DE HART v. ILLINOIS CASUALTY CO., 116 F.2d 685

EVANS, Circuit Judge. Defendant disputes liability solely on the ground that the assured, Roin, failed to cooperate with it in “securing information, furnishing evidence and attendance of witnesses” in the trial of the original action.

Among other clauses, the insurance policy provided: “No action shall lie against the Company unless, as a condition precedent thereto, the assured shall have fully complied with all the conditions hereof. * * *.” “Assured shall render to the Company full cooperation and assistance in securing information, furnishing evidence and the attendance of witnesses.” “The neglect or failure of assured to comply with the foregoing requirements or the refusal to comply with a request of the Company or its attorney or representative for the cooperation and assistance stated above, shall relieve the Company of all liability under this policy.” The Facts.

Ben Roin, with the consent of Ben Reuben, upon whose car the automobile insurance was written, drove the automobile into the State of Indiana, where a collision occurred in which plaintiff was injured and his car damaged. Roin also claimed damages to himself and the car he was driving. Plaintiff sued for damages, and the defendant Roin counterclaimed. In the course of the trial one Henry Jacobsen testified for the defendant Roin, and falsely stated that he was present at the accident. His story revealed negligent driving by plaintiff and careful action on the part of Roin.

Before the trial was completed, however, plaintiff recalled Jacobsen for further cross-examination and caused him to take the witness stand, where he stated that his previous testimony was false; that he was not present at the time of the accident and knew nothing about it; that one David H.- Greenberg, attorney for Roin had persuaded him to take the witness stand for the defendant and to testify falsely to facts related to him by Green-berg. He said his previous testimony was false and fictitious.

Thereupon the court excused the jury and conducted an investigation into the facts and circumstances surrounding the perjury and subornation of perjury. It appeared on this investigation that counsel for defendant herein were not involved in the subornation of perjury, and were ignorant of the falsity of Jacobsen’s testimony when it was first given. Defendant herein, then 'moved to withdraw a juror and declare a mistrial, which was denied. After the verdict, defendant Roin, who denied knowledge of the falsity of Jacob-sen’s story (although court and jury found otherwise) moved for a new trial which was denied.

Roin took no appeal from the judgment against him, and it remains un-' satisfied. Defendant herein, after the disclosure of the perjury, participated in the trial, presented other witnesses, argued the case to the jury, submitted proposed instructions, asked for stay of entry of judgment, and not until the judgment .was about to be entered did it withdraw from further participation in the case, asserting for the first time, lack of cooperation and assistance on the part of Roin. Rejection of defendant’s attack on the judgment is urged because of,

(1) The action of the defendant in electing to proceed with the trial and take a chance on the verdict.

(2) The failure of the evidence to show a breach of the contract. Appellant unduly stretches the provision of its contract which required assured’s cooperation.

(3) The fact that the court found that cooperation’and assistance were given.

We* quote from one of its special findings: “ * * that, pursuant to the provisions of such policy,’ * * Ben Roin * * cooperated at all times with the defendant in this action in the preparation of said cause for trial, and in the presentation of the evidence to the jury; that this defendant did not know that the witness Jacob-sen would commit, or had committed, perjury, prior to his admission thereto upon the witness ’ stand, but, after he had admitted in open court that he had committed perjury in his former testimony, and after the examination of said witness and his attorney, Greenberg, in the absence of the jury, the attorneys for the defendant in this action who were representing the said Ben Roin in cause No. 601, did not withdraw from that case and refuse to participate fur- ■ ther in the trial of the same, but continued to conduct the defense; that the defendant Roin thereafter took the witness stand in that case, was examined by attorneys for the defendant in this case and testified in his own behalf; that attorney Greenberg was also called to the witness stand by the attorneys conducting the defense and testified as a witness for the defendant.” While the court found that Roin cooperated at all times with the' defendant in the preparation of said cause for trial and in the presentation of the evidence to the jury, it also found that the defendant herein did not know that the witness Jacobsen would commit or had committed perjury prior to his admission on the witness stand.

Defendant argues that this last stated fact impeaches and negatives the finding of cooperation.

In considering the effect of this asserted lack of knowledge by defendant, we can not ignore another special finding that said witness Jacobsen also testified that he had not been employed for a period of months prior to the trial and was not employed at the time of trial, when it was known to the defendant herein, the insurance company,, that he was at the time of the trial and prior thereto, employed by a taxicab company in the City of Chicago as an investigator. ’ In other words, it is .not a complete or correct statement to say that defendant was unaware of the falsity of Jacobsen’s testimony.' Its representative examined Jacob-sen before trial, and it knew the moment Jacobsen testified that his testimony was false so far as occupation and employment were concerned.

