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Docket Number

File No. 9628.

Attorney(S)

Gene E. Pruitt, Sioux Falls, for Garnishee Defendant and Appellant. Morgan Fuller, Mitchell, for Plaintiff and Respondent.

Judges

RUDOLPH, J.

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Smart Summary

Summary of Opinion: Munson v. Speck (Security General Insurance Company, Appellant)

Factual and Procedural Background

The plaintiff obtained a judgment against Alfred Speck for injuries sustained when struck by an automobile driven by Speck on May 1, 1955. The plaintiff then brought a garnishment proceeding against Security General Insurance Company (the garnishee), seeking recovery under an automobile liability policy the company had issued to Speck. The trial court entered judgment for the plaintiff holding the insurer liable; the insurer appealed. The Supreme Court of South Dakota reversed the trial court's judgment.

Pertinent evidentiary facts, as found in the opinion, derive primarily from Speck's testimony. Speck had purchased a 1950 Studebaker in November 1954, made partial payments and become in default on payments by March 30, 1955. On that date a tire went flat; Speck left the car in a farmyard and notified the dealer, Andy Pflaum, who took the car to his garage. Speck signed a transfer of title in blank and left it with Pflaum, testified he "turned it over to Andy Pflaum," never again saw the car, and stated he intended to abandon it and was "through with it."

Legal Issues Presented

Whether the automobile driven by Speck at the time of the accident was covered under the policy provision extending coverage to an automobile "not owned by the named insured while temporarily used as the substitute for the described automobile while withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction."
Whether coverage under a separate policy provision (extending coverage to other automobiles owned or used by the named insured unless "furnished for regular use to the named insured") applied to the automobile involved in the accident.
Whether the insurer waived the policy's written-notice and forwarding-of-process requirements by conducting investigations after learning of the accident.

Arguments of the Parties

Plaintiff's Arguments

Plaintiff sought recovery under the policy provision covering an automobile "not owned by the named insured while temporarily used as the substitute for the described automobile" when the described automobile was withdrawn from normal use because of breakdown, repair, servicing, loss or destruction.
Plaintiff also relied upon an alternative policy provision that extends coverage to "any other automobile" when the named insured owns an automobile classified as "pleasure and business," subject to exclusions such as automobiles "furnished for regular use to the named insured." (The opinion identifies that the plaintiff relied on this provision but notes there was no trial-court finding on whether the vehicle was furnished for regular use by the owner to Speck.)

The opinion does not contain a detailed account of the garnishee defendant's specific legal arguments beyond the fact of appeal and the insurer's contention (implicit in the record) that coverage under the substitute-vehicle provision did not apply and that notice/waiver issues exist.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Utilities Ins. Co. v. Wilson, 207 Okla. 574, 251 P.2d 175	Cited among authorities addressing construction of substitute-vehicle policy provisions.	The court listed this decision as one of relatively few cases considering the provision; the opinion did not extract or rely upon a specific rule from it.
Erickson v. Genisot, 322 Mich. 303, 33 N.W.2d 803	Cited among authorities addressing construction of substitute-vehicle policy provisions.	Referenced as a case considering the provision; the court did not adopt a specific holding from it for disposition here.
Midden v. Allstate Ins. Co., Ill. App.2d 499, 129 N.E.2d 779	Cited among authorities addressing construction of substitute-vehicle policy provisions.	Cited in a collection of cases; the opinion states few cases exist but did not rely on Midden for a controlling rule.
Fleckenstein v. Citizens' Mutual Automobile Ins. Co., 326 Mich. 591, 40 N.W.2d 733	Cited among authorities addressing construction of substitute-vehicle policy provisions.	Cited as one of the cases considering the clause; the court did not base its disposition primarily on this case.
Iowa Mutual Ins. Co. v. Addy, 132 Colo. 202, 286 P.2d 622	Cited among authorities addressing construction of substitute-vehicle policy provisions.	Mentioned in the list of cases; the opinion did not rely upon a specific legal principle from it in deciding this appeal.
Tanner v. Pennsylvania Threshermen Farmers' Mut. Cas. Ins. Co., 6th Cir., 226 F.2d 498	Cited among authorities addressing construction of substitute-vehicle policy provisions.	Included in the cited authorities; the court did not adopt a controlling rule from it in this opinion.
Western Casualty Surety Co. v. Norman, 5th Cir., 197 F.2d 67, 69	Quoted for the principle that, to extend coverage as a "substitute" vehicle, the claimant must show not only withdrawal from service because of breakdown but also that except for the breakdown the insured vehicle would have been in use at the time and circumstances involved.	The court quoted this language and applied it to conclude that, because Speck had abandoned the described automobile (and thus would not have been using it), the vehicle he drove was not a "substitute" within the meaning of the policy.

