the original order of the trial court to enter a defense for Otis. The Court of Appeals affirmed the lower court's decision. Nationwide then brought this suit claiming non-liability based on the lack of cooperation by Otis.
There are two questions presented for the Court's consideration:
First, did Otis's failure to keep Nationwide advised of his whereabouts and to appear at trial in order to give evidence violate the 'cooperation' clause of his policy and thereby relieve Nationwide of any liability?
Second, assuming, arguendo, that Nationwide was relieved of liability by Otis's lack of cooperation, did it waive this defense by voluntarily appealing on the merits?
(1) Plaintiffs may only recover from Nationwide, the garnishee, if Otis can recover from Nationwide, as they -- the plaintiffs -- stand in the shoes of the policyholder and enjoy no better rights than he does. Rushing v. Commercial Cas. Ins. Co., 251 N.Y. 302, 167 N.E. 450 (1929). It is apparent that the clause in Nationwide's policy with Otis requiring the cooperation of the defendant in the defense of the suit is of great importance to the insurer, for without that, the insurer may be tremendously handicapped, even to the extent of making the action incapable of defense. As such a clause is a material condition of the policy, its violation in a substantial manner so as to be prejudicial in effect to the insurer, relieves the latter of all liability. State Auto. Mut. Ins. Co. of Columbus, Ohio v. York, 104 F.2d 730 (4th Cir. 1939); 139 A.L.R. 780 (1942).
In the instant case Otis was the driver of one of the cars involved in the collision. From the extended efforts made by Nationwide to obtain his cooperation, and for purposes to which it was entitled to have such cooperation, it is clear that it considered Otis a vital link to an effective defense. That the presence and testimony at trial of Otis, a participant in the accident, was vital, and that the deprivation of his presence was prejudicial, is evident. The failure of an insured to furnish the insurer his new address, where reasonable diligence to locate him has been used, and the voluntary disappearance of the insured and his consequent failure to attend trial, have been held to release the insurer of its obligations under the policy. Polito v. Galluzzo, 337 Mass. 360, 149 N.E.2d 375 (1958); Associated Indemnity Corp. v. Davis, 45 F.Supp. 118 (M.D.Pa.1942); Hoff v. St. Paul-Mercury Indemnity Co., 74 F.2d 689 (2d Cir. 1935). The total contempt of Otis for his insurer's rights can only indicate that his non-cooperation was indeed willful and avowed. Therefore, there is no doubt in the Court's mind that at the completion of trial Nationwide was not liable on the judgment rendered against Otis.
(2) There is a further problem, however, due to the fact that without 'reserving' any rights to this defense, Nationwide chose to appeal that judgment on the merits. Nationwide contends that this action does not amount to a waiver and that 'counsel did only what the order of the court required, i.e., they continued in the defense.' The insured relies on the case of Beam v. State Farm Mutual Ins. Co., 269 F.2d 151 (6th Cir. 1959); however, that reliance is misplaced, for that case did not involve the issue in this case -- the voluntary appeal of a lower court decision without reservation of rights. Closer in point is the case of Pennsylvania Casualty Co. v. Miller, 145 F.2d 292 (7th Cir. 1944), where the insurer not only defended the action (under compulsion of court), but also argued a motion for new trial. Had Nationwide gone as far as the insurer in that case, and no further, the Court would hold that waiver was not applicable.
The insurer may or may not, at its option, take advantage of the breach. Having once determined that the insured has breached his contract, as Nationwide did in this case prior to trial, it must adopt and maintain a posture consistent with that position. Nationwide, to the contrary, with knowledge of Otis's breach, undertook an appeal -- which was clearly not contemplated in the trial court's order -- and thereby acknowledged by its conduct that it did not choose to hold Otis to the consequences of his actions. This is a clear instance of waiver, which is defined as the 'intentional relinquishment of a known right.' C.I.T. Corp. v. Carl, 66 App.D.C. 232, 234, 85 F.2d 809, 811 (1936). See 45 C.J.S. Insurance § 673 (1946); 8 Couch, Insurance Law § 2150 (1931). Waiver, unlike estoppel, does not require any action by the insured to his detriment in reliance upon a position taken by the insurer. Therefore, even though Otis was not placed in any worse position by Nationwide's appeal, this does not change the fact that Nationwide waived its right to claim non-cooperation. See John Alt Furniture Co. v. Maryland Casualty Co., 88 F.2d 36, 40 (8th Cir. 1937); 45 C.J.S. Insurance 673 (1946).
Therefore, plaintiffs are to recover judgment from the garnishee in the sum of $ 1,750, plus interest from November 1, 1957, until date of payment. This memorandum represents the Court's findings of fact and conclusions of law.