Indiana Ins. Co. v. Williams

• Decision Date: 25 May 1983
• Docket Number: No. 3-782A159,3-782A159
• Citation: 448 N.E.2d 1233
• Parties: INDIANA INSURANCE COMPANY, (Plaintiff Below), v. John R. WILLIAMS d/b/a Williams Motor Sales, John E. Williams, and Sherry Hart, (Defendants Below).
• Court: Indiana Appellate Court

Page 1233

448 N.E.2d 1233

INDIANA INSURANCE COMPANY, (Plaintiff Below), v. John R. WILLIAMS d/b/a Williams Motor Sales, John E Williams, and Sherry Hart, (Defendants Below).

No. 3-782A159.

Court of Appeals of Indiana Third District.

May 25, 1983.

Steven R. Crist, Terence M. Austgen, Singleton, Levy, Crist & Johnson, Highland, for appellant.

John S. Diaz, James W. Myers, III, Diaz, Moore & Associates, P.C., Portage, for appellee Sherry Hart.

John Hovanec, Gary, for appellees John R. Williams d/b/a Williams Motor Sales, and John E. Williams.

STATON, Judge.

The car driven by John E. Williams struck Sherry Hart's car on April 20, 1980. Hart was injured and Williams was charged with driving while intoxicated. On September 29, 1980, Hart sued Williams for personal injuries after Williams had pled guilty to the intoxication charge and promised to pay for all damages resulting from the accident.

Indiana Insurance Company (insurance company) represented Williams until June 3, 1981 when it sought a declaratory judgment. It claimed that Williams's noncompliance with two policy provisions relieved it from liability. Subsequently, the insurance company filed a motion for summary judgment with a verified affidavit by Richard A. Sweet, the insurance supervisor handling the case. The summary judgment was granted and Hart and Williams filed motions to correct errors.

Williams and Hart supplemented their motions to correct errors with affidavits challenging the insurance company's denial of liability based on its claim of Williams's noncompliance with policy provisions. The trial court granted the motions to correct errors.

The insurance company appeals the trial court's reversal of its grant of summary judgment based on its consideration of the evidence in the affidavits which accompanied Williams's and Hart's motions to correct errors. It has raised the following restated issues:

(1) Did the trial court err by reversing its grant of summary judgment upon consideration of evidence which was available but not presented at the summary judgment hearing?

(2) Can the insurance company avoid its liability under the policy without showing that it was actually prejudiced by either Williams's delayed notice of his car accident with Hart or by Williams's guilty plea and promise to pay for all damages resulting from his accident?

Affirmed. ¹

I. Newly Submitted Evidence

Williams's and Hart's supplemental affidavits challenged the insurance company's claim of the date upon which it first received notice of Williams's accident. The trial court determined that this challenge created a genuine issue of material fact; it granted the motions to correct errors.

The insurance company correctly contends that the trial court could not consider evidence which had been available but had not been presented at the summary judgment hearing. Collins v. Dunifon (1975), 163 Ind.App. 201, 206, 323 N.E.2d 264, 268. Therefore, the trial court erred when it granted the motions to correct errors based on the evidence presented in the affidavits.

While the trial court erred by considering Williams's and Hart's supplemental affidavits, our review standard of summary judgments requires us to affirm the trial court's reversal of its grant of summary judgment because summary judgment was improper as a matter of law. Carrell v. Ellingwood (1981), Ind.App., 423 N.E.2d 630, 636 (trans. denied ). As discussed in the next section, the grant of summary judgment for the insurance company was improper because the insurance company did not show actual prejudice from Williams's material noncooperation with policy provisions.

II. Actual Prejudice

The insurance company contends that Williams failed to comply with two policy provisions. It alleges that this noncompliance relieves it of its liability to defend Williams and from any liability to Hart. These provisions read as follows:

"PART VII--CONDITIONS

The insurance provided by this policy is subject to the following conditions:

A. YOUR DUTIES AFTER ACCIDENT OR LOSS:

1. You must promptly notify us or our agent of any accident or loss. You must tell us how, when and where the accident and loss happened. You must assist in obtaining the names and addresses of any injured persons and witnesses.

2. Additionally, you and other involved insured must:

a. Cooperate with us in the investigation, settlement or defense of any claim or suit. No insured shall, except at his or her own cost, voluntarily make any payment assume any obligation or incur any expense."

The first provision requires prompt notice of an accident. The insurance company asserts that Williams did not comply with this provision because he first notified it of his April 20, 1980 accident on October 9, 1980.

The second provision proscribes agreements to assume liability. The insurance company contends that Williams's guilty plea and promise to pay for all damages resulting from the accident constitutes noncompliance with this provision. We will discuss these two provisions separately.

