Carpenter v. Superior Court In and For Maricopa County

• Decision Date: 28 December 1966
• Docket Number: No. 8670,8670
• Citation: 422 P.2d 129,101 Ariz. 565
• Parties: John CARPENTER and Carol Ann Carpenter, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA, Hon. Donald F. Daughton, Judge, Zurich Insurance Company, a Swiss Corporation, Steve Gasper and Lydia Gasper, husband and wife, and Maricopa Mortgage Co., Inc., a corporation, Respondents.
• Court: Arizona Supreme Court

Page 129

422 P.2d 129

101 Ariz. 565

John CARPENTER and Carol Ann Carpenter, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF MARICOPA, Hon. Donald F. Daughton, Judge, Zurich Insurance Company, a Swiss Corporation, Steve Gasper and Lydia Gasper, husband and wife, and Maricopa Mortgage Co., Inc., a corporation, Respondents.

No. 8670.

Supreme Court of Arizona, In Banc.

Dec. 28, 1966.

Rehearing Denied Jan. 31, 1967.

Kenneth S. Scoville, Leroy W. Hofmann, Phoenix, for petitioners

Moore, Romley, Kaplan, Robbins & Green, by Robert H. Green, Kenneth J. Sherk, Phoenix, for respondents.

Samuel Langerman, Phoenix, amicus curiae American Trial Lawyers Ass'n.

Snell & Wilmer, by Roger W. Perry, Phoenix, O'Connor, Anderson, Westover, Killigsworth & Beshears, by John H. Killingsworth, Phoenix, Jennings, Strouss, Salmon & Trask by Ozell M. Trask, Phoenix, Lewis, Roca, Scoville, Beauchamp & Linton, by Nathan Holt, Phoenix, Phoenix Association of Defense Counsel by Rex H. Moore, Phoenix, amici curiae.

McFARLAND, Justice.

John Carpenter and Carol Ann Carpenter, husband and wife, herein referred to as petitioners, filed a petition with this court seeking issuance of a writ of certiorari to test the propriety of the granting of a motion for summary judgment by Donald F. Daughton, Judge of the Superior Court of Maricopa County, Division 17, respondent, in a garnishment proceeding instituted by petitioners against respondent Zurich Insurance Company, a Swiss corporation, herein referred to as Zurich.

On December 15, 1961, petitioner Carol Ann Carpenter was injured in a collision between her automobile had a truck being operated by Steve Gasper in the course of his employment with Maricopa Mortgage Co., Inc., herein referred to as Maricopa Mortgage. Petitioners filed suit against Steve Gasper, his wife Lydia Gasper, and Maricopa Mortgage Co., Inc., on June 26, 1962, with service of process on all parties. Maricopa Mortgage forwarded the summons and complaint to its insurer, Zurich, and counsel for Zurich filed an answer on behalf of Maricopa Mortgage and the Gaspers. The record does not show that counsel ever consulted or attempted to discuss with the Gaspers the facts of the case, or the policy coverage, either before or after the answer was filed.

Written interrogatories for Steve Gasper were mailed on July 20, 1962, to counsel retained by Zurich. Defense counsel notified petitioners that Steve Gasper had disappeared, and no answers to the interrogatories were filed. On September 17, 1962, Steve Gasper's deposition was noticed for October 10, 1962, but Gasper failed to appear.

On November 19, 1962, petitioners moved to strike the answer insofar as it applied to Steve or Lydia Gasper under Rule 37(d), Rules of Civil Procedure, 16 A.R.S. based on Steve Gasper's failure to answer the written interrogatories or appear for the taking of his deposition. This motion was granted January 11, 1963. On September 27, 1963, defense counsel moved to withdraw as attorneys for Steve and Lydia Gasper, which motion was granted November 12, 1963.

On March 19, 1964, default judgment was entered against Steve and Lydia Gasper in the amount of $55,295.00, plus costs, the amount prayed for in petitioners' complaint. The Gaspers were not present at this hearing, nor were they represented by counsel.

Petitioners, as judgment creditors of the Gaspers, then instituted garnishment proceedings against Zurich as garnishee-defendant, by causing a writ of garnishment to be served on the Arizona Insurance Director, statutory insurance agent for Zurich. A.R.S. § 20--221. Zurich denied indebtedness on the ground of non-cooperation. Zurich moved for summary judgment The insurance policy was issued by Zurich to Maricopa Mortgage, and Steve Gasper was an additional insured as an employee of Maricopa Mortgage.

presenting affidavits in support of its alleged inability to locate Steve Gasper. The motion was granted, and summary judgment was entered in favor of Zurich on June 30, 1965. Certiorari was then granted by this court.

