Direct Auto Insurance Company v. Reed

Insurer filed declaratory judgment action seeking declaration that it had no duty to provide coverage for its insured involved in auto accident because its insured breached cooperation clause in insurance policy. Insured failed to appear at a mandatory arbitration hearing in underlying personal injury and subrogation litigation, resulting in order debarring her from rejecting unfavorable arbitration award. Court properly found that although insurer had made a prima facie showing that insured had willfully refused to cooperate, insurer failed to present sufficient evidence to make a prima facie case that it suffered substantial prejudice as a result of breach of cooperation clause. Substantial prejudice to insurer does not automatically flow from issuance of a debarring order preventing insured from rejecting unfavorable arbitration award.(CONNORS and SIMON, concurring.)