Bowyer by Bowyer v. Thomas, 20730

Citation188 W.Va. 297,423 S.E.2d 906
Decision Date13 November 1992
Docket NumberNo. 20730,20730
CourtSupreme Court of West Virginia
PartiesWilliam Robert BOWYER, By His Next Friend, Ida Bowyer; and Ida Bowyer, Plaintiffs Below, Appellants, v. David THOMAS; McDonough Caperton Shepherd Group, Inc.; and the Aetna Casualty & Surety Company, Defendants Below, Aetna Casualty & Surety Company, Appellee.

Syllabus by the Court

1. Before an insurance policy will be voided because of the insured's failure to cooperate, such failure must be substantial and of such nature as to prejudice the insurer's rights.

2. In addition to prejudice, the insurer must show that its insured willfully and intentionally violated the cooperation clause of the insurance policy before it can deny coverage.

3. The insurer must exercise reasonable diligence in obtaining the insured's cooperation, including attendance at trial, before the policy will be voided.

4. The insurer has the burden of proof on its claim that the insured failed to cooperate.

5. " 'When, upon the trial of a case, the evidence decidedly preponderates against the verdict of a jury or the finding of a trial court upon the evidence, this Court will, upon review, reverse the judgment; and, if the case was tried by the court in lieu of a jury, this Court will make such finding and render such judgment on the evidence as the trial court should have made and rendered.' Syllabus Point 9, Bluefield Supply Co. v. Frankel's Appliances, Inc., 149 W.Va. 622, 142 S.E.2d 898 (1965)." Syllabus Point 5, Estate of Bayliss v. Lee, 173 W.Va. 299, 315 S.E.2d 406 (1984).

Ralph C. Young, Hamilton, Burgess, Young, Tissue & Pollard, Oak Hill, for appellants.

R. Ford Francis, Jay W. Craig, Shuman, Annand & Poe, Charleston, for appellee.

MILLER, Justice:

In this appeal of a declaratory judgment action, we consider the scope of an insured's duty to cooperate with his insurer under an automobile liability policy. In the instant case, we find that the insurer failed to prove that its insured did not cooperate as required by the terms of his insurance policy. I.

On August 13, 1981, the insured, David Thomas, and William Bowyer, age 15, were involved in a single car accident near Oak Hill in Fayette County, West Virginia. The insured was only slightly injured, but William Bowyer's injuries were extensive. Mr. Thomas was insured under an automobile liability policy issued by Aetna Casualty & Surety Co. (Aetna).

In April of 1982, Ida Bowyer, the mother and next friend of William Bowyer, filed suit against Mr. Thomas in the Circuit Court of Fayette County. Aetna retained a local attorney to represent its insured, Mr. Thomas. Before answering the complaint, the attorney attempted to contact Mr. Thomas by telephone, but was unable to reach him. Nonetheless, an answer was filed on Mr. Thomas's behalf in order to avoid a default judgment.

Thereafter, Mr. Thomas made several appointments to meet with the attorney, but did not do so until the end of June, 1982. After relating the circumstances surrounding the automobile accident, Mr. Thomas explained that it would be difficult to reach him because his job required him to be on the road constantly. He did give the attorney his mother's address in Oak Hill and indicated that his mother would know how to get in touch with him. In the months that followed, Mr. Thomas would occasionally call the attorney, but did not provide him with a permanent address.

Although there is no notice of deposition in the record or correspondence verifying the insurer's allegations, Aetna claims it had arranged to depose Mr. Thomas on August 17, 1982. When Mr. Thomas failed to appear at the scheduled deposition, Aetna's claim representative, Ralph Schrader, sent a letter, dated August 23, 1982, to Mr. Thomas at his mother's residence in Oak Hill. The letter stated that Mr. Thomas "failed to appear in Fayetteville, West Virginia on August 17, 1982 for the taking of [his] discovery deposition[.]" After citing language from the insurance policy which requires every person seeking coverage to cooperate with the insurer, 1 Mr. Schrader's letter warned that if Mr. Thomas failed to cooperate in the future, Aetna would "conduct any investigation or activity in connection with the case under a full reservation of the Company's rights." The letter did not inform Mr. Thomas that his failure to cooperate might relieve Aetna of its duty to defend the lawsuit. 2

Subsequently, Mr. Thomas contacted Mr. Schrader and advised him that he had moved to California, but still did not have a permanent address. During the next several months, Mr. Thomas called Mr. Schrader on several occasions and seemed willing to assist Aetna in preparing his defense. Moreover, although Mr. Thomas agreed to be deposed in California, a deposition was never scheduled.

