Bjork.

For the respondent there was a brief by Riley, Riley Pierce, and oral argument by Michael B. Torphy, Jr., all of Madison.

Action commenced by plaintiff American Insurance Company, a foreign corporation, against defendant Rural Mutual Casualty Insurance Company, a Wisconsin corporation, for the recovery of an amount paid by plaintiff to its insured, Wonewoc Rendering Works, for property damage sustained in an accident involving the motor vehicles of plaintiff's insured and defendant's insured, Keith McNamer. Defendant moved for summary judgment, which motion was granted, and from a judgment dismissing the complaint, plaintiff appeals.

The collision occurred on November 5, 1951. It resulted in the death of Keith McNamer, defendant's insured, and damage to the vehicle of Wonewoc Rendering Works, plaintiff's insured, which vehicle was being operated by the insured's employee, one Dempsey. Under the terms of its policy, plaintiff paid its insured's property damage in amount of $2,014.75 and by virtue thereof was subrogated to the claim of its insured to that extent. Defendant's policy issued to McNamer was one of liability insurance.

On August 19, 1953, action was commenced by a personal representative of McNamer against the plaintiff here, its insured, and Dempsey, and thereafter American Insurance Company served and filed its counterclaim for property damage. That case was tried in the circuit court for Juneau county and a jury verdict returned finding Wonewoc Rendering Works (Dempsey) solely responsible for the accident. Judgment was entered in favor of McNamer's estate. On appeal, on October 5, 1954, this court reversed the judgment, remanding the case with instructions to enter judgment dismissing the complaint on the ground there was no negligence on the part of Wonewoc Rendering Works. McNamer v. American Ins. Co. (1954), 267 Wis. 494, 66 N.W.2d 342.

The policy issued by defendant to McNamer was subject to the following condition:

"6. Action Against Company, Coverages A (Bodily Injury) and B (Property Damage) No action shall lie against the company unless as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy."

Defendant had notice of the accident and made an investigation thereof, but it received no notice of the action against its insured by way of the counterclaim in the McNamer Case until October 15, 1954. McNamer's representative never forwarded the process to his insurer, the defendant here, and the company had neither actual nor constructive knowledge of the existence of the counterclaim until after the appeal, more than thirteen months after it was served.

The trial court held that defendant has a complete affirmative defense in bar of plaintiff's cause of action. We agree.

Under the policy, McNamer was required to notify Rural Mutual immediately of any claim or suit brought against him and forward the process received by him. Upon his death, that duty devolved upon his personal representative, upon whom the counterclaim was served. Failure to comply with the terms of the policy was a breach of the insurance contract and relieved Rural Mutual of liability as to such claim. Heimlich v. Kees Appliance Co. (1950), 256 Wis. 356, 41 N.W.2d 359, Anno. 18 A.L.R. 2d 455; Al Shallock, Inc., v. Zurich General Accident Liability Ins. Co. (1954), 266 Wis. 265, 63 N.W.2d 89.

There can be no doubt that Rural Mutual was prejudiced by failure of McNamer's personal representative to give it notice of the counterclaim. It was not a party to that action; it was deprived of its right to defend against the counterclaim on the merits; it was afforded no opportunity to protect its interests.

Plaintiff urges that this is a separate and distinct action from the earlier McNamer Case and no claim is being made here on the basis of the pleadings in that action. The claim made in this case is, however, based upon McNamer's alleged negligence, as was its claim in the earlier case. That issue was tried, the jury finding the deceased free from negligence as to position on the highway, the only question submitted as to McNamer. The jury found Dempsey causally negligent as to position on the highway and as to operating his vehicle while intoxicated. American, the defendant in that case, appealed on the questions of Dempsey's negligence only. It presented no argument with respect to the finding on McNamer's negligence. This court held the evidence insufficient to support the findings as to Dempsey's negligence and ordered the complaint dismissed. Now American attempts to retry the issue of McNamer's negligence in an action against his insurer on the identical cause of action it asserted by counterclaim in the previous case. Moreover, as the trial court observed, it could be reasonably inferred that American knew or should have known that Rural Mutual was the insurer of McNamer, but it did not seek to join the insurance company as a party defendant in the previous action.

The facts recited above as to the McNamer Case are unnecessary to a decision in this case except to show that the claim made by plaintiff in this action is the same claim it asserted in the previous case against McNamer's personal representative. The bar to its cause of action now arises from its own failure to join Rural Mutual in the first instance and then pursue its claim on the previous appeal.

By the Court. — Judgment affirmed.

I cannot agree that there was such breach of condition on the part of the personal representative of the defendant's insured, the deceased McNamer, as to relieve the defendant insurance company from all liability on the policy.

In the recent case of Kurz v. Collins (1959), 6 Wis.2d 538, 551, 95 N.W.2d 365, we held that a breach of condition of a policy of automobile liability insurance, in order to work an avoidance of the policy, must be material if the rights of an injured third party have intervened subsequent to the issuance of the policy. The chief factor to be considered in determining whether such a breach is material is whether prejudice has resulted to the issuing company.

Manifestly in the instant case no prejudice resulted to the defendant company by the failure of McNamer's personal representative to promptly forward to it the counterclaim served in the former action. The jury in that action by their special verdict found that McNamer was not causally negligent. Such finding was not disturbed by either the trial court or this court on appeal. Apparently the counterclaim was not disposed of by any formal judgment which specifically alluded to it, either before or after the appeal. Therefore, whatever effect such jury finding with respect to McNamer's freedom from causal negligence has in the instant action is unaffected by the fact that the defendant did not assume the defense of the counterclaim in the first action. However, the defendant has not seen fit to plead that such jury finding is conclusive in this action.

As pointed out in the majority opinion the defendant had received prompt notice of the accident and had made its own investigation. Therefore, the failure to have the counterclaim forwarded to it in no way has made it harder for the defendant to defend the instant action than if such counterclaim had been so forwarded.

The last paragraph of the majority opinion seems to hold that the plaintiff is now precluded from suing the defendant because of its failure to implead the defendant as a party in the first action. However, this is an issue entirely outside the pleadings in the trial court and this precludes the defendant from raising it on the appeal.

I am authorized to state that Mr. Justice FAIRCHILD and Mr. Justice DIETERICH join in this dissent.

Summaries of

American Ins. Co. v. Rural Mut. Cas. Ins. Co.

Supreme Court of Wisconsin
Nov 1, 1960
105 N.W.2d 798 (Wis. 1960)
Case details for

American Ins. Co. v. Rural Mut. Cas. Ins. Co.

Case Details


Court:Supreme Court of Wisconsin

Date published: Nov 1, 1960


105 N.W.2d 798 (Wis. 1960)
105 N.W.2d 798

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