State Farm Mut. Auto. Ins. Co. v. Porter., 790053

Citation272 S.E.2d 196,221 Va. 592
Decision Date26 November 1980
Docket NumberNo. 790053,790053
CourtSupreme Court of Virginia

George H. Gray, Chesapeake (Outland, Gray, O'Keefe & Hubbard, Chesapeake, on brief), for appellant.

George Minor, Jr., Portsmouth, for appellee.


COCHRAN, Justice.

On May 24, 1976, George Lee Porter obtained a judgment by default in the amount of $5,000 against William H. Edwards for personal injuries and damages sustained when Porter was struck by an automobile operated by Edwards on November 3, 1974. The automobile, a 1968 Ford owned by Edwards' wife, was covered by a liability insurance policy issued to her by State Farm Mutual Automobile Insurance Company. State Farm, which was not notified of the accident or of Porter's claim until June, 1975, declined to defend the personal injury action or pay the judgment. Unable to collect the judgment from Edwards, Porter filed a motion for judgment against State Farm for $5,000, with interest and costs.

The trial court, sitting without a jury, ruled that the evidence showed that State Farm had not been prejudiced by the failure of Edwards to comply with the notice requirements of the insurance policy, and entered judgment on October 19, 1978, for Porter against the company in the amount sued for. State Farm has appealed, contending that the failure of Edwards to comply with the policy provisions constituted breach of a condition precedent to recovery, so that it is immaterial whether State Farm was prejudiced by the lack of notice. State Farm further contends that even if it was required to show prejudice to bar recovery, the record establishes that it did so.

The accident occurred when Porter, crossing a street on foot, was struck by an automobile that did not stop at the scene. Witnesses followed the vehicle and identified it and the driver; as a consequence, Edwards was arrested on a hit-and-run charge. On February 21, 1975, Porter filed suit against Edwards, but State Farm never received the suit papers or any accident report. Edwards pleaded guilty to the hit-and-run charge in the trial court on April 2, 1975. Porter's attorney took Edwards' discovery deposition on June 12, 1975, pursuant to notice and subpoena, and learned that State Farm had a liability policy covering the Edwards automobile on the date of the accident. A letter from the attorney delivered to State Farm on June 23, 1975, was the first information received by the insurance company that the accident had occurred. On that same date, Richard A. Lyons, Claim Specialist for State Farm, after trying unsuccessfully to confer with Edwards in person, took a statement from him by telephone. Edwards denied that he operated the vehicle that struck Porter and stated that, although he was not guilty, he had pleaded guilty to the hit-and-run charge on the advice of counsel.

State Farm notified Edwards by letter dated June 27, 1975, that it reserved the right to deny coverage under the policy because of late notification of the accident and non-cooperation by Edwards, and that it was handling the claim without waiving this right. A copy of this letter was enclosed in a letter of the same date from State Farm to Porter's attorney advising that the insurer intended to rely upon its non-waiver and reservation of rights. Porter's attorney gave State Farm the name of an eyewitness, James Williams, from whom the insurer took a statement on July 11, 1975, in which Williams reported that two sailors who had seen the accident followed Edwards to his home and apprehended him. The identity of the sailors was not established.

On January 20, 1976, Porter dismissed without prejudice the action that he had filed against Edwards as sole defendant, but two days later he instituted an action against both Edwards and his wife for injuries and damages arising from the accident and forwarded a copy of the suit papers to State Farm. Neither Edwards nor his wife delivered any suit papers to State Farm. Lyons made numerous efforts to interview Edwards in person but could never find him at home; Lyons left messages for Edwards to telephone him, but Edwards never did so.

Lyons testified that his investigation of the accident was adversely affected by the delay in reporting it. He could never talk to the two sailors. There was no physical evidence to investigate. He could not question the insured driver about specific facts that Edwards would remember "right after the accident". It was too late to take pictures or measurements at the scene. He had no opportunity to interview Edwards or to inform him of the effect on the civil action of a guilty plea in the criminal case. He was denied the opportunity to have a representative present at the hearing on the criminal charge, and to have a transcript made of those proceedings. Lyons admitted, however, that after receiving notice of the claim he did not recall making any effort to locate the sailors who had witnessed the accident and identified Edwards as the hit-and-run driver.

The following provisions of the liability insurance policy upon which State Farm relies were introduced into evidence as Defendant's Exhibit 1:

1. Notice of Accident-Coverages A, B and C. When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses.

2. Notice of Claim or Suit-Coverages A and B. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

15. Assistance and Cooperation of the Insured-Coverages A, B, D, E, G and H. 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 failure or refusal of the insured to cooperate with or assist the company which prejudices the company's defense of an action for damages arising out of the operation or use of an automobile shall constitute non-compliance with the requirements of the policy that the insured shall cooperate with and assist the company. The insured shall not, except at his own...

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