Aetna Casualty & Surety Co. v. Murphy
206 Conn. 409, 538 A.2d 219, 1988 Conn. LEXIS 52 (1988)
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Rule of Law:
An insured's unexcused and unreasonable delay in providing notice of a claim to their insurer creates a rebuttable presumption of prejudice to the insurer. The insured may overcome this presumption and obtain coverage by proving that the insurer was not materially prejudiced by the delay.
Facts:
- George A. Murphy III, a dentist, terminated a lease with Hopmeadow Professional Center Associates on or about November 30, 1982.
- Hopmeadow claimed Murphy damaged the building while dismantling his office.
- Aetna Casualty and Surety Company, Hopmeadow's insurer, became subrogated to the claim and sought to recover damages from Murphy.
- Murphy was served with Aetna's complaint on November 21, 1983.
- Murphy held a comprehensive liability insurance policy with Federal Insurance Company, Chubb Group (Chubb).
- Murphy did not notify Chubb of Aetna's claim and lawsuit against him until January 10, 1986, more than two years after he was served.
Procedural Posture:
- Aetna Casualty and Surety Company sued George A. Murphy III in a trial court to recover for property damage.
- Murphy filed a third-party complaint in the same court to implead his insurer, Federal Insurance Company (Chubb), seeking coverage for Aetna's claim.
- Chubb moved for summary judgment, arguing Murphy's two-year delay in giving notice violated the policy's terms and voided coverage.
- The trial court granted summary judgment in favor of Chubb, finding the delay was inexcusable and unreasonable.
- Murphy, the third-party plaintiff and appellant, appealed the summary judgment to the state's highest court.
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Issue:
Does an insured's unexcused and unreasonable delay in notifying their insurer of a claim automatically discharge the insurer's duty to provide coverage, or may the insured still recover by proving the insurer was not prejudiced by the delay?
Opinions:
Majority - Peters, C. J.
No, an insured's unreasonable delay does not automatically discharge the insurer's duty to provide coverage. While such a delay creates a presumption of prejudice to the insurer, this presumption is rebuttable, and the insured may still recover if they can prove the insurer suffered no material prejudice. The court reasoned that insurance policies are contracts of adhesion, and a strict enforcement of notice provisions would result in a disproportionate forfeiture of coverage for which the insured has paid premiums. Balancing the interests of both parties, the court abandoned the traditional rule of strict compliance and adopted a new rule requiring a factual inquiry into prejudice. The legitimate purpose of notice provisions—to allow the insurer a fair opportunity to investigate—can be protected without the harshness of automatic forfeiture. However, the burden of proving a lack of prejudice falls on the insured, who has failed to comply with the contract. Because Murphy provided no facts to suggest Chubb was not prejudiced by the two-year delay, summary judgment against him was proper, though based on this new legal framework.
Analysis:
This decision significantly modifies the common law of insurance in the jurisdiction by rejecting the traditional, strict-compliance approach to notice provisions in insurance contracts. It establishes a new, more equitable standard that avoids disproportionate forfeiture by allowing a factual inquiry into whether the insurer was actually prejudiced by the delay. The case creates a burden-shifting framework: an unreasonable delay creates a presumption of prejudice, which the insured must then rebut. This holding aligns the state with a growing number of jurisdictions that favor a prejudice requirement, thereby increasing protection for policyholders while still safeguarding insurers' legitimate interests in timely investigation.
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