Opinion
44816.
ARGUED OCTOBER 6, 1969.
DECIDED NOVEMBER 3, 1969. REHEARING DENIED DECEMBER 11, 1969.
Action on insurance policy. Clarke Superior Court. Before Judge Barrow.
Hudson Stula, Jim Hudson, for appellant.
Erwin, Epting, Gibson Chilivis, Nickolas P. Chilivis, for appellee.
1. The co-operation clause in a liability insurance policy is a material condition of liability, and a breach of it by one who is insured or who claims the benefit of insurance under the policy relieves the insurer of any obligation to defend a damage action against the insured, which it is otherwise required to defend, or to pay any claim or judgment against him.
2. A judgment creditor who sues on a policy indemnifying the insured against claims for damages stands in the shoes of the insured, and a breach of the co-operation clause by the insured relieves the insurer of any obligation to pay the judgment.
3. Usually, whether there has been a breach of the co-operation clause is a fact question. The insurer has the burden of showing, prima facie, a violation of the agreement by the insured and that it has been diligent and acted in good faith in seeking to obtain the insured's co-operation. The breach, once prima facie shown, shifts the burden to him who seeks to enforce a claim under the policy to show justification or excuse therefor. The insurer is not required to anticipate or negate all excuses or reasons that might justify it.
4. A breach of the clause is prima facie shown when it appears that counsel employed to defend on behalf of the insured made reasonable effort to obtain the insured's co-operation. If the asserted breach is the insured's failure to attend the trial of a case, a showing of reasonable effort to notify him of the time and place of the trial, as scheduled by the court, and a request for his attendance is sufficient.
5. If the facts as stipulated, or as shown by evidence, demand a finding of a breach of the clause by the insured, a verdict should be directed or judgment entered for the defendant, absent a countershowing of justification for the breach.
ARGUED OCTOBER 6, 1969 — DECIDED NOVEMBER 3, 1969 — REHEARING DENIED DECEMBER 11, 1969.
St. Louis Fire Marine Insurance Company issued to Jack Shelby a policy of public liability and property damage insurance for his protection against claims of injury and damage arising from his operation of a described automobile. He was involved in a collision with a vehicle owned by H. Y. Akers Sons, Inc., as a result of which suit was filed against Shelby, and the company employed counsel to defend the action in his behalf. At the first trial term of the court the case was continued because of defendant Shelby's illness. When the next term at which the case was scheduled for trial approached, counsel attempted to get in touch with him and have him come in and go over the case and the evidence which would be offered in defense of the action, but they could not. A letter was addressed and mailed to him with proper address and postage, asking him to come in for preparation for trial and notifying him of the date when the case would be placed on trial, and was sent by certified mail, but he refused to accept it. Another similar letter was sent by ordinary mail, which was not returned, but he did not respond to it. Several efforts were made to reach him by telephone, but these were unavailing. He was sent a telegram similarly informing him, which was apparently delivered, but there was no response to it. He never appeared at counsel's office or at the court, and when the case was called counsel informed the court of the efforts which had been made to obtain Shelby's attendance and announced that because of his failure to co-operate with them in preparing and presenting a defense, he being the chief witness upon whom they could rely, they were withdrawing as his counsel. The names of counsel were thereupon stricken and the case went to trial, resulting in a verdict for the plaintiff.
Plaintiff then filed suit seeking to enforce the judgment against Shelby's insurer, St. Louis Fire Marine Insurance Company, and it defended on the ground that Shelby had failed to meet the obligation imposed upon him by the co-operation agreement in the policy, in that he had failed and refused to assist counsel in their preparation for trial and had failed to appear when the case was called for trial, he being a key and material witness for the defense; indeed the only witness the defense had as to the facts of the collision, and under a statement he had made to the company his testimony would show a lack of liability.
The facts were stipulated by counsel and the case was submitted for trial thereon by the judge without a jury. Judgment was entered for the defendant and plaintiff appeals.
1. We have recognized the obligation of an insured to co-operate under this or similar provisions in liability policies, and the insurer's right to decline to make a defense and to claim its relief of obligation to make payment when the insured fails to cooperate in Sims T. V., Inc. v. Fireman's Fund Ins. Co., 108 Ga. App. 41 ( 131 S.E.2d 790); Cotton States Mut. Ins. Co. v. Martin, 110 Ga. App. 309 ( 138 S.E.2d 433); State Farm Mut. Auto. Ins. Co. v. Wendler, 115 Ga. App. 452 ( 154 S.E.2d 772); State Farm Mut. Auto. Ins. Co. v. Burden, 115 Ga. App. 611 ( 155 S.E.2d 426); Hardware Mut. Cas. Co. v. Scott, 116 Ga. App. 637 ( 158 S.E.2d 275); St. Paul Fire c. Ins. Co. v. Gordon, 116 Ga. App. 658 ( 158 S.E.2d 278); State Farm Mut. Auto Ins. Co. v. Wendler, 117 Ga. App. 227 ( 160 S.E.2d 256), and perhaps in others. The nonco-operation must, of course, have been material — not merely technical or inconsequential in nature.
Whether there has been a breach of the co-operation clause is sometimes a question of fact for resolution by the jury and at other times a question of law. If there was a factual issue here the judge sitting as judge and jury has resolved it. It is, then, a question of whether there was any evidence to authorize the judgment. We conclude that there was ample evidence.
