Case Bulletin – West Virginia Supreme Court Reverses Jury Verdict in Silica Claims Coverage Law Suit for Late Notice
At the end of 2015, the Supreme Court of Appeals of West Virginia reversed a jury verdict for $8,000,000, concluding that the Morgan County Circuit Court erred by not finding that the late notice provided by U.S. Silica precluded coverage of silica claims under three Travelers’ policies. Applying West Virginia law, the Court cited that the over thirty year delay between when the claims were filed and when Travelers Indemnity Company was given notice of the claims was unreasonable, even though U.S. Silica was unaware of the existence of the insurance policies prior to it providing notice.
The Court’s opinion cites that the record in the case showed that Plaintiff U.S. Silica incurred the majority of its unreimbursed defense and settlement costs related to silica claims between 2001 and 2005, though it first was a defendant in silica claims in 1975, when it was known as Pittsburgh Glass Sand Company (“PGS”). Prior to 2005, U.S. Silica was provided with portions of the costs and defense for silica claims against it pursuant to an indemnity agreement . However, when the indemnity agreement expired in 2005, U.S. Silica began to look at its insurance policies to determine whether any coverage existed as to the silica claims. At this time, U.S. Silica discovered the existence of three policies of comprehensive general liability insurance from Travelers Insurance Company and Travelers Indemnity Company. The policies collectively provided coverage from approximately 1949 to 1958.
While Travelers did provide coverage for those suits filed after it received notice of the claims, U.S. Silica eventually filed a declaratory judgment action against Travelers, among other insurers, in 2006 in Morgan County seeking coverage for the unreimbursed costs of the silica lawsuits filed in the thirty years prior to providing notice. The trial court denied both parties’ motions for summary judgment and the jury returned a verdict of over $8 million dollars in favor of U.S. Silica, finding that Travelers breached its policies.
In analyzing the case, the Supreme Court of Appeals of West Virginia found that the case turned upon the insured’s compliance with the policies’ notice provisions. The Court ruled that the satisfaction of the notice provision in an insurance policy is a condition precedent to coverage for the policy holder and cited further that an insured’s failure to satisfy the notice requirement would constitute a failure to comply with a condition precedent, precluding coverage as a matter of law.
The policies at issue contained the following notice provision:
[i]f claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
Noting the above language, the Court then applied the following two-step inquiry to determine whether late notice would preclude coverage: 1) the delay must be reasonable, and only if the delay is reasonable, 2) the burden shifts to the insurer to demonstrate prejudice by the late notice in order to preclude coverage. Absent a showing of such prejudice, coverage should be afforded. The Court applied this test to U.S. Silica’s notice and found that U.S. Silica should have provided Travelers’ with notice in 1975, when it was first named as a defendant in silica lawsuits. Noting that thirty years elapsed before U.S. Silica provided notice to Travelers, the Court noted that U.S. Silica failed to demonstrate that the delay was reasonable. Without meeting this prong of the two-step inquiry, the Court found that the burden did not shift to Travelers to prove that it was prejudiced by delayed notice. The Court remanded the matter to the circuit court with directions to enter an order granting Travelers’ post-trial motion for judgment as a matter of law.