Van Dyke v. White

• Decision Date: 11 February 1960
• Docket Number: No. 34819,34819
• Parties: Peter VAN DYKE and Anna Van Dyke, his wife, Appellants, v. Theodore WHITE, Defendant, Mayflower Insurance Exchange, Respondent and Garnishee Defendant.
• Court: Washington Supreme Court

Page 601

55 Wn.2d 601

349 P.2d 430

Peter VAN DYKE and Anna Van Dyke, his wife, Appellants, v. Theodore WHITE, Defendant Mayflower Insurance Exchange, Respondent and Garnishee Defendant.

No. 34819.

Supreme Court of Washington, En Banc.

Feb. 11, 1960.

Morrison, Lake, Cael & Huppin, Spokane, for appellants.

Palmer, Willis & McArdle, Yakima, for respondent.

FOSTER, Judge.

Van Dyke and wife, plaintiffs below, appeal from a judgment dismissing a writ of garnishment against the Mayflower Insurance Exchange.

The controversy revolves around an automobile accident in January, 1955, in which the appellants' car was struck from the rear by one driven by T. R. White, who had a standard automobile liability insurance policy written by respondent, Mayflower Insurance Exchange. The policy contained the standard provisions requiring notice to the company within sixty days of all accidents; cooperation with the insurer in the defense of all actions; and a provision requiring the insurer to defend, at its expense, all actions brought against the policyholder. Such provisions were expressly made conditions precedent.

Within ten days after the accident, the policyholder's lawyer gave the insurance company notice of the accident, which notice had been supplied by the Van Dykes. Respondent denied liability because of the insured's personal failure to give notice of the accident, and refused to discuss settlement respecting the Van Dykes' claim.

White left the state, but returned in 1957. Thereafter, the Van Dykes sued White and wife and served both personally in Chelan county. White delivered the summons and complaint to the respondent, which employed counsel to defend him. ¹ Conferences ensued between White and his attorneys who served and filed an answer to the complaint. White informed the respondent that he would cooperate and attend the trial which was set for December 9, 1957.

On September 11, 1957, Mayflower Insurance Exchange notified White of a reservation of its rights, stating that, although Mayflower was undertaking the defense, it was not thereby admitting any liability under the policy. The reservation letter contained the following specifications of reasons:

'* * * to have the insured give timely notice or notice of any kind of any accident and/or give a report of any accident and/or fully cooperate in the defense of this action including the right to have the insured attend and testify at the trial and assist in the preparation for trial and/or attend any hearings or depositions or settlement of this action.'

The cause was tried in White's absence, resulting in a judgment for the appellants which they failed to collect. Whereupon, appellants caused a writ of garnishment to be served upon the insurance company, which, by answer, denied indebtedness. This was controverted by the appellants. The issue thus made came on for trial before a jury. Respondent's challenge to the sufficiency of the evidence was sustained and the writ dismissed, from which judgment the Van Dykes appeal.

The court took the case from the jury solely because of White's breach of the cooperation clause. The court held that there was sufficient evidence to go to the jury on compliance with the notice requirement. Appellants argue that the defense of non-cooperation must be affirmatively pleaded and that evidence of such defense is not admissible under a general denial. The contention is without merit. Gill v. Massachusetts Bonding & Ins. Co., 158 Wash. 290, 290 P. 698.

Appellants further argue that the burden of proving breach of the policy provisions was upon the respondent, but that argument overlooks the distinction between conditions precedent and conditions subsequent. The policy made the performance of all provisions a condition precedent to any action on the policy. The notice and cooperaiton clauses were within this category, and the burden of proving compliance was on the appellant. Port Blakely Mill Co. v. Hartford Fire Ins. Co., 50 Wash. 657, 97 P. 781. See, also, Shawnee Fire Ins. Co. v. Knerr, 72 Kan. 385, 83 P. 611, rehearing denied 72 Kan. 389, 83 P. 613; 20 Appleman, Ins. Law and Practice, 149, § 11416.

Appellants argue that the court erred in taking the case from the jury because there was evidence of substantial performance of the cooperation clause, but we think the evidence is undisputed that White deliberately refused to appear, aid, and testify at the trial and actually left the state, for which no excuse is offered. The breach of the cooperation clause is clear and beyond the range of legitimate controversy. This signally distinguishes Lienhard v. Northwestern Mut. Fire Ass'n, 187 Wash. 47, 59 P.2d 916. Failure to attend and testify was there held not in itself to be noncompliance, for the surrounding circumstances showed a reason for nonattendance. The reasonableness of the failure to cooperate was the crux of that case, but here no reason is advanced for White's failure in this respect.

