PROVIDENCE WASHINGTON INSURANCE COMPANY v. CONTAINER FREIGHT INC (1997)

In this action brought by an excess insurer against its insured and the insured's primary insurer, we consider the effect of the insured's delay in giving notice to the excess carrier of a third-party claim that ultimately resulted in a judgment invading the excess policy.   We reject the insured's contention that the “notice-prejudice” rule applied to primary carriers should apply to excess carriers.   Instead, we hold that when the timeliness of notice is challenged by the excess carrier, the fundamental issue is whether the insured acted reasonably in withholding notice until it was given, and that resolution of the reasonableness issue turns on the particular facts and circumstances of the underlying claim, taking into account but not necessarily depending upon the existence, if any, of actual prejudice to the excess insurer.   We reverse a summary judgment granted in favor of the insured and its primary insurer.

FACTS

In 1991 and 1992, Consolidated Freightways, Inc. was insured under a commercial general liability policy issued by CF Financial Services Corporation (CFFS), with coverage of $1 million per occurrence.¹  CFFS is a “captive” insurance company, formed and wholly owned and controlled by Consolidated solely to provide primary insurance to Consolidated.   CFFS has no employees, and has delegated all claims adjusting responsibilities to Consolidated, which has an in-house claims adjustment department.   In 1991, Consolidated was also insured under a policy issued by Providence Washington Insurance Company, with policy limits of $2 million in excess of the coverage provided under the CFFS policy.   Providence's excess policy included the following notice provision:

“a. Notice of Incident

“Whenever [Consolidated has] information from which [Consolidated] may reasonably conclude that a loss appears likely to involve this policy, written notice shall be given to us ․ as soon as practicable.

“b. Notice of Suit

“If suit is brought which appears likely to involve this policy or alleges damages involving this policy, immediate written notice shall be given to us along with copies of the suit papers.”  (Italics added.)

In August 1991, a Consolidated truck was involved in a multi-vehicle accident.   Several claims were made and most were settled for about $100,000, leaving about $900,000 in coverage available under Consolidated's primary policy.   Claims by Carolyn Stevens and David Carpenter were not settled, and in July 1992, Stevens and Carpenter (collectively “Stevens” except as otherwise noted) sued Consolidated to recover unspecified damages for injuries sustained in the accident.²  Consolidated's in-house “Vehicular Claims Department” adjusted the Stevens claim.

In September 1993, Consolidated stipulated to liability in the Stevens action.   Settlement demands were thereafter made by Stevens, with counter-offers by Consolidated, and several settlement conferences were held before the Honorable Peter Smith (retired).   Stevens's demands started at about $875,000 and ended at $260,000.   Consolidated's maximum offer was $200,000.   Judge Smith valued the case at a high of $500,000, expressed concern to Consolidated about the possibility it might be “hit hard” at trial, and (to no avail) urged Consolidated and CFFS to accept Stevens's $260,000 settlement demand.   No settlement was reached and the case was tried to the court, which rendered a judgment in favor of Stevens for nearly $2.7 million (plus $171,000 for Carpenter).   At that point, Consolidated first notified Providence of the action and the judgment.   Later, Stevens settled for $2 million (Carpenter settled for $165,000).   CFFS paid the remaining policy limits (about $900,000), and the balance (about $1,267,200) was paid by Providence, subject to a reservation of rights.

Providence then filed this action against Consolidated and CFFS for reimbursement of the $1.2 million it paid to Stevens.   On cross-motions for summary judgment supported by a joint statement of stipulated facts and evidence, the trial court granted summary judgment in favor of Consolidated and CFFS. Providence appeals.

DISCUSSION

I.

Providence contends Consolidated owed it a duty to “timely report” the Stevens action, and that timely notice was not given.   Consolidated agrees it owed a duty to Providence but contends it did not arise until judgment was rendered because it was not until then that it “appear[ed] likely” that the Stevens claim would “involve [the Providence] policy.”   In the alternative, Consolidated contends the judgment in its favor must be affirmed on the ground that Providence did not (and could not) show prejudice.   We agree with Providence that, on this record, summary judgment should not have been granted.

A.

