Bailey v. Universal Underwriters Insurance Co.

301 rehearing May September 23, petition Argued for reversed Tongue JJ, Howell, (Denecke, 24, 1970 denied November petition rehearing), reconsideration would allow March 1971 denied Respondent, UNDER- BAILEY, UNIVERSAL Appellant. COMPANY, INSURANCE WRITERS P2d 482 P2d 158 argued ap- Portland, the cause Schouboe, L. M. pellant. him on the briefs were With Thomas Cav- Cavanaugh, anaugh Portland. and Schouboe & argned Ferris F. Boothe, Portland, the cause for respondent. himWith on the brief were Ken- Black, Higgins, dall, Tremaine, Boothe and Portland. Presiding Before McAllister, Justice, Sloan, Tongue and Howell, O’Connell, Denecke, Holman, Justices.

TONGUE, J. policy by This is an action on an insurance injured person in an automobile who accident, filed obtaining unpaid judgment against action after an alleged the driver of the vehicle to be covered policy. coverage grounds: (1)

Defendant denied on three policy, issued to an automobile did dealer, (2) not cover the car involved in the accident; given defendant was no notice of the true facts of the (3) accident, that the driver of the car failed to cooperate original in the defense of the action. The sitting case was tried before the jury. court, without a Prior to the accident defendant issued an in- surance to Kellum Motors, Inc., automobile Oregon. operated dealer at Gladstone, Kellum also away. used car lot several miles Wilbert Steele, the question, repair driver in did work at the used car lot evenings. employee, He was not an however. July 23, 1967, On Steele started home after his car, work in own which broke down. He then was permitted manager, the used car lot Mr. Smith, to the used cars borrow one of to drive home. On the way home he collided with a plain- vehicle driven investigated by accident was tiff. The an officer who report stating, prepared among things, other ear owned Helium That statement was Motors. upon given by was based information at the Steele scene of the accident to the as he later testi- officer, fied. evening

The next Steele took the car back the used car lot and told Smith that he had an accident guess got with it. He also told “I Smith that I’ve bny price agreed I now that wrecked it.” No was upon, papers signed however, no were time. In the course of the discussion the idea was suggested, apparently that he Steele, “represent” would that he owned the car at the time of the accident.

Some time later a “retail installment contract” prepared signed, predated July as of 22nd, originally predated as well as a “car order,” also of “7/22,” but with that date crossed out and redated A 1967. “commission voucher” for a commis- “8/1” sion on the sale to Smith was also dated “8-1-67.” The amount of that commission was not included in the July check to Smith, dated for other sales July. journal” made him The “used vehicle sales August sheet for the “month 1967,” however, shows top the sale to Steele as the first item at the of including sheet, with the date “7/22,” instead of it as preceding the last item on the sheet for used car sales July. for the month of days

About fifteen after the accident an invest- igator plaintiff’s company insurance visited Hel- examining ium Motors and in its records noticed some discrepancies. day of these On that same he learned that defendant was Helium’s insurance carrier. He agents then called and told one of its that “there was involving possibly an accident a vehicle that was owned might for him, and it be advisable Motors, Kellum into the matter.” to look time, at that investigator then Kellum visited Defendant’s given copy was examined and where he Motors, He installment contract. the retad ear order and and was told that on the car order the alteration noted through these came when had been closed “the books the car the alteration on lot” and that the car from only.” financing The in- “for reasons made order was vestigator from both Smith and then took a statement signed the contract that Steele who told him Steele, July had the accident the purchase 22nd and the car on reported day. and recommended then that He next seriously injured,” Bailey was defendant Mrs. “since position that this car had been sold and was “take the your policy.” under not insured personal an action for in- then filed Plaintiff alleging against juries Kellum Motors and Steele, both by Kellum and it was owned that was car provided being operated Defendant Steele. counsel Depositions but Steele. were Kellum to defend appeared who without Steele, counsel then taken employee again he was not an stated that of Kel- day bought the car the before the and had accident. lum May that case came on for trial. On voluntary an order of took then nonsuit Plaintiff against and took order of Motors Kellnm default appearance. had made no against who Plain- Steele, support complaint evidence of her offered tiff also judgment May was entered 13th default and on against $19,080.72. Steele plaintiff’s May attorney 10, 1968,

Meanwhile, then and for the again who Steele, first time visited previous lied he had statements admitted day bought the accident and car before he had purchased by after him until was not admitted that it the accident. plaintiff The filed this action. weeks later

Six manager, deposition was lot the used ear Smith, after the accident then taken and he then testified that suggested “swear that the idea that he would Steele bought prior my to the car” “I had it” because worry” told “not to and that the accident and Smith signed papers predated. were later and He also swore that he never informed Mr. Kellum or Mr. his Rikke, testimony manager, facts and there was no of these they previously were aware of these facts. attempt was made No defendant, however, judgment against to set aside the default Steele, even taking deposition after a further which Steele, purchased he also admitted that he had not the car previously until after the accident and that he had lied testifying contrary. to the Instead, defendant’s at- torney denying wrote a letter to Steele insurance cov- erage upon ground for the accident the that Steele was policy” not an “insured within the definition of the upon ground the further that: “* * * you cooperate you failed to in that ma- terially misrepresented relating the facts to the ownership you operating of the vehicle were at prejudice time of the all to the extreme accident, Company.” Underwriters Insurance Universal “person Toy 1. was a insured” Steele insurance policy. judge “per-

