Blackwood v. Maryland Casualty Co. , 227 Ala. 343 ( 1933 )

The opinion of the Court of Appeals limits our inquiry to the effect of notice by the insurance carrier in liability insurance given to the attorney for the insured and the consent of such attorney, that the insurer will not waive the right to claim a forfeiture of the contract for a breach of its co-operation clause, by reason of its continued defense of the insured in the suit against him, and by its failure to withdraw from such defense upon a discovery of the breach committed by insured.

It was held on the former appeal of this case that the agreement of the attorney for insured with the attorney for insurer that such continued defense shall not be a waiver of the breach is not binding as an agreement by the insured because he had no such implied authority. But the Court of Appeals now holds that an agreement is not necessary, but that notice of such claim to the insured is all that is required, and that such notice may be effectually given to defendant's attorney appearing for him in the case. This theory is predicated upon section 9491, Code, that written notice to the attorney of record is as effectual as notice to the party. The authority of the attorney, as treated by the Court of Appeals, is that he was employed by insured and appeared for him to defend the suit. We cannot go to the record to see what additional authority the evidence showed that the attorney had conferred on him beyond that stated by the Court of Appeals. Counsel argue that it shows sufficient authority, but that court has declined to find whether that is so or not. So that much that is argued in brief on that subject is outside the facts relied on by that court, and is beyond the range of our consideration.

The question therefore involves only two inquiries: (1) Whether and when notice to the insured is sufficient to relieve the insurer of the consequences of what would otherwise be a waiver of the breach; and (2) whether the attorney for the insured may accept such notice so as to affect the client.

Other questions have heretofore been determined by this court, as the Court of Appeals rightly held. For that court finds as a fact that insured violated the co-operation clause of the contract, which is a complete defense unless effectually waived, as we have repeatedly held. Metropolitan Cas. Ins. Co. v. Blue, 219 Ala. 37, 121 So. 25; George v. Employers' Liability Assur. Corporation, 219 Ala. 307, 122 So. 175, 72 A.L.R. 1438.

But we are not in agreement with the Court of Appeals that it is sufficient to give notice to the attorney of the insured that the insurer reserves the right to insist on the forfeiture on account of the neglect of the insured, unless such attorney is authorized to consent to such reservation. The cases cited in the opinion of the Court of Appeals are predicated upon an inference that the insured acquiesced in such nonwaiver reservation. And in the case of Miller v. Union Indemnity Co.,209 App. Div. 455, 204 N.Y. S. 730, the insurer requested the insured to consent that his continued defense of the case would not waive its right to claim a forfeiture. The insured refused to agree, and the insurer nevertheless continued to defend the suit. The court held that the insurer could either claim the forfeiture and refuse to go on, or it could abandon such claim and conduct the defense of the action, but it could not do both: that the choice of one waived the other right. We believe that is the true rule.

The insured may be said to have acquiesced in the nonwaiver claim of the insurer if notice is given to him of such claim and he makes no protest or other objection but permits the insurer to continue to defend the suit upon the belief that by doing so it does not waive the forfeiture. But this cannot be so treated unless the insured has acquiesced in such claim of the insurer, or otherwise agreed to it, or is estopped to insist to the contrary. It is by virtue of acquiescence that the insured is treated as having consented to, or is estopped to deny, the claim. It is upon the strength of an agreement expressed or implied, or construed by law, which operates to the advantage of the insurer. But there can be no implied contract, nor an estoppel, when the parties to it could not expressly so contract. So that the effect of notice to, and acquiescence in, such nonwaiver claim, by the attorney, is effective against the insurer, client, only to the extent that such attorney could bind his client by an express agreement. An agreement was expressly made. Its validity is therefore the controlling inquiry.

We are advised by counsel in brief that there was much evidence to show full authority of the attorney to make the agreement for his client. But without authority beyond his employment to defend the litigation, and extending to the making of such a contract, the attorney of insured could not waive his client's rights either expressly or impliedly. Indemnity Co. of Am. v. Bollas, 223 Ala. 239, 135 So. 174, 175; Craft v. Standard Acc't. Ins. Co., 220 Ala. 6, 123 So. 271; Hoover v. Miller, 198 Ala. 499, 73 So. 817; Senn v. Joseph,106 Ala. 454, 17 So. 543; Robinson v. Murphy, 69 Ala. 543; Blackwood v. Maryland Casualty Co., 24 Ala. App. 527,137 So. 467.

Section 6253, Code, does not confer such right on an attorney. Senn v. Joseph, supra. Neither does section 9491, Code. The notice there mentioned does not extend beyond those proceedings in the litigation which relate to its prosecution or defense, and only to such matters about which an attorney may bind his client or waive by contract under section 6253, Code.

Our judgment is that the Court of Appeals on the former appeal of this case correctly held that the attorney employed to defend an action has no implied power to excuse one from the consequences to his client of what would otherwise be the waiver of a forfeiture, and that for the reasons we have stated the notice to the attorney can have no more force than an agreement by him.

We cannot therefore concur even in the result as held by the majority, but think that the judgment of the Court of Appeals should be reversed. We therefore respectfully dissent.

ANDERSON, C. J., and BROWN, J., concur in this dissent.