dissenting.
I respectfully dissent. Whatever may be the law of other jurisdictions, I am unpersuaded that the insurance company is es-topped from asserting its defense based on the effect of lack of notice under Tennessee law. Since there are no state decisions dealing with the subject, it is our duty to decide what rule the Supreme Court of Tennessee would reach if faced with the issue. Under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 54 S.Ct. 817, 82 L.Ed. 188 (1938), and its progeny, we cannot simply *668substitute the majority rule or what we consider to be the more desirable law. Moreover, our circuit has consistently followed the rule in diversity cases that if state law is uncertain and a federal district judge has reached a permissible conclusion upon a question of state law, the appellate court should not reverse even if it thinks the rule should be otherwise. Rudd-Melikian, Inc. v. Merritt, 282 F.2d 924, 929 (6th Cir. 1960); Lee Shops, Inc. v. Schatten-Cypress Co., 350 F.2d 12, 17 (6th Cir. 1965), cert. denied, 382 U.S. 980, 86 S.Ct. 552, 15 L.Ed.2d 470 (1966); Insurance Company of North America v. Federated Mutual Insurance Co., 518 F.2d 101, 106 (6th Cir. 1975). See also Lenoir v. Porters Creek Watershed District, 586 F.2d 1081, 1093 (6th Cir. 1978).
Beem accidentally shot Booth during a hunting expedition causing admittedly grievous injuries. Unaware that his homeowner’s policy covered the accident, Beem did not notify the insurer as required by the policy until nearly one year after the event. The majority correctly concludes that under applicable Tennessee law, Melton v. Republic Vanguard Insurance Co., 548 S.W.2d 313 (Tenn.App.1976), the insured’s ignorance of the coverage of his homeowner’s policy is insufficient to excuse his failure to give notice “as soon as practicable.” 1 The majority incorrectly concludes, however, that the insurer is estopped under Tennessee law from asserting its defense based on lack of notice because it undertook the defense of a state court tort action arising from the accident. In disagreeing with the judgment of the district court, the majority fails to apply Tennessee authority to the undisputed facts surrounding the execution of the non-waiver agreement signed by Beem.
In Hardware Mutual Casualty Co. v. Higgason, 175 Tenn. 357,134 S.W.2d 169 (1939), the Tennessee Supreme Court upheld the validity of a non-waiver agreement which included both the investigation and the defense of a lawsuit by the insurer. The plaintiff, in seeking to avoid application of the non-waiver agreement, charged that its specific language incorrectly described the type of vehicle as a Pontiac instead of a Nash. The court observed that an insurer is not estopped from raising its defenses by participating in litigation so long as the insured has actual notice of the reservation. The court stated:
[T]he recitals of the instrument fixing the date of the accident as that of November 15,1928, as well as recitals of the stipulation of fact, clearly show that the intention of the parties was to relate the agreement to this accident and the litigation growing out of it. There can be no doubt about this. The agreement must be construed as a whole and in the light of the circumstances surrounding its execution.
134 S.W.2d at 177 (emphasis added). It is true that the non-waiver agreement in the present case fails to contain language reciting that the company was not waiving its defenses when it entered an appearance in the tort litigation; the agreement refers to non-waiver of the insurer’s defenses during the investigation. Nonetheless, the circumstances here lead unerringly to the conclusion that the insurance company reserved its rights to resist liability for payment under the policy while undertaking the investigation and entering an appearance on behalf of Beem.
The hunting accident occurred on November 13, 1976. The first notice to the insurer of the accident, and accordingly of its potential liability under the policy, came on November 10, 1977, when Beem reported the accident to the insurance company. Transamerica’s Memphis claim office received notice on November 14, three days *669after suit was filed. The insurer obviously did not have the opportunity to complete an adequate investigation before entering an appearance. Both parties were aware of this circumstance when they executed the non-waiver agreement on November 18, 1977. This factor was considered important by the Tennessee district judge in assessing whether the insurance company was es-topped to deny liability:
We simply do not think so. In fact, we think that the insurance company did the sensible, logical, reasonable thing. If they had, without having any court determination as to their liability simply failed and refused to defend and had allowed a default judgment or some other prejudicial action to have taken place, then they may have been liable for allowing something to be, something to the prejudice of Mr. Beem ....
