OPINION
This is аn appeal by an insurer, Globe Indemnity Company, from a summary judgment in favor of plaintiffs-appellees in a declaratory judgment action. The trial court found that the plaintiffs were entitled to recover from appellant for amounts due оn a judgment entered in a prior action against John Hay, an insured under a policy issued by Globe.
The underlying facts are as follows. The original suit brought by the Blomfields against Hay resulted from an incident in which Hay struck Blomfield in the face with a drinking glass. Blomfield was badly scarred and ultimately lost his sight in one eye. This incident occurred on January 1, 1973, in Mexico. While in Mexico, Blomfield agreed to release Hay from all liability in exchange for $10,000. This was necessary in order for the insured and Blomfield to be able to leave Mexiсo. In June 1973, Blomfield filed suit in the Maricopa County Superior Court. Appellant was notified of the incident at the time suit was filed and commenced defense of Hay under a reservation of rights. While suit was pending, the parties entered into negotiations and on January 15, 1975, Hay rescinded the release in return for a refund of the $10,000. Prior to this agreement, plaintiffs’ attorneys wrote to the insurer’s attorney requesting information as to whether this rescission would be considered a breach of the policy’s cooperation clause releasing the insurer from all obligation to defend or indemnify the insured. Appellant-insurer admits in its brief that prior to the rescission, it never informed appellees that it considered this a breach of the cooperation clause. In addition, personal counsel for the insured offered not to rescind the release if the insurer would reimburse the $10,000 and rescind its reservation of rights, but appellant rejected the offer by letter dated January 14, 1975, without any comment on the effect of the proposed rescission of the release. After the release had been rescinded, appellant on January 16, 1975, ordered its attorney to withdraw from the suit but he refused because the trial was only 11 days away. Subsequently, Blomfield signed a covenant not to execute against Hay in exchange for Hay’s payment of $10,000. The covenant not to execute is dated January 26, 1975. The case went to trial and judgment was obtained against Hay in the amount of *7 $175,000 compensatory damages. Globe refused to satisfy the judgment and this lawsuit ensued.
Appellant-Globe raises four points in its appeal from the summary judgment. First, it contends that there is a disputed factual issue as to the insured’s breach of the policy’s notice provisions. It is not neсessary to consider whether the insured’s delay in giving notice was a breach excusing the insurer from performance. Even if the delay constituted a breach, appellant has not made a sufficient showing of prejudice as a result of the delay. An insurer cannot withdraw coverage on the ground that a condition such as notice has not been met unless the insurer can show that it was prejudiced by the act of the insured.
American Home Assurance Company v. Sand,
Appellant’s only other support for its allegation of prejudice consists of a few vague assertions by its claims manager that if the company “had known of it sooner, we may had [sic] been able to handle directly with it.” He also stated that it was “possible” the suit might have been settled before lawyers became involved. An appeal from the granting of a motion for summary judgment “must be able to point to an issue of fact in the record which renders the summary judgment improper.”
Joseph, M. D. v. Markovitz, M. D.,
The appellant-insurer’s second ground for appeal is that it should be permitted, in the declaratory judgment action, to assert the policy’s exclusion for intentional acts which nеgates coverage. We disagree and hold that appellant is collaterally estopped from asserting the intentional act exclusion. Appellant admits that in a subsequent action the insurer is bound as to all material findings of fact essential to the judgment of tort liability in the prior case.
Hartford Accident & Indemnity Co. v. Villasenor, 21
Ariz.App. 206,
Appellant complains that there was no opportunity to submit directly the question of intent in the personal injury trial after appellees were permitted to strike those portions of the complaint alleging inten
*8
tional tort. Thе argument ignores the availability of a determination before trial by declaratory judgment in a separate action, thereby avoiding the possible conflict of interest between insured and insurer under the policy, as well as the professional conflict for the attorney retained by the insurer to represent the insured in the personal injury case. See
Cowan v. Insurance Company of North America,
Appellant’s third argument on appeal is that it is entitled to assert as a defense the insured’s breach of the policy’s cooperation provisions. We hold that even if there was a lack of cooperation, appellant is estopped from asserting it as a defense. Appellant was informed of the negotiations between its insured and appellees prior to rescission of the release. Appellant was asked whether it would consider such a rescission to be a breach of the cooperation clause and appellant failed to respond. Appellant argues that it communicated with the insured prior to rescission of the release and that a factual issue as to estoppel is thereby raised. Appellant fails, however, to explain how these communications gave notice that the comрany considered a rescission a breach of the cooperation clause. The letter of January 14, 1975, included in the record on appeal, does not refer to breach of the cooperation clause. It is well settlеd that a reservation of the insured’s rights, to be effective, must fairly inform the insured of the insurer’s problems. 44 Am.Jur.2d Insurer, § 1156. For the same reason, the insurer should not be allowed to invoke the cooperation clause after remaining silent despite its knowledge thаt the insured proposed to do what it afterward says he should not have done. Appellant is therefore estopped from asserting lack of cooperation as a defense. The appellees can raise the claim оf estoppel even though they are not the assignees of the insured. See
Sandoval v. Chenoweth,
As its last point on appeal, appellant contends that because there is a covenant not to execute between plaintiffs-appellees and the insured, the insurer has no obligation to pay appellees. Appellant argues that it has contracted with the insured only to pay sums which the insured shall become “legally obligated to pay” and that, because of the covenant, the insured has no legal obligation to pay anything. A covenant not to execute is merely a contract and not a release.
Fagerberg v. Phoenix Flour Mills Co.,
“We agree with the opinion expressed in Holcomb v. Flaving,62 Ill.App.2d 245 ,210 N.E.2d 565 (1965):
‘In our opinion it matters greatly how the servant’s liability was extinguished. Where the master’s liability rests solely on respondeat superior, if the servant is exonerated by trial on the merits, then, of course, the master cannot be held liable, but there is no logical or legal basis for extending the rule to situations where a servant terminates his liability by obtaining a covenant not to sue.’ ”62 Ill.App.2d at 249 ,210 N.E.2d at 567 .
In
Hovatter,
a petroleum company and its distributor were defendants in a personal injury action. This differs from the usual insuranсe situation in which the insurer is not a co-defendant. The two defendants in
Hovatter,
however, were not joint tortfeasors. The court noted that “Both parties agree that had the case against Simkins [the distributor] been dismissed with prejudice, such dismissal would have operated as a dismissal on the merits.”
Even assuming that
Hovatter
is inapplicable to the instant case, there is an alternative theory under which Globe may be held liable to the plaintiffs despite the covenant not to execute. The covenant not to execute was entered into after the insurance carrier denied coverage and attempted to require its attorney to cease defending the insured. The attorney refused to drop the case eleven days before trial. Nevertheless, the insured was justified in taking steps to protect himself. Even if there were a rule that a covenant not to execute by one party released another party whose liability was solely derivative, an exception to this rule should be recognized where the insured madе the covenant in order to protect himself after being abandoned by the insurer. This is especially true where the covenant, as here, expressly reserves to the plaintiff a right to proceed against the insured’s insurance carrier. Such а reservation was made in
First National Indemnity Co. v. Mercado,
We hold that for the reasons discussed above, appellees were entitled to summary judgment against the appellant-insurer. We therefore affirm the judgment of the trial court.
Affirmed.