holding that the plaintiffs in the underlying tort suit were not bound by a default judgment against the insureds in the insurer’s declaratory judgment suit because the underlying plaintiffs were “necessary parties defendant” to the declaratory judgment action
How later courts described this case
- holding that the plaintiffs in the underlying tort suit were not bound by a default judgment against the insureds in the insurer’s declaratory judgment suit because the underlying plaintiffs were “necessary parties defendant” to the declaratory judgment action
- holding that "[p]roof of substantial prejudice requires an insurer to demonstrate that it was actually hampered in its defense by the violation of the [condition subsequent]"
- prime objective of cooperation clause is to prevent collusion between the insured and injured, as well as to enable the insurer to prepare its defense; insurer must prove substantial prejudice, which requires it to demonstrate “that it was actually hampered in its defense by the violation of the cooperation clause”
- “Mindful of the fact that the public is the beneficiary of the automobile policy” and that “the prime objective of the cooperation clause is to prevent collusion,” a court requires proof of prejudice resulting from failure to cooperate
Written by the judges who cited it.
The opinion
MR. JUSTICE UNDERWOOD, specially concurring:
The orders defaulting Valleroy and Cheek in this declaratory judgment action are not, as urged by the insurer, res judicata as to the plaintiffs. Those orders were simple default orders which did not purport to declare the rights of the parties nor to constitute final judgments. Had they done so, with notice to the Millers, a different question would be presented.
I agree that an insurer should be relieved of liability to innocent third parties by the insured’s breach of his contractual duty only if the insurer has been prejudiced by that breach. In this case the insured lied to the police and the insurer as to the identity of the driver of the car at the time plaintiffs were struck. Likewise the other occupants of the insured car gave the insurer the same false information. Their credibility as witnesses in the future trial of this case has, it seems to me, been largely destroyed. As a result, the insurer may well have been severely prejudiced in defending against plaintiff’s claim, since the testimony of the witnesses upon whom it might normally rely is now subject to impeachment on the identity of the driver of the insured vehicle. The ultimate effect of that impeachment will, of course, affect a jury’s assessment of the balance of the testimony of those witnesses.
Concealment from the insurer of the true facts for some six months constituted, in my judgment, a clear breach of the cooperation clause. The insurer, however, neither alleges in this declaratory judgment action nor argues that it has been prejudiced by that breach. Consequently I agree that the judgment of the appellate court should be affirmed.