State Farm Ins. Co. v. Arghyris

• Decision Date: 07 September 1949
• Docket Number: Record No. 3524.
• Citation: 189 Va. 913
• Court: Virginia Supreme Court
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, A FOREIGN CORPORATION v. NICHOLAS C. ARGHYRIS, AN INFANT, ETC.

Page 913

189 Va. 913

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, A FOREIGN CORPORATION v. NICHOLAS C. ARGHYRIS, AN INFANT, ETC.

Record No. 3524.

Supreme Court of Virginia, Staunton.

September 7, 1949.

Present, All the Justices.

(1) Indemnity Insurance — Liability of Insurer — Judgment Creditors of Insured Held to Have Same Rights and Disabilities as Insured.

(2) Indemnity Insurance — Liability of Insurer — Breach of Co-operation Clause Defense to Liability Regardless of Whether Insurer Prejudiced.

(3) Insurance — Interpretation and Construction of Contract — Limitation on Rule Requiring Liberal Construction.

(4) Words and Phrases — "Co-operate" Needs No Interpretation.

(5) Indemnity Insurance — Defense of Suits against Insured — Duty of Insured to Assist and Co-operate.

(6) Indemnity Insurance — Liability of Insurer — Insurer Held Not Liable Where Co-operation Clause Breached.

(7) Indemnity Insurance — Liability of Insurer — Motor Vehicle Safety Responsibility Act Held Not Applicable to Voluntary Policy.

(8) Indemnity Insurance — Motor Vehicle Safety Responsibility Act — Code Section 2154(a14)a Declaratory of Existing Law.

1. Plaintiffs recovered judgments for personal injuries resulting from a hit and run collision against the driver of an automobile which was owned by defendant's insured, and was being used at the time of the accident with the latter's permission. Defendant's contract with insured was an automobile liability policy in the standard form, containing the usual omnibus provisions extending its coverage to anyone operating the automobile with insured's permission. Plaintiffs' judgment debtor, therefore, by virtue of the permissive use given by insured, occupied the same status as insured, and plaintiffs had no contract with defendant but claimed through their judgment debtor, had his rights and were under his disabilities.

2. In liability insurance policies, provisions are usually found requiring the co-operation and assistance of the insured in resisting claims, or, more particularly, requiring that he shall aid in securing information, evidence and the attendance of witnesses, in effecting settlements, in prosecuting appeals, etc. Such a provision is commonly called a "co-operation clause". It is in the nature of a condition precedent to liability on the insurer's part for the loss growing out of a claim with the disposition of which the insured's co-operation is demanded, and a failure to perform, in the absence of a waiver or estoppel, constitutes a defense to liability on the policy, if the insurer so elects, even though it does not appear that harm resulted to the insurer from such breach. The test is not whether failure to fulfill the condition precedent prejudiced the insurer but whether the condition precedent was unfulfilled by the insured. To constitute a breach of a co-operation clause by the insured there must be a lack of co-operation in some substantial and material respect; a technical or inconsequential lack of co-operation or a misstatement to the insurer is immaterial in such respect.

3. The rule requiring a liberal construction of insurance contracts does not confer a right or impose a duty on the courts to add new conditions, provisions, or exceptions to such contracts which increase or decrease the obligations of the parties thereto.

4. The word "co-operate" needs no interpretation. It is a simple word with a simple meaning, thoroughly understood by simple minds to mean aid and assistance.

5. Where an insurer is to prepare an adequate defense in cases of contested liability, or where it desires to make a settlement without litigation, it must have from its insured a complete and truthful statement of the facts, made in the spirit of co-operation and assistance; an insured, in many cases, being the only source of information available to the insurer.

6. Under the facts of headnote 1, insured's liability policy contained a co-operation clause, under which the facts of an accident were to be fairly, fully and accurately disclosed, and defendant was entitled to know "as soon as practicable" whether its insured was involved in an accident. The driver of the automobile repeatedly misled defendant as to his connection with the accident over a period of many months, and not only failed to claim the protection of the policy but denied the liability of defendant to him or to anyone claiming through him. He never gave any notice of the accident, except indirectly, until the day of the trial of the proceedings against him. The trial court found that defendant did not sustain prejudice by reason of this conduct and entered judgment against defendant for the amount of plaintiffs' judgments against the driver. Defendant correctly contended that the failure to comply with the policy provisions justified its denial of liability, regardless of whether it was prejudiced by it. The driver's conduct was a clear violation of the conditions of the policy. He did not merely neglect the performance of the co-operation condition, he wilfully and deliberately failed to comply with it.

