Lovi CAMPBELL and Harry Campbell, Plaintiffs and Appellants, v. ALLSTATE INSURANCE COMPANY, a corporation, Defendant and Respondent.
This is an appeal by plaintiffs Lovi and Harry Campbell from a judgment in favor of defendant Allstate Insurance Company. The facts are as follows: On November 11, 1954, the plaintiffs stopped their automobile at a stoplight; shortly thereafter they were struck from the rear by an automobile driven by Marvin Hammer. The police report of the accident indicated that Hammer had been drinking, and that he had been cited for following too closely and for driving with an expired license.
At the time of the accident, Hammer was insured by the defendant against liability for bodily injury and property damage. On the evening of the accident, Hammer notified the defendant by telegram that he had been involved in an accident, that his car had been towed to McBride Motors in Burlingame, and gave his policy number and address. Defendant's representative thereafter attempted to contact Hammer and obtain a report of the accident, but they were unable to reach him either at his home or business address. On December 14, 1954, defendant wrote Hammer at his last known address and informed him that a serious personal injury had resulted from the accident in which he was involved. The letter further stated that Hammer was required, under the cooperation clause of his policy, to give the defendant a statement as to his version of the accident and he was requested to contact defendant and arrange for a convenient time when his statement could be taken. Defendant received no response to this letter. Subsequently, on December 21, 1954, defendant again wrote Hammer. This second letter, which was informed him that defendant was not waiving any of its rights under the policy. It further stated, ‘We are making this Reservation of Right because to date, in spite of many calls, visits and other solicitations on behalf of this company * * * to locate you and secure your statement of this accident have to date met with no success. * * * As you are well aware, your policy calls for cooperation with this company in the investigation, attempted negotiation and settlement of this loss and requires that you render a full account of your version of the accident. * * * If we fail to hear from you within a reasonable time we shall assume that you have no desire to utilize the benefits of your policy with us.’ Hammer made no response to this letter.
In the meantime, plaintiffs, who had filed suit against Hammer to recover for the property damage and personal injuries sustained in the accident, were encountering similar difficulties in their attempts to locate Hammer and serve him with process. By April of 1956, plaintiffs had been able to learn only that Hammer had left the state and had lived temporarily in Oregon and Illinois. Private investigators employed by plaintiffs ultimately learned that Hammer had returned to California. On March 26, 1958, plaintiffs, ‘by a fortuitous happenstance,’ found Hammer in Salinas California, and served him with process. On May 15, 1958, plaintiffs forwarded a copy of the summons and complaint to the defendant.
Hammer thereafter made no attempt to communicate with the defendant. He failed to answer the complaint, and, on June 25, 1959, plaintiffs recovered a default judgment against him in the amount of $35,829.91.
When the judgment was not satisfied in whole or in part, plaintiffs commenced the instant action to enforce the claim obligation of defendant to pay the judgment to the extent of the liability insurance which it had issued to Hammer. Defendant answered, alleging that Hammer's failure to comply with the terms and conditions of the policy had resulted in prejudice to defendant and had thereby released it from all obligations arising from the contract of insurance. After a trial by court, judgment was for the defendant.
Insurance Code, section 11580, requires that every policy insuring ‘Against loss or damage resulting from liability for injury suffered by another person * * *’ or ‘Against loss of or damage to property caused by * * * any vehicle, and for which the insured is liable’ must contain ‘A provision that whenever judgment is secured against the insured * * * in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.’ (Emphasis added.)
The insurance policy upon which this action is based sets forth certain ‘conditions' applicable to all coverages. Among these conditions is the requirement that the insured, in the event of accident or loss, give written notice ‘containing all particulars' to the insurer as soon as practicable. The insured is further required to immediately forward to the insurer every demand, notice or summons received by him in the event that claim is made or suit is brought against him. Another condition provides that ‘No action shall lie against Allstate, under any Coverage, until after full compliance with all the terms of this policy * * *.’ The policy also contains certain other conditions which, although not applicable to all coverages, do apply to both bodily injury and property damage coverage. One of these is a cooperation clause as follows: ‘The insured shall cooperate with Allstate, disclosing all pertinent facts known or available to him, and upon Allstate's request shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits.’
