Barnes v. Waco Scaffolding and Equipment Co.

• Decision Date: 19 October 1978
• Docket Number: No. 77-941,77-941
• Parties: J. Richard BARNES, Commissioner of Insurance, State of Colorado, as Receiver for Manufacturers and Wholesalers Indemnity Exchange, a reciprocal exchange, Plaintiff-Appellant, v. WACO SCAFFOLDING AND EQUIPMENT COMPANY, a Colorado Corporation, Defendant-Appellee. . II
• Court: Colorado Court of Appeals

Page 505

589 P.2d 505

41 Colo.App. 423

J. Richard BARNES, Commissioner of Insurance, State of

Colorado, as Receiver for Manufacturers and Wholesalers Indemnity Exchange, a reciprocal exchange, Plaintiff-Appellant, v. WACO SCAFFOLDING AND EQUIPMENT COMPANY, a Colorado

Corporation, Defendant-Appellee.

No. 77-941.

Colorado Court of Appeals, Div. II.

Oct. 19, 1978.

Rehearing Denied Nov. 16, 1978.

Certiorari Denied Jan. 22, 1979.

White & Steele, P.C., Robert A. Zupkus, Denver, Colo., for plaintiff-appellant.

Yegge, Hall & Evans, Richard D. Hall, Denver, Colo., for defendant-appellee.

ENOCH, Judge.

Plaintiff is receiver for Manufacturers and Wholesalers Indemnity Exchange (Manufacturers), which was declared insolvent and placed in receivership after this action was initiated. Plaintiff appeals from a declaratory judgment that defendant Waco Scaffolding and Equipment Company was entitled to the protection provided under its policy of insurance issued by Manufacturers even though Waco delayed giving Manufacturers notice of an accident. We affirm.

The material facts are not in dispute. Waco is in the business of selling, leasing, and servicing construction equipment. On several occasions in 1971, Waco was called to service a hoist being used to carry materials and equipment at a construction site. On December 23, 1971, the hoist fell to the ground causing serious injuries to two construction workers who were riding the hoist. Waco became aware of the accident that day and conducted its own investigation. Believing that it was in no way liable and that no claims would be asserted against it, Waco did not inform Manufacturers of the accident at that time. In January 1974, however, the injured workmen served a summons and complaint on Waco, and Waco then notified Manufacturers of the accident, calling upon the insurance company to defend the suit. Manufacturers subsequently brought this action for declaratory judgment that it owed no duty to defend or insure Waco for the accident because of Waco's failure to give timely notice under the terms of the insurance contract.

Plaintiff contends that the court erred in concluding as a matter of fact or law that Waco's stated belief of non-liability for the accident constituted a sufficient excuse to delay reporting the accident until served in the personal injury suit. We do not agree.

Under the terms of the contract Waco was required to give Manufacturers written notice of an occurrence "as soon as practicable." Failure to notify the insurer within a reasonable time constitutes a breach of contract unless there is a justifiable excuse or extenuating circumstances explaining the delay. Certified Indemnity Co. v. Thun, 165 Colo. 354, 439 P.2d 28 (1968).

There are no Colorado appellate decisions determining whether a reasonable belief of non-liability will excuse delayed notice. In Barclay v. London Guarantee & Accident Co., 46 Colo. 558, 105 P. 865 (1909), our Supreme Court held against the insured for failure to give notice but specifically reserved decision on whether a reasonable construction of the policy excused notice when the insured had no reason to apprehend that a claim would be made.

Courts in other jurisdictions have allowed the excuse of reasonable belief of non-liability when it appears that the insured has exercised a high degree of care and has acted in good faith in coming to that conclusion. U.S. Fidelity & Guaranty Co. v. Giroux, 129 Vt. 155, 274 A.2d 487 (1971); Frederick v. John Wood Co., 263 Minn. 101, 116 N.W.2d 88 (1962). See also 8 J. Appleman, Insurance Law & Practice § 4744. The general rule is stated in 44 Am.Jur.2d Insurance § 1474, as follows:

"It is generally recognized that the insured may be excused for a delay or failure to give the required notice to the insurer where it appears that, acting as a reasonably prudent person, he believed he was not liable for the accident. Thus, where the insured has no reasonable grounds for believing that any act or omission by it, or any act of its employees, was the cause of an injury upon which an action was later based by an injured party against the insured, the insured was held not to be required to give any notice to the insurer under a liability policy requiring notice of an accident to be given 'as soon as practicable.' "

We agree with the general rule and hold that a reasonable construction of the policy excuses delayed notice where the insured has acted as a reasonably...