Lumbermens Mutual Casualty Company v. RGIS Inventory Specialists, LLC, No. 09-0753 (2d Cir. 2010)
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09-0753-cv Lumbermens Mutual Casualty Company v. RGIS Inventory Specialists, LLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _______________ August Term, 2009 (Argued: November 19, 2009 Decided: December 9, 2010) Docket No. 09-0753-cv _______________ LUMBERMENS MUTUAL CASUALTY COMPANY, Plaintiff-Counter-DefendantCounter-Claimant-Appellant, v. RGIS INVENTORY SPECIALISTS, LLC and ROBERT M. BIRARDI, Defendants-Counter-Claimants-Appellees, CAMRAC INC., doing business as ENTERPRISE RENT-A-CAR, Defendant-Counter-ClaimantCounter-Defendant-Appellee. _______________ Before: KEARSE, SACK, and KATZMANN, Circuit Judges. _______________ Appeal from a judgment of the United States District Court for the Southern District of New York (Baer, J.), dated January 22, 2009, denying plaintiff-appellant s motion for partial summary judgment, granting defendants-appellees motion for summary judgment, and dismissing the complaint with prejudice. We affirm. Judge Kearse dissents in a separate opinion. _______________ THORN ROSENTHAL, Cahill Gordon & Reindel LLP, New York, N.Y., for Appellant. SANFORD N. BERLAND, Dickstein Shapiro LLP, New York, N.Y., for Appellees RGIS and Birardi. PETER M. KHRINENKO, Brand Glick & Brand, P.C., Garden City, N.Y., for Appellee Camrac. _______________ PER CURIAM: This appeal calls upon us to address the meaning and scope (under Michigan law) of a notice provision contained in an excess liability insurance policy issued by plaintiff-appellant Lumbermens Mutual Casualty Company ( Lumbermens ), to its insureds, defendants-appellees RGIS Inventory Specialists, LLC ( RGIS ), Robert M. Birardi ( Birardi ), and Camrac Inc. ( Camrac ). We hold that, under the specific circumstances of this case, defendants provided timely notice within the meaning of the excess liability insurance policy s notice provision, and therefore affirm the judgment of the district court. BACKGROUND The instant dispute arises out of an April 2003 accident in which non-party Robert Shore was struck and injured by a minivan owned by Camrac and driven by Birardi in the course of his employment with RGIS. Birardi was driving eastbound on an unilluminated two-lane highway 2 in Middlebury, Connecticut in the early morning hours of April 8, 2003. According to a Middlebury Police Department Incident Report, [i]t had snowed throughout the previous evening and . . . a light drizzle of freezing rain was occurring. J.A. 1072. The travel portion of the roadway was restricted due to ongoing snow removal operations, J.A. 1067, and Birardi was driving at between 30 and 40 miles per hour, well below the posted 45 mile per hour speed limit. After cresting a hill, Birardi s vehicle suddenly encountered Shore, who was dressed in dark clothing and in violation of Connecticut law1 was walking westbound in the narrow plowed portion of the eastbound travel lane of the highway. Birardi had no opportunity to brake or avoid a collision, and his vehicle immediately struck Shore and threw him to the side of the road. Meanwhile, a patrol car operated by Middlebury Police Officer Anthony Quicquaro was approaching from the westbound side of the highway, and observed the accident as it occurred. Officer Quicquaro called for medical assistance, and brought his vehicle around to the accident scene. On May 11, 2003, Officer Quicquaro submitted an Incident Report after completing his investigation of the accident, concluding as follows: Primary responsibility rested on Shore who should have been walking as far to the side of the roadway as possible. Because of the snow on the side of the roadway, the bare pavement section of the roadway was restricted to approximately 7 - 7.5 feet. With the width of the van at approximately 6 feet, there left very little room for safe passage. Shore chose to walk on the bare pavement. As a result the minivan struck Shore while the van was still operating within all legal parameters. This officer personally witnesses the collision and saw that the minivan did not have enough reaction time to perform any type of evasive maneuver. J.A. 1074. 1 Connecticut General Statute § 53-182 ( Use of highways by pedestrians ) prohibits pedestrians from improperly using the travel lanes of state roadways. 