State Farm Fire and Casualty Company v. King Sports, Inc.

Case: 11-16169 Date Filed: 09/04/2012 Page: 1 of 21
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-16169
________________________
D.C. Docket No. 1:10-cv-00131-TCB
STATE FARM FIRE AND CASUALTY COMPANY,
Plaintiff - Counter Defendant - Appellee,
versus
KING SPORTS, INC., et al.,
Defendants,
ROGER CLEVELAND GOLF COMPANY, INC.,
Defendant - Counter Claimant - Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(September 4, 2012)
Case: 11-16169 Date Filed: 09/04/2012 Page: 2 of 21
Before JORDAN and HILL, Circuit Judges, and HOOD,* District Judge.
HOOD, District Judge:
Roger Cleveland Golf Company, Inc. (“Cleveland Golf”), appeals the
district court’s decision to grant summary judgment in favor of State Farm Fire &
Casualty Company (“State Farm”) with respect to State Farm’s declaratory
judgment action and Cleveland Golf’s counterclaims. Among other things, State
Farm sought and obtained a declaration that it need not afford coverage to its
insured, Kings Sports, Inc. (“King Sports”), with respect to a lawsuit brought by
and a judgment obtained by Cleveland Golf because both King Sports and its
owner, Jui-Chen “Jimmy” Chang, failed to abide by, satisfy, comply with, or fulfill
the duties imposed on them by the policy’s “general conditions,” including an
obligation to cooperate in the defense of claims made against them. We affirm the
decision of the district court for the reasons stated below.
I.
King Sports advertised and sold golf clubs online. The company identified
Chang as the owner and primary contact in an application, completed in English,
for a business liability policy made to State Farm in 2001. State Farm issued the
*
The Honorable Joseph M. Hood, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
2
Case: 11-16169 Date Filed: 09/04/2012 Page: 3 of 21
policy, written in English, to King Sports and insured that entity from December
14, 2002, through December 14, 2008.
In 2007, King Sports was sued for alleged trademark infringement of golf
clubs and accessories by Nike and Callaway Golf. Those claims were defended by
and settled through the efforts of counsel hired by State Farm for under $20,000
each within months of their filing.1
In June 2008, Cleveland Golf sent King Sports a cease-and-desist letter,
alleging that King Sports was violating Cleveland Golf’s trademarks by
advertising and selling golf clubs that looked like clubs manufactured by but
which were not, in fact, manufactured by or with the permission of Cleveland
Golf. On July 2, 2008, State Farm sent King Sports a reservation-of-rights letter
informing King Sports that State Farm reserved its right to not defend or
indemnify King Sports with respect to Cleveland Golf’s claims under certain
policy exclusions.
Eventually, when no resolution of the dispute was reached, Cleveland Golf
filed suit against King Sports in the district court on August 18, 2009. In the
Complaint, Cleveland Golf averred direct trademark infringement, unfair
1
State Farm never shared the information obtained during the defense of the Nike and Calloway
matters, which included recorded statements and written discovery, with Attorney Bruce
Hedrick, who was retained to represent King Sports in the defense of the suit by Cleveland Golf.
3
Case: 11-16169 Date Filed: 09/04/2012 Page: 4 of 21
competition, false advertising, trade dress infringement, trademark dilution,
trademark counterfeiting, unfair and deceptive trade practices, violations of the
Georgia anti-dilution statute, and common-law trademark infringement. The
Complaint was eventually amended to include averments against Chang.
