State Farm Mutual Automobile Insurance Company v. Hearn, Adm'x

Oppenheimer, J., delivered the opinion of the Court. This appeal from a decree in a declaratory judgment proceeding raises, albeit inchoately, the relative rights and obligations of an additional insured and the insurer in respect of the giving of notice under an automobile liability insurance policy after accident and suit. The facts before us are uncontradicted. Appellant, State Farm Mutual Automobile Insurance Company (State Farm) issued to Delores Ann Griffith (Delores) an automobile liability insurance policy.

This policy extended coverage to the use of a non-owned automobile when being used by the named insured or a relative who is a resident of the same household. As a condition precedent to any obligation on the part of the insurer, the insured was required to give written notice of the accident to the insurer as soon as practicable and immediately forward to the insurer every demand, notice, summons or other process received by him. 1 ⁵⁷⁹ On March 3, 1964, Robert Douglas Griffith (Robert), the husband of Delores, the named insured, was an occupant in a motor vehicle that was involved in a collision. On that day, William Brewster, a cousin of Robert, either borrowed or obtained an automobile belonging to Verna Griffith, mother of Robert. Later on that night, while Brewster, Robert and one Lester Orville Hearn, Jr. were occupants of this car, a collision occurred and Hearn was killed.

On April 10, 1964, suit was filed in the Circuit Court for Wicomico County by the appellee, as administratrix of Hearn’s estate, against both Robert and Brewster to recover damages for the death of Hearn. The first and second counts of this declaration alleged that Robert was driving the automobile in which Hearn was a passenger and the third and fourth counts alleged that Brewster was operating the vehicle. Following the accident, neither Robert nor Delores gave any notice to State Farm of the occurrence and the summons and declaration served on Robert were never forwarded to State Farm. The first notice of this accident received by State Farm was by a letter from Kenneth Link, an investigator evidently ⁵⁸⁰ working for the Unsatisfied Claim and Judgment Fund Board, ■dated July 20, 1964 and received by the agent for State Farm ■on July 21, 1964.

After State Farm received notice, it conducted an investigation, and then, on September 18, 1964, disclaimed any coverage to Robert for the accident. On October 2, 1964, a petition for declaratory judgment was filed by the appellee in the Circuit Court for Wicomico County ■against Robert, State Farm, and the Unsatisfied Claim and Judgment Fund Board asking that Robert be declared an insured of State Farm and that State Farm is obligated to defend Robert in the appellee’s suit, or, in the alternate, that Robert be declared an uninsured motorist and that the appellee’s claim comes within the provisions of the Unsatisfied Claim and Judgment Fund law. Robert, in his answer, claimed to be an insured of State Farm under his wife’s policy. State Farm, in its answer, denied Robert was protected under Delores’ policy, giving as reasons, inter alia, that Robert failed to report the accident and failed to give any notice of the suit filed against him.

Robert, in an amended answer, denied that he was the operator of the car which caused Hearn’s death. The case was tried before Judges Taylor (now retired), Prettyman and Mace. Delores testified that at the time of the accident, she was home and the car was home. She did not know her insurance had anything to do with Robert or that it •covered him.

She only learned of the possible coverage from Link, evidently from Link’s investigation in July 1964. Robert testified he was not familiar with the policy or what it covered. It was not until the summer of ’64 that he too learned from Mr. Link that he might be covered following the accident. Robert’s education had stopped at the seventh grade.

He did mot know whether the suit that was filed against him alleged lie was driving his mother’s automobile at the time of the accident because he did not read the declaration that was served •on him. Because of the objections of Brewster’s attorney, no testimony was allowed at the trial to show who was actually ■driving the car. It does not appear from the evidence whether •or not Delores ever read the policy which State Farm had issued to her, or whether she had even discussed it with Robert. At the conclusion of the testimony, the court stated that it ⁵⁸¹ felt Robert was an insured of State Farm on the date of the accident, and that State Farm had a duty to defend Robert in the suit which the appellee had brought.

