United States Court of Appeals
For the Eighth Circuit
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No. 15-2120
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Century Surety Company
lllllllllllllllllllll Plaintiff - Appellant
v.
Jim Hipner LLC; Robert Lopez; Huey Brock; Jose Chavez; Abraham Reyes
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the District of North Dakota - Bismarck
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Submitted: September 20, 2016
Filed: November 23, 2016
[Published]
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Before SMITH, BYE, and BENTON, Circuit Judges.1
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PER CURIAM.
1
This opinion is being filed by Judge Smith and Judge Benton pursuant to 8th
Cir. Rule 47E.
Century Surety Company (“Century”) appeals from a final judgment of the
district court2 determining that Jim Hipner, LLC3 (“Hipner”) does have coverage
under an umbrella policy entered into between Century and Hipner. After finding the
notice provision in the policy ambiguous, the district court concluded that the
governing law, the law of Wyoming, would consider Hipner’s delayed notice of claim
not to be untimely. Century appealed, seeking reversal of the district court’s
determinations that the notice provision is ambiguous and that Hipner gave timely
notice. Because Wyoming law, however, had not definitively addressed whether an
insurer must be prejudiced before being entitled to deny coverage when the insured
has failed to give notice “as soon as practicable,” we certified the question to the
Supreme Court of Wyoming. See Wyo. Stat. Ann. § 1-13-106.
On certification, the Supreme Court of Wyoming adopted the notice-prejudice
rule, holding that “prejudice to the insurer [is required] before coverage may be denied
based upon a violation of a notice provision contained in the policy.” Century Sur. Co.
v. Jim Hipner, LLC, 377 P.3d 784, 791 (Wyo. 2016). Additionally, the court held that
“an insurance clause is [not] enforceable where it excludes coverage unless the insured
notifies the insurer ‘as soon as practicable . . . whether [the insurer] [is] prejudiced or
not.’” Id. at 792 (ellipses in original) (second and third alterations in original). After
supplemental briefing to this court, we now affirm the district court.
2
The Honorable Daniel L. Hovland, United States District Judge for the District
of North Dakota.
3
The named appellees in this case are Jim Hipner, LLC, Robert Lopez (Hipner’s
employee), Huey Brock (an injured passenger), Jose Chavez (an injured driver), and
Abraham Reyes (an injured passenger). However, the present appeal relates only to
the contractual relationship between Century and Hipner.
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I. Background
In 2010, Hipner, a trucking company, purchased a $2 million umbrella policy
(“Century Policy”) from Century. In paragraph 3, the Century Policy contains the
following notice provision:
b. If you notify any “underlying insurer” of an “occurrence” or an
offense involving “bodily injury” or “personal and advertising injury[,”]
you must see to it that we are also notified in writing as soon as
practicable.
Later, in the same paragraph, the Century Policy contains an exclusion provision that
states:
Failure to notify us, as required per paragraphs 3. a. and 3. b. above, of
an “occurrence” or offense as soon as practicable will result in exclusion
of coverage whether we are prejudiced or not.
On March 31, 2011, one of Hipner’s drivers created a road obstruction that
caused a multi-vehicle collision (“the accident”) in North Dakota. According to the
North Dakota Motor Vehicle Crash Report, a passenger in a car that was rear-ended
by another vehicle suffered injuries deemed minor at the time. The Motor Vehicle
Crash Report indicates that the other persons involved in the accident had
“non-incapacitating” injuries at the time of the accident. Jim Hipner (“Jim”), a co-
owner of Hipner, learned of the accident the same day that it occurred.
Jim testified that, upon his arrival to the scene of the accident, the state patrol
officer told him that “there were no serious injuries.” Jim also testified that the officer
told him that one of the passengers had “some numbness or tingling,” but that “it was
nothing to worry about” and that this “happens quite often in these cases.” According
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to the medical records, one person, Huey Brock, arrived at Trinity Hospital on March
31 unable to move his arms or legs.