The trial held that Mr. Steele was policy. agree. insured” under terms of son We policy “comprehensive The insurance was a lia- bility policy (general-automobile),” No. 756241,issued

n “insuring agree- As Inc. one of Motors,

to Kellum policy included an “omnibus under clause,” ments” the “any coverage bodily injury was extended to which using person a hired while an owned automobile or ** provided the actual use of the *, automobile, per- named insured or with his automobile is * * *” exceptions by certain mission followed apply case. claimed to to this Attached are a number of endorse coverage, provide for most of which additional ments, premiums. ‹ clearly with additional Other endorsements certain hazards. › Included these other excluded with designated was an endorsement as endorsements “Garage (premises-operations- and entitled UU-3139, subheading automobiles),” with the “Limited addi covering the “hazards” tional interests” and described “garage “garage operations hazard.” This endorse the term ment,” “insured,” definition of limits cov erage persons paid for “automobile hazard” to such as employees or members of the household of the named “any person” only other insured and to while the ‹ These among include, others, endorsements an endorsement extending coverage separate “locations,” including to some 25 “apartments” “dwelling,” lots,” and “vacant as well as business properties; endorsement;” a “customer rental an endorsement for coverage; endorsement,” an uninsured motorist “occurrence broad ening scope coverage the of for “accidents” to include “occur “personal injury liability coverage rence;” endorsement,” a extend coverage injuries ing “comprehensive personal coverage hazards; to from false arrest and related liability extending endorsement” further payments; and benefit a “use of other automobiles” en coverage extending dorsement, to the use of some nonowned auto mobiles; premium pay endorsement and “other insurance en dorsement.” › These Energy include endorsements entitled “Nuclear Lia bility Agreement” and the “Limitation Exclusion of Additional injuries arising relating loading Interests,” from to the or unload ing of vehicles. by persons physically operated as such is automobile paid employees. or his the named insured “garage the contended defendant It is provides policy” the and endorsement” is the “meat of “Insuring Agreement policy (the III of the clause’) apply.” Thus, does defendant ‘omnibus coverage endorsement limits under contends that this policy purpose the of all the the for Kellum’s basic operations,” including “garage the car used lot. policy the

The schedule attached to basic as endorsement, sets forth a first “break- premium charged personal injury down” the damage property coverage policy under the basic goes on to state that for “non-owned automobiles” coverage is and “hired automobiles” there “no for this provided by except Garage as Endorsement hazard — coverage With reference UU-3139.” for “owned (as also automobiles,” referred to under the “omnibus “comprehensive liability policy”) clause” of basic provision there is no to the effect that there is “no coverage except provided by garage for this as hazard, contrary, expressly pro- endorsement.” On it is coverage this vided same schedule that for “owned “subject automobiles” to all the terms and condi- policy (referring policy tions of No. 756241, ‘Comprehensive Liability Policy’) AND Form No. (the so-called‘Garage Endorsement’).” UU-3139 attempted through have We follow the maze provisions, exceptions, endorsements, seemingly contradictory provisions. These include a purpose broad definition of “insured” for of “comprehensive liability policy” basic and as stated in compared clause,” its “omnibus with a more limited “garage term in definition endorsement.” coverage They express an of include limitation also “hired automobiles” and automobiles” “non-owned “garage provided by coverage endorsement,” the any respect omitting such limitation with cov- while erage providing, on the for “owned automobiles,” subject contrary, coverage is of such to all the that “garage policy the basic and also the terms of both endorsement.” considering

Upon “comprehensive lia the basic bility policy” “con its when endorsements, various (as that sidered whole” defendant contends we as a do), the is reason must we have concluded that ably interpretation subject that to the effect the “garage either re was not intended to endorsement” peal application of the “omnibus clause” or limit the liability “comprehensive policy” insofar in the basic were concerned. as “owned automobiles” in established, course, It is well of interpreta policy, of an insurance construction to the insured must tion is most favorable be which adopted. Company, Insurance Reed v. Commercial Accordingly, (1967). 432 P2d 691 we 152, 156, 248 Or though employee was not an hold even Steele nevertheless, and because the time Kellum, driving owned accident he was automobile permission Kellum and with the man Motors ager charge “person in car lot, used he in insured” the definition of that term within “comprehensive liability of the basic “omnibus clause” person” policy” was thus an “insured under as found the trial case, facts of this court. Cf. John (1963). Doughty, 79-80, 236 Or 385 P2d 760 son cited read cases defendant We have contrary support they conclusion and find that of a policies point, involved either because the are not clause,” fi not an “omnibus or because did contain “garage were endorse endorsements involved clearly the insurance which limited ments,” but endorsements rage. fl cove Defendant contends also that “Ore gon require policy liability law does not automobile except contain under certain clause,” an omnibus may circumstances not in this case. be involved This policy true. The fact remains, however, case include does an “omnibus clause” and we hold coverage may that while under that clause have been by “garage pur limited endorsement” for some poses, such “non-owned automobiles” and “hired policy reasonably subject automobiles,” to the interpretation coverage that such was not limited “garage involving endorsement” in accidents “owned at least under the automobiles,” facts of this case. Company Adequate

