Navigazione Alta Italia v. Columbia Casualty Company

HUTCHESON, Chief Judge.

The suit was on a standard form Manufacturers and Contractors Liability Policy, with special indorsement attached,¹ taken out by Walsh Stevedoring Co., Inc., for a policy period from November 1, 1951, to November 1, 1952, to afford protection to steamship owners and charterers for whom Walsh was loading or unloading. Providing that Columbia ■Casualty Company “does hereby agree with the insured named in the declarations made a part hereof”, it recited, as in Special Endorsement No. 1, that it was issued to “principals whether steamship owners or charterers for whom Walsh Steamship Company is loading or unloading”.

Filed November 22, 1955, the suit was brought by plaintiff to recover amounts paid by it in preparing for and defending a suit for damages for personal injuries against the Steamship Monginevro and in satisfaction of a judgment obtained thereon on March 16, 1954, by one William Andrews, a longshoreman employed by Walsh.

Alleging, its ownership of the steamship, the injury to Andrews on May 8, 1952, in the course of a discharging operation in Mobile which was being carried out by Walsh Stevedoring Company, the filing by Andrews of a libel against the Monginevro, the trial and judgment in the action, and the payment by it of $20,354.08 in payment and satisfaction of the judgment, and of attorneys’ fees, expenses and costs which it had been compelled to incur, it further alleged that it was the insured in the policy on which it sued, and that the defendant, as insurer, had agreed to pay and had become liable for the sums sued for.

In lieu of alleging compliance with the conditions of the policy,² plaintiff averred in its complaint, to which the policy was attached, that it was not aware of the existence of the policy until October, 1955, and that promptly upon learning of its existence plaintiff made demand for payment, and the demand was denied in writing.

Defendant, pointing out that the policy sued on expressly provides in Condition No. 11: “No action shall lie against the company unless as a condition precedent thereto the insured shall have fully complied with all of the terms of the policy”, and that plaintiff has not alleged compliance with any of them, moved to dismiss the suit.

The district judge sustained the motion, and this appeal followed.

Here appellant insists that since it did not know of the existence of the policy at the time of the occurrence of the accident, the filing and trial of the suit, the obtaining, and the payment, of the judgment therein, it could not comply with the conditions of the policy for notice of accident and suit and cooperation with the insurer, and thus was released from the conditions prescribed in the policy as precedent to action on it.

On its part, appellee points, to the prime importance to the insurer of compliance by the insured with the conditions precedent to liability, particularly those ensuring it an opportunity to investigate and defend against the claim, and to the admitted fact that because of the want of compliance by the insured with these conditions the insurer has been finally and completely deprived of these rights.

So pointing, it insists that it is in complete contradiction both of the letter and the spirit of the policy for the appellant to contend: thát, because of the fact alone that it did not know of the existence of the policy, appellee, though it has had no opportunity to have any part or say, in the consideration and determination of what should be done about the claim, in the preparation for and defense of the suit, or in the incurring of the expenses and attorneys’ fees, must pay the whole account; that, in short, appellee must not only dance to the tune appellant calls but must pay the piper for calling it.

Appellee in its brief thus well states its plight:

“We wish to place emphasis on the fact that we are not dealing with a case where there was a mere delay in giving notice of an accident, or delay in giving notice of a claim, or delay in giving notice of a suit, or delay in forwarding suit papers to the insurer. In this case, no such notice was ever given and no such papers were ever forwarded to Ap-pellee. The Appellee was never notified of the accident, and was never given notice of any claim, and was never notified of any suit. No suit papers were ever forwarded to Ap-pellee. All that the Appellee ever received was a demand in November, 1955, to pay a judgment, which demand was made over three years after the accident occurred and over a year and a half after the judgment was obtained. A demand that a judgment be paid is by no means a notice of an accident or of a claim or suit! At the time of the demand, the house was not merely on fire — it had already burned to the ground!”

In addition to this fundamental attack on the appellant’s claim that solely because of its lack of notice of the existence of the policy it should be allowed to recover on it, though none of its conditions have been complied with, appellee presents an additional reason for denying appellant’s claim.

This is that, if appellant is right in claiming that it was in fact without notice of the existence of the policy until shortly before it made claim upon it, it would be excused for not giving earlier notice, there is no basis in the record for the claim that it was without earlier notice, for, under cases such as Johnson v. Maryland Cas. Co., 73 N.H. 259, 60 A. 1009, and Metropolitan Life Ins. Co. v. Henry, 217 Ind. 33, 24 N.E.2d 918, the knowledge of Walsh who took the policy out for plaintiff’s benefit was in law notice to the plaintiff.

We find ourselves in agreement with both of the positions taken by appellee. The arguments presented and the authorities cited by appellant, such as Sanderson v. Postal Life Ins. Co., 10 Cir., 87 F.2d 58 and Standard Accident Ins. Co. v. Alexander, 5 Cir., 103 F.2d 500, are wholly inapposite, indeed unrelated to the facts of this case. Without exception the cases it relies on deal with situations in which the failures to comply with the conditions of the policy consisted of mere delay in giving notice, a delay from which no real prejudice resulted. Cf. Young v. Travelers Ins. Co., 5 Cir., 119 F.2d 877, cited and relied on by appellant, which at page 880 well states the principle controlling here. Pointing out that the vital question in notice cases is whether prejudice has resulted from the delay, the court concluding its thorough discussion of that question said of it:

“In its nature it was one to which the doctrine of prejudice vel non has peculiar application. There was no prejudice. The notice clause was not breached.”

A recent case from this court illustrative of the point is St. Paul Mercury Indemnity Co. v. Valdosta Milling Co., 5 Cir., 253 F.2d 667. We held there that since, when the insurer received belated notice thereof, the suit which it had contracted to defend was still pending and could still be defended, the insurer, under the circumstances of the case which excused the insured’s delay, was obligated to assume the defense and defend the suit.

In none of the cases cited did the failure consist, as here, of a total, absolute, and final failure to give notice, a failure completely fatal to the insurer and in undoubted breach of its contract. Here, depriving the insurer, by its failure to comply with the conditions of the policy, of all opportunity to defend against the claim, and thus completely abrogating its contract, the insured presents it with a fait accompli in the form of a final and satisfied judgment obtained in a suit in the defense of which the insurer has been deprived of all effective part.

The judgment was right. It is affirmed.

1 . Item 1 of the policy reads: “Name of Insured — See Special Endorsement No. 1.”

Special Endorsement No. 1, as material here, reads:

“Item One (1) of the policy to which this endorsement is attached shall read ‘Any Steamship Company and its principals whether steamship owners or charterers, for whom Walsh Stevedoring Company is loading or unloading, * * ’ ”

2 . Those pertinent here are:

“8. Notice of Accident. Upon the occurrence of an accident written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place, and circumstances of the accident, the names and addresses of the insured and of available witnesses.”

“9. Notice of Claim or Suit. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.”

“10. Assistance and Co-operation of the Insured. The insured shall co-operate with the company and, upon the company’s request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits; and the company shall reimburse the insured for expenses, other than loss of earnings, incurred at the company’s request. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other Ilian for such immediate medical and surgical relief to others as shall bo imperative at the time of accident.”

“11. Action against Company. No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all of the terms of this policy, nor until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant, and the company.”