McDonnell v. Hestnes

• Decision Date: 26 June 1970
• Docket Number: No. 220,220
• Citation: 177 N.W.2d 845,47 Wis.2d 553
• Parties: Jo Anne (Bradley) McDONNELL, Plaintiff-Respondent, v. Duane O. HESTNES, Defendant-Respondent, National Indemnity Co., a foreign ins. corp. Defendant-Appellant.
• Court: Wisconsin Supreme Court

Page 845

177 N.W.2d 845

47 Wis.2d 553

Jo Anne (Bradley) McDONNELL, Plaintiff-Respondent, v. Duane O. HESTNES, Defendant-Respondent National Indemnity Co., a foreign ins. corp. Defendant-Appellant.

No. 220.

Supreme Court of Wisconsin.

June 26, 1970.

Rehearing Denied Sept. 1, 1970.

This is an appeal from the judgment of the circuit court for Dane county in favor of the plaintiff, Jo Anne McDonnell, and against the defendant, National Indemnity Company, in the amount of $10,000 and the defendant, Duane O. Hestnes, in the amount of $7,691.05.

The case arose out of a one-car automobile accident which occurred in the early morning hours of June 14, 1968, when an automobile owned by Duane Hestnes ran off Highway I--90, traveled 690 feet down the median strip, and upon hitting an incline soared 135 feet through the air, and came to rest 102 feet beyond the point at which the automobile again touched down. Shortly thereafter, a state highway patrolman came upon the scene of the accident and found Duane Hestnes behind the wheel, the plaintiff, Jo Anne McDonnell, in the center, and Bert Stacey on the right. According to the testimony of State Trooper Schrock, the seat had been pushed forward and the three occupants were pinned against the dashboard. The defendant Hestnes was against the wheel. Both doors were jammed, and the state trooper testified that the opening of the left door on the driver side required the use of a pry bar and the right door only opened after the application of considerable force.

In August 1968 Hestnes and his liability insurer, National Indemnity Company, were served with the plaintiff's summons and complaint. The complaint alleged that the plaintiff had sustained injuries as a result of Hestnes' negligent driving.

It appears that, shortly after the accident, Hestnes gave a statement to a representative of the National Indemnity Company in which he acknowledged that he was the driver and had lost control of the vehicle. Bert Stacey gave almost an identical statement. Sometime in September, Hestnes changed his story and stated to the best of his knowledge the plaintiff McDonnell was driving and he was not. Sometime after this changed version of Hestnes' account of the accident came to the attention of his liability insurer, his liability insurer advised him that, because he had breached the cooperation clause of the policy, they would refuse to defend him.

Subsequently, in October 1968, the defendant Hestnes answered plaintiff McDonnell's complaint, denying any negligence, and defendant counter-claimed against the plaintiff, claiming on information and belief, that she, in fact, was the driver of the vehicle and that her negligence had caused injuries to him. He also cross-complained against the National Indemnity Company for the attorney's fees he would incur as the result of that company's refusal to defend him.

National Indemnity Company answered plaintiff McDonnell's complaint, in which it denied any negligence on the part of its insured and affirmatively alleged that plaintiff McDonnell was driving and that her injuries were caused by her own negligence, by her own intoxication, and by her failure to use seat belts. It is also alleged that the conduct of the driver was intentional, not negligent, and, in addition, alleged that Hestnes had breached his duty of cooperating with his insurer. It additionally alleged, in answer to Hestnes' cross cromplaint, that he had conspired with the plaintiff to defraud the insurance company.

Subsequent to the filing of these pleadings, Hestnes was tried on a traffic charge in Dane county arising out of the same incident. It was disputed therein that Hestnes was the driver. On the basis of the testimony of the state trooper and other evidence adduced therein, it was determined that Hestnes was the driver, and he was found guilty of the traffic violation.

This case was brought to trial on June 30, 1969. Conflicting testimony was presented.

