Spencer v. State Farm Mutual Automobile Insurance

California Court of Appeal Jul 26, 1957 No. Civ. 17266Published

Before: Lernhart

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Holding. The court held that an insurer has no duty to defend an insured who was never served with a summons, and that an injured third party cannot maintain an action against an insurer for failure to defend absent a judgment against the insured or policy language indicating the contract inures to the benefit of third parties.

Issues

Whether an insurer has a duty to defend an insured who was not served with a summons.
Whether an injured third party can sue an insurer for failure to defend an insured absent a judgment or specific policy language benefiting third parties.

Disposition. Affirmed

Quotations verified verbatim against the opinion

“Fortney was never served with summons. Thus, the duty to appear and defend did not devolve upon him.”

“Appellants’ complaint sets forth no language of the policy in any way indicating that it is for the benefit of third parties. Thus, appellants have pleaded no right under the contract of insurance.”

LERNHART, J. pro tem.

Appeal from judgment sustaining demurrer without leave to amend. The complaint alleged that: in 1952 plaintiff Lawrence J. Spencer was injured in a collision of his car and one driven by John H. Fortney. Action was commenced against John H. Fortney as operator and his wife, Eleanor Fortney, as owner. Mr. Fortney was not served with summons. The action resulted in judgment against Mrs. Fortney for $5,000, the maximum recoverable upon her liability as owner only. That judgment was paid in full. The insurer defendant in the present ease defended Mrs. Fortney in the personal injury action, but, despite demand by plaintiffs, refused to appear for Mr. Fortney, who had not been served.

The complaint in the present action names as defendants the insurer of the Fortneys, and the “general manager” of that insurer. The complaint alleges that on the day of the accident there was in force a policy of defendant insurer which “insured said John H. Fortney and Eleanor Fortney against liability,” with policy limits “customarily designated ... as ‘Ten and Twenty Thousand.’ ” The complaint quotes but a portion of this policy, as follows:

“II. Defense, Settlement, Supplementary Payments.

“As respects the insurance afforded by the other terms of this policy under coverages A and B the company shall:

‘ ‘ (a) defend any suit against the insured alleging such injury, sickness, disease, or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;”

■ The complaint is in two causes of action, one in contract and one for negligent failure to defend John Fortney. After twice sustaining demurrers with leave to amend, the court sustained the demurrer to this second amended complaint without such leave. Plaintiffs appeal from the ensuing judgment.

Appellants argue that under its policy, as pleaded, respondent insurer agreed to defend Fortney against any suit, even if groundless, false or fraudulent. It follows, they say, that it is liable to the parties injured by Fortney for failure to

[799]

Spencer v. State Farm Mutual Automobile Insurance

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