Although Consolidated did not have any written guidelines covering the point at which its excess carrier was to be notified, it was the “practice” of its claims supervisor to report claims to the excess carrier when Consolidated's claims adjuster “evaluated the severity of injury or exposure” at an amount equal to one-half of the available primary policy limits.   At the time the Stevens action was filed, the amount of available coverage under the primary policy was about $900,000, half of which would have been $450,000.

There is no evidence about Stevens's demand before or at the time her suit was filed (July 1992), but there is evidence that, at that time, Consolidated's reserve for all claims was $103,000.   In September, Stevens served on Consolidated a Statement of Damages (Code Civ. Proc., § 425.11) ³ in which she claimed general damages of $500,000, plus additional medical expenses and lost earnings “according to proof.”   In October, Consolidated increased its reserve to $192,000.   In March 1993, Consolidated's trial counsel (Daniel E. Hoffman) told Consolidated that, in his view, Stevens's claims were “inflated.”   In April, Stevens served on Consolidated a revised Statement of Damages in which she increased her estimate to $550,000, still subject to proof at trial.   At the same time, Carpenter filed a separate Statement of Damages in which he sought a minimum of $250,000, plus additional damages according to proof.

In May 1993 (following Stevens's deposition), Hoffman sent a report to Consolidated in which he explained that Stevens had been employed as a dancer at Knott's Berry Farm and, at the same time, as a waitress and dancer at Crackers Restaurant, earning a total of about $1,000 per month.   After the accident, she was unable to return to either job (she had suffered a herniated disc) but had nevertheless tried to find some work and, at the time of her deposition, was employed part-time at a theatre, earning about $160 per week.   Her doctor told her she would no longer be able to dance.⁴  In June, Consolidated increased its reserve to $237,000.   On September 10, Consolidated stipulated to liability in the Stevens action.

In a settlement conference statement filed by Stevens in January 1994, she demanded $875,000.   At a January 28 settlement conference, Judge Smith valued Stevens's case at about $300,000 to $400,000.   On February 9, Hoffman communicated Judge Smith's views to Consolidated, and enclosed with his letter copies of Stevens's pay stubs, a list of her healthcare providers, and copies of her medical reports.   On February 9 and March 30, Hoffman sent “status reports” to Consolidated in which he provided a detailed description of Stevens's injuries and the factual basis for her demand, and explained that her medical specials were about $28,000 (Carpenter's were about $7,700) and her past lost earnings were $93,000.

In a May 4 letter, Hoffman advised Consolidated that Stevens, with a probable need for future surgery, was demanding $750,000 (Carpenter's demand was $125,000).   On June 7, Stevens reduced her demand to $350,000 and Carpenter reduced his to $50,000.   At this stage, Consolidated's claims adjusters fixed the value of Stevens's claim “in the range” of $35,000 to $50,000 (although it was the claims supervisor's view that it was worth slightly more, about $50,000 to $75,000, and that Carpenter's claim was worth an additional $10,000 to $15,000).   The claims supervisor believed the Stevens action could not be settled (because in the supervisor's view, the claims were grossly exaggerated), and the maximum settlement authority given to Hoffman was $50,000 for Stevens and $15,000 for Carpenter.

In early June, Consolidated offered a total of $200,000 to settle Stevens's and Carpenter's claims.   At a June 21 settlement conference (which Consolidated's claims adjuster refused to attend), Judge Smith told Hoffman to tell his client that Consolidated was undervaluing the case and that, in the court's view, it had a settlement value of $225,000 to $260,000-and he believed Consolidated could get “hit hard” at trial over Stevens's loss of earnings.   Hoffman's settlement authority was not increased.   On June 24, Stevens made a statutory offer to compromise for $200,000 (and Carpenter made a similar offer for $27,500. § 998.)   Consolidated's claims adjuster instructed Hoffman to reject the offers of compromise.

