This is a declaratory judgment action by an insurance company, which seeks to avoid *664its obligation under a homeowner’s policy to defend a serious personal injury action against its insured, because of the failure of the insured to give timely notice of the potential claim, as required by the policy.
The trial court granted summary judgment for the plaintiff insurance company. Although few facts are disputed, this court is of the opinion that the granting of the summary judgment must be reversed because the insurance company, as a matter of law, is estopped from disclaiming liability under the policy, in that it undertook to defend the action on behalf of its insured without securing a sufficiently comprehensive nonwaiver agreement.
On November 13,1976, appellant Stephen G. Beem was involved in a hunting accident, in which the appellant William Douglas Booth sustained extremely serious injuries, which included the loss of sight in one eye and partial loss of sight in the other. In fact, Booth claims to have been rendered legally blind by the injuries sustained in the accident.
Beem, a young lawyer, had purchased a homeowner’s policy, issued by the appellee Transamerica Insurance Group. The policy was on Beem’s home, and his testimony is that he obtained it primarily for purposes of fire protection. There is no doubt that it also provided liability coverage for accidents of this kind, even though they occurred off of Beem’s premises. Beem claims he was not aware of this latter coverage. Beem’s homeowner’s policy required that the insured give notice to the company, “as soon as practicable” of any event which might give rise to a covered liability claim against the insured.
Beem did not give notice to the insurance company of the hunting accident, until almost a year after the accident, although he was in constant communication with Booth and knew the extent of his injuries. On November 9, 1977, Booth’s lawyer informed Beem of his intention to sue him. That same day, Beem had a discussion with one of the other lawyers in his firm from whom he found out for the first time that there might be coverage under the policy. Promptly thereafter, Beem did notify his insurance agent of the accident and potential claim, and the agent verified that there was coverage.
On November 11, 1977, suit was instituted by Booth against Beem for damages arising out of the hunting accident. The personal injury action was filed in the circuit court of Shelby County, Tennessee, and in it Booth sought damages against Beem in the amount of $150,000. Beem duly forwarded the suit papers to the insurance agent.
On November 18, 1977, an adjuster met with Beem, took a statement from him, and at the same time obtained his signature on a printed form of non-waiver agreement. The terms of this agreement are critical to the outcome of this action, and we, therefore, quote it in full:
“IT IS HEREBY UNDERSTOOD AND AGREED by and between the parties signing this agreement, that any action taken by the hereinafter named Insurance Company or Companies in investigating the cause of loss, or investigating and ascertaining the amount of sound value, or the amount of loss and damage which occurred on 11-13-76 shall not waive or invalidate any of the terms or conditions of any policy or policies, and shall not waive or invalidate any rights whatever of either of the parties to this agreement.
“IT IS FURTHER UNDERSTOOD AND AGREED that neither the examination of the insured or of any other person, the examination of the books of account, bills, invoices, or other vouchers of the insured or any other person, the request of any other information, or the furnishing thereof, or the insuring of any trouble or expense by the insured shall waive or invalidate any of the terms and conditions of the policy or policies, or any defense thereunder.
“THE INTENT of this agreement is to preserve the rights of all parties hereto, and to permit an investigation of the cause of loss, the investigation and ascertainment of the amount of sound val*665ue, or the amount of loss and damage, or any of them without regard to the liability of the hereinafter named Insurance Company or Companies.
“WITNESS our hands in duplicate this 18th day of November, 1977.”1
Thereafter, the insurance company conducted such an investigation of the accident as it thought proper and retained a law firm, which filed an answer in the state court case on December 8, 1977.
That law firm and the insurance company also took other measures to defend Beem in the state court action, including entering into serious settlement negotiations with Booth. According to Beem’s testimony at the summary judgment hearing, he heard nothing further with regard to any reservation of rights or disclaimer under the policy by the insurance company, until it filed this declaratory judgment action in the United States District Court for the Western District of Tennessee on August 15,1978. It is admitted that the insurance company did not make any other reservation of rights than that contained in the non-waiver agreement or give either Booth or Beem any indication it was still relying on the defense of untimely notice until the filing of the federal declaratory judgment action.
