Fidelity & Casualty Co. of New York v. Rosenheimer

EVAN A. EVANS, Circuit Judge (after stating the facts as above). As one of its defenses, applicable to both policies, defendant contends that plaintiffs were obligated to give prompt notice of the pendency of any claim- — malpractice, error, or mistake; that they did not do so, and therefore liability on its part terminated. The clause in the policy relied upon, reads: “In ease the assured becomes aware of any malpractice, error or mistake covered hereunder, or any alleged malpractice, error or mistake, the assured shall give immediate written notice thereof with the fullest information obtainable at the time to the company at its home office in New York City, * * * or * * *. If any claim is made against the assured on account of malpractice, error or mistake covered hereunder, or on account of any alleged malpractice, error or mistake, the assured shall give like notice thereof with full particulars. The assured shall, at all times, render to the company all cooperation and assistance within his power.” The patient was operated on March 16, 1922. On July 2d of the same year the patient consulted another physician in her home , city of Appleton, Wis. Another abdominal operation was performed and the -gauze sponge found and removed. The doctor who performed this operation wrote plaintiffs July 20, 1922, as follows: [962] “A Mrs. Korth, who has been your patient for some time, has recently come into our hands. * ' * * To-day, under ether assthesia, I dissected out, etc., and in the abdominal cavity * *• * I found a gauze sponge, which we removed. I feel that you will be interested in these findings, but can assure you that nothing has been said to the patient in regard to finding this foreign body. We will leave it to you to do as you see fit about informing the patient. Trusting that this will meet with your approval, and, if it does not, kindly let us know what you wish us to do. Very sincerely.” Plaintiffs replied to the doctor, but did not, prior to the institution of the suit, give notice to defendant of the receipt of this letter. On October 31, 1923, the patient brought the action referred to, and plaintiffs promptly notified defendant by letter as follows: “Milwaukee, Wis., Nov. 5, 1923. “This is to notify you that a malpractice suit has been instigated against us by Mr. and Mrs. Prank Korth, Appleton. Kindly come in and see up at your earliest convenience.” They also promptly delivered the summons and complaint served in the action to defendant, who attended the adverse examination permitted under section 4096 of the Wisconsin Revised Statutes. Thereafter, on December 8, 1923, defendant notified plaintiff as follows: “Please be informed that we are handling this matter under a full reservation of all the rights, of the company until we have had an opportunity to fully investigate the case. This is because of.,the delay in notifying us of the claim being made against you.” Thereafter, and on. March 31, 1924, defendant returned the summons and complaint and added: “I am instructed to inform you that the company feels that, because of the delayed notice to us of the claim being made upon you, we will have to withdraw from participating in defending you. We regret that we must find ourselves upon the necessity of the decision to decline to cover this case because of the delayed notice, as indicated above.” It was thereafter that plaintiffs employed other counsel and confessed judgment for $8,000 in favor of Mrs. Korth, and for the sum of $2,000 in favor of her husband. Defendant relies on the failure of plain- . tiffs to give notice, as called for in the policies, while plaintiffs insist that defendant waived the giving of such notice by taking charge of the litigation, and for nearly five months conducting the defense, with full knowledge that the assured had failed • to give such notice. Many cases may be found —a few being here collected — that hold the insurer may and does ordinarily .waive the giving of such notice by taking charge of the litigation. Reilly v. Linden, 151 Minn. 1, 186 N. W. 121, N. E. 897; Mining Co. v. Fidelity Co., 126 Mo. App. 104, 103 S. W. 1098; Employers’ Liability Co. v. Chicago & Big M. Coal Co. (C. C. A.) 141 F. 962; Miller v. Union Indem. Co., 204 N. Y. S. 730, 209 App. Div. 455; Farrell v. Merchants’ Mutual Auto Liability Co., 196 N. Y. S. 383, 203 App. Div. 118; Goldman v. Fidelity & Deposit Co., 125 Wis. 395, 104 N. W. 80; Cannon v. The Home Ins. Co. of N. Y., 53 Wis. 585, 11 N. W. 11; Patterson v. Philadelphia Casualty Co., 119 Minn. 308, 138 N. W. 281, 48 L. R. A. (N. S.) 184; Fairbanks Canning Co. v. London Guaranty & Accident Co., 154 Mo. App. 327, 133 S. W. 664; Humes Const. Co. v. Phil. Casualty Co., 32 R. I. 246, 79 A. 1, Ann. Cas. 1912D, 906; Lee v. Phil. Casualty Co., 90 Conn. 202, 96 A. 952. Few of them, however, consider the effect of an attempted reservation, such as the defendant made by its letter of December 8th, above quoted. But all of them recognize that the insurer must have knowledge of all the material facts before its conduct can constitute a waiver. The action of the District Court in directing a verdict in plaintiffs’ favor was necessarily predicated upon one of two assumptions, either that the evidence showed conclusively that defendant knew all the material facts respecting plaintiffs’ failure to give this written notice, or that the evidence showed conclusively that plaintiffs were not obligated to give the defendant any written notice prior to the commencement of the damage action against them. From all the evidence we are of the opinion that both these questions were for the jury. It may be true that defendant early learned of plaintiffs’ failure to give it written notice of the substance of the letter of July 20th.' But there was other material information respecting the alleged malprae-. tice which defendant did not receive until later. In fact, the long time that elapsed between the date of the operation and the commencement of the malpractice action added to the burdens of the investigation, and left the question of whether any written notice. was required. doubtful and uncertain. Until defendant received this in [963] formation, which, of necessity, had to come to it largely from, or through plaintiffs, its action in conducting the defense could not be said as a matter of law to have been a complete waiver. In other words, the question was one for the jury. Likewise we cannot say, upon all the evidence in this ease, that the plaintiffs were not required to give written notice under the terms of their policies. While it may be true that the assured, in a case like this, is not required to give written notice of their “malpractice, error, or mistake” upon the receipt of every bit of hearsay information that may reach them, the evidence in this case demanded that this question be submitted to the jury. In fact, the more debatable question, upon all the evidence, is whether plaintiffs should not, as a matter of law, lhave been held to such a requirement. In view of the fact, however, that there are conflicting inferences properly dedueible from this evidence, this issue was one for the jury. There are, serious questions presented by the record respecting plaintiffs’ right to recover on the so-called hospital poliey, which we refrain from discussing because of the uncertainty of the evidence bearing upon these questions. As the judgment must be reversed, and a new trial ordered, and upon a new trial these uncertainties may disappear, we do not pass upon these questions. The judgment is reveled, with directions to grant a new trial.