Summary
In Sanderfoot v. Sherry Motors, Inc. (1967), 33 Wis.2d 301, 147 N.W.2d 255, a delay of over seven months with no reasonable explanation for not notifying the insurer was held not timely....
Summary of this case from Resseguie v. American Mut. Liability Ins. Co.Opinion
November 30, 1966 —
January 3, 1967.
APPEAL from a judgment of the county court of Outagamie county: RAYMOND P. DOHR, Judge. Reversed.
For the appellant there was a brief by Schlotthauer, Jenswold Studt and Robert R. Studt, all of Madison, and oral argument by Robert R. Studt.
For the respondents there was a brief by Bradford Gabert of Appleton, and oral argument by Stanley Gabert.
This appeal involves an insurance policy defense of lack of timely notice of the auto-pedestrian accident. The policy defense issue was tried separately without a jury and before the principal action.
The facts are not in dispute. Prior to November 2, 1963, Universal Underwriters Insurance Company (hereinafter "Universal") issued a policy of automobile liability insurance to Sherry Motors, Inc. (hereinafter "Sherry"), an automobile dealer in Appleton. Terry Bartman, an employee of Sherry, while driving a pickup truck owned by Sherry, was blinded by the sun and bumped into the plaintiff, Mrs. Sanderfoot, in the course of executing a right turn at an intersection in the city of Appleton. Mrs. Sanderfoot was not knocked down. She walked over to the sidewalk, rubbed her knee, and told Bartman, "I don't think I am hurt." Upon return to the garage Bartman reported the incident to Sherry's office manager, Greg Coenen.
The day following the accident Mrs. Sanderfoot telephoned Mr. Coenen and stated that her leg was sore and was beginning to get a little stiff. Mr. Coenen suggested that she see a doctor and stated that Sherry would take care of the bill. Mrs. Sanderfoot said she would wait until the following Monday to see how it felt; if it still bothered her she would see a doctor and let Sherry know about it. Mr. Coenen asked Mrs. Sanderfoot to report the name of the doctor she would see. Neither Sherry nor Bartman received any communication from Mrs. Sanderfoot until June 10, 1964, when Sherry received a letter from Mrs. Sanderfoot's attorney, Mr. Sigman, informing Sherry that Mrs. Sanderfoot had been injured and that she wished to assert a claim against Sherry, its driver, and its insurer.
Intervening the date of the accident and June 10, 1964, Mrs. Sanderfoot had retained Attorney Sigman to handle her claim, had been under medical treatment, and in March of 1964 she had surgery to correct the gradually worsening condition of her knee. She received therapy treatments into the summer of 1964.
On June 20, 1964, Sherry sent a letter notifying Universal of the claim asserted by Mrs. Sanderfoot. Enclosed was a copy of Attorney Sigman's letter of June 10, 1964. On July 13, 1964, Universal sent a letter to Sherry stating that Universal would undertake an immediate investigation of the Sanderfoot claim, but that since a question of coverage was involved, Universal reserved its right to rely on that defense. No ground for denial of coverage was asserted in this letter. On August 27, 1964, one of Universal's adjusters took statements from Bartman and Coenen with regard to the facts of the accident.
On November 2, 1964, Universal wrote a letter to Sherry disclaiming coverage under the policy because of an unreasonable length of time in reporting the loss. Universal advised Sherry to retain its own counsel to defend the action. On November 6, 1964, Attorney Sigman wrote Universal stating that he had received no response from it regarding a letter he had sent Universal on June 30, 1964, requesting that one of Universal's adjusters contact him with regard to Mrs. Sanderfoot's claim. He stated that Mrs. Sanderfoot was receiving medical treatment and suggested that it was time to determine whether the claim could be settled or whether it would have to go to trial. Universal did not answer Attorney Sigman's letters and apparently Universal did not attempt to attain any information regarding Mrs. Sanderfoot's injury and medical treatment. However, at an informal conference one of Universal's adjusters did inform Attorney Sigman that he had no authority to proceed to settle the claim.
On May 8, 1965, Mrs. Sanderfoot signed the verified complaint against the defendants. On May 25, 1965, Universal wrote Sherry a letter stating that it would not defend Sherry or Bartman in Mrs. Sanderfoot's action because Universal disclaimed coverage for lack of timely notice. Universal informed Bartman by sending him a copy of this letter. On June 7, 1965, Universal answered the complaint, denying coverage on the policy as to Sherry. Sherry and Bartman answered and cross-complained against Universal for coverage on the policy.