Court's Reasoning and Analysis

The court's analysis proceeded primarily from the factual finding that Speck had effectively abandoned the described Studebaker. The key factual points relied upon were:

Speck left the Studebaker in a farmyard after a flat tire on March 30, 1955, and notified the dealer (Pflaum), who took the car to his garage.
Speck left a signed transfer of title in blank with Pflaum, never again saw the car, and testified he intended to abandon it and was "through with it."
There was no evidence of "loss or destruction" of the Studebaker; nor was there evidence that Speck intended to resume use of the vehicle.

Applying those facts to the insurance language, the court considered the quoted substitute-vehicle provision, which covers an automobile "not owned by the named insured while temporarily used as the substitute for the described automobile while withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction." The court reasoned that:

The policy's use of "temporarily" implies the described automobile is to be again placed in use by the insured; thus substitute coverage contemplates a temporary interruption in the use of the described car due to repair, breakdown, etc., not an abandonment or de facto sale.
Because Speck had abandoned the Studebaker and was no longer interested in or using it, the substitute-vehicle clause did not cover the vehicle he was driving at the time of the accident. The court analogized that this situation is no less distant from the "temporary substitute" the policy contemplates than if Speck had actually sold the Studebaker on March 30.
The court applied the principle quoted from Western Casualty Surety Co. v. Norman: to claim substitute-vehicle coverage, the claimant must show both withdrawal from service because of breakdown (or similar cause) and that but for that withdrawal the insured vehicle would have been in use at the time. That showing was absent here because Speck had abandoned the described vehicle.

The court also addressed the plaintiff's alternative reliance on a provision extending coverage to "any other automobile" owned or used by the insured unless "furnished for regular use to the named insured" by another. The court noted there was no finding whether the automobile driven at the time of the accident had been furnished for regular use to Speck by his father, and that the trial court had premised liability on the temporary-substitute provision rather than this alternate clause.

On the notice/waiver issue the court observed that the policy required prompt written notice of an accident and forwarding of suit papers. It is conceded the insurer received no notice until about 45 days after the accident from Pflaum. The record does not show whether the insurer was ever notified that suit had been commenced or whether it received suit papers. The insurer later made investigations and took written statements from Speck. The trial court had held the insurer waived the notice provision by conducting investigations, but the Supreme Court found the record too meager on this point and, because it reversed the judgment on the coverage ground, refrained from expressing an opinion on waiver.

Holding and Implications

Judgment reversed.

Direct effect: The Supreme Court of South Dakota reversed the trial court judgment that had held Security General Insurance Company liable under the substitute-vehicle provision of the policy. On the facts before the court (Speck's abandonment of the described automobile), the vehicle driven at the time of the accident did not qualify as a "temporary substitute" for the described automobile under the policy language and the authorities discussed.

Additional notes on implications:

The court did not decide whether the alternative policy provision (coverage for "any other automobile" unless "furnished for regular use") applies because there was no finding on whether the car was furnished for regular use by the father.
The court declined to rule on whether the insurer waived the notice requirement by investigating, finding the record inadequate on that issue and reversing on the coverage ground.
No broader, controlling rule beyond the application to these facts is expressly announced; the disposition rests on the court's interpretation that "temporary substitute" coverage does not extend to a vehicle driven after the insured has abandoned (or effectively parted with) the described automobile with the intent never to use it again.

