We consider here three causes that come to us on petitions to transfer from the Indiana Court of Appeals. The causes are unrelated but each concerns issues involy-ing the notice provisions found in insurance contracts and we consolidate them- only for purposes of our consideration and written opinion so that these issues might be resolved.
Indiana Insurance Co. v. Williams, (1983) Ind.App.,
Indiana Insurance filed a request for declaratory judgment, asking that the trial court determine that it did not owe Williams any insurance obligation due to his violation of the provisions of the automobile insurance policy: the duty to promptly notify and the duty to cooperate. Later, the insurance company filed a motion for summary judgment with a verified affidavit by the insurance supervisor handling the matter. The trial court initially granted summary judgment in favor of Indiana Insurance, then reversed itself and granted defendants' motion to correct errors based on affidavits submitted by Hart and Williams which challenged the claim of Williams' noncompliance with policy provisions.
The Court of Appeals affirmed the trial court's reversal of summary judgment in a two to one decision (Hoffman, J., dissenting). The Court of Appeals determined that the trial court erred when it accepted and considered the affidavits which were filed with the defendants' motions to correct errors. Indiana Insurance agrees with this holding and does not raise it in this petition to tranfer. The Court оf Appeals went on to hold, however, that summary judgment was still improperly granted because the insurance company failed to show that it was actually prejudiced by Williams' six month notification delay. (emphasis added)
Kosanovich v. Meade, (1983) Ind.App.,
The Court of Appeals, again, in a two to one decision, (Hoffman, J., dissenting) followed its ruling in Indiana Insurance, claiming there is no material difference between a notice provision and a cooperation provision in an automobile liability policy. Accordingly, the Court of Appeals found that the trial court had applied an improper standard by not requiring a showing of prejudice to the insurer and reversed the trial court's entry of summary judgment.
Miller v. Dilts, (1983) Ind.App.,
The Fourth District (Young, J., dissenting without opinion) followed the Third District's rulings in Indiana Inswrance and Kosanovich and held that Indiana has rejected the presumption of prejudice where an insured does not promptly notify the insurer about an accident.
The common question in each of the three transfer cases is whether there is a difference between a duty to give prompt notice and a duty to cooperate in an automobile insurance policy. The insurers contend that an insurance company is entitled to a presumption of prejudice if it receives unreasonably late notice of an automobile accident or cause of action involving its insured, but at the same time they agree that there must be a showing of prejudice if the insured violates the duty to cooperate clause. The Court of Appeals, Third and Fourth Districts, held that there is no difference and that each violation requires a showing of prejudice to the insurer in order to avoid coverage under the policy. As an example of these two clauses, we set out here the provisions that were found in the insurance policy in Indiana Insurance:
PART VII-CONDITIONS
The insurance provided by this policy is subject to the following сonditions:
A. YOUR DUTIES AFTER ACCI DENT 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 Court of Appeals correctly found in Indiana Insurance that the duties to notify and to cooperate are condi
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tions precedent to the insurance company's liability to its insured. Motorist Mutual Insurance Co. v. Johnson, (1966)
The Court of Appeals was correct in interpreting Indiana law to be that an insurance company must show actual preju- + - « dice from an insured's noncompliance with _ the policy's cooperation el€use before it can , CZ unde avoid Hability under the policy. This issue was clearly and properly decided in Motorist's Mutual Insurance Co., supra. Notice was not an issue in Motorist, however, as the evidence clearly showed the insurance company was aware of the loss and of the action pending against its insured from its very inception. The question in Motorist was a violation of the cooperation clause that created prejudice to the insurance company. In Motorist, Farley was the named insured in the policy but the automobile was being driven by a Mr. Gammon when James Johnson was struck and killed. Under the permissive use provisions of the policy, Gammon would have the same rights and privileges under the policy that Farley did if Gammon was driving the automobile with Farley's permission. Farley stated unequivocally that Gammon was driving the automobile without his permission. Gammon insisted from the start that Farley had given him permission to drive the automobile and that he had a right to the protection of the insurance company as an insured driver. When Johnson's estate sued Farley and Gammon, Motorist entered its appearance and defended Farley but refused to represent or defend Gammon, leaving him with private counsel. During the trial Farley changed his story and stated that Gammon was, in fact, driving the automobile with Farley's permission. Motorist claimed both men viоlated the cooperation clause, thereby placing the company in the untenable position of being severely prejudiced. Motorist alleged two reasons to show a lack of cooperation: Farley falsely stated that he had not given Gammon permission to drive the car; and Gammon and his attorney never forwarded the summons or tendered the defense to Motorist's attorneys.
