Opinion ID: 1209086
Heading Depth: 2
Heading Rank: 4

Heading: Breach of the Cooperation Clause

Text: At trial Continental contended that its refusal to defend B & R without a reservation of rights was justified since Roberts, as an officer of B & R, had breached the contractual duty of the insured to cooperate in the defense by giving willfully false testimony at his deposition. [18] After all the evidence was presented, however, the trial court directed a verdict in favor of B & R on this issue, finding that there was no evidence that Roberts had intentionally given false testimony. [19] A directed verdict on an issue is appropriate when the evidence is such that reasonable persons could not differ in their judgment. See Holiday Inns of America, Inc. v. Peck, 520 P.2d 87, 92 (Alaska 1974). However, we need not decide whether the evidence in this case was sufficient to avoid a directed verdict, since we have concluded that Continental's right to rely on B & R's alleged breach of its cooperation clause was barred on other grounds. In De Hart v. Illinois Casualty Co., 116 F.2d 685 (7th Cir.1941), the United States Court of Appeals, Seventh Circuit, in a case involving a similar issue, said: The discovery of perjury and assured's part therein gave to the insurance company an election of courses which it could pursue. It had, or at least it could assert it had, the option to withdraw then and there and deny liability because of lack of cooperation. On the other hand, it could waive its right and proceed with the trial and possibly win the case then about to be submitted to the jury. Id. at 687. The failure of an insurer to inform the insured promptly of its intention to deny liability, upon discovering facts [amounting to] a breach of the co-operation clause by the insured, constitutes a waiver of the breach. State Farm Fire and Casualty Co. v. First National Bank, 2 Ill. App.3d 768, 277 N.E.2d 536, 540 (1972) (citations omitted). See also Ohio Casualty Insurance Co. v. Beckwith, 74 F.2d 75 (5th Cir.1935); Allstate Insurance Co. v. Keller, 17 Ill. App.2d 44, 149 N.E.2d 482 (1958); Dougherty v. Hanover Insurance Co., 114 N.J. Super. 483, 277 A.2d 242 (1971); Ziegler v. Ryan, 66 S.D. 491, 285 N.W. 875 (1939); Francis v. London Guaranty & Accident Co., 100 Vt. 425, 138 A. 780 (1927); Nationwide Mutual Insurance Co. v. Gentry, 202 Va. 338, 117 S.E.2d 76 (1960). The alleged breach of the cooperation clause occurred on October 25, 1972, when Roberts's deposition was taken. Attorney Gantz was immediately aware of the conflict that had arisen in Roberts's testimony, and the possibility of a policy defense based on that conflict. Such knowledge on the part of Gantz, we believe, was imputed to his principal, Continental. By its failure to inform B & R of its intention to deny liability, until well after trial had begun, Continental waived this alleged breach of its cooperation clause as a matter of law. We are also convinced that Continental's right to rely on the alleged breach was barred by principles of estoppel. After a deposition has been transcribed, the witness deposed can make any change in the deposition he desires. Any changes in form or substance which the witness desires to make shall be entered upon the deposition by the officer [before whom the deposition was taken] with a statement of the reasons given by the witness for making them. Rule 30(e), Alaska R.Civ.P. As previously noted, Gantz elected not to make any effort to have Roberts correct his deposition before proceeding to trial. This course of conduct not only jeopardized B & R's ability to defend against the claim of Warbelow, but also exposed B & R to the possibility of a policy defense being raised by Continental. Such conduct, we believe, on the part of the attorney employed by an insurance company to defend its insured, forecloses the insurance company from asserting a breach of the cooperation clause against its insured. See Van Dyke v. White, 55 Wash.2d 601, 349 P.2d 430, 434 (1960). We therefore affirm the trial court's decision to grant B & R's motion for a directed verdict.