State Farm attempted to contact Chang and King Sports about the suit by
phone, on August 20, 2009, only to learn that the number it had been provided was
no longer in service. State Farm sent correspondence requesting contact from its
insured on August 20, 2009, and again on September 2, 2009. State Farm
eventually learned that Chang was out of the country and unreachable. State Farm
also learned that his son, Ike Chang, who had assisted State Farm in
communicating with King Sports and Jimmy Chang with respect to the Nike and
Calloway disputes, was out of state and unwilling to assist in the defense of the
Cleveland Golf case. State Farm again sent King Sports and Chang a letter on
November 6, 2009, requesting contact about the claim and advising that failure to
communicate or cooperate could result in a denial of coverage. Other letters
requesting that Chang or King Sports contact State Farm were sent on November
12, 2009, and February 4, February 19, March 25, April 1, April 5, April 16, May
26, June 22, June 25, July 20, August 16, and September 2, 2010, but no response
was received. In addition to the letters, phone calls were made on multiple
4
Case: 11-16169 Date Filed: 09/04/2012 Page: 5 of 21
occasions by State Farm representatives to all known phone numbers, and email
messages were sent as well. In the midst of State Farm’s efforts to contact its
insured by mail, on November 6, 2009, a State Farm claim representative visited
Kings Sports’ business address only to find the space vacant.
State Farm personnel then searched the Internet in an attempt to obtain
working contact information for Chang and King Sports, even turning to its own
internal investigation division to search for names, addresses, and phone numbers
that would allow State Farm to contact Chang and King Sports, but had no
success. No response was received with respect to messages left at a phone
number which was discovered and thought to be connected with King Sports, nor
was any response received in response to a personal visit by a State Farm
representative to or correspondence left at an address which was receiving other
mail intended for King Sports.
While King Sports received at least some of State Farm’s letters concerning
Cleveland Golf’s claim, State Farm never received a substantive response or any
of the information it requested from Chang or King Sports. Thus, State Farm
could never get King Sports’ “version of what happened” with respect to the
allegations.
5
Case: 11-16169 Date Filed: 09/04/2012 Page: 6 of 21
In the meanwhile, the lawsuit filed by Cleveland Golf was still pending, and
State Farm retained attorney Bruce Hedrick to represent King Sports and Chang.
In a November 2009, letter addressed to Jimmy Chang and King Sports and
received by King Sports, State Farm again made a reservation of rights, outlined
King Sports’ duty to cooperate in the investigation and defense of Cleveland
Golf’s lawsuit, and then advised the insureds that it had retained Hedrick as
counsel for King Sports and Chang. By that point, Hedrick had already contacted
counsel for Cleveland Golf, leaving a November 2, 2009, voicemail message
which stated, in part:
...what State Farm has told me, they’re not going to pay
that but about to just move forward with the dec action
because the Insured is not cooperating with them and
unfortunately, at the moment, not cooperating with me to
enable me to file an answer. 2
[DE 119 at 00:36-00:51.]
For Hedrick, defending Chang and King Sports would prove to be no easy
task. During the months that Hedrick worked on the case, he repeatedly attempted
to contact King Sports and Chang through telephone calls, text messages, email,
2
Jill Reina, State Farm’s corporate designee, has testified that it was too early at that date to
determine whether King Sports or Chang had adequately cooperated or not. Cleveland Golf
points out that, ordinarily, State Farm representatives would “split the file,” with one
representative maintaining the file on the issue of defense and another on the issue of coverage.
In this case, until mid-December 2009, State Farm agent Latasha Williams was the sole claims
representative working on this case.
6
Case: 11-16169 Date Filed: 09/04/2012 Page: 7 of 21
and regular mail, requesting a response each time. While he did hear from Chang
on at least two occasions and Andy Lee, an employee of King Sports, on multiple
occasions, Hedrick spent the better part of his time and effort trying to get his
clients to contact him about the litigation, with little success. Even when he did
receive communications, no one ever provided information to Hedrick that would
allow him to respond to the substantive allegations in the Complaint.
After obtaining numerous extensions of time from the court, Hedrick
finally filed an answer in the underlying suit on behalf of King Sports and Chang
on January 15, 2010 – an answer that he felt was inadequate and had deficiencies
that were due to his inability to communicate with his clients about the case.
Then, in February 2010, Lee told Hedrick that he was no longer affiliated with
King Sports and that he did not want Hedrick to communicate with him further.
