Late notice provisions in insurance policies continue to be a regular source of insurance coverage litigation in Alabama courts. With respect to the issue of notice itself, Alabama law is clear. “Pursuant to Alabama law, when a primary insurance policy requires notice ‘as soon as practicable’ … the insured is required to give notice ‘within a reasonable time’ in view of all the facts and circumstances of the case,’ and the insured’s failure to do so releases the insurer from providing coverage.” Lemuel v. Admiral Ins. Co., 414 F. Supp. 2d 1037, 1050 (M.D. Ala. 2006)(quoting Southern Guar. Ins. Co. v. Thomas, 334 So. 2d 879, 882-83 (Ala. 1976)) (emphasis added). See also Haston v. Transamerica Ins. Services, 662 So.2d 1138, 1141 (Ala. 1995) (citing Thomas); Reeves v. State Farm Fire & Cas. Co., 539 So.2d 252, 254 (Ala. 1989) (citations omitted).
The Alabama Supreme Court recently issued yet another strong late notice opinion, Travelers Indemnity Co. v. Miller, 86 So. 3d 338 (Ala. 2011). Miller, the plaintiff, sued Travelers’ insured Smith. Smith never told Travelers about the occurrence or the suit. Miller obtained a default judgment against Smith, and then sued Travelers to collect under the direct action statute. Travelers asserted defenses including late notice. Miller tried to argue that while Smith (the insured) may not have given notice, Miller did provide reasonable notice to Travelers of the default, relying on the Haston opinion. The Miller opinion focuses more on failure to tender the lawsuit, but does note that the insured failed to provide Travelers notice of the occurrence as well. The Supreme Court reiterated its long-standing position on late notice, providing insurers doing business in Alabama an even newer case upholding late notice policy provisions. However, what is most interesting in this Miller case is what else the Supreme Court did.
In Miller, the court denied Travelers’ motion for summary judgment, and the case went to trial with a verdict against Travelers for over $250,000. The Supreme Court reversed, and in a very rare occurrence, overruled a case (Haston) that it was not asked to overrule. In Haston (a 1995 opinion), the Alabama Supreme Court appeared to create two separate notice requirements – one of the insured to give notice per the contract, and the other, a requirement that an injured party give timely notice of a default judgment against an insured. Haston almost appeared to “re-set the clock” as to an injured party with respect to notice. In Miller, the Supreme Court cleared that up, and overruled Haston “to the extent that it purports to give a right to an injured party who gives notice after a default judgment has been entered, a right the insured would not have had nor have been successful in pursuing.” (Miller at 347).
The Miller opinion was recently cited in a Federal court opinion from the Northern District of Alabama, Auto-Owners Ins. Co. v. Toxey Constr. Co., Inc., 2012 U.S. Dist. LEXIS 71718 (N.D. Ala., May 23, 2012). Miller demonstrates that even though trial courts do not like late notice cases, the Alabama Supreme Court continues to be very strong in upholding the importance of the insurer’s right to timely notice.