Century Sur. Co. v. Jim Hipner, LLC

• Decision Date: 17 August 2016
• Docket Number: S–15–0294
• Citation: 2016 WY 81,377 P.3d 784
• Parties: Century Surety Company, Appellant (Plaintiff), v. Jim Hipner, LLC; and Huey Brock, Appellees (Defendants).
• Court: Wyoming Supreme Court

377 P.3d 784

2016 WY 81

Century Surety Company, Appellant (Plaintiff)

v.Jim Hipner, LLC; and Huey Brock, Appellees (Defendants).

S–15–0294

Supreme Court of Wyoming.

August 17, 2016

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.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

FOX, Justice.

[¶1] The United States Court of Appeals for the Eighth Circuit certified a question to this Court concerning the enforceability of an insurance policy notice provision. Specifically, the Eighth Circuit asked:

[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.

We answer in the affirmative.

FACTS

[¶2] Although the parties provided a record containing various documents, we find it unnecessary to refer to that record. Where a question of law is certified to this Court pursuant to W.R.A.P. 11, we rely upon the factual determinations of the certifying court. Wexpro Co. v. Brimhall , 7 P.3d 42, 43 (Wyo. 2000) ; Allhusen v. State By and Through Wyo. Mental Health Professions Licensing Bd ., 898 P.2d 878, 881 (Wyo. 1995). The following facts were provided in the Eighth Circuit's Order for Certification of Questions of State Law:

In 2010, [Jim Hipner, LLC (“Hipner”) ], a trucking company, obtained a $2 million umbrella policy (“Century Policy”) from Century [Surety Company (“Century”) ] in order to secure a contract with a customer. In paragraph 3, the Century Policy contains the following notice provision:

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.

Later, in the same paragraph, the Century Policy contains an exclusion provision that states:

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.

On March 31, 2011, one of Hipner's drivers created a road obstruction that produced an injury-generating, multi-vehicle collision (“the accident”) in North Dakota. According to the North Dakota Motor Vehicle Crash Report, a passenger in a car that was rear-ended by another vehicle suffered injuries deemed minor at the time. The Motor Vehicle Crash Report indicates that the other persons involved in the accident had “non-incapacitating” injuries at the time of the accident. Jim Hipner (“Jim”), a co-owner of Hipner, learned of the accident the same day that it occurred.

Jim testified that, upon his arrival to the scene of the accident, the state patrol officer told him “there were no serious injuries.” Jim also testified that the officer told him that one of the passengers had “some numbness or tingling,” but that “it was nothing to worry about” and that this “happens quite often in these cases.” According to the medical records, one person, Huey Brock, arrived at Trinity Hospital on March 31 unable to move his arms or legs.

On the day of the accident, Jim called and reported the accident to representatives at Willis of Wyoming and Great West Casualty Company (“Great West”), the underlying primary insurance companies for Hipner. But, no one at Hipner notified Century. In his deposition, Jim stated that he thought notifying Willis of Wyoming satisfied his obligations to notify all of the insurance companies. On March 31, Great West set up a claim and began investigating the accident.

Brock's injuries rendered him quadriplegic. Jim testified that he did not know that Brock sustained significant injuries from the accident until May 2011. On September 20, 2011, Century was notified of the accident indirectly when Willis of Wyoming sent Century the policy renewal for Hipner. The next day, Century created an umbrella claim relating to the accident. On December 31, 2011, Great West sent its claim file, including the investigation materials, to Century. Century did not perform its own investigation of the accident because “[t]he duty to investigate the accident fell upon Great West Casualty. Century Surety relied upon Great West Casualty to perform a competent investigation.” Nevertheless, Century later found fault with Great West's investigation, claiming it was not thorough enough. In November 2012, Century received Brock's settlement demand but declined to participate in the settlement “based upon lack of coverage for Jim Hipner LLC under the Century Policy coupled with serious questions regarding liability and damages.”

