Century Surety Company v. Jim Hipner, LLC and Huey Brock
377 P.3d 784
Wyo.2016Background
- Jim Hipner, LLC (Hipner) had a $2 million umbrella policy (Century Policy) with Century Surety; policy required written notice to Century "as soon as practicable" and contained an exclusion stating failure to notify "will result in exclusion of coverage whether we are prejudiced or not."
- A March 31, 2011 truck accident in North Dakota ultimately left a claimant, Huey Brock, quadriplegic; Hipner reported the accident to its primary insurers the same day but did not notify Century until September 2011 (indirectly via a renewal packet); Brock’s severe injuries were not known to Hipner’s co-owner until May 2011.
- Great West (primary insurer) opened and investigated the claim and later forwarded its file to Century; Century relied on Great West’s investigation but later criticized its thoroughness and declined to participate in settlement negotiations.
- Century sued for a declaratory judgment in federal court seeking a ruling that it had no duty to defend or indemnify Hipner based on Hipner’s alleged untimely notice; the district court found the policy’s "as soon as practicable" language ambiguous and held Century received timely notice.
- The Eighth Circuit certified to the Wyoming Supreme Court whether Wyoming law requires insurer prejudice before denying coverage for late notice and whether a policy clause disavowing the prejudice requirement is enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wyoming requires insurer prejudice before denying coverage for untimely notice | Hipner: courts should require insurer prejudice before denying coverage; aligns with public policy and fairness | Century: policy language is contractually enforceable; prejudice irrelevant; policy even disclaims prejudice requirement | Court: Adopted the notice-prejudice rule — insurer must show actual prejudice before denying coverage for late notice |
| Whether a policy clause denying coverage "whether we are prejudiced or not" is enforceable | Hipner: Such a clause is void as against public policy once notice-prejudice rule adopted | Century: The explicit clause should control; parties are free to contract for notice conditions | Court: Clause is void as against public policy and cannot circumvent the notice-prejudice rule |
| How to analyze timeliness when notice is alleged untimely | Hipner: (implicit) timeliness depends on facts and reasonableness of delay; prejudice matters | Century: strict contractual timing controls; untimely notice alone defeats coverage | Court: Two-step test — first determine timeliness under circumstances; if untimely, then determine whether insurer suffered prejudice |
| Relevance of Wyoming precedent to adopting notice-prejudice rule | Hipner: Wyoming precedent supports considering prejudice (Pacheco, Brown) | Century: Wyoming hasn’t formally adopted notice-prejudice; contract terms should be enforced | Court: Wyoming precedent is consistent; the court formally adopts the notice-prejudice rule |
Key Cases Cited
- Pacheco v. Continental Cas. Co., 476 P.2d 166 (Wyo. 1970) (considered prejudice in assessing untimely notice and evidence staleness concerns)
- Brown v. Life Ins. Co. of N. Am., 8 P.3d 333 (Wyo. 2000) (found lack of insurer prejudice dispositive in notice dispute)
- Alcazar v. Hayes, 982 S.W.2d 845 (Tenn. 1998) (adopted notice-prejudice rule and discussed public policy reasons)
- Brakeman v. Potomac Ins. Co., 371 A.2d 193 (Pa. 1977) (rejected strict contractual approach and emphasized adhesive nature of insurance contracts)
- Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223 (Colo. 2001) (modern adoption of prejudice requirement explained)
- North Fork Land & Cattle, LLLP v. First Am. Title Ins. Co., 362 P.3d 341 (Wyo. 2015) (insurance policies construed as contracts of adhesion; plain-meaning and contra proferentem principles)