State Farm Mut. Auto. Ins. Co. v. Gonzales, 9271

• Decision Date: 13 December 1971
• Docket Number: No. 9271,9271
• Citation: 491 P.2d 513,83 N.M. 296,1971 NMSC 121
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois Corporation, Plaintiff-Appellant, v. John Raymond GONZALES et al., Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 513

491 P.2d 513

83 N.M. 296

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois Corporation, Plaintiff-Appellant, v. John Raymond GONZALES et al., Defendants-Appellees.

No. 9271.

Supreme Court of New Mexico.

Dec. 13, 1971.

[83 N.M. 297] Hal F. Simmons, Albuquerque, for appellant.

Edward G. Parham, Keleher & McLeod, Ranne B. Miller, Albuquerque, for appellees Bailey.

Walter K. Martinez, Grants, for Rominger & Schlenker.

OPINION

OMAN, Justice.

Plaintiff issued a policy of automobile insurance to a Mr. and Mrs. Torrez. On October 28, 1967, defendant Gonzales, a brother of Mrs. Torrez, without the permission or knowledge of the named insureds, took the automobile, and while operating the same collided with the rear of a vehicle in which Mr. and Mrs. Bailey were riding. The Bailey vehicle was then caused to collide with the vehicle in which Rominger and decedent Nolan were riding.

Plaintiff brought a declaratory judgment suit for the purpose of acquiring a judicial determination on the question of its coverage of Gonzales under the policy. The trial court granted plaintiff a summary judgment on this issue and no appeal has been taken therefrom. However, the court permitted the case to be tried to a jury on the defenses of waiver and estoppel. The jury returned a verdict for defendants and against plaintiff. The trial court denied plaintiff's motions for a directed verdict, for judgment notwithstanding the verdict and for a new trial, and entered judgment requiring plaintiff to defend Gonzales against any claims asserted against him by the other defendants and to pay any judgment entered against him in favor of the claimants. Plaintiff appeals. We reverse.

It appears from the record and the briefs that the asserted waiver concerns itself with the claim that plaintiff 'waived its right to deny coverage' to Gonzales, and the asserted estoppel concerns itself with plaintiff's failure to fully investigate the accident and to notify Gonzales prior to service of summons and a copy of the complaint upon him on July 23, 1968, that he was not covered by the policy.

In addition to the foregoing recited facts, the following are pertinent:

(1) Plaintiff at no time told Gonzales or any one else that he was covered by the policy of insurance.

(2) On November 1, 1967 plaintiff had Mrs. Torrez execute an 'Authorization for Claim Service and Non-Waiver of Rights.' A like authorization and non-waiver was taken from Gonzales on November 7. By these instruments it was agreed that such actions as plaintiff might take in investigating, negotiating, settling, denying or defending against any claim arising out of the accident would not waive any rights of plaintiff under any contract of insurance.

(3) Plaintiff's investigation consisted of interviewing Mrs. Torrez and Mr. Gonzales and taking statements from them, taking from them the said non-waiver agreements, taking pictures of the automobiles involved, and securing the state police report of its investigation of the accident.

(4) Plaintiff's agent testified he may have told Gonzales he would be notified as to whether he was covered under the policy. He also testified that generally it is a good practice to conduct an investigation as soon as possible after an accident, and it would be more difficult to conduct an investigation after a lapse of nine months.

(5) Gonzales testified plaintiff's agent said plaintiff 'was investigating the accident,' but did not tell him '* * * there was a question of whether or not (he) would be covered under the policy,' and plaintiff never told him he was not covered.

(6) Gonzales never made an investigation of the accident. He knew he had taken the automobile without permission and after having been told not to take it because of his driving record. As above stated, it has been judicially determined that he had no permission to take the automobile and was not covered under the policy. Thus, at no time were there any rights and duties existing between him and plaintiff under this contract.

Insofar as waiver is concerned, it is apparent the 'right of plaintiff to deny coverage to Gonzales' is not a right arising under the contract of insurance, and the rights and duties with which we are here concerned are those of plaintiff under the policy. In any event, the evidence is not sufficient to support a verdict on the theory of waiver.

Substantial evidence is such relvant evidence as a reasonable mind might accept as adequate support for a conclusion. The substance of this relevant evidence must be such as will support the drawing of reasonable inferences therefrom. Durrett v. Petritsis, 82 N.M. 1, 474 P.2d 487 (1970); Cave v. Cave, 81 N.M. 797, 474 P.2d 480 (1970); Young v. Signal Oilfield Service, Inc., 81 N.M. 67, 463 P.2d 43 (Ct.App.1969).

Defendants claim that under the trial court's instruction on waiver the first element thereof is '* * * that waiver occurs when a party having a duty to act or speak has full knowledge of all facts. * * *' They claim plaintiff had this knowledge when it learned from Mrs. Torrez and Mr. Gonzales that he was using the vehicle without permission. Gonzales also knew this and knew it before plaintiff did. The following language taken from Smith v. Orion Insurance Company, 298 F.2d 528, 533 (10th Cir. 1961) is quoted and relied upon by defendants as support for their position:

'It is, of course, true that (an insurance) company may waive a defense it has by unreasonably delaying and notifying an insured that it stands thereon.' (Emphasis added)

The fallacies in this reliance by defendants lie in the facts that Gonazales was not an insured and plaintiff was not relying upon a defense it had under the contract of insurance. There was a total absence of right on the part of Gonzales under the policy. If the 'right to deny coverage' can in some inexplicable manner be converted into a right of defense on the part of plaintiff under the policy, still Gonzales must fail, because plaintiff owed him no duty to investigate further or to tell him what he already knew.

Defendants next contend 'The final element of waiver is whether (plaintiff's) inaction reasonably lead to the conclusion it was abandoning a legal right. * * ' Again the purported legal right is that of the 'right to deny coverage' to one who at no time was covered under the policy, and the purported waiver of this right could only arise from the failure of plaintiff to conduct a complete investigation into the accident, which duty it did not owe Gonzales, and in failing to advise him before filing suit that it was denying coverage, which also was a duty it did not owe him.

Defendants also contend plaintiff may not rely upon the fact that waiver is the intentional abandonment or relinquishment of a known right as held in Ed Black's Chevrolet Center, Inc. v. Melichar, 81 N.M. 602, 471 P.2d 172 (1970); Clovis National Bank v. Thomas, 77 N.M. 554, 425 P.2d 726 (1967); Chavez v. Gomez, 77 N.M. 341, 423 P.2d 31 (1967); Perry v. Staver, 81 N.M. 766, 473 P.2d 380 (Ct.App.1970). Plaintiff not only requested an instruction so defining waiver, but objected to the trial court's failure to give this request. However, it does not now claim error on the part of the trial court in denying the request or in giving the court's instruction. It contends the matter of intentional abandonment or relinquishment is implicit within the court's instruction. It makes no difference whether the language of the instruction can or cannot properly be equated with an intentional abandonment or relinquishment of a known right. As already stated, as between plaintiff and Gonzales, there existed no rights or duties between them under the policy of insurance, because Conzales was at no time a party to this contract. In any event, the evidence here...