The uncontradicted evidence reveals that Marvin Hammer at no time undertook to inform respondent as to the particulars of the accident in which he was involved. His sole communication with respondent consisted of the telegram which he dispatched on the night of the accident. Although respondent's representatives thereafter attempted to contact Hammer at his home and business addresses, and although they left messages with both his daughter and his estranged wife, Hammer never communicated with respondent. The letter of December 21, 1954, was received by Hammer but not replied to, and it is apparent from appellants' affidavit that he thereafter left the state for the purpose of eluding both respondent and appellants. When he was finally served by appellants in March of 1958, Hammer made no attempt to comply with the policy requirement that he forward the summons to respondent.
Appellants concede that Hammer breached the insurance contract. Their sole contention is that the trial court erred in finding that Hammer's failure to cooperate resulted in prejudice to respondent and thereby relieved it from its obligations under the policy. This contention may not be sustained.
In the leading case of Hynding v. Home Acc. Ins. Co. (1932), 214 Cal. 743, 7 P.2d 999, 85 A.L.R. 13, the plaintiff recovered judgment against the insured and then brought suit upon the policy against his insurance company. The insurer, as in the present case, based its defense on the insured's failure to comply with a clause of the policy requiring him to attend the trial and to cooperate in securing information and witnesses. The trial court granted a motion to strike this defense and judgment was subsequently entered in favor of the plaintiff. On appeal, the judgment was reversed, with the California Supreme Court pointing out that the Legislature had authorized an injured party to bring suit against an insurer subject to the terms and limitations of the policy. The court stated: ‘We see no escape from the conclusion that the violation of the co-operation clause by the assured was a valid defense against the injured party's action. We say this with the knowledge that in some cases it may work a hardship on such party, who is ordinarily in no position to force the assured to co-operate. Further, there is the possibility of collusion between the assured and the insurance company, to defeat the rights of the injured party. This possibility is balanced, of course, by an equal possibility of collusion between the assured and the injured party to defeat the rights of the insurance company. Coleman v. New Amsterdam Casualty Co., supra [247 N.Y. 271, 160 N.E. 367, 72 A.L.R. 1443]. Neither of these possibilities, however, is properly subject to consideration here in view of the terms of our statute. It is not a compulsory insurance law, requiring every automobile owner or those in a particular class to secure insurance for the protection of the public generally.’ (P. 751, 7 P.2d p. 1002.) The court then went on to enumerate certain elements which it considered essential to such a defense. The court stated that the injured party would be barred from a recovery under the policy only if (1) the provision violated by the insured was one reasonably necessary for the protection of the insurer; (2) the provision was one which could readily have been complied with by the insured; and (3) the violation resulted in substantial prejudice to the insurer (p. 752, 7 P.2d p. 1002).
In the later case of Valladao v. Fireman's Fund Indem. Co. (1939), 13 Cal.2d 322, 89 P.2d 643, the court discussed in greater detail the showing which an insurer was required to make in order to defeat the claim of an injured party. There, the insurer had based its defense upon the fact that its insured had concealed information as to the identity of the person who was driving at the time of the accident. The trial court entered judgment notwithstanding the verdict in favor of the insurer, and the plaintiff appealed. In affirming the judgment, the court stated: ‘It may not be denied that aside from the obligation arising from the law of contract, a condition of a policy requiring the cooperation and assistance of the assured in opposing a claim or an action lodged against him by an injured person is material to the risk and of the utmost importance in a practical sense. * * * The insurer is entitled to know from its assured the true facts (of which he may have knowledge) underlying an accident and upon which the injured person bases his claim in order that it may determine for itself, in the light of such information, whether it should contest or attempt to settle the claim.’ (Pp. 328–329, 89 P.2d pp. 646.) The court then stated that there was considerable doubt, despite the language of the Hynding case, that the insurer was required to make a showing of prejudice resulting from the insured's breach of a condition of the policy (pp. 331–332, 89 P.2d pp. 647–648). In any event, the court concluded that ‘as matter of law prejudice must be presumed (if prejudice be essential to the insurer's defense) from the substantial and wilful breach by the assured of the material cooperation clause of the policy.’ (P. 333, 89 P.2d p. 648.)
