Wehner v. Foster

• Decision Date: 05 September 1951
• Docket Number: No. 17,17
• Citation: 331 Mich. 113,49 N.W.2d 87
• Parties: WEHNER et al. v. FOSTER et al.
• Court: Michigan Supreme Court

Page 87

49 N.W.2d 87

331 Mich. 113

WEHNER et al. v. FOSTER et al.

No. 17.

Supreme Court of Michigan.

Sept. 5, 1951.

Davidson & Kaess, Detroit (Richard K. Amerson, Detroit, of counsel), for garnishee defendant and appellant.

Ward & Plunkett, Detroit (Dexter A. Clark, Detroit, of counsel), for plaintiffs and appellees.

Before the Entire Bench.

SHARPE, Justice.

This is a garnishment proceeding by which plaintiffs seek to enforce payment by Citizens' Mutual Automobile Insurance Company, garnishee defendant, of a judgment under the property damage coverage of an automobile insurance policy.

The facts are not in dispute and are as follows: On January 3, 1947, Abner J. Foster Jr., bought a policy of insurance from the Citizens' Mutual Automobile Insurance Company which contained the following under the heading, 'Conditions:' 'Upon the occurrence of an accident or loss covered by this Policy, written notice shall be given by or on behalf of the Assured to the Company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the Assured and also reasonably obtainable information respecting the time, place and circumstances of the accident or loss; the names and addresses of the injured, if any, and of any available witnesses.'

Abner J. Foster, Jr., was involved in an automobile accident on September 7, 1947, in which he collided with a parked car owned by plaintiff Kenneth Wehner. In April 1948, Abner Foster, Jr., was served with process in the common pleas court for the city of Detroit in an action commenced by Kenneth Wehner and his insurer. Following service of process upon defendant Foster, he, on April 15, 1948, made a written statement and report of the accident to his insurance company. Garnishee defendant insurance company disclaimed liability on the policy in a letter dated April 19, 1948, which reads, in part, as follows:

'The above mentioned suit arises out of an accident, which occurred in September, 1947. The Summons and Declaration were served upon you on April 8, 1948, according to the information you gave us.

'The first notice of this accident that you made to the Citizens' Mutual Automobile Insurance Company was on April 15, 1948, and the first notice of this pending suit that you gave to this Company was on the same day, to-wit, April 15, 1948.

'The policy of this Company, issued to you, requires that written notice of an accident shall be given to the Company as soon as practicable, and that every demand, summons or other process received by you shall be immediately forwarded to the Company.

'Because of your violation of the above mentioned terms and provisions of the policy herein referred to, the Company disclaims liability under its policy, and declines to take over, defend or in any way participate in the suit or action hereinbefore referred to.'

On July 1, 1948, a judgment was rendered against defendant Abner J. Foster, Jr., in the sum of $612.54 plus $13.50 costs. On September 21, 1948, plaintiffs herein filed a declaration and summons to show cause why judgment should not be rendered against the Citizens' Mutual Automobile Insurance Company was issued. Garnishee defendant insurance company answered and asked that the declaration and summons instituted by plaintiffs be dismissed.

The cause was tried before a jury and at the close of all testimony, garnishee defendant insurance company made the following motion for a directed verdict of no cause of action: 'The clear proofs are that something over seven months elapsed from the date of an accident, which is obviously serious, wherein obviously great damage was done. The failure to the principal defendant, Abner Foster, to communicate with his company, as the contract called upon him to do, has not been explained, and his failure operated to the material prejudice of the company, first of all because the mere lapse of seven months deprived them of their right to investigate, settle or adjust the matter and deprived them of their right to inspect the damaged property, and deprived them of their right and legal duty to set up proper reserves.'

The trial court withheld decision on the motion under authority of the Empson Act, Comp.Laws 1948, §§ 691.691-691.693, and submitted the following special question to the jury: 'Did the delay in giving notice materially prejudice the garnishee defendant insurance compnay? The jury retired and returned a verdict answering the special question in the negative, whereupon, the court entered judgment for plaintiff in the amount of $640, with costs of $57.00.

The garnishee defendant thereafter made a motion for judgment non obstante veredicto as follows: 'The grounds for such Motion are that this garnishee defendant was released from its obligation to the principal defendant and to the plaintiff due to the delay of said principal defendant in giving notice as soon as practicable after the occurrence of an accident creating potential liability on the part of said principal defendant on September 7th, 1947, which delay materially prejudiced this garnishee defendant in its handling of the claim and subsequent litigation arising from said accident.'

This motion was denied by the trial court. Garnishee defendant appeals and urges that the trial court was in error:

'1. In refusing to direct a verdict in favor of garnishee defendant.

'2. In failing to hold that the delay of Plaintiff [sic, principal defendant?] in reporting an accident caused material prejudice unto the rights of Garnishee Defendant.

'3. In failing to hold that Plaintiff [sic, principal defendant?] violated his contract with Garnishee Defendant in such manner as to release it from liability.'

In Kennedy v. Dashner, 319 Mich. 491, 30 N.W.2d 46, the controlling question presented on appeal was whether a notice received by the insurance company 47 days after the accident satisfied the contractual obligation to give a notice 'as soon as practicable.' We there held that prejudice to the rights of the insurer is a necessary element to be considered in determining whether there has been an unreasonable delay in giving notice of an accident to the insurer 'as soon as practicable.' In Weller v. Cummins, 330 Mich. 286, 47 N.W.2d 612, we again affirmed the rule of 'prejudice' and held that where the insurance company receives the necessary information from other sources than the assured it is not prejudiced by the failure of the insured to furnish the required information.

Having in mind that the burden of showing 'prejudice' is upon the insurer, garnishee defendant insurance company urges that a delay of more than 7 months prevented it from examing the damaged automobile, prevented it from settling the claim of plaintiff and the setting up of reserves for unpaid claims as required by C.L.1948, §§ 533.3, 543.9, Stat.Ann.1943 Rev. §§ 24.435, 24.536.

In support of its claim of prejudice, garnishee defendant insurance company produced Angus McIsaac, assistant claims manager for the insurance company, who testified:

'Whenever an accident comes in, the first thing we would do, we would report it to the Home Office and if it was a policy holder's car damage, we would obtain competitive estimates. That would be a couple of estimates from garages. In the event there was a report of damage to the third party's car, we would arrange to obtain estimates from garages. If the damage exceeded $75.00 or $100.00, we would have our collision adjuster or inspector look at the car and we would also make an investigation of the facts surrounding the accident so that we could determine the question of liabilty. We have a man in our organization who specializes in inspecting damaged automobiles. That is all he does. The first thing he would do would be to inspect the damaged car and if he wasn't satisfied with the two estimates that had already been obtained, he would have an estimate made by another garage, a garage we know something about, that we have confidence in. While he is getting these estimates, we conduct an...