Shee v. London Guarantee & Accident Co.

• Decision Date: 02 June 1953
• Docket Number: NO. 2882.,2882.
• Court: Hawaii Supreme Court
• Parties: MRS. TOM YUEN SHEE v. LONDON GUARANTEE & ACCIDENT COMPANY, LIMITED, AND GENERAL ACCIDENT, FIRE & LIFE INSURANCE CORPORATION, LIMITED.

40 Haw. 213

MRS. TOM YUEN SHEE

v.LONDON GUARANTEE & ACCIDENT COMPANY, LIMITED, AND GENERAL ACCIDENT, FIRE & LIFE INSURANCE CORPORATION, LIMITED.

NO. 2882.

Supreme Court of the Territory of Hawai‘i.

Submitted January 8, 1953.

Decided June 2, 1953.

OPINION TEXT STARTS HEREERROR TO CIRCUIT COURT FIRST CIRCUIT, HON. W. C. MOORE, JUDGE.

Syllabus by the Court

A judgment by default adjudicates only the merits of the claim in controversy. That determination does not ipso facto constitute the allegations of the complaint competent evidence in a cause upon a different claim.

A judgment by default constitutes a binding adjudication of all of the rights of the party litigants embraced in the prayer for relief arising from the allegations of the complaint.

As constituting a bar to subsequent litigation, a distinction is recognized in the elements constituting res judicata and estoppel by judgment. The former constitutes a bar to subsequent suits upon the same cause of action between the same litigants or their privies; the latter a bar only to issues adjudicated or which could have been adjudicated in prior suits between the same parties upon a different cause of action.

A co-operation clause in a standard automobile indemnity policy such as here in controversy is a material condition of the policy, fulfillment of its terms being a condition precedent. Upon failure to perform in circumstances wherein no estoppel or waiver is asserted, such failure constitutes a valid defense when invoked by an assurer.

In circumstances wherein it is contended by an insurer that violation of the terms of a co-operation clause has occurred, such lack of co-operation must be of a substantial and material nature.

The term “co-operation” as used herein means a fair and frank disclosure of relevant and material information reasonably to be anticipated by an insurer in order to enable it to determine whether a valid defense to an asserted claim exists.

Where a written statement signed and submitted by an insured deceives the insurer by conveying or impliedly creating the supposition that a valid defense in fact exists, and thereby precludes the insurer from any attempt at compromise, such misrepresentations militate to the prejudice of the insurer. This principle applies with particular force in circumstances wherein the insured later testifies and substantially admits liability. Such conduct by the assured constitutes a breach of a co-operation clause such as in controversy here.

In a suit against an insurer which is defended upon the ground of non-co-operation, such defense being an affirmative one, evidence of any character which tends to establish that the insurer was cognizant of the asserted breach prior to undertaking the defense of a suit against its assured is competent and admissible.

Estoppels are of two types: those technically such, which by their nature are required to be pleaded to constitute them absolute; and those in pais, which, though not pleaded, may be established by competent evidence, so as to operate as effectively as technical estoppels.

One with full knowledge of material facts, is precluded from acting in a manner inconsistent with his former position or conduct, when reliance thereon results in injury to another.

Where assurer is aware of alleged breach of policy condition by insured and insured refuses to consent that insurer's defense of suit will not constitute waiver by the insurer of any defense under policy, the insurer is thereby required to elect. It may rely upon such defense and refuse to proceed, but is considered to have waived such defense if it undertakes the defense of the insured.H. K. H. Lee for plaintiff in error.

E. J. Botts and F. Patterson for London Guarantee & Accident Company, Limited, defendant in error.

M. D. White for General Accident, Fire & Life Insurance Corporation, Limited, defendant in error.

TOWSE, C. J., LE BARON AND STAINBACK, JJ.

OPINION OF THE COURT BY TOWSE, C. J.

This cause is before us upon writ of error from a judgment in favor of both defendants in error. Eleven errors are assigned which require consideration of two prior suits arising out of the same transaction.

The instant proceeding is the third suit prosecuted by the plaintiff in error to recover for injuries sustained in an automobile collision, and names the London Guarantee & Accident Company and General Accident, Fire & Life Insurance Corporation, Limited, as defendants seeking to enforce the general-liability provisions of their policies as insurers of Clarence I. Allgaier and the New Home Grocery, respectively.

