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Grinnell Mutual Reinsurance Co. v. Jungling12/18/2002
age insurance with the thought of defrauding someone in the future. And for sure, there is no evidence that Jungling purchased the policy contemplating that he would defraud the Steckels.
The countervailing considerations mentioned in Jacobson and Kambly are likewise present here. Compensating Jungling's innocent victims-the Steckels-outweighs the concern that Jungling will unjustly benefit from coverage. It is true that Jungling will benefit to the extent he is reimbursed for what he is out, which, as we discuss later, will be considerably less than the demand amount. But the ultimate and primary beneficiaries of the coverage will be innocent third parties-the Steckels. And as far as Grinnell is concerned, it was in a far better position than anyone to protect itself by including an intentional-acts-exclusion provision in the excess policy. We therefore conclude public policy does not operate here to preclude coverage.
VI. The Notice Issue
The notice provision in the excess policy was included in the "Conditions" section under the subpart captioned "Your Duties After a Loss":
If legal proceedings are brought against the insured person, the insured person must immediately notify us in writing and forward to the underlying insurer and to us every demand, summons or other process received by the insured person.
The policy further stated in the "Conditions" section under the subpart captioned "Suit Against Us":
No legal action can be brought against us until:
(a) The insured person has complied with all policy terms.
When, as here, a notice provision is written as a condition precedent to policy coverage, the insured must show substantial compliance with the condition. Met-Coil Sys. Corp. v. Columbia Cas. Co., 524 N.W.2d 650, 654 (Iowa 1994). The notice provision is one of the basic and essential provisions of the contract and is of the essence of the agreement. Id. at 655. The substantial compliance requirement is necessary because the notice provision is "the only avenue by which unjust claims can be successfully denied or defended. Unless given notice within a reasonable time, evidence could be lost and key witnesses never discovered." Henderson v. Hawkeye-Security Ins. Co., 252 Iowa 97, 107, 106 N.W.2d 86, 92 (1960). Where, as here, the notice provision requires notice to be provided directly to the insurer, notice to an agent does not constitute substantial compliance. Met-Coil, 524 N.W.2d at 656.
If the insured cannot show substantial compliance, the insured, to maintain an action against the insurer, must show that the failure to comply was excused, or that the requirements of the condition were waived, or that failure to comply was not prejudicial to the insurer. Henderson, 252 Iowa at 107, 106 N.W. 2d at 92. Ordinarily, the question of whether the insured has reasonably given notice of suit to the insurer is one of fact for the factfinder. Fireman's Fund Ins. Co. v. ACC Chem. Co., 538 N.W.2d 259, 262 (Iowa 1995).
Unless the insured shows such substantial compliance, excuse, waiver, or lack of prejudice to the insurer, prejudice must be presumed. Henderson, 252 Iowa at 107, 106 N.W.2d at 92. The presumption is rebuttable, but unless the presumption is overcome by a satisfactory showing of lack of prejudice, the presumption will defeat the insured's recovery. Met-Coil, 524 N.W.2d at 658.
An insured's mistaken belief or lack of knowledge regarding coverage may be a justifiable excuse for noncompliance with an insurance policy's notice provision. Id. at 657. Such a justifiable excuse exists only if the insured exercised due diligence. Id. To satisfy the due diligence
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