2. The Insurance Received “No- tice” the Accident. of appear

First of it all, would to be doubtful whether defendant’s contention that it did not receive adequate properly “notice” is within defendant’s sole fi Orth Company, v. Universal Underwriters Insurance 284 1960) 857, (9th (in Cir F2d 858 which this same insurance com pany policy “garage endorsement,” issued with a with but no clause”); Gray Maryland Casualty Company, “omnibus Supp 520, v. 152 F (DC 1957); Wylie ED Motors, 521 Ill v. Mountain 494, (1943). 126 SE2d W Va 27 495 fl Schaffer Company, Mill v. Owners Mutual Insurance 242 150, 152, (1965); Or P2d 614 407 Universal Underwriters Insur Company Bush, (10th (in ance 1959), v. 272 677 Cir F2d which issuing company, clearly this same an endorsement which coverage clause,” prem limited under the “omnibus reduced the charged coverage ium from that for the broader under the “omni clause”), Company bus Bouler, and Zurich Insurance So 198 2d (LA 1967). App pri which error, complains of assignment

remaining of cooperation. (cid:176) court 19 of this Rule of lack marily clearly be error shall assignment that “each requires and appropriate under separate stated succinctly letter denying defendant’s Furthermore, headings.” notice not received it had did not state coverage cooperate failed to that Steele only but accident, relating ownership facts misrepresenting the car. with the we agree from this,

Aside August 8, or about finding in its trial court the occurrence of after days 1967, “approximately was furnished defendant in question,” the accident received that the information the accident notice the terms of its satisfied substantially insurance. defendant was notified that date about

orOn involved your “possibly and the accident of then undertook to agent promptly Defendant’s car.” (cid:176) assignment as follows: reads This concluding: in erred “The court liability company avoid to an insurance to ‘In order for liability coverage policy party injured its under third necessary by insured, noncooperation the it is grounds of the by prejudiced that it has the to show been insurer for the noncooperation.’ proposed adopt refusing the defendant’s as a conclusion to and alternative of law as follows: conclusions the co- ‘(a) breached assistance and Steele That Wilbert policy, wilfully, in that he operation of defendant’s clause misrepresented going fraudulently fact falsely material and coverage policy. very under defendant’s essence the to willful, false ‘(3) has been and fraud- there That where fact which an in- misrepresentation a material leads ulent coverage good faith, is company, to there no in believe surance company policy, the receives no notice its under afforded prejudice no need be shown. for 12 months facts true prejudice nevertheless, case to the in this de- ‘(4) That ” shown.’ fact been has fendant including investigate, question whether the car and by policy. were It true that driver covered gave defend- false information to Steele Smith agent, cooperation of the clause of ant’s violation below), say policy, (as discussed but we cannot support that there was no substantial evidence to finding by judge of fact the trial that defendant re- “particulars ceived notice of the accident with suf- identify “reasonably ficient the insured” and also respecting place obtainable information the time, circumstances of the the names accident, and addresses injured of the and of available witnesses,” so as to satisfy requirements policy. “notice” of the point

Indeed, defendant makes no of the fact that the information of which it received notice failed satisfy specific requirements of the “notice” provision policy or that such information was received from another source, instead of “written * * * by notice or on behalf of the insured,” ex- cept complains extent that defendant that the original statement Steele that the car had been purchased by day him on the before the accident was false. Counsel also admits that the named insured, (through Kellum Motors Mr. Kellum and Mr. Rikke, manager) “completely ignorant his office of and participate did not in the fabrication.” defendant Thus, contends that the false state- very question ment “went to the heart of the whether appellant’s any or not coverage afforded for the accident” and that the notice of the accident received it was “no notice at all” in that it did not include “true and full facts sufficient to enable it to coverage make a determination of first, whether the policy per- involved and, second, sufficient to ;214 go investigation with an

buit it to forward and afford its insured the to which he is entitled under benefits policy.” the support

In of its contention that the absence coverage policy notice avoids of the of such does showing any require prejudice further hot it, Employer’s Liability defendant cites v. As- Hoffman Corporation, (1934); 66, 146 Or 29 P2d 557 81, surance Bonney (1968); v. 249 439 P2d 881 Jones, 578, Or Oregon Company Farm Bureau Insurance v. Safeco Company, (1968). 249 Or 438 P2d Insurance 1018 In three of those cases, however, all the insurance company received no notice whatever of the accident they year, so that did .for over one not involve or es- requirements sufficiency the of the tablish notice period received within a short an accident after in this case. accident, contrary, the contention that a notice

On which includes material accident false state expressly rejected all” notice at ments is “no Fidelity leading Casualty case & Com Griffin 1959). – (5th pany, F2d 48 Cir 273 – The fallacy contention, for the of such reason as well Laundry Indemnity Co. v. Ohio in Charleston Farmers Co., stated (SD Supp 1950), 649, at 652-653 W Va is that: F89 required by object of the notice “The notice clause is to company acquaint the insurance with the occurrence of an accident, may proper investigation, make so that and take may necessary protect action as be such its interest. See p. C.J.S., Insurance, (1) 1182. Even § when the requires particulars/ only notice ‘with such de- full be included as will tails need termine whether a claim is enable the insurer to de- likely against to be made Jur., p. given insured. See Am. 843. The notice in the requirements. case satisfied these instant It contained a surrounding statement of the facts and circumstances inform accident sufficient defendant of occurrence,

215 defendant was not ease, only In this notified fact of the hut was informed accident, by insurance the ve agent plaintiff’s company in the accident was owned “possibly hicle involved Kellum and it be advisable for him at Motors, might to look into the matter.” de Furthermore, time, fendant’s then was told of all of agent by Steele the circumstances of the truth accident, except relating to the of the vehicle ownership involved. We believe under that, the circumstances of this case, informa tion was sufficient support finding by trier of the fact that defendant was put notice, not only the fact of the but also accident, of the fact that “a claim is to be made likely against the insured.”

