GOODWYN, Justice. This is the second appeal in this case. The first appeal, reported as Alabama Farm Bureau Mutual Casualty Insurance Co. v. Mills, 266 Ala. 681, 98 So.2d 48, was from a decree of the circuit court of Tuscaloosa County, in equity, sustaining respondents' (appellees') demurrers to the bill for declaratory judgment. We reversed, holding that the bill presented a justiciable controversy appropriate for declaratory relief. On remandment, the respondents-appellees answered the bill and a hearing was had on the merits. The evidence included oral testimony, depositions and a stipulation. The trial court rendered a decree denying the relief sought by the bill. The complainant insurance company brings this appeal from that decree.
The material facts are as follows:
The insurance company issued a policy of automobile liability insurance to Roy R. Mills covering the operation of a 1950 Dodge, "subject to the limits of liability, exclusions, conditions and other terms" of the policy. Conditions 2, 5, and 12 of the policy are as follows:
* * * * * *
The insured is thus defined in the policy:
The automobile covered by the policy was involved in an accident on February 18, 1956. It was being driven by Roy Leland Mills, one of the respondents below, who was 16 years of age and the son of Roy R. Mills. There appears to be no dispute that the son was driving the car with the father's permission, thus making the son an "insured" within the terms of the policy. At the time of the accident, two young ladies, each 16 years of age, were passengers in the car. One of the girls, Charlotte Mills, was a respondent below and is an appellee here.
On February 20, 1956, both the father and son went to the insurance company's office in Tuscaloosa. The son reported that he had been involved in an accident while driving the insured automobile. An employee of the company then prepared a report of the accident which was read and signed by the son. In the report the son related that at the time of the accident he was driving along a muddy and slippery country road; that he was traveling at a speed of from 30 to 35 miles per hour; that, while going down an incline, the left front tire blew out, causing him to lose control of the automobile, which continued on for a distance of about 40 yards before coming to a stop with its rear wheel in a ditch; that Charlotte Mills and Helen Hughes were in the automobile with him and that they were injured. The report also showed Ray Watson and Jim Freeman as witnesses to the accident. The insurance company's adjuster got written statements from Miss Hughes, Watson and Freeman, substantially supporting the facts as related by Roy Leland in reporting the accident. The adjuster made a report to the company's claims office that the cause of the accident was the blowing out of a tire which caused the car to go into a ditch.
On April 19, 1956, Charlotte Mills, suing by her father as next friend, filed a suit against Roy Leland Mills in the circuit
Sometime between May 19 and June 1, 1956, the adjuster received a telephone call from Robert Mills stating that he had discharged his attorneys in the two suits and asked that the adjuster come talk with him. The adjuster went to Robert Mills' home where he was told that the accident had not been caused by a blowout. Robert Mills offered to settle both suits for $8,000. The adjuster reported this information to the company's home office and later also reported it to the company's Tuscaloosa attorney.
At the request of the company's attorney both Roy R. and Roy Leland Mills went to his office at Tuscaloosa on June 4, 1956. After being informed by the attorney that the tire did not blow out Roy Leland gave another signed statement about the facts of the accident. This last statement reads, in part, as follows: "It had been raining and the road was wet, but I did not think that I was speeding, for just before the accident occurred at the top of a little hill, when I was at the bottom of the hill, I noticed my speedometer was on approximately 35 miles an hour. And I did not gain any speed as I went up the hill. As I got to the top of the hill for some reason I got out of the ruts in the road and skidded or lost control of the car and went off of the road on my left * * *. As we were leaving, one of the boys suggested that I cut the left front tire and claim that I had a blowout, so I got out of the car, took my knife and cut the left front tire of the car, and then threw my knife away."
On June 13, 1956, the witness Jerry Freeman gave the adjuster an additional statement in which he said he was following Roy Leland's car, which got up to about 60 miles an hour when it got to the top of a hill; that he saw the car sliding sideways and it left the road; that Roy expressed concern about what his daddy would do to him; that someone suggested he could claim that the tire blew out; that Roy took a knife from his pocket and cut the left front tire.
The adjuster also secured an additional statement from Ray Watson on June 13, 1956. Watson stated that Freeman was driving the car in which he was a passenger at about 40 to 45 miles per hour when they came up behind the car driven by Roy; that Freeman slowed his car to about 30 miles an hour; that Roy then speeded up and Freeman picked back up to about 40 to 45 miles an hour; that Roy kept on pulling away until he reached a speed of 55 to 60 miles per hour, at about which time he went over the top of a hill; that when they came over the hill, the Mills car was sliding into the ditch; that after moving the two girls from the Mills car to the Freeman car someone mentioned cutting the tire and claim that it "blowed out"; and that Roy cut the left front tire.
On June 27, 1956, the insurance company wrote a letter to Roy Leland informing him that it was denying him coverage under the policy; that it was instructing its counsel
On July 5, 1956, the company brought this declaratory judgment proceeding for a judicial determination as to whether or not it is obligated, under the circumstances, to defend the two suits brought against Roy Leland.
The decree appealed from contains findings "that no written or oral misrepresentations or warranties in connection with proof of loss in connection with said policy made by Roy R. Mills or Roy Leland Mills or any one else were made with actual intent to deceive or increased the risk of loss to complainant so as to in any way prejudice or release complainant from its obligations under said Policy No. A-76535 referred to in the Bill of Complaint herein."