Appellants argue that the court erred in failing to submit the case to the jury because there was no showing that the respondent was prejudiced by the insured's failure to cooperate; but that argument completely overlooks the terms of the policy which make compliance with all policy terms a condition precedent. Chief Judge Cardozo for the New York court of appeals in Coleman v. New Amsterdam Casualty Co., 247 N.Y. 271, 160 N.E. 367, 369, 72 A.L.R. 1443, correctly stated:

'The plaintiff makes the point that the default should be condoned, since there is no evidence that co-operation, however willing, would have defeated the claim for damages or diminished its extent. For all that appears the insurer would be no better off if the assured had kept its covenant, and made disclosure full and free. The argument misconceives the effect of a refusal. Co-operation with the insurer is one of the conditions of the policy. When the condition was broken, the policy was at an end, if the insurer so elected. The case is not one of the breach of a mere covenant, where the consequences may vary with fluctuations of the damage. There has been a failure to fulfill a condition upon which obligation is dependent.'

Sears, Roebuck & Co. v. Hartford Accident & Indemnity Co., 50 Wash.2d 443, 313 P.2d 347, is in accord.

If a party has breached a contract condition precedent, neither he nor one standing in his shoes may maintain an action on it, and prejudice or the lack of it is immaterial. Only a waiver of such breach or estoppel to assert it by the defendant can remove this fatality.

Respondent argues that appellants' failure specially to plead a waiver by the appellants forecloses the introduction of evidence on that issue. But this is not so if cancellation of the policy is the defense relied on by the insurer. All parties knew of the existence of the policy, and respondent's answer denying liability put the cancellation of the policy in issue, although perhaps less explicitly than advisable. The new matter in respondent's answer was controverted, and it was not necessary, although it is better under existing practice, specifically to plead waiver. This view is sustained in Olympia Brewing Co. v. Pioneer Mut. Ins. Ass'n, 53 Wash. 16, 101 P. 371, and Walker v. Home Indemnity Co., 145 Cal.App.2d 318, 302 P.2d 361.

Appellants complain of the court taking the case from the jury and holding, as a matter of law, that there was no substantial evidence of abandonment by respondent of its defense of non-cooperation. Respondent continued to defend the action against White after it knew of his absence from the state and of his intention not to attend nor to testify. The claim is that, although respondent at the opening of the trial declared a reservation of its rights to deny liability on the policy, such declaration was not enough. Respondent's continuance of the defense constituted an abandonment of its claim of non-cooperation, it is argued, because a mere declaration at the trial or even notice to the insured would not suffice to prevent a waiver. Appellants claim only an agreement between insurer and insured reserving such rights would suffice where the defense is based on breach of a policy condition rather than the scope of policy coverage.

Respondent contends that notice to the insured of a reservation of rights is sufficient to prevent a waiver by its continued defense of the action.

Neither argument need to be considered because respondent failed even to notify White of a reservation of rights under the cooperation clause after it became clear that he would not return for the trial.

Associated Indemnity Corp. v. Wachsmith, 2 Wash.2d 679, 99 P.2d 420, 426, 127 A.L.R. 531, set forth the requirements necessary for an insurer to reserve its rights to deny liability. The court said:

'There is nothing in the statute or the cases on this matter * * * which requires such notice on the part of an insurer, where it desires to reserve the right to contest liability under the policy, to be in the form of a nonwaiver agreement, or in any particular form. All that seems to be required is notice to the insured that the insurer will defend under a reservation of its rights.' (Emphasis supplied.)

In Basta v. United States Fidelity & Guaranty Co., 107 Conn. 446, 140 A. 816, 818, upon which this court relied in the Wachsmith case, it was said:

'* * * An insurer is not estopped to set up the defense that the assured's loss was not covered by the contract of indemnity by the fact that the insurer participated in the action against the assured, if at the same time it gives notice to the assured that it does not waive the benefit of such defense. * * *'

Here there is no evidence that, after discovering that White declined to cooperate, the insurer notified him that it defended the action under a reservation of its denial of liability because of the breach of the cooperation clause. Without agreement or notice of reservation, the insurer's...