In Tierney Insurance Company, 216 F Safeco 590 it was Supp (D 1963), Or contended that an almost identical notice was provision breached when the driver of the vehicle in involved an accident falsely pursue investigation. and to enable it to Defendant could readily likely ascertain from the notice that claim was against plaintiff. falsely

be made is It true that the notice Slaughter driving, stated that when in fact Johnson driver; and, report being was the Slaughter made duty, in line of if this falsification could be said to be a clause, prejudicial violation of the notice defendant, liability. it would relieve defendant from But we have purpose seen that requiring of that clause in notice is company fulfilled when the insurance is advised of the oc- unnecessary currence of any the accident. Since is given details comply of the accident in be order to with clause, may the notice then such details as be set out in the though notice, falsely equivalent related, even are to mere surplusage. given complied substantially The notice as with policy provisions general requirements giving as to compliance usually of notice. Such substantial is sufficient. C.J.S., Insurance, 1088, p. See 45 1323. § The one false not, statement made clause, here did under the notice in- policy, compliance validate fected, since substantial was ef- general requirements giving as to the. notice (Emphasis added.) satisfied.” agent company informed the that he was insurance driving informing the car at the instead of time, hy was owned him at the him that vehicle time, rejected by in this case. That contention was J. Kilkenney, although facts other of the case were some- case was what different and the controlled the law Washington. This result also accord with the decision Doughty, this court Johnson v. Or (although (1963), point in which not in P2d 760 on its p facts) we that: held, had the insurer notice of the “Since collision from right prejudiced to notice was not sources, other by Doughty’s give failure to notice.” Bonney In that as noted case, 249 Jones, (1968), open P2d we 881 held 578, 580, Or the question prejudice the insurer whether must show it has actual notice of an accident where and seeks to ground coverage the that on such notice was avoid not person given by the involved in the accident. we hold, however, In this case that when the including notice of the had actual accident, insurer of the of the circumstances and accident, most under- investigate the fact that such it, notice was took wholly by given the named insured is immaterial. We in such a case the further also hold fact that a of a material fact was statement made false to the must be viewed considered as a insurer matter in- policy volving provisions the of insurance a breach cooperation requiring the as insured, next discussed, involving a as one breach of the rather than contract requiring provision notiee of the accident. This is only applic- particularly in this ease because the true assignment relating error was cast in of terms able

21V cooperation policy clause breach denying coverage was also on that limited the letter ground. Cooperation is the Insured Not a De- 3. Lack of it the Insurer Proves Unless Suffered fense Prejudice as Result. a Defendant’s next contention the trial holding court erred in that for as an defendant, insurer, injured liability plaintiff, an to avoid as third grounds party, non-cooperation of the in- prejudiced defendant must sured, show that was non-cooperation. the result such In his comments from bench at the con- judge expressed trial trial, clusion his desire place squarely Oregon Supreme “to before the Court” question prejudice there “whether must be shown proven misrepresenta- in the event of material person tion he a named assured, be or insured, an insured under who becomes terms.” Riggs Jersey Fidelity In v. New and Plate Glass Company, (1928), P 126 Or also a case involving alleged defense that the insured failed to cooperate company, with the insurance this court p stated, 413:

“In for the answer to order constitute defense it would show that the assured in faded, some sub- particular particulars, or material or stantial co-operate company with and assist the in the de- damages an action by fense of for covered the policy, apparently so that the trial resulted in a judgment part in wrong, which was in whole or or, other that the the words, in interests of defendant company prejudiced the were in the defense of injury (Emphasis personal added) action.”

218 Oregon Allegretto subsequent v. decision

Our (1932), has P2d 647 140 538,13 Or Co., Insurance Auto contrary. Even to the construed been sometimes (at 541) p mis that the it was held however, case, that “substantially affects representation which must be one (at although it was stated rights insurer,” the say going that far to 542) is too p think it “we that misrepresentation affected that must be shown clearly quite convinced also was The court verdict.” 543). (see p case prejudice in that had shown been that (1933). 256, L Rev 258 also 12 Or See Doughty, v. case of Johnson more recent In the (1963), this court seemed P2d 760 78, 236 385 Or by prejudice indicated must shown, be assume 80) (at p that: its statement cooperate with the the insured to failure “A prejudice and, the contract, is a breach of insurer if proven, amounts to a defense the insured its duties under insurer of relieve the will added) policy.” (Emphasis Insurance Automobile Farm Mutual In State Exchange, Company Insurance Or Farmers (1964), did not the court P2d 768 P2d prejudice question must shown, be whether reach diligence not shown due insurer had that the but ruled presence cooperation his the insured from to obtain (at clearly dissenting p 299-300) opinion The at trial. prejudice recognized, must be shown adopted previously this court. rule as under the Appeals States Court Both the 'United District States Court United Ninth Circuit Oregon held that under have also District of for the Oregon prejudice insurer to the must be law of Indemnity Company v. McDonald, 107 shown. Pacific

219 1939); Tierney (9th Insur- F2d Cir 446, Safeco Supp (D Company America, ance 216 F Or 1963).

Accordingly, any and if there has been doubt position question, as court this we to the this recognize expressly now the rule that order non cooperation provide to a whether a named defense, by person insured or who becomes insured under policy, the terms of the insurance the insurance com prove pany plead has the burden to that it has prejudice suffered as a result. To the extent that Allegretto may holding contrary, be construed to the case overruled.