Century then filed the instant action in federal court seeking a declaratory judgment that Century does not have an obligation to defend or indemnify Hipner in connection with any claims arising out of or relating to the accident. Both Hipner and Brock filed motions for summary judgment, or in the alternative a motion for partial summary judgment, requesting Century's claims for declaratory relief be denied. Century, in response, filed a cross-motion for summary judgment seeking a declaration that it has no obligation to defend or indemnify Hipner in connection with the accident. Specifically, Century argued that it is not liable under Wyoming law because Hipner failed to provide written notice “as soon as practicable” as required by the Century Policy.

The district court determined that although the Century Policy clearly and unambiguously requires written notice of a claim, the “as soon as practicable” requirement is ambiguous. Citing to Pacheco v. Continental Cas. Co. , 476 P.2d 166 (Wyo. 1970), the district court concluded that Wyoming courts have found similar language ambiguous. After a “balancing of the beneficiary's right to have the policy liberally construed in his favor with the legitimate interest of the insurer in being protected from stale claims,” Pacheco , 476 P.2d at 169, the district court found that Century received timely notice under the Century Policy as a matter of Wyoming law.

[¶3] Century appealed to the United States Court of Appeals for the Eighth Circuit. On December 28, 2015, the Eighth Circuit filed the Order for Certification of Questions of State Law, stating the question quoted above, see supra ¶ 1. On January 20, 2016, this Court issued a Notice of Agreement to Answer Certified Question.

STANDARD OF REVIEW

[¶4]Pursuant to W.R.A.P. 11.01, we may answer a question of law that may be determinative of a cause pending in the certifying court for which there appears to be no controlling precedent from this Court. Preston v. Marathon Oil Co. , 2012 WY 66, ¶ 4, 277 P.3d 81, 83 (Wyo. 2012). Certified questions are queries of law that are reviewed de novo. Id. ; State v. Mares , 2014 WY 126, ¶ 10, 335 P.3d 487, 493 (Wyo. 2014).

State v. Black Hills Power, Inc. , 2015 WY 99, ¶ 4, 354 P.3d 83, 85 (Wyo. 2015).

DISCUSSION

[¶5] In North Fork Land & Cattle, LLLP v. First American Title Insurance Company , 2015 WY 150, ¶ 14, 362 P.3d 341, 346 (Wyo. 2015), we explained that Wyoming courts interpret insurance policies like other contracts; however, we give insurance policy language “the plain meaning a reasonable insured would understand it to mean,” and where terms are ambiguous, they are strictly construed against the insurer. We take this approach because insurance policies are contracts of adhesion where “the insured has little or no bargaining power to vary the terms....” Id . (quoting Doctors' Co. v. Ins. Corp. of America , 864 P.2d 1018, 1024 (Wyo. 1993) (internal citations omitted)).

[¶6] Century argues that the policy language at issue is unambiguous and even a strict construction of that language in favor of Hipner requires its enforcement. Century also claims that because the notice provision language is not unconscionable, it must be enforced. Finally, Century avers that Wyoming law requires the rejection of the notice-prejudice rule (which requires an insurance company to be prejudiced before it can deny coverage based upon the violation of a notice provision in an insurance policy), especially in this case where the notice provision contains language requiring notice whether Century was prejudiced or not. In response, Hipner asserts that, regardless of the policy language, prejudice should be required when an insurer denies coverage based upon a failure to provide timely notice of a claim or occurrence and urges this Court to adopt the notice-prejudice rule because it is consistent with Wyoming precedent and is warranted by a variety of public policy considerations.

The Traditional Rule and the Notice-Prejudice Rule

[¶7] Traditionally, courts held that in order to avoid liability or its duty to defend, an insurance carrier only needed to establish that an insured's notice of an occurrence or claim was untimely; prejudice to the insurer was irrelevant to the inquiry. Charles C. Marvel, Annotation, Modern Status of Rules Requiring Liability Insurer to Show Preju dice to Escape Liability Because of Insured's Failure or Delay in Giving Notice of Accident or Claim, or in Forwarding Suit Papers , 32 A.L.R.4th 141, § 2 (updated 2106). According to this view, “timely notice is not...