Indiana Lumbermen's Mut. Ins. Co. v. Champion

343 S.E.2d 15 (1986)

INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Plaintiff, v. Boyce R. CHAMPION, Defendant. Boyce R. CHAMPION, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant. INDIANA LUMBERMEN'S MUTUAL INSURANCE COMPANY, Third-Party Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Third-Party Defendant.

No. 8527SC1029.

Court of Appeals of North Carolina.

May 6, 1986.

*18 George C. Collie and Charles M. Welling, Charlotte, for plaintiff Indiana Lumbermen's Mut. Ins. Co.

Hamrick, Mauney, Flowers, Martin & Deaton by Fred A. Flowers, Shelby, for defendant Boyce R. Champion.

Horn, West, Horn & Griffin, P.A. by J.A. West, Shelby, for third-party defendant Nationwide Mut. Ins. Co.

WELLS, Judge.

Nationwide's Appeal

Nationwide first contends the trial court erred in its order of 21 September 1984 by not permitting Nationwide to offer as a defense that the third-party actions had been brought in violation of the "no action" provision of its policy. In its pleadings, Nationwide alleged as a defense that the third-party actions were brought in violation of Condition Six of the policy it issued to Champion and that such actions were premature because the liability of Champion had not yet been judicially determined or agreed upon by the parties. Condition Six of the policy allegedly provides as follows in pertinent part:

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, nor until the amount of the Insured's obligation to pay shall have been finally determined either by Judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company. Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join the Company as a party to any action against the Insured to determine the Insured's liability, nor shall the Company be impleaded by the Insured or his legal representative.

In the 21 September 1984 order, the trial court concluded that Nationwide was not entitled under the law to plead any policy defenses, relying on Nixon v. Insurance Co., 255 N.C. 106, 120 S.E.2d 430 (1961), and denied those defenses. Nationwide apparently contends the court's ruling was erroneous with respect to its defense based on Condition Six of the policy, the "no action" provision and argues that Nixon is distinguishable. We disagree.

In Nixon, our Supreme Court held that where a liability insurer denies liability for *19 a claim asserted against the insured and unjustifiably refuses to defend an action therefor, such refusal constitutes a breach of the insurer's contract with the insured and the insured is released from certain provisions of the policy including a provision making the liability of the insurer dependent upon a final determination of its insured's obligation to pay either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. As our Supreme Court recognized in Nixon, courts generally hold that where an insurer unjustifiably refuses to defend an action against its insured, the insurer waives its right to enforce a "no action" provision in the policy, such as the one in Condition Six of the policy concerned herein and cannot thereafter successfully invoke that provision. See also Annot., 49 A.L.R.2d 694 (1956); 44 Am.Jur.2d, Insurance § 1420 (1982 and Supp.1985); 14 Couch, Insurance 2d § 51:163 (1982). See, e.g., Satterwhite v. Stolz, 79 N.M. 320, 442 P.2d 810 (1968).

The obligation of a liability insurer to defend an action brought by an injured third party against the insured is absolute when the allegations of the complaint bring the claim within the coverage of the policy. Insurance Co. v. Insurance Co., 269 N.C. 358, 152 S.E.2d 513 (1967); Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 314 S.E.2d 775 (1984). See also Waste Management v. Insurance Co., 340 S.E.2d 374 (N.C.1986). The insurer's refusal to defend the action is unjustified if it is determined that the action is in fact within the coverage of the policy. 14 Couch, Insurance 2d § 51:156 (1982). This is so even if the refusal to defend is based on the insurer's honest but mistaken belief that the claim is outside the policy coverage. Id.

The allegations of the complaint filed by Indiana Lumbermen against Champion were sufficient to bring the claim set forth therein within the coverage of Nationwide's policy yet Nationwide denied coverage under its policy and refused to defend the action. In the 21 September 1984 order, the court concluded that Nationwide had a duty to defend the action and determined that Indiana Lumbermen's claim was within the coverage of Nationwide's policy. Since the claim was within the coverage of Nationwide's policy, Nationwide's refusal to defend the action was unjustified and therefore Nationwide was not entitled to successfully invoke the "no action" provision in its policy as a defense. See Nixon v. Insurance Co., supra; 14 Couch, Insurance 2d §§ 51:156 and 51:163 (1982). Accordingly, we find no error in the court's ruling as to this policy defense.

