Hallows, C. J.
On March 26, 1969, while the bond was in force and effect, the bank loaned $8,275 to one James DeLap who secured the loan with an agreement whereby Viola Motors, Inc., sold eight hay balers to him and one Leon Mellem. The agreement was assigned by Viola Motors, Inc., to the bank. About four months later, in July of 1969, there was a default on the loan and the bank resorted to the security and made demand on Leon Mellem for payment. Mellem refused liability on the ground his signature had been forged to the document. The following month, DeLap, Mellem, and Viola Motors, Inc., were adjudged bankrupts. At a bankruptcy hearing in October of 1969, DeLap admitted he had forged Mel-lem’s signature to the security agreement.
Late in October of 1970, a year later, a representative of Capitol Indemnity while discussing with the bank’s officers a proposed increase in the policy limits of the blanket bond was advised of this forgery and asked if it might have been covered by the bond. Prior to that time the bank was ignorant that the bond might cover losses occasioned through fraud and consequently had not notified Capitol Indemnity of the loss or filed a proof of loss. Fifteen days after this conference, the bank gave oral notice of the loss. After a month of negotiation, Capitol Indemnity denied coverage. On March 12, 1971, the bank commenced an action to recover on the policy. In its amended answer, Capitol Indemnity denied coverage and alleged a lack of notice and a failure to file
proof of loss. Other evidentiary facts giving rise to the questions of law decided by the trial court are set forth in the various affidavits supporting and opposing the motion for summary dismissal.
Banker’s blanket bonds are fairly standard contracts in the insurance field. We recently considered a question of coverage under one in
Racine County Nat. Bank v. Aetna Casualty & Surety Co.
(1973), 56 Wis. 2d 830, 203 N. W. 2d 145.
The notice provision of the bond issued by Capitol Indemnity, which is the central point of issue on this appeal, provided:
“The foregoing agreement is subject to the following conditions and limitations:
“Loss — Notice—Proof—Legal Proceedings
“Section 3. At the earliest practicable moment after discovery of any loss hereunder the Insured shall give the underwriter written notice thereof and shall also within six months after such discovery furnish to the Underwriter affirmative proof of loss with full particulars. Legal proceedings for recovery of any loss hereunder shall not be brought prior to the expiration of sixty days after such proof of loss is filed with the Under
writer nor after the expiration of twenty-four months from the discovery of such loss . . .”
The provisions of the bond relating to coverage for losses sustained through forgery are not at issue in this case, the bank claiming only that coverage was doubtful as a justification for not giving a timely notice.
The trial court held the giving of notice fifteen months after discovery of the forgery was too late as a matter of law and constituted noncompliance with the contract unless excusable. In reaching this conclusion, the trial court was not without support.
We conclude the bank’s
argument that a question of fact was raised concerning the reasonableness of the delay and therefore it was entitled to a jury trial is without merit. Likewise, there is no merit to the bank’s argument that Capitol Indemnity is estopped to raise the defense of failure to give timely notice or waived it because it denied liability. This argument would have merit if Capitol Indemnity had denied coverage within the time the notice was required to be given or had induced the bank to postpone giving notice by promises or action upon which the bank relied. Here, the bank was not misled in its failure to give timely notice as required by the bond.
Capitol Indemnity denied liability only after the expiration of the time within which notice should have been given, and such denial has no retrospective effect.
The bank claims error on the theory that the language in the bond requiring notice to be given at “the earliest practicable moment” means within a reasonable time under all the circumstances and such circumstances in this case consist of the uncertainty of coverage, the lack of a forfeiture clause and the lack of prejudice to Capitol Indemnity because of the delay.
In construing the effect of a provision in fidelity bond or policy calling for notice of loss within a prescribed period of time (such as “at the earliest practicable moment after discovery of a loss”), some courts have taken the position that unless a fidelity bond or policy specifically provides that the notice of loss provision is
a condition precedent, or that failure to comply therewith will effect a forfeiture of the bond or discharge the surety, failure of compliance will not bar recovery.