The legal foundation for Zurich's attorneys' withdrawal as counsel for the Gaspers, and Zurich's denial of its indebtedness under the policy in the subsequent garnishment action, is Steve Gasper's violation of the 'non-cooperation clause' of the policy which provides as follows:

'Zurich Insurance Company * * * Agrees with the insured, named in the declarations made a part hereof, in consideration of the payment of the premium and in reliance upon the statements in the declarations and subject to the limits of liability, exclusions, conditions and other terms of this policy:

CONDITIONS

'12. Assistance and Cooperation of the Insured. The insured shall cooperate with the company and, upon the company'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.'

This provision must be read in conjunction with the 'no action clause' in determining Zurich's liability under the policy, as the rights of a judgment-creditor of an insured are no greater than those of the insured, in whose shoes he stands. Fidelity & Casualty Co. of New York v. McConnaughy, 228 Md. 1, 179 A.2d 117; 8 Appleman, Insurance Law and Practice § 4817. Petitioner, as garnishor, obtained no rights in the policy superior to those of his judgment debtor, the insured. A.R.S. § 12--1585, Ellery v. Cumming, 40 Ariz. 512, 14 P.2d 709, 83 A.L.R. 1081. The 'no action clause' provides as follows:

'13. Action Against Company. No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.'

Petitioners contend that Zurich's evidence presented in support of its motion for summary judgment fails to show willful non-cooperation on Steve Gasper's part and also fails to show the required diligence on the part of Zurich in attempting to secure this cooperation.

The following is a summary of the statements contained in the uncontroverted affidavits.

The Arizona claims superintendent for Zurich forwarded suit papers to Zurich's attorneys on July 3, 1962, and requested they defend on behalf of Maricopa Mortgage Co. and Steve and Lydia Gasper. On being informed September 5, 1962, that the attorneys were unable to locate Steve Gasper, he and other members of the Zurich office attempted on numerous occasions to locate Steve Gasper and Lydia Gasper, or either of them. This included visits to Steve Gasper's last-known address by several persons and telephone calls to that address and to Maricopa Mortgage, Steve Gasper's former employer.

An affidavit in support of the motion to withdraw as counsel, placed on file and incorporated by reference in Zurich's motion for summary judgment, attempts to meet the requisites necessary to show non-cooperation as follows:

'* * * (T)hat defendant Gasper's whereabouts have been unknown to the defendant Maricopa Mortgage Co., Inc. or to its attorneys of record up to the present time; that both defendant Maricopa Mortgage Co., Inc. and its attorneys of record have diligently searched for defendant Gasper, both within the state and without, through personal investigation by their agents and by the United States mail; that despite these efforts to locate defendant Gasper his whereabouts remain unknown to both defendant Maricopa Mortgage Co., Inc. and its attorneys of record; that both defendant Maricopa Mortgage Co., Inc. and its attorneys of record have exhausted every possible avenue in their unsuccessful attempt to locate defendant Gasper.

'Defendant Gasper has failed to answer the interrogatories propounded by plaintiff and has in every way failed to assist his attorneys of record in preparing his defense.'

Zurich contends that the question of Zurich's diligence was not raised in the lower court, and, further, that it was incumbent upon petitioners to controvert the affidavits in support of Zurich's motion, and, in absence of such response, summary judgment must be given for the moving party under Rule 56(e), Rules of Civil Procedure, 16 A.R.S.

The insurer has the burden of proving the insured's breach of the non-cooperation clause in order to defend successfully on that ground. Western Casualty & Surety Co. v. Weimar, 9 Cir., 96 F.2d 635; Employers Ins. Co. of Alabama v. Crook, 276 Ala. 177, 160 So.2d 463; Mariani v. Bender, 85 N.J.Super. 490, 205 A.2d 323; Employers Mut. Cas. Co. v. Ainsworth, 249 Miss. 808, 164 So.2d 412; State Farm Mut. Automobile Ins. Co. v. Farmers Ins. Exchange, 238 Or. 285, 387 P.2d 825, 393 P.2d 768. The question of Zurich's failure to show a breach of the non-cooperation clause was raised in the lower court in petitioner's objection to the form of judgment, wherein petitioner stated:

'1. The court has not and could not find that defendant Steve Gasper 'committed a substantial and material breach of the cooperation clause' since the affidavits submitted in support of garnishee's motion for summary judgment are totally insufficient, both factually and legally to establish such a breach.

'2. The court has not and could not find that such breach (if any) 'materially and substantially prejudiced garnishee-defendant's since such affidavits are likewise insufficient to establish such a finding.'

As the burden is on Zurich to show the insured's breach, Zurich is necessarily obligated to show all of the elements of this defense, including its own diligence in notifying the insured of the need for assistance, and in its attempts to locate the insured. Without these elements, Zurich could not show a breach of the non-cooperation clause entitling it to...