Montana Supreme Court: 38-Month Delay in Notification of Claim is Late Notice
The Montana Supreme Court this week ruled that a policy issued to a corporation provided no coverage to an officer of the corporation and that the officer’s 38-month delay in notifying the insurer was late notice. The case, Lee v. Great Divide Insurance Co., involved an automobile accident between an uninsured driver and Lee. Lee was driving a Ford pickup insured by American States Insurance Company under a corporate policy issued to his corporation. Great Divide insured two trailers and a Ford pickup pursuant to a separate commercial policy issued to the corporation specifically naming Lee as an insured that was later amended by endorsement removing Lee. Lee filed suit against the driver of the other vehicle and for UM benefits from American States in May 2002 ultimately settling with American States and obtaining a $1 million default against the uninsured driver in April 2005. Lee did not notify Great Divide concerning the original lawsuit, the default or the settlement with American States then filed suit against Great Divide seeking to recover the amount of the default.
In affirming the trial court’s dismissal of the case, the Montana Supreme Court first rejected Lee’s argument that the Great Divide policy was ambiguous as to its general reference to “you” as used in the section of “Who is an insured” and thus officers of the named insured corporate entity should be considered insureds. In rejecting this argument the court noted that the definition of “you” in the policy was the named insured corporation and the policy itself was identified as a “corporate policy.”
The Court also found that the policy expressly required Lee to “promptly send [Great Divide] copies of the legal papers if a 'suit' is brought.’” The court found that in addition to the large amount of time it took for Lee to notify Great Divide of the cases, he omitted the “most significant information of this claim and suit” from his notice which was a material breach of his policy obligations. This information included his failure to provide Great Divide a copy of the initial Complaint alleging UM coverage against American States as well as a copy of his Second Amended Complaint until 2 ½ years after filing his original complaint. Moreover, Lee’s notice to Great Divide failed to disclose that he had obtained a default judgment against the uninsured driver and he would be seeking coverage. Accordingly, the court found the late notice was sufficient to deny coverage to Lee.
In a strongly worded dissent, Justice Cotter raised several points including the fact that Lee had moved for summary judgment at the trial court level and that the court, in addition to denying his motion, sua sponte granted Great Divide summary judgment on coverage issues which, she believed, deprived Lee of his ability to properly raise issues of fact precluding summary judgment.
