Facts
- Dixie K. Davies was injured in an August 2, 1974 collision with a vehicle operated by Patricia Ann Turner.
- Turner was insured under an automobile liability policy issued by State Farm Mutual Automobile Insurance Company that included a cooperation clause requiring the insured to cooperate and attend hearings and trials.
- Davies carried uninsured-motorist coverage with Government Employees Insurance Company (GEICO).
- Davies sued Turner for personal injuries; Turner delivered the suit papers to State Farm.
- Turner failed to appear at the tort trial; State Farm defended under a reservation of rights.
- The jury returned a $10,725 verdict and judgment for Davies, which remained unpaid.
- Davies then filed a declaratory-judgment action to determine whether State Farm or GEICO was responsible for payment.
- State Farm denied coverage, asserting Turner materially breached the cooperation clause by failing to appear and that the breach prejudiced its defense.
- GEICO contended State Farm’s disclaimer was ineffective, so Turner was not “uninsured” and GEICO’s UM coverage was not implicated.
- The record showed Turner had previously communicated with State Farm and provided statements about the accident, but State Farm could not produce her for trial.
Issues
- Whether Turner’s failure to appear at trial, in breach of the policy’s cooperation clause, prejudiced State Farm’s defense so as to relieve State Farm of liability under Virginia law.
- What showing is required to establish “prejudice” from noncooperation—specifically, whether the insurer must prove the insured’s testimony would have changed the tort verdict.
Decision
- The Supreme Court of Virginia reversed the declaratory judgment that held State Farm liable and dismissed GEICO.
- The court held Turner’s willful failure to appear was a clear, material breach of the cooperation clause.
- The court held the breach prejudiced State Farm as a matter of law because it deprived State Farm of evidence sufficient to create a jury issue on liability.
- The court rejected any requirement that State Farm prove Turner’s appearance and testimony would have produced a different result.
- Because State Farm’s disclaimer was effective, Turner was treated as an uninsured motorist for purposes of Davies’s recovery, making GEICO’s UM coverage applicable.
Legal Principles
- An insurer asserting breach of a cooperation clause bears the burden to prove prejudice.
- Prejudice does not require proof that the insured’s appearance or testimony would have changed the outcome of the underlying tort trial.
- Prejudice is shown where noncooperation deprives the insurer of a substantial defense or of evidence of sufficient quality and weight to create a jury issue on liability or damages.
- A willful failure to attend trial can constitute a material breach of the cooperation clause that, if prejudicial, relieves the liability insurer of responsibility and may shift the claim to uninsured-motorist coverage.
Conclusion
The court held that an insured’s willful nonappearance at trial prejudices the liability insurer when it deprives the insurer of evidence that could have created a genuine jury issue, and the insurer need not prove the testimony would have changed the verdict; thus State Farm was relieved of liability and the claim fell within GEICO’s uninsured-motorist coverage.