On December 29, 1965, a separate trial was had to the court on the issue of coverage. The trial court found that the notice of the accident was given to Universal "as soon as practicable," that Universal was not prejudiced by the delay of notice and that Universal by its actions in delaying investigation after it did receive notice waived the delay and is estopped from asserting it as a defense. On March 22, 1966, judgment was entered in favor of Sherry on the coverage issue, from which judgment Universal has appealed.
On March 24, 1966, the parties' stipulated to a settlement of Mrs. Sanderfoot's claim for $5,000, with all defendants reserving their rights on the coverage issue during this appeal.
The issues are as follows:
(1) Was notice of the accident given "as soon as practicable" as required by the policy?
(2) If notice was not given "as soon as practicable," was Universal prejudiced by the fact that notice was given seven months after the accident?
(3) If Universal was prejudiced, has Universal waived or is it estopped from asserting its policy defense of lack of timely notice?
Universal relies upon the conditions in the policy and upon sec. 204.34 (3), Stats., in this appeal. In the condition section of the insurance policy the following provisions are found:
"10. Notice of Accident. When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses.
". . .
"13. Action Against Company. No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company . . . ."
Sec. 204.34(3), Stats., provides:
"No policy of insurance, agreement of indemnity or bond as provided in subsection (1) shall limit the time for the giving of notice of any accident or casualty covered thereby to a period less than that provided in subsection (1) of section 204.29. Failure to give such notice shall not bar liability under such policy of insurance, agreement of indemnity or bond as provided in subsection (1) if the insurer was not prejudiced or damaged by such failure, but the burden of proof to so show shall be upon the person claiming such liability."
Sec. 204.29(1), Stats., provides:
"No licensed accident or casualty insurance company in Wisconsin shall limit the time for the service of any notice of injury to less than twenty days, except as provided in section 204.31."
Universal concedes that if notice was given "as soon as practicable," then sec. 204.34 (3), Stats., has no application to this case. Universal contends, however, that in view of the fact that it did not receive notice until seven months after the accident, as a matter of law, notice was not given as soon as practicable.
In support of its position Universal cites Parrish v. Phillips (1938), 229 Wis. 439, 282 N.W. 551, in which the court held that a thirty-three-day delay in giving notice was not "as soon as practicable" as a matter of law. In further support of its position Universal cites Calhoun v. Western Casualty Surety Co. (1951), 260 Wis. 34, 49 N.W.2d 911, in which the court held that a delay of almost one year in giving notice of an accident was not distinguishable from the Parrish Case and that notice was not given "as soon as practicable" as a matter of law. Both Parrish and Calhoun involved notice provisions similar to that in the insurance policy in the instant case and both involved questions of the applicability of sec. 204.34 (3), Stats. In both Parrish and Calhoun the plaintiff was obviously seriously injured at the time of the accident.
In the case at bar the trial court found that notice was given "as soon as practicable" after the accident "because Sherry Motors did notify the Company as soon as it found out that a claim was being made against it for what had been considered by them to be no accident at all." Sherry maintains that the determination of the trial court was correct, and that Parrish and Calhoun are distinguishable from the instant case.
In short, Universal contends that the passage of a certain length of time between accident and notice absolves the insurer of liability under the policy and the statutes as a matter of law; Sherry contends that whether notice is "as soon as practicable" depends upon the particular circumstances of the accident and that an insured need not report every trivial occurrence that would not lead a reasonable person to suspect that a claim will probably be made against it.
In the case at bar the plaintiff was not visibly injured at the time of the accident. She was. not knocked down, walked to the sidewalk, and told Bartman, "I don't think I am hurt." Mrs. Sanderfoot did call Sherry the next day stating that her knee was stiff and sore and that she would see a doctor the next Monday if the condition did not improve, but she made no additional contact with Sherry for over seven months. She did not comply with Sherry's specific request that she report the name of her doctor to Sherry.
In support of its position, Sherry offers the case of Sheafor v. Standard Accident Ins. Co. (1918), 166 Wis. 498, 166 N.W. 4, in which the court held that where a blow to the insured's head did not result in indicia of serious injury, the insured was excused from giving notice of injury within twenty days of the accident as required by the policy, even though the insured eventually lost an eye as a result of the accident. The condition had gradually worsened until the eye had to be removed. The Sheafor Case must be distinguished from this case in two respects: (1) The policy there required "notice of injury" within twenty days (this policy requires "notice of accident"), and the court found that there was no "injury" until the insured's eye required treatment; and (2) the policy provided that timely notice would not invalidate a claim if the insured showed that it was not "`reasonably possible to give the notice and that notice was given as soon as was reasonably possible.'" Sheafor, supra, at pages 498, 499.