The federal declaratory judgment action was set for trial on May 2, 1979. A motion for summary judgment was filed by the insurance company, which was set for hearing by the trial judge on the same day as the trial. At the hearing, the trial judge stated his opinion that the law of Tennessee was harsh in its requirement that an insured live up to his obligations to give notice as soon as practicable under his policy and that failure to read the policy and be familiar with its terms could, as a matter of law, not be accepted as an excuse.2
The plaintiff argued that, because he was so upset about the injury to his friend, he should be relieved of the obligation to inform himself of the contents of the insurance policy, until the state court action was filed against him. The trial court rejected this excuse, as a matter of law. Although the result is harsh and the rule applied seems to us unduly inflexible, we cannot say the trial court erred in holding that it reflects the law of Tennessee. But there is another issue, on the basis of which reversal is clearly required.3
*666After the trial court had stated its intention to grant the motion for summary judgment, counsel for Beem requested the court to hear testimony, as part of the summary judgment hearing, on the issue that the insurance company by defending Beem and negotiating with Booth for a period of some nine months, had exceeded its reservation of rights under the nonwaiver agreement, and thus had estopped itself to disclaim under the policy by the time it filed the federal declaratory judgment action. The trial judge heard such testimony, but granted the summary judgment motion in spite of it. In fairness, it must be pointed out that this issue was raised at the last moment and was not briefed to the trial court. Nevertheless, this court holds that the trial court committed an error of law in this last ruling. If the testimony at the trial confirms that of the summary judgment hearing, the insurance company must be held to have exceeded the terms of its non-waiver agreement, which was limited purely to investigation, by actively defending the state court action for a period of several months.
Counsel for all parties stated at the oral argument, and the court’s own research confirms, that there are no Tennessee cases with regard to an insurance company’s es-topping itself from relying on a non-waiver agreement by exceeding its terms. Nevertheless, there is ample authority on the subject from other jurisdictions, and this court is of the opinion that the Tennessee courts would follow the majority and better reasoned precedents on the subject, which we find to be as follows.
The general rule may be said to be that, although an insured may have violated a term or condition of the policy, such as by failing to give timely notice, if the insurer nevertheless assumes the defense, it will have waived the breach of the condition.4
If the insurer gives proper notice that it is reserving its rights, in spite of investigating the claim or defending any action which may arise from it, such investigation or defense will not waive its right to rely on the breach of condition. This notice is usually accomplished by a reservation of rights letter or a non-waiver agreement. However, the reservation of rights or non-waiver notice given by the insurance company “will be held sufficient only if it fairly informs the insured of the insurer’s position.” 5 Also, it is the law of Tennessee, as elsewhere, that documents prepared by the insurance company, which is in a better position than the insured to understand these matters, will be strictly construed against the company.6
With this background, it may be seen that the insurance company in this case gave its insured, Beem, notice only that it was reserving its rights during an investigation of the accident. This is all that the non-waiver agreement refers to. But the company went beyond investigation. It retained an attorney who filed an answer on behalf of the insured, and it entered into serious negotiations with the injured party. By taking these steps the insurance company waived its rights, or es-topped itself from relying on its policy defense or the non-waiver agreement.
Directly in point is the case of Columbia Casualty Company v. Ingram.7 There, as here, the insurance company reserved its right to “proceed with an investigation of the facts in the case,” but went beyond its reservation of rights and entered the insured’s appearance in a suit and took other *667measures in the defense of the action.8 The language of the court in Ingram is so pertinent to the instant case, that it bears quoting at length.
“While the insurer was entitled to prompt notice of the accident and of the ensuing claim of damages, the assured had the right to be informed within a reasonable time, after the reservation of July 18th, as to whether the insurer intended to accept or disavow the duty of resisting or adjusting the claim. The record shows no reason why a sufficient investigation of the facts could not have been made before the entry of an appearance for the defendant, and the filing of pleas, in the suit against the assured, became necessary. It does not appear that there were any conditions which prevented the insurer from deciding at a much earlier date than September 9th whether it would perform the obligations imposed upon it by the contract of insurance. If prejudice could result to the insurer from a delay of ten days in the receipt of notice of the accident, it is readily conceivable that the interests of the assured might be prejudiced by the insurer’s delay for more than a month and a half in determining upon, and declaring, its attitude in regard to the question of its liability. The reservation in the letter of July 18th was made specifically for the purpose of permitting an ‘investigation’ by the insurer without a waiver of its rights under the policy ... But it was not stated in the letter that the assumption by the insurer of full and sole control of the suit brought against the assured would not operate as a waiver of the insurer’s right to disclaim liability on the ground of delay in the notification for which the policy provided. The effect, upon the waiver issue, of the insurer’s conduct in taking, and so long retaining, charge of the suit, must be considered without reference to the reservation in the letter, because it was not the kind of conduct which the letter specified. Consequently, the primary question is reduced to the simple inquiry whether the control which the insurer assumed, and retained for the period mentioned, over the suit against the insured, must be judicially declared to be insufficient to support the theory of waiver upon which the assured relies.”9
This court adopts the rationale of the Maryland court and believes that the Supreme Court of Tennessee would do so as well. Other cases, not quite as close on the facts but adopting the same approach, are set forth in the margin.10
Therefore, the granting of the summary judgment by the trial court must be reversed and the cause remanded for further proceedings not inconsistent with this opinion.