Nationwide contends the court erred in the 21 September 1984 order by not permitting it to offer the defense of "no coverage" and by determining that its policy provided coverage to Champion. Nationwide argues that the 1954 Dodge van truck driven by Champion at the time of the collision was not "a private passenger, farm or utility automobile" as defined in its policy and that therefore its policy did not cover Champion's liability arising from his operation of that vehicle.

The record does not show that the court refused to permit Nationwide to offer the defense of "no coverage"; rather, it tends to show that Nationwide simply elected not to offer any evidence at the 17 September 1984 hearing concerning whether the 1954 Dodge vehicle was one covered by its policy. If any evidence was presented by Nationwide at the hearing on the third-party actions, it has not been included in the record on appeal. When the evidence is not in the record, it is presumed that the court's findings are supported by competent evidence and the findings are conclusive on appeal. Steadman v. Pinetops, 251 N.C. 509, 112 S.E.2d 102 (1960); Town of Mount Olive v. Price, 20 N.C.App. 302, 201 S.E.2d 362 (1973). The record does contain the affidavit of Champion and the verified pleadings of Indiana Lumbermen. These materials were considered by the court in entering the 21 September 1984 order and are either consistent with or support the findings made by the court. The remaining pleadings in the record are unverified.

It is clear from the findings made that the court determined that the 1954 Dodge *20 vehicle driven by Champion at the time of the collision was a utility automobile as defined in Nationwide's policy. The affidavit of Champion supports this determination. We are unable to say based on the record before us that such finding was error. The court concluded that Nationwide's policy covered Champion's liability arising out of his operation of the 1954 Dodge truck on the date of the collision, relying on Devine v. Casualty & Surety Co., 19 N.C.App. 198, 198 S.E.2d 471, cert. denied, 284 N.C. 253, 200 S.E.2d 653 (1973). The findings made by the court are sufficient to support this conclusion. We therefore find no error in the court's determination that Nationwide's policy provided coverage to Champion in these circumstances.

Nationwide next assigns as error the court's conclusion in the 21 September 1984 order that the three-year statute of limitations is not applicable to the third-party action instituted against Nationwide by Indiana Lumbermen. The insurance policy issued by Nationwide to Champion has not been made a part of the record on appeal. Where the record is silent on a particular point, it is presumed that the trial court acted correctly. State v. Dew, 240 N.C. 595, 83 S.E.2d 482 (1954). In the absence of the policy from the record, we presume the trial court was correct in finding, concluding and ruling that the three-year statute of limitations does not apply to the action.

Nationwide assigns as error the trial court's denial of its motions for summary judgment and judgment on the pleadings. Since material outside the pleadings was presented to and considered by the court, specifically Champion's affidavit, Nationwide's motions for judgment on the pleadings were to be treated as ones for summary judgment. N.C.Gen.Stat. § 1A-1, Rule 12(c) of the Rules of Civil Procedure. Our Supreme Court recently held in Harris v. Walden, 314 N.C. 284, 333 S.E.2d 254 (1985), that "the denial of a motion for summary judgment is not reviewable during appeal from a final judgment rendered in a trial on the merits." We find such law controlling in the present case and therefore overrule this assignment of error.

Lastly, Nationwide contends the trial court erred by refusing to allow it to offer evidence supporting its defenses at the jury trial and by concluding that a judgment against Champion would automatically be a judgment against Nationwide. Nationwide had an opportunity to present evidence supporting its defenses at the 17 September 1984 hearing on the third-party actions. It apparently elected not to offer any evidence at that time. By the judgment entered 21 September 1984, the court rejected Nationwide's defenses and in effect determined that Nationwide was liable in the event the liability of its insured, Champion, was established. The entry of that judgment determined that issue in this case. Since Nationwide's liability had been established and the parties had stipulated to the amount of damages recoverable, the entry of judgment against Nationwide upon the establishment of Champion's liability was proper.