In Margellini v. Pacific Automobile Ins. Co. (1939), 33 Cal.App.2d 93, 91 P.2d 136, the facts upon which the insurer based its defense were almost identical to those in the instant case. In that case, the insurance policy required that the insured give the insurer immediate written notice of any accident with the fullest information obtainable, give notice of any claim made, forward summons or process served upon him, and, when requested, cooperate with the insurer in defense of any suit brought, and aid in effecting a settlement, obtaining evidence, and procuring witnesses. The policy had been issued to one Frank Levar, but provided that its terms extended to the benefit of anyone driving the insured's car with his permission. While the insured's wife was driving, she was involved in an accident and was charged with reckless driving and taken into custody as intoxicated. Her attorney thereafter notified the insurer that an accident had occurred but gave no further particulars. When the insurer's adjusters undertook an investigation, they were unable to contact Mrs. Levar, who had apparently left the city. Mr. Levar stated only that he knew nothing of the accident. Registered letters informing Mrs. Levar of her obligations and of the insurer's intention to reserve its rights under the policy were returned as undeliverable. She made no attempt to communicate with the insurer until she and her husband forwarded the summons and complaint which had been served upon them. At that time, the insurer returned the papers and refused to assume any obligation under the policy. The plaintiff recovered a default judgment against the Levars and then brought suit against the insurer. Judgment was again in favor of the plaintiff, and the defendant insurer appealed. In reversing the judgment, the court stated: ‘Not only was there a failure here to make the reports required under the terms of the policy, but there was a violation on the part of the assured of the cooperation clause contained therein which we think brings this case within the principles of the recent case of Valladao v. Fireman's Fund Indemnity Company, [13 Cal.2d 322] Cal.Sup., 89 P.2d 643, 646, and which bars a recovery on the part of the respondent.’ (P. 97, 91 P.2d p. 138.) After noting that Mrs. Levar had failed in her duty, as one of the insured, to report the accident and to give the insurer a fair and frank disclosure of any information she possessed, the court concluded: ‘Nor can it be said, under such circumstances, that there remains a question of fact as to whether the appellant was prejudiced. No prejudice may have resulted from the mere failure to make a written report as called for by the policy, since the appellant learned of the injured party's claim within about a week and began an investigation. But that investigation must necessarily have been hampered, and could not possibly have been complete, without such information as Mrs. Levar could and should have furnished. If she was intoxicated at the time of the accident, that fact does not, as respondent suggests, conclusively show that no defense existed and that no prejudice resulted. A violation of that, or any, provision of the Vehicle Code, St.1935, p. 93, on the part of Mrs. Levar, may not have been the proximate cause of the accident. If it be assumed that any information which could have been furnished, in response to the appellant's request, would have disclosed or led to the discovery of the fact that no defense existed, that very fact would have shown the desirability of settling the claim. * * * In our opinion, prejudice sufficiently appears from the uncontradicted facts of this case, and again it is not necessary to decide whether, in a case of this character, an insurer must affirmatively show that prejudice has resulted from the breach of a cooperation clause. Under these circumstances it must be said here, as in the Valladao case, that ‘as a matter of law prejudice must be presumed (if prejudice be essential to the injurer's defense) from the substantial and wilful breach by the assured of the material cooperation clause of the policy.’' (Pp. 99–100, 91 P.2d pp. 139–140.) Clearly, the language above quoted is equally applicable to the present case.
The uncontradicted evidence established that Hammer wilfully breached the cooperation clause of his policy. Under the rule of the Valladao and Margellini cases, such a showing gave rise to a presumption of prejudice to respondent. Appellants point to no evidence tending to rebut this presumption. Moreover, the testimony of respondent's regional claim manager, Mr. McDonough, indicated that respondent was in fact prejudiced by its inability to obtain a statement from Hammer. Under such circumstances, it cannot be doubted that the record amply supports the trial court's finding that Hammer's failure to cooperate resulted in substantial prejudice to respondent and released it from liability to appellants under the policy.
KAUFMAN, P. J., and AGEE, J., concur.