3 All three defendants were covered by a $2 million primary liability policy issued by United States Fidelity & Guaranty Company ( USF&G ), a non-party, and a $25 million excess liability policy issued by Lumbermens ( the Excess Policy ). Birardi immediately reported the accident to his employer (defendant RGIS), RGIS immediately notified its third-party claims administrator, Gallagher Bassett Services, Inc. ( Gallagher Bassett ), and Gallagher Bassett, in turn, timely notified USF&G, the primary insurer. In the meantime, Shore s counsel sent Camrac a letter of representation. Gallagher Bassett and Discovery Managers, Ltd., the claims managing agent for USF&G, thereafter conducted an accident investigation, began negotiations with Shore s counsel, and retained an automobile-accident defense firm, Cella, Flanagan & Weber, P.C. ( the Cella firm ) to assist them in evaluating the claim. Beginning almost immediately after the accident, Gallagher Bassett and the Cella firm issued a number of reports and assessments of the Shore claim. Throughout 2003 and early 2004, Gallagher Bassett attributed 0% fault to the defendants. On April 30, 2004, Gallagher Bassett noted that [w]e have determined liability at 0% client, assessed liability as doubtful, but nevertheless recommended that counsel be retained [d]ue to the nature of this claim and voluminous records received by the claimant s attorney. J.A. 558-59. On July 28, 2004, Gallagher Bassett reiterated its belief that Shore bore responsibility for the accident, but recommended increasing reserves due to the details of accident/inj[uries]. J.A. 561-62. On August 19, 2004, the Cella firm issued a Liability Damages Opinion Letter, estimating the full value of Shore s claim (without regard to comparative fault)2 as being between $1.25 million and 2 Connecticut has a modified contributory negligence statute, whereby a claimant who is more than 50% responsible for his injuries is not entitled to recovery. See Conn. Gen. Stat. § 52-572h. 4 $4 million, noting that [i]f the claimant is found to be more than 50% at fault . . . , his comparative fault will act as a bar to recovery, and concluding that, based on the police officer s eyewitness report, the chances of prevailing on liability issues is 90%. J.A. 566, 570. An October 29, 2004 report from Gallagher Bassett reiterated that it had determined liability at 0% client, and noted that [t]he likelihood of prevailing at trial is 90%. J.A. 572, 574. On March 1, 2005, the Cella firm issued a litigation report, which (1) concluded that [i]t is quite likely that a jury would assign in excess of 50% comparative fault to the plaintiff barring recovery on this action, (2) observed that this matter poses significant risk given the massive injuries suffered by the claimant, his medical bills, and the future cost of care, (3) noted that even a slight risk of plaintiff s verdict poses a substantial risk of a large award, (4) estimated the full value of the claim as being between $1.25 million and $4 million without regard to comparative fault; and (5) recommended filing reserves in the amount of $750,000. J.A. 580-83. A June 20, 2006 letter from the Cella firm (1) noted that the fact that the accident occurred halfway down a hill, rather than halfway up the hill as was initially thought, negatively impacts the defense of this case, (2) estimated the full jury value of the case at approximately $4 million without regard to comparative fault, and (3) concluded that although it had become apparent that there was a less than 90% chance of prevailing on liability, there was still a 70% chance of securing a defendant s verdict, noting that Shore had a difficult burden to overcome. J.A. 615-17. Based on the foregoing analyses, reserves for the Shore claim were never increased above $1.15 million ($1 million for liability and $150,000 for defense costs). On February 10, 2005, Shore s representative filed suit against the defendants, and in May 2005, Shore s damages expert valued the claim at $3.7 million. The parties participated in 5 a mediation in June 2007. In its pre-mediation report, the Cella firm noted that it continued to believe [it had] a strong chance of securing a defense verdict on the comparative fault special defense. J.A. 219 (noting that this case presents the rare situation where the chance of a defense verdict outweighs the chance of a plaintiff verdict ). The report nevertheless noted, however, that the most likely scenario should a jury return a plaintiff s verdict, presently consists of the 50% comparative fault threshold, which would permit the plaintiff to recover between $1.5 million and $3.5 million. Id. (emphasis added). At the June mediation, Shore s counsel stated that he was confident that the jury would return a verdict for Shore, and estimated only a 20 to 25% reduction in damages for comparative fault. Shore s counsel s initial settlement demand was $9.5 million, which he lowered to $7.5 million, while defense counsel made two settlement offers: $50,000 and $100,000. Settlement discussions continued through January 2008, but ultimately were unsuccessful. On January 14, 2008 (nearly five years after the accident and on the eve of trial), RGIS (through its primary insurer and Gallagher Bassett) notified Lumbermens of the Shore action. Lumbermens issued a reservation of rights letter that same day, contending that the insureds had violated the Excess Policy s