Indem. Ins. Co. of North America v. Smith

• Decision Date: 08 February 1951
• Docket Number: No. 77,77
• Citation: 197 Md. 160,78 A.2d 461
• Parties: INDEMNITY INS. CO. OF NORTH AMERICA v. SMITH.
• Court: Maryland Court of Appeals

Page 160

197 Md. 160

78 A.2d 461

INDEMNITY INS. CO. OF NORTH AMERICA v. SMITH.

No. 77.

Court of Appeals of Maryland.

Feb. 8, 1951.

J. Gilbert Prendergast, Baltimore (Clark, Thomsen & Smith, Baltimore, on the brief), for appellant.

Melvin J. Sykes, Baltimore (Paul Berman, Sigmund Levin, and Theodore B. Berman, Baltimore, on the brief), for appellee.

Before MARBURY, C. J., and DELAPLAINE, COLLINS, HENDERSON and MARKELL, JJ.

DELAPLAINE, Judge.

This attachment case was filed in the Superior Court of Baltimore City by Mary Smith, a resident of Baltimore, against Indemnity Insurance Company of North America, garnishee, to collect on a judgment which she had recovered against Catherine Pullman and James E. Pryor.

Plaintiff was injured on October 5, 1946, when a trackless trolley in which she was riding collided with an automobile owned by Mrs. Pullman and operated by Pryor at the intersection of Caroline and Orleans Streets. In December, 1946, she instituted suit for damages against the Baltimore Transit Company, operator of the trolley. In January, 1947, Pryor and Mrs. Pullman were made third party defendants. Copies of the declaration and third party claim were served on them, and they forwarded the papers to the insurance company, which had issued a policy of liability insurance to Mrs. Pullman. The company authorized its attorneys to enter their appearances for the third party defendants.

The case was set for trial on September 27, 1947. A week before that date a claims investigator of the insurance company went to 39 South Caroline Street, the address given by Mrs. Pullman and Pryor as their home, but was unable to find them. The judge postponed the trial until October 27 in order to give the attorneys further opportunity to look for them, but neither could be found. On October 14 the superintendent of the company mailed registered letters to them, but the letters were returned undelivered. Summonses for them were also returned non est.

The attorneys for Pryor and Mrs. Pullman asked for leave to strike out their appearances, but the judge ordered them to continue with the defense of the case. On October 28 the jury found in favor of the transit company, but awarded plaintiff a verdict against Pryor and Mrs. Pullman for the sum of $1,500. On October 31 judgment was entered upon that verdict.

In 1948 a writ of fieri facias was issued on the judgment and was returned nulla bona. An attachment was thereafter issued on the judgment and laid in the hands of the insurance company. The company pleaded nulla bona. It admitted that it had issued a policy of liability insurance covering the automobile owned by Mrs. Pullman and operated by Pryor, but claimed that the policy did not give them any coverage because they breached its conditions 'by failure to co-operate with the insurer in the defense of the suit brought against them, by departing from their respective addresses after writs of summonses had been served on them, without giving the insurer notice of their departure or informing it of their new address or whereabouts, by failing or refusing to attend the trial and to testify as witnesses on their behalf, but on the contrary, making themselves unavailable to the insurer.'

When the attachment case came on for hearing before a jury in June, 1950, the insurance policy was admitted in evidence. The policy provides that in consideration of the payment of the premium, the company agrees to pay all sums which the insured shall become obligated to pay by reason of the liability imposed upon her by law for damages sustained by any person or persons caused by accident and arising out of the ownership, maintenance or use of the automobile; and to defend any suit against the insured alleging such injury and seeking damages on account thereof. The policy provides, however, that no action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of the policy.

The provision of the policy with which we are particularly concerned on this appeal is the co-operation clause, which provides as follows: 'The insured shall co-operate 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.'

The trial judge refused to direct a verdict in favor of the garnishee on the ground that, although Mrs. Pullman and Pryor did not appear at the trial, there was nothing to show that they knew that the case was to be tried. On June 8 the jury awarded plaintiff a verdict against the garnishee for $1,798, which included the judgment debt, interest thereon and costs. On June 12 judgment was entered upon the verdict. The garnishee appealed from that judgment.

It is conceded that an insured should not be charged with a breach of the co-operation clause merely because of immaterial and unsubstantial failures. It is thus a well settled rule that to relieve an insurer of liability on the ground of lack of co-operation, discrepancies in statements made by the insured must be made in bad faith and must be material in nature and prejudicial in effect. State Automobile Mutual Insurance Co. v. York, 4 Cir., 104 F.2d 730. But the particular condition alleged to have been violated in this case is the provision that the insured shall attend hearings and trials and assit in securing and giving evidence. The failure of the insured to comply with this condition precludes recovery by the person injured from the insurer, even though...