Whether the finding that there was, excluding this knowledge of falsity of part of this witness’ testimony, cooperation depends, in part, upon the terms of the insurance contract and particularly the terms of the provision which called for “full cooperation and assistance.” The query naturally arises- — In what subjects was there to be cooperation? It was to be in three matters. The provision above-quoted is clear. (

a) First, in the attendance of witnesses. Obviously there was no default here. (

b) Second, assistance in securing information. Again, there was no breach. Roin gave to the defendant the names of possible witnesses who were examined by the defendant. The defendant was free to examine them and did examine them before trial. (

c) The third activity in which the assured was to give full cooperation was in the matter of “furnishing evidence.” What constitutes “furnishing evidence?” This language was chosen by defendant, who wrote the policy. In case of doubt all uncertainty should be construed against, rather than in favor of, the insurance company. Notwithstanding the inclusive implications of the word “furnish” we hardly feel justified in construing it to include perjured testimony.

This view, however, does not dispose of the question, for the assured’s obligation was to render “full cooperation” in “furnishing testimony.” Specifically, the query is — Does one who in a personal injury case produces a witness who testifies falsely but favorably to the non-liability contention of the insurance company, fail to cooperate? In a broad sense, it may be truly said the assured over-cooperated. “May such over-cooperation constitute failure to cooperate? A too-willing witness can hardly be charged with a lack of cooperative effort because of his too-willinguess.

So it may be said of the witness whose overstatement extends to deliberate falsehoods. Notwithstanding the rather persuasive argument that there was no lade of willing or full cooperation on the part of Roin, we accept the insurance company’s more ethical position that over-cooperation which consists of the giving of perjured testimony, is lack of cooperation, provided the insurance company is unaware of the extent (to-wil, perjury and subornation of perjury) of said over-cooperation. This brings us to the effect of defendant’s course when the falsity of Jacobsen’s testimony was by it discovered.

The discovery of perjury and assured’s part therein gave to the insurance company an election of courses which it could pursue. It had, or at least it could assert it had, the option to withdraw then and there and deny liability because of lack of cooperation. On the other hand, it could waive its right and proceed with the trial and possibly win the case then about to be submitted to the jury.

Its situation was not unlike that of an insurance company, which upon the discovery of false and fraudulent statements made in an application for insurance, has the option of rescinding the contract or waiving the fraud and continuing to collect premiums.- In other words, it may rescind or ratify. Prentiss v. Mutual Ben. Health & Acc. Co., 7 Cir., 109 F.2d 1. It can not do both. Also quite similar is the situation of one who hears counsel make improper and inflammatory statements to a jury, yet who sits by and complains not until after the verdict is rendered. Paschen v. United States, 7 Cir., 70 F.2d 491.

An unusual situation confronted the parties in the instant case. Plaintiff was free from fault. He participated in neither the perjury nor in the subornation of perjury. The insurance company may likewise be acquitted of any participation in the subornation of perjury. Nevertheless it was subject to a possible charge of participation therein, because of the fact that it knew when the testimony was given that Jacob-sen was testifying falsely as to a material fact. The insurance company’s counsel were charged with a duty of election of courses to be pursued.

This duty was met by its counsel’s weighing the possibilities of victory or of small recovery against the possibility of a complete denial of liability because of Roin’s failure to give full cooperation, which issue might well become one of fact, in view of its knowledge that Jacobsen had testified falsely in reference to a material fact. Then too, there may well have been a question of business policy involved. In other words, it was defendant’s clear duty to act. It did so. It took the chance of winning the case before the jury.

Thereby it lost its right to assert its defense under the full cooperation clause of the contract. Moreover, it is worthy of note that the defendant never gave an unqualified notice of its intention to rely upon the assured’s failure to fully cooperate with it.

On this issue the court made the following finding: “ * * when said motion (for mistrial) was by the court overruled, the defendant in this action, through its attorney, before the resumption of said trial, prepared and presented to said Ben Roin an agreement in writing wherein it was provided that they could continue, the defense of said action without waiving the violation of any of the provisions of their contract of insurance, and they represented to said Roin at such time that they would withdraw from the defense of said action unless he, the said Roin, would execute such agreement; that the said Roin refused to execute said agreement, but, nevertheless, such attorneys continued in said trial, * *.” Defendant’s statement that unless the agreement was signed it would withdraw, was inconsistent with its contention that it notified assured of its reliance upon the non-cooperation as the basis for its asserted non-liability.

We need not consider the effect of defendant’s failure to repudiate that part of the witness’ false testimony which was to it known to be false or the further question of the right of defendant to assert against plaintiff, the defense here raised which may have existed against the insured. The judgment is affirmed.