Loblaw v. Employers' Liability Assur. Corp., Ltd.

• Decision Date: 14 October 1982
• Citation: 57 N.Y.2d 872,456 N.Y.S.2d 40,442 N.E.2d 438
• Parties: , 442 N.E.2d 438 LOBLAW, INC., Appellant, v. EMPLOYERS' LIABILITY ASSURANCE CORP., LTD., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 40

456 N.Y.S.2d 40

57 N.Y.2d 872, 442 N.E.2d 438

LOBLAW, INC., Appellant, v. EMPLOYERS' LIABILITY ASSURANCE CORP., LTD., Respondent.

Court of Appeals of New York.

Oct. 14, 1982.

Beth L. Hoffman and Chris G. Trapp, Buffalo, for appellant.

Diane F. Bosse, Buffalo, for respondent.

OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division, 85 A.D.2d 880, 446 N.Y.S.2d 743, should be affirmed, with costs.

The record shows that a medical evaluation commissioned by Loblaw in April, 1966 determined that the employee had suffered a permanent partial disability. In addition an appraisal of the potential liability made at Loblaw's request concluded that this could result in a very expensive claim in view of the comparative youth of the employee. A little more than a year later Loblaw's agent informed it that a reserve of $31,500 was warranted and a subsequent medical evaluation of the employee confirmed the permanence of the injury and its extent. Nevertheless Loblaw did not notify the insurance company until June 20, 1972.

On the particular facts of this case it cannot be said that the Appellate Division erred when it held, as a matter of law, that Loblaw's ongoing obligation to give notice of any claims arising under the policy was not complied with when it failed to give notice until five years after being informed that this claim might exceed $25,000.

FUCHSBERG, Judge (concurring).

This appeal, directly involving the interpretation of the language of an insurance policy, presents us with an opportunity to provide much-needed clarification of the confusion which now so frequently attends the construction of such contracts. In the hope that it will prove useful on that score, I therefore venture to set out the views on which I base my vote.

The case comes to us in the context of a suit brought by the plaintiff, Loblaw, Inc., a retail chain, under a "workmen's compensation excess insurance policy" issued to it by the defendant, Employers' Liability Assurance Corporation. By its terms, Employers' agreed to reimburse Loblaw for any amounts beyond $25,000 which the latter might be required to pay for any one accident; Loblaw qualified as a self-insurer for the $25,000 retention (Workmen's Compensation Law, § 50; ^* cf. Vehicle and Traffic Law, § 316 [liability "self insurance"] ).

The pivotal question is whether Loblaw complied with the excess policy's notice provision. In pertinent part, it reads: "The Self-Insurer, upon the occurrence of any accident which in the opinion of the Self-Insurer may involve liability on the part of the Company shall give immediate written notice thereof, with the fullest information obtainable at the time, to * * * the Company * * * The Self-Insurer shall give like notice with full particulars on any claim made or suit brought on account of such accident".

Relevant too is the policy's prescription that: "The Self-Insurer shall assume charge of the settlement or defense of any claim made or proceeding instituted against the Self-Insurer but the Company shall be given the opportunity and shall have the right, to be exercised at its own election and at its own expense, to be associated with the Self-Insurer in the defense and control of any claim or suit or proceeding relative to any accident where in the opinion of the Company there is a possibility of the loss exceeding the amount to be borne by the Self-Insurer".

These clauses before us, we turn to the events governing this litigation, both those relating to the underlying compensati claim from which it emanates and those bearing directly on whether the notice necessary to implicate the excess coverage was given.

It all starts with an accident on February 24, 1964, when a Loblaw employee, then in apparent good health, sustained a work-related back injury. It is undisputed that while, as first reported, the injury was relatively slight, over the next 14 months it took a troublesome course which led to three hospitalizations, one for back surgery, whose aftermath, according to a medical evaluation commissioned by Loblaw in April, 1966, was permanent partial disability. Concomitantly, an appraisal of the financial exposure the employee's compensation claim then represented, made for Loblaw by the licensed insurance adjusting company which acted as its agent in such matters, advised it that the claim "can prove very expensive because here we have a fairly young man and this can go on forever".

Up to this point, Loblaw had given no notice of the occurrence to Employers'. Nor did it do so when, on September 28, 1967, the agent advised Loblaw that a reserve of $31,500 was warranted. Indeed, though reports of intervening medical examinations produced equally pessimistic prognoses, the matter remained unreported to the excess carrier as late as December, 1970, when the agent not only drew its principal's attention to the fact that the latter already had paid out $21,061.04 against this open-ended claim, but also politely, but expressly, suggested that it "might wish to contact the excess carrier". Nevertheless, as is now conceded, it was not until June 20, 1972 that notice was despatched to Employers'. The latter's response, in July, was in the form of a letter reserving the right to disclaim, and, in October after investigation, the exercise of that purported right on the ground that its insured failed to timely comply with the notice clause. There followed this suit, for a declaration of rights and for all payments due under the policy.

After a nonjury trial, Supreme Court, Erie County, held, explicitly that, until "shortly" before it advised Employers' of the ongoing claim, Loblaw entertained a genuine opinion that the claim "was not likely to exceed the retenti figure" and, implicitly, that, so long as Loblaw held that opinion, no matter its subjectivity, no notice was required. On that rationale, the court entered an order (1) directing Equitable to reimburse Loblaw for $21,751.64, the sum by which the $25,000 retention had by then been exceeded, and (2) declaring that Employers' was obligated as well to reimburse Loblaw for all future medical and compensation payments on account of this claim.

On appeal, however, the Appellate Division, Fourth Department, held, first, that Loblaw's obligation under the agreement was not so limited but an ongoing one and, second, that, by May, 1969, it surely was derelict in not notifying Employers'. In reaching this second conclusion, it placed specific reliance on (1) medical diagnoses which, as of that date, well over five years after the accident, continued to certify the permanent nature of the claimant's disabling injury, (2) on the $14,000 which the steadily mounting compensation payments then had already reached, and (3) on the fact that the 55-year-old claimant (who under the life expectancy tables of the United States National Center for Health Statistics had a life expectancy of 20.8 years [NY PJI2d, 1981 Cum.Supp., p. 225] ) had many compensable years ahead of him. Accordingly, the court reversed the order from which the appeal was taken and, on the facts...