Plaintiff testified that Hestnes was driving and that, although she got into the driver's side of the vehicle in order to take the defendant's keys from the car, Hestnes pushed her away from the wheel and subsequently drove. She claimed that Stacey got in on the other side of the vehicle and struck her in the mouth and forced her to stay in the car. She denied that she was intoxicated, she admitted that she had been drinking, but consistently asserted she was certain that Hestnes was driving.

Stacey, the third passenger in the car, testified that he did not know who was driving. He claimed not to understand 'all these big words' in his earlier statement.

Hestnes was called adversely by the National Indemnity Company. The court, however, initially refused to consider him an adverse witness although later did when the testimony revealed his adverse interest. Hestnes at this trial testified that he did not know whether the information on his original statement--the one in which he acknowledged that he was the driver--was true or not. He stated that he had no recollection of the particulars of the accident. He testified that, while he was at the hospital, plaintiff McDonnell had told him he had been driving, so he just assumed he was. He asserted in this trial that he did not remember who was driving, and the more he thought about it the less he remembered, but he thought he remembered getting in the right side of the automobile.

On the basis of this disputed but somewhat equivocal testimony, the jury returned a unanimous verdict finding that Hestnes was the driver of the vehicle, and his negligence was assessed at 100 percent.

National Indemnity Company, during the course of the trial, persistently asserted its policy defense that the insured had failed to cooperate, and in its motions after verdict asked for the dismissal of the plaintiff's complaint because of the material breach of cooperation by Hestnes. It alternatively moved for a new trial on the grounds that the court had erred in excluding an offer of proof which the company contends, if believed, would have tended to show that the conduct of the driver was intentional and not negligent.

Appeal has been taken only on the points raised in the motions after verdict, and no objection is raised to the factual determination that Hestnes was the driver or that he was 100 percent negligent.

The defendant Hestnes has asked for affirmative relief on the ground that National Indemnity Company breached its duty to defend him and, therefore, was responsible for the entire judgment irrespective of the $10,000 policy limit and that, in addition, it be found liable for attorneys' fees incurred by Hestnes upon National's refusal to defend. No post-trial motions were made in this respect.

Schlotthauer, Johnson & Mohs, Madison, for defendant-appellant.

Oldenburg & Lent, Madison, for plaintiff-respondent.

John Kasimatis, Madison, for defendant-respondent.

HEFFERNAN, Justice.

The insurance company relied upon the clause in its policy which reads:

'8. 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 is the standard cooperation clause noted in Risjord-Austin, Automobile Liability Cases, Standard Provisions and Appendix (1964), p. 28. This court has on numerous occasions recognized the validity of the standard cooperation clause and has concluded that in proper cases an insurer may be relieved of its contractual obligations. This court, however, has consistently held that, where there is an admitted breach of the insured's duty to cooperate, the insurer will not be relieved of liability to an injured third party unless the insurer has been materially harmed or prejudiced by the insured's wilful and deliberate misrepresentations. Kurz v. Collins (1959), 6 Wis.2d 538, 547, 95 N.W.2d 365; Schauf v. Badger State Mutual Cas. Co. (1967), 36 Wis.2d 480, 485, 153 N.W.2d 510. Kurz held that the question of breach was generally one of fact, to be determined by the trier of fact, while the materiality of the harm or the prejudice to the insurer was a matter for the court. A recent law review article, Schoone and Berzowski, Liability Insurance: Effect of False Statements on Duty to Cooperate, 52 Marquette Law Review 221 (1968), presents an admirable discussion of the problems that have arisen in this court and its holdings on the subject.

During the course of the trial the circuit judge before whom the case was heard emphasized correctly that Wisconsin cases conceive of an automobile liability policy as being more than a mere contract of indemnity and that, when the rights of a third party intervene, it is the policy of the Wisconsin law to avoid the cancellation of coverage because of a technical and nonmaterial and nonprejudicial breach of the duty to cooperate. We believe, however, that the court...