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Commercial Umbrella Policy |
Proof of Loss |
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Notice of Loss |
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The United States Environmental Protection Agency
(EPA) notified Chicago & North Western Railway Company (C & NW) that it
was responsible for cleaning up the drainage ditch that connected to Ravine
Creek that then connected to the James River near the intake point for Huron's
drinking water.
C&NW had been contributing to the pollution
since 1910 and although it carried excess liability policies with Continental
Casualty Co. (Continental) for nine years that covered losses in excess of
$500,000 it decided to clean up the site itself instead of having the EPA do
it.
The Union Pacific Railroad (UPR) purchased the
assets of C & NW in 1995 during the cleanup and assumed its environmental
obligations.
UPR informed Continental of the cleanup four years
after C&NW had being ordered to perform the cleanup. It stated that it had
spent over $5,000,000 to completely remediate the site. Continental responded quickly
that that it was attempting to locate the policies involved, reserved its
rights under them, and requested certain information from UPR. After receiving
no response, Continental sent five different follow-up letters over the next
three years. The fifth and final letter stated that it would close its claim
file in 30 days if UPR did not respond. UPR never responded and Continental
closed its file.
Four years after than final notice, UPR brought a
declaratory judgment action seeking recovery from Continental. Continental
responded that it was not obligated to provide coverage because it did not
receive timely notice and that the late notice caused prejudice. The circuit
court granted summary judgment to UPR that year and then four years later UPR
appealed.
UPR's appeal claimed that, because the policy
provision placed an "as soon as practicable" time frame on the proof
of loss requirement, but did not on the notice of loss requirement, it could
provide notice of loss at any time. The appellate court strongly disagreed. It
held that UPR had a duty to give a notice of loss to Continental, that it
failed to give a written notice of loss within a reasonable time, and that
Continental was prejudiced by UPR's failure to give timely written notice. It
affirmed the circuit court's judgment on all issues raised in the appeal.
Supreme Court of South Dakota. Union Pacific
Railroad as Successor-In-Interest to the Chicago and North Western Railway
Company, Plaintiff and Appellant, v. Certain Underwriters At Lloyd's London, et
al., Including Continental Casualty Co., Defendants and Appellees. No. 22931.
Argued April 29, 2009. Decided August 5, 2009. 771 N.W.2d 611, 2009 SD 70