Dalzell v. Northwestern Mut. Ins. Co.

• Decision Date: 09 July 1963
• Citation: 218 Cal.App.2d 96,32 Cal.Rptr. 125
• Court: California Court of Appeals Court of Appeals
• Parties: Charles T. DALZELL and Robert Henry Harrison, Plaintiffs and Respondents, v. NORTHWESTERN MUTUAL INSURANCE COMPANY, Defendant and Appellant. Civ. 10327.

Page 125

32 Cal.Rptr. 125

218 Cal.App.2d 96

Charles T. DALZELL and Robert Henry Harrison, Plaintiffs and Respondents, v. NORTHWESTERN MUTUAL INSURANCE COMPANY, Defendant and Appellant.

Civ. 10327.

District Court of Appeal, Third District, California.

July 9, 1963.

Rich, Fuidge, Dawson & Marsh, by Charles C. Dawson, Jr., Marysville, for appellant.

Steel & Arostegui, by Albert J. Arostegui, Marysville, and Weis, Weis & Harpham, Yuba City, for respondents.

SHOTTKY, Justice.

Automobile being operated respectively by plaintiff Dalzell and plaintiff Harrison were involved in a collision on April 9, 1958. Dalzell brought an action against Harrison and in November 1958 recovered a default judgment for $10,000, which defendant Northwestern Mutual Insurance Company, Harrison's liability insurance carrier, refused to pay, claiming that it had no knowledge until May 19, 1959 (too late to remove default) that Harrison had been served, when it learned of said service from an adjuster employed by Dalzell's insurer, and that Harrison had breached an express condition of the policy by failing to notify it that he had been served. Dalzell refused to set aside the default by stipulation and thus allow Northwestern to defend Harrison as per its offer upon discovering the default. Dalzell and Harrison then joined in an action against Northwestern upon the policy. The action was tried to a jury and resulted in a verdict for $10,000 in favor of plaintiffs. Defendant has appealed from the judgment.

Appellant's major contentions upon this appeal are that there is no credible evidence to support the judgment and that the jury was incorrectly instructed as to the law, particularly as to the scope of an insurer's duty to independently ascertain whether a client had been served. Before discussing these contentions, we shall give a brief summary of evidence as shown by the record, bearing in mind the familiar rule that the evidence must be viewed in the light most favorable to the respondents that all reasonable inferences to support the judgment must be indulged in; and that all conflicts in the evidence must be disregarded.

The following facts appear to be undisputed: Northwestern had received prompt notice of the accident from Harrison, knew within a few days after its filing that a complaint had been filed against Harrison on July 14, 1958, and knew that Dalzell's attorney was attempting to have Harrison personally served. Harrison was personally served on September 25, 1958, at Lake Almanor where he worked from May 14, 1958, to about October 27, 1958. He had made intermittent trips to his home in Wheatland during the period that he was working at Lake Almanor. On one of those trips he had met with Mason, Northwestern's adjuster for the area, and Coe, Northwestern's Wheatland agent, in Coe's office. This was before service had been effected (the date is disputed). At that time, and in response to a request by Mason that he deliver any papers related to the lawsuit which he had received, Harrison turned over his copy of a statement he had inadvertently given to an adjuster for the American Automobile Association (Dalzell's insurer) upon solicitation. Harrison and Coe conversed on the streets of Wheatland at various times after that--at least one of these meetings being after Harrison had been personally served at Lake Almanor. Mason then met with Harrison in the home of the latter's mother on January 6, 1959. At this time the summons was laying on the refrigerator in his mother's house. It was not handed over at that time, or at any time, until May 19, 1959.

There is some conflict in the remainder of the evidence. In pretrial depositions taken of Coe and Harrison it was stated by Harrison that he had never told Mason or Coe about the summons because he assumed that they 'automatically knew all about the papers.' (Elsewhere in the record he states that he had relied upon statements by the deputy who served him that the insurer would take care of everything, and upon an assumption that his wife whom Mason had contacted in August 1958 had told Coe of the service.) However, at the trial, after contradicting himself several times, Harrison testified he had told both Coe and Mason that he had been served.

Mason testified that he had at both the pre-September and the January meeting requested Harrison to turn over any papers received, or that he might receive. In his pretrial deposition Harrison stated that this was true. But at the trial, after saying the deposition must be true and that he did not remember, he flatly stated that neither Mason nor Coe had made such a request.

It is fairly inferable from the record that Harrison used the terms 'sued' and 'served' interchangeably and was not sure in his own mind what he had said.

From correspondence sent by Mason to the San Francisco office of Northwestern on April 22, 1959, it would appear that Mason did not think Harrison had been served up to that time.

The principal question presented on this appeal is whether the evidence is sufficient to show that the insurance company by its conduct waived or is estopped from asserting as a defense the provision in the policy requiring the assured to notify it of service of summons.