When Mrs. Sanderfoot called Sherry's office manager the day after the accident and told him that her leg was sore and beginning to get a little stiff, he should have known that there was a possibility of an injury and a claim. The provision of the policy required Sherry to notify Universal of the accident as soon as practicable. By the terms of the policy Universal undertook the obligation of defending the claim, including an investigation. Because of these obligations (as well as its financial obligation), Universal had a right to notice of the accident as soon as practicable. Whether it took immediate and extensive steps to investigate is beside the point — it should have been notified so that it would have had an opportunity to do so.
In Parrish v. Phillips, supra, at page 445, it is stated:
"The reasons for the policy provisions requiring the assured to give written notice of an accident as soon as practicable are obvious. As said in McCarthy v. Rendle, 230 Mass. 35, 38, 119 N.E. 188:
"`The occurrence of an accident and injury, however slight, may result in litigation, even in protracted litigation. It is the experience of every defender of causes that it is a matter of first importance to become possessed of all material facts and of the names and residences of all known witnesses at the earliest possible moment, as facts may be forgotten or distorted and witnesses may go beyond reach.'"
Even though the notice of accident was not given as soon as practicable under the terms of the policy, this failure does not relieve the insurer of liability unless that failure was prejudicial to the insurer.
Sec. 204.34 (3), Stats., provides in part:
". . . Failure to give such notice shall not bar liability under such policy of insurance, agreement of indemnity or bond as provided in subsection (1) if the insurer was not prejudiced or damaged by such failure, but the burden of proof to so show shall be upon the person claiming such liability."
By placing the burden of proof upon the person claiming liability the statute creates a presumption of prejudice because of untimely notice.
See Buss v. Clements (1963), 18 Wis.2d 407, 412, 413, 118 N.W.2d 928; Parrish v. Phillips, supra; and Calhoun v. Western Casualty Surety Co., supra.
In its memorandum decision, the trial court made the following statements regarding the question of prejudice:
"As to Question No. 1, this court can see no damage resulting to the Company from the seven and a half month delay in reporting the accident. There was no change in circumstances as far as any of the parties were concerned as a result of the delay. When it was discovered that a claim was going to be made and that there were personal injuries involved, a Sherry Motors employee notified the Company by letter of the accident, and the Company then caused its adjuster to make an investigation, and Sherry Motors was so notified by Exhibit 2, being a letter from the Company.
"The adjuster was able to interview all of the witnesses and ascertain the facts. The Company itself moved slowly in checking these facts. No proof was presented at the trial by which the Company was prejudiced or suffered damages as a result of the delay. It did not meet its burden of proof as required by the statutes."
It is clear that the trial court placed the burden of proof upon Universal, the insurer, to show that it had been prejudiced by lack of timely notice. This is contrary to sec. 204.34 (3), Stats., and constitutes a prejudicial error. Even though there are no substantial variances in the facts offered by the parties, we deem this issue should be retried under the presumption of prejudice and proper burden of proof.
In its memorandum decision the trial court found that because of the way it had "leisurely made its investigation, "Universal had waived the notice provision. This finding overlooks the fact that in its first reply to Sherry after it received notice of the accident — the letter of July 13, 1964 — Universal expressly reserved its rights as to the question of coverage. In Parrish v. Phillips, supra, the insurer undertook an investigation of the claim while expressly reserving its right to rely on the policy defense of delayed notice. Although the court in Parrish did not pass on the waiver/estoppel issue, in deciding the case for the insurer the court at least impliedly recognized the validity of the insurer's reservation-of-right letter. In view of the express reservation of right in the case at bar there was no waiver, or voluntary relinquishment of Universal's known right to rely on the policy defense.
Estoppel is equally hard to support in this case because the record reveals nothing which shows that Sherry relied to its detriment upon the fact that Universal would undertake the investigation of the claim. We find an unresolved inconsistency in Sherry urging on the one hand that because all the witnesses were available Universal was not prejudiced by delayed notice, and on the other that Universal's delay in denying coverage caused detrimental reliance on the part of Sherry.
Neither the doctrine of waiver nor estoppel are appropriate in support of Sherry's position.
By the Court. — Judgment reversed, and a new trial ordered on the issue of whether Universal Underwriters Insurance Company was prejudiced by lack of timely notice of the accident.