A decree was signed' to this effect. No findings of fact or conclusions of law were given as to any of the issues involved. The issues inherent in the case are in part factual and in part legal. Admittedly, Robert was an additional insured under the policy.

As conditions to his right to have State Farm defend the action brought against him, he was under the obligations to report the accident “as soon as practicable” and to forward “immediately” to State Farm the summons or other process served upon him in connection with the suit. Whether or not he reported the accident as soon as practicable may depend upon a determination of whether the fact he did not know he was covered by his wife’s policy of itself excuses his failure to report: —a question of law. If, on the other hand, the lower court’s-determination of this phase of the matter rested upon a factual finding that Robert reported the accident as soon as practicable in view of all the circumstances, that determination might be reviewable only under Maryland Rule 885, to be reversed only-if clearly erroneous. See Lennon v. American Farmers Mut.

Ins. Co., 208 Md. 424, 431 , 118 A. 2d 500 (1955). Whether Robert complied with the condition to report the filing of the suit against him “immediately” is a separate, although correlative question, involving, first, the construction of the clause,, ordinarily a matter for the court (Keyworth v. Industrial Sales Co., 241 Md. 453, 456 , 217 A. 2d 253 (1966) and cases therein-cited) and, second, a factual determination in the light of the legal construction. The correctness of such a factual finding, again, might or might not turn on the legal question of whether lack of knowledge of the coverage of itself relieves an additional insured of the obligation which otherwise would rest upon him as a condition to coverage.

In addition to these issues, there is the question of the effect,, if any, of the provisions of Code (1964 Repl. Vol. Cum. Supp.)Article 48A, § 482, which reads as follows: “Where any insurer seeks to disclaim coverage on any policy of motor vehicle liability insurance issued by it, on the ground that the insured or anyone claim ⁵⁸² ing the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving requisite notice to the insurer, such disclaimer shall be effective only if the insurer establishes, by a preponderance of affirmative evidence that such lack of cooperation or notice has resulted in actual prejudice to the insurer.” That statute, by its terms, did not become effective until June 1, 1964.

It was enacted at the next session of the General Assembly after this Court’s decision in Watson v. United States Fid. & Guar. Co., 231 Md. 266 , 189 A. 2d 625 (1963), in which it was held that, in order to deny liability under a policy for noncompliance with the condition of notice, the insurer need not show that it was prejudiced by the failure to give notice. The applicability of the statute, vel non, was briefed and argued in this appeal. No contention is made that the question was not argued below, and, for all that appears in the record, the conclusion of the lower court may have been based on a determination that the statute was retroactive and therefore State Farm could not avail itself of the defense of lack of notice because it did not show prejudice.

If such a conclusion is the basis for the court’s decree, the conclusion is erroneous. “The general presumption is that all statutes, State and federal, are intended to operate prospectively and the presumption is found to have been rebutted only if there are clear expressions in the statute to the contrary. Retro-activity], even where permissible, is not favored and is not found, except upon the plainest mandate in the act.” Bell v. State, 236 Md. 356, 369 , 204 A. 2d 54 (1964). See also cases cited in 20 M.L.E. Statutes § 164 (1962). This rule of construction is particularly applicable where the statute adversely .affects substantive rights, rather than only altering procedural machinery.

Beechwood Coal Co. v. Lucas, 215 Md. 248, 253-54 , 137 A. 2d 680 (1958) and cases therein cited. See also Janda v. General Motors Corp., 237 Md. 161, 169-71 , 205 A. 2d 228 (1964). We deem it evident that the statute here involved affects substantive rights. Before the statute, the insurer was not liable to defend an insured, whether named or additional, under ⁵⁸³ a policy if due notice was not given.

Compliance with the policy provision by the assured was a condition precedent to the insurer’s liability, whether or not the insurer was prejudiced, By the terms of the policy, before the statute, the insurer had a contractual right to deny liability if the conditions were not complied with, irrespective of prejudice. Watson, supra; Employers’ Liability Assur. Corp. v. Perkins, 169 Md. 269, 283-84 , 181 Atl. 436 (1935). In this case, the accident occurred on March 3, 1964, suit was filed against Robert on April 10 and the