Watson v. Jones

• Citation: 610 P.2d 619,227 Kan. 862
• Decision Date: 10 May 1980
• Docket Number: No. 51068,51068
• Parties: Earl J. WATSON and Marlene Watson, Appellees and Cross-Appellants, v. Burley JONES, Defendant, and Automobile Club Inter-Insurance Exchange, Appellant and Cross-Appellee.
• Court: United States State Supreme Court of Kansas

Page 619

610 P.2d 619

227 Kan. 862

Earl J. WATSON and Marlene Watson, Appellees and Cross-Appellants, v. Burley JONES, Defendant, and Automobile Club Inter-Insurance Exchange, Appellant and Cross-Appellee.

No. 51068.

Supreme Court of Kansas.

May 10, 1980.

Syllabus by the Court

1. When an insurance policy contains a provision relieving the insurer from liability if the assured fails to cooperate in making settlements and in the conduct of suits, an insurer is not liable for a judgment against the assured if the assured has willfully failed and refused to appear and give testimony at trial after receiving adequate notice. However, the insurer is liable for payment of a judgment if the insurer was not sufficiently diligent in its attempts to secure the appearance and testimony of its assured or if the assured's failure to attend is found to have occurred through lack of timely effort and diligence on the part of the insurer.

2. An insurer in asserting a policy defense of noncooperation has the burden of proof to establish noncooperation when garnisheed by a judgment creditor of its assured. The insurer must prove it acted in good faith and attempted to secure the attendance and testimony of its assured at the trial and that the assured's failure to appear and testify at trial was due to an intentional refusal to cooperate despite timely and diligent efforts by the insurer.

3. The provisions of K.S.A. 1979 Supp. 60-718(c ), relating to the burden of proof in contested garnishment proceedings, do not apply to an affirmative policy defense pled by a garnishee insurance company. An affirmative policy defense in such case must be proven by the pleader-garnishee.

4. The trial court did not err in finding from the evidence that assured's failure to appear at trial did not constitute "noncooperation" so as to relieve the insurer-garnishee from liability for the judgments rendered against the assured in the tort action.

5. The record is examined with regard to plaintiffs' claim to recover reasonable attorney's fees under K.S.A. 40-256 and it is held there existed unresolved questions of fact and an undecided question of law which justified denial of liability under the policy so that the insurer incurred no liability for plaintiffs' attorney's fees.

Joel K. Goldman, of Schnider, Shamberg & May, Chartered, Shawnee Mission, argued the cause and was on the brief for appellant and cross-appellee.

Ernest L. Johnson, of Dear, Yarnevich & Carey, Kansas City, argued the cause, and Joseph T. Carey, Kansas City, was with him on the brief for appellees and cross-appellants.

FROMME, Justice:

Garnishee, an insurance company, appeals from judgments entered against it in a garnishment proceeding. The judgments require it to pay the full amounts of judgments previously entered against one of its policy holders in a tort action. It contends that the policy defense of noncooperation was established, that the plaintiffs had the burden of disproving this policy defense, and that plaintiffs introduced no evidence and thus failed in their burden of proof.

The plaintiffs, who sought and obtained the order of garnishment, have cross-appealed from the disallowance of reasonable attorney fees. They contend the insurance company refused to pay their claim without just cause or excuse. See K.S.A. 40-256.

We turn to the facts out of which the present controversy arose. The plaintiffs, Earl and Marlene Watson, suffered personal injuries and property damage while making a left turn on Oakland Street in Kansas City, Kansas. Their automobile was hit broadside by an automobile owned and driven by Burley Jones as he was attempting to pass at an intersection in disregard of a turn signal operating on the Watson vehicle. Defendant Jones pled guilty to charges of driving while under the influence of intoxicating liquor, transportation of an open bottle, and possession of untaxed liquor.

The collision occurred on May 16, 1969. Plaintiffs filed suit on May 11, 1971. Summons was issued the following day but was returned unserved. Numerous other attempts to obtain service were unsuccessful until September 15, 1971, when defendant was served at a construction site in (Wyandotte County where he was employed. Defendant notified his insurer, Automobile Club Inter-Insurance Exchange (Insurance Exchange), of the suit. Insurance Exchange obtained a statement from defendant as to the facts surrounding the collision.