In a July 22 memo to the file, Consolidated's claims adjuster noted that Stevens's medical expenses had recently increased because she had more surgery, that Consolidated's own medical examiner believed that Stevens had “sustained a chronic cervical sprain/strain,” and that Stevens had been suffering for over three years (since the date of the accident).   On July 26, another settlement conference was held before Judge Smith.   This time, as ordered by the court, Consolidated's claims adjuster attended, heard Judge Smith value the case at $300,000 to $500,000, heard him advise that Stevens's then-current demand of $260,000 was “very reasonable,” and heard him recommend that Consolidated accept it.   Hoffman-Consolidated's own attorney-told Consolidated's claims adjuster the demand “appeared to be reasonable.” ⁵

Hoffman disagreed with the notion of keeping Carpenter in the case but Consolidated was adamant about rejecting a settlement with him.   On July 28, Hoffman reminded Consolidated that trial would begin on August 1, and confirmed that, despite offers of compromise from Stevens and Carpenter of $292,500, Hoffman's maximum authority was $155,000.   At trial of the Stevens case, the defense failed to offer any medical evidence to rebut Stevens's claims about her injuries and disability (because the defense medical examiner's views were “too damaging”).   The defense did present expert economic testimony but it was not particularly helpful to the defense-because the expert fixed Stevens's past and future earnings at more than $300,000).⁶

Although Hoffman testified in this action that he “never imagined” the Stevens judgment would be “anywhere near” $1 million, the judge who heard that case obviously thought otherwise and, as noted at the outset, gave Stevens and Carpenter a judgment in their favor for about $2.9 million.   Only then did Consolidated give notice to Providence of the Stevens “incident” and “suit.”

B.

 Providence's policy imposed on Consolidated a duty to give “notice of [an] incident [w]henever [Consolidated had] information from which [Consolidated might] reasonably conclude that a loss appear[ed] likely to involve [the excess] policy,” and a separate duty to give “notice of suit” when a suit was “brought which appear[ed] likely to involve [the excess] policy or alleg[ed] damages involving [the excess] policy.”  (Italics added.)   The way Providence sees it, Consolidated's duty to give notice of the incident was triggered by the settlement judge's evaluation of the case and the demands asserted by Stevens, which together should have caused Consolidated “reasonably [to] conclude that a loss appear[ed] likely to involve [the excess policy],” and certainly should have made it “appear likely [to Consolidated that Stevens's suit] alleg[ed] damages involving [the excess] policy.”   As we will explain, we think the reasonableness of Consolidated's decision to defer notice is inextricably tied to the prejudice, if any, suffered by Providence as a result of the post-judgment notice.   At this point, however, we pause to explain why we cannot accept the trial court's finding that, as a matter of law, Consolidated acted reasonably.

More than $100,000 of the $1 million “per occurrence” limit of the primary policy had been consumed to satisfy the claims of others injured in the same accident that caused Stevens's injuries, leaving less than $900,000 available to satisfy Stevens's claim.   By Consolidated's self-imposed standards, it was obligated to notify Providence when its claims adjuster “evaluated the severity of injury or exposure” at an amount equal to one-half of the available primary policy limits.   At the outset, therefore, the question is whether-at any time after the Stevens claim was submitted-Consolidated acted “reasonably” in evaluating Stevens's claim below $450,000, notwithstanding that (1) Stevens's early demands exceeded $450,000;  (2) Consolidated's own medical expert fixed Stevens's medical damages at about $50,000;  (3) Consolidated's own economist fixed Stevens's loss of earnings at more than $300,000;  (4) no new or unexpected evidence was presented at trial;  and (5) these facts and figures do not take into account any award for pain and suffering or for Carpenter's damages.   Looking to “reasonableness” in the abstract (without regard to prejudice), these facts suggest the trial court made credibility calls or otherwise resolved disputed questions of fact.   Although we do not suggest the issue of reasonableness cannot be decided by summary judgment, we do not believe this record supports that approach.⁷

C.

This brings us to the issue of prejudice.   Consolidated contends that, even assuming its duty to notify Providence was triggered at some point prior to judgment, the late notice is irrelevant because (according to Consolidated) Providence did not suffer “actual and substantial prejudice.”   Providence contends that, as an excess carrier, it is not required to meet the burden imposed by the trial court.   As we will explain, the rule applied to primary carriers makes no sense when applied to excess carriers, and we therefore apply a rule that treats prejudice as an element of reasonableness.

1.