Lee understood that King Sports and Chang’s insurance coverage could be in
jeopardy if the insured parties did not communicate with Hedrick. Lee passed
along the email to others at King Sports but he did not, however, provide an
alternate contact at King Sports with whom Hedrick could communicate, despite
Hedrick’s request for that information. Hedrick heard nothing further from Chang
or anyone at King Sports.
7
Case: 11-16169 Date Filed: 09/04/2012 Page: 8 of 21
Hedrick filed a Notice of Intention to File Motion for Withdrawal on
February 12, 2010, and a Motion to Withdraw as Attorney for King Sports and
Chang on March 9, 2010. On March 10, 2010, Cleveland Golf also sent King
Sports and Chang an email, in Mandarin and English, explaining that a failure to
cooperate and communicate with Hedrick could jeopardize insurance coverage
under the policy issued by State Farm.3 Counsel for Cleveland Golf included a
message from Hedrick informing King Sports and Chang that if they wanted
Hedrick to represent them they needed to contact him immediately. The message
supplied all of Hedrick’s contact information, including his email address, direct
office phone number, general office phone number, and personal cell phone
number.
Neither Hedrick nor State Farm heard from Lee, Chang or King Sports in
response to the email from Cleveland Golf’s counsel. Ultimately, the Motion to
Withdraw was granted over Cleveland Golf’s objection on March 30, 2010.
Although the Motion for Withdrawal was silent as to the reasons for Hedrick’s
request for relief, he later testified that he sought to withdraw due to his clients’
complete lack of cooperation.
3
State Farm also sent to King Sports, at Hedrick’s request, correspondence in Mandarin which
provided Hedrick’s contact information and requesting that contact be made with him.
8
Case: 11-16169 Date Filed: 09/04/2012 Page: 9 of 21
Strangely enough, Lee was still in communication with Cleveland Golf, and
he entered into a “Settlement Agreement” with Cleveland Golf agreeing to a
$1,000,000 judgment, which he executed as the “owner” of King Sports.4
Cleveland Golf agreed not to pursue King Sports for the amount of the judgment,
agreeing that it would, instead, seek to collect the amount from State Farm, and
King Sports assigned any claims it might have against State Farm to Cleveland
Golf under its insurance policy.
As it happened, neither King Sports, Chang, nor Cleveland Golf informed
State Farm of the Settlement Agreement, nor did anyone obtain State Farm’s
consent to it. Cleveland Golf understood that approval of any settlement was
required under the terms of the insurance policy in order for coverage to apply.
On July 15, 2010, the district court entered a consent judgment in favor of
Cleveland Golf and against King Sports in the amount of $1,000,000, in
accordance with the settlement agreement.
Meanwhile, on January 15, 2010, State Farm filed a complaint in the district
court, seeking a declaratory judgment against King Sports and Cleveland Golf.
4
When State Farm learned of these settlement discussions, it sent Chang and King Sports yet
another letter on June 25, 2010, reiterating its request that they contact State Farm immediately
and pointing out that portion of the insurance policy which provided that, “[e]xcept at their own
cost, no insureds will voluntarily make a payment, assume any obligation or incur any expense,
other than for first aid, without our consent.” [DE 106-1 at 84-85.]
9
Case: 11-16169 Date Filed: 09/04/2012 Page: 10 of 21
State Farm later amended its complaint to seek relief against Chang, King Sports,
Inc., and Cleveland Golf, including a declaration that it owed no coverage
whatsoever to King Sports and/or Chang because both failed to abide by, satisfy,
comply with or fulfill the duties imposed on them pursuant to the policy’s “general
conditions,” specifically their obligation to cooperate in the defense of the case,
and that, by extension, Cleveland Golf could not recover against it. Cleveland
Golf answered the second amended complaint on October 26, 2010, averring in a
counterclaim, as the assignee of King Sports and a putative third-party beneficiary
of State Farm and King Sports’ contract of insurance, that State Farm had
breached its duty to defend King Sports with respect to the suit by and between
Cleveland Golf and King Sports and to indemnify King Sports for sums it was
legally obligated to pay Cleveland Golf as a result of the consent judgment entered
into by Cleveland Golf and King Sports.