7. Under the facts of headnote 6, plaintiffs contended that defendant was liable to the extent of $5,000, whether or not the driver of the automobile breached the co-operation clause of the policy, under provisions of the Virginia Motor Vehicle Safety Responsibility Act (sections 2154(a6) and 2154(a12) of the 1948 Supplement to the Code of 1942 (Michie)) and a provision in the policy which recited that the insurance afforded by it should comply with the provisions of any such state law which should be applicable. But the policy was not issued under the name of insured or the driver to meet the Act. It was not certified as provided therein (section 2154(a4) of the 1948 Supplement to the Code of 1942 (Michie)), and the Act was not applicable.

8. The amendment of the Virginia Motor Vehicle Safety Responsibility Act by section 2154(a14)a of the 1948 Supplement to the Code of 1942 (Michie) was to remove any doubt as to the application of the Act under purely voluntary policies. It wrought no change in the existing law, but was merely a statutory declaration thereof.

Error to a judgment of the Circuit Court of the city of Norfolk. Hon. Clyde H. Jacob, judge presiding.

The opinion states the case.

John B. Browder and Robert Lewis Young, for the plaintiff in error.

Broudy & Broudy, for the defendants in error.

SPRATLEY, J., delivered the opinion of the court.

Nicholas C. Arghyris, an infant, who sued by his father and next friend, Christ Arghyris, on the 5th day of December, 1947, recovered a judgment against Dennis R. Bohler for the sum of $5,000 for personal injuries sustained by him as a result of the negligent operation of a motor vehicle by Bohler. On the same day Christ Arghyris, the father of Nicholas C. Arghyris, also obtained a judgment against Dennis R. Bohler for $1,542.95 for damages arising out of the injuries sustained by his infant son. Executions were issued on these judgments and returned unsatisfied, marked "No Effects."

Subsequently, the same two plaintiffs instituted separate notices of motion for judgment against the State Farm Mutual Automobile Insurance Company, alleging its liability for the amount of the judgments obtained by them against Bohler, by reason of an automobile liability insurance policy issued by it to George Newman, the owner of the automobile involved in the accident mentioned, insuring Newman, and also Bohler who was driving the motor vehicle with the permission of Newman, at the time of the infliction of the injuries. Virginia Code, 1942 (Michie), section 4326a.

The insurance company appeared on June 14, 1948, and filed its separate grounds of defense to each action and denied any liability on its part to the respective plaintiffs on the ground that Bohler had failed to comply with a condition of the policy requiring his assistance and cooperation with the company, in the event the automobile insured was involved in an accident.

On motion of the parties the causes were consolidated and set for trial on July 29, 1948. On that day, by consent of all parties, the whole matter of law and fact was heard and submitted to the trial court for determination. The issue was whether or not the failure of Bohler to comply with the cooperation clause of the insurance policy resulted in prejudice to the interests of the company. The court expressed the opinion that "The evidence did not sustain prejudice in any way by the false statements of Bohler or that the company had been deceived in any way as to what the true facts were," and entered a final judgment against the insurance company for the respective amounts awarded the plaintiffs in their actions against Bohler. From this judgment this writ of error was allowed the insurance company.

For purposes of convenience, Arghyris and his son will be sometimes hereinafter referred to as plaintiffs, and the insurance company as the defendant, the respective positions they occupied in the trial court.

The facts of the case are without material conflict; but, because of the questions involved, will be set out somewhat at length.

On April 19, 1947, the defendant issued to George V. Newman, a petty officer in the Marine Corps, stationed at Norfolk, Virginia, its automobile liability policy covering Newman's 1938 Ford sedan. It was in the standard form, containing the usual omnibus provisions, extending its coverage to any one operating the automobile with Newman's permission.

Dennis R. Bohler, a petty officer of the Navy, and a friend of Newman, owned a more recent model automobile, which Newman borrowed to drive on a trip, leaving his Ford for Bohler's use.

On a day prior to May 12, 1947, not fixed by the evidence, Bohler telephoned McDonald Meadors, one of the company's agents, in Norfolk, and the one who had issued the policy to Newman, informing him that he, Bohler, had been erroneously accused of being involved in...