Lindus v. Northern Ins. Co. of New York

• Decision Date: 30 June 1967
• Docket Number: CA-CIV,No. 2,2
• Citation: 6 Ariz.App. 74,429 P.2d 708
• Parties: Roger LINDUS, a minor child, by and through his Guardian ad Litem, Robert S. Tullar, Appellant, v. NORTHERN INSURANCE COMPANY OF NEW YORK, a corporation, and the Travelers Insurance Company, a corporation, also known as the Travelers Indemnity Company, Appellees. 261.
• Court: Arizona Court of Appeals

Page 708

429 P.2d 708

6 Ariz.App. 74

Roger LINDUS, a minor child, by and through his Guardian ad Litem, Robert S. Tullar, Appellant, v. NORTHERN INSURANCE COMPANY OF NEW YORK, a corporation, and the Travelers Insurance Company, a corporation, also known as the Travelers Indemnity Company, Appellees.

No. 2 CA-CIV 261.

Court of Appeals of Arizona.

June 30, 1967.

Fennemore, Craig, Allen & McClennen, by Calvin H. Udall, Phoenix, for appellant

Spaid, Fish, Briney & Duffield, by William Spaid, Tucson, for appellee Northern Insurance.

Kramer, Roche, Burch, Streich & Cracchiolo, by William P. French, Phoenix, for appellee Travelers Insurance.

HATHAWAY, Chief Judge.

The appellant, Roger Lindus, a minor, brought an action to recover under insurance policies issued by Northern Insurance Company of New Youk and the Travelers Indemnity Company, both corporations. The plaintiff appeals from a judgment in the lower court in favor of both defendants.

On May 26, 1960, the plaintiff, then a twelve year old resident student at Orme Ranch School, was severely burned by ignited gasoline. The accident occurred when Richard Phillippi, a resident student at Orme Ranch School, was pouring gasoline into the carburetor of a car and William Nelson, then an 18 year old resident student, turned the ignition switch and engaged the starter. The engine backfired and the gasoline can which Phillippi was holding caught fire. He threw the flaming can which struck and seriously burned the plaintiff, a passer-by.

At the time of the accident, William Nelson was not aware that he was insured under either of the defendants' policies. The defendant Travelers was notified of the occurrence in November of 1961 by a Phillippi insurer. The defendant Northern was notified in June of 1962 after the plaintiff had filed a complaint against Orme Ranch School and Phillippi in March of 1962 and Orme Ranch School had filed and served a third party complaint on William Nelson in May of 1962. Both defendants denied coverage under the policies after investigations.

In February, 1963, the plaintiff gave Royal-Globe Insurance Company and Farmers Insurance Group a 'covenant not to sue' Orme Ranch School for the consideration of $75,000. A judgment was recovered in March, 1963, against Nelson for $92,200. The plaintiff demanded payment from the defendant insurance companies and upon their refusal to make payment the complaint in this action was filed.

Northern Insurance's answer was filed in June, 1963, which answer raised lack of notice as a defense. Travelers Insurance's answer filed in August contained no reference to notice. However, Travelers did raise the defense of notice in answers to interrogatories at the end of August, 1963.

All of the parties stipulated that all issues of fact and law would be submitted to the court for decision on the basis of depositions, interrogatories and answers thereto, affidavits, pleadings, stipulations, exhibits admitted, and all other matters of which the court would take cognizance on motions for summary judgment made by all the parties.

The questions presented in this appeal are:

1. Whether the notice given was 'as soon as practicable' as required under both policies as conditions precedent.

2. If such notice was not given, whether the facts present a reasonable excuse for the failure thereof.

3. Whether the defendants waived the defense of failure of notice.

NOTICE GENERALLY

The plaintiff argues that timely notice was given or alternatively, that the delay in giving notice was excused because: (1) it was 'unlikely' that Mr. Nelson or any layman would have recognized the possible liability of William Nelson; (2) the minority of the insured is a circumstance to be considered; and, (3) there was no awareness of the existence of, or possible coverage by, an insurance policy. 'The true rule * * * must be declared to be that notice is an essential requirement in order to fix liability on the insurer when there has been such an occurrence or accident as would lead the ordinary prudent and reasonable man to believe that it might give rise to a claim for damages.'