 With regard to primary insurance policies, “California law is settled that a defense based on an insured's failure to give timely notice requires the insurer to prove that it suffered substantial prejudice․  Prejudice is not presumed from delayed notice [and the] insurer must show actual prejudice, not the mere possibility of prejudice.”  (Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 760-761, 15 Cal.Rptr.2d 815.) ⁸  Stated differently, the burden is on the primary insurer to show that, but for the delay, there was a substantial likelihood that the primary insurer could have caused the insured to prevail in the underlying action brought against the insured, or that the primary insurer could have settled the underlying case for a small sum or a smaller sum than that for which the insured ultimately settled the claim.  (Northwestern Title Security Co. v. Flack (1970) 6 Cal.App.3d 134, 141-143, 85 Cal.Rptr. 693.)  “[P]rejudice is not shown simply by displaying end results;  the probability that such results could or would have been avoided absent the claimed default or error must also be explored.”  (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 883, fn. 12, 151 Cal.Rptr. 285, 587 P.2d 1098.)

 Consolidated's attempted application of this so-called “notice-prejudice” rule to excess carriers shows the circuitry of its reasoning and the fallacy of that approach.   According to Consolidated, Providence “cannot meet its burden of proving that it suffered actual and substantial prejudice due to alleged late notice [because it would have] to show that if it had received earlier notice of the claim, it would have taken action to change the outcome of the claim-something it cannot do given its status as an excess insurer.”   In effect, therefore, Consolidated's argument is that the excess policy's notice provisions are unenforceable surplusage.   We view that result as unacceptable and, as we will explain, unnecessary.⁹

 The “notice-prejudice” rule was developed in the context of occurrence policies and has not been applied to “claims-made” policies ¹⁰ -because application of the rule to a claims-made policy (under which notice must be given during the policy period) would transform the notice requirement into surplusage and, as a practical matter, transform claims-made coverage into occurrence-based coverage (because the date of the occurrence may not have been during the policy period).  (Pacific Employers Ins. Co. v. Superior Court (1990) 221 Cal.App.3d 1348, 1358-1359, 270 Cal.Rptr. 779; ¹¹  see also Slater v. Lawyers' Mutual Ins. Co. (1991) 227 Cal.App.3d 1415, 1421-1424, 278 Cal.Rptr. 479.)   Although the practical effect is different in our case (since the primary and excess policies are both occurrence policies), the analytical foundation is the same-because the “notice-prejudice” rule makes sense with regard to the primary policy, but not with regard to the excess policy.¹²

 As Consolidated concedes, the rights and duties of an excess insurer differ from those of the primary insurer.   Although the primary insurer has the right to control the defense and settlement of the underlying action until the limits of the primary policy are exhausted, the excess carrier usually has no duty to defend and no right to step in to settle the case-or even to prevent a settlement that invokes the excess carrier's coverage.   (Croskey, Kaufman et al., Cal. Practice Guide:  Insurance Litigation (Rutter 1997) § 8:127, pp. 8-36.4-8-36.5;  see also Diamond Heights Homeowners Assn. v. National American Ins. Co. (1991) 227 Cal.App.3d 563, 577-578, 580, 277 Cal.Rptr. 906;  Ticor Title Ins. Co. v. Employers Ins. of Wausau (1995) 40 Cal.App.4th 1699, 1707, 48 Cal.Rptr.2d 368.)   On the other hand, when the primary carrier unreasonably refuses to settle a claim within the primary policy's limits, the excess carrier may step in and settle the case directly with the injured party.  (Diamond Heights Homeowners Assn. v. National American Ins. Co., supra, 227 Cal.App.3d at p. 579, 277 Cal.Rptr. 906.)   Since the only practical purpose of notice to an excess carrier is to permit it to intercede where the insured (with or without the participation of the primary carrier) has dropped the ball, the facts determining the reasonableness of late notice and prejudice, if any, to the excess carrier are necessarily different from those governing late notice to the primary carrier.

In the context of notice, therefore, an excess policy is as different from a primary policy as is a claims-made policy from an occurrence policy.   With an excess policy (as with a claims-made policy), application of the “notice-prejudice” rule would erase the notice requirement from the policy and dramatically alter the terms of coverage.   Just as the “notice-prejudice” rule converts a claims-made policy into an occurrence policy, application of the “notice-prejudice” rule to an excess policy would deprive the excess carrier of the right to do the one thing it is entitled to do before the third party's damages are fixed by judgment-decide whether the insured or the primary carrier is unreasonably refusing to settle and, if so, whether it should step in and settle the case within the limits of the primary policy.¹³  For this reason, we conclude that an excess carrier defending on the ground of late notice is not bound by the “notice-prejudice” rule.

