Opinion ID: 781580
Heading Depth: 2
Heading Rank: 2

Heading: Duty to Defend and to Indemnify

Text: 13 The Policy conditioned Underwriters's duty to defend and to indemnify upon ICC timely notifying Underwriters of the Awais' lawsuit. The Policy provides: 14 [I]f a claim is made or a suit is brought against the insured, which but for the provisions of this self-insured retention endorsement would involve or might involve this policy, the insured shall immediately forward to the company every demand, notice, summons or other process received by the insured or the insured's representative. 15 A condition predicating coverage upon the insured notifying the insurer immediately of an occurrence or forwarding suit papers to the insurer is enforceable. See Johnston, 68 S.W.3d at 401. This condition is reasonable and is foreseeable from the standpoint of the insured, who would logically expect to give immediate notice of a claim to its insurer. 16 An insured's failure to give timely notice may be excused by substantial compliance and by incapacity or impossibility. Tresner v. State Farm Ins. Co., 913 S.W.2d 7, 10 (Mo.1995) (en banc). We are not presented here with any claim of incapacity or impossibility. 17 To ascertain if ICC substantially complied with the Policy's notice provision, we must determine if ICC's delay prejudiced Underwriters. See id. at 15. Underwriters bears the burden of establishing prejudice. Id. at 11, 16. Prejudice is a question of fact. Id. at 16. Although a question of fact, the issue of prejudice may become a question of law if all reasonable persons would conclude the insured did not provide notice in a reasonable time. Id. at 14. 18 In Johnston, Johnston sued Sweany for damages caused by Sweany negligently repairing Johnston's home. Sweany failed to provide his insurer with notice of the suit until after he had confessed judgment. The Missouri Supreme Court affirmed the trial court's grant of summary judgment for Sweany's insurer, holding Sweany's insurer had suffered prejudice. Johnston, 68 S.W.3d at 402-03. The Missouri Supreme Court reasoned that Sweany's failure to comply with [the notice] provisions denied [his insurer] the opportunity to investigate the facts applicable to the subject of the lawsuit, to settle the dispute before trial, to defend against liability at trial, and to dispute the amount of damages. Id. at 402. 19 ICC failed to notify Underwriters of the Awais' lawsuit until after ICC defended the Awais' action, and rejected settlement before trial (Awais demanded $25,000), and until after the jury had rendered a verdict. Like in Johnston, this tardiness deprived Underwriters of the opportunity to investigate facts, to defend on liability, to settle the lawsuit, and to choose a trial strategy. By the time ICC notified Underwriters of the Awais' claims, Underwriters had already been prejudiced. The jury had already found ICC liable and established a value for the Awais' claims. The district court was correct, ICC failed to provide timely notice as required by the Policy, and Underwriters suffered prejudice from the delay.