{ "id": 11869368, "name": "ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff v. THE CATO CORPORATION, Defendant", "name_abbreviation": "Royal Insurance Co. of America v. Cato Corp.", "decision_date": "1997-03-04", "docket_number": "No. COA96-545", "first_page": "544", "last_page": "550", "citations": [ { "type": "official", "cite": "125 N.C. App. 544" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "32 ALR4th 141", "category": "reporters:specialty", "reporter": "A.L.R. 4th", "opinion_index": -1 }, { "cite": "343 S.E.2d 430", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1986, "opinion_index": 0 }, { "cite": "80 N.C. App. 643", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8525351 ], "year": 1986, "opinion_index": 0, "case_paths": [ "/nc-app/80/0643-01" ] }, { "cite": "195 S.E.2d 529", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1973, "pin_cites": [ { "page": "532" } ], "opinion_index": 0 }, { "cite": "283 N.C. 234", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8558358 ], "year": 1973, "pin_cites": [ { "page": "238" } ], "opinion_index": 0, "case_paths": [ "/nc/283/0234-01" ] }, { "cite": "370 S.E.2d 228", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1988, "pin_cites": [ { "parenthetical": "citations omitted" } ], "opinion_index": 0 }, { "cite": "322 N.C. 482", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2515177, 2515312, 2514514, 2516085, 2519448 ], "year": 1988, "pin_cites": [ { "parenthetical": "citations omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/322/0482-05", "/nc/322/0482-03", "/nc/322/0482-02", "/nc/322/0482-01", "/nc/322/0482-04" ] }, { "cite": "364 S.E.2d 678", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1988, "pin_cites": [ { "page": "680", "parenthetical": "citations omitted" } ], "opinion_index": 0 }, { "cite": "88 N.C. App. 642", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8358891 ], "year": 1988, "pin_cites": [ { "page": "645-46", "parenthetical": "citations omitted" } ], "opinion_index": 0, "case_paths": [ "/nc-app/88/0642-01" ] }, { "cite": "462 S.E.2d 527", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1995, "opinion_index": 0 }, { "cite": "341 N.C. 656", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 793056, 793186, 793211, 793107, 793243 ], "year": 1995, "opinion_index": 0, "case_paths": [ "/nc/341/0656-02", "/nc/341/0656-05", "/nc/341/0656-03", "/nc/341/0656-01", "/nc/341/0656-04" ] }, { "cite": "458 S.E.2d 734", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1995, "opinion_index": 0 }, { "cite": "119 N.C. App. 365", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11915281 ], "year": 1995, "opinion_index": 0, "case_paths": [ "/nc-app/119/0365-01" ] }, { "cite": "459 S.E.2d 275", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1995, "opinion_index": 0 }, { "cite": "119 N.C. App. 444", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11915984 ], "year": 1995, "opinion_index": 0, "case_paths": [ "/nc-app/119/0444-01" ] }, { "cite": "414 S.E.2d 339", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1992, "opinion_index": 0 }, { "cite": "331 N.C. 57", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2500046 ], "year": 1992, "opinion_index": 0, "case_paths": [ "/nc/331/0057-01" ] } ], "analysis": { "cardinality": 595, "char_count": 13758, "ocr_confidence": 0.751, "pagerank": { "raw": 6.818182446141182e-08, "percentile": 0.41637350285673025 }, "sha256": "5ea329ba8e5876538ccc7108504bd625cbfa899b4a9d31988662f921cedd20aa", "simhash": "1:3e0be56f6863764a", "word_count": 2258 }, "last_updated": "2023-07-14T22:18:02.941264+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges EAGLES and GREENE concur." ], "parties": [ "ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff v. THE CATO CORPORATION, Defendant" ], "opinions": [ { "text": "MARTIN, John C., Judge.\nPlaintiff Royal Insurance Company of America (Royal) brought this action seeking a declaration of its rights and obligations under a commercial general liability insurance policy (the Policy) issued to defendant Cato Corporation (Cato). The dispute arises out of the following factual background:\nIn January of 1993, Zenobia Hurt was charged, arrested, and jailed as a result of allegations of theft lodged against her by a manager of a Cato retail store in Bluefield, Virginia. The charges were subsequently dismissed. On 24 September 1993, Ms. Hurt filed an action against Cato in the Circuit Court for Tazewell County, Virginia, alleging false imprisonment and malicious prosecution (the Hurt suit). Cato\u2019s Regional Vice President and duly-appointed registered agent for service of process was properly served with summons and a copy of the complaint in the Hurt suit on 28 September 1993. Defendant Cato did not file an answer to the Hurt complaint, and, on 24 November 1993, the trial court entered a default judgment in favor of Ms. Hurt in the amount of $500,000.