Virginia federal court bars coverage based on violation of prompt notice provision

In Amalgamated Casualty Insurance Col v. Valley Cab, et al, Civil Action No. 5:22-cv-00011 (W.D. Va. June 14, 2022), the Court granted the insurer’s motion for summary judgment that it had no duty to defend because of the insured’s breach of the policy’s provision requiring “prompt notice” of any accident and immediate notice concerning a claim or suit.

The claim arose from an alleged sexual assault by a cab driver in July 2019. The victim reported the assault to the police the next morning, was examined by hospital personnel and completed an incident report. The police interviewed the cab driver the same day.

Just before the statute of limitations expired two years later, the victim sued the cab company and the driver in state court in Virginia.

The cab company and the driver first notified the insurer of the pending civil suit on December 17, 2021.

The insurer filed a declaratory judgment action in the Western District of Virginia, seeking a declaration that it had no duty to defend or indemnify due to the insureds' failure to comply with the notice provisions of the policy.

Subsequently the insurer filed a motion for summary judgment based on the insureds’ breach of the policy’s notice provisions.

The Court granted the motion for summary judgment, based on the following reasons.

  • Virginia courts routinely enforce “prompt notice” provisions in insurance policies.
  • Such provisions have been held to be a condition precedent, and if not complied with will bar coverage under the policy.
  • For untimely notification to constitute a breach of the policy such as to bar coverage, the failure to notify must be “substantial and material.”
  • There are three factors that bear on the materiality of such a breach:
    • The reasonableness of the delayed notice;
    • The amount of prejudice suffered by the insurer as a result of the delay;
    • The length of time that elapsed before notice was given.
  • A prolonged delay in notification alone may breach the policy even absent a showing of prejudice.
  • Here, 883 days passed after the police interview of the cab driver and the insureds’ notification, and 157 days passed between the filing of suit and the insureds’ notification.
  • The Court found that nothing about these delays was reasonable.
    • Significantly, the cab driver was a part owner of the cab company, and thus the cab company had knowledge of the alleged assault based on the police interview of the cab driver.
    • Knowledge acquired by an agent while acting within the scope of his authority on behalf of the principal is imputed to the principal.
  • The Court declined to analyze whether the insureds’ delay prejudiced the insurer because the length of time of each delay violated the Policy’s prompt notice provision as a matter of law.
Categories: Insurance, Virginia