APPEAL from the Circuit Court of Cook County; the Hon. EDWARD
J. EGAN, Judge, presiding.
MR. JUSTICE SCHWARTZ DELIVERED THE OPINION OF THE COURT:
Plaintiff brought suit for personal injuries sustained in a collision between a car in which they were riding and one driven by defendant Gonzales. Gonzales was covered by a policy of insurance with the garnishee-defendant (Merit). Merit engaged attorneys to defend the action and they filed an appearance on behalf of Gonzales. Sometime before trial Gonzales left the city. An investigation by Merit revealed his whereabouts, but he did not respond to communications nor did he appear at the trial and the attorneys for Merit had to go to trial without him. Plaintiffs obtained a judgment for $4000 and sought payment thereof from Merit. Merit denied liability because of the failure of the insured to cooperate in the defense of the action. Plaintiffs then instituted a garnishment suit against Merit and following trial, an order was entered by the garnishment court requiring Merit to pay the judgment. Merit has filed this appeal from the garnishment order.
In the garnishment court Merit contended that it was absolved from liability under the policy because the insured failed to attend the trial, notwithstanding proper notification. The notification relied upon by Merit was a letter to Gonzales advising him that his failure to respond to telegrams and letters may result in Merit's refusal to pay a judgment should one be entered against him. The full context of that letter will presently be stated. The garnishment court held that the insurance company could not absolve itself from liability under the policy by claiming non-cooperation only, but that it must further show that prior to trial it notified the policy holder in unequivocal language of a disclaimer of liability under a reservation of rights. It was on that basis that the trial court entered judgment in the sum of $4000. The facts follow.
On October 12, 1963, a vehicle driven by defendant Gonzales struck the vehicle in which plaintiffs were riding. Plaintiffs filed suit and in due course the case came below the black line (that is, notification that it would be tried when called) on April 29, 1969, and the attorneys wrote Gonzales at his last known Chicago address, advising him of the approaching trial and asking him to come to their office for a conference. The letter was returned with the notation that Gonzales had moved. After intensive investigation he was located on May 15, 1969, in Springfield, Mass. The attorneys sent him a telegram on that day. He failed to respond and they sent him a second telegram. The second telegram requested Gonzales to telephone the attorneys and stated they would provide him with funds to appear at the trial. Gonzales failed to respond however and on May 27, 1969, two copies of a letter, one of which was certified, were sent to him. The pertinent part reads as follows:
"As your attorney, I must advise you that your failure to respond to our telegrams and letters may be considered by the insurance carrier as a lack of cooperation under the terms of the policy issued to you. Should you fail to cooperate with us, and should a judgment be entered against you, your insurance carrier can refuse to satisfy the judgment which would leave you personally liable." (Emphasis added.)
A return receipt signed by Gonzales was delivered to the attorneys, but Gonzales failed to communicate with them personally.
After the attorneys for Gonzales were granted several continuances in the personal injury suit, a judgment was entered for plaintiffs. Merit refused to pay the judgment and the garnishment suit before referred to was instituted. The garnishment court heard the evidence, entered judgment for plaintiffs and stated his reason as follows:
"The documentary evidence does not constitute an unequivocal disclaimer or reservation. I hold therefore that by proceeding to trial after having clear evidence of a breach without a disclaimer or reservation to Gonzales, the insurer [is] estopped to raise the defense of non-cooperation now."
The only question before us is whether the trial court correctly stated the law and whether the letter in question was in compliance therewith.
There appears to be no specific authority in Illinois, but in other states the bar of waiver or estoppel in a garnishment proceeding such as the one before us has been upheld. Henry v. Johnson (Kan. 1963), 381 P.2d 538; Meirthew v. Last (Mich. 1965), 135 N.W.2d 353; Bogle v. Conway (Kan. 1967), 433 P.2d 407.
In Meirthew the insurer sent a letter headed "Notice of Reservation of Rights" to its insured. It read in part as follows:
"Now therefore you are hereby notified that the Company will defend such actions pending against you * * * but the Company in undertaking your defense, does so under a reservation of rights, * * * and subject to the conditions, * * * and agreements of said policy, and subject to the express understanding that by so doing the Company does not waive any of its rights to rely upon the provisions of the said policy, and does not waive any defense it may have to any claimed liability under said policy."
The court held that the foregoing notice was legally insufficient to reserve the insurer's rights under the policy because it did not inform the insured as to the nature of the policy defense the insurer had in mind. In the case before us the letter purporting to give notice to the insured did not state the policy defense which Merit later relied on, but stated only that Gonzales' failure to respond may be considered a lack of cooperation under the terms of the policy.
In Henry v. Johnson, supra, the insurer sent the following letter to its insured purporting to reserve the ...