Appeal from the District Court of the United States for the Middle District of Pennsylvania; Albert W. Johnson, Judge.
Before MARIS, JONES, and GOODRICH, Circuit Judges.
This is an action for a declaratory judgment by the plaintiff insurance company, which seeks a declaration of its freedom from liability under the policy as to Harry R. Davis, Jr., based on his alleged failure to cooperate with the insurer as required by the terms of the policy. The plaintiff issued, in 1938, a combination automobile insurance policy to Harry R. Davis, Sr. On October 29, 1938, Harry R. Davis, Jr., the insured's son, was driving the automobile, covered by the policy, in a caravan of cars going to a football game. In the car were a number of fellow students of the Harrisburg Academy, including John Brindle Anstine, Ned Loftin and Eugene Pat Maley. At a railroad crossing, in Lancaster County, Pennsylvania, the Davis automobile collided with a train owned and operated by the Pennsylvania Railroad. Davis, Jr., and the other named occupants of the car suffered personal injuries.
The Anstine and Maley boys, by their parents as next friends and in their own right, instituted separate suits in trespass in the Court of Common Pleas, Dauphin County, Pennsylvania, against the railroad and both Davises at the September Terms of 1938 and 1939 respectively. Loftin, although he had not brought suit, at the time the present action was brought, was alleged to be claiming damages for his injuries. The plaintiff company retained William H. Neely, Esquire, as counsel to represent the Davises in these actions. When the Anstine case was called for trial on April 1, 1940, Neely sought and was granted leave to withdraw his appearance for Davis, Jr., and his guardian ad litem, his mother, because of a failure to cooperate in the preparation of the defense and absence in court, both of which were conditions required by the insurance policy. This matter will be discussed more fully later. Disclaimers of liability on the part of the insurer for any judgment that might be recovered against Davis, Jr., were promptly served.*fn1 The case was continued at the request of counsel for the railroad until May 8, 1940, when it was tried. Neely represented Davis, Sr., and obtained a compulsory non-suit as to him. Davis, Jr., and his mother, who apeared at the trial on May 8, were represented by Willis F. Daniels, Esquire. The jury returned a verdict in favor of the Anstines but failed to make any finding as to the liability of Davis, Jr. The Supreme Court, on June 30, 1941, reversed the judgment on grounds not relevant here and ordered a new trial in which the defendants were to be the railroad company and Davis, Jr. Anstine v. Pennsylvania Railroad Company, 1941, 342 Pa. 423, 20 A.2d 774.*fn2
On December 6, 1940, the insurer instituted the present action, seeking a declaratory judgment that it was not obligated to pay any claims against Davis, Jr., arising from the accident nor to defend suits against him because of his breach of the cooperation clause of the policy. An order was rendered in favor of the insurer. This appeal was taken by the Pennsylvania Railroad.
Objection was seasonable made to the entertainment of this suit by the trial court. It was contended that the state courts had taken jurisdiction of the subject-matter by virtue of the Anstine and Maley suits; that the same questions of law and fact were there involved as in the action for declaratory judgment and could be fully adjudicated by the state court. This contention is without merit. The plaintiff in the action for declaratory judgment was not a party to the Anstine and Maley suits. The latter were actions in trespass for personal injuries. They did not involve the question of the insurer's liability on its policy which was sought to be adjudicated in the declaratory judgment action. The Anstine and Maley suits would not determine the controversy between the parties in the action for a declaratory judgment. The trial judge's refusal to dismiss the action on these grounds was a proper exercise of discretion. Maryland Casualty Co. v. Consumers Finance Service, Inc., of Pennsylvania, 3 Cir., 1938, 101 F.2d 514.
The other theory on which dismissal was sought was that since the Supreme Court of Pennsylvania had ordered a new trial in the Anstine suit, the action for declaratory judgment had become moot. The order for a new trial, it is said, citing appropriate Pennsylvania authorities, restored the case to the status it had before any trial occurred. There was thus no "actual controversy."
This does not reach the heart of the problem as we understand it to be. A condition of the policy involved was cooperation by the insured. If, prior to the order for a new trial, that condition was so violated as to terminate the insurer's liability, nothing except agreement by the insurer, absent here, could revive that liability. The order for a new trial, in the personal injury suit, did not render that issue moot. The question which must be decided is whether the liability of the insurer had been terminated. This, we take it, is a question to be decided under the law of Pennsylvania. While the plaintiff is a foreign corporation the policy was countersigned in Philadelphia, delivered to a Pennsylvania policy holder, and all the subsequent operative facts took place in Pennsylvania. Under those circumstances, we take our rule from the state decisions. Erie Railroad Co. v. Tompkins, 1938, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487. We turn then to the merits of the case.
The policy of insurance, under the heading of "Conditions" provides: "7. Assistance and Cooperation of the Insured: The insured shall cooperate with the company and, upon the company's request, shall attend hearings and trials * * *, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. * * * " The facts, as found by the trial judge, show, we think, that at the time the first disclaimers of liability were served, April 1, 1940, there had been non-compliance by Davis, Jr., and his guardian with the conditions of the policy. The relevant facts may be outlined as follows:
After the accident on October 29, 1938, Davis, Jr., was taken to a Lancaster hospital. C. C. Norton, investigating the case on behalf of the insurer, made four calls at the hospital to obtain a statement from Davis, Jr. The first call was on October 31, 1938. On his first visit the investigator was turned away by the nurse. Although he informed Davis, Jr., that he represented his insurance company, he failed in his efforts until his fourth visit, on December 6, 1938, when, with the assistance of Davis, Sr., he obtained a satisfactory interview.
After Neely was retained as attorney for the insurer to represent the Davises in the Anstine action, he tried to get Davis, Jr., and his mother, to consult and cooperate with him in preparing the defense. From January 23, 1940, to April 1, 1940, Neely, on various occasions, sent two letters to Davis, Jr., two to his mother, sent the investigator to the Davis home, had numerous conversations with Daniels, representing Davis, Jr., and his mother, and was in touch with Davis, Sr.*fn3 It was made clear to the son and his mother that Neely represented them on behalf of the insurance company, that the son's help was needed to secure information and witnesses for the defense, and that a refusal to cooperate would result in Neely's withdrawing from their defense. Neely even offered to come out to the Davis home to facilitate matters. All the letters, requests and conversations proved of no avail.
On January 24, 1940, the case was continued over to April 1. On that date the investigator called at the Davis house and found no one home. When the case was called for trial in the courtroom, neither Mrs. Davis nor her son, Davis, Jr., made themselves known to Mr. Neely, though it is not found as a fact that they were not present. Neely, then, asked for leave to withdraw on account of the foregoing facts and permission was granted by the court. The facts recited clearly show that the cooperation of the insured, called for by the policy, was not met on April 1, 1940, and for a period prior thereto.
At this point the theme changes. Upon the Neely withdrawal the case was continued to May, 1940, at the request of counsel for the railroad. On April 11, Mrs. Davis wrote to Neely, apologized for the previous lack of courtesy and cooperation and stated that both she and her son would give him every assistance in preparing the case for trial in May. They were present at the trial, were represented by counsel, though not the counsel for the insurance company, and Davis, ...