Applying ap- these to rules it would case, pear urge that if defendant is entitled to the defense non-cooperation it would then follow from the fact judgment against that a default was entered Steele that prejudiced, defendant was as a matter of law, unless application defendant could and should have made judgment learning upon set aside the true facts. The trial court held in this case, since application defendant did not make such an it cannot prejudiced by entry contend that it was of the default judgment. provides may, 18.160 ORS that “the court in its * * * party judgment

discretion relieve a from a * * * against through taken him his in- mistake, surprise neglect.” advertance, or excusable We have liberally held that this statute is be construed “in impede manner to subserve and not to defeat or justice.” ends of substantial Peters v. Dietrich, 145 Or (1934). 27 P2d 1015 may It be that- under the facts of this case the company, proper defendant insurance if it stand- had ing apply made a relief, for such could have show- neglect” ing “surprise to excusable sufficient of or by judge, his a in the exercise of order trial sustain an setting judgment the default in this aside discretion, necessary appropriate “to ends or serve the case justice.” general however, is the rule, It of substantial judg- may only party to aside default a seek set a that ordinarily “strangers to the record” and that ment application. standing no which to base such an have on providing significant that in 18.160, It OES is judgment” “may party a from a court relieve that the application provide such relief that the for does not significant party by himself. It also must be made the Oregon directly point, are no cases in that while there in v. 57 Or Milner, 16, 21-22, 109 this court held Fildew (1910) proper a trial to set that it was court P 1092 by grantees judgment application the a default aside subject property which was the matter of the suit. application made in the the was name In that case grantees defendant and the of the the named both property Ariz Butler, involved. See also Liston v. (1967). Dudley App Dickie, But see 421 P2d 542 (9th 1960). F2d 360 Cir may if a to It be that motion set aside judgment in case in had been filed default company Steele, defendant insurance name both (as Milner) in if insured,” Fildew v. the “named by setting supported an affidavit had been that motion case, circumstances of this a trial the facts and forth judge, of his could have discretion, in exercise judgment properly so as aside the default not set justice.” impede ends of In substantial “defeat or judge any was re since trial event, quired that still must hold defendant was so, do we entry prejudiced, law, as a matter of ways considering other in what judgment, without prejudiced. may been also have Un- on-cooperation is Not Insured

4. N Defense Diligence Reasonable Acted With Has less Insurer Faith. and Good prejudiced though defendant

Even judgment, entry not neces- it still does default recovery plaintiff sarily from was barred follow holding, at least trial court was correct if the good duty faith to make had a that defendant effect, investigation diligent accident and failed of this duty. perform that appeal plaintiff on this contends Thus, accident and was was notified of the after defendant day purchased the car the that he had told Steele than a “hear it made no more no the accident before investigation” of case. Defendant see no evil evil, contrary, rely that it was entitled contends, upon and that to hold Steele the statements industry place contrary the insurance “would position precarious in the conduct of ridiculous its affairs.” Imperiali Mass Pica, 494, v. 338 156 498,

In p (1959), at that: held, 47, NE2d 44 “* * * liability cannot be relieved an insurer cooperation alleged breach of clause because by where it has in a situation not itself the insured * * * good diligence faith. Ele- exercised justice dealing mentary principles and fair re- obligations coopera- under quire The a rule. such reciprocal.” are clause tion Pennsylvania see: effect Thresher the same To Casualty Insurance Mutual Co. v. Farmers men and 222 (4th

Owens, 238 F2d 1956); 550-551 549, Cir Iowa Casualty Home Mutual Co. v. 255 F2d Fulkerson, 242 (10th 1958); Carpenter Superior Cir Court, 101 Ariz (1967); Ray 422 565, P2d 129, 132, 134 v. John App 81 Ill (1967); son, 2d 456, 225 NE2d 158 Allstate Insurance Co. v. Coe, 248 29, NYS2d 21 AD2d 34 (1964); Oberhansly v. Travelers Insurance 5Co., Utah (1956); 2d 295P2d 15, 1093 see also Tennessee Farmers Mutual Insurance (6th Co. v. 277 F2d Wood, 34 21, 1960). Cir

This in State court, Farm Mutual Automobile Insurance Exchange, Co. v. Farmers Insurance 238 Or (1964), recognized P2d 285, 387 393 P2d 825, this holding, same p at least in rule, effect, at 293, that: holding are “We an insurer must make a sub- showing diligence stantial before it can success- fully rely non-cooperation.” on the defense of Doughty, See also Johnson v. 236 Or 78, 82, (1963). P2d 84, 385

The reason at rule, least in cases in volving against by injured claims insurers third parties, as stated in Wallace v. Universal Insurance Company, (1963), 238 NYS2d 18 AD2d p is that: * * “* responsibility The insurer’s under

cooperation clause must be viewed in the frame of emphasized the State’s solicitude for the victims of * * emerging automobile accidents *. Such an responsibility general legislative blends with the purpose, anticipations as well as with the of in- * * entirely purpose; surers aware of that same see effect, To the Barrera v. State Farm Rptr Co., Mutual Automobile Insurance 79 Cal 106, (1969); P2d at 683-84 674, 456 Peterson v. Western

223 Surety Casualty 769, 2d P2d 26, 19 Utah 425 Co., and Pennsylvania (1967), Threshermen and 771 Casualty Owens, v. Insurance Co. Mutual Farmers Farley supra, Farmers Insurance See also v. at 550. (1966); Exchange, v. P2d Deblon 415 680 37, 91 Id. (1968); Super A2d 345, 172, 247 175 103 NJ Beaton, Neb Sailors, 201, 180 MFA Mutual Insurance Co. v. (1966). 846, 849 NW2d Again, pat ex- Farm, 293, this court State recognized: pressly