Some of these courts, however, qualify such holding by requiring a finding that the noncompliance did not so prejudice the surety that it would be inequitable to permit recovery.
Under this minority view, the notice of loss provision merely creates a covenant or promise on the part of the insured. However, most courts have regarded the notice of loss provision as a condition precedent even though the contract does not expressly say so or contain a forfeiture clause and have held that noncompliance will defeat recovery on the bond.
The rationale behind the
majority rule is to give the earliest opportunity to the surety to investigate, minimize and recoup losses while the time is ripe for such purpose, and to give the surety a reasonable opportunity to protect its rights.
Under this view, the failure to comply with the condition precedent to liability vitiates the insured’s claim regardless of whether or not prejudice to the surety resulted from the delay or the relative carelessness of the insured in giving notice or the insured’s ignorance of coverage under the bond.
The bank urges this court to adopt the minority view and questions whether the majority view is in fact what the courts have held as distinguished from what they have said. We do not agree with the bank’s analysis of the cases or with the merit of the minority view. Among our own decisions, we find relevant
Bank of Kaukauna v. Maryland Casualty Co.
(1940), 234 Wis. 321, 291 N. W. 319, in which the bank brought an action on a banker’s blanket bond to recover for loss on account of an embezzlement by the cashier. The bond had been can-celled but provided that if a loss should be discovered within one year after cancellation, the loss would be covered.
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Hallows, C. J.
On March 26, 1969, while the bond was in force and effect, the bank loaned $8,275 to one James DeLap who secured the loan with an agreement whereby Viola Motors, Inc., sold eight hay balers to him and one Leon Mellem. The agreement was assigned by Viola Motors, Inc., to the bank. About four months later, in July of 1969, there was a default on the loan and the bank resorted to the security and made demand on Leon Mellem for payment. Mellem refused liability on the ground his signature had been forged to the document. The following month, DeLap, Mellem, and Viola Motors, Inc., were adjudged bankrupts. At a bankruptcy hearing in October of 1969, DeLap admitted he had forged Mel-lem’s signature to the security agreement.
Late in October of 1970, a year later, a representative of Capitol Indemnity while discussing with the bank’s officers a proposed increase in the policy limits of the blanket bond was advised of this forgery and asked if it might have been covered by the bond. Prior to that time the bank was ignorant that the bond might cover losses occasioned through fraud and consequently had not notified Capitol Indemnity of the loss or filed a proof of loss. Fifteen days after this conference, the bank gave oral notice of the loss. After a month of negotiation, Capitol Indemnity denied coverage. On March 12, 1971, the bank commenced an action to recover on the policy. In its amended answer, Capitol Indemnity denied coverage and alleged a lack of notice and a failure to file
proof of loss. Other evidentiary facts giving rise to the questions of law decided by the trial court are set forth in the various affidavits supporting and opposing the motion for summary dismissal.
Banker’s blanket bonds are fairly standard contracts in the insurance field. We recently considered a question of coverage under one in
Racine County Nat. Bank v. Aetna Casualty & Surety Co.
(1973), 56 Wis. 2d 830, 203 N. W. 2d 145.
The notice provision of the bond issued by Capitol Indemnity, which is the central point of issue on this appeal, provided:
“The foregoing agreement is subject to the following conditions and limitations:
“Loss — Notice—Proof—Legal Proceedings
“Section 3. At the earliest practicable moment after discovery of any loss hereunder the Insured shall give the underwriter written notice thereof and shall also within six months after such discovery furnish to the Underwriter affirmative proof of loss with full particulars. Legal proceedings for recovery of any loss hereunder shall not be brought prior to the expiration of sixty days after such proof of loss is filed with the Under
writer nor after the expiration of twenty-four months from the discovery of such loss . . .”
The provisions of the bond relating to coverage for losses sustained through forgery are not at issue in this case, the bank claiming only that coverage was doubtful as a justification for not giving a timely notice.