II.
We review a district court’s decision to grant summary judgment de novo
and utilize the same standard for review as utilized by the district court. Perry v.
Sec’y Florida Dept. of Corr., 664 F.3d 1359 (11th Cir. 2011); Miccosukee Tribe of
Indians of Fla. v. United States, 566 F.3d 1257, 1264 (11th Cir. 2009). Summary
judgment is proper when no genuine issue as to any material fact is present and the
10
Case: 11-16169 Date Filed: 09/04/2012 Page: 11 of 21
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
movant carries the initial burden and must show that there is “an absence of
evidence to support the nonmoving party’s case.” Celotex Corp. v. Catrett, 477
U.S. 317, 325 (1986).
“Only when that burden has been met does the burden shift to the
non-moving party to demonstrate that there is indeed a material issue of fact that
precludes summary judgment.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608
(11th Cir. 1991). The nonmovant is then required to “go beyond the pleadings”
and present competent evidence in the form of affidavits, depositions, admissions,
and the like, designating “specific facts showing that there is a genuine issue for
trial.” Celotex, 477 U.S. at 324. “The mere existence of a scintilla of evidence”
supporting the nonmovant’s case is insufficient to defeat a motion for summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Resolving
all doubts in favor of the nonmoving party, the Court must determine “whether a
fair-minded jury could return a verdict for the plaintiff on the evidence presented.”
Id.
III.
Cleveland Golf’s argument on appeal turns on the idea that State Farm
orchestrated King Sports and Chang’s failure to cooperate by not seeking their
11
Case: 11-16169 Date Filed: 09/04/2012 Page: 12 of 21
cooperation in good faith with respect to the defense of Cleveland Golf’s lawsuit.
The undisputed evidence, however, demonstrates that State Farm made at least a
reasonable effort to obtain King Sports and Chang’s cooperation, and we conclude
that no fair minded jury could conclude from that evidence that State Farm or
Hedrick acted other than diligently and in good faith in their respective efforts to
secure information from King Sports and Chang and to provide a defense of the
lawsuit filed by Cleveland Golf. Because King Sports and Chang then failed to
cooperate in the defense of that lawsuit, notwithstanding State Farm’s efforts,
recovery on the policy is appropriately foreclosed for King Sports, Chang, and, by
extension, Cleveland Golf. Summary judgment was properly granted in favor of
State Farm by the district court.
Under Georgia law, “[i]nsurance is a matter of contract[,] and rules
governing construction of contracts are applicable to insurance contracts.” Wilson
v. S. Gen. Ins. Co., 349 S.E.2d 544, 545 (Ga. Ct. App. 1986) (quoting Nationwide
Mut. Ins. Co. v. Ware, 231 S.E.2d 556, 559 (Ga. Ct. App. 1976)). Thus, “terms in
an insurance policy are given their ordinary and customary meaning.” Stagl v.
Assurance Co. of Am., 539 S.E.2d 173, 175 (Ga. Ct. App. 2000) (citing Boardman
Petroleum v. Federated Mut. Ins. Co., 498 S.E.2d 492 (Ga. 1998)). When a duty
to cooperate is included in a contract,
12
Case: 11-16169 Date Filed: 09/04/2012 Page: 13 of 21
The insured is obligated to assist in good faith in making
every legitimate defense to a suit for damages. If he
refuses to give the information which the insurer needs
in establishing the defense, or absents himself so that his
testimony at the trial cannot be obtained, recovery on the
policy should be denied, if the insurer acts with good
faith and diligence.
H.Y. Akers & Sons, Inc. v. St. Louis Fire & Marine Ins. Co., 172 S.E.2d 355, 359
(Ga. Ct. App. 1969).
Thus, an insurer may “claim its relief of obligation to make payment when
the insured fails to cooperate” in a material fashion. Id. at 358; see also S. Mut.