notice condition, and observing that the Excess Policy confers no obligation on [Lumbermens] to respond to this matter until such time as all underlying limits are properly exhausted. J.A. 1040. Lumbermens thereafter issued a notice of disclaimer, contending that it had not received timely notice of the claim, and refusing to indemnify the insureds or provide them with a defense. Meanwhile, the Shore action proceeded to trial. On January 30, 2008, the jury returned a verdict for Shore, allocating 100% of liability to the insureds, and on February 13, 2008, the jury 6 awarded approximately $11 million in damages. Lumbermens commenced the instant action on February 6, 2008, seeking a declaratory judgment to the effect that defendants are not entitled to coverage under the Excess Policy for the Shore claim because of defendants untimely notice. As noted, the Lumbermens $25 million policy is excess over the $2 million primary USF&G policy. The Excess Policy provides, in part, that: We will pay only the amount in excess of the sums actually payable under the terms of the underlying insurance. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for . . . . In the event the duty of the underlying insurer to defend the insured against a suit ceases solely because the applicable limit of insurance is used up in the payment of judgments or settlements, then we shall assume the duty for such defense. J.A. 834. The primary policy, by contrast, acknowledges the primary insurer s right, duty, and ultimate authority to investigate, defend or settle any claim or suit asking for damages. J.A. 818. The Excess Policy requires notice of an occurrence or an offense whenever it appears likely it will result in a claim involving excess coverage, and notice of a claim or suit whenever it appears likely that such claim or suit will involve excess coverage. J.A. 845 (emphases added). The Excess Policy also requires copies of demands, notices, summonses, or legal papers received in connection to a claim or suit to be furnished only whenever it appears likely that the claim will involve excess coverage or where Lumbermens has assumed the duty to defend the insured. Id. The USF&G primary policy, by contrast, requires notice as soon as possible of (1) an accident which may result in a claim or suit seeking a total amount of damages . . . in excess of the self-funded retention, (2) each claim or suit which involves serious injury(ies) or damage(s) ; and (3) each claim or suit which has, should have, or is 7 likely to have, without regard to liability, a reserve equal to or exceeding thirty-three and one third percent (33 1/3 %) of the self-funded retention. J.A. 821-22 (emphasis added). After the instant action was filed, the parties cross-moved for summary judgment. On January 21, 2009, the district court granted summary judgment for defendants and denied summary judgment for Lumbermens, finding that, under Michigan law,3 defendants provided timely notice within the meaning of the Excess Policy. District Court Opinion at 10. In so concluding, the court observed that [e]very professional who investigated the accident on behalf of RGIS and Birardi found that any finding of liability against the Defendants was unlikely, i.e., less than 50%, and that the claim should be fully resolved well within the limits of the Primary Policy. Id. at 9. As a result, the court found that defendants believed that they would likely be held not liable, or, if they were held liable, that they would be liable for only a small amount of damages, due to Connecticut s comparative fault statute. Id. (emphasis in original). The court thus concluded that defendants had no obligation to notify Lumbermens until the accident, claim or suit appeared probable, or more likely than not, to exceed more than $2 million. Id. at 8. The court also rejected Lumbermens claims of prejudice as unsupported and speculative. Id. at 11. The district court entered final judgment on January 22, 2009, and the instant appeal followed. Meanwhile, in the Shore action, defendants filed a notice of appeal to the Connecticut state appellate court. The parties in that action participated in formal mediation, and, while the instant appeal was pending, Shore accepted an offer to settle the case for $6 million. By summary order dated December 11, 2009, this panel dismissed Lumbermens appeal, vacated the 3 None of the parties here challenges the district court s decision to interpret the Excess Policy under Michigan law. 8 district court s judgment, and remanded the case to the district court with instructions to consider whether that settlement rendered this declaratory judgment action moot. See Lumbermens Mut. Cas. Co. v. RGIS Inventory Specialists, LLC, 356 Fed. App x 452, 455 (2d Cir. 2009) (summary order). The district court, in turn, determined that this action is not moot, reinstated its original opinion granting defendants