On December 21, 1982, Mr. Schrader wrote Mr. Thomas again. As in his first correspondence, Mr. Schrader noted that Mr. Thomas "failed to appear in Fayetteville, WV on August 19, 1982 [sic ] for the taking of [his] discovery deposition[.]" He reiterated that Mr. Thomas had a duty to cooperate with Aetna and once again advised him that further uncooperation would result in the company continuing to investigate the loss "under a full reservation of the Company's rights." This letter did not warn Mr. Thomas that his failure to cooperate would result in a loss of coverage under the policy. 3

On January 24, 1983, Ida Bowyer's attorney, Ralph Young, took the deposition of David Thomas's mother, Lucy Thomas. She testified that her son left West Virginia in August, 1982, to look for work in California. Since August, she had heard from him on several occasions, and he had given her an address where he could be reached. Mrs. Thomas provided the address to all the attorneys present at the deposition.

Aetna's attempts to contact Mr. Thomas in California are found in an affidavit submitted to the circuit court by Mr. Schrader. In the affidavit, Mr. Schrader generally asserted that he made several attempts to contact Mr. Thomas to no avail. 4 The only date Mr. Schrader identified specifically was May 23, 1983, when Mr. Thomas called him inquiring about the status of the lawsuit. During this telephone conversation, Mr. Schrader informed Mr. Thomas that Aetna was denying coverage because Mr. Thomas had failed to cooperate. 5 That same day, Mr. Schrader wrote to the plaintiff's attorney and informed him that Aetna was "declining coverage to David Thomas for his failure to cooperate."

Thereafter, Ida Bowyer filed a separate declaratory judgment action in the Circuit Court of Kanawha County against Aetna seeking a declaration of coverage up to the policy limits. 6 W.Va.Code, 55-13-1. The declaratory judgment action was transferred to the Circuit Court of Fayette County and ordered consolidated with the underlying personal injury action.

Subsequently, Aetna filed a motion for summary judgment, arguing that because Mr. Thomas failed to cooperate, as required under the terms of the insurance policy, Aetna was absolved of its duty to defend or pay in this action. An evidentiary hearing was held on December 17, 1986. Aetna presented the testimony of the attorney it assigned to represent Mr. Thomas and of Mr. Schrader and submitted into evidence the August 23, and December 21, 1982 letters.

In an order dated June 25, 1991, the Circuit Court of Fayette County found that Aetna had made a good faith effort to secure the cooperation of its insured and that the insured had failed to cooperate as required by the insurance policy. Accordingly, the court ruled that Aetna was relieved of any liability under the policy in excess of the $20,000 mandated by the Motor Vehicle Safety Responsibility Law, W.Va.Code, 17D-1-1, et seq. The plaintiff appeals. 7

II.

We have not had occasion to give any extended consideration to the scope of the insured's duty to cooperate under an automobile liability policy. In Marcum v. State Automobile Mutual Insurance Co., 134 W.Va. 144, 59 S.E.2d 433 (1950), we dealt with this issue briefly. In Marcum, the insured, a Kentucky resident, was involved in an automobile accident in West Virginia. Several pedestrians were injured, and at least one person was killed. One of the injured individuals sued the insured. The lawyer retained by the insurance company to defend the insured advised him to stay out of West Virginia in order to avoid service of process. Nonetheless, the insured did return to West Virginia and was served. Following a jury trial, a judgment was rendered against the insured. Although the insurance company defended the insured in the personal injury action, it did so under a reservation of rights letter and later refused to pay the judgment.

Subsequently, the plaintiff filed suit against the insurance company. In response, the insurance company claimed that the insured violated the cooperation clause in his insurance policy when he failed to heed the advice of the attorney retained to represent him. We disagreed and pointed out that suit could have been commenced against the insured by substitute service of process even if the insured never returned to West Virginia. 8 We concluded: "The well considered cases are almost unanimous in holding that a breach of the 'co-operation clause', to constitute a basis of discharge of the insurer from liability, must be substantial and of such nature as to prejudice the insurer's rights." 134 W.Va. at 150, 59 S.E.2d at 436.

Marcum follows the general rule elsewhere that before an insurance policy will be voided because of the insured's failure to cooperate, such failure must be substantial and of such nature as to prejudice the insurer's rights. 9 In addition to prejudice the insurer must show that its insured willfully and intentionally violated the cooperation clause of the insurance policy before it can deny coverage. 10 Moreover, the insurer must also exercise reasonable...

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