Opinion
April 15, 1975.
Editorial Note:
This case has been marked 'not for publication' by the court.
Bollinger, Flick & Young, Louis J. Stuart, E. Tuck Young, Pueblo, for plaintiff-appellant.
Sheldon, Bayer, McLean & Glasman, Daniel H. Polsby, Denver, for garnishee-appellee.
RULAND, Judge.
The opinion announced on December 3, 1974, is withdrawn, and the following opinion is issued in its stead.
Plaintiff appeals from a judgment dismissing his writ of garnishment against defendant Reliance Insurance Company (Reliance). We affirm.
The material facts are not disputed. On July 31, 1969, defendant Frank S. Arko (Arko), as landlord, and defendant U.S. Fiberglass Corporation (Fiberglass) entered into a lease whereby Fiberglass rented space from Arko to erect and maintain an amusement device known as 'Jolly Giant Slide.' The written lease provided that Fiberglass would hold Arko harmless from all liability incurred from accidents on the slide and that Fiberglass would maintain liability insurance in the minimum amount of $300,000. Arko required a Certificate of Insurance from Fiberglass in conjunction with execution of the lease, and Fiberglass obtained such a certificate from Reliance. At some point, Reliance was furnished a copy of the written lease between Arko and Fiberglass signed by defendant Stuart Pandolfo as president of Fiberglass.
The insurance policy issued by Reliance provided, insofar as material here:
'If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.'
On August 12, 1970, plaintiff filed suit against Arko and Pandolfo to recover damages for injuries sustained on the slide. The complaint alleged that Arko and Pandolfo were owners or lessees of the slide and that the slide was defective and unreasonably dangerous. Arko furnished copies of the summons and complaint to his insurance company, Safeco, and Safeco, by letter dated September 23, 1970, forwarded copies of the summons and complaint to Reliance. This letter identified Reliance's insured Fiberglass by name and gave reference to the policy number. The letter stated:
'It would appear from your Certificate of Insurance that you are the primary carrier for the accident mentioned in the Summons & Complaint in this matter . . ..
'After you have completed your coverage investigation and determined that you are the primary carrier in this matter, we would appreciate your reimbursing us our defense costs. We will forward you a bill when it is available.'
By letter dated October 1, Reliance returned the copies of the pleadings to Safeco, advising that its insured was Fiberglass and not Arko or Pandolfo.
On October 30, plaintiff amended his pleadings to name Fiberglass as an additional defendant, and service was obtained on the registered agent for Fiberglass on November 6, 1970. This agent did not forward copies of the pleadings to Reliance or otherwise advise Reliance of the pending litigation. Finally, on March 11, 1971, a representative of Safeco forwarded to Reliance a copy of its letter to Fiberglass advising of the amended complaint which named Fiberglass as a defendant.
Approximately one year later, plaintiff obtained a default judgment against Fiberglass in the amount of $40,000, plus interest. Plaintiff then obtained a writ of garnishment against Reliance, Reliance filed its answer, and plaintiff traversed the answer. Following a trial to the court, it determined that the notification to Reliance on March 11, 1971, of the suit against Fiberglass was not made within a reasonable time, that there was no justifiable reason for the delay, and that, therefore, Reliance was not liable on its policy. By reason of its decision on this issue, the trial court did not rule on a request by Reliance to amend its answer.
In this appeal plaintiff contends first that the trial court erred in ruling that notice of suit was not timely received by Reliance. In support of this contention, plaintiff argues that Reliance knew or should have known from the letter of September 23, 1970, and the attached complaint sent to Reliance by Safeco that its insured was a proper party to the lawsuit and thus Reliance had the requisite notice of suit at that time.
Reliance, in effect, concedes that the letter of September 23 was sufficient notice of claim; however, it contends that the September 23 letter may not be deemed to serve as notice of suit because Reliance's insured was not named as a party to the lawsuit at that time. Hence, it contends that its insured failed to comply with the notice provisions of the policy and that therefore it is without liability as to plaintiff.
In Barclay v. London Guarantee & Accident Co., Ltd., 46 Colo. 558, 105 P. 865, our Supreme Court construed a policy provision requiring both immediate notice of accident and notice of claim and held:
'We are of the opinion that by the language of the contract an immediate notice of the accident and also notice of claim for damages as stipulated for are Conditions precedent to the liability of the defendant, and without such notice or Notices, or a legal excuse for the failure to give the same, the defendant cannot not be held. . . .' (emphasis supplied)
The rule in Barclay was quoted with approval in Certified Indemnity Co. v. Thun, 165 Colo. 354, 439 P.2d 28. Hence, we conclude that in this jurisdiction the notice requirement must be construed as written and that the failure to forward the amended complaint in a timely manner absolves Reliance of liability. Furthermore, under the principles established in Barclay, it is not material that Reliance had ample opportunity to answer and defend. Hence, even if we accept plaintiff's contention that no prejudice to Reliance has been shown, failure to comply with the notice requirements is, in and of itself, sufficient to terminate coverage for this incident and no showing of prejudice is required.