Ins. Co. v. Mason, 445 S.E.2d 569, 572 (Ga. Ct. App. 1994) (“It is well established
that the insured has a duty to cooperate with his insurer in all aspects of a lawsuit
and to make a full, fair, complete, and truthful disclosure of all facts relating to the
[incident].”) (quoting Hurston v. Ga. Farm Bureau Mut. Ins. Co., 250 S.E.2d 886,
888 (Ga. Ct. App. 1978))); Wolverine Ins. Co. v. Sorrough, 177 S.E.2d 819, 820
(Ga. Ct. App. 1970) (“The cooperation clause in a liability insurance policy is a
material condition of liability, and a breach of it by one who is insured ... relieves
the insurer of any obligation to defend a damage action against the insured.”); St.
Paul Fire & Marine Ins. Co. v. Gordon, 158 S.E.2d 278, 279 (Ga. Ct. App. 1967)
(“insured does have an obligation to co-operate with his insurer in the
investigation of accidents, the securing of evidence, giving notice of the accident
13
Case: 11-16169 Date Filed: 09/04/2012 Page: 14 of 21
and of claims or suits brought against him arising out of it, in attending court,
assisting as he can at the trial, and in making full, fair, complete and truthful
disclosures of the facts known to him relative to the accident when called upon to
do so”).
While the question of an insurer’s bad faith or lack thereof is a question of
fact reserved to the finder of fact in many situations, the issue can be decided as a
matter of law where there is no evidence of bad faith, as is the case in the matter
before us. See Wolverine Ins., 177 S.E.2d at 820; cf. State Farm Mut. Auto. Ins.
Co. v. Ainsworth, 402 S.E.2d 759, 765-66 (Ga. Ct. App. 1991) (citing Strickland
v. Am. Home Assur. Co., 367 S.E.2d 241, 242 (Ga. Ct. App. 1988); comparing
Int’l Indem. Co. v. Collins, 367 S.E.2d 786 (Ga. 1988)) (holding that trial court
properly denied summary judgment on issue of whether insurer denied coverage in
bad faith because there was evidence of insurer’s delay in obtaining required
information and informing others of necessity of prompt provision of information
or other proof); State Farm Mut. Auto Ins. Co. v. Acheson, 355 S.E.2d 128, 129
(Ga. Ct. App. 1987) (citing Binns v. Metro. Atlanta Rapid Transit Auth., 301
S.E.2d 877, 878 (Ga. 1983); Ga. Farm Bureau Mut. Ins. Co. v. Matthews, 254
S.E.2d 413 (Ga. Ct. App. 1979)) (holding that district court erred in dismissing
insured’s request for penalties and attorneys fees against insurer where record did
14
Case: 11-16169 Date Filed: 09/04/2012 Page: 15 of 21
not support finding that there was no evidence of bad faith or that issue of liability
was so close as to require a finding of good faith). If the evidence shows that
there was no bad faith on the part of the insurer with respect to obtaining the
cooperation of the insured, judgment as a matter of law is then appropriate if the
evidence demonstrates that an insured breached its contractual duty to cooperate in
the investigation and defense of a claim. See Allstate Ins. Co. v. Hamler, 545
S.E.2d 12, 15 (Ga. Ct. App. 2001) (holding that trial court erred when it denied
insurer’s motion for summary judgment where insured breached contract of
insurance when it provided some information but failed to provide material
information relevant to insurer’s investigation of claim); Diamonds & Denims,
Inc. v. First of Ga. Ins. Co., 417 S.E.2d 440, 442 (Ga. Ct. App. 1992) (citing Saft
America, Inc. v. Ins. Co. of N.A., 271 S.E.2d 641 (1980); St. Paul Fire & Marine
Ins., 158 S.E.2d 278) (“[T]he insurer’s failure to act with diligence and good faith
in securing the necessary information also will preclude the grant of summary
judgment to the insurer on the issue of the insured’s compliance with policy
prerequisites.”); cf. Hurston v. Ga. Farm Bureau Mut. Ins. Co., 250 S.E.2d 886,
888 (Ga. Ct. App. 1978) (“[I]f the facts as either stipulated or shown by the
evidence demand a finding of a breach of the [cooperation] clause by the insured,
a verdict should either be directed or entered for the insurance company.”).