* * governmental pro- in favor of tecting the innocent victims of vehicular accidents though may totally have the tortfeasor been even rights indifferent others.” also held in Barrera State Farm Mutual As v. supra, at Co., Insurance 682: Automobile expectation public of both “The reasonable duly per- is that insurer will and the insured form provide its basic commitment: to insurance * * * companies engaged ‘insurance are in the * * running pay risks business Conversely, Carpenter Superior held quoting approval supra, with from Court, v. Traders General Insurance Co., Comunale (1958): 328 P2d Cal 2d “* * * coverage insurer An who denies does although position may risk, and, at its own so entirely groundless, if have been the denial wrongful it is for the full amount to be liable found compensate the insured for all the detri- will which express breach of caused the insurer’s ment ** obligations implied contract policy, public the same result reasons of

Por liability involving persons in- in cases also follows jured by negligence the insured.

In cases, such the to standard be used in de termining discharged duty the whether insurer has his diligence to exercise reasonable is as stated in Peter Casualty Surety supra, son v. Western and Co., 771- at as 72, follows:

“* * * In view of the anomalous situation where company compensation the insurance for has received undertaking responsibility may a which it be by failing discharge part able to avoid duty, to one itsof proper require showing it is a the company degree diligence the used same to se- cooperation cure the insured’s that would have prudent person been exercised where and reasonable cooperation the the insured would tobe advantage protecting against liability, its to relieve it rather than therefrom. We believe this requirement that the insurer exercise the same dili- gence protect would as it exercise to its own in- advantage gained were no if there to be terests, if cooperation fails, is a fair and reasonable standard apply unduly such and situations is to insurers.” burdensome Casualty v. Fire Kuzmanich United See also (1966). 532, 410 P2d 812 Or Co., see effect, same Tennessee To the Farmers Mutual supra, (an Wood, v. at lia- Insurance Co. excess bility case) p the court went on to in which hold, at 35: against claim the the insured

“Since exceeded limits, conflict of the interests arose be- agent, insurer, as and the the tween insured, company’s principal; insurance conduct in subject scrutiny is to closer case than that such a of terests.” ordinary agent, because of its in- adverse recognized conflict of interest was This same supra, at Farm, 290-91. in State this court seeking party who insurer is Since by al insurance contract burdens of to avoid the non-cooperation, leging it follows the defense the ele all of to establish has the burden insurer including performance of defense, of that ments diligence good duty faith. reasonable exercise supra, Superior Peterson Carpenter 132; Court, supra, Casualty Surety at 770. See Co., & v. Western supra, at 32, and Coe, v. Allstate Insurance Co. also de see the effect, To the same cases cited therein. supra, at 297. Farm, this court in cision of State question in such whether, The case, diligence good exercised insurer has reasonable and ordinarily question jury of fact faith is for the or trier of the facts and its other determination of that appeal supported by will be reversed on if issue any substantial evidence. See Barrera v. State Farm supra, Co., Mutual Automobile Insurance at 689, and Home Assurance Evans v. American 252 Co., SC 417, (1969). 811 See also Tennessee 166 SE2d Farmers supra, v. Wood, Mutual Insurance Co. at 35 and Casualty Maryland (5th v. 326 F2d Hallatt, Co. 277 275, 1964). Casualty Cf. Kusmanich v. United Fire and Cir supra, at 532. Co., determining is also to be remembered that

It affirm a whether to determination trier of the the insurer did not sustain his facts that burden to non-cooperation, including defense establish the its discharged duty prove that it burden to exercise good diligence question and faith, reasonable light particular in the decided facts and to be Cyr of each case. circumstances See v. American Liability and Insurance 242 F2d Co., 8, Guarantee (2d 1957), and Modl v. National Farmers 13 Cir Union

226 Property Casualty and 272 76 Co., 650, Wis NW2d (1956). 599, applying foregoing

Before rules of law to facts of this it should he case, noted that no case involving has cited heen similar facts. There are, cases in which the courts have held that where an insurer contends the insured has failed to co by failing operate give to attend the trial and testi mony, high degree diligence it must exercise a making including efforts to locate the insured, in quiries employers, at all former addresses and from neighbors by checking as well relatives, official reports, finding and that a records that the insurer prove performance to sustain its burden has faded duty diligence good exercise of its reasonable appeal, supported by if faith will not be reversed substantial evidence. Thrasher v. United States Lia bility 19 NY2d Co., Insurance 225 NE2d 503, at (1967); East Coast Insurance Cohen Co., 283 (1967); NYS2d Wallace v. Universal Insur supra, at Nationwide Co., 382-83; ance Mutual Insur (DC 1957). 134 A2d Burka, ance v. Co. See also the by this court in Farm decision State Mutual Auto Exchange, mobile Insurance Co. Farmers Insurance supra, 294-96. foregoing of the

For all we hold reasons, company duty insurance owed a the defendant to make investigation diligent of the accident involved a in this good including question one faith, and case, by vehicle involved was covered whether the by question defendant. The more difficult issued the facts of this ease, under whether, defendant obligation perform discharged duty. its Insurance Case, This the Facts 5. Under Defendant of Diligent Duty a Company to Make its Performed Investigation the Accident. Faith and Good of performed determining or defendant In whether good' diligent duty and perform a to make faded ap investigation in this case, accident faith judgment, peal plaintiff’s course, of must, we a from plaintiffs, as we facts most favorable consider the proceed to do. shall now shortly previously after the accident' stated,

