Johnson v. Doughty

• Decision Date: 17 October 1963
• Citation: 385 P.2d 760,236 Or. 78
• Parties: Carl J. JOHNSON, Respondent, v. Lawrence W. DOUGHTY, Defendant, and Farmers Insurance Exchange, Appellant. Bessie JOHNSON, Respondent, v. Lawrence W. DOUGHTY, Defendant, and Farmers Insurance Exchange, Appellant.
• Court: Oregon Supreme Court

Page 760

385 P.2d 760

236 Or. 78

Carl J. JOHNSON, Respondent, v. Lawrence W. DOUGHTY, Defendant, and Farmers Insurance Exchange, Appellant.

Bessie JOHNSON, Respondent, v. Lawrence W. DOUGHTY, Defendant, and Farmers Insurance Exchange, Appellant.

Supreme Court of Oregon, Department 2.

Argued and Submitted Sept. 11, 1963.

Decided Oct. 17, 1963.

Pat Dooley, Portland, argued the cause for appellant. With him on the briefs was Leo Levenson, Portland.

Ben T. Gray, Portland, argued the cause for respondents. With him on the brief was Richard F. Porter, Portland.

Before McALLISTER, C. J., and O'CONNELL, GOODWIN, DENECKE and LUSK, JJ.

GOODWIN, Justice.

Carl Johnson and Bessie Johnson each recovered a default judgment against one Lawrence Doughty for damages arising out of an automobile collision. Thereafter, the Johnsons brought writs of garnishment against Farmers Insurance Exchange. That garnishee now appeals from judgments entered in favor of each plaintiff. The cases have been consolidated for this appeal.

The collision occurred while Doughty was driving an automobile he had borrowed from one Smith. The garnishee at all material times was the carrier of insurance for Smith's automobile. Smith and Doughty resided at the same address in Bingen, Washington. Doughty borrowed the automobile to go to The Dalles, Oregon. He went to The Dalles and the collision occurred on his return to Bingen. While there is a dispute as to the fidelity with which Doughty observed the scope of his bailment, there is evidence from which the trier of fact could have found that Doughty was, at all material times and places, a permissive user of the Smith automobile within the meaning of Smith's policy ¹ of liability insurance. See Wallin v. Knudtson, 46 Wash.2d 80, 278 P.2d 344 (1955). The legal conclusion that Doughty was, accordingly, an 'insured' under Smith's policy rested upon findings of fact which the trial court made in favor of the plaintiffs. There was adequate evidence to support those findings, and there is no reason to disturb them on appeal.

The focal issue here is whether the insurer-garnishee was relieved of its duty to pay the damages assessed against Doughty because of an alleged failure on the part of Doughty to cooperate with the insurer as required by the 'insuring agreements' contained in the contract between Smith and the insurer. A failure by the insured to cooperate with the insurer is a breach of the contract, and, if prejudice to the insurer is proven, amounts to a defense that will relieve the insurer of it duties under the policy. See Allegretto v. Oregon Auto. Ins. Co., 140 Or. 538, 13 P.2d 647 (1932). (We need not in this case reexamine the implication in the Allegretto case that prejudice need not be shown.)

On the issue of noncooperation, these additional facts are relevant:

After the collision, Doughty failed to stop. He was pursued and forced to the curb. He paused long enough to display evidence of intoxication, then drove off. He was never seen again by any of the persons interested in this litigation. The automobile was later found where Doughty had abandoned it. The automobile was traced to Smith. The collision was promptly reported by the Johnsons to Smith. Smith then reported the episode to his insurer. The collision was also promptly reported to the insurer by the Johnsons. The insurer thus had knowledge of the incident, even though it had not received a report from Doughty.

Some effort was made by police officers in Bingen, Washington, to learn the whereabouts of Doughty. They learned only enough to 'believe' that he was 'in California.' Since there was no charge of a felony against Doughty, the police declined to pursue the matter further.

While the record is not clear on the point, there is evidence that one or more of the insurer-garnishee's adjusters knew that Doughty might be located at his mother's home in Azusa, California. The only evidence concerning Doughty's whereabouts during the times in question after the collision came from the adjuster and was admittedly based upon hearsay information from Doughty's relatives. The adjuster admitted that he knew the mother's name and address, but that he had made no effort to pursue the matter of Doughty's whereabouts.

The insurer sent Doughty a letter notifying him, not that he had a duty to cooperate, but only that the insurer was denying coverage. The letter was addressed to 'Larry Daughty [sic], Bingen, Washington.' Doughty had last resided there, but everyone agreed he could not be found in Bingen after the collision. No letter appears to have been sent to Doughty at the California address the adjuster had discovered. There is no evidence that Doughty ever received a letter from the insurer. It is equally clear that Doughty did not correspond with the insurer, nor did he participate in any manner in the defense of the actions brought by the Johnsons.

The insurer, as noted, had initially refused to defend either action, apparently relying upon Doughty's failure to give notice of the collision as a breach of the policy which relieved...