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Union Automobile Indemnity Association v. Capitol Indemnity Insurance Co.

November 21, 1962


Author: Swygert

Before HASTINGS, Chief Judge, and DUFFY and SWYGERT, Circuit Judges.

SWYGERT, Circuit Judge.

Plaintiff, Union Automobile Indemnity Association, an inter-insurance exchange with its principal office in Bloomington, Illinois, brought this action against defendant, Capitol Indemnity Insurance Company, an Indiana corporation, to recover $39,017.03 paid by plaintiff to settle three personal injury suits. The suits were instituted against one Michael Ruggles and arose out of an automobile accident occurring in Terre Haute, Indiana, July 5, 1958. Plaintiff sued as subrogee of Michael Ruggles in respect of his claim against Capitol Indemnity for indemnification of the amount representing the costs expended in his behalf by Union Indemnity in defending the actions and also the amount paid to settle them. The latter company had issued an insurance policy to one Fred Ruggles, father of Michael Ruggles, which covered any automobile, regardless of ownership, driven by the insured or any relative residing in his household in the event that the automobile was not covered by other insurance. Capitol Indemnity denied liability on the ground that it had not extended any insurance covering the automobile being driven by Michael Ruggles at the time of the occurrence. The District Court, after a trial, gave judgment for defendant, from which judgment plaintiff appeals.

The car involved in the collision driven by Michael Ruggles was owned by one Carol Acton, nee Newman. Union asserts that Carol Newman had an oral contract of insurance with Capitol Indemnity covering this car by reason of which the latter company was obligated to defend the personal injury actions and to discharge any liability resulting therefrom. By assuming the defense and settling the claims, plaintiff admitted that it was liable under the policy unless defendant was primarily liable under the asserted oral contract.

The District Court decided that plaintiff had not discharged its burden of establishing a contract of insurance between Miss Newman and Capitol Indemnity and gave judgment to defendant. We do not reach the merits of the controversy because we have concluded that the District Court unduly restricted the cross-examination of one of defendant's principal witnesses to the prejudice of plaintiff's cause and that a retrial is required.

In order to show the background of the erroneous evidentiary ruling, it is necessary to elaborate on the facts disclosed at the trial. Miss Newman lived in Dennison, Illinois. She worked in Terre Haute, Indiana. On May 20, 1958, she purchased the car in question in Terre Haute and while arranging for its financing was introduced to Charles Deeter, an agent of Capitol Indemnity, for the purpose of insuring the car.

Miss Newman testified that an application was filled out on May 20 wherein the period of insurance was fixed at six months and full coverage provided; also, that Deeter told her that as soon as the car was driven from the lot "it would be insured." Until after the accident on July 5, she heard nothing from Deeter or defendant. Plaintiff introduced the application into evidence. This carries a notation "Bound 6-1-58 effective * * from 6-2-58 to 12-2-58 * * *."

Defendant then called Deeter as a witness who testified as to his name and where he lived, and further, that on May 20, 1958, he did not tell Miss Newman that she had "insurance on her automobile effective at any time on that date or at any time." (Emphasis supplied.) This was the extent of Deeter's direct examination. Plaintiff sought to cross-examine him concerning: his occupation as an insurance agent; the occupation in which he engaged at his residence; the conversation with Miss Newman on May 20, 1958; and his conversation with her concerning insurance. Defendant objected to these questions as being beyond the scope of direct examination. The objections were sustained.*fn1 Plaintiff then called Deeter as its own witness on rebuttal. The District Court would not permit plaintiff to examine him as to his conversation on May 20, 1958, with Miss Newman on the ground that this was not proper rebuttal evidence.

It is the rule in federal courts that cross-examination of a witness is confined to the subject matter of his direct examination. United States v. Bender, 218 F.2d 869 (7th Cir. 1955) cert. denied, 349 U.S. 920, 75 S. Ct. 660, 99 L. Ed. 1253. On the other hand, cross-examination is a matter of right. Alford v. United States, 282 U.S. 687, 691, 51 S. Ct. 218, 75 L. Ed. 624, (1931). This right is not confined to specific questions asked on direct examination but extends to the subject matter about which the inquiry was made. Butler v. New York Central R.R. Co., 253 F.2d 281 (7th Cir. 1958).

In the instant case, we are satisfied that plaintiff was unduly restricted in its cross-examination of the witness Deeter. After the witness was asked on direct examination whether on May 20, 1958, he told Carol Newman that she had insurance on her automobile "effective at any time on that date or at any time," plaintiff should have been permitted to question him about the substance of his conversation with Miss Newman. Furthermore, because of the statement in the application regarding the effective date of the insurance, the witness should have been subject to cross-examination about whether he told her she had insurance starting June 2, 1958, - an inquiry clearly warranted in view of the "at any time" segment of the question propounded to him on direct examination.

It is apparent from his statement,*fn2 in deciding whether there was an oral contract of insurance, that the trial judge was influenced by his evaluation of the witnesses' ability to recall specifics of their conversation in May, 1958. Consequently, the restriction of the cross-examination of the witness Deeter was clearly prejudicial and constitutes reversible error. The trial judge should have had the benefit of the excluded cross-examination before deciding the case.

The judgment of the District Court is reversed and the cause remanded for a new trial.

HASTINGS, Chief Judge (dissenting).

The judgment of the district court has been reversed on the sole ground that the trial court committed prejudicial error in restricting cross-examination of witness Deeter. The cause is remanded for a new trial. It is held that the "trial judge should have had the ...

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