Barrera v. State Farm Mutual Automobile Insurance Co.

In 1958, Anthony Alves bought a car from a used-car salesman. The salesman arranged for Alves to meet with an insurance agent of State Farm Mutual Automobile Insurance Co. (State Farm) (defendant). Alves went to the insurance agent’s office and applied for a State Farm automobile-insurance policy to cover Alves and his spouse. Alves did not read the insurance application. Instead, the insurance agent filled out the application for Alves. One of the questions on the application was whether the applicant’s driver’s license had been suspended within the last five years. The agent responded “no” to this question. However, Alves’s driver’s license had been suspended within the past five years, and there were two probation orders on his license in the same timeframe. At the end of the meeting with Alves, the insurance agent gave Alves a 30-day proof of insurance coverage. Within 30 days, State Farm issued a longer-term insurance policy to Alves, without investigating Alves’s driving record. While the State Farm policy was in effect, Alves’s spouse negligently drove into a pedestrian named Barrera (plaintiff). State Farm then investigated Alves’s driving record and learned of his license suspension. A few months later, State Farm attempted to rescind the insurance policy. In the meantime, Barrera sued Alves and the spouse and obtained a judgment for damages. Barrera then sued State Farm for payment of the judgment. State Farm sought a declaratory judgment that the Alves policy was void ab initio, on the ground that Alves had materially misrepresented his driving record. The trial court entered judgment for State Farm. Barrera sought a new trial, arguing that laches barred State Farm from rescinding the policy. The trial court denied Barrera’s request. Barrera appealed.