2.

 Our rejection of the “notice-prejudice” rule in this context does not mean that late notice to an excess carrier is conclusively presumed to be prejudicial.   Under Providence's policy, Consolidated had discretion to determine the time at which to give notice to Providence-the date on which Consolidated “reasonably conclude[d]” that it “appear[ed] likely” that the loss would involve the excess policy.   In our view, it follows ineluctably that, when the excess carrier defends on the ground that the notice was untimely, the question is whether, viewed objectively and considering the facts and circumstances that actually were or reasonably should have been known to the insured, the insured acted reasonably in withholding notice until it was actually given, with the determination of reasonableness taken into account but not entirely dependent upon the prejudice, if any, caused to the excess carrier.   This is not a novel concept.

In Illinois, for example, the rule is that “when the timeliness of the notice is challenged by an excess insurer and a court is asked to consider whether an insured has complied with the notice provision in an excess insurance policy which leaves the timing of the notice up to the discretion of the insured, the court must determine whether the insured abused the discretion granted it by the insurer, i.e., whether the insured acted unreasonably under the circumstances.   The insured must show that notice was given when it concluded that the excess insurance policy was implicated and, if the facts are not in dispute, whether the insured acted unreasonably by withholding notice to the insurer up to that point, is a question of law for the court to determine.   Furthermore, part of the equation in determining the reasonableness of the insured's actions is whether the insurer has been prejudiced by the timing of the notice.   Surely, the more prejudice that an insurer can show, the more likely it is that the insured's failure to notify the insurer is unreasonable.”  (Hartford v. Rush-Presbyterian-St. Luke's (1992) 231 Ill.App.3d 143, 150-151, 172 Ill.Dec. 641, 646, 595 N.E.2d 1311, 1316;  see also Greyhound Corp. v. Excess Insurance Co. of America (5th Cir.1956) 233 F.2d 630 [applying Florida law to the same effect];  Ralston Purina Co. v. Home Ins. Co. (8th Cir.1985) 760 F.2d 897 [applying Missouri law to the same effect].) ¹⁴

Following the Illinois court's approach, we hold that when the timeliness of notice is challenged by an excess carrier, the fundamental issue is whether the insured acted reasonably in withholding notice until the date it was actually given.   To decide that issue, the court should consider the particular facts and circumstances of the underlying claim and the manner in which that claim was evaluated by the insured, taking into account any evidence of actual prejudice to the excess insurer.   The greater the prejudice to the excess insurer, the more likely it is that the insured's delay was unreasonable, but the absence of demonstrable prejudice does not in itself defeat the defense of untimely notice where the failure to give timely notice was flagrantly unreasonable under the circumstances.   The facts of this case make the point.   On remand, Consolidated will have the opportunity to present evidence explaining its reasons for doubting the extent of Stevens's damages and summarily rejecting her demands, for ignoring its own medical expert, for failing to appreciate the effect of its own economist's analysis, and for rejecting the evaluation of an experienced trial judge.   Providence, in turn, will have the opportunity to present evidence refuting Consolidated's reasons, and evidence to show (if it can) that, upon notice, it would have inquired about the case, learned the true facts, and stepped in to accept Stevens's offer of compromise.   The trier of fact (or the trial court on summary judgment if the material facts are undisputed) will then determine the reasonableness of Consolidated's delay, balancing the degree of prejudice, if any, against the degree of unreasonableness.   In any case where the insured is able to satisfy the court that earlier notice to the excess carrier would not have affected the outcome of the underlying litigation-that is, where the excess insurer has not been able to show any prejudice at all-the late notice would be irrelevant and, necessarily, not unreasonable under the circumstances of the case.¹⁵

It follows that, on this record, the summary judgment in favor of Consolidated cannot stand.¹⁶

II.

 By the time the dispositive cross-motions for summary judgment were before the trial court, Providence had one remaining claim against CFFS, for equitable subrogation, concerning which the trial court found that, “as a matter of law, there is no legally cognizable claim․  For [Providence] to prevail on such a claim, it would have to assert and stand on the rights of [Consolidated] against [CFFS];  however, since it was [Consolidated] that made the decision to settle the underlying case, [Consolidated] has no rights to [subrogation] against [CFFS]. Thus, [Providence's] claim must fail.”   The trial court was mistaken.