The first suit was entitled: “Mrs. Tom Yuen Shee, plaintiff vs. Mrs. Chun Wong Shee and Clarence Irwin Allgaier, defendants.” Plaintiff in error's son-in-law Allgaier as operator of the vehicle in which she was a passenger, and Mrs. Chun Wong Shee, the alleged owner of the other vehicle involved, were named defendants. The proceeding terminated in a mistrial and was later discontinued without prejudice by plaintiff in error, when it developed that the New Home Grocery and not Mrs. Chun Wong Shee was the owner of the other vehicle.

The second suit was entitled: “Mrs. Tom Yuen Shee, plaintiff vs. Noble H. Lono and Clarence Irwin Allgaier, defendants.” It named Allgaier, as in the first suit, and Lono, the operator of the vehicle owned by the New Home Grocery, as defendants. Plaintiff in error alleged that the New Home Grocery's vehicle was being operated by Lono at the time of the accident with the permission of the owner, Mrs. Chun Wong Shee. Lono, though served, failed to answer or appear and default judgment was entered against him. Following trial of the second suit, judgment was rendered in favor of plaintiff in error and against the remaining defendant, Allgaier.

The third and instant suit names the defendants in error as party litigants for the first time. It was filed when both refused to discharge the judgment awarded against Lono and Allgaier in the second suit; and it is upon this denial of liability that plaintiff in error instituted the instant suit to enforce that judgment. Each insurer has raised a separate defense peculiar to its own insured. The facts upon which those defenses are predicated will be treated separately.

London Guarantee does not deny that Allgaier is its named insured, or that its liability policy was in effect at the time of the accident. Its sole contention is that the policy was vitiated by acts of non-co-operation on the part of its insured. Vitiation is premised upon clause 8 of the policy:

“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. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.”

Upon this issue the trial judge found that prior to trial of the first suit Allgaier had executed a statement to London Guarantee's claims' agent, the relevant portions reciting:

“As we approached Liliha Street there was a car already ahead of me a short distance. This car was proceeding ewa in the traffic lane nearest the center of School Street. As we reached Liliha Street the green light was in our favor and the car ahead of me proceeded into the intersection and I did also. When this car reached a point over half way across Liliha Street it came to a very sudden stop. As I came abreast of this car I saw another car making a left turn into Liliha Street. This car had been proceeding Waikiki on School Street and made a left turn to go mauka on Liliha Street. I did not have time to stop and struck the right front of this other car as it crossed my traffic lane * * *.

“At the time of the accident I was driving slowly and carefully and the entire fault of this accident rests on the driver of the car which made an unsafe left turn in the face of approaching traffic.”

The trial judge further found:

“Lono [the operator of the car turning left] was charged with driving without a license and making an illegal left turn; was convicted of each and fined. Allgaier was not charged with any offense. He testified in the District Court against Lono in the trial in which Lono was convicted. * * *

“During the trial of the first case (Law No. 19197) the plaintiff mother-in-law testified in substance that at the gas station at School and Liliha Streets Allgaier called to her daughter who was in the back seat with her, and said something and it was then that the other car ‘hit our car.’ The London Guarantee & Accident Company, Limited's attorney asked Allgaier if this were true and he shook his head in the negative. After the mistrial was entered the attorney made further inquiry of Allgaier about talking to his wife in the back seat just before the accident. He said that that was true. Upon being asked why he had not told the Insurance Company or its attorney about this he made no reply. He was then advised that because of his failure to co-operate with the Insurance Company it would be necessary to get other counsel. He did not bring the complaint and summons served on him in the second suit to his Insurance Company or its attorney. The Insurance Company, however, filed an answer. Allgaier was advised before the trial ‘that in the event there was a judgment against the cause the Company would not honor any such judgment under the terms of the policy for the reason that there had been a breach of policy.’

“At the trial, however, Allgaier testified that just prior to the accident he turned his head sidewise to speak to his wife in the back seat and that ‘my mind was off my driving’ as we approached the intersection where the accident occurred, ‘about 6 or 8 feet before the crash...