The purpose of a notice provision is to afford the insurer an opportunity to make a timely and adequate investigation of all the circumstances. American Southern Insurance Co. v. England, 260 F.Supp. 55 (D.C.1966); 18 A.L.R.2d 443, 447. Provisions which require notice to be given 'as soon as practicable' are generally construed to mean within a reasonable time after the happening of the event insured against, having in view all the facts and circumstances of the case.

Nye v. Louis Ostrov Shoe Co., 43 N.E.2d 103 (Ohio App.1942). See also 13 Couch on Insurance, 2d ed., § 49:10, pp. 639--640. When a delay in notice is found to be based upon a reasonable excuse, then the general rule is that 'an accepted excuse restores the timeliness of the notice.' 18 A.L.R.2d 443, § 18, p. 470; see also 13 Couch on Insurance, 2d ed., § 49:128, p. 716.

We must determine whether the circumstances are such as to excuse the 17 months delay in giving notice to Travelers Insurance Company and the two years delay in giving notice to Northern Insurance Company. Each policy must be considered as a whole in determining whether the policies put the insureds on reasonable notice of coverage. Droz v. Paul Revere Life Insurance Co., 1 Ariz.App. 581, 583, 405 P.2d 833 (1965).

NOTICE AS TO TRAVELERS

The Travelers Insurance policy at the top of the first page of the policy is captioned, 'Family Automobile Policy.' We believe that a reasonable man should take notice from the title of the policy above, that this policy covered any of the family members involved in any accident connected with an automobile.

The defendant Nelson's involvement in the occurrence is clear. When he turned the ignition switch the spark ignited the gasoline. He was forewarned by prior experience with a similar occurrence. Potential liability should have been apparent even to a layman under these circumstances. Although young Nelson was not aware of liability insurance coverage at the time of the accident, it is reasonable to expect that he should have communicated immediately with his parents and particularly concerning insurance. We believe that a reasonable prudent 18 year old boy under the circumstances in which we find the defendant Nelson should foresee that some automobile liability insurance could be involved. The Travelers policy provides:

'The following are insureds under Part I:

'B. With respect to a non-owned automobile,

'1. The named insured,

'2. Any relative, but only with respect to a private passenger automobile or trailer provided the actual use thereof is with the permission of the owner * * *.'

We feel that this working clearly includes the facts presented in this case and put the defendant on notice that the accident which was a direct result of his operating or attempting to operate the automobile.

Under the fourth condition of the policy entitled 'Notice' the insured was to give notice to the insurer 'as soon as practicable' in the event of an 'accident, occurrence or loss.' This notice requirement is made a condition precedent to any actions against the company by condition No. 27:

'No action shall lie against the company unless as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy * * *.'

The trial judge's decision holding for the defendant, Travelers, was based solely on the conclusion that the long delay in notice resulted in direct prejudice to 'But when we come to the consideration of the effect of the inclusion of the clause that the performance of the conditions is a condition precedent to the right of action against the insurer, we find the authorities overwhelmingly in favor of giving full recognition to such provision, in which case the presence or absence of prejudice resulting from a delay in giving notice becomes immaterial.'

the defendant and therefore precluded its liability. We do not share the trial court's concern with the issue of prejudice. When notice is made a condition precedent to an action against the insurer the issue of prejudice is immaterial. We find this rule to be almost unanimously followed. In State Farm Mutual Automobile Insurance Co. v. Cassinelli, 67 Nev. 227, 216 P.2d 606 at page 615, 18 A.L.R.2d 431 (1950) the court said:

We cannot agree with the appellant that this well researched opinion is the result of 'sophistry based on this supposed distinction' between conditions subsequent and conditions precedent.

The Arizona cases, Massachusetts Bonding and Insurance Co. v. Arizona Concrete Co., 47 Ariz. 420, 56 P.2d 188 (1936) and Watson v. Ocean Accident and Guarantee Corp....