On the day of the accident, Jim called and reported the accident to
representatives at Willis of Wyoming and Great West Casualty Company (“Great
West”), his company’s primary insurers. But, no one at Hipner notified Century. In
his deposition, Jim stated that he thought that notifying Willis of Wyoming satisfied
his obligations to notify all of the insurance companies. On March 31, Great West set
up a claim and began investigating the accident.
Brock’s injuries rendered him quadriplegic. Jim testified that he did not know
that Brock sustained significant injuries from the accident until May 2011. On
September 20, 2011, Century received notice of the accident indirectly when Willis
of Wyoming sent Century the policy renewal for Hipner. The next day, Century
created an umbrella claim relating to the accident. On December 13, 2011, Great West
sent its claim file, including the investigation materials, to Century. Century did not
perform its own investigation of the accident because “[t]he duty to investigate the
accident fell upon Great West Casualty. Century Surety relied upon Great West
Casualty to perform a competent investigation.” Nevertheless, Century later found
fault with Great West’s investigation, claiming that it was not thorough enough. After
reviewing the materials that Great West sent to Century, Century concluded that Great
West did not do a timely and thorough investigation of the claim. According to
Century, Great West “did not do . . . the type of investigation that an insurance
company should do when [it] receive[s] a claim involving injuries involving a
quadriplegic.” Century subsequently asked Great West to investigate further.
Specifically, it asked Great West to retain an accident reconstructionist, but Great
West declined that request and indicated that it would not hire an accident
reconstructionist unless litigation resulted. Century admitted that nothing prevented
it from obtaining an accident reconstructionist or investigating further.
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In November 2012, Century received Brock’s settlement demand but declined
to participate in the settlement “based upon lack of coverage for Jim Hipner LLC
under the Century Policy coupled with serious questions regarding liability and
damages.”
Century then filed the instant action in federal court seeking a declaratory
judgment that Century does not have an obligation to defend or indemnify Hipner in
connection with any claims arising out of or relating to the accident. Both Hipner and
Brock filed motions for summary judgment, or in the alternative, a motion for partial
summary judgment, requesting Century’s claims for declaratory relief be denied.
Century, in response, filed a cross-motion for summary judgment seeking a
declaration that it has no obligation to defend or to indemnify Hipner in connection
with the accident. Specifically, Century argued that it was not liable under Wyoming
law because Hipner failed to provide written notice “as soon as practicable” as
required by the Century Policy.
The district court determined that although the Century Policy clearly and
unambiguously requires written notice of a claim, the “as soon as practicable”
requirement is ambiguous. Citing to Pacheco v. Continental Casualty Co., 476 P.2d
166 (Wyo. 1970), the district court concluded that Wyoming courts have found similar
language ambiguous. After a “balancing of the beneficiary’s right to have the policy
liberally construed in his favor with the legitimate interest of the insurer in being
protected from stale claims,” id. at 169, the district court found that Century received
timely notice under the Century Policy as a matter of Wyoming law.4 The district
4
Ultimately, the district court granted summary judgment in favor of Century,
concluding that the policy was not triggered because there was no “ultimate net loss,”
as required by the insuring agreement and because Hipner’s settlement with Brock did
not allow judgment to be entered against Hipner. But the district court suggested that
because of the personal-injury statute of limitations, Brock had time to sue Hipner in
connection with the collision and attempt to establish that Hipner’s liability and
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court explained that “Century Surety’s choice to rely on Great West’s investigation
and not to independently investigate the accident, posed the substantial obstacle to
Century Surety ascertaining the facts surrounding the accident rather than Hipner
LLC’s failure to notify Century Surety for approximately three to four months.”
II. Discussion
On appeal, Century argues that the policy language at issue is unambiguous and
that, applying Wyoming’s notice-prejudice rule, it suffered prejudice from the delay
in receiving notice of the accident as a matter of law.
“The construction and interpretation of the terms of [an insurance] policy are
questions of law for the court, where there is no ambiguity in the language of the
policy when applied to the undisputed facts, and it is error to leave its construction to
the jury . . . .” Tadday v. Nat’l Aviation Underwriters, 660 P.2d 1148, 1155 (Wyo.