It is well settled that an insurance company may waive provisions placed in a policy for its own benefit and may by its conduct be estopped to assert defenses which might otherwise be available. (J. Frank & Co. v. New Amsterdam Cas. Co., 175 Cal. 293, 295-296, 165 P. 927; Scott v. Federal Life Ins. Co., 200 Cal.App.2d 384, 19 Cal.Rptr. 258.) This rule applies to a provision requiring that suit papers be forwarded to the insurer. (18 A.L.R.2d 490.) To constitute a waiver there must be an intentional relinquishment of a known right, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished. (Scott v. Federal Life Ins. Co., supra, 200 Cal.App.2d p. 391, 19 Cal.Rptr. p. 262.)

The evidence in the record does support the implied finding of the jury that there was a waiver of the requirement that Harrison forward summons to it. Harrison testified that he was never told to deliver the summons to the insurer prior to May 19th; that he was told that he had nothing to worry about; and that Rich, Fuidge and Dawson would take care of the matter.

There was also evidence in the record which would support a finding that the insurance company had assigned the case to its counsel prior to the date default was taken. A letter from the adjuster to counsel dated April 22, 1959, requested counsel to ascertain whether Harrison had been served. No action was taken on this letter, at least within the six month's period when the default judgment could be set aside.

In the instant case the insurer knew that the accident had occurred and that suit had been filed by Dalzell. It assured Harrison that everything would be taken care of. From this evidence the jury could find that the insurer waived the requirement that the suit papers be forwarded to it. (Accord A-1 Cleaners & Dyers v. American Mut. Liability Ins. Co., 307 Ill.App. 64, 30 N.E.2d 87.)

It should be noted that actual knowledge of a breach of a policy provision is not essential to establish a waiver of a policy provision. It is sufficient if the insurer has information which if pursued with reasonable diligence would lead to the discovery of the breach. (Loduca v. St. Paul Fire & Marine Ins. Co., Mo.App., 105 S.W.2d 1011; see also E. A. Boyd Co. v. United States Fidelity & Guaranty Co., 35 Cal.App.2d 171, 94 P.2d 1046.)

It is clear that the critical question in this case was whether the insurer had waived the requirement of the policy that the summons be forwarded to it. Both parties submitted instructions dealing with waiver. The jury asked that the instructions pertaining to waiver be reread shortly before the verdict was returned, and the evidence clearly supports the implied finding of the jury that a waiver occurred.

There was also evidence in the record from which the jury could find that even if summons were not forwarded appellant was not prejudiced by the failure of Harrison to forward the summons to it.

In the recent case of National Automobile & Casualty Ins. Co. v. Brown, 197 Cal.App.2d 605 at page 608, 17 Cal.Rptr. 347, at page 349 (hearing denied), the court said:

'It is settled in this state that failure to give the required notice is not fatal to an insured's claim unless the insurer has been prejudiced thereby. (Hynding v. Home Acc. Ins. Co., 214 Cal. 743, 752, 7 P.2d 999, 85 A.L.R. 13; Reed v. Pacific Indem. Co., 101 Cal.App.2d 151, 159, 225 P.2d 255.) The rule approved by the authorities in this state is that the question of prejudice is one of fact for the trier of fact. 'The ultimate conclusion in each case must depend on its own facts.' (Abrams v. American Fidelity & Cas. Co., 32 Cal.2d 233, 239, 195 P.2d 797, 800; Gibson v. Colonial Ins. Co., 92 Cal.App.2d 33, 206 P.2d 387; Security Ins. Co. v. Snyder-Lynch Motors, Inc., 183 Cal.App.2d 574, 580, 7 Cal.Rptr. 28.)'

And in Artukovich v. St. Paul-Mercury Indemnity Co., 150 Cal.App.2d 312 at page 326, 310 P.2d 461 at page 469 (hearing denied), the court said:

'In the absence of waiver or estoppel it is well settled that if a liability policy makes compliance with a 'Notice of Injury, Claim or Suit' provision such as that in Industrial's policy a condition precedent to liability, no recovery can be had where the provision has not been complied with if prejudice to the insurer has resulted. (Abrams v. American Fidelity & Cas. Co., 32 Cal.2d 233, 195 P.2d 797; Gibson v. Colonial Ins. Co., 92 Cal.App.2d 33, 206 P.2d 387; Aronson v. Frankfort, etc., Ins. Co., 9 Cal.App. 473, 475-478, 99 P. 537. See cases collected 76 A.L.R. 23, 182, 123 A.L.R. 950, 981, 139 A.L.R. 771, 781, 18 A.L.R.2d 443, 452.) There is no claim of waiver or estoppel.

'Whether an insured has complied with a ...