On October 4, 1971, counsel for Insurance Exchange filed an answer on behalf of defendant raising a defense of the statute of limitations. All manner of discovery concerning the damage claims, including interrogatories, production of wage and tax documents and plaintiffs' depositions, was completed on behalf of defendant. No notice to take defendant's deposition was given. On December 15, 1972, Insurance Exchange obtained an affidavit from defendant giving his current address and setting forth his claimed whereabouts during the 127 days between the filing of the petition and the date service was obtained. A counter affidavit was filed by plaintiff Earl Watson detailing his efforts to locate defendant and indicating that defendant concealed himself during the period of time following the filing of the petition so he could not be served, thus tolling the statute of limitations. See K.S.A. 60-517.

Defendant filed a motion for summary judgment based on the running of the statute of limitations. The motion was overruled on March 9, 1973. At this time counsel for Insurance Exchange decided that defendant's deposition should be taken. Counsel attempted to locate defendant to obtain his deposition. A letter was mailed to his last known address on November 30, 1973, 15 days before the pretrial conference. At pretrial the case was set for trial on January 21, 1974. No mention of the noncooperation of the defendant was made at the pretrial conference although both parties knew of the difficulties of obtaining service.

After the pretrial conference counsel for the defendant began a flurry of activity for the purpose of locating the defendant. Numerous letters were mailed to him. An investigator was employed by Insurance Exchange in an attempt to locate defendant. The investigator was unable to talk with defendant. Ten days before the trial date Insurance Exchange wrote a letter to defendant at his last known address in an effort to withdraw its insurance coverage and reserve all rights under the policy arising by reason of the noncooperation of the defendant.

Defendant failed to appear on the day of the trial. Evidence of defendant's negligence was introduced, including guilty pleas to the traffic charges. Testimony was introduced to establish plaintiffs' pecuniary losses. The lawyers representing Jones and the Insurance Exchange were present. They took part in the trial and cross-examined the plaintiffs' witnesses. The court entered judgments as follows: $5,227.00 for Earl Watson and $7,507.00 for Marlene Watson, plus costs. The court specifically found that defendant had absconded and concealed himself after the petition was filed and that the action was timely filed. See K.S.A. 60-517.

On February 1, 1974, counsel for Insurance Exchange were permitted to withdraw from the case. No appeal was taken from the judgments. They are now final and no collateral attack upon the judgments can be permitted.

Two and one-half years later plaintiffs sought an order of garnishment to attach any funds due plaintiffs or defendant Jones under the policy of insurance issued by Insurance Exchange and in effect when the collision occurred.

Insurance Exchange, garnishee, denied that it owed money to defendant Jones or to the plaintiffs, asserted that the insurance coverage had been withdrawn for lack of cooperation, and that Insurance Exchange was not liable under the policy for any judgment against Burley Jones.

Plaintiffs filed a reply denying that coverage under the policy was withdrawn, alleging that Insurance Exchange did have the cooperation of Jones, and asserting that Insurance Exchange was estopped from denying coverage and liability because it fully participated in the defense of the tort action which gave rise to the judgments.

At the trial of the garnishment action the plaintiffs relied on the documents, transcript and other papers in the court file to place the burden of proof on the Insurance Exchange as garnishee. See K.S.A. 1979 Supp. 60-718. The garnishee-insurer had pled the policy defense of noncooperation of its assured, Burley Jones. Garnishee moved for a directed verdict in its favor on the ground that plaintiffs had failed to sustain their burden of proof. The motion was overruled. The trial court held the garnishee-insurer had the burden of establishing that Jones breached the cooperation requirements in the policy. The trial court further held that the garnishee-insurer had failed to establish noncooperation and, in addition, that it was estopped from denying liability for the judgments by participating in the tort action. The court denied plaintiffs' claim for attorney fees.

We turn now to the questions raised on appeal. The insurance policy issued to Burley Jones contained a provision requiring the assured, Burley Jones, to cooperate with the Insurance Exchange "in making settlements, in the conduct of suits and in enforcing any right of contribution." The trial court placed the burden of proving the policy defense on the insurer. The garnishee-insurer claims this was error, pointing to K.S.A. 1979 Supp. 60-718(c ). This statute in pertinent part provides:

"If the garnishee answers as required herein and . . . If a reply is filed as herein provided, the court shall try the issues joined, the burden being upon the party filing the reply to disprove the sworn statements of the answer, except that the garnishee shall have the burden of proving offsets or indebtedness claimed to be due from the defendant to the garnishee, or liens...