Appellees argue for application of the rule that a chancellor's findings of fact from evidence given orally before him are presumed to be correct. But, here, there is no substantial conflict in the evidence bearing upon the material issues presented, that is, whether there was a failure to comply with the notice and cooperation conditions of the policy in some substantial or material respect. There is, therefore, "no real ground for the application of the rule, here prevailing, of the presumption of verity to be indulged as to the finding of the lower court on the evidence offered and noted on the hearing." State v. McKenney, 268 Ala. 165, 169, 105 So.2d 439, 442; State v. Mobile Stove & Pulley Mfg. Co., 255 Ala. 617, 620, 52 So.2d 693; Batson v. Birmingham Trust & Savings Co., 241 Ala. 629, 632, 4 So.2d 307; Esco v. Davidson, 238 Ala. 653, 655, 193 So. 308; Barnes v. Clark, 227 Ala. 651, 653, 151 So. 586, 90 A.L.R. 637; Metropolitan Casualty Ins. Co. of New York v. Blue, 219 Ala. 37, 41, 121 So. 25; Commercial Credit Co. v. Tarwater, 215 Ala. 123, 126, 110 So. 39, 48 A.L.R. 1437.
It is apparent that the trial court based its decree on § 6, Tit. 28, Code 1940, and on a finding that the company was not prejudiced.
We will discuss first the question of prejudice. In the recent case of American Fire & Casualty Company v. Tankersley, Ala., 116 So.2d 579, 581, where there was involved a liability policy containing provisions and conditions identical with those in the policy now before us, it was held to be "entirely immaterial whether the insurance company was prejudiced or not." As there said:
Section 6, Tit. 28, Code 1940, provides as follows:
Appellees insist that the false statements were made in connection with furnishing "proof of loss" under the policy, were not made "with actual intent to deceive" and did not "increase the risk of loss." Assuming (there being no necessity of deciding) that § 6 is applicable, we see no basis for holding that such statements were not made "with actual intent to deceive." It is apparent—in fact, undisputed—that the false statements were made deliberately as part of a planned scheme of deception. That the plan was devised originally as a protective shield for Roy Leland against what his father might do to him cannot serve to excuse him, as an insured, from complying with the notice requirement of the policy. It should be remembered that the false statements were given to the insurance company, obviously in connection with the insurance policy, and not just to the father. As to the cooperation requirement, there is no contention that it is in anywise controlled by § 6.
We are clearly of the opinion that there was a failure of substantial compliance (Alabama Farm Bureau Mutual Casualty Ins. Co. v. Teague, 269 Ala. 53, 56-57, 110 So.2d 290; George v. Employers' Liability Assur. Corporation, 219 Ala. 307, 309, 112 So. 175, 72 A.L.R. 1438) with the notice and cooperation conditions of the policy and that the trial court erred in its holding.
The following from Hoffman v. Labutzke, 233 Wis. 365, 374-375, 289 N.W. 652, 656, is equally applicable here:
Accentuating the materiality of the statements as to the cause of the accident is the fact that liability of the insured to the passengers in the car was subject to the "guest statute". Code 1940, Tit. 36, § 95.
In Allegretto v. Oregon Automobile Ins. Co., 140 Or. 538, 13 P.2d 647, 648, the court, in considering the effect of a false statement made by the insured, had this to say:
"* * * It was his contractual. obligation to make a full, fair, and complete
In Fidelity & Casualty Company of New York v. Griffin, D.C.Tex., 178 F.Supp. 678, 680, there was involved a policy containing conditions quite similar to those in the case before us. It was there said:
While the deceit here did not continue as long as it did in Fidelity & Casualty Company of New York v. Griffin, supra, the question of lack of substantial compliance with the notice and cooperation conditions is not one "of mere time lapse." Miller v. Zurich General Accident & Liability Ins. Co., 36 N.J.Super. 288, 115 A.2d 597; Maryland Casualty Co. v. Emery, D.C.N.J., 163 F.Supp. 657.
In applying the foregoing principles to the case before us it is to be noted that the false statements were deliberately made, reiterated, and persisted in for about three and a half months and were not changed until Roy Leland was confronted with their falsity by counsel for the company; that the false statements were corroborated by other witnesses to the accident in accordance with the planned deception; that the statements, if true, undoubtedly would have absolved the company from ultimate liability, particularly in view of the "guest statute"; and that the company relied on such false statements in preparing a defense to any claim arising out of the accident, thus lulling it into a sense of false security, to its detriment
It seems patently clear to us that the deliberate making of and persistence in such false statements constituted a failure to comply with the notice and cooperation conditions in a "substantial and material respect." Alabama Farm Bureau Mutual Casualty Ins. Co. v. Teague, supra [269 Ala. 53, 110 So.2d 293]; George v. Employers' Liability Assur. Corporation, supra.
The guardians ad litem who represent the minor appellees have filed motions in this court praying that they be allowed fees for their services in this proceeding. The motions are well taken. Sellers v. Sellers, Ala., 117 So.2d 386, 389; Code 1940, Tit. 7, §§ 165, 180; Equity Rule 112, Code 1940, Tit. 7 Appendix.
The decree appealed from is due to be reversed and the cause remanded with directions that the trial court enter a decree in
Reversed and remanded with directions.
LIVINGSTON, C. J., and SIMPSON and COLEMAN, JJ., concur.