As by representative' was notified a in this case defendant only company plaintiff’s insurance of of the fact that it but involved vehicle accident, “that possibly might owned Kellum Motors, was * * * for him to look into be advisable the matter.” alleged, plaintiff’s complaint as a Later, fact, that the by Kellum Motors. car was owned Thus, defendant put plaintiff seriously was on notice contended by Kellum that the car was owned at the time of the' accident. then

Defendant undertook to make an investi- agent gation the case. Defendant’s first then went given where he Motors, to Kellum examined and copy the car order and the retail installment con- the alteration tract. He noted of the date on the car- bookkeeper and was told order that the alter- financing only.” “for was made reasons ation He did copies any take not examine or additional records. agent did, Defendant’s then interview manager, the used car lot Smith, Steele both they him that the car was told sold both to Steele on day the accident. He did not before check the ac- report, which showed that cident the vehicle was Motors at the time owned Kellum of the accident. prepared Neither did he interview the officer who report, upon based a statement to that effect shortly Steele after the accident and while the facts agent were fresh in his mind. Instead, defendant’s investigation terminated his and recommended to de- deny coverage. fendant that it recognize present We these facts an ex tremely escape close case. We cannot the conclusion, performed duty that defendant to make a diligent good investigation faith of this matter. To specific, be more we hold that after defendant’s in vestigator, investigation, in the course of his was told manager both Steele and the used car Smith, (later repeated deposition), under oath on prior vehicle had been sold to Steele accident and thing by after he was told the same Kellum’s book keeper, gave plausible explanation who also for the appearing alterations on the records, defendant was rely upon entitled to such statements. In other words, particular we hold that under the facts of this case there no substantial evidence that defendant sus pected, any good suspect, or had reason to that both deliberately Steele Smith had lied to its investi gator or that Kellum’s records had been falsified, so require investiga as to defendant to make a further tion of matter.

Accordingly, under these facts and for these rea- judgment plaintiff it follows that sons, in favor of must be reversed and the case dismissed.

[Reversed. REQUEST RESPONDENT’S FOR ON RECONSIDERATION AND MOTIONS REMAND ALTERNATIVE TO AND FOR REMITTITUR AND MOTION TO STAY MANDATE request. Ferris for the Boothe, Portland, P.

PER CURIAM. previously petition

Plaintiff filed a for rehear ing requested was denied. which She then and was stay granted the mandate of this court for allowing purpose petition time in which to file a Supreme in the writ of certiorari for a Court of the files She now States. document United entitled “Bequest Beconsideration and for Alternative Mo- [sic]

tions to Remand and for Remitittur and Motion Stay Mandate.” procedure The rules of of this court do not provide proceedings for such further after denial rehearing petition except application of a for an stay further for a of the mandate. all re- Therefore, quests for further action this court are denied ex- cept stayed that the mandate of this court will be twenty days additional from March 17, so that plaintiff may prepare petition and file a for a writ of Supreme certiorari in the Court of United States, if she so desires. concurring. specially J.,

TONGUE, Following petition rehearing, denial of a for granted, requested, stay plaintiff and was a of the filing purpose Supreme in the mandate for the of petition a for of the United States writ of Court plaintiff “Request has now filed a Instead, certiorari. and Alternative Motions Reconsideration to Re- for Stay [sic] and Motion and for Remitittur to mand Mandate.” petition rehearing, of a for the denial

After “requests” and motions have no further stand- such ing of Procedure of Rules court under the- this and by majority. as held denied, be therefore, must, charges by nature of the serious of the made Because present support her plaintiff of motions, in charges that these should be the view set I am of together statement with a of further reason forth, present must why plaintiff’s motions be denied. charge that “the determinations of Plaintiff’s (1) prejudice issues the defend- court on this (2) right rely company its and insurance ant performed (i.e., duty investigation whether it its to- its investigation) reasonably diligent constitutes make a findings by based a trial court fact reversals of upon legally not therefore, and, sufficient evidence” statutory only review- “exceed the constitutional process” power the “due violate court,” of this but guarantees Fourteenth Amendment to Con- of the by taking away from States, stitution United judgment seriously injured plaintiff by depriving plaintiff oppor- $19,957.72 prejudice. tunity present on the issue of evidence particular, plaintiff complains although In by had it was held this court that defendant the bur- prejudice, “prejudice from this den to establish pleaded source was never defendant” and “defend- any put prejudice” in ant had never evidence assignment of error on that issue. made no Thus, plaintiff concluding contends that this court erred in required not that because a trial court was to set judgment upon aside the default a motion made directly through either or defendant, Wil- insured, prejudiced bert it followed that defendant was Steele, entry judgment, as matter of law of that findings by despite express the trial court that de- prejudiced. fendant was plaintiff effect, the same

To the al- moves, either the case be remanded ternative, to may that evidence trial court order be offered on prejudice or that it be the issue of “remitted” so as stipulate parties permit to that to default against plaintiff judgment taken Wilbert Steele, permit be set aside “in order insured, defendant’s to plaintiff of that cause,” the merits which trial on defendant “all available to make would statements of investigation with in connection her taken witnesses among things. other accident,” Plaintiff of the con- by Art is tends that sneh a “remittitur” authorized Oregon. (Amended) § of of Constitution VII, an affi- Plaintiff’s counsel also has submitted setting in that forth facts not of record davit various stating grants the that unless this court case by plaintiff he will have “no alterna- relief demanded file an action “at the federal district court tive” but to against the members of this court “exceed- level” ing jurisdictional limitations.” their made all, clear,

