Watson v. United States Fidelity & Guaranty Co.

²⁶⁹ Prescott, J., delivered the opinion of the Court. An insurer sought and obtained a declaratory judgment to the effect that the appellant (the insured) and the driver of his automobile at the time of an accident were not protected by an automobile liability insurance policy issued by the insurer, and the insurer was not required or obligated to defend any claims or suits arising out of said accident, nor to pay any judgments or costs which may be rendered as a result of any suit filed for damages resulting from said accident. The appellant suggests that four questions are presented by the appeal, but all of his contentions may be answered under two headings: 1. Is the insurer herein liable under its policy of insurance even though the assured failed to comply with a condition precedent of the policy requiring the giving of written notice of an accident as soon as practicable? 2.

Has the appellee waived, or become estopped to assert, its defense of the policy provision respecting notice ? The United States Fidelity & Guaranty Company (Company or appellee) issued to the appellant an automobile liability insurance policy, which required the insured, as a condition precedent, to give written notice of an accident to the insurer “as soon as practicable” following an accident. 1 On March 5, 1961 ²⁷⁰ (all subsequent dates are in 1961 unless otherwise specified), when the policy was in full force and effect, the appellant was riding in the front seat of his automobile, which was being operated in Baltimore City by one Joseph Chappie, when it became involved in an accident with two other motor vehicles. The appellant claimed to have been asleep at the time of the accident, but Officer Hall, who interrogated him at the scene of the accident just a few minutes after its occurrence, advised him that his car had been involved in the accident, and the trial judge found that appellant did know that his car had been involved. Appellant did nothing concerning the accident until he received a letter from an attorney, on April 8th, stating that he represented a party who claimed damages resulting from the accident.

This letter was taken to the Company’s office on April 10th, and, at that time, the accident was reported to it. On April 13th, the Company sent a reservation of rights letter to the appellant informing him that in view of the fact that prompt notice of the accident had not been given to it, in accordance with the terms and conditions of the policy, “we are holding this notice and letter from Attorney without prejudice and under strict reservation of the company’s rights pending the completion of our investigation.” Thereafter the Company undertook a routine investigation, and assembled as much information concerning the accident as was then available. On June 3rd, Robert Ellis, an adjuster for the Company, went to appellant’s house, and, during the course of his visit, informed appellant that he thought there would be a denial of coverage. No further investigation relating to the facts of the accident was made by the appellee.

By letter dated June 12th, the appellee consulted its counsel with reference to the filing of a declaratory judgment proceeding to test its liability under the policy, but was advised that such an action could not be maintained at that time. Counsel apparently believed that no justiciable issue could be presented to the court until suit had been filed against the assured. A like inquiry was made by the Company on October 12th, after it had received, on October 11th, a notice of hospital lien con ²⁷¹ cerning one of the persons claiming to have been injured in the accident, and it was again notified that declaratory judgment action would not lie. After consulting additional counsel, this suit was instituted on November 9th.

All persons claiming to be entitled to damages resulting from the accident were joined as defendants; however the appellant, alone, prosecutes this appeal. I A policy of insurance is, of course, a contract, and when the language employed in it is unambiguous, such a policy is to be construed as other contracts. In the policy here involved, by the plain and explicit terms of conditions 3 and 6, written notice of an accident to the Company as soon as practicable is made a condition precedent to an action against the insurer. Lennon v. Amer.

Farm. Mut. Ins. Co., 208 Md. 424 , 118 A. 2d 500 .

Such a condition precedent (although it may be waived, and, under certain circumstances an assurer may be estopped from asserting it as a defense) is one that must be performed before any obligation on the part of the assurer commences. Cf. Employer’s Liability Assurance Corp. v. Perkins, 169 Md. 269 , 181 A. 436 . The appellant asserts that the Company was under “an affirmative duty” promptly to investigate the accident following its reservation of rights letter, and thereafter to advise him within a reasonable period of time whether it intended to deny coverage.

