Title: Nationwide Mutual Fire Insurance Company v. Estate of Jack Files

State: alabama

Issuer: Alabama Supreme Court

Document:

rel: 11/26/2008
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2008-2009
_________________________
1071288
_________________________
Nationwide Mutual Fire Insurance Company 
v.
Estate of Jack Files, deceased
Appeal from Walker Circuit Court
(CV-04-318)
WOODALL, Justice.
Nationwide Mutual Fire Insurance Company ("Nationwide")
appeals from a $75,000 judgment against it and in favor of the
estate of Jack Files, deceased.  We reverse and render a
judgment for Nationwide.
1071288
2
The relevant facts are undisputed.  On May 1, 2001, Jack
Files and Herbert Sanford were involved in a physical
altercation that resulted in injuries to Files.  At the time
of the incident, Sanford was insured under a homeowner's
insurance policy issued by Nationwide that included personal-
liability coverage.  Sanford never notified Nationwide of the
incident involving Files.
Nationwide first learned of the altercation between Files
and its insured on October 1, 2001, when it was contacted by
Files's attorney.  Subsequently, both Nationwide and its
attorney 
sought 
to 
secure cooperation in Nationwide's
investigation of the altercation.  However, Sanford failed to
cooperate, and Nationwide was unable to obtain any information
from him.  On March 29, 2002, Nationwide advised Sanford that
it would not defend or indemnify him for the claims brought
against him in Files's personal-injury action.  Nationwide
advised Sanford that its decision was based, in part, upon his
failure to give it notice of the underlying occurrence "as
soon as practicable," as required by the conditions of the
liability coverage in his homeowner's policy.
1071288
3
Sanford never answered the complaint filed against him by
Files.  On February 20, 2004, the trial court entered a
default judgment against Sanford in the amount of $75,000.
When Files sought to garnish his wages, Sanford filed for
bankruptcy protection.  The bankruptcy court allowed Files to
seek to collect the judgment against Sanford only to the
extent of any available insurance proceeds.
Section 27-23-2, Ala. Code 1975, provides:
"Upon recovery of a final judgment against any
person, 
firm, 
or 
corporation 
by 
any 
person,
including administrators or executors, for loss or
damage on account of bodily injury, or death or for
loss or damage to property, if the defendant in such
action was insured against the loss or damage at the
time when the right of action arose, the judgment
creditor shall be entitled to have the insurance
money provided for in the contract of insurance
between the insurer and the defendant applied to the
satisfaction of the judgment, and if the judgment is
not satisfied within 30 days after the date when it
is entered, the judgment creditor may proceed
against the defendant and the insurer to reach and
apply the insurance money to the satisfaction of the
judgment."
On May 11, 2004, Files filed this action against Nationwide
seeking to apply the liability coverage in Sanford's
homeowner's policy to the satisfaction of the judgment against
1071288
Files died on January 14, 2005; his estate was
1
substituted as the plaintiff on May 5, 2005. See Rule
25(a)(1), Ala. R. Civ. P.
4
him.   Nationwide answered the complaint, stating, in relevant
1
part, that it was not obligated to make any payment, because
Sanford, its insured, had failed to satisfy conditions
precedent to coverage under his policy.  Ultimately, after a
trial at which ore tenus evidence was presented, the trial
court entered a judgment against Nationwide for $75,000, and
Nationwide timely appealed.
In Haston v. Transamerica Insurance Services, 662 So. 2d
1138, 1139-40 (Ala. 1995), this Court stated:
"A claim under §§ 27-23-1 and -2 [, Ala. Code
1975,] to apply the proceeds of a contract of
insurance to satisfy a judgment has been described
by this Court as follows:
"'Under Alabama law, the injured party
acquires a vested interest (secondary) in
the nature of a hypothecation of the
insured's rights under the policy.
"'....
"'Once an injured party has recovered
a judgment against the insured, the injured
party may compel the insurer to pay the
judgment.  The injured party, however, can
bring an action against the insurer only
after he has recovered a judgment against
the insured and only if the insured was
covered against the loss or damage at the
1071288
5
time the injured party's right of action
arose against the insured tort-feasor.'
"Maness v. Alabama Farm Bureau Mut. Casualty Ins.
Co, 416 So. 2d 979, 981-82 (Ala. 1982).  The injured
party's 'vested interest' is subject to the further
qualification that 'the terms of the policy imposing
obligations on the insured are effective as against
the injured party.'  George v. Employers' Liab.
Assurance Corp., 219 Ala. 307, 310, 122 So. 175, 177
(1929); see James & Hackworth v. Continental
Casualty Co., 522 F. Supp. 785, 787 (N.D.Ala. 1980).
Thus, defenses to liability available to the insurer
in an action brought by the insured would also be
available to the insurer in an action brought
pursuant to §§ 27-23-1 and -2 by the injured party.
Employers Ins. Co. v. Crook, 276 Ala. 177, 183, 160
So. 2d 463, 469-70 (1964); Employers Ins. Co. v.