\nOn 28 December 1993, Ms. Hurt\u2019s attorney in Virginia transmitted a copy of the court order and judgment in the Hurt suit to Cato\u2019s President in Charlotte, North Carolina. Ms. Hurt\u2019s attorney also informed Cato\u2019s Chief Financial Officer that the sheriff had seized Cato\u2019s Bluefield, Virginia store to satisfy the default judgment. Cato\u2019s Chief Financial Officer delivered a copy of the Hurt judgment to the Director of Risk Management of Cato\u2019s Insurance Department, who in turn, notified Royal of the Hurt suit for the first time. Cato unsuccessfully sought an injunction to stay execution to satisfy Ms. Hurt\u2019s judgment, and Cato subsequently paid Ms. Hurt $425,000 in settlement to satisfy the judgment.\nOn 29 December 1993, Royal received a General Liability Notice of Occurrence/Claim under the Policy from Cato, as well as a copy of the Hurt judgment, but did not receive a copy of the Hurt complaint until the next day. On 30 December 1993, Royal made a preliminary determination to deny coverage based on Cato\u2019s failure to meet the notice requirements of the Policy. Royal subsequently declined coverage by letter to Cato dated 28 February 1994 on the grounds that Cato had failed to \u201cgive Royal notice of the Hurt suit as soon as practicable and to forward the summons and complaint to Royal immediately\u201d pursuant to Section IV, Paragraph 2 of the Policy. After Cato threatened to file suit, Royal filed this action seeking a determination of its obligation to indemnify Cato under the Policy. Cato answered and filed a counterclaim alleging claims for Royal\u2019s breach of the policy and refusal to pay the judgment, failure to defend, breach of duty of fair dealing, and bad faith refusal to pay Cato\u2019s claim under the policy.\nAfter discovery, both parties moved for summary judgment. The trial court granted Royal\u2019s motion for summary judgment finding \u201cno genuine issue as to any material fact concerning Royal\u2019s claim for declaratory judgment or concerning CATO\u2019s counterclaims for damages, and that Royal is entitled to entry of judgment as a matter of law on both its claim for declaratory judgment and CATO\u2019s counterclaims for damages.\u201d Defendant Cato appeals.\nThe rules with respect to summary judgment are well-established. When considering a motion for summary judgment, the trial court is required to view the pleadings, affidavits and discovery materials in the light most favorable to the non-moving party to determine whether any genuine issues of material fact exist and, if there are none, whether the moving party is entitled to judgment as a matter of law. N.C. Gen. Stat. \u00a7 1A-1, Rule 56 (1990); Roumillat v. Simplistic Enterprises, Inc., 331 N.C. 57, 414 S.E.2d 339 (1992). Summary judgment is a proper procedure in a declaratory judgment action when there are no disputed issues of fact. Hendrickson v. Lee, 119 N.C. App. 444, 459 S.E.2d 275 (1995).\nCato argues that the \u201cKnowledge of Occurrence\u201d provision of Endorsement A to the Policy modifies Section IV, Paragraph 2, and requires that an executive officer or the insurance department of Cato must receive written notice of a claim before it is \u201cknowledge\u201d for purposes of requiring Cato to notify Royal. Cato further argues that it timely notified Royal of the Hurt claim on 28 December 1993, the same day an executive officer of Cato received written notice of the Hurt judgment. On the other hand, Royal argues that the \u201cKnowledge of Occurrence\u201d endorsement has no effect on Section IV, Paragraph 2, and that under Condition 2(c) Cato had an obligation to \u201cimmediately send\u201d suit papers to Royal. Thus, it argues, Cato\u2019s failure to do so was a breach of Cato\u2019s obligation under the Policy and relieves Royal of its obligation to indemnify Cato for its liability to Ms. Hurt.\nRoyal\u2019s complaint for declaratory judgment and the first claim in Cato\u2019s counterclaim, alleging Royal\u2019s breach of contract, present the same legal issues concerning the construction and interpretation of the Policy language. The determinative issue is whether the \u201cKnowledge of Occurrence\u201d endorsement modifies the notice requirements in Section IV, Condition 2(c) of the Policy.