Mighty Midgets, Inc. v. Centennial Ins. Co.
| Decision Date | 05 April 1979 |
| Citation | 47 N.Y.2d 12,389 N.E.2d 1080,416 N.Y.S.2d 559 |
| Parties | , 389 N.E.2d 1080 MIGHTY MIDGETS, INC. v. CENTENNIAL INSURANCE COMPANY, Appellant-Respondent. |
| Court | New York Court of Appeals Court of Appeals |
Applying an objectively stanced reasonable person standard, in the facts and circumstances of this case we hold that it could be found that written notification of the occurrence of an accident approximately seven and a half months after the assured learned of the event met a liability policy's requirement that the insurer be given notice "as soon as practicable". On a subsidiary issue, we also hold that the insurer is not liable for attorneys' fees and disbursements necessarily incurred in the policyholder's successful prosecution of the action it brought to compel the insurer to comply with its policy obligations.
Plaintiff, Mighty Midgets, Inc., is a nonprofit corporation organized to encourage, manage and otherwise lend support to boys' football teams in Orangetown, Rockland County. On this appeal, its liability carrier, Centennial Insurance Company, challenges so much of an order of the Appellate Division as affirmed a judgment declaring that Centennial was required to defend and, within the limits of the applicable coverage, indemnify the Midgets against liability asserted in a suit arising out of an occurrence in which nine-year-old Glenn De Temple suffered serious personal injuries. The Midgets cross-appeal from so much of the order as deleted an award to cover its attorneys' fees and expenses in the present litigation.
The accident to Glenn, then a member of a Midgets-sponsored team, took place on October 18, 1970, when, immediately after the completion of a game in which he had participated, a large pot of boiling water which rested on the counter of an improvised frankfurter stand the Midgets operated as a fund-raising activity was caused to pour over him. Robert Halle, the unpaid volunteer president of the Midgets, was not present. But, learning of the misadventure before the day was out, he was the one who thereafter acted for his organization in a sequence of communications which, as found by the Trial Judge and later affirmed by the Appellate Division, provide the factual backdrop for the central legal issues confronting us today.
The first communication took the form of a telephone call to the Dunn & Fowler, Division of Frank B. Hall & Company (Dunn), to whom Halle gave oral notice of the event and made inquiry as to the procedure to be followed in presenting a claim. It was no accident that it was Dunn that Halle called. Both the Centennial liability policy and a second one providing accident and health protection with the Hartford Accident & Indemnity Company had been secured for the Midgets at the instance of Dunn, a leading specialist in athletic team insurance and apparently the organization upon which the more than 2,500 teams enrolled in the national program of which the Midgets were a part would rely for guidance in insurance matters. Dunn's role went far beyond that of solicitor of the liability policy. It collected the premiums, issued the policy and was designated by the policy as "agent or broker". Moreover, this disjunctive phraseology was not at odds with the Modus operandi Dunn and Centennial had in fact adopted. Their established practice was for Dunn, who wrote most if not all its athletic team business with Centennial, to be entrusted with large batches of policies executed by Centennial's authorized signatories in blank, leaving it to Dunn rather than Centennial to fill in such things as policy numbers, names of assureds it procured and the premiums to be charged. When Dunn was ready to do so, it required no further authorization from Centennial to decide, as indeed it did in the case of the Midgets, if and when a policy was to go into effect.
Returning to Halle's initial telephone call, his testimony, fully credited by the courts below, is that, upon identifying himself, describing the De Temple incident and asking whether he should "put it under a medical or (a) liability claim", the Dunn representative to whom he reported instructed him the appropriate one was under the Hartford accident and health policy. There was not the slightest suggestion that notice to Centennial would also be in order. The result was that the 21-year-old Halle, whose limited personal and vocational backgrounds were totally alien to either the world of insurance or that of the law, and who, as Dunn and Centennial presumably would know, until then had no previous experience in the processing of a liability claim, filed a claim only on a Hartford form supplied him by Dunn.
Thereafter, so far as the Midgets knew, things proceeded uneventfully until April 7, 1971, when Hartford for the first time notified the Midgets that its policy did not cover the accident because it had transpired after the game in which Glenn had participated was over. In the intervening months, Glenn's father, an avid supporter of the Midgets, had never indicated the slightest intention of pursuing any claim other than the one filed against the Hartford. Nor does that possibility appear to have ever entered Halle's mind. But Hartford's refusal to pay the medical claim apparently roused the De Temples from their quiescence sufficiently for them to consult counsel, who, on May 25, sent a letter informing the Midgets that a liability suit on behalf of their clients was in the offing. Still reflecting his belief that communicating with Dunn was the same as communicating with Centennial, Halle forwarded this letter to Centennial care of Dunn and reminded this insurer that the facts of the accident had been reported previously, an obvious reference to his original telephone call to Dunn. 1 This was the Midgets' first written notice to Centennial. 2
It was on this record that Trial Term, sitting without a jury, found as fact (1) that Dunn's handling of the communications from Halle was negligent; 3 (2) that, "under the circumstances", including Halle's "limited * * * understanding of insurance matters" and the relationship between Dunn and Centennial, the Midgets acted reasonably in that they did all that they "could do" until the arrival of the letter on May 25 first disabused them of the misinformation Dunn had imparted; and (3) that the letter transmitting the De Temple lawyer's liability claim letter constituted written notice given "as soon as practicable" after the claim was made. Though the subsequent affirmance by the Appellate Division was by a vote of three to two, there was no division among its members either over the operative facts or over the deletion of the award for fees and expenses. However, the dissenters would have held the Midgets' written notice untimely. For the reasons which follow, we, in turn, now affirm.
At the outset, we draw attention to the two provisions of the Centennial policy about which the controversy revolves. One tells us that, in the event of an occurrence resulting in personal injury or property damage, "written notice * * * shall be given by or for the INSURED to the company or any of its authorized agents as soon as practicable". The other reads: "Notice to any agent * * * shall not effect a waiver or a change in any part of this policy or estop the company from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy, signed by a duly authorized representative of the company".
It is well settled that the phrase "as soon as practicable" is an elastic one, not to be defined in a vacuum. By no means does it connote an ironbound requirement that notice be "immediate" or even "prompt", relative as even those concepts often are; "soon", a term close to each of these in common parlance, is expressly qualified in the policy here by the word "practicable". Nor was compliance with the insurance policy's temporal requirement to be measured simply by how long it was before written notification came forth. More crucial was the reason it took the time it did. So, the provision that notice be given "as soon as practicable" called for a determination of what was within a reasonable time in the light of the facts and circumstances of the case at hand. (Deso v. London & Lancashire Ind. Co. of Amer., 3 N.Y.2d 127, 129, 164 N.Y.S.2d 689, 690, 143 N.E.2d 889, 890; State Farm Mut. Auto. Ins. Co. v. Bush, 46 A.D.2d 958, 362 N.Y.S.2d 220.)
Of course, there is no inflexible test of reasonableness. As with most questions whose answers...
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