1983) (Thomas, J., concurring) (footnotes omitted) (quoting 46 C.J.S. Insurance
§ 1368 (1946)). Furthermore, “whether the notice-prejudice rule applies in this context
is a question of law.” In re Centrix Fin., LLC, No. 09-CV-01542-PAB-CBS, 2015 WL
3499853, at *4 (D. Colo. June 2, 2015).
As a threshold matter, the Supreme Court of Wyoming held in Century
Surety that Century’s exclusion provision “exclud[ing] coverage unless the insured
notifies the insurer ‘as soon as practicable . . . whether [the insurer] [is] prejudiced or
not’” is unenforceable. 377 P.3d at 792 (ellipses in original) (second and third
damage exceed the underlying policy limits, notwithstanding the agreement fully
releasing Hipner from all liability. Brock has now sued the insured, Hipner, for
negligence in connection with the collision. Because the district court rejected
Century’s late-notice defense, collateral estoppel would preclude Century from raising
the same defense if Brock or Hipner seeks umbrella coverage under the Century
policy. For that reason, Century has standing to appeal the district court’s judgment
even though it was the prevailing party on summary judgment.
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alterations in original). As a result, we must apply Wyoming’s “two-step approach to
an insurer’s claim of late notice.” Id. at 791.
First, we must determine whether Hipner’s
notice was untimely, in violation of the notice requirement contained in
the insurance policy. The question of the timeliness of the insured’s
delay in providing notice will depend upon a number of factors,
including, but not limited to, the language of the notice requirement in
the policy, the timing of the notice, the insured’s knowledge of the
underlying facts and ability to provide notice, the sophistication of the
parties, the type of insurance at issue, and the reasonableness of any
delay.
Id. (citing Northbrook Prop. & Cas. Ins. Co. v. Applied Sys., Inc., 729 N.E.2d 915,
922 (Ill. Ct. App. 2000)). Second, if we conclude that Hipner’s notice was untimely,
we must then determine “whether the insurer was prejudiced by that delay. If the
insurer was prejudiced, then the insurer will be relieved of its obligation to provide
coverage.” Id.
A. Timeliness of Notice
As to the first inquiry, the district court determined that although the Century
Policy clearly and unambiguously requires written notice of a claim, the “as soon as
practicable” requirement is ambiguous. It then balanced the parties’ competing
interests and found that Century received timely notice under the Century Policy as
a matter of Wyoming law.
We conclude that the “as soon as practicable” requirement is unambiguous.
Wyoming law provides that the phrase “as soon as practicable” means “within a
reasonable time.” See Black & Yates, Inc. v. Negros-Philippine Lumber Co., 231 P.
398, 401 (Wyo. 1924) (“Where no time for performance is specified in a contract the
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law implies that it must be performed within a reasonable time. This is substantially
true even where the mode of defining the time of performance of a commercial
contract is by the use of the phrase ‘as soon as practicable’ or other similar phrases.”
(citations omitted)).5
We also conclude, under the undisputed facts of this case, that notice to Century
would have been no less “practicable” than the notice given to the primary carriers.
The record shows that Hipner notified the underlying primary insurance companies
on March 31, 2011; however, he never directly provided notice to Century. Instead,
Century received notice of the accident indirectly when Willis of Wyoming sent
Century the policy renewal for Hipner. Jim Hipner attributed his failure to notify
5
Other courts are in agreement that the phrase “as soon as practicable” means
“within a reasonable time.” See, e.g., Weitz Co., LLC v. Lexington Ins. Co., 982 F.
Supp. 2d 975, 1000 (S.D. Iowa 2013), aff’d, 786 F.3d 641 (8th Cir. 2015) (“First,
regarding the ‘substantial compliance’ issue, this Court must interpret the phrase ‘as
soon as practicable’ from Lexington/Allied’s insurance policy. Iowa courts are in
agreement that ‘as soon as practicable’ means ‘within a reasonable time in light of the
circumstances.’” (citation omitted)); Hughey v. Aetna Cas. & Sur. Co., 30 F.R.D. 508,
511 (D. Del. 1962) (“Delaware law further provides a requirement to give notice ‘as
soon as practicable’ means within a reasonable time under the circumstances; mere
time lapse is not the determining factor.”); Greenway v. Selected Risks Ins. Co., 307
A.2d 753, 755 (D.C. 1973) (“The words ‘as soon as practicable’ have uniformly been
held to mean within a reasonable time in view of all the facts and circumstances of
each particular case.”); Bass v. Allstate Ins. Co., 187 A.2d 28, 30 (N.J. Super. Ct. App.
