Denial of Coverage for Failure to Cooperate

I sued and served an auto wreck defendant. His insurance company sent us a letter saying they were not covering the loss because their insured “failed to cooperate.” They are closing their file. I am preparing a default judgment and will then garnish the defendant insurer. Any way to set this up for damages in excess of the state minimum?

There may be. The controlling case is likely to be Baldridge v. Kirkpatrick, 2003 OK CIV APP 9, 63 P.3d 568. There the insured totally failed to notify the insurance company so it disclaimed coverage after judgment was taken. The Court held that, since the policy was one issued to satisfy the compulsory insurance law, lack of notice was not a defense to the extent of minimum compulsory insurance law limits (now 25/50/25). However, because the insurance company had no prior notice of the suit and no opportunity to defend, it could not be held liable for the damages unless and until it had an opportunity to assert whatever defenses there may be.

So, if they can make the defense of lack of cooperation, they will owe you $25,000+ maybe some property damage.

However, the insurance company has to prove prejudice by reason of the insured's lack of cooperation or it will not be a coverage defense. See: Fox v. National Savings Ins. Co., 1967 OK 27, 424 P.2d 19: Insurance company must prove prejudice. Accord: Melton Truck Lines, Inc. v. Indemnity Ins. Co. of North America, 2006 WL 1876528 (N.D. Okla.) (J. Payne).

For this reason, if it appears you would have won your case anyway, the failure to cooperate will not be a defense and you get all the coverage, plus attorney fees. You get attorney fees under either a garnishment (12 O.S. 1190) or a suit on the policy, which you have standing to bring after you get a judgment. You would probably be better off suing on the policy because your fee would be provided for in 36 O.S. Sec. 3629(B) while under a garnishment 12 O.S. Sec. 1190(D) limits your fee: "D. In addition to sums otherwise due pursuant to a judgment, a judgment creditor, if represented by an attorney, shall be entitled to an attorney fee of Fifty Dollars ($50.00) for prosecuting a garnishment pursuant to subparagraphs b, c, and d of paragraph 2 of subsection B of Section1171of this title, and an attorney fee of One Hundred Dollars ($100.00) for prosecuting a garnishment pursuant to subparagraph e of paragraph 2 of subsection B of Section1171of this title, not to exceed a total of Two Hundred Dollars ($200.00) in any calendar year."