Opinion ID: 611210
Heading Depth: 2
Heading Rank: 1

Heading: your duties after accident or loss.

Text: 13 1. You must promptly notify us or our agent of any accident or loss. You must tell us how, when and where the accident or loss happened. You must assist in obtaining the names and addresses of any injured persons and witnesses. 14 2. Additionally, you and other involved insureds must: 15 ... 16 b. Immediately send us copies of any notices or legal papers received in connection with the accident or loss . 17 Similar provisions are usually considered a condition precedent to recovery under the policy requiring substantial compliance by the insured. State Farm v. Porter, 221 Va. 592, 599, 272 S.E.2d 196, 200 (1980). 18 The district court granted summary judgment for Travelers on the ground that AAA materially breached the insurance agreement by failing to send the amended motion for judgment to Travelers. 19 Reviewing the grant of summary judgment de novo, United States v. Carolina Transformer Co., 978 F.2d 832, 835 (4th Cir. 1992), we affirm the district court's declaration that Travelers is not liable for the payment of the default judgment. We reverse the district court's declaration voiding the insurance contract between RPS and Travelers. 20  Virginia Code § 38.2-2204(C) provides in part: 21 If an insurer has actual notice of a motion for judgment or complaint having been served on an insured, the mere failure of the insured to turn the motion or complaint over to the insurer shall not be a defense to the insurer, nor void the endorsement or provision, nor in any way relieve the insurer of its obligations to the insured, provided the insured otherwise cooperates and in no way prejudices the insurer. 22 Travelers contends that this statute does not support Atkins' claim because the motion for judgment was never served on RPS. The district court made no definitive finding about service of process, but this omission is immaterial. 23 In Porter, 221 Va. at 598, 272 S.E.2d at 199, the Supreme Court of Virginia construed Va. Code § 38.1-381(a), which in pertinent respects was recodified as § 38.2-2204(C), on which Atkins relies. The Court wrote: 24 By Acts 1980, Chapter 331, Code § 38.1-381(al) was further amended by adding a provision that if an insurer has actual notice that a suit has been instituted against an insured, mere failure of the insured to deliver suit papers shall not defeat coverage under the policy if the insured otherwise cooperates and does not prejudice the insurer. (emphasis added). 25 In Virginia, instituted in the context of commencing a suit is a word of art. Rule 3.3 of the Supreme Court of Virginia provides: An action shall be commenced by filing in the clerk's office a motion for judgment. The action is then instituted and pending as to all parties defendant thereto. 26 It is undisputed that Travelers had actual notice that the suit against its insured, RPS, had been instituted. Travelers investigated the claim and monitored the suit, which lay dormant because of RPS's bankruptcy. The bankruptcy of RPS did not affect coverage because Part VI(J) of the policy provides: Bankruptcy or insolvency of the insured shall not relieve us of any obligations under this policy. 27 Applying § 38.2-2204(C) and Porter, we conclude that neither the alleged lack of service nor the failure to deliver the suit papers defeated coverage under the RPS policy. There remains, however, the question whether AAA's failure to notify Travelers of the amended motion for judgment defeated coverage pursuant tos 38.2-2204(C) which binds the insurer to coverage provided the insured otherwise cooperates and in no way prejudices the insurer. II 28 Supreme Court of Virginia Rule 3:15 allows substitution of parties. The amended motion for judgment simply substituted AAA for RPS. The cause of action remained the same. The substitution of AAA did not add or detract from Travelers' duty to afford a defense and coverage under the RPS policy. AAA was not insured by Travelers, and AAA had no other insurance that covered the loss claimed by Atkins. 29 In addition to permitting a successor of a party to move for substitution, Rule 3:15 permits any party to move for substitution. Travelers knew about the merger of RPS and AAA and that AAA was the successor of RPS. It could have moved in AAA's name for substitution pursuant to Rule 3:15. It had no need to wait for AAA to notify it of the substitution. Although Travelers knew that an action had been instituted against its insured, RPS, to whom it owed defense and coverage, it discontinued monitoring the action and closed its file while the action was pending. 30 Neither statute nor judicial precedent in Virginia provides that failure to give notice of substitution of parties relieves an insurer of its duty to afford a defense and coverage. We conclude that since Travelers had actual notice that an action had been instituted against its insured, RPS, the failure of AAA to give notice that it had been substituted for RPS did not exonerate Travelers from its duty to provide a defense and coverage under the RPS policy. III 31 While Va. Code § 38.2-2204(C) as construed by Porter, 221 Va. at 598, 272 S.E.2d at 199, precludes Travelers from denying coverage under the RPS policy, the statute does not impose liability on Travelers for a default judgment which it had no opportunity to challenge. Consequently, the district court properly declared that Travelers was not liable to Atkins for the $250,000 default judgment against AAA. 32 For reasons stated in Parts I and II of this opinion, the district court erred in declaring that failure of AAA to give notice of the amended motion disclosing substitution voids the contract between Travelers and RPS or AAA. To repeat, Virginia Code § 38.2-2204(C) and Porter, 221 Va. at 598, 272 S.E.2d at 199, establish that Travelers is obliged to furnish a defense and coverage under the RPS policy. Failure of AAA to give notice of the substitution of parties did not exonerate Travelers from this obligation. AFFIRMED IN PART; REVERSED IN PART