PUREFOY v. PACIFIC AUTOMOBILE INDEMNITY EXCHANGE (1935)

On December 15, 1929, W. S. Austin insured his automobile with respondent company. On the following day, December 16, while Austin's young son was driving the car with his father's consent, an accident occurred in which the appellant, J. W. Purefoy, was injured. Purefoy filed suit for damages against the Austins on March 15, 1930. The respondent company was notified of this action by appellant's attorneys on March 31, 1930, September 20, 1930, and April 10, 1931. Austin, however, did not personally notify the insurer of the accident until March 18, 1931, a year and three months after it occurred, when he was served with summons and complaint in the action against him for damages. These he transmitted to the company's agent with the request, ‘Please advise procedure.’

Respondent company disclaimed liability for lack of timely notice, asserting Austin had failed to comply with the provisions of the co-operation clause in the insurance policy, and refused to participate in the action for damages which resulted in a judgment for Purefoy, which went unpaid. Purefoy brought suit against the insurer, and the trial court held against him. From this judgment, he appeals.

Respondent relies upon a strict and literal interpretation of the co-operation clause of its insurance contract with Austin, requiring that assured give ‘immediate written notice of any accident, claim, loss or suit hereunder * * *,’ and other requirements customary in such insurance contracts, which conclude with the declaration that ‘immediately upon a failure or refusal to perform any one or more of said conditions this policy and the liability of the Exchange, if any, thereunder shall automatically terminate.’ Were such an interpretation given effect in all cases, it would open an avenue of temptation to insurers, through collusive action with judgment proof clients, to evade payment of just claims.

A contract of insurance against liability is one for the benefit of unknown third parties who become known and identified upon being injured by the insured. It would be a strange and useless proceeding on the part of the Legislature to give to the injured party the right to sue the insurer (Stats. 1919, p. 776), if such action could be defeated by the insurance company and the insured without the knowledge or consent of, or any act on the part of, the injured person. Malmgren v. Southwestern Automobile Ins. Co., 201 Cal. 29, 33, 255 P. 512; Bachman v. Independence Indemnity Co., 112 Cal. App. 465, 483, 297 P. 110, 298 P. 57. The failure of Austin, the insured, to fully co-operate with the insurance company did not, therefore, deprive plaintiff of his right of action in this case.

It cannot be said that the insurance company here was substantially prejudiced by the indifference of the insured to his engagement to promptly notify defendant in case of an accident. Seven months before the trial of the injury case, the defendant informed plaintiff that it was not liable to plaintiff under the policy of insurance, and ‘was not interested in the action’ against the Austins for the reason that the Austins had not furnished it with any information or assistance concerning the accident. Subsequently, the Austins delivered to defendant the complaint and summons which had been served on them. No facts are found from which it may be reasonably found that the defendant did not have ample opportunity to defend the injury action. It is not found that the defendant required anything of the insured that the insured did not do. Defendant chose to rely absolutely on the co-operation clause. The facts here differentiate this case from the case of Hynding v. Home Accident Ins. Co., 214 Cal. 743, 7 P.(2d) 999, 85 A. L. R. 13. In that case, the court held that it was error for the trial court, in an action similar to this, to strike from the answer of the insurance company its defense that the insured had failed to co-operate. Here the defense was pleaded, but defendant has failed to show it was prejudiced by the insured's action.

The judgment is reversed.

WASTE, Chief Justice.

We concur: SHENK, J.; THOMPSON, J.; CURTIS, J.; SEAWELL, J.