Div. 1962) (“The policy in question requires that written notice of the occurrence shall
be given to the company as soon as practicable. This phrase has been construed to
mean within a reasonable time.”); Ragland v. Nationwide Mut. Ins. Co., 120 S.E.2d
482, 490–91 (W. Va. 1961) (“It is apparent from the decisions of courts of other
jurisdictions and by the great weight of authority that: (1) The phrase ‘as soon as
practicable’ means a reasonable time; and (2) more than five months is not, under
normal circumstances, a reasonable time for an insured to report a fatal accident to his
insurer.”); Wallace v. State Farm Mut. Auto. Ins. Co., 216 S.W.2d 697, 700 (Tenn.
1949) (“The language ‘as soon as practicable’ means a reasonable time.”).
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Century of the accident to his belief that notice to Willis of Wyoming satisfied his
obligations to notify all of the insurance companies. Under the undisputed facts of this
case, we conclude that Hipner did not provide timely notice of the accident to
Century.
B. Prejudice to Century
We must now determine whether Century was prejudiced by the delay in
receiving notice of the accident. Century received indirect notice of the accident on
September 20, 2011, four months after the accident occurred.
Century argues that the delay in receiving notice of the accident prejudiced it
as a matter of law. Century contends that a rebuttable presumption of prejudice exists
where the insured fails to show substantial compliance with a condition precedent, see
Gainsco Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051, 1067 (Wyo. 2002), and that
Hipner failed to submit evidence rebutting the presumption of prejudice to Century
based on the delay in receiving notice of the claim. Century cites the following
evidence in support of its argument that it was prejudiced: (1) Century was not
provided the claim file from Great West, the underlying insurer, until nine months
after the accident; (2) Great West did not do a timely or thorough investigation of the
claim; (3) Great West did not retain defense counsel until about five months after the
accident; (4) Century learning of an accident that occurred months prior prevented
Century from interviewing witnesses while the facts were still fresh in their minds; (5)
the vehicles were not preserved; and (6) Century was unable to take scene photos.
Century’s argument fails because Century does not show how the four-month
delay in receiving notice actually prevented it from taking any meaningful
investigatory steps that it would have done had there been no delay. This is because
Century chose not to investigate once it received the investigative materials from
Great West. If Century believed that something was missing after receiving the
investigative materials, it could have launched its own investigation or followed up
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with Great West’s investigation, but it chose not to. Specifically, it did not
(1) interview any persons involved; (2) take any photographs of any vehicle involved
in the accident or the accident scene; (3) obtain any medical records regarding any
individual involved in the accident other than what Great West provided; (4) contact
any employers of any of the people involved in the accident; (5) hire any outside
company to do an investigation regarding witnesses, statements, or photographs; or
(6) hire an accident reconstructionist. Century admitted that nothing prevented it from
investigating further. During the span of time between when Century received
notice—September 2011—and when it denied coverage—May 2012—Century made
no attempt to ascertain whatever information that it deemed necessary. For that reason,
we hold, as a matter of law, that Century suffered no prejudice from the delay in
notice. As the district court concluded:
Century Surety’s choice to rely on Great West’s investigation and not to
independently investigate the accident, posed the substantial obstacle to
Century Surety ascertaining the facts surrounding the accident rather
than Hipner LLC’s failure to notify Century Surety for approximately
three to four months. Century Surety cannot postpone its independent
investigation based on its reliance on Great West’s investigation and then
later submit Great West’s investigation was incompetent and that too
much time has lapsed for Century Surety to perform an investigation;
Century Surety cannot have it both ways.
III. Conclusion
Accordingly, we affirm the judgment of the district court.
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