 An “excess carrier may maintain an action against the primary carrier for wrongful refusal to settle within the latter's policy limits․  This rule ․ is based on the theory of equitable subrogation:  Since the insured would have been able to recover from the primary carrier for a judgment in excess of policy limits caused by the [primary] carrier's wrongful refusal to settle, the excess carrier, who discharged the insured's liability as a result of this tort, stands in the shoes of the insured and should be permitted to assert all claims against the primary carrier which the insured himself could have asserted.”  (Commercial Union Assurance Companies v. Safeway Stores, Inc. (1980) 26 Cal.3d 912, 917-918, 164 Cal.Rptr. 709, 610 P.2d 1038.)

To avoid this rule, CFFS contends that, because CFFS did nothing at all (having delegated the entire claims handling procedure to Consolidated), CFFS cannot be liable to Providence.   The argument is specious.   CFFS, Consolidated's primary insurer, decided unilaterally to delegate all claims handling matters to Consolidated.   Providence provided coverage in excess of that provided by CFFS. To permit CFFS to avoid liability to Providence by reason of CFFS's delegation of its duties to its inept insured is to invite mischief every time there is a primary captive insurer.¹⁷  There is no law or logic to support such a result, and we summarily refuse to accept it.   (Fireman's Fund Ins. Co. v. Morse Signal Devices (1984) 151 Cal.App.3d 681, 686, 198 Cal.Rptr. 756 [the purpose of the doctrine of equitable subrogation is to place the ultimate charge on the party who in equity and good conscience ought to pay for the loss].)

Because the trial court found that CFFS could not be liable to Providence on an equitable subrogation claim, the court never decided whether Providence had proved its subrogation claim.  (Fireman's Fund Ins. Co. v. Wilshire Film Ventures, Inc. (1997) 52 Cal.App.4th 553, 60 Cal.Rptr.2d 591.)   Accordingly, further proceedings will be necessary as to this claim as well as those against Consolidated.

DISPOSITION

The judgment is reversed and the cause is remanded to the trial court with directions to vacate the summary judgment and the orders on the cross-motions for summary judgment, and to set the case on track for trial.   The parties are to pay their own costs of appeal.

FOOTNOTES

1.   The named insureds under the primary policy were Consolidated and two of its subsidiaries, Express Intermodal Transport, Inc. and Container Freight, Inc.   For simplicity's sake, we refer to Consolidated and its subsidiaries collectively as “Consolidated.”

2.   Jose A. Renderos was driving a Consolidated truck, pulling a 20-foot chassis, traveling south on Interstate 5 at about 50 to 55 miles per hour, when a car swerved in front of him, striking his front bumper.   In response, Renderos swerved from the No. 4 lane into the No. 5 lane, rear-ended a Camry, swerved out of the No. 5 lane, lost control of the truck, went across the southbound traffic lanes to the center divider, and ended up with the tractor facing eastbound in the No. 1 lane and the chassis jackknifed, facing southbound in the No. 2 lane.   Carpenter (who was driving, with Stevens as a passenger) tried to stop but struck Consolidated's truck, as did a pick-up truck.   An uninvolved witness placed most of the blame on Renderos, and Consolidated's investigation disclosed that Renderos was driving in a lane closed to traffic.

3.   All section references are to the Code of Civil Procedure.

4.   At his deposition, Carpenter testified that, at the time of the accident, he had been employed for about four to six weeks as a box office attendant for the Long Beach Civic Light Opera, earning about $7 per hour and averaging about 40 hours per week.   He had also been working as a self-employed musician, earning about $1,500 per month.   After the accident, he was unable to return to work for about two and one-half to three months.

5.   In a follow-up memo to the file, Consolidated's claims adjuster mentioned that she had been able to see Stevens and Carpenter at the settlement conference, at which time she noticed that Carpenter “had really long hair” and that Stevens “was not as attractive as she had looked” in videos provided by Stevens's attorney.   Because of Carpenter's long hair, Hoffman was told to keep him “in the trial and not try to settle him out before trial.”   The claims adjuster suggested in her memo that Stevens's lawyer was lying about various items, and the adjuster boasted that she had been able to watch a film of Stevens's surgery without flinching.