The insured was protected from immediate danger of default by the answer filed on his behalf by the insurer. This answer contained general denials of the allegations in the complaint except for the occurrence of the accident; it was obviously prepared to avoid default while the insurance company completed an investigation. Thus, Beem must have understood that the investigation mentioned in the non-waiver agreement was incomplete when the insurance company filed an answer.
The majority is probably correct in its observation that the particular form of non-waiver agreement is “more suited to a claim under a casualty policy, and may have been intended for use with such.” This argument implies that the more comprehensive type of non-waiver agreement which appears in Hardware Mutual Casualty Co. v. Higgason, supra, would normally have been used. This suggests a fortuitous advantage conferred upon the plaintiff by the use of an incorrect form. It infers that the insurance company intended more comprehensive language than was actually used. Construing the agreement in light of the surrounding circumstances, this observation by the majority supports an interpretation that the insurance company is not estopped from asserting the defense based on failure to receive timely notice.
The majority opinion ignores the reason for an estoppel. An insurer is estopped from denying liability once it has undertaken the defense of an insured because its conduct has prejudiced the right of the insured to defend himself. Thus it is stated in 14 Couch on Insurance 2d § 51:93 (1965) (footnotes omitted):2
In order to protect the insured from the improper withdrawal from the defense by the insurer, it has been held that if such conduct of the insurer causes prejudice to the insured, the insurer is thereafter estopped to deny liability under the policy, but it is not estopped to do so if its action does not result in any prejudice to the insured.
Beem has suffered no prejudice because of the actions taken on his behalf by the insurance company. On the contrary, if an answer had not been filed, there could have been a default judgment requiring satisfaction out of Beem’s personal estate. Moreover, there has been no showing that the passage of time caused any prejudice or that the insurer acted adversely to Beem’s interests. Most importantly, Beem was not led to take a course of action adverse to his own personal interests. Once more the Tennessee district court judge recognized this fact in ruling from the bench:
[W]e are not happy that an insurance company under these circumstances seems to get off the hook with persons that are involved in a bad and unfortunate situation, but we do not find under these circumstances and conditions that the insurance company had taken action to the detriment and to the prejudice of the plaintiff or would have changed the posture or position of Mr. Beem, that Mr. Beem is still, is a defendant in a case that is pending, he has the benefit of whatev*670er actions have been taken by the insurance company on his behalf, if there had been depositions or other things, of course, the insurance company is not entitled to get back anything that they may have done up to this point. We do not feel that it changes the position of Mr. Booth as a claimant, as a plaintiff in the state courts against Mr. Beem as a defendant. It is simply holding, unhappily that Mr. Beem is not entitled to the benefits of liability coverage under the circumstances and that the insurance company under the circumstances adduced is not estopped or precluded from raising the defense and presenting, as they have before this court, that question.
As tempting as it might be to agree with the majority on the substantive merits of the appeal, I regretfully conclude that it has strayed beyond a federal court’s discretion in a diversity case. The circumstances here were such that Beem had to understand that the insurance company was not waiving its defense. Furthermore, he was not prejudiced by the delay which preceded the initiation of this action. The district court’s interpretation of Tennessee law is not shown to be in error. Accordingly, I would affirm the judgment of the district court.
. The Tennessee Supreme Court has consistently adhered to the principle that notice is a condition precedent to an insurer’s obligation under an insurance policy. See Phoenix Cotton Oil Co. v. Royalty Indemnity Co., 140 Tenn. 438, 205 S.W. 128 (1918); Hartford Accident and Indemnity Co. v. Creasy, 530 S.W.2d 778 (Tenn.1975). The policy in question expressly provides that “no action shall lie against this Company unless, as a condition precedent thereto, the Insured have fully complied with all the terms of this policy....” It should be noted that ignorance of the notice provision does not provide an excuse for failure to give notice. Fisher v. Mutual of Omaha Insurance Co., 503 S.W.2d 191 (Tenn. 1973).
. Prejudice is one of the elements required for an estoppel under Tennessee law. S.ee, e. g., Provident Washington Insurance Co. v. Reese, 213 Tenn. 355, 373 S.W.2d 613, 615 (1963), and cases cited therein.