Of coarse the Company was obligated to investigate the accident promptly, which it did. One of the proper objectives of such an investigation would have been, and no doubt was, to ascertain whether the notice given by the insured was furnished “as soon as practicable” after the accident. 2 The investigation disclosed that the notice was not so given; a fact that is not contested by the appellant, hence no more need be said concerning it. And we find no “affirmative duty” imposed by the policy, or the law, upon the Company to advise the appellant of its intention to deny responsibility within any specified ²⁷² period of time, short of such a period as would constitute a waiver of the notice condition, or would estop the Company from asserting it as a defense. In regard to the lapse of time before disavowal of liability in the instant case, we deal with it when we reach the questions of waiver and estoppel.

The appellant further asserts “that the modern view which holds that the insurer must show actual prejudice in order to be relieved of its obligations under a policy is clearly the better view, and the one now being followed by a majority of jurisdictions.” In other words, he contends that even though the notice condition herein involved is a condition precedent, it is unavailable to the Company as a denial of liability under the policy, unless the Company was prejudiced by the failure to give prompt notice. This contention is not in accord with the Maryland decisions, nor with the weight of authority elsewhere in this country. In Lewis v. Commercial Cas. Ins.

Co., 142 Md. 472 , this Court approved a prayer that took the case from the jury because “the uncontradicted evidence” showed that the insured failed to give notice in accordance with the terms of the policy. The question of actual prejudice to the insurer is not explicitly dealt with in the opinion, but the Court points out the wisdom of assurer’s requiring prompt notice of accidents, and no specific items of harm to the insurance company were proved. The Court, in Amer. Etc.

Ins. Co. v. Fid. & Cos. Co., 159 Md. 631 , 152 A. 523 , held that when the insured admitted liability, in violation of the policy, it was a material breach irrespective of prejudice to the assurer. Although there was no necessity for a direct ruling upon the subject, the same principle was recognized in American Cos.

Co. v. Purcella, 163 Md. 434 , at page 439, 163 A. 870 . In Employer's Liability Assurance Corp. v. Perkins, supra, 169 Md. 269 , 181 A. 436 , the insured notified the assurer of the accident, but failed to “forward the suit papers.” The Court stated: “On principle and by the weight of authority, the general rule is that, without reference to whether or not the assurer sustained any * * * prejudice by the failure of the assured to forward * * * the documents served upon the assured, this failure to fulfill a condition upon which perform ²⁷³ anee by the assurer is dependent was a breach of the contract, which denied the assured a right of recovery * * And, in Lennon v. Amer. Farm, Mut. Ins.

Co., supra, it was said: “We adopt the rule, which has been followed * * * in this country almost universally, that in order to hold liable the insurer * * *, the insured must give to the insurer a notice of the accident in accordance with the policy’s provision * * Compare Fid. & Cas. Co. v. McConnaughy, 228 Md. 1, 13 , 179 A. 2d 117 , and National Indemnity v. Simmons, 230 Md. 234 , 186 A. 2d 595 . These decisions of the Court of Appeals are in accord with the great weight of authority in this country. Houran v. Preferred Acc.

Ins. Co. of New York, 195 A. 253 (Vt.), and State Farm Mut. Automobile Ins. Co. v. Cassinelli, 216 P. 2d 606 (Nev.), are two cases dealing with the question of prejudice, which have been frequently cited.

The opinion in Cassinelli is carefully reasoned, well expressed and quite comprehensive in nature. We quote from it briefly ( 216 P. 2d 615 ) : “Thus we see that while terms of great variety are used in defining the effect of a failure to give notice, when the same is defined by the policy as a condition precedent, they lead to precisely the same result. * * *. As we have seen however, a careful consideration of the cases shows that in no case so holding [that prejudice was required] did the policy contain a clause to the effect that the compliance with the requirements for notice was a condition precedent to recovery. It would be presumptuous on our part to establish a rule of law in this state which departs from the overwhelming majority of decisions throughout the United States.” And we add that most of the cases, cited by the appellant as sustaining his point of view, are considered and carefully analyzed in this opinion.

For a collection of the cases establishing and supporting the majority rule, see the annotations in 76 A.L.R. 23 123, A.L.R. 952, and 18 A.L.R. 2d 447 , 452, 453. ²⁷⁴ II This Court has had occasion to deal with questions of waiver and estoppel many times. In Gould v. Transamerican, 224 Md. 285 , 167 A. 2d 905 , we pointed out in considerable detail the