15
Case: 11-16169 Date Filed: 09/04/2012 Page: 16 of 21
Cleveland Golf argues that evidence has been presented from which a
reasonable juror could conclude that State Farm failed to act in good faith and
with diligence in securing King Sports’ cooperation in defending the matter and
that, as a result, the district court erred when it concluded that recovery on the
policy was not available in the absence of the insureds’ cooperation. We disagree.
Cleveland Golf points first to Attorney Hedrick’s voicemail left for its
counsel on November 3, 2009, shortly after Hedrick was retained to represent
King Sports, in which he indicated that his client was not cooperating with its
insurer or him and that the insurer was not sure it would pay on any claim if there
was a lack of cooperation. Cleveland argues that this message was particularly
meaningful for two reasons: (1) because Hedrick’s voicemail was left after State
Farm’s coverage counsel had advised that the claims it faced in an identical suit
were “virtually indefensible, and that significant potentially covered damages
could be awarded” and (2) because both Hedrick and State Farm’s corporate
representative agreed, during testimony in the present case, that it was too early at
that point to determine whether the insured had cooperated or not.
From this evidence, it is clear that State Farm and Hedrick were concerned
about whether the insureds would cooperate from the earliest stages of the
litigation, but we are not persuaded that this is evidence from which a reasonable
16
Case: 11-16169 Date Filed: 09/04/2012 Page: 17 of 21
juror could conclude that State Farm or Hedrick were acting to secure a lack of
cooperation from King Sports or Chang or to otherwise act in bad faith. Notably,
the facts are not contrary to nor do they take away the conclusions that may be
naturally drawn from State Farm’s efforts over the course of nearly two years and
Hedrick’s repeated efforts over a period of more than six months – by letter, phone
call, email, and personal visit to the physical headquarters of King Sports – to
contact and gain the cooperation of King Sports and Chang once Cleveland Golf
gave notice of its claims and, subsequently, filed its lawsuit. A reasonable juror
could only conclude that State Farm and, in turn, Hedrick were diligently seeking
a response and the cooperation of King Sports and Chang. Further, no one,
including a reasonable juror, would be surprised to learn that State Farm and
Hedrick had these concerns in light of the lack of substantive communications
about the lawsuit received by Hedrick from Lee, who was Hedrick’s only contact
at King Sports, including Lee’s purported disassociation with King Sports during
the course of the litigation.
Cleveland Golf also argues that a jury could conclude that State Farm did
not seek in good faith to provide a defense to King Sports and Chang because
State Farm did not “split” the coverage and defense files with respect to its lawsuit
against King Sports and Chang; did not provide Hedrick with information
17
Case: 11-16169 Date Filed: 09/04/2012 Page: 18 of 21
gathered in prior, similar lawsuits against the insured; and did not advise Hedrick
that the individuals associated with King Sports spoke Mandarin Chinese as a
“first language,” not English. Again, we disagree.
In the first instance, even if we assume that State Farm had an ethical duty
to “split” the file, there is no evidence that any specific information and, notably,
no privileged information was ever shared between coverage counsel and Hedrick
or that the failure to split the file caused State Farm or Hedrick to abdicate their
obligation to seek the insured’s cooperation in good faith. Neither has Cleveland
Golf identified any legal basis for the idea that State Farm was required to provide
information from other cases to Hedrick nor any suggestion as to how sharing that
information might have improved State Farm and Hedrick’s chances of obtaining
King Sports or Chang’s cooperation. As to State Farm’s supposedly meaningful
failure to disclose its clients’ preference for communication in Mandarin Chinese,
the contract of insurance is in English, and Cleveland Golf has not identified any
contractual obligation between the insurer or insured to communicate in Mandarin
Chinese. Further, Hedrick communicated with Lee in English, and it appears that
Lee understood him. Hedrick also had correspondence translated into Mandarin
Chinese, to no apparent avail, for there is no evidence that receiving
correspondence in Mandarin rather than in English prompted his clients to provide
18
Case: 11-16169 Date Filed: 09/04/2012 Page: 19 of 21
him any information or to otherwise cooperate with him or State Farm in the
investigation or defense of the suit. In other words, we are not persuaded that a
reasonable juror could conclude from this evidence that State Farm acted in bad
faith when it sought to secure its insureds’ cooperation.
