Moore v. General Acc. Ins. Co. of America, 88-2611

Citation896 F.2d 1367
Decision Date02 November 1989
Docket NumberNo. 88-2611,88-2611
PartiesUnpublished Disposition NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. Royston MOORE, Plaintiff-Appellant, v. GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA; Donald A. Swofford, Defendants-Appellees. . Argued:
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

Clay James Summers, Sr. (Summer & Childress, on brief), for appellant.

Steven Mark Levine (David Florin, Jane K. Hylinski, Wilson, Elser, Moskowitz, Edelman & Dicker, on brief), for appellee.

Before K.K. HALL and MURNAGHAN, Circuit Judges, and JOHN R. HARGROVE, United States District Judge for the District of Maryland, sitting by designation.

PER CURIAM:

The appeal pits Royston Moore against both General Accident Insurance Company of America and Donald Swofford, General Accident's insured. Moore first sued Swofford over damages resulting from Swofford's allegedly negligent renovation work on Moore's home. On the eve of the trial of that action, Swofford confessed judgment. Ten days later, the district court entered judgment against Swofford in the amount of $160,000. Swofford filed bankruptcy on that same afternoon. When Moore attempted to collect the judgment from Swofford's insurer, General Accident, General Accident moved for summary judgment. The district court granted that motion holding that Swofford's action in confessing judgment constituted a breach of the cooperation clause of his policy with General Accident. We remand for further findings.

I

General Accident issued a professional liability insurance policy to Swofford which covered his "architectural and construction management" services. The policy contained a cooperation clause specifying that:

It is a condition precedent to the application of all insurance afforded herein that the Insured shall: (c) cooperate with the Company and upon the Company's request, shall submit to examination and interrogation by a representative of the Company, under oath if required, and shall attend hearings, depositions and trial and shall assist in effecting a settlement, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits....

Thus, Swofford was required to cooperate with General Accident in the litigation of claims growing out of his policy. Further, the policy included a "no action" clause. The "no action" clause prevented Swofford from recovering against the policy "until the amount of such loss shall have been fixed or rendered certain ... by final judgment against the Insured after trial of the issues."

Moore initiated an action against Swofford. He alleged that Swofford was responsible for a number of negligent acts and omissions and that as architect/construction manager he breached oral as well as written contracts with Moore in failing to deliver both a renovated house and various furnishings for that house. The ad damnum clause for the breach of contract and the negligence claims was for $160,000. Swofford in his answer denied generally both the breach of contract and negligence allegations and asserted affirmative defenses of estoppel, waiver, and contributory negligence. Swofford also asserted a counterclaim.

After extensive discovery and the day before the trial, Swofford entered an oral motion to confess judgment. Ten days later, the district court entered an order granting Swofford's oral motion and awarding Moore $160,000. Later that same day, Swofford filed a petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Code, 11 U.S.C. Secs. 301 et seq. Moore then filed a second suit seeking to collect the judgment, naming General Accident Insurance Company and Donald Swofford. The insurance company moved for and received from the district court summary judgment on the grounds that it was not liable under the policy because of the cooperation and "no action" clauses.

II

An injured party suing an insurer for damages caused by the insured stands in the shoes of the insured. Storm v. Nationwide Mutual Ins. Co., 199 Va. 130, 135, 97 S.E.2d 759, 762 (1957). When an injured party claims through the insured, the injured party has the insured's rights and is also under his disabilities. State Farm Ins. Co. v. Arghyris, 189 Va. 913, 922, 55 S.E.2d 16, 20 (1949). Therefore, Moore had no greater rights than Swofford to coverage under the policy. If Swofford breached the cooperation clause in his policy, Moore could not recover.

To establish a defense of breach of a cooperation clause by the insured, the insurer must prove that the breach was willful in a material or essential particular and that the insurer made a reasonable effort to secure cooperation. Continental Cas. Co. v. Burton, 795 F.2d 1187, 1194 (4th Cir.1986). Virginia Code Sec. 38.2-2204(C), formerly Va.Code Sec. 38.1-381, adds an additional requirement. The insurer must show that the noncooperation prejudiced the defense of the action.

In State Farm Mutual Ins. Co. v. Davies, 226 Va. 310, 316, 310 S.E.2d 167, 170 (1983), the Virginia Supreme Court set forth the following standard for proof of such prejudice:

[W]e favor neither a per se rule that would...

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