Champion's Appeal

Champion assigns as error the trial court's refusal to submit to the jury the issue tendered by him concerning a latent defect in his brakes and to instruct upon such issue as he requested. Champion tendered a written request for the following instruction on brake failure:

If because of some latent defect, unknown to the operator of an automobile and not reasonably discoverable on proper inspection, he is not able to control movement of his automobile, he is not negligent, and for that reason not liable for injuries resulting from such loss of control of his vehicle.

He further requested that the following issue be submitted to the jury: "Was the loss of control of [Champion's] vehicle because of some latent defect in the brakes, the origin of which was unknown to [Champion] and not reasonably discoverable upon a brake inspection?" The trial court denied both requests.

It is well established that when a party aptly tenders a written request for a specific instruction which is correct in itself and supported by the evidence, the failure of *21 the court to give the instruction, at least in substance, is reversible error. Bass v. Hocutt, 221 N.C. 218, 19 S.E.2d 871 (1942); Calhoun v. Highway Com., 208 N.C. 424, 181 S.E. 271 (1935). It is also error for the trial court to refuse to submit to the jury an issue tendered which is raised by the pleadings and supported by the evidence. Copening v. Insurance Co., 224 N.C. 97, 29 S.E.2d 33 (1944); Lewis v. Pate, 208 N.C. 512, 181 S.E. 623 (1935).

The instruction requested by Champion was a correct statement of the law in this State as set forth in Stephens v. Oil Co., 259 N.C. 456, 131 S.E.2d 39 (1963). See also Wilcox v. Motors Co., 269 N.C. 473, 153 S.E.2d 76 (1967). Compare N.C.P.I. Civil 215.80. In Stephens, our Supreme Court stated:

The Legislature did not intend to make operators of motor vehicles insurers of the adequacy of their brakes. The operator must act with care and diligence to see that his brakes meet the standard prescribed by statute; but if because of some latent defect, unknown to the operator and not reasonably discoverable upon proper inspection, he is not able to control the movement of his car, he is not negligent, and for that reason not liable for injuries directly resulting from such loss of control. The injuries result from an unavoidable accident. [Emphasis added.]

The pleadings in this case are sufficient to raise the issue tendered by Champion concerning the latent defect in his brakes; thus, the only question remaining is whether the evidence supports submission and instruction upon this issue.

The evidence presented at trial tends to show the following facts: On the afternoon of 4 June 1981, defendant Champion and his wife purchased a 1954 Dodge van. Before driving the van, Champion checked its brakes and the brake fluid and put a capful of brake fluid in the master cylinder of the vehicle. After purchasing the van, Champion proceeded to drive it home with his wife following behind him in another vehicle. As Champion proceeded south on rural paved road 2044 approaching the intersection of that road with rural paved road 2033, he began trying to apply his brakes when he was approximately 300-500 feet from the stop sign at the intersection. Champion testified that at that point:

I laid my foot up on the brake pedal, the brake pedal was there. The brake pedal was a full pedal. It didn't go to the floor.... [A]s I approached on down the hill I started applying pressure to the brakes. The brake pedal would not mash so at that time I looked to see if there was anything under the brake pedal the reason it wouldn't push and I put enough pressure on the brake pedal that I bent the steering wheel with my hands and it would not mash. That was approximately 200 feet on down the road. I seen the brakes would not mash so I started gearing the vehicle down. I pushed it into third gear and the vehicle just [went] "whoom", you know, in slow motion, like it was slung. Then I tried to come to second gear and it wouldn't come in. It justgear stripped. It would not come in second gear. And at this time, I was approximately 300 foot when I lost the clutch. I tore the clutch out of the vehicle when I jammed it in third gear. Then at that time, I tried to get it in low gear. I was approaching approximately 150 foot to the intersection and which, at this time, I seen the Weston vehicle coming or I'd seen it before that but I seen we were going to meet so I turned the vehicle to the right in an opening ... but it wouldn't turn. The speed and the force of the vehicle and the friction with the road, it just got in sort of a like this and the truck did not turn where I was trying to turn it.... I was trying to estimate it and I was trying to turn my truck behind Mr. Weston's truck.