The trial court held the giving of notice fifteen months after discovery of the forgery was too late as a matter of law and constituted noncompliance with the contract unless excusable. In reaching this conclusion, the trial court was not without support.
We conclude the bank’s
argument that a question of fact was raised concerning the reasonableness of the delay and therefore it was entitled to a jury trial is without merit. Likewise, there is no merit to the bank’s argument that Capitol Indemnity is estopped to raise the defense of failure to give timely notice or waived it because it denied liability. This argument would have merit if Capitol Indemnity had denied coverage within the time the notice was required to be given or had induced the bank to postpone giving notice by promises or action upon which the bank relied. Here, the bank was not misled in its failure to give timely notice as required by the bond.
Capitol Indemnity denied liability only after the expiration of the time within which notice should have been given, and such denial has no retrospective effect.
The bank claims error on the theory that the language in the bond requiring notice to be given at “the earliest practicable moment” means within a reasonable time under all the circumstances and such circumstances in this case consist of the uncertainty of coverage, the lack of a forfeiture clause and the lack of prejudice to Capitol Indemnity because of the delay.
In construing the effect of a provision in fidelity bond or policy calling for notice of loss within a prescribed period of time (such as “at the earliest practicable moment after discovery of a loss”), some courts have taken the position that unless a fidelity bond or policy specifically provides that the notice of loss provision is
a condition precedent, or that failure to comply therewith will effect a forfeiture of the bond or discharge the surety, failure of compliance will not bar recovery.
Some of these courts, however, qualify such holding by requiring a finding that the noncompliance did not so prejudice the surety that it would be inequitable to permit recovery.
Under this minority view, the notice of loss provision merely creates a covenant or promise on the part of the insured. However, most courts have regarded the notice of loss provision as a condition precedent even though the contract does not expressly say so or contain a forfeiture clause and have held that noncompliance will defeat recovery on the bond.
The rationale behind the
majority rule is to give the earliest opportunity to the surety to investigate, minimize and recoup losses while the time is ripe for such purpose, and to give the surety a reasonable opportunity to protect its rights.
Under this view, the failure to comply with the condition precedent to liability vitiates the insured’s claim regardless of whether or not prejudice to the surety resulted from the delay or the relative carelessness of the insured in giving notice or the insured’s ignorance of coverage under the bond.
The bank urges this court to adopt the minority view and questions whether the majority view is in fact what the courts have held as distinguished from what they have said. We do not agree with the bank’s analysis of the cases or with the merit of the minority view. Among our own decisions, we find relevant
Bank of Kaukauna v. Maryland Casualty Co.
(1940), 234 Wis. 321, 291 N. W. 319, in which the bank brought an action on a banker’s blanket bond to recover for loss on account of an embezzlement by the cashier. The bond had been can-celled but provided that if a loss should be discovered within one year after cancellation, the loss would be covered. The bond provided by express condition that “at the earliest practicable moment, and at all events not later than ten days” after discovery of a loss notice had to be given. The bank failed to give notice within ten days after discovery of the loss within the year of cancellation of the bond. This court ordered the trial court to grant the defendant’s motion for summary judgment dismissing the complaint. The court did not base its holding of non-
liability on the presence of a forfeiture clause or prejudice to the surety but on the terms of the contract.
The provision for timely notice in an insurance policy or any other contract raises the question of whether a contract means what it says or whether a contract, to make time essential must be phrased in “terms of art,”
i.e.,
to emphasize the importance of the intention of the makers of the contract expressly stating compliance with the notice provision is a condition precedent to liability or that the contract is void or forfeited for noncompliance.
The bank relies on a line of fire insurance cases which hold that the requirement in a fire insurance, policy for the filing of proof of loss is not a condition to liability but merely postpones the maturity of the claim and does not work a forfeiture of the policy. This doctrine was explained in
Ciokewicz v. Lynn Mut. Fire Ins.
(1933), 212 Wis. 44, 248 N. W. 778, and questionably applied to notice of loss and is an unusual doctrine in the insurance field and confined to fire cases. In
Britz v. American Ins. Co.
