The Wyoming Supreme Court, in response to a question certified to it by the U.S. Court of Appeals for the Eighth Circuit, has ruled that, under Wyoming law, an insurer must be prejudiced before being entitled to deny coverage when the insured had failed to give notice “as soon as practicable” – regardless of the express language of the policy.
The Case
As explained by the Eighth Circuit, Jim Hipner, LLC, a trucking company, obtained a $2 million umbrella policy from Century Surety Company in order to secure a contract with a customer.
After an accident involving one of Hipner's drivers, Mr. Hipner called and reported it to representatives at Willis of Wyoming and Great West Casualty Company, the underlying primary insurance companies for Hipner. No one at Hipner, however, notified Century.
Century later learned about the accident, denied coverage, and asked a federal court to decide if it had an obligation to defend or indemnify Hipner in connection with any claims arising out of or relating to the accident. Century argued that it was not liable under Wyoming law because Hipner had failed to provide written notice “as soon as practicable” as required by the Century policy.
The district court ruled against Century, which appealed to the Eighth Circuit.
The Eighth Circuit asked the Wyoming Supreme Court:
[W]hether, under Wyoming law, an insurer must be prejudiced before being entitled to deny coverage when the insured has failed to give notice “as soon as practicable.” Many states have expressly adopted a notice-prejudice rule under which an insurer will only be able to disclaim coverage if it demonstrates it was actually prejudiced by late notice. See 46A C.J.S. Insurance § 1769. To date, Wyoming has not.
The Century Policy
The Century Policy provided:
b. If you notify any “underlying insurer” of an “occurrence” or an offense involving “bodily injury” or “personal and advertising injury”, you must see to it that we are also notified in writing as soon as practicable.
It also stated:
Failure to notify us, as required per paragraphs 3.a. and 3.b. above, of an “occurrence” or offense as soon as practicable will result in exclusion of coverage whether we are prejudiced or not.The Wyoming Supreme Court's Decision
The court answered the certified question in the affirmative and adopted the notice-prejudice rule.
In its decision, it explained that a two-step approach to an insurer's claim of late notice was appropriate. This approach required a “preliminary determination that an insured's notice was untimely, in violation of the notice requirement contained in the insurance policy.” If it was determined that notice was untimely, a court “should then turn to the question of whether the insurer was prejudiced by that delay.” If the insurer was prejudiced, the court concluded, then the insurer would be “relieved of its obligation to provide coverage.”
The court then ruled that Century could “not circumvent” the notice-prejudice rule “by simply adding language to its policy stating that insufficient notice 'will result in exclusion of coverage whether [Century was] prejudiced or not.'” That language, the court concluded, was void as against public policy.
The case is Century Surety Co. v. Jim Hipner, LLC, No. S-15-0294 (Wyo. Aug. 17, 2016). Attorneys involved include: Representing Appellant: Christopher C. Voigt and Nicholas T. Haderlie of Crowley Fleck PLLP, Sheridan, Wyoming; Jeffrey C. Gerish of Plunkett Cooney, Bloomfield Hills, Michigan; Bradford S. Moyer of Plunkett Cooney, Kalamazoo, Michigan. Argument by Mr. Gerish; Representing Appellees: Duane A. Lillehaug of Maring Williams Law Office, P.C., Fargo, North Dakota, representing Jim Hipner, LLC; Colleen M. Pratt and Michael D. Ainbinder of Ainbinder & Pratt, Long Beach, California, representing Huey Brock; Philip White Jr. of Karpan and White P.C., Cheyenne, Wyoming, representing Jim Hipner, LLC and Huey Brock. Argument by Mr. Ainbinder.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].