Champion's efforts to avoid Weston's truck were unsuccessful and the two vehicles collided near the intersection.

Champion's wife testified that as she followed Champion in the vehicle behind him she could see him through the back window of the van; that smoke started boiling up from the van when it was about 300 feet from the intersection; that she saw her husband pulling on the steering wheel of the van; and that upon seeing this, she *22 started blowing her car horn. The evidence further tends to show that Champion had been driving the van for about an hour and had stopped it at least four times without any problem prior to the collision.

The testimony of L.W. Blanton, the highway patrolman who investigated the collision, tends to show that when Blanton arrived on the scene Weston's truck was for the most part on the right shoulder of highway 2033 and Champion's van was partially on the right side of the highway and partially in the roadway; that there was a stop sign at the intersection for traffic travelling south on road 2044; and that Champion told the patrolman that he had tried to apply his brakes but was unable to stop for the stop sign because of some problems with his vehicle. Patrolman Blanton observed damage to the inside of Champion's vehicle and observed 105 feet of scuff and skid marks on the road made by Champion's vehicle as it approached the intersection and Weston's vehicle.

Weston's testimony tends to show that Weston was operating a pick-up truck in an easterly direction on rural paved road 2033 on 4 June 1981; that as he approached the intersection of that road with rural paved road 2044, he observed Champion's van coming down road 2044 and saw that it was not going to be able to stop; that upon seeing this, Weston pulled his truck onto the right shoulder of road 2033 approximately 100 feet west of the intersection and stopped, and lay down in the seat of his truck. Prior to the collision, Weston noticed that the tires on Champion's vehicle were skipping on the road and heard the tires sliding, skipping and squealing.

We conclude that the evidence is sufficient to permit the jury to find that Champion was unable to stop at the intersection and to control his vehicle so as to avoid the collision because of a defect in his brakes, that Champion was unaware of the defect and that the defect was not reasonably discoverable upon proper inspection and did not result from Champion's failure to exercise reasonable care in inspecting, using or maintaining the brakes. Thus, the evidence supports the instruction and issue submitted by Champion concerning a latent defect in his brakes and it was error for the trial court to refuse to submit and instruct upon that issue. See Stephens v. Oil Co., supra. Because of such error, Champion is entitled to a new trial on the question of his negligence.

Champion further assigns as error the court's refusal to submit to the jury the issue of Weston's contributory negligence and to instruct upon Weston's duty to keep a proper lookout and to observe ordinary care as he requested. The court concluded that the evidence presented established as a matter of law that Weston was not contributorily negligent and for that reason refused to submit the issue of contributory negligence to the jury and to give the instructions correlative to that issue tendered by Champion. We find no error in the trial court's rulings on this issue. The court's refusal to give instructions and to submit an issue tendered by a party which are not supported by the evidence is proper. Jordan v. Storage Co., 266 N.C. 156, 146 S.E.2d 43 (1966) (instructions requested); Hooper v. Glenn, 230 N.C. 571, 53 S.E.2d 843 (1949) (issue tendered). The evidence here, even when viewed in the light most favorable to Champion, is insufficient to permit the jury to find that Weston failed to use such care as an ordinarily prudent person would have used under similar circumstances and thus was contributorily negligent. See Cockman v. Powers, 248 N.C. 403, 103 S.E.2d 710 (1958). Champion's assignments of error numbers 2, 3 and 5 are hereby overruled.

In summary, we affirm the judgment entered by the trial court on 21 September 1984 on Nationwide's motions and on the request of Indiana Lumbermen and Champion for a declaratory judgment but hold that Champion is entitled to a new trial on the question of his negligence.

Affirmed in part; new trial in part.

WHICHARD and COZORT, JJ., concur. *23 *24