JOHN R. BROWN, Circuit Judge:
This case presents for review the propriety of the District Judge's granting of Insurer's motion for summary judgment in a suit by the widow of the Assured as administratrix of the Assured's estate to establish the Insurer's liability for failure to defend suits by third parties against the estate. The facts are these.
On July 3, 1958, the named Assured
The unsuccessful complainant appeals, asserting two things primarily as a basis for reversal. The first is that her subsequent valid appointment as administratrix on December 20, 1962, relates back to validate the judgments entered March 26, 1962, in the State Court third-party suits against her in her representative capacity.
In view of our disposition of the case we need not now decide these questions. The District Judge apparently thought that the pleadings limited the scope of available relief, and if that formally sought was not allowable none could be granted. This is not the law. As we have many times said, except in the case of a default judgment, the Court is bound to grant whatever relief the facts show is necessary or appropriate. F.R.Civ.P. 54(c); Smoot v. State Farm Mut. Auto. Ins. Co., 5 Cir., 1962, 299 F.2d 525; Arthur H. Richland Co. v. Harper, 5 Cir., 1962, 302 F.2d 324; Brotherhood of Railway Trainmen v. Central of Georgia Ry. Co., 5 Cir., 1962, 305 F.2d 605; Shull v. Pilot Life Ins. Co., 5 Cir., 1963, 313 F.2d 445. To grant summary judgment dismissing the whole main case could be sustained, not by showing that the relief prayed for was not available, but rather that there was no genuine issue of fact on which any kind or type of relief, complete, final, contingent or interim, could be granted.
The case was decided below and argued here as though this was a suit on the State Court judgments. On that approach
The policy contained the traditional defense coverage.
On that approach what is the test for determining whether the claim is "of the type for which [the Insurer] would have to make payment"? Does the duty to defend depend on the facts ultimately established in the damage suit? Or does it ordinarily depend on what the third party claimant contends?
For us the moving hand of Florida makes the Erie choice here simple and inescapable. Aligning Florida with the majority a late, if not the latest, writing Court, Ford Motor Co. v. Mathis, 5 Cir., 1963, 322 F.2d 267, 269, spells it out plainly.
See the comprehensive discussion in 7A Appleman, Insurance Law and Practice § 4682 (1962); and the full treatment of the subject by Judge Pope in The Travelers Indemnity Co. v. State Farm Mutual Auto. Ins. Co., 9 Cir., 1964, 330 F.2d 250.
The comment in III Risjord & Austin, Automobile Liability Insurance Cases, case 3112,
Did the complaint state a cause of action against the Assured? If so, what is the remedy for the Company's breach
Under the policy, the Company undertook
There is no question about the State Court suits being against the "insured." The policy definitions state "under coverages A [personal injury], B [property damage] * * * the unqualified word `insured' includes (1) the named insured * * *."
More important, the broad definition of "Insured," note 9, supra, extends coverage for personal injury and property damage claims to "(4) * * any person or organization legally responsible for the use thereof by an insured as defined under the three subsections above." When this is read with the balance of the policy, and particularly the provisions respecting notice of an accident or likely claim,
These State Court third-party suits on their face showed that three things were presented: (1) the negligent operation of the described insured automobile, (2) negligent operation thereof by the named Assured causing the damages sought, and (3) the death of the named Assured and the asserted existence of his estate.
Thus the third-party suits charged as plainly as words can a claim for which the Assured would be liable if proved. And, of course, the Insurer knew of those suits. It is uncontradicted on this record that the Insurer received copies of every pleading, motion or other document filed in each of the State Court suits. It is also uncontradicted that the widow complied with all policy conditions relating to notice, cooperation with the Insurer and the like.
