Aetna Cas. & Sur. Co. v. Murphy

Brief Fact Summary.

Aetna Cas. & Sur. Co. (Plaintiff) brought an action against George A. Murphy, III (Defendant) for damage he allegedly caused to a building it insured.  Defendant filed a third party complaint impleading his insurer, Federal Insurance Co., Chubb Group (Chubb).  Chubb was granted summary judgment on the ground that the Defendant and Murphy had inexcusably and unreasonably delayed in complying with the notice requirements of the contract.

Synopsis of Rule of Law.

Absent waiver, an unexcused, unreasonable delay in notification constitutes a failure of condition that entirely discharges an insurance carrier from any further liability on its insurance contract. 

However, a proper balance between the interests of the insurer and the insured requires a factual inquiry into whether, in the circumstances of a particular case, an insurer has been prejudiced by its insured’s delay in giving notice of an event triggering insurance coverage.  If it can be shown that the insurer suffered no material prejudice from the delay, the nonoccurrence of the condition of timely notice may be excused because it is not “a material part of the agreed exchange.”

Facts.

The Chubb policy required that notice be given “as soon as practicable.”  However, although Murphy received the Plaintiff’s complaint on November 21, 1983, he did not notify Chubb until January 10, 1986. 

The trial court granted summary judgment to Chubb, finding the two year delay inexcusable and unreasonable. 

Issue.

Can an insured who belatedly gives notice of an insurable claim nonetheless recover on the insurance contract by rebutting the presumption that his delay has been prejudicial to the insurance carrier?

Held.

Yes.  However, in this case, there was no error.    

·         The trial court was correct in granting summary judgment, although not for the reason upon which it relied. 

·         Chubb, the third party defendant, was not automatically discharged because of the delay of Murphy, the third party plaintiff, in giving notice of an insured occurrence. 

·         However, Chubb was entitled to summary judgment because Murphy’s affidavit opposing summary judgment contained no factual basis for the claim that Chubb had not been materially prejudiced by Murphy’s delay.

Dissent.

None.

Concurrence.

None.

Discussion.

·         This case sought to balance competing principles in the law of contracts.  The law of contracts supports the principle that contracts should be enforced as written, and that contracting parties are bound by the contractual provisions they have assented to.  On the other hand, strict compliance has increasingly been tempered by the recognition that the occurrence of a condition may, in appropriate circumstances, be excused in order to avoid a “disproportionate forfeiture.”

An insured seeking to be excused from the consequences of a contract provision which he has concededly failed to comply has the burden of establishing lack of prejudice to the insurer.