Although the court in Motorist held that Farley breached the cooperation clause by' intentionally furnishing false information of a material nature, the court аlso stated that Motorist was estopped from denying liability for Gammon because it had waived the strict provisions of the policy. "The doctrines of 'waiver' and 'estoppel' extend
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to practically every ground upon which an insurer may deny liability." Travelers Insurance Co. v. Eviston, (1941)
The court in Motorist went on to cite Frankfort, etc., Ins. Co. v. Lafayette Tel. Co., (1922)
"Many cases are cited by appellant on failure to comply with the policy as constituting conditions precedent. These are also readily distinguished from the instant case in that most such cases exhibit facts from which it can be said that insurer had no notice of mattеrs vitally affecting its interests. As pointed out, in the opinion in [Lomont v. State Farm Mut. Auto. Ins. Co., (1958)128 Ind.App. 645 ,151 N.E.2d 701 ,] at p. 652 of128 Ind.App., at p. 704 of 151 N.E.2d there the insurance company first received notice of the existence of the action against its unnamed insured 'over eight years after the happening of the accident' No comparison can be made here where the insurer knew the action was pending almost since its inception." (emphasis added)
Td.
While the precise issue of whether or not actual prejudice is required whenever the notice provision of an insurance policy is violated hаs not been discussed until now by the appellate courts in Indiana, the federal courts have decided the issue based on an interpretation of the law in Indiana. In Hartford Accident & Indem. Co. v. Lochmandy Buick Sales, (7th Cir.1962)
The Seventh Circuit again faced this issue in Ohio Casualty Ins. Co. v. Rynearson, (7th Cir.1974)
We agree with the Court of Appeals that we are not bound by federal court decisions in their interpretations of Indiana law. We give respectful consideration to them, however, as we do to decisions in other jurisdictions to aid us in coming to the ultimate conclusion of what the law is in Indiana on a particular issue. In so doing, we find the opinions of the Seventh Circuit Court of Appeals in Lockmandy and Rynearson to be sound and well grounded in Indiana law. The Seventh Circuit Court of Appeals in both of the above opinions cited London Guarantee and Accident Co., Ltd. v. Siwy, (1904)
"This court in the case of Employers, et., Corp. v. Light, etc., Co. (1902),28 Ind.App. 437 [63 N.E. 54 ], held that the words 'immediate notice,' in a condition of a policy, mean notice within a reasonable time, considering the purpose for which the notice is given and the circumstances of the case. To the same effect are the following cases: Travelers Ins. Co. v. Myers & Co. (1900)62 Ohio St. 529 ,57 N.E. 458 ,49 L.R.A. 760 ; Smith & Dove Mfg. Co. v. Travelers Ins. Co. (1898),171 Mass. 357 ,50 N.E. 516 ; Pickel v. Phenix Ins. Co. (1889)119 Ind. 291 [21 N.E. 898 ]; Edwards v. Lycoming County Mut. Ins. Co. (1874),75 Pa.St. 37 . What is reasonable notice is a question of law for the court to determine when the facts are not in dispute. Baker v. German Fire Ins. Co. (1890),124 Ind. 490 [24 N.E., 1041 ]; Foster v. Fidelity, etc., Co. (1898),99 Wis. 447 ,75 N.W. 69 ,40 L.R.A. 833 .
A condition in a policy of insurance of the kind issued by appellant herein, which requires that the assured shall give immediate notice to the company of a claim for damages on account of an injury to an employe, is a condition precedent. Underwood Veneer Co. v. London Guarantee, etc., Co. (1898),100 Wis. 378 , 75 NW. 996; Green Bros. v. Northwestern, etc., Ins. Co. (1893), 87 Towa 358,54 N.W. 349 ; Smith & Dove Mfg. Co. v. Travelers Ins. Co., supra; Victorian, etc., Co. v. Australian, etc., Co. (1893), 19 Vict.L.R. 139; California Sav. Bank v. American Surety Co. (1898),87 Fed. 118 ; Railway Passenger Assur. Co. v. Burwell (1873),44 Ind. 460 .
The notice required by the condition as heretofore set out is material, and of the essence of the contract. A failure immediately to give such notice involves an absolute forfeiture which can not be re- . lieved against in equity. It has often been so held, where the condition in a life insurance policy required the payment of the premium on a certain day. Klein v. Insurance Co. (1881)104 U.S. 88 , 26 *264 L.Ed. 662; New York Life Ins. Co. v. Statham (1876),93 U.S. 24 ,23 L.Ed. 789 ; Thompson v. Insurance Co.,104 U.S. 252 ,26 L.Ed. 765 . The same holding necessarily follоws where notice is required of the happening of the very thing which the policy is intended to indemnify against. Victorian, etc., Co. v. Australian, etc., Co., supra. The failure on the part of the assured to comply with material conditions expressed in insurance policies can not be relieved against in equity, because the court can not put the insurance company in as good condition as if the condition had been performed. Klein v. Insurance Co., supra.