Johnston, 238 Ala. 26, 31, 189 So. 58, 62 (1939);
see Fleming v. Pan American Fire & Casualty Co., 495
F.2d 535, 541 (5th Cir. 1974); Southeastern Fire
Ins. Co. v. Helton, 192 F. Supp. 441, 444-45
(S.D.Ala. 1961)."
Consequently, if Sanford failed to comply with terms of the
policy imposing obligations on him -- his homeowner's policy
-- Files is not entitled to reach and apply the liability
coverage of that policy to the satisfaction of the judgment he
obtained against Sanford.
It is undisputed that the Nationwide policy required
Sanford to notify Nationwide of the altercation with Files "as
soon as practicable."  This Court addressed identical policy
language in United States Fidelity & Guaranty Co. v. Baldwin
1071288
6
County Home Builders Ass'n, Inc., 770 So. 2d 72, 75 (Ala.
2000):
"If an 'occurrence' takes place, ... the policy
requires that the insured give USF&G notice 'as soon
as practicable.'  This Court has held:
"'The requirement of notice "as soon
as practicable" means that the insured must
give notice "within a reasonable time under
all the circumstances."  See American
Liberty Insurance Co. v. Soules, 288 Ala.
163, 258 So. 2d 872 (1972).  In making this
determination, the only factors to be
considered are the length of the delay in
giving notice and the reasons therefor.
Absence of prejudice to the insurer from
the delay is not a factor to be considered.
Southern Guaranty Insurance Co. v. Thomas,
334 So. 2d 879 (Ala. 1976).'
[United States Fidelity & Guar. Co. v.] Bonitz
Insulation Co., 424 So. 2d [569,] 572 [(Ala. 1982)].
In Thomas, cited by this Court in Bonitz Insulation,
this Court stated:
"'Where facts are disputed or where
conflicting inferences may reasonably be
drawn from the evidence, the question of
the reasonableness of a delay in giving
notice is a question ... for the [trier of
fact].  Provident Life & Accident Ins. Co.
v. Heidelberg, 228 Ala. 682, 154 So. 809
([Ala.] 
1934). 
Conflicting 
inferences
concerning the reasonableness of a delay
may sometimes be drawn where the insured
offers evidence of mitigating circum-
stances.
"'"However, where an insured
fails to show a reasonable excuse
1071288
7
or the existence of circumstances
which would justify a protracted
delay, the Court should as a
matter of law hold that there has
been a breach of the condition as
to notice...."
"'Zurick General Accident & Liability
Insurance Co. v. Harbil Restaurant, Inc.,
7 A.D.2d 433, 435, 184 N.Y.S. 2d 51, 53
(1959).'
"Thomas, 334 So. 2d 879, 882-83.  Thus, the
determination of the fundamental issue, whether
notice of the occurrence or claim was given to the
insurer within a reasonable time, rests on the
reasonableness of the delay. ... If conflicting
inferences can be drawn from the evidence, the
question of reasonableness is submitted to the trier
of fact.  If the facts are undisputed, however, and
the insured does not show justification for the
protracted delay, the court may find the delay
unreasonable as a matter of law.  Thomas, 334 So. 2d
at 883: Bonitz Insulation, 424 So. 2d at 572-73."
Nationwide argues that Sanford, as a matter of law, failed to
give it notice of the altercation between him and Files within
a reasonable time.  We agree.
The facts of this case are somewhat unusual, because it
is undisputed that Sanford has never notified Nationwide of
his altercation with Files.  Thus, it could be argued that his
failure to give notice is a continuing violation of the notice
condition of his policy.  However, as previously stated,
Nationwide learned of the incident five months after it
1071288
8
occurred.  A few days later, Nationwide sent a letter to
Sanford advising him that it had been contacted by Files's
attorney.  For the purposes of our review, we will assume,
without deciding, that Nationwide's actual notice of the
occurrence excused Sanford from any continuing duty to provide
the notice required of him by the policy.  
A five-month delay in giving notice is sufficiently
protracted as to require the insured to offer evidence of a
reasonable excuse for the delay.  See Phoenix Assurance Co. v.
Harris Harless Co., 303 F. Supp. 867 (N.D. Ala.), aff'd, 414
F.2d 794 (5th Cir. 1969)(four-month delay); Pharr v.
Continental Cas. Co., 429 So. 2d 1018 (Ala. 1983)(eight-month
delay); Southern Guar. Ins. Co. v. Thomas, 334 So. 2d 879
(Ala. 1976)(six-month delay).  Sanford did not testify at
trial; thus, there is no evidence of any excuse or
justification for his failure to provide the requisite notice
as soon as practicable.  In his brief, Files makes no attempt
to justify Sanford's failure.
For the foregoing reasons, we hold that, as a matter of
law, Sanford failed to comply with the notice requirement of
his homeowner's insurance policy.  Therefore, as a matter of
1071288
Our 
conclusion 
concerning 
the 
notice 
requirement
2
pretermits the need to address Nationwide's contentions that
Sanford violated the policy conditions in other ways.  
9
law, Files is not entitled to reach and apply the liability
coverage of that policy to satisfy the judgment he obtained
against Sanford.  Consequently, the trial court's judgment is
reversed, and a judgment is rendered for Nationwide.2
REVERSED AND JUDGMENT RENDERED.
See, Lyons, Stuart, Smith, Bolin, Parker, and Murdock,
JJ., concur.
Cobb, C.J., concurs in the result.