(1957), 2 Wis. 2d 192, 86 N. W. 2d 18, this court had before it a claim for the value of a motor tractor which defendant had insured against loss by theft. The policy required the insured to “give notice thereof as soon as practicable to the company or any of its authorized agents.” The court followed its long-standing rule that where notice of loss is required in the policy, timely notice to the insurer is a condition precedent to the maintenance of an action on the policy, notwithstanding the absence of a forfeiture clause, and the failure to perform the condition precedent constituted a defense to liability except for waiver or estoppel, citing
Foster v. Fidelity & Casualty Co.
(1898), 99 Wis. 447, 75 N. W. 69;
Underwood Veneer Co. v. London Guarantee & Accident Co.
(1898), 100 Wis. 378, 75 N. W. 996; and
Bachhuber v. Boosalis
(1930), 200 Wis. 574, 229 N. W. 117.
The validity of the holding in the
Ciokewiez Case
in respect to notice of loss was questioned in
Britz:
“The rule regarding the effect of failure to furnish
proof of loss
is different. There is no great hurry there, such as there is when loss occurs and the insurer must be notified so that it may proceed, while the evidence is fresh and available, to investigate and, if possible, to reduce or prevent loss. Historically, failure by the assured to furnish proof of loss within a stipulated time has only postponed maturity of the claim until the proof was furnished. It was so held in
Vangindertaelen v. Phenix Ins. Co., supra, Flatley v. Phenix Ins. Co.
(1897), 95 Wis. 618, 70 N. W. 828, and
Klingler v. Milwaukee Mechanics Ins. Co.
(1927), 193 Wis. 72, 213 N. W. 669. It was these cases dealing with proof-of-loss derelictions which were cited as authority in a notice-of-loss case,
Ciokewicz v. Lynn Mut. Fire Ins. Co.
(1933), 212 Wis. 44, 49, 248 N. W. 778, . . .
“Tardy
proof of loss
is different in its effect from failure to give
notice of loss
and we think now that the precedents of the notice-of-loss cases might better have been followed in the
Ciokewiez Case, supra,
than the precedents of the proof-of-loss cases . . . .”
In
Britz,
this court refused to extend its holding in the
Ciokewiez Case
beyond the facts of that case. Likewise, we refused to extend the questionable rule of
Ciokewiez
to the other types of insurance and left it strictly limited to fire insurance cases where the defense of prejudice in fact to an insurance company can be asserted.
The rule in respect to automobile liability insurance is governed by sec. 204.34 (3), Stats.,
and sec. 204.29.
As pointed out by the trial court in its opinion, “these statutes respectively provide that lack of notice under a motor vehicle policy is no defense unless there is prejudice and that all insurance policies issued by a licensed accident or casualty company must give the insured at least twenty days within which to serve a notice of injury. There are no comparable statutes which specifically apply to surety bonds or to banker’s blanket bonds such as the kind involved in the case at bar.” We hold that where the giving of timely notice is required by the banker’s blanket bond prior to the maturity of the liability of the insurer, such requirement is a condition precedent in fact to liability whether or not expressly so stated and is to be enforced as written whether or not its importance is emphasized by further language that noncompliance works a forfeiture or voids the policy.
Ignorance of policy provisions or a belief that coverage is questionable is no excuse for failure to give notice of loss under the banker’s blanket bond. In case of questionable coverage, notice of loss to the insurance company would start the investigative process in motion and resolve the uncertainty of coverage. As for ignorance of coverage, a bank should know its business and the ordinary terms of standard insurance contracts applying to banking business. The existence of such ignorance on the part of a bank would seem to be inexcusable and unreasonable.
The fact that Capitol Indemnity was not prejudiced is irrelevant. The contract language requiring timely notice of loss is designed to prevent prejudice or harm to the insurer. It is a fact of life in the insurance field that a timely notice of loss is important. It is a notice of loss that starts the investigation by the insurance company while the evidence is fresh and gatherable. Insurers are entitled to contract for this protection.
By the Court.
— Judgment affirmed.