Id. at 345-46,
The questiоn of notice was again considered by the Indiana Court of Appeals in Hartford Accident & Indem. Co. v. Armstrong, (1955)
In Lomont v. State Form Mut. Auto Ins. Co., (1958)
Many, if not all, policies of liability insurance makе the forwarding to the insurer of notices, summons, process or other papers relating to an action against the insured within a certain time a condition precedent of liability on the part of the insurer. Where this is the case, compliance with such a condition is essential in the absence of a sufficient excuse or a waiver, in order to permit a recovery on the policy.
It also cited 45 C.J.S. Insurance § 1048 and London Guarantee, supra, to show there was no compliance with this condition precedent. The court then determined that there hаd been no waiver by State Farm and affirmed the trial court's judgment in its favor. This line of reasoning has been followed by Indiana courts when rendering decisions on notice requirements within other types of insurance policies. Baker, et al. v. German Fire Ins. Co., (1890)
Opinions from other jurisdictions are helpful and persuasive to our determination of the issue here. The United States Court of Appeals, District of Columbia Circuit, held that an eight month delay in providing notice constituted a breach of the condition precedent language of the insurаnce policy. This breach violated the terms of the policy and the insurer did not need to establish prejudice. Waters v. American Automotive Ins. Co., (D.C.Cir.1966)
We agree with Judge Hoffman in his dissent to Indiana Insurance in which he found that notice given ten days after the suit was filed and almost seven months after the accident ocсurred "hardly consti-tutled] timely notice." Judge Hoffman further pointed out that late notice given to an insurer places it in a position that could have been avoided through timely notlce, and that the "most cooperative insured cannot erase this prejudice suffered by the insurer" in situations Where the scene of the accident cHanges or w1tnesses move away or have their memories lapse, due to the passage of time.
Because the provisions of the policy with reference to notice were clear, there is no question beforе this Court concerning a construction of terms or phrases of a contract that are superfluous or meaningless. The terms of an insurance policy should be . construed liberally in favor of the Insured only if there is an ambiguity in the policy's language. Cincinnati Ins. Co. v. Mallon, (1980) Ind.App.,
We conclude, therefore, that the notice provisions in insurance policies are not equivalent to the cooperation clauses and do not serve the same objectives. Failure to cooperate can come about in many ways, some of which may be technical and inconsequential, thereby resulting in no prejudice to the insurance company. An insurance company must show actual prejudice from an insured's noncompliance with the policy's cooperation clause before it can avoid liability under the policy. Motorist, supra. The same cannot be said of the notice provision because, as Judge Hoffman stated, "[nljotice is a threshold requirement which must be met before an insurer is even aware that a controversy or matter exists which requires the cooperation of the insured." The notice requirement is "material, and of the essence of the contract." London Guarantee, supra,
Indiana Insurance Co. v. Williams shows that Indiana Insurance received no notice of the accident until six months after its occurrence and ten days after the lawsuit was filed. Kosanovich v. Meade shows that the accident occurred on September 7, 1979, and that the insurance company found out about the accident a little over a month later. A lawsuit was filed but the insurer did not receive notice of this until after default judgment was taken on January 12, 1981. The insurance company became aware of the lawsuit and resultant judgment when it became a garnishee defendant in proceedings supplemental to garnish the proceeds of the policy. Miller v. Dilts shows that the accident occurred on February 2, 1979, but notice was not provided to State Farm Mutual Insurance Company until seven months after the accident and five days after the suit was filed.
In Indiana Insurance v. Williams, No. 3-782 A 159, transfer is granted and the opinion of the Court of Appeals is vacated. The cause is remanded to the trial court with orders to re-enter summary judgment in favor of Indiana Insurance Company. In"the cause 6TKosanovich v. Meade, No. 3-282 A 30, transfer is granted and the opinion of the Court of Appeals is vacated. C Entry of summary judgment in favor of ^National Insurance Association by the trial | court is accordingly affirmed. In the cause of Miller v. Dilts, No. 4-183 A 27, transfer is granted and the opinion of the Court of Appeals is vacated. Entry of summary judgment in favor of State Farm Mutual Automobile Insurance Company by the trial court is affirmed.
This opinion is ordered filed in each of the above-captioned cases.