Globe Indem. Co. v. Blomfield

• Decision Date: 19 January 1977
• Docket Number: No. 2,CA-CIV,2
• Parties: GLOBE INDEMNITY COMPANY, a corporation, Appellant, v. Anthony BLOMFIELD and Harriette Blomfield, husband and wife, Appellees. 2274.
• Court: Arizona Court of Appeals

Page 1372

562 P.2d 1372

115 Ariz. 5

GLOBE INDEMNITY COMPANY, a corporation, Appellant, v. Anthony BLOMFIELD and Harriette Blomfield, husband and wife, Appellees.

No. 2 CA-CIV 2274.

Court of Appeals of Arizona, Division 2.

Jan. 19, 1977.

Rehearing Denied Feb. 28, 1977.

Review Denied April 5, 1977.

[115 Ariz. 6] Lesher, Kimble, Rucker & Lindamood, P.C., by Michael J. Gothreau, Tucson, for appellant.

Miller, Pitt & Feldman, P.C., by Janice A. Wezelman and Stanley G. Feldman, Tucson, for appellees.

OPINION

HATHAWAY, Judge.

This is an appeal by an insurer, Globe Indemnity Company, from a summary judgment in favor of plaintiffs-appellees in a declaratory judgment action. The trial court found that the plaintiffs were entitled to recover from appellant for amounts due on a judgment entered in a prior action against John Hay, an insured under a policy issued by Globe.

The underlying facts are as follows. The original suit brought by the Blomfields against Hay resulted from an incident in which Hay struck Blomfield in the face with a drinking glass. Blomfield was badly scarred and ultimately lost his sight in one eye. This incident occurred on January 1, 1973, in Mexico. While in Mexico, Blomfield agreed to release Hay from all liability in exchange for $10,000. This was necessary in order for the insured and Blomfield to be able to leave Mexico. In June 1973, Blomfield filed suit in the Maricopa County Superior Court. Appellant was notified of the incident at the time suit was filed and commenced defense of Hay under a reservation of rights. While suit was pending, the parties entered into negotiations and on January 15, 1975, Hay rescinded the release in return for a refund of the $10,000. Prior to this agreement, plaintiffs' attorneys wrote to the insurer's attorney requesting information as to whether this rescission would be considered a breach of the policy's cooperation clause releasing the insurer from all obligation to defend or indemnify the insured. Appellant-insurer admits in its brief that prior to the rescission, it never informed appellees that it considered this a breach of the cooperation clause. In addition, personal counsel for the insured offered not to rescind the release if the insurer would reimburse the $10,000 and rescind its reservation of rights, but appellant rejected the offer by letter dated January 14, 1975, without any comment on the effect of the proposed rescission of the release. After the release had been rescinded, appellant on January 16, 1975, ordered its attorney to withdraw from the suit but he refused because the trial was only 11 days away. Subsequently, Blomfield signed a covenant not to execute against Hay in exchange for Hay's payment of $10,000. The covenant not to execute is dated January 26, 1975. The case went to trial and judgment was obtained against Hay in the amount of $175,000 compensatory damages. Globe refused to satisfy the judgment and this lawsuit ensued.

Appellant-Globe raises four points in its appeal from the summary judgment. First, it contends that there is a disputed factual issue as to the insured's breach of the policy's notice provisions. It is not necessary to consider whether the insured's delay in giving notice was a breach excusing the insurer from performance. Even if the delay constituted a breach, appellant has not made a sufficient showing of prejudice as a result of the delay. An insurer cannot withdraw coverage on the ground that a condition such as notice has not been met unless the insurer can show that it was prejudiced by the act of the insured. American Home Assurance Company v. Sand, 253 F.Supp. 942 (D.Ariz.1965); Lindus v. Northern Insurance Company of New York, 103 Ariz. 160, 438 P.2d 311 (1968); Massachusetts Bonding and Insurance Company v. Arizona Concrete Company, 47 Ariz. 420, 56 P.2d 188 (1936); Arizona Title Insurance and Trust Company v. Pace, 8 Ariz.App. 269, 445 P.2d 471 (1968). Appellant-insurer did not adequately demonstrate the existence of disputed facts as to prejudice. It argues that the mere fact that notice of the incident was not given to it until suit was brought six months later is enough to raise a factual issue as to prejudice. The mere fact of delay is not a sufficient showing of prejudice. Massachusetts Bonding and Insurance Company v. Arizona Concrete Company, supra. The notice was given in June 1973, when the complaint was filed and the trial was not held until January 1975. The insurer thus had ample time to investigate the incident and prepare for trial. Globe made no showing to the contrary.

Appellant's only other support for its allegation of prejudice consists of a few vague assertions by its claims manager that if the company 'had known of it sooner, we may had (sic) been able to handle directly with it.' He also stated that it was 'possible' the suit might have been settled before lawyers became involved. An appeal from the granting of a motion for summary judgment 'must be able to point to an issue of fact in the record which renders the summary judgment improper.' Joseph, M.D. v. Markovitz, M.D., 27 Ariz.App. 122, 551 P.2d 571, 574 (1976); Mozes v. Daru, 4 Ariz.App. 385, 420 P.2d 957 (1966). These vague statements do not present any evidence of prejudice. We hold that appellant has not met its burden of proving the existence of a factual issue as to prejudice.

The appellant-insurer's second ground for appeal is that it should be permitted, in the declaratory judgment action, to assert the policy's exclusion for intentional acts which negates coverage. We disagree and hold that appellant is collaterally estopped from asserting the intentional act exclusion. Appellant admits that in a subsequent action the insurer is bound as to all material findings of fact essential to the judgment of tort liability in the prior case. Hartford Accident & Indemnity Co. v. Villasenor, 21 Ariz.App. 206, 517 P.2d 1099 (1974); Herendeen v. United States Fidelity and Guaranty Co., 19 Ariz.App. 399, 507 P.2d 1011 (1973). Appellant argues, however, that the prior finding of negligence did not preclude a later determination that the insured's actions were intentional. This is incorrect. A finding of negligence necessarily includes a finding that the act was not intentional. It is well accepted that there is a 'distinction between negligence and intent. In negligence, the actor does not desire to bring about the consequences which follow, nor does he know that they are substantially certain to occur, or believe that they will.' Prosser, § 31, p. 145. This view is also found in 65 C.J.S. Negligence § 3, pp. 473--74. Miller v. U.S. Fidelity & Casualty Co., 291 Mass. 445, 197 N.E. 75 (1935), supports the proposition that an adjudication of negligence precludes the insurer from later asserting that the insured's act was intentional. Appellant complains that there was no

Appellant complains that there was no of intent in the personal injury trial after appellees were permitted to strike those portions of the complaint alleging intentional tort. The argument ignores the availability of a determination before trial by declaratory judgment in a separate action, thereby avoiding the possible conflict of interest between insured and insurer under the policy, as well as the professional conflict for the attorney retained by the insurer to represent the insured in the personal injury case. See Cowan v. Insurance Company of North America, 22 Ill.App.3d 883, 318 N.E.2d 315 (1974).

Appellant's third argument on appeal is that it is entitled to assert as a defense the insured's breach of the policy's cooperation provisions. We hold that even if there was a lack of cooperation, appellant is estopped from asserting it as a defense. Appellant was informed of the negotiations between its insured and appellees prior to rescission of the release. Appellant was asked whether it would consider such a rescission to be a breach of the cooperation clause and appellant failed to respond. Appellant argues that it communicated with the insured prior to rescission of the release and that a factual issue as to estoppel is thereby raised. Appellant fails, however, to...