The co-operation clause is a material condition of a liability policy and a breach of it in any material respect relieves the insurer of liability. The voluntary and unexcused failure of an insured to attend a trial, after notice or request to do so, upon a claim covered by his policy of insurance is such a breach of the clause. It has been held that his failure to attend the trial, after notice or request to attend, and aid in the defense is, per se, prejudicial, and one who would seek to enforce the contract for his benefit must show that he has performed all conditions on his part required to be performed as a condition precedent to his right. Hynding v. Home Acc. Ins. Co., 214 Cal. 743 ( 7 P.2d 999, 85 ALR 13); Potomac Ins. Co. v. Stanley, (7 Cir.) 281 F.2d 775; Royal Indem. Co. v. Rexford, (5 Cir.) 197 F.2d 83.
Of course it must go without saying that no court will countenance a conspiracy between the insured and the insurer to bring about the insured's breach so that the insurer will be relieved of liability, nor will it countenance a conspiracy between the insured and the claimant to deprive the insured of a fair trial by arranging the insured's absence from the trial to deprive the defense of an opportunity to present material evidence or to rebut evidence, resulting in an unjustified verdict which the company must pay. But none of either appears in this case.
"Every person familiar with the trial of cases by jury knows that the case of an individual defendant is seriously, if not hopelessly, prejudiced by his absence from the trial." Glens Falls Indemnity Co. v. Keliher, 88 N.H. 253, 260 ( 187 A 473). "His failure to be present in defense of the claim can have an intangible effect upon the jury both as to the question of liability and the amount of the verdict, the net effect of which is difficult to measure. Unexpected developments in the plaintiff's evidence might be offset by an explanation on the part of the insured." Beam v. State Farm Mut. Auto. Ins. Co., (6th Cir.) 269 F.2d 151, 154. This is particularly true where, as here, the insured is a material witness as to the issues, or some of them.
2. The insured is obligated to assist in good faith in making every legitimate defense to a suit for damages. If he refuses to give the information which the insurer needs in establishing the defense, or absents himself so that his testimony at the trial cannot be obtained, recovery on the policy should be denied, if the insurer acts with good faith and diligence. The judgment creditor, who sues on a policy indemnifying the insured against claims for damages, stands in the shoes of the insured and is chargeable, like the insured, with any breach of conditions on which liability depended. Indemnity Ins. Co. of N. A. v. Smith, 197 Md. 160 ( 78 A.2d 461). The rights of a third party can rise no higher than and are dependent upon the rights of the insured. Royal Indem. Co. v. Watson, (5 Cir.) 61 F.2d 614.
"Having elected to seek the fruits of the policy, he is bound by the limitations and conditions thereof." American Ins. Co. v. Hattaway, 194 Ga. 15, 19 ( 20 S.E.2d 406). Accord: Sims T. V., Inc. v. Fireman's Fund Ins. Co., 108 Ga. App. 41, supra; Cotton State Mut. Ins. Co. v. Martin, 110 Ga. App. 309, supra.
3. In the usual case the question as to whether there has been an unjustified refusal to attend a trial is one of fact for the jury, but if the evidence is without dispute and clearly shows a failure to co-operate, a directed verdict should be granted for the insurer. Maryland Cas. Co. v. Hallatt, (5 Cir.). 295 F.2d 64. The insurer has the burden of showing a violation of the clause by the insured, and he who seeks to enforce a claim against the insurer under the policy has the burden of refuting the affirmative defense, once prima facie made, by evidence of justification or excuse. Hartford Acc. Ind. Co. v. Partridge, 183 Tenn. 310 ( 192 S.W.2d 701); Shalita v. American Motorists Ins. Co., 266 App. Div. 131 ( 41 NYS2d 507); Pawlik v. State Farm Mut. Auto. Ins. Co., (7 Cir.) 302 F.2d 255. To show a prima facie breach the insurer is required to do no more than show that it exercised good faith and diligence in an effort to procure the attendance of the insured at the trial and that he did not attend. Cf. Hardware Mut. Cas. Co. v. Scott, 116 Ga. App. 637, 639, supra, where efforts to communicate with the insured were similar to those here. It is not required to anticipate and negate all of the excuses and reasons that might justify his nonattendance. Maryland Cas. Co. v. Hallatt, (5 Cir.) 295 F.2d 64, supra. The insured is under a duty to keep up with his case, and where the attorneys show a reasonable effort to notify him, the fact that they are unable to show actual delivery of the notice to him does not avoid the showing of a breach. Patton v. Washington Ins. Exchange, 288 Ill. App. 594 ( 6 N.E.2d 472). He has a duty to reply to communications addressed to him by or on behalf of the company relative to the subject-matter. State Farm Mut. Auto. Ins. Co. v. Burden, 115 Ga. App. 611, 616 ( 155 S.E.2d 426).
The efforts of his insurer to get the insured's co-operation here exceed those appearing in Pawlik v. State Farm Mut. Auto. Ins. Co., (7 Cir.) 302 F.2d 255, supra (and other cases) where it was held that failure to appear at the trial after two notices or requests to him to attend released the company from any obligation to defend or liability for the judgment obtained. By the contract terms the insured's duty to co-operate does not end with the giving of notice of the collision and in full the facts relative thereto which he may know or ascertain, the forwarding of demands or copies of suits which may be served upon him to the company (as to which see Ericson v. Hill, 109 Ga. App. 759 (1) ( 137 S.E.2d 374); Cotton States Mut. Ins. Co. v. Martin, 110 Ga. App. 309, supra; Hardware Mut. Cas. Co. v. Scott, 116 Ga. App. 637, supra), and the giving of his deposition if called upon to do so; he is obligated to assist counsel employed to defend the action in securing evidence, the attendance of witnesses, and generally in making preparation for trial, and to attend hearings and trial of the case when notified or requested so to do.
Where, as here, the stipulated or the undisputed facts demand a finding that the insured has breached the co-operation agreement in a material respect and there is nothing shown by way of justification for the breach, the court should direct a verdict or enter judgment for the defendant.
Judgment affirmed. Bell, C. J., and Deen, J., concur.