1977, April, Pg. 620. Overcoming the Late Notice Defense.

• Author: by Gilbert M. Sackheim

6 Colo.Law. 620

Colorado Lawyer

1977.

1977, April, Pg. 620.

Overcoming the Late Notice Defense

620Vol. 6, No. 4, Pg. 620Overcoming the Late Notice Defenseby Gilbert M. Sackheim[Please see hardcopy for image]Gilbert M. Sackheim, Boulder, is a partner in the firm of Day, Hilgers & Sackheim.621Most, if not all, automobile liability insurance policies contain language requiring the insured to provide his insurance company with "immediate notice" of the occurrence of an accident, or to notify the company "as soon as practicable."

If this provision of the policy is not complied with, the insurance company will be relieved of any liability under the policy because the notice requirement has been construed to be a condition precedent.(fn1) This not only affects the insured, of course, but the person claiming against the insured as well, because the claimant "stands only in the shoes of the insured and is subrogated only to such rights against the insurer as the insured had himself."(fn2)

Method of Litigating the IssueAs soon as a representative of the insurance company makes it known that the company intends to deny coverage because of the alleged late notice, the attorney for the claimant must decide in which of two ways the issue should be litigated. His first choice is to file suit against the insured and, if the claimant obtains judgment, then initiate garnishment proceedings against the insurance company. If this procedure is followed, the insurance company will raise the late notice issue as a defense in the garnishment action. The second way in which to litigate the issue is for the claimant's attorney to file suit against the insured, and then immediately file a declaratory judgment action against the insurance company, seeking a ruling that the company is in fact liable to satisfy any judgment which may be given against the insured. If a declaratory judgment action is filed, the insured should be joined as a plaintiff because he has the same interest in the outcome of the action as does the claimant.

Filing a declaratory judgment action is probably the more advisable course of action, from the claimant's point of view. If he is successful in the declaratory judgment action, it should enhance his ability to obtain a satisfactory settlement of the case, because the insurance company will no longer be proceeding under the belief that it can possibly avoid liability altogether. And, if the claimant is not successful, he will be better able to decide whether to incur the expense of pursuing an uninsured defendant who

622might be judgment-proof.

Regardless of how the issue is litigated, however, the person claiming against the insured, or the insured himself, has at least four possible ways to overcome the assertion by the insurance company of the late notice defense.

Notice Within a Reasonable Length of TimeThe first argument is that despite the wording contained in the policy that "immediate notice" must be furnished by the insured, or that the notice must be given "as soon as practicable," the courts have held that all such clauses simply mean that notice must be provided within a "reasonable length of time under the facts and circumstances of each particular case."(fn3)

Of critical importance is that the issue of whether notification was in fact made within a reasonable length of time is to be decided by the jury.(fn4)

The significance of this is that not only will the claimant be entitled to present evidence explaining the delay in notification, but that the insurance company will have to overcome the appearance of being a large corporate defendant who, based on some "small print" in the insurance policy, is asking to be relieved of its promise to represent the insured and satisfy any...