Opinion authored by Rudolph, J.; all judges concurred.

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MUNSON, Respondent v. SPECK, (Security General Insurance Company, Appellant)

RUDOLPH, J.

The plaintiff has a judgment against the defendant, Alfred Speck, for injuries sustained when struck by a car driven by Speck on May 1, 1955. In this proceeding the plaintiff seeks to recover from the garnishee defendant, Security General Insurance Company, under a policy of liability insurance it had issued to Speck. The trial court held the Insurance Company liable. The company has appealed. We reverse the judgment of the trial court.

The car driven by Speck at the time of the accident was not the specific car described in the policy but was a car owned by his father. Plaintiff seeks recovery under a policy provision which provides for coverage of an automobile "not owned by the named insured while temporarily used as the substitute for the described automobile while withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction; * * *"

The trial court found that the car owned by Speck and specifically covered by the policy "was temporarily not in use because of its breakdown", and that the car Speck was driving at the time of the accident came within the coverage of the above quoted provision of the policy.

The only witness to testify was the defendant Speck. It appears that the automobile specifically covered by the policy was a 1950 used Studebaker which Speck had purchased in November 1954 from Andy Pflaum, an automobile dealer at Wessington Springs. Speck agreed to pay $650 for the car. He made a down payment of $250 and was to pay the balance at the rate of $38.25 a month. Two monthly payments had been made by March 30, 1955 and on that date Speck was in default on the payments. While driving the car on March 30, 1955, a tire became flat, and having no spare tire, Speck hauled the car into a farmyard. He further testified that some "rods" were making trouble and the car was using oil, but it was not in such condition it could not be driven, except for the flat tire. Speck notified Mr. Pflaum that the car was at the farmyard, and Pflaum took the car to his garage. Speck testified, "I turned it over to Andy Pflaum and told him to take it in." It further appears that when the car was purchased Speck signed a transfer of title in blank which was left with Mr. Pflaum. After leaving the car in farmyard Speck never again saw it. Speck further testified as follows:

"Q. At that time (when the car was left in the farmyard) didn't you intend to just abandon it because you owed so much on it and you couldn't pay for it? A. Well, yes.

"Q. In other words as of that time you were through with it? A. Yes.

"Q. You didn't care what happened to it; isn't that right? A. That's right."

We are of the view that this evidence establishes without serious question that Speck had renounced any further interest in the car. He had abandoned it and "turned it over to Andy Pflaum" who held the transfer of title signed by Speck. Mr. Pflaum actually took possession of the car and it was never again seen by Speck.

Speck did answer "Yes" to a question by counsel for the plaintiff as follows: "But at the time of the accident you considered it to be your automobile?" But this conclusion of the witness is without real probative effect, when considered in the light of the facts disclosed by this record.

It is clear that there was no "loss or destruction" of this automobile within the meaning of the quoted provision of the policy. The question presented is whether the automobile being driven by Speck at the time of the accident was "temporarily used as the substitute for the described automobile while withdrawn from normal use because of its breakdown, repair, (or) servicing." It was thirty days or more between the time the car was abandoned in the farmyard and the time of the accident. In the meantime the car had been taken into the Pflaum garage. There is no showing that it was not driven to the garage after the flat tire was repaired, or that the car was not in running condition at the time of the accident. The record is clear that Speck was not interested in whether any repairs were made. He never saw the car after leaving it in the farmyard. True, so far as Speck was concerned the car had been withdrawn from normal use, but it is apparent from the record that the reason for such withdrawal was as testified to by Speck that he was through with it, didn't care what happened to it and turned it over to Andy Pflaum. It is further apparent that Speck never intended to and never did use the Studebaker after leaving it in the farmyard. Under these circumstances we do not believe the car was "temporarily used as the substitute" for the Studebaker within the meaning of the policy. No one would seriously contend if Speck had sold the Studebaker on March 30, that a car driven by him thirty days later would be driven as a "substitute" for the Studebaker as that term is used in the policy. We do not believe the present facts any more nearly reach the situation intended to be covered by this policy provision than the actual sale of the car. The word "temporarily" read in connection with the whole of the policy indicates that it is intended the described car is to again be placed in use by the insured.