6.   When Hoffman called Consolidated's claims adjuster mid-trial to be sure she understood this testimony, the adjuster made these notes of her conversation:  “Economist/rehab-ran number $300,000!   Why the hell are we running them now.   I thought the figure we were looking at was $50,000.”

7.   In his statement of decision, the trial judge who presided in the Stevens case explained his decision in detail, reciting facts that were known to Consolidated's claims adjusters and that should have been relevant to any evaluation of Stevens's claim:“At the time of the accident ․ Stevens was in excellent health and physical condition․  She is 31 years old and has followed a career of professional dancing․  [¶] [Stevens and Carpenter] have had their lives and careers significantly affected by the accident․  [A] videotape [shows] Stevens dancing professionally at Knott's Berry Farm in a show containing intricate, physically demanding and very artistic dances.   She was an accomplished dancer and could have continued in her profession to her early- or mid-forties.   Choreography and teaching were also within her plan and capability on a developing course․  [¶] Stevens has had one back surgery and another is reasonably certain within the next five years.   She has not danced professionally since the collision ․, and it is reasonably certain that she will not return to professional dancing.  [¶] [In the accident, t]here [was] no comparative fault on the part of [Stevens or Carpenter]․  The impact was major and [Carpenter's] vehicle was totaled․  [¶] Stevens called three treating physicians to testify about injuries sustained by her and treatment that was rendered.  [Consolidated] did not call a medical expert to testify about the injuries sustained by Stevens.   The evidence is persuasive that Stevens suffered career-ending injuries and that she has been in excruciating pain since the collision․”

8.   Consolidated says that Shell “specifically addressed the standard applicable both to primary and excess carriers on late notice claims.”   Consolidated is mistaken.   While it is true that the insured in Shell was covered by nine layers of excess coverage over and above its primary policy, the fundamental issue in the case was whether the insured's failure to give timely notice to any of its carriers afforded a defense to coverage.  (Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at pp. 735, 759-764, 15 Cal.Rptr.2d 815.)   There is nothing in the opinion to suggest the court considered the facts now before us-timely notice to the primary carrier but untimely notice to the excess carrier.

9.   We do not agree with Consolidated's assumption that an excess carrier could never “change the outcome.”   As explained below, an excess carrier has fewer rights than a primary carrier, but it does have some rights to step in and “affect the outcome.”

10.   An “occurrence” policy covers the insured's liability for damage that “occurs” during the policy period regardless of when the claim is first asserted.  (A.C. Label Co. v. Transamerica Ins. Co. (1996) 48 Cal.App.4th 1188, 1192, 56 Cal.Rptr.2d 207;  Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 669-670, 42 Cal.Rptr.2d 324, 913 P.2d 878.)   A “claims made” policy “limits coverage to claims made against the insured during the policy period.   Coverage does not depend on when the ‘actual or alleged negligent act, error or omission’ occurs․  The event that triggers [coverage] is transmission of notice of the claim.”   (Homestead Ins. Co. v. American Empire Surplus Lines Ins. Co. (1996) 44 Cal.App.4th 1297, 1304, 52 Cal.Rptr.2d 268.)

11.   Although Pacific Employers Ins. Co. clearly holds that the “notice-prejudice” rule does not apply to claims-made policies, it is a bit vague when it comes to the rule that does apply.   The most that can be said is that, under a claims-made policy, notice must be given at some point during the policy period.  (Pacific Employers Ins. Co. v. Superior Court, supra, 221 Cal.App.3d at pp. 1356-1359, 270 Cal.Rptr. 779.)

12.   Consolidated relies on Ins. Co. of Pennsylvania v. Associated Intern. (9th Cir.1990) 922 F.2d 516.   We do not find that opinion persuasive.  Ins. Co. of Pennsylvania holds that the notice-prejudice rule applies to notice provisions in reinsurance policies.   (Id. at p. 523.)   Although this holding is supposedly based on California law, the court relied on cases from Pennsylvania, Louisiana and New York for its analysis of the reinsurance issue and failed to discuss the analysis of Pacific Employers Ins. Co. v. Superior Court, supra, 221 Cal.App.3d at pages 1356-1359, 270 Cal.Rptr. 779.  (Ins. Co. of Pennsylvania v. Associated Intern., supra, 922 F.2d at p. 523.)   In any event, we believe each type of policy must be analyzed according to its purposes and its language, and that the rules applied to one form of coverage may differ from those applied to other forms.