motion for summary judgment, and dismissed Lumbermens complaint. See Lumbermens Mut. Cas. Co. v. RGIS Inventory Specialists, LLC, No. 08 Civ. 1316, 2010 WL 2017272 (S.D.N.Y. May 20, 2010). Lumbermens promptly restored jurisdiction to this Court by letter dated May 20, 2010. With our jurisdiction restored, we now turn to the merits of Lumbermens claim. DISCUSSION We review the grant of summary judgment de novo, examining the evidence in the light most favorable to, and drawing all inferences in favor of, the non-movant. Sheppard v. Beerman, 317 F.3d 351, 354 (2d Cir. 2003). In so doing, we utilize[] the same standard as the district court: summary judgment is appropriate where there exists no genuine issue of material fact and, based on the undisputed facts, the moving party is entitled to judgment as a matter of law. D Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). Where, as here, there are cross-motions for summary judgment, each party s motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration. Morales v. Quintel Entm t, Inc., 249 F.3d 115, 121 (2d Cir. 2001). The central question presented here is whether defendants provided timely notice of the Shore claim as required by the Excess Policy s notice provision. The answer to that question turns on the language of the notice provision itself and the reasonableness of defendants belief 9 that it was highly unlikely that the primary insurance policy limits would be exhausted. For the following reasons, we are satisfied that defendants notice was timely, and thus see no error in the district court s grant of summary judgment dismissing Lumbermens action. Under Michigan law, we give the language contained within [an insurance] policy its ordinary and plain meaning so that technical and strained constructions are avoided. Amway Distribs. Benefits Ass n. v. Northfield Ins. Co., 323 F.3d 386, 392 (6th Cir. 2003) (citation omitted). We are required to enforce the contract as written if it fairly allows but one interpretation, Morley v. Auto. Club of Michigan, 581 N.W.2d 237, 240 (Mich. 1998), and our ultimate goal is to enforce the agreement intended by the parties. See Engle v. Zurich-American Ins. Grp., 583 N.W.2d 484, 485 (Mich. Ct. App. 1998). Here, as noted, the Excess Policy requires notice of an occurrence or an offense whenever it appears likely it will result in a claim involving excess coverage, and notice of a claim or suit whenever it appears likely that such claim or suit will involve excess coverage. J.A. 845. Such language, on its face, does not require notice of all claims for amounts that exceed the primary policy s limits of $2 million. Rather, the notice provision plainly refers to the likelihood of the Excess Policy actually being implicated through liability once the primary coverage is exhausted. See Aetna Cas. & Sur. Co. v. Dow Chem. Co., 10 F. Supp. 2d 800, 807, 829 (E.D. Mich. 1998); see also Sudul v. Coregis Ins. Co., No. 214715, 2001 WL 633698, at *4 (Mich. App. May 25, 2001) (treating similar language as referring to the likelihood of a policy being implicated through liability once the limits of all underlying insurance were exhausted ). In Aetna, as the dissent notes, the court interpreted a notice provision similar to the one in issue here to require the insured to give notice when it has information from which the Assured may reasonably conclude that an 10 occurrence covered hereunder involves injuries or damages, which, in the event that the Assured should be held liable, is likely to involve this Policy, 10 F. Supp. 2d at 807 (original emphases omitted), but the court also concluded that an occurrence would be likely to involve the excess policy only in those instances where the insured reasonably concluded that the primary policy would be exhausted, id. at 829. The Excess Policy further limits the insured s notification duties to those specific circumstances in which it appears likely that a claim will involve the Excess Policy. Thus, on its face, the Excess Policy does not require notice to be given when it appears possible that a claim may or might involve the Excess Policy; nor does the policy require notice whenever a claim involves serious injuries or high monetary demands. Indeed, the Excess Policy s language in this respect stands in stark contrast to the notice provision contained in the primary policy, which requires notice without regard to liability of all claims that involve[] serious injury(ies) or damage(s) or exceed a certain threshold amount.4 J.A. 821-822. Moreover, unlike certain other notice provisions previously interpreted under Michigan law, the notice provision here does not require notice whenever an insured has information from which [it] may reasonably conclude that a policy would be implicated in the event [the insured] should be held liable. Assoc. Indemnity Corp. v. Dow Chem. Co., 248 F. Supp. 2d 629, 645, 647 (E.D