First it should be view of charges by plaintiff (and made of the the nature majority agree), gives will that it sure that I am judgment pleasure to set aside a for an no this court injury personal injured plaintiff in a case and that gift infallibility. claim does not court also apply Oregon, duty, the law of It our coming cases before this court, we to all re- can, best gardless the outcome. noted that in this should be case de-

Next, alleging that after Wilbert answer, Steele fendant’s (instead represented that defendant he Kel- had lum insured) was the named owner Motors, expressly pleaded accident, in the involved vehicle entry including prejudice from prejudice, of the de- judgment, as follows: fault representations were material, “That said false willfully and in were made with in- fraudulent, defendant, reliance deceive thereon tent was led to conclude defendant coverage said for the Wilbert Steele, afford did investigation was made the defendant’s after the defendant representative; reliance on oppor- was not afforded the representations said investigate and defend said action and a tunity to against the judgment was entered defend- default it was not afforded an Steele; Wilbert ant adequately opportunity place properly a to claim reserve all to file, defendant’s prejudice.” (Emphasis added) During copy of that the course of the trial a judgment by plain- default in was offered evidence opening tiff’s counsel in there was Thus, his case. evi- support allegation dence to offer of this without assign- evidence defendant. defendant’s first Also, appeal ment of error on was that the trial court erred, among things, refusing adopt other in defendant’s proposed “prejudice conclusion of law that to the de- fendant has in fact been shown.” purported

It is true the trial court finding make a fact that defendant was not prejudiced “ample opportunity because had under Oregon judgment upon law to set aside the default showing good cause which have would existed in my case.” In view, this not a however, true finding of was, but a fact, most, conclusion law, incorrect conclusion of law. plaintiff personal in a an action for

When in- juries against a defendant who is covered insur- judgment against ance takes a default the defendant, company thereby prejudiced, insurance as might matter of law. This not be if true the insurance right company judg- had a to demand that the default right. set failed to aside, ment be but exercise such a Oregon, pointed for reasons In out in our opinion, original company an insurance has no such right addition, court and, which entered judgment has discretion whether default or not to set judgment aside. default very represent reasons, these For counsel who injury personal plaintiffs cases appears in which it grounds may possible so-called there be companies “policy based on insurance defenses” making “non-cooperation” by by the insured drivers companies may which of statements to insurance usually proceed caution so as be with extreme false, provide to the insurance com- such a defense falsely pany. in which insured has stated Cases the person driver of insured was the the ve- that another example a are such cases. In such case hicle one of plaintiff’s who of such a false counsel learns state- may it to inform the deem advisable ment insurance falsity possible company of such a statement, the of a defense. such order forestall plaintiff’s attorney, by however, In case, this suspicious present affidavit, was that his Steele falsely purchaser he was the and owner stated that of entry long before of the insured vehicle the de- fully judgment, pos- as so to be aware of the fault sibility “policy pro- He defense.” nevertheless of a judgment the default and then filed ceeded take an against company the insurance for the action amount informing judgment before counsel for the of the in- suspicions. company his of surance previous opinion, in our As stated the trial required judge judgment, to set aside was par- discretion to decline to do so, retained but company ticularly party insurance was not a since against Steele and since he Steele, action had position hardly in a to ask that the default lied, opinion, as held judgment Thus, aside. in that set be judgment, request entry plaintiff, on by vehicle of the covered against driver insurance prejudice to the in substantial insurance resulted company. previous opinion,

For reasons stated in onr this court then went to hold that even company prejudiced if an insurance is as the result “non-cooperation” by company may insured, “policy not be entitled to claim such a defense” if it diligent investigation has failed to make a of the facts. investigation if such an Thus, would have disclosed hardly the false statement Steele, defendant can complain entry judgment. of the default The application depends, upon of such a rule of course, particular facts of each case. judge

It true, course, that the trial made finding investigation of fact that further de- discrepancies fendant would have revealed in the purchased statement Steele that he had the car prior from Kellum Motors to the accident and was its owner at that time. It is also true, stated in our previous opinion, very question was a close whether there was substantial support evidence to finding, required § as under Art (Amended), VTI, perform duty that defendant failed to make a reasonably diligent investigation of the facts of this petition rehearing case. On for three members of including opinion, court, the writer of this were of the rehearing granted view that a should have been so as question. remaining to reconsider that The members contrary of the were court, however, of the view. my opinion,

In while original both our disposition plaintiff’s as as well our decision, sub- sequent petition may subject motions, be by plaintiff, criticism there is no basis sug- for the gestion that this court has exceeded its “review “jurisdictional powers” or limits,” now contended powers by plaintiff. such While should be exercised with, judicial always de- matter for is a restraint, contended evidence court whether this termination judge finding is sub- support fact a trial a always just matter for as it is evidence, stantial sup- jury judicial verdict whether determination agree we ported can evidence. Neither substantial duty this plaintiff’s it is the contention with unhappy remedy created.” it has situation court “to “unhappy fully agree situa- this is an I "While parties in- themselves, for which it is one tion,” acknowledge cluding plaintiff, least substan- at must responsibility. tial I with the decision concur reasons,

For all of these having previously majority court, this rehearing, plaintiff’s petition cannot denied questions properly for a third the same reconsider particularly present plaintiff’s motions, under time late date.

Case Details

Case Name: Bailey v. Universal Underwriters Insurance Co.

Court Name: Oregon Supreme Court

Date Published: Sep 23, 1970

Citation: 474 P.2d 746

Court Abbreviation: Or.