Provisions within an insurance policy's cooperation clause are conditions precedent to the insurance company's liability to its insured. Motorists Mutual Insurance Co. v. Johnson (1966), 139 Ind.App. 622, 628, 218 N.E.2d 712, 715. Where the insurance company is prejudiced by its insured's noncompliance with the provisions, it is relieved of its liability under the policy. Id. 218 N.E.2d at 717. ²

The insurance company asserts that prejudice to its ability to prepare an adequate defense can be assumed from Williams's six month notification delay. To support this assertion, the insurance company relies on Hartford Accident & Indemnity Co. v. Lochmandy Buick Sales (7th Cir.1962), 302 F.2d 565 and Ohio Casualty Insurance Co. v. Rynearson (7th Cir.1974), 507 F.2d 573, 578-79.

Our review of Indiana law reveals that Hartford, supra and Ohio Casualty, supra do not control in this situation. Indiana had no controlling precedent when the Seventh Circuit decided Hartford, supra. In Hartford, the Court looked to the law of Indiana's sister states in determining that where the insured waited twenty-two months before notifying his insurance company of his accident, it could presume that the delay prejudiced the insurance company. Id. 302 F.2d at 567-68. In Ohio Casualty, supra, the Court followed Hartford, supra, to allow a presumption of prejudice and adopted a different rationale--that an insured who is an attorney and claims adjuster should be held to a higher standard. Id. at 578-79.

We decline to follow these federal opinions. It is axiomatic that a federal court's interpretation of Indiana law is not binding on this Court. Clipp v. Weaver (1982), Ind.App., 439 N.E.2d 1189, 1191. In Indiana, an insurance company must show actual prejudice from an insured's noncompliance with a policy's cooperation clause before it can avoid liability under the policy. Motorists, supra 218 N.E.2d at 715, 717. Indiana has held notice provisions to be conditions precedent to an insurance company's liability, as are cooperation clause provisions. London Guarantee & Accident Co. v. Siwy (1903), 35 Ind.App. 340, 345, 66 N.E. 481, 482. Contra Railway Passenger Assurance Co. of Hartford v. Burwell (1873), 44 Ind. 460, 465 and Couch on Insurance 2d (Rev. ed.) Sec. 51:106. In addition, public policy dictates that we should treat noncompliance with notice provisions the same as we treat noncompliance with cooperation clause provisions. We must liberally construe the insurance policy in favor of Williams and Hart. Motorists, supra 218 N.E.2d at 718; Norways Sanatorium, Inc. v. Hartford Accident & Indem. Co. (1942), 112 Ind.App. 241, 41 N.E.2d 823, 825.

Cooperation clause provisions and notice provisions have the same purpose and effect. A cooperation clause requires the insured to assist the insurance company in its preparation for settlement or trial. Motorists, supra 218 N.E.2d at 715, 717. The insured's responsibilities under the cooperation clause involve attending hearings and trials, assisting in effecting settlement, securing and giving evidence, and obtaining the attendance of witnesses. Couch on Insurance 2d (Rev. ed.) Sec. 51:106.

Similarly, notice provisions require the insured to assist the insurance company by giving it an opportunity to make a timely and adequate investigation during its preparation for settlement or trial. Motorists, supra 218 N.E.2d at 715; cf. 8 J. Appleman, Insurance Law and Practice Sec. 4731 (1981). ³ Noncompliance with notice provisions and noncompliance with cooperation clause provisions constitute a failure to assist the insurance company in its preparation for settlement or trial. Therefore, common sense dictates that a failure to notify should be treated the same as a failure to cooperate.

As this Court held in Motorists, supra, to avoid its liability under its policy an insurance company must show actual prejudice from its insured's failure to assist. Id. 218 N.E.2d at 715, 717. "Noncooperation must be material. Prejudice must be shown by the insurer." Id. 218 N.E.2d at 715. Therefore, to avoid its liability under the policy, the insurance company had to show that it was actually prejudiced by Williams's six month notification delay. Since the insurance company failed to show that it was actually prejudiced, we must affirm the trial court's reversal of its grant of summary judgment.

The second provision of Williams's policy is the cooperation clause. The insurance company can not avoid its liability under the cooperation clause simply by establishing that Williams had pled guilty to the intoxication charge and promised to pay for all damages resulting from the accident. As a matter of law, prejudice to the insurance company from Williams's non-cooperation can not be presumed. Motorists, supra 218 N.E.2d at 715, 717. Instead, the insurance company must show that it was actually prejudiced by Williams's actions. Id. Because it did not show actual...