13.   In the trial court, there was evidence that it was not Providence's practice to intercede and settle lawsuits.   Had Providence been aware of Stevens's claim, a routine inquiry would probably have disclosed Judge Smith's evaluation and Consolidated's ostrich-like response.   For Providence, this case might well have been the exception.

14.   In the Illinois case, the trial court found that a 20-month delay in giving notice to the excess carrier was unreasonable and, as a matter of law, fatal to the insured's claim for indemnification.   The Court of Appeal disagreed because the primary and excess policies were issued by the same insurer, thus eliminating even a possibility of prejudice.  (Hartford v. Rush-Presbyterian-St. Luke's, supra, 172 Ill.Dec. at p. 642, 595 N.E.2d at p. 1312.)   Although we have not undertaken an exhaustive review of Illinois law, it appears that the Illinois courts take a similar approach regarding late notice to primary insurers.  (Ill. Val. Minerals Corp. v. Royal-Globe Ins. (1979) 70 Ill.App.3d 296, 26 Ill.Dec. 629, 633-634, 388 N.E.2d 253, 257-258;  Twin City Fire Ins. v. Old World Trading (1993) 266 Ill.App.3d 1, 203 Ill.Dec. 264, 268-269, 639 N.E.2d 584, 588-589.)

15.   Even where the “notice-prejudice” rule applies, our courts are more inclined to find actual prejudice where, as here, notice is not given until after judgment is entered.  (See Select Ins. Co. v. Superior Court (1990) 226 Cal.App.3d 631, 637-638, 276 Cal.Rptr. 598 [reversing summary judgment where a primary insurer did not receive notice of a suit against its insured until after judgment was entered because the carrier was entitled to demonstrate substantial prejudice];  Earle v. State Farm Fire & Cas. Co. (N.D.Cal.1996) 935 F.Supp. 1076, 1080-1082 [under California law, post-trial tender held prejudicial as a matter of law].)   Moreover, a close reading of the notice-prejudice cases shows that, more often than not, the court's finding of no prejudice is supported by facts that could not (or probably would not) arise in the excess carrier context.   For example, in Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th at page 763, 15 Cal.Rptr.2d 815, the court defined the “crux” of the prejudice issue this way:  “In order to demonstrate actual, substantial prejudice from lack of timely notice, an insurer must show it lost something that would have changed the handling of the underlying claim.   If the insurer asserts that the underlying claim is not a covered occurrence or is excluded from basic coverage, then earlier notice would only result in earlier denial of coverage.   To establish actual prejudice, the insurer must show a substantial likelihood that, with timely notice, and notwithstanding a denial of coverage or reservation of rights, it would have settled the claim for less or taken steps that would have reduced or eliminated the insured's liability.”  (Italics added.)

16.   To avoid this result, Consolidated contends the adoption of any rule other than the “notice-prejudice” rule would work a “technical forfeiture” and thus be unacceptable in California.   As our discussion in the text demonstrates, we do not view the notice requirement as a mere technicality-and a defense established by evidence proving that an insured unreasonably withheld notice to the prejudice of the excess carrier would not constitute a technical forfeiture.   Stated otherwise, we do not view this as an “unreasonable enforcement” of the terms of a policy, and the cases cited by Consolidated are inapposite.  (Olds v. General Acc. Fire etc. Corp. (1945) 67 Cal.App.2d 812, 818, 155 P.2d 676, disapproved in part by Barrera v. State Farm Mut. Automobile Ins. Co. (1969) 71 Cal.2d 659, 679, 79 Cal.Rptr. 106, 456 P.2d 674.)

17.   The evidence suggests the claims adjusters used by Consolidated, with CFFS's approval, were inexperienced and ill-equipped to evaluate a substantial claim.

MIRIAM A. VOGEL, Associate Justice.

ORTEGA, Acting P.J., and MASTERSON, J., concur.