Frankly, the evidence presented in this case leaves no one wondering
whether State Farm might have done something differently or taken just one more
step and secured the insured’s cooperation. Thus, factually, this case is
distinguishable from Wolverine Ins. Co. v. Sourrough, in which the Georgia Court
of Appeals concluded that there was an issue of fact for the jury as to whether the
insurer had made a reasonable effort to obtain its insured’s cooperation. 177 S.E.
2d at 821. Wolverine Insurance had difficulty obtaining the cooperation of its
insured with respect to the investigation of a motor vehicle collision and,
ultimately, sent a registered letter outlining its unsuccessful efforts, requesting
cooperation, and explaining that coverage could be disclaimed if cooperation was
not forthcoming. Id. at 820-21. Unlike the present case, however, the insured in
Wolverine accepted the letter and made an appointment by telephone with the
insurance company’s adjuster, agreeing to meet him at his office. Id. at 821. As it
happened, when the insured went to the office, the adjuster was out. Id. Although
he was asked to call back and make another appointment, the insured did not. Id.
19
Case: 11-16169 Date Filed: 09/04/2012 Page: 20 of 21
So, the adjuster tried to call the insured at his home only to learn from his wife that
the insured was at work. Id. The adjuster telephoned the insured’s workplace and
was told when the insured would get off of work and where he was working. Id.
Wolverine Insurance never got the details about the accident that it wanted,
though, because the insured and the adjuster never managed to get together for the
exchange of that information. Id.
By contrast, the undisputed material facts demonstrate that State Farm and
Hedrick made repeated efforts to secure the insured’s cooperation in defending the
claim of Cleveland Golf. Multiple letters, telephone calls, personal visits, email
correspondence, and text messages were employed to invite the insureds’
cooperation. State Farm even sought new ways to contact Chang and others at
King Sports when old addresses and phone numbers were no longer useful for
contacting them. At the end of the day, no matter what State Farm and Hedrick
did, no cooperation was forthcoming. There is no point in the story of State Farm
and Hedrick’s efforts where one wonders whether one of them “dropped the ball”
when it came to seeking the insureds’ cooperation. Rather, their reasonable efforts
to reach King Sports and Chang and to communicate the need to cooperate in the
investigation and defense of Cleveland Golf’s claims were never met with
anything but silence as to issues of substance. There is no evidence of bad faith,
20
Case: 11-16169 Date Filed: 09/04/2012 Page: 21 of 21
only King Sports and Chang’s utter failure to cooperate in the defense of that
underlying suit. Thus, as a matter of law, State Farm is relieved of any obligation
of coverage with respect to Cleveland Golf’s action against King Sports and
Chang, and by extension, any obligation to King Sports’ assignee, Cleveland
Golf.5 See H.Y. Akers & Sons, 172 S.E.2d at 359 (citing Indemnity Ins. Co. of
North America v. Smith, 78 A.2d 461, 463 (Md. 1951)) (“The judgment creditor,
who sues on a policy indemnifying the insured against claims for damages, stands
in the shoes of the insured and is chargeable like the insured with any breach of
conditions on which liability depended.”).
Accordingly, we AFFIRM the decision of the district court.
5
Having reached the conclusion that State Farm was relieved of any obligation of coverage with
respect to Cleveland Golf’s claim due to its insureds’ failure to cooperate in the investigation and
defense of that lawsuit, we do not reach the issue of whether King Sports, Chang, and Cleveland
Golf’s failure to seek State Farm’s approval of the Settlement Agreement would have precluded
recovery under the contract of insurance, in any event.
21