\nSection IV entitled \u201cCommercial General Liability Conditions\u201d provides:\n2. Duties In The Event Of Occurrence, Claim Or Suit\na. You must see to it that we are notified as soon as practicable of an \u201coccurrence\u201d or an offense which may result in a claim....\nb. If a claim is made or \u201csuit\u201d is brought against any insured, you must:\n(1) Immediately record the specifics of the claim or \u201csuit\u201d and the date received; and\n(2) Notify us as soon as practicable.\nYou must see to it that we receive written notice of the claim or \u201csuit\u201d as soon as practicable.\nc. You and anv other involved insured must,:\n(1) Immediately send us conies of anv demands, notices. summonses or legal papers received in connection with the claim or \u201csuit:\u201d (emphasis added).\nEndorsement Changes of the Policy provides:\nENDORSEMENT A\nKNOWLEDGE OF OCCURRENCE\nIT IS UNDERSTOOD AND AGREED THAT KNOWLEDGE OF AN OCCURRENCE BY THE AGENT, SERVANT OR EMPLOYEE OF THE INSURED, SHALL NOT IN ITSELF CONSTITUTE KNOWLEDGE BY THE INSURED UNLESS AN EXECUTIVE OFFICER OR THE INSURANCE DEPARTMENT OF THE INSURED CORPORATION SHALL HAVE RECEIVED WRITTEN NOTICE OF SUCH CLAIM FROM THE AGENT, SERVANT OR EMPLOYEE.\nThe construction of insurance policy provisions and the meaning of policy language is a question of law for the court to decide. U.S. Fidelity & Guaranty Co. v. Country Club of Johnston County, 119 N.C. App. 365, 458 S.E.2d 734, disc. review denied, 341 N.C. 656, 462 S.E.2d 527 (1995).\nWe reject Cato\u2019s argument that the \u201cKnowledge of Occurrence\u201d endorsement modifies Section IV, Condition 2(c) such that Cato had no duty to send Royal the Hurt legal papers until an executive officer or the insurance department had the written materials in hand. By its terms, the \u201cKnowledge of Occurrence\u201d provision only addresses Cato\u2019s duty to provide notice with respect to underlying \u201coccurrences,\u201d and designates the insurance department and executive officers as the persons whose knowledge triggers a duty to report \u201coccurrences.\u201d The provision makes no reference to Cato\u2019s obligation to \u201cimmediately send\u201d suit papers pursuant to Condition 2(c), which is separate and distinct from Cato\u2019s duty under the Policy to notify Royal of an occurrence, offense or claim. Accordingly, we conclude that the \u201cKnowledge of Occurrence\u201d endorsement does not modify Section IV, Condition 2(c).\nHaving determined that Condition 2(c) is not modified, we now turn to the questions of whether Cato complied with Condition 2(c), and if not, whether Royal had a duty to indemnify Cato as a matter of law.\nNotice provisions in insurance contracts have long been recognized as valid in North Carolina. \u201cThe purpose and intention of an insurance contract\u2019s notice provision is to enable the insurer to begin its investigation and to initiate other procedures as soon as possible after a claim arises, and to avoid any prejudice that might be caused by a delay in receiving notice.\u201d\nSouth Carolina Ins. Co. v. Hallmark Enterprises, 88 N.C. App. 642, 645-46, 364 S.E.2d 678, 680, disc. review denied, 322 N.C. 482, 370 S.E.2d 228 (1988) (citations omitted). \u201c[U]nless the insured or his judgment creditor can show compliance with the requirement, the insurer is relieved of liability.\u201d Davenport v. Indemnity Co., 283 N.C. 234, 238, 195 S.E.2d 529, 532 (1973).\nSection IV, Condition 2(c), required Cato to \u201cimmediately send\u201d Royal copies of any legal papers received in connection with a claim or suit to Royal. On 28 September 1993, Cato\u2019s duly appointed registered agent for service of process was properly served with the Hurt summons and complaint. Cato, however, did not notify Royal of the Hurt suit until 28 December 1993. It is clear that by sending the Hurt legal papers to Royal three months after Cato was served, Cato did not comply with the requirement of Condition 2(c) to \u201cimmediately send\u201d legal papers. Moreover, Royal was materially prejudiced by Cato\u2019s failure to \u201cimmediately send\u201d the Hurt legal papers. By the time Cato notified Royal about the Hurt suit, a default judgment in favor of Ms. Hurt had already been entered against Cato. As a result, Royal was deprived of an opportunity to investigate or defend the Hurt claim. Accordingly, we conclude as a matter of law that Royal had no duty to indemnify Cato for the money it paid to settle the Hurt judgment.