It is difficult to comprehend the position of the Insurer. With notice of the accident and the pendency of suits which on the face of the complaints charged a case for liability of the Assured, the Insurer stood mute. It refused to defend, or presumably to budge or even so much as speak. Whether this was the reason, or whether counsel now hard pressed to rationalize the strange result so far reached have simply advanced it as the best way out,
While this is a pretty and beguiling theory, it is in essence the tired, weary and universally rejected notion that the duty to defend extends only to meritorious suits. But at this late date, it should now be clear that the duty of defense has nothing at all to do with whether the suits are intrinsically meritorious or not. American Fidelity & Cas. Co. v. Pennsylvania Threshermen & Farmers' Mut. Cas. Ins. Co., 5 Cir., 1960, 280 F.2d 453, 458. Indeed, if suits are brought against the wrong party or in the wrong court, or if necessary parties are missing, it is to Insurer's advantage to come in and defend knowing all the while that liability cannot be maintained in that suit and hoping against hope that the statute of limitations will run or other impedients will arise before a proper suit is instituted. A pleading that is demurrable (under the old concepts) or one subject to a motion to dismiss for failure to state a claim, F.R. Civ.P. 12(b), if it otherwise describes an occurrence within the coverage imposes on the Insurer at least the duty to supply the defense of filing the demurrer or motion. And, knowledge by the Insurer that the wrong party has been sued is not different from knowledge that the liability facts are different than alleged in the third-party suits. Yet clearly in the latter instance the duty to defend is positive. Indeed, the duty to defend encompasses the duty of honorably bringing forward whatever defense will exonerate the Assured.
Since the asserted filing of the third-party suits against the wrong (or nonexistent) party goes only to the merits and not the duty to defend, the Insurer may not drag this in through the back door by claiming it got no notice. Of course it had notice. It cannot in fact deny this. But by metaphysical dialectic it says that what its files revealed it did not in law know because the party sending the materials, i. e., the notice, did not exist. But this is confusing duty to defend with notice of claim, and on that the record is all one way.
The upshot is that there is here a clear case of breach of the Company's duty to defend.
The duty to defend is not the duty to pay, although a consequence of a failure to defend is often an obligation to pay. But that depends on there being valid judgments against the assured. Perhaps this is just a way of saying that the duty to defend is not only distinct and separate, but it is continuous until satisfied. The situation here, therefore, is one in which this continuing duty to defend takes on a different form. Failure to defend initially has resulted in outstanding judgments. So long as these are still outstanding, it is impossible to go back of them to assert nonliability. But if, under applicable Florida law, these judgments are not valid, then the duty to defend now comprehends the obligation of taking all available steps to set aside such judgments or otherwise have them declared to be of no legal effect against the estate of the deceased Assured or the validly appointed administratrix.
The predicament of the Insurer may be summed up in this way: either pay the judgments
The record therefore establishes as a matter of law that the Insurer had the duty to act. It did not. It now has a duty to act, and since it declines to do so, it is essential that a suitable remedy be fashioned by the Federal Court to secure compliance.
What seems to have troubled the District Judge, and presumably the Insurer, was a feeling that some kind of order had to be entered which disposed of the whole case now, once and for all. But the Federal Court is not so rigidly bound. Relief to be granted depends not on the prayer, but on what the facts — either found by a trier or established as a matter of law — reasonably requires, F. R.Civ.P. 54(c). And there is like flexibility in the operative terms of any decree or judgment. Thus, where things depend on the outcome of litigation elsewhere, or future developments as to controlling substantive or procedural law, the Federal Court has the power — and the duty where appropriate — to enter a conditional order or decree. Smoot v. State Farm Mut. Auto. Ins. Co., 5 Cir., 1962, 299 F.2d 525; Travelers Ins. Co. v. Busy Elec. Co., 5 Cir., 1961, 294 F.2d 139, at 145; Sax v. Sax, 5 Cir., 1961, 294 F.2d 133, 139; Dotschay v. National Mut. Ins. Co., 5 Cir., 1957, 246 F.2d 221. Thus, the Court by taking full advantage of the elasticity of declaratory orders, 28 U.S.C.A. § 2201, may mold a decree
These considerations show why on the record as of the time of the order appealed from, the Court below had the duty of retaining the case, not dismissing it outright, for the entry of appropriate orders, conditional, contingent, or otherwise, to make certain that the rights of all — Insurer and Assured — were preserved and enforced.
For reasons which are apparent from a consideration of all of these factors, it is plain that we do not, we could not, blueprint the exact nature of the proceedings on remand or the relief to be granted. But to remedy the breach of the unconditional contractual obligation to defend, United Services Auto. Ass'n v. Russom, 5 Cir., 1957, 241 F.2d 296, 301, the District Court must mold and enter an appropriate decree or decrees.
Reversed and remanded.