This provision, we are convinced, was not intended to cover a car used by the insured after the described car was sold or abandoned with the intention of never using it again as disclosed by the facts presently before us.

We have not been able to find a decided case very helpful in construing this policy provision and but few cases where the provision has been considered. See Utilities Ins. Co. v. Wilson, 207 Okla. 574, 251 P.2d 175; Erickson v. Genisot, 322 Mich. 303, 33 N.W.2d 803; Midden v. Allstate Ins. Co., Ill. App.2d 499, 129 N.E.2d 779; Fleckenstein v. Citizens' Mutual Automobile Ins. Co., 326 Mich. 591, 40 N.W.2d 733; Iowa Mutual Ins. Co. v. Addy, 132 Colo. 202, 286 P.2d 622; Tanner v. Pennsylvania Threshermen Farmers' Mut. Cas. Ins. Co., 6 Cir., 226 F.2d 498; Western Casualty Surety Co. v. Norman, 5 Cir., 197 F.2d 67, 69.

In the last above cited case it is said, "To authorize such extension the party claiming it should, (certainly when in his power, as here), adduce testimony which is sufficient to show, not only that the insured vehicle had been withdrawn from service because of a breakdown, but also that except for this the insured car would have been in use at the time and in the circumstances involved. Such showing is necessary to establish `temporary use as a substitute', i.e., a car put in place of another.

The facts in this case, as above stated, disclose without question that while Speck's car had been withdrawn from use so far as he was concerned, he had, at the time in question, abandoned it. If his car had been capable of use at the time of the accident (which it might have been in so for as this record reveals) it would not "have been in use at the time and in the circumstances involved", because he had abandoned it, he was "through with it". The car being driven at the time, in other words, was not being driven as a "substitute".

Plaintiff relies upon another policy provision, the material parts of which are as follows:

"If the named insured is an individual who owns the automobile classified as `pleasure and business' * * * such insurance as is afforded by this policy for bodily injury liability, for property damage liability and for medical payments with respect to said automobile applies with respect to any other automobile, subject to the following provisions:

"(a) With respect to the insurance for bodily injury liability and for property damage liability the unqualified word `insured' includes (1) such named insured * * *

"(b) This insuring agreement does not apply:

"(1) To any automobile owned by, hired as part of a frequent use of hired automobiles by, or furnished for regular use to the named insured or a member of his household * * *"

We have considered the findings of the trial court and do not find that the court made any finding on this feature of the case. Under the agreement as above set out the use of other automobiles is not covered by the insuring agreement if "furnished for regular use to the named insured." There is no finding that this automobile was or was not furnished to the defendant Speck for regular use by his father. As we read the findings the trial court placed liability upon the policy provision relating to a temporary substitute automobile which we are convinced for the reasons heretofore given does not sustain liability in this case.

The policy further provides that written notice of the accident shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable and further if claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons, or other process received by him or his representative. It is conceded in this case that the insurance company had no notice of this accident until they were advised of the accident by Andy Pflaum approximately 45 days after its occurrence. The record is silent upon the question of whether the company was ever advised that a suit against Speck had been commenced or whether the company ever received any of the papers in connection with such suit. The company after being advised of the accident by Andy Pflaum did on two separate occasions thereafter make an investigation of the accident and in the course of this investigation took certain written statements from the defendant Speck. The trial court held that the company waived the provision of the policy requiring notice by making the investigations. This record is so meager upon this issue and in view of the fact that the judgment must in any event be reversed, we refrain from expressing any opinion thereon at this time.

The judgment appealed from is reversed.

All the Judges concur.

MUNSON v. SPECK