\nWe must next determine, pursuant to count two of Cato\u2019s counterclaim, whether Royal \u201cfurther breached its obligations under the policy by failing to take any action to litigate the Hurt default and by failing to defend the Hurt action by seeking injunctive or other relief to set aside the judgment\u201d as a matter of law.\nGenerally, an insurer\u2019s duty to defend the insured is broader than its obligation to pay damages. Walsh v. National Indemnity Co., 80 N.C. App. 643, 343 S.E.2d 430 (1986). An insurer\u2019s duty to defend is triggered by the allegations of the complaint against its insured, and where it appears that there may be coverage for claims asserted in the complaint, the insurer has a duty to defend, whether or not the insured is ultimately liable. Id.\nIn order to begin to satisfy its duty to defend a suit against the insured, Royal not only must have notice that the suit has been filed pursuant to Condition 2(b), but it must also have copies of the suit papers and the time-critical information that they contain about the case as provided for in Condition 2(c). As stated above, Cato did not notify Royal of the Hurt suit until more than a month after a default judgment had been entered in favor of Ms. Hurt, and after the time to appeal the default judgment had expired. Moreover, by the time Royal received the actual Hurt complaint, Cato\u2019s motion to set aside the default judgment had been denied by the Virginia court. Thus, we hold, as a matter of law, that Cato\u2019s delay in providing Royal with the Hurt legal papers eliminated \u00e1ny obligation under the Policy to provide Cato a defense to the Hurt action.\nBecause we conclude as a matter of law that the \u201cKnowledge of Occurrence\u201d endorsement did not relieve Cato of its duty to \u201cimmediately send\u201d the Hurt legal papers pursuant to Condition 2(c), that Cato did not comply with Condition 2(c), and that Royal had no duty to indemnify or to defend Cato, Cato\u2019s counterclaims for breach of fair dealing, bad faith, punitive damages, and attorneys\u2019 fees are without merit. Accordingly, we affirm the entry of summary judgment in Royal\u2019s favor.\nAffirmed.\nJudges EAGLES and GREENE concur.", "type": "majority", "author": "MARTIN, John C., Judge." } ], "attorneys": [ "Smith, Helms, Mulliss & Moore, L.L.P., by Douglas W. Ey, Jr., and Leigh F Moran, for plaintiff-appellee.", "McCalla, Raymer, Padrick, Cobb, Nichols & Clark, by Carol V. Clark, and J. Gregory Fagan, for defendant-appellant." ], "corrections": "", "head_matter": "ROYAL INSURANCE COMPANY OF AMERICA, Plaintiff v. THE CATO CORPORATION, Defendant\nNo. COA96-545\n(Filed 4 March 1997)\nInsurance \u00a7 668 (NCI4th)\u2014 claim against insured \u2014 declaratory judgment \u2014 default judgment \u2014 failure to notify\u2014 insurance\nThe trial court did not err in granting summary judgment for plaintiff insurance company in a declaratory judgment action arising from a false imprisonment and malicious prosecution claim when plaintiff refused to indemnify defendant for a default judgment because defendant failed to timely notify plaintiff of the claim. A \u201cknowledge of occurrence\u201d provision in the policy which designated plaintiffs insurance department and executive officers as the persons whose knowledge triggers a duty to report occurrences only addresses the duty to provide notice of \u201coccurrences\u201d and is separate and distinct from the duty to \u201cimmediately send\u201d suit papers to plaintiff. It is clear that defendant did not comply with the requirement to \u201cimmediately send\u201d legal papers by sending the papers to plaintiff three months after service. Moreover, plaintiff was materially prejudiced by that failure because a default judgment had already been entered and plaintiff was deprived of the opportunity to investigate or defend the claim. Moreover, defendant\u2019s delay in providing plaintiff with the legal papers eliminated any obligation under the policy to provide a defense.\nAm Jur 2d, Automobile Insurance \u00a7\u00a7 414 et seq.\nModern status of rules requiring liability insurer to show prejudice to escape liability because of insured\u2019s failure or delay in giving notice of accident or claim, or in forwarding suit papers. 32 ALR4th 141.\nAppeal by defendant from order and judgment entered 30 November 1995 by Judge John M. Gardner in Mecklenburg County Superior Court. Heard in the Court of Appeals 28 January 1997.\nSmith, Helms, Mulliss & Moore, L.L.P., by Douglas W. Ey, Jr., and Leigh F Moran, for plaintiff-appellee.\nMcCalla, Raymer, Padrick, Cobb, Nichols & Clark, by Carol V. Clark, and J. Gregory Fagan, for defendant-appellant." }, "file_name": "0544-01", "first_page_order": 582, "last_page_order": 588 }