Plaintiff contends in the alternative that the trial court erred in finding that there was no justifiable excuse for any delay in providing notice of suit to Reliance. Again, we disagree.
Plaintiff stands in the same position as the insured on this issue; thus, for plaintiff to prevail on this argument, it must appear that Fiberglass had a justifiable excuse for the failure to forward notice of suit to Reliance. See General Accident Fire & Life Assurance Corp. v. Mitchell, 120 Colo. 531, 211 P.2d 551. Viewed in that context, the evidence supports the trial court's finding, and we may not, therefore, disturb that finding on appeal. See Interstate Fire & Casualty Co. v. Burns, 29 Colo.App. 276, 484 P.2d 1257.
Following service of the amended complaint and summons on November 6, 1970, the registered agent for Fiberglass mailed the papers to Fiberglass and the papers were returned marked 'moved, left no address.' The agent took no further action relative to the service upon him. Since, as a matter of law, service on the agent constituted service upon Fiberglass, s 7--3--112, C.R.S.1973 (C.R.S.1963, 31--2--12), absent an affirmative showing that Fiberglass' agent diligently pursued efforts to locate the officers or directors of Fiberglass so that they, in turn, could notify Reliance, we can find no basis for Fiberglass, and therefore plaintiff, to claim a justifiable excuse for delay.
Judgment affirmed.
VAN CISE, J., concurs.
SMITH, J., dissents.
SMITH, Judge (dissenting):
I respectfully dissent.
Fiberglass through its president Pandolfo, one of the original defendants in the suit, clearly intended by execution of the insurance contract and payment of the premiums to provide a means of reimbursing anyone injured by its negligence for damages suffered, and Reliance clearly intended to assume such a contractual obligation.
The specific policy provisions at issue must be construed in light of this general purpose. Indeed, to ignore the purposes clearly intended by the parties by giving a hyper-technical construction to an isolated clause of the contract is to place form ahead of substance and often will result in justice going unrecognized during a misdirected search for uniformity of meaning.
The only reasonable purpose and function of the notice provision at issue is to prevent prejudice to the insurer's right to conduct a reasonable investigation of the occurrence, and to allow it adequately to defend any action brought against the insured. Hence, if such prejudice to the insurer does not result, as was the case here, no sound reason exists to permit a technical noncompliance to deprive either the insured or an innocent third party of benefits to which he would otherwise have been entitled. See Factory Mutual Liability Insurance Co. v. Kennedy, 256 S.C. 376, 182 S.E.2d 727.
The majority's construction of the notice requirement makes it a technical escape hatch by which the insurer may avoid coverage even where there is no prejudice to its interests. It thereby becomes a means of defeating the fundamental protective purpose of the insurance contract, that purpose being to guarantee the insured and the general public that liability claims will be paid up to the policy limits for which premiums were collected. See Miller v. Marcantel, 221 So.2d 557 (La.App.). I cannot in good conscience adhere to such a construction.
Although the policy may speak of the notice provision in terms of 'condition precedent,' nonetheless what is involved is a forfeiture. The carrier seeks, on account of a breach of that provision, to deny the insured the very thing paid for. To allow a forfeiture of coverage in the absence of prejudice to the insurer would be manifestly unfair to insureds and would also disserve the public interest. See Cooper v. Government Employees Insurance Co., 51 N.J. 86, 237 A.2d 870.
In the instant case, not only was Reliance advised of the claim but was also advised of the lawsuit arising therefrom as soon as it was begun. Even though such initial advisement only informed it that the president of its insured had been named as a party, it was advised several months later that the corporation itself had been added as a party. Reliance took no action whatsoever relative to the lawsuit. Judgment was not taken against its insured until approximately one year after Reliance had been advised that Fiberglass had been sued upon a liability claim which the policy had been intended to cover.
The majority concludes that:
'(I)t is not meterily that Reliance had ample opportunity to answer and defend. . . . (F)ailure to comply with the notice requirements is, in and of itself, sufficient to terminate coverage for this incident and no showing of prejudice is required.'
I believe the better reasoned rule and the one that should be adopted here is that, in an action affecting rights of third parties under a liability insurance policy, the noncompliance by the insured with the policy provisions as to notice and forwarding suit papers will not bar recovery unless the insurer shows that the failure to give such notice has resulted in substantial prejudice to its rights. Cooper v. Government Employees Insurance Co., Supra; Pickering v. American Employers Insurance Co., 109 R.I. 143, 282 A.2d 584. In the instant case, the insurer failed to make any such showing. I would therefore reverse.