Opinion
No. C3-96-122.
Filed July 2, 1996.
Appeal from the District Court, Isanti County, File No. C0-93-669.
Richard P. Clem, (for Appellant).
B. Jon Lilleberg, Teresa M. Croke, Johnson Condon, P.A., (for Respondent American Alliance Insurance Company).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1994).
UNPUBLISHED OPINION
Lynda Wynalda appeals from the final judgment and from the order denying her rule 60.02 motion. She argues that the district court erred in determining that the insurer was prejudiced as a matter of law by not being notified of a claim against its alleged insured, Michael Poff, until over two months after entry of a default judgment against Poff (eleven months after the accident). We affirm.
FACTS
On May 16, 1993, Peter Poff and his friend Chris Hermanson attended a party in Isanti County. While driving home after the party, they were involved in an automobile accident. Both were intoxicated at the time of the accident (Hermanson's BAC was .24, and Poff's BAC was .19). Hermanson died in the accident, and Poff sustained minor injuries. There was, and still remains, contradictory evidence regarding who was driving at the time of the accident.
On July 29, 1993, Lynda Wynalda served a complaint on Poff, alleging that Poff negligently caused the death of Hermanson while under the influence of alcohol. Poff did not answer. On February 2, 1994, a default judgment was entered in the amount of $187,000, plus costs and disbursements of $260.
Wynalda's attorney took Poff's deposition on April 12, 1994. At the deposition, Poff indicated that he was living at his mother's home at the time of the accident. Poff promised at the deposition that he would provide Wynalda's attorney with information regarding his mother's insurance. He did not. Wynalda's attorney learned the name of Poff's mother's insurer, American Alliance (the insurer), from her motor vehicle registration. He told the insurer of the claim on April 22, 1994.
Wynalda initiated a garnishment action against the insurer. The insurer denied coverage. The court granted Wynalda leave to serve a supplemental complaint on the insurer, which she did, seeking recovery of the default judgment from Poff's mother's policy. After cross-motions for summary judgment, the district court granted summary judgment in favor of the insurer, concluding that it had been prejudiced as a matter of law by the late notice. Wynalda moved for reconsideration under Minn.R.Civ.P. 60.02. The district court denied the motion, concluding that she failed to state a ground under that rule for vacating the judgment. This appeal followed.
DECISION
Wynalda argues that the district court erred in determining that the insurer was prejudiced as a matter of law by not being notified of a claim against Michael Poff until over two months after entry of the default judgment against Poff (eleven months after the accident).
Courts uphold notice provisions in insurance contracts because the policy behind the requirement is to give the insurer an opportunity for prompt investigation so as to protect itself against fraudulent or exorbitant claims and, while the matter is fresh in the minds of all, to appraise and determine a disposition by way of settlement or defense.
Sterling State Bank v. Virginia Surety Co. , 285 Minn. 348, 354, 173 N.W.2d 342, 346 (1969). However, failure to give timely notice is not fatal to an insured's claim unless the insurer was prejudiced by the delay. Ryan v. ITT Life Ins. Corp. , 450 N.W.2d 126, 130 (Minn. 1990). The mere passage of time between the accident and notification can be prejudicial, but a determination depends on the circumstances of the case. Id.
Wynalda argues that this case is similar to Reliance Ins. Co. v. St. Paul Ins. Cos. , 307 Minn. 338, 239 N.W.2d 922 (1976). In that case, the court determined that the insurer was not prejudiced by an 18-month delay between the event and notification of the insurer because "[t]he record does not disclose that the facts have changed in any way, or that the investigation will become any more difficult." Id. at 343, 239 N.W.2d at 925. Even though the delay in notification was longer in Reliance than in this case (18 months versus 11 months), as the insurer correctly notes, the action in that case had not been reduced to judgment.
Wynalda cites a foreign case for the proposition that the fact that judgment has been entered in the underlying action is not dispositive on the issue of prejudice. See Pulse v. Northwest Farm Bureau Ins. Co. , 566 P.2d 577 (1977). As the insurer correctly notes, in Pulse , the insured, "represented by their own counsel, defended" the action, and the matter was tried to the court. Id. at 578. In this case, however, the insured did not have counsel, did not defend, and there was no trial.
This court has reversed a trial court's determination that an insurer who was not notified of a car accident until six years after the accident, and four years after a default judgment, was prejudiced by the delay in notification. See Dairyland Ins. Co. v. Clementson , 431 N.W.2d 895 (Minn.App. 1988). However, there are several differences between Clementson and this case: the insured in that case was the injured party, not the injuring party; in this case, there are some facts that would suggest negligence on the part of someone besides the defendant; two insurers were involved in that case, not one; and the parties in that case stipulated to medical expenses, but the parties in this case did not.
Wynalda argues that the insurer is not prejudiced because the evidence of liability is "overwhelming" despite Poff's "after-the-fact denials." Nevertheless, as the district court noted, "[t]here is contradictory evidence regarding who was the driver of the vehicle at the time of the accident." It is not this court's role to resolve such disputes. Thus, we conclude that the insurer was prejudiced as a matter of law by the late notice in this case because it had no opportunity to investigate, settle, or defend, and a default judgment had been entered.
Our conclusion is consistent with the decisions of foreign courts that have considered this issue. See, e.g., Liberty Mut. Ins. Co. v. Cruz , 883 S.W.2d 164, 166 (Tex. 1993) ("[A]n insurer that is not notified of suit against its insured until a default judgment has become final, absent actual knowledge of the suit, is prejudiced as a matter of law."); Independent Sch. Dist. No. 1 v. Jackson , 608 P.2d 1153, 1154 (Okla. 1980) (When the insurer received no notice of a pending lawsuit or that default judgment would be taken, the insurer was prejudiced "because it did not have an opportunity to present its defense.").
Wynalda notes that she has offered to allow the default judgment to stand and allow the insurer to "relitigate" the issues of liability and damages. The district court rejected this offer:
Plaintiff has offered to relitigate the issues of liability and damages as they relate to Garnishee, while leaving intact the judgment against Defendant Poff. Such a procedure is difficult to conceptualize, since Garnishee has no liability except through Defendant Poff, its alleged insured. It is conceivable that relitigating the issues could result in a different verdict on either liability or damages than the existing default judgment, and that would be an intolerable result.
The insurer argues that there is no mechanism for "relitigating" these issues. Wynalda cites no authority that would allow such relitigation. She correctly notes that in Reliance , the time to answer was extended. However, allowing more time to answer is very different from relitigating issues after judgment has been entered.
The district court did not err in determining that the insurer was prejudiced as a matter of law by not being notified of a claim against its alleged insured, Michael Poff, until over two months after entry of the default judgment against Poff.