Gaulkin, J.c.c. (temporarily assigned).
Plaintiff's action here is to recover from defendant, its insured under a workmen's compensation policy, the sum of $4,302.85 which plaintiff was compelled to pay in satisfaction of a workmen's compensation award obtained by one of defendant's employees. The plaintiff insurance company contends that the defendant failed to give it notice of the accident as required by the policy; that consequently defendant forfeited his rights under the policy; that nevertheless under R.S. 34:15-85 plaintiff was compelled to pay the employee; and that therefore defendant is obligated to reimburse the plaintiff for the full amount of the award. Plaintiff moved for summary judgment, which was denied because the opposing affidavits raised an issue of fact. However, because the issues of law were argued ably and at length, and since this appears to be a proper case for such treatment, counsel have agreed that the issues be stated pursuant to R.R. 4:58-4.
The principal issue of law is the measure of damages, if plaintiff should recover. Plaintiff contends that if it shows defendant failed to give the notice required by the policy, plaintiff will be entitled to recover the full amount of the award it was compelled to pay. Defendant contends, on the other hand, that plaintiff may recover only to the extent it can show that it was prejudiced and damaged by the failure to give notice. Cf. Rockmiss v. New Jersey Manufacturers Ass'n , 112 N.J.L. 136 (E. & A. 1933).
Plaintiff relies on Miller v. Zurich General Accident & Liability Ins. Co. , 36 N.J. Super. 288 (App. Div. 1955); Kindervater v. Motorists Casualty Ins. Co. , 120 N.J.L. 373 (E. & A. 1938); Whittle v. Associated Indemnity Corp. , 130 N.J.L. 576 (E. & A. 1943); and Bankers Indemnity Ins. Co. v. A.E.A. Co. , 32 N.J. Super. 471 (App. Div. 1954).
Defendant admits that these cases have established the rule in New Jersey to be that where "performance of the conditions stated is made by the policy a condition precedent to recovery thereon * * * the company is entitled to assert substantial non-performance of any condition as a
defense to any proceeding against it on the policy, entirely without regard to whether or not it has been prejudiced by the default." Miller v. Zurich General Accident & Liability Ins. Co., supra. However, says defendant, these cases are not in point because in the policy now before us the provision for notice is not a condition precedent to the insurer's liability, as it was in each of the cases mentioned above. The defendant argues that the policy here does not expressly say that compliance with the notice provision is a condition precedent, nor that failure to give notice causes a forfeiture; nor does it provide for reimbursement from the insured, in the event of non-liability to the insured but liability to the injured party, as did the policy in the case of Bankers Indemnity Ins. Co. v. A.E.A. Co., supra. Defendant says the workmen's compensation policy here involved is in the form used by all workmen's compensation carriers in this State; they drafted it well knowing the language used in accident and other types of insurance, and they deliberately elected not to use that language, which made notice a condition precedent, or which provided for reimbursement in cases such as this. Since the policy must be construed strictly in accordance with its terms against the company that drew it and liberally in favor of the insured, defendant says the provision as to notice should not be construed as a condition, but as a covenant.
Defendant relies heavily on Fidelity & Casualty Co. of New York v. Vantaggi , 300 Mich. 528, 2 N.W. 2 d 490, 493 (Sup. Ct. 1942); Id. , 309 Mich. 633, 16 N.W. 2 d 101 (Sup. Ct. 1944). Defendant says this case is "the only reported case * * * wherein a compensation insurer sued to recover back money paid, on the ground that the employer violated a breach of notice provision in the policy." In that case the Michigan Supreme Court did say:
"The failure of an employer to give notice of an accident as provided for in his policy of insurance is such a substantial breach as to furnish a basis for recovery by the insurer. However, the insurer must show the extent and amount of the damages it has suffered by reason of this breach."
This case appears to overrule dictum to the contrary contained in the case of Fidelity & Casualty Co. of New York v. Board of County Commissioners , 267 Mich. 193, 255 N.W. 284 (Sup. Ct. 1934).
However, Michigan is a state which does not follow the rule which has been established in this State (called the "Whittle Rule" by Judge Conford in Miller v. Zurich General Accident & Liability Ins. Co., supra) that substantial non-performance of any condition works a forfeiture, without a showing by the insurer of prejudice. Michigan is one of the states that require the insurer to show the non-compliance not only to be substantial, but also to be prejudicial. Wehner v. Foster , 331 Mich. 113, 49 N.W. 2 d 87 (Sup. Ct. 1951); Weller v. Cummins , 330 Mich. 286, 47 N.W. 2 d 612 (Sup. Ct. 1951); Kennedy v. Dashner , 319 Mich. 491, 30 N.W. 2 d 46, 47 (Sup. Ct. 1947); Note 68 Harv. L. Rev. 1436, at 1437. As Judge Conford said in the Miller case, we must follow the New Jersey rule, because the deliberately considered determination by our court of last resort in the cases cited is not to be disregarded by a lower court. Hence the cases, such as those from Michigan, "which are influenced by the factor of prejudice are * * * not authoritative in this jurisdiction." Miller v. Zurich General Accident & Liability Ins. Co., supra , at page 296. Therefore, unless there is something in the policy involved in this case, or in the nature of workmen's compensation insurance, that distinguishes this case from our decided cases which established and followed the "Whittle Rule," we cannot follow the Vantaggi case.
Let us turn then to the policy. It is true that nowhere in the policy is it said in so many words that the insured's rights shall be forfeited for failure to give the stipulated notice, nor do the words "condition precedent" appear anywhere in the policy, nor is there a reimbursement clause, nor is there any provision that no action may be maintained until compliance with all of the terms and provisions of the policy.
But is that necessary to make the performance by the insured of the provision for notice a condition precedent to the liability of the insurance company? Williston says (Contracts (rev. ed. 1936), sec. 671):
"Any words will create a condition which express, when properly interpreted, the idea that the performance of the promise is dependent on some other event * * * 'For the most part conditions have conditional words in their frontispiece and do begin therewith.' * * * In the early books there are said to be three words most proper for the purpose: proviso, ita quod , and sub conditione; * * *."
The policy here involved provides "THIS AGREEMENT IS SUBJECT TO THE FOLLOWING CONDITIONS," which would appear to be the equivalent of the " sub conditione " mentioned by Williston. See Bankers Indemnity Ins. Co. v. A.E.A. Co., supra , at page 475. Under that heading, in this policy, appears the following:
This employer, upon the occurrence of an accident, shall give immediate written notice thereof to the company with the fullest information obtainable. He shall give like notice with full particulars of any claim made on account of such accident. * * * Nothing elsewhere contained in this policy shall relieve this employer of ...