. Emphasis added. It seems to this court that this form is more suited to a claim under a casualty policy and may have been intended for use with such. In a liability situation insurance companies customarily use a much more comprehensive form of non-waiver agreement or reservation of rights letter. See Hardware Mutual Casualty Co. v. Higgason, 175 Tenn. 357, 134 S.W.2d 169 (1939).
. See Melton v. Republic Vanguard Ins. Co., 548 S.W.2d 313 (Tenn.App.1976).
. The district judge’s rulings on a matter of state law are entitled to respect by this court. Randolf v. New England Mutual Life Ins. Co., 526 F.2d 1383 (6th Cir. 1975); In re Winters, 586 F.2d 1363 (10th Cir. 1978); Lamb v. Amalgamated Labor Life Ins. Co., 602 F.2d 155 (8th Cir. 1979). With regard to the second issue herein, however, we think the weight of authority is sufficient to overcome this presumption.
It is certainly true, as pointed out in Judge Engel’s thoughtful dissent, that a federal appellate court should not reverse a district judge who has reached a permissible conclusion on a question of state law. In this case, however, the record clearly shows that the trial judge did not have the benefit of briefs of counsel in deciding the issue of the sufficiency of the non-waiver agreement. This issue was raised on the spur of the moment, although appellant sufficiently preserved his appeal on it. Therefore, the trial judge did not have the opportunity to consider the authorities cited in this opinion. A majority of this panel believes that the result reached herein would be reached by the Supreme Court of Tennessee, and it is certainly not our intention to substitute our policy views for those in which the state courts have the final word under the Erie Doctrine.
Although the Tennessee cases hold, as Judge Engel points out, that an insurer is not es-topped from raising its defenses by participating in the litigation as long as the insured has actual notice of the reservation, the crux of the majority opinion herein is that the insured did not have actual notice of the reservation sought to be invoked by the company, because of the express statement in the non-waiver agreement that it was limited solely to investigation.
Also, it is clear that the result reached herein does not confer a “fortuitous advantage” upon the plaintiffs from the company’s inadvertent use of an incorrect form. The company’s es-toppel is based on much more substantial considerations. Not only must the insured be pre*666sumed to be prejudiced where the company enters into active negotiations with the claimant without the insured’s having an opportunity to be represented by counsel, but the insured under the facts revealed by the uncontradicted record herein actually was prejudiced, because the case proceeded for nine months and substantial settlement offers were made without the insured’s being notified to retain his own counsel.
. Annotation, 38 A.L.R.2d 1148.
. Id at 1167.
. Interstate Life & Accident Insurance Co. v. Gann, 196 Tenn. 422, 268 S.W.2d 336 (1954); Pacific Mutual Life Insurance Co. v. Walt, 198 Tenn. 59, 277 S.W.2d 434 (1955).
. 154 Md. 360, 140 A. 601 (1928).
. Cf. Beam v. State Farm Mutual Insurance Company, 269 F.2d 151 (6th Cir. 1959) (cooperation clause).
. 140 A. at 602 (emphasis added).
. Claverie v. American Casualty Co., 76 F.2d 570 (4th Cir. 1935) (prejudice to insured results from company’s assuming defense); Tiedtke v. Fidelity & Casualty Co. of New York, 222 So.2d 206 (Fla. 1969) (company estopped if proceeds to defend without informing insured it is standing on reservation of rights); Henry v. Johnson, 191 Kan. 369, 381 P.2d 538 (1963) (non-waiver agreement to be strictly construed); American Casualty Co. v. Shely, 314 Ky. 80, 234 S.W.2d 303 (1950) (insurer estopped by assuming defense for a year without reservation of rights); Hardware Mutual Casualty Co. v. Higgason, 175 Tenn. 357, 134 S.W.2d 169 (1939) (example of nonwaiver agreement comprehensive enough to include defense). See also 44 Am. Jur.2d §§ 1507-1522; Couch, Insurance 2d §§ 49.769, 51.77, and § 51.83.