Why it matters: The Supreme Court of Appeals of West Virginia reversed an $8 million jury verdict and held that an insurance company had no coverage obligation to U.S. Silica for claims related to injuries from exposure to silica because notice of the claims was 30 years too late. U.S. Silica and its predecessors were named in several lawsuits seeking damages from injuries related to silica sand exposure beginning in 1975.
In 2005, U.S. Silica discovered three commercial general liability policies that had been issued to one of its predecessors between 1949 and 1958. Upon discovery of the policies, U.S. Silica immediately notified its insurer of the underlying claims and requested coverage. The insurer denied the request, claiming that U.S. Silica failed to comply with the policies' requirement to provide reasonable notice, but a jury ultimately awarded U.S. Silica more than $8 million. The insurer appealed and the court reversed the jury verdict. The court was not persuaded by the fact that prior to when U.S. Silica first gave notice it was unaware of the insurance policies' existence. The court held that although the question of reasonableness should typically be determined by a jury, "given the undisputed and egregious facts giving rise to the subject claims and the sophisticated nature of the parties involved," the delay of notice in the case was unreasonable as a matter of law.
Detailed discussion: U.S. Silica mines and processes silica sand. The company and its multiple predecessors had been named in numerous silica claims seeking damages for injuries allegedly caused by exposure to silica sand, with the first lawsuits filed in 1975.
In September 2005, U.S. Silica found three commercial general liability policies issued by Travelers Insurance Company. The policies were in effect from 1949 to 1958.
U.S. Silica immediately sent Travelers a letter informing the insurer of the silica claims and requesting coverage under the policies. Travelers denied the request, and U.S. Silica filed suit in West Virginia state court. A jury returned a verdict in favor of U.S. Silica and ordered Travelers to reimburse the company more than $8 million. Travelers appealed.
Travelers argued that U.S. Silica breached the notice provision in the policies, which stated: "If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, summons or other process received by him or his representative."
The court of appeals agreed. "Given that compliance with such a notice provision is a condition precedent to the existence of coverage under the subject policy, resolution of the notice issue necessarily determines the outcome of the instant declaratory judgment proceeding," the court ruled.
The court stated a two-step inquiry was required to determine whether U.S. Silica's late notice foreclosed coverage. First, the court considered the length of the delay and whether the delay was reasonable. If the delay is deemed reasonable, the burden shifted to the insurer to demonstrate prejudice from the notice.
U.S. Silica did not make it to the second step, however, as the court found the 30 years between the initial lawsuit and notice to Travelers unreasonable as a matter of law. U.S. Silica argued that as soon as it found the policies in 2005, it notified the insurer, but the court held those were not the operative dates.
While the issue of reasonableness would normally be a question of fact for the jury, the court ruled the delay was so egregious under the facts of the case that it could be determined as a matter of law.
To read the opinion in The Travelers Indemnity Company v. U.S. Silica Company, click here.