Hartford Insurance Company v. Ernest Sheffield

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2000-CA-00594-SCT
HARTFORD INSURANCE COMPANY
v.
ERNEST SHEFFIELD AND PERMANENT GENERAL ASSURANCE CORP.,
GARNISHEE

DATE OF JUDGMENT: 06/14/1999
TRIAL JUDGE: HON. R. KENNETH COLEMAN
COURT FROM WHICH APPEALED: MARSHALL COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: DION JEFFERY SHANLEY
H. SCOT SPRAGINS
ATTORNEY FOR APPELLEE: MELANIE M. STEWART
RICHARD W. WACKERFUSS
NATURE OF THE CASE: CIVIL - INSURANCE
DISPOSITION: REVERSED AND REMANDED-10/31/2001
MOTION FOR REHEARING FILED: 11/13/2001; denied 3/7/2002
MANDATE ISSUED: 3/14/2002

EN BANC.

SMITH, JUSTICE, FOR THE COURT:

¶1. On February 8, 1991, Archie B. McDaniel ("McDaniel") filed a complaint against Earnest Sheffield
("Sheffield") in the Circuit Court of Marshall County, Mississippi. The case involved a collision between a
tractor driven by McDaniel and a truck driven by Sheffield. Permanent General Assurance Corporation
("PGA") insured the truck driven by Sheffield, and McDaniel was insured by Hartford Underwriters
Insurance Company ("Hartford").

¶2. Circuit Court Judge Henry Lackey entered a default judgment against Sheffield in the amount of $75,
000 on March 9, 1993. The court issued a writ of garnishment against PGA for the amount of the judgment
plus interest and costs. PGA answered the writ of garnishment denying it was indebted to Sheffield.

¶3. On September 9, 1994, McDaniel filed a Motion to Consolidate the action against Sheffield with that
against Hartford, also filed in the Circuit Court of Marshall County.(1) Hartford paid McDaniel $20,000 in
uninsured motorist benefits on January 31, 1995, and McDaniel executed an absolute release and
assignment of third party claims to Hartford. Hartford took over the suit against Sheffield as McDaniel's
subrogee on September 15, 1995.

¶4. On June 14, 1999, the circuit court granted PGA's Motion for Order to Quash Writ of Garnishment
and/or for Summary Judgment. The court found that Sheffield failed to cooperate with the PGA in the
defense of the action against him and that Sheffield's lack of cooperation nullified any obligation of PGA to
pay damages owed by Sheffield to McDaniel.
¶5. Hartford timely filed its notice of appeal with this Court on July 7, 1999.

FACTS

¶6. The accident between McDaniel and Sheffield occurred on March 22, 1990. The details of the accident
are not pertinent to the issues before us, save to note that at the time of the accident, Sheffield was driving a
truck owned by Dennis Morgan ("Morgan"), the named insured under the policy with PGA. The policy
issued by PGA was a Tennessee policy, effective November 30, 1989. The policy was cancelled on July 7,
1990, for non-payment of premiums.

¶7. McDaniel initiated his action against Sheffield on February 8, 1991. Sheffield was served by secondary
process received by his wife on February 14, 1991, and a copy of the complaint was mailed to Sheffield
the following day. Sheffield never answered the complaint.

¶8. The section of the PGA policy titled "Duties After an Accident or Loss" requires that a person seeking
coverage must cooperate and promptly send copies of any notices of legal papers received in connection
with the accident or loss. Though Morgan was aware of the accident, neither Morgan nor Sheffield
contacted PGA to report the accident. Sheffield did not tell Morgan about the lawsuit. PGA received
neither notice of the accident nor notice of a potential claim until it received a letter and copy of the
complaint from McDaniel's attorney on February 7, 1991, nearly one year after the accident.

¶9. PGA attempted to contact Morgan on February 13, 1991, by certified mail; March 13, 1991, by first
class mail; and May 14, 1991, by certified mail and by first class mail. Morgan finally contacted PGA on
June 18, 1991. Upon receipt of a copy of the accident report containing Sheffield's address from
McDaniel's attorney on December 13, 1991, PGA wrote Sheffield on December 16, 1991, advising him
that it was reserving rights of coverage under its policy with Morgan due to lack of permission to operate
Morgan's vehicle, failure to promptly report the loss, failure to promptly furnish suit papers or other legal
documents, and failure to cooperate. PGA also requested that Sheffield contact them. Sheffield never
contacted PGA. On January 14, 1992, PGA advised Sheffield via certified mail that since Sheffield had not
contacted PGA, PGA was denying coverage under Morgan's policy. McDaniel's attorney was also advised
by letter dated January 14, 1992.

¶10. Default judgment was entered against Sheffield for failure to appear on March 9, 1993. The circuit
court ultimately granted PGA's Motion to Quash Writ of Garnishment and/or Summary Judgment, finding
that Sheffield's lack of cooperation with PGA in the defense of the action against him nullified any obligation
of PGA to pay damages owed by Sheffield to McDaniel. Aggrieved, Hartford argues that the circuit court
erred in granting PGA's motion, raising specifically the following issues:

I. THE PROVISION RELIED UPON BY PGA IS NOT A CONDITION PRECEDENT TO
RECOVERY.

II. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER MCDANIEL OR
MORGAN TIMELY COMPLIED WITH THE REQUIREMENTS OF THE PGA POLICY.

III. PGA MUST DEMONSTRATE PREJUDICE IN ORDER TO DENY COVERAGE
UNDER THE POLICY.

IV. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER SHEFFIELD WAS A
 PERMISSIVE USER.

V. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER PGA HAS WAIVED THE
NOTICE REQUIREMENTS OR IS OTHERWISE ESTOPPED TO DENY COVERAGE.

STANDARD OF REVIEW

¶11. A lower court's decision to grant summary judgment is reviewed de novo. Hernandez v. Vickery
Chevrolet-Oldsmobile Co., 652 So. 2d 179, 181 (Miss. 1995). Entry of summary judgment is
appropriate when there exists no genuine issue of material fact that can be found and the moving party is
entitled to judgment as a matter of law. Brown v. Credit Ctr., Inc., 444 So. 2d 358, 362 (Miss. 1983).
The burden of demonstrating that no genuine issue of fact exists is on the moving party, viewing all evidence
in the light most favorable to the non-moving party. Cook v. Children's Med. Group, P.A., 756 So. 2d
734, 739 (Miss. 1999).

LEGAL ANALYSIS

¶12. As a preliminary matter, this Court must determine whether the substantive rule of law here applied
should be that of our own state or that of Tennessee. Though the accident between McDaniel and Sheffield
occurred in Mississippi, we find that the proper choice of law governing the policy at issue is that of
Tennessee.

¶13. Where a question is presented as to whether the substantive rule of law should be our own or that of
another state, we must determine which state has the most substantial contacts with the parties and the
subject matter of the action. O'Rourke v. Colonial Ins. Co., 624 So. 2d 84, 86 (Miss.1993) (applying
the "center of gravity" test in the context of non-resident attempts to procure the benefit of Mississippi's
laws regarding uninsured motorist coverage). In addressing the coverage questions in O'Rourke, this Court
adhered to the only reasonable expectation the parties could have had -- that the protection offered by the
policy would be determined by reference to the laws of the state in which they had been effected. Id. at 86.

¶14. A recent Court of Appeals opinion, Baites v. State Farm Mut. Auto. Ins. Co., 733 So.2d 320,
321 (Miss. Ct. App. 1998), properly dealt with the application of the principles stated in O'Rourke to facts
similar to those of the instant case. The policy in Baites was a Tennessee policy issued in Tennessee to a
person claimed to be a resident of Tennessee. The fact that the accident occurred in Mississippi, and that
the person turned out to actually live in Mississippi, did not change the determination that Tennessee law
applied. The court held that the governing law should be the law of Tennessee. Id. at 324.

¶15. In the case sub judice, the insurance policy was a Tennessee policy issued by a Tennessee insurance
agent. Morgan was a Tennessee resident. The fact that the accident occurred in Mississippi does not affect
our choice of law determination. This Court finds that in the case sub judice, the controlling law governing
the insurance policy is Tennessee law. See also Nationwide Mut. Ins. Co. v. Tillman, 249 Miss. 141,
161 So. 2d 604, 613 (1964) (New York law controlled construction of automobile liability policy which
was executed in New York although the accident happened in Mississippi).

I. THE PROVISION RELIED UPON BY PGA IS NOT A CONDITION PRECEDENT TO
RECOVERY.

II. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER MCDANIEL OR
 MORGAN TIMELY COMPLIED WITH THE REQUIREMENTS OF THE PGA POLICY.

¶16. The first two issues raised by Hartford will be considered together. Hartford asserts that the policy
provision relied upon by PGA is not a condition precedent to recovery under the policy and that a genuine
issue of fact exists regarding compliance with the provision. The portion of the policy relied upon by PGA
states:

PART E -- DUTIES AFTER AN ACCIDENT OR LOSS

A. We must be notified promptly of how, when and where the accident or loss happened. Notice
should also include the names and addresses of any injured persons and of any witness.

B. A person seeking any cover must:

1. Cooperate with us in the investigation, settlement or defense of said claim or suit.

2. Promptly send us copies of any notices or legal papers received in connection with the accident or
loss.

3. Submit, as often as we reasonably require:

a. to physical exams by physicians we select. We will pay for these exams.

b. to examination under oath and subscribe the same.

4. Authorize us to obtain:

a. medical reports, and

b. other pertinent records

5. Submit a proof of loss when required by us.

C. A person seeking Uninsured Motorists Coverage must also:

1. Promptly notify the police if a hit and run driver is involved.

2. Promptly send us copies of the legal papers if a suit is brought.

D. A person seeking Coverage for Damage to Your Auto must also:

1. Take reasonable steps after loss to protect "your covered auto" and its equipment from further loss.
We will pay reasonable expenses incurred to do this.

2. Promptly notify the police if "your covered auto" is stolen.

3. Permit us to inspect and appraise the damaged property before its repair or disposal.

¶17. Under Tennessee law, policies requiring "prompt" notice have generally been interpreted to
mean that notice must be given within a reasonable time under the circumstances surrounding the
case. Allstate Ins. Co. v. Wilson, 856 S.W.2d 706, 709 (Tenn. Ct. App. 1992). The Supreme Court
of Tennessee has stated:

A condition in an insurance policy which requires the insured to give notice of an occurrence
"as soon as practicable" imposes a duty on the insured to give notice when he becomes, or
should become, aware of facts which would suggest to a reasonably prudent person that the
event for which coverage is sought might reasonably be expected to produce a claim against
the insurer.

Reliance Ins. Co. v. Athena Cablevision Corp., 560 S.W.2d 617, 618 (Tenn. 1977). In Reliance,
the Tennessee Supreme Court also observed:

The time words in the clause, "as soon as practicable" are not words of precise and definite
import. They are roomy words. They provide for more or less free play. They are in their
nature ambulatory and subject under the guiding rule, to the impact of particular facts on
particular cases. They do not in terms require immediate notice or notice within a particular
number of days. They may not be so construed. They do not even provide for notice "as
soon as possible." In terms, they require notice "as soon as practicable" and they must not
be construed as requiring the notice within a reasonable time under all the circumstances, to
effectuate the objects and purposes of the notice clause.

Id. at 618 (quoting Transamerica Ins. Co. v. Parrott, 531 S.W.2d 306, 312-13 (Tenn. Ct. App.
1975); Young v. Travelers Ins. Co., 119 F.2d 877 (5th Cir. 1941)).

¶18. In the case sub judice, the record indicates that PGA had no knowledge of either the lawsuit
against Sheffield or even the collision between Sheffield and McDaniel until McDaniel's attorney
mailed a copy of the complaint to PGA on February 7, 1991. This was nearly one year after the
date of the accident. PGA made multiple attempts by mail to contact Morgan and Sheffield. PGA
attempted to contact Morgan on February 13, 1991, by certified mail; March 13, 1991, by first
class mail; and May 14, 1991, by certified mail and by first class mail. Morgan finally contacted
PGA on June 18, 1991.

¶19. Upon receipt of a copy of the accident report containing Sheffield's address from McDaniel's
attorney on December 13, 1991, PGA wrote Sheffield on December 16, 1991, advising him that it
was reserving rights of coverage under its policy of insurance with Morgan due to lack of
permission to operate Morgan's vehicle, failure to promptly report the loss, failure to promptly
furnish suit papers or other legal documents, and lack of cooperation. PGA also requested that
Sheffield contact them. Sheffield never responded. On January 14, 1992, PGA advised Sheffield
via certified mail that since Sheffield had not contacted PGA, PGA was denying coverage under
Morgan's policy.

¶20. Hartford argues that an issue of fact exists as to whether McDaniel or Morgan timely
complied with the notice requirements of the policy. Even assuming the notification of the
collision and lawsuit by McDaniel's attorney were sufficient notice under the terms of the policy,
this notification occurred nearly a year after the accident in question. Morgan waited four more
months before contacting PGA, and Sheffield made absolutely no effort to communicate with PGA
nor to cooperate with PGA. The circuit court granted summary judgment in favor of PGA on the
grounds that Sheffield failed to cooperate with PGA. Even assuming an issue of fact exists as to
whether the notification was sufficient, there is clearly no such issue regarding Sheffield's failure
to cooperate. Summary judgment was properly granted as to this issue.

¶21. Additionally, Hartford points out that Part E of the policy does not state that failure to
comply with its requirements will result in forfeiture of coverage under the policy. Thus, insists
Hartford, compliance with the notice and cooperation requirement is not a condition precedent to
coverage under the policy.

¶22. Hartford's argument is not persuasive. A condition precedent is "a condition which must be
fulfilled [by one party] before the duty [of the other party] to perform an existing contract
arises." Federal Deposit Ins. Corp. v. Newton, 737 S.W.2d 278, 282 (Tenn. Ct. App. 1987)
(quoting 13 C.J. Contracts § 532, at 564-65 (1917)). The Tennessee Supreme Court stated in
Reliance that failure to give prompt notice of the occurrence upon which liability is asserted will
release the insurer from liability where there is no reason for the delay. Reliance, 560 S.W.2d at
619 (citations omitted). Furthermore, in Tennessee Farmers Mut. Ins. Co. v. Nee, 643 S.W.2d 673
(Tenn. Ct. App. 1982), the court stated that notice provisions of an insurance policy are valid
conditions precedent to coverage even where the policy does not contain a forfeiture provision.
Id. at 675 (citing Phoenix Cotton Oil Co. v. Royal Indem. Co., 205 S.W. 128 (Tenn. 1918);
Osborne v. Hartford Acc. & Indem. Co., 476 S.W.2d 256 (Tenn. Ct. App.1971); Barfield v.
Insurance Co. of N. Am., 443 S.W.2d 482 (Tenn. Ct. App.1968)).

¶23. We find that PGA, pursuant to the express language of its policy, has properly asserted
Sheffield's failure to comply with the notice and cooperation provisions as a defense to coverage
of the accident in question. Further, we find that there exists no question of fact as to Sheffield's
failure comply with these provisions. These assignments of error are without merit.

III. PGA MUST DEMONSTRATE PREJUDICE IN ORDER TO DENY COVERAGE
UNDER THE POLICY.

¶24. Hartford argues that once it has been determined that PGA did not receive timely notice
under the terms of the policy, PGA must demonstrate that it has been prejudiced by the lack of
notice. Hartford argues that the circuit court erred in granting PGA's Motion for Summary
Judgment because PGA presented no proof that would allow an inference of prejudice to PGA as
a result of the delay. Hartford relies solely on Mississippi law for this assertion. As stated
previously, the governing law in this action is that of Tennessee. Tennessee law regarding proof
of prejudice has undergone recent changes. Prior Tennessee law, as stated in Phoenix Cotton Oil
Co. v. Royal Indemnity Co., 205 S.W.128 (Tenn. 1918), and Hartford Acc. & Indem. Co. v.
Creasy, 530 S.W.2d 778 (Tenn. 1975), required no showing of prejudice by the insurer. Hartford
at 779; Phoenix Cotton at 130.

¶25. This requirement changed with Alcazar v. Hayes, 982 S.W.2d. 845 (Tenn. 1998), in which the
Tennessee Supreme Court reversed the approach established in Phoenix Cotton and Creasy in
order to closer align itself with the modern trend approach adopted by the overwhelming number
of Tennessee's sister states. Alcazar, 982 S. W. 2d at 851-52. The Alcazar Court adopted the
rebuttable presumption rule. Id. at 856. According to this rule, once it is determined that the
insured failed to provide timely notice in accordance with the policy, it is presumed that the
insurer has been prejudiced by the breach. Id. The insured, however, may rebut this presumption
by offering competent evidence that the insurer was not prejudiced by the delay. Id. The Court in
Alcazar expressly stated that the rebuttable presumption rule would apply to all cases tried or
retried after the date of the opinion and to all cases pending on appeal in which the prejudice issue
was raised in the trial court. Id.

¶26. The rule announced in Alcazar was applied in the context of an uninsured motorist policy.
The rule was not applied to a liability policy until March 27, 2000, when the court decided
American Justice Ins. Reciprocal v. Hutchison, 15 S.W.3d 811 (Tenn. 2000). Summary judgment
in the case at hand was granted subsequent to the court's decision in Alcazar and prior to the
court's decision in American Justice. Nevertheless, it is clear that the rebuttable presumption
announced in Alcazar should apply to the case at hand.

¶27. We noted in Presley v. Mississippi Highway Comm'n, 608 So. 2d 1288, 1299 (Miss. 1992),
the common law doctrine that judicial decisions apply retroactively unless designated as
prospective. Upon review of Tennessee law, the Tennessee Supreme Court has repeatedly held
that decisions in civil cases apply retroactively. Hill v. City of Germantown, 31 S.W.3d 234
(Tenn. 2000); Broadwell v. Holmes, 871 S.W.2d 471 (Tenn. 1994); Dupuis v. Hand, 814 S.W.2d
340 (Tenn. 1991); Davis v. Davis, 657 S.W.2d 753 (Tenn. 1983). Therefore, the rebuttable
presumption rule, as applied in American Justice, similarly applies in the case at bar.

¶28. Furthermore, the inquiry before this Court, in seeking to apply Tennessee law, does not stop
with the determination of whether Tennessee, at the time the case sub judice was decided, had
applied the rebuttable presumption rule to the precise policy as exists in the case at hand, but
whether, faced with the policy in the case at hand, the Tennessee court would apply the rebuttable
presumption rule. Based on the reasoning of the court in Alcazar, the answer is yes, as evidenced
by the fact that the court so decided in American Justice.

¶29. The rationales expressed by the Alcazar court for adopting the view that prejudice to an
insurer should be required as a prerequisite to forfeiture of a policy based on failure to give
timely notice apply to liability policies to the same degree as to uninsured motorist policies.
Furthermore, many of the cases cited in Alcazar in support of the decision to adopt the rebuttable
presumption model involved a failure to give notice under a liability insurance policy. See Tiedtke
v. Fidelity & Cas. Co., 222 So. 2d 206 (Fla. 1969); Miller v. Dilts, 463 N.E.2d 257 (Ind. 1984);
Fillhart v. Western Res. Mut. Ins. Co., 684 N.E.2d 1301 (Ohio Ct. App. 1996); Gerrard Realty
Corp. v. American States Ins. Co., 277 N.W.2d 863 (Wis. 1979). As the Tennessee court stated in
American Justice, "nothing in the Alcazar holding indicates that the modern trend is limited to
uninsured / underinsured motorist policies." American Justice, 15 S.W.3d at 817.

¶30. Hartford argues, in its brief to this Court, that PGA's defense of the action against Sheffield
could not have been prejudiced by the delay as Sheffield has never disputed the fact that he was
speeding at the time of the accident and that he was under the influence of alcohol. The circuit
court's order granting summary judgment makes no finding regarding the existence of prejudice.
It is impossible to determine whether the question of prejudice arose at the hearing on PGA's
motion for summary judgment because no transcript from that hearing is included in the record
before this Court, despite Hartford's designation of that transcript as part of the record on
appeal. The judgment of the trial court is therefore reversed, and this case remanded for a
determination of whether there was offered evidence to rebut the presumption of prejudice which
arose upon PGA's showing that it did not receive timely notice.

IV. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER SHEFFIELD WAS A
PERMISSIVE USER

¶31. Hartford argues that an issue of fact exists as to whether Sheffield was a permissive user of
Morgan's truck at the time of the accident. The record indicates that Morgan informed PGA that
Sheffield did not have permission to use the truck, while Sheffield stated he had permission from
Morgan to use the truck. PGA made no argument regarding lack of permission in its
memorandum in support of its motion for summary judgment. The only argument made in the
memorandum is that regarding Sheffield's failure to give timely notice to PGA and to cooperate
with PGA in defending the claim, and the only finding in the circuit court's order granting
summary judgment is that regarding Sheffield's failure to cooperate.

¶32. This argument is without merit. Summary judgment was clearly granted on the basis that
Sheffield failed to cooperate and the lack of cooperation nullified any obligation of PGA to
provide coverage for the accident. Whether there exists an issue of fact as to permissive use was
not a question brought before the circuit court by PGA's motion for summary judgment, and it is,
therefore, not a question which may be considered for the first time by this Court on appeal.
Fondren North Renaissance v. Mayor of City of Jackson, 749 So. 2d 974, 980 (Miss.1999)).
Furthermore, if on remand the circuit court finds that Sheffield failed to offer evidence to rebut
the presumption of prejudice, summary judgment is appropriate regardless of the existence of an
issue of fact as to permissive use because the failure to cooperate is, in and of itself, grounds for
forfeiture of coverage under the policy.

V. A GENUINE ISSUE OF FACT EXISTS AS TO WHETHER PGA HAS WAIVED THE
NOTICE REQUIREMENTS OR IS OTHERWISE ESTOPPED TO DENY COVERAGE.

¶33. Hartford argues that PGA never attempted to preserve its rights concerning Sheffield's
failure to provide notice and cooperation and that PGA has, therefore, waived its right to rely on
the notice and cooperation requirement as a condition precedent to providing coverage. Hartford
relies on Monarch Ins. Co. v. Cook, 336 So.2d 738, 740 (Miss. 1976), in which this Court stated
that where an insurer carrier denies coverage, it is estopped from enforcing notice requirements
within the policy as conditions precedent to coverage. Monarch is distinguishable from the case
sub judice.

¶34. In Monarch, the insured made various attempts to have the insurer cover the loss. Id.
Although the insured was told in various communications that there was a question as to
coverage, the insured was never definitely told whether the coverage was allowed. Id. The court
found these communications constituted actual and repeated notice to the insurer of the
occurrence, the claim, and the suit against the insured. The accident in Monarch occurred on or
about January 16, 1973, and first notice of loss was transmitted by the insured on or about
January 28, 1973. The Court found that by denying coverage after actual notice provided by the
insured seeking coverage, the insurer waived any right to insist that the insured give further
notice of the filing of the suit. Id.
¶35. In the case sub judice, almost a year passed before PGA had any knowledge of the claim or
legal proceedings. Sheffield did not notify PGA of the loss and wholeheartedly failed cooperate in
his defense. Hartford argues that PGA failed to reserve its rights. On December 16, 1991, PGA
wrote Sheffield advising him that it was reserving rights of coverage due to his failure to promptly
report the loss, failure to promptly furnish suit papers or other legal documents, failure to
cooperate, and lack of permission to operate Morgan's vehicle. This letter also advised Sheffield
to contact PGA. By letter dated January 14, 1992, PGA stated it was denying coverage due to
Sheffield's failure to contact PGA.

¶36. PGA clearly reserved its rights under the policy. This Court finds that this issue is without
merit.

CONCLUSION

¶37. The circuit court correctly concluded that no issue of fact exists as to whether Sheffield
failed to cooperate with PGA and that, under the terms of the policy, this lack of cooperation
nullifies any obligation of PGA to provide coverage for the accident in question. However,
Tennessee law also requires that PGA be prejudiced by Sheffield's failure to give timely notice in
order to deny coverage pursuant to the policy provision at issue in this case. See Alcazar, 982 S.
W. 2d at 851-52. Upon PGA's showing of untimely notice, such prejudice is presumed, and
Hartford may offer evidence to rebut this presumption. Hartford. Because the court below made
no finding regarding prejudice to PGA and because the transcript from the summary judgment
hearing is not before this Court for review as requested by Hartford, the judgment of the circuit
court is reversed and this case remanded for a determination of whether there was offered
evidence to rebut the presumption of prejudice to PGA.

¶38. REVERSED AND REMANDED.

PITTMAN, C.J., BANKS, P.J., MILLS, WALLER AND COBB, JJ., CONCUR. EASLEY,
J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY DIAZ, J. McRAE,
P.J, JOINS IN PART.

EASLEY, JUSTICE, DISSENTING:

¶39. In my opinion, the majority properly determines that the controlling law governing the
insurance policy is that of Tennessee. The accident's occurrence in Mississippi is not our sole
consideration. As cited by the majority, the Court of Appeals, in Baites, stated that when
presented with a question of law, the court must determine which state has the most substantial
contacts with the parties and the subject matter of the action. 733 So.2d at 321. The majority also
correctly finds that Sheffield's failure to cooperate or provide any notice is clear. Prompt notice
was not provided within a reasonable time under the circumstances surrounding the case. See
Allstate Ins. Co., 856 S.W.2d at 709; Reliance, 560 S.W.2d at 618.

¶40. However, I believe that the majority reaches an incorrect outcome. Therefore, I respectfully
dissent. The majority's view is that proof of prejudice was required by Hartford in asserting lack
of notice as a defense under Tennessee law as a condition precedent to coverage. The law in
Tennessee as to proof of prejudice has undergone changes recently. The line of theory that had
been followed was stated in Hartford, 530 S.W.2d at 778. The court in Hartford, stated that "[n]
otice is a vital and indispensable condition precedent to recovery under the policy." Id. at 779. In
Phoenix Cotton, the court stated the general proposition that "(1) notice is a condition precedent
to recovery under the policy and (2) there need not be any showing of prejudice." 205 S.W. at
130. The court in Hartford, addressed the ability of the insured to give notice as being the key
determination. 530 S.W.2d at 780. The court stated that "[t]he burden of offering an explanation
or excuse for failure to give notice must rest heavily upon the insured since he seeks relief from
the plain terms of a contract of insurance coverage." Id.

¶41. The law in Tennessee as to the showing of prejudice by the insurer changed with the 1998
decision in Alcazar, which reluctantly overturned the approach established in Phoenix Cotton and
Hartford, to come more in line with the modern trend adopted by the overwhelming number of
Tennessee's sister states. 982 S.W.2d at 851-52. The standard was applied to (1) all cases tried
or retried after the date of the opinion, and (2) all cases pending on appeal in which the prejudice
issue was raised in the trial court." Id at 856.

¶42. The court in Alcazar, only addressed the approach in the context of uninsured/underinsured
motorist policy. Id. The court, in a later decision reached in 2000, applied the rational of Alcazar
to liability insurance policies to the same degree as to the uninsured motorist policies. American
Justice, 15 S.W.3d at 816-17. The court in American Justice stated that "[b]oth types of
insurance policies are contracts of adhesion in that they are 'form contracts drafted by the
insurer and the insured has little, if any, bargaining power.'" Id. at 817. Forfeiture without any
prejudice to the insurer would result in a windfall to the insurer under both types of policies. Id.

¶43. Here the summary judgment hearing was not until February 22, 1999, and decided June 14,
1999. Alcazar had already been decided by the Tennessee courts establishing prejudice to be
shown in uninsured/underinsured motorists context on December 21, 1998. However, the court
did not address the application of the rationale in Alcazar to standard liability policies until
sometime later in American Justice decided in 2000. For the foregoing reasons, I believe
requiring proof of prejudice to be shown by the insurer was not required to deny coverage based
on the law as it existed in 1999. Therefore, I respectfully dissent.

DIAZ, J. JOINS THIS OPINION. McRAE, P.J., JOINS IN PART.

1. McDaniel filed a complaint against Hartford on March 10, 1993, in which he asserted that if
Sheffield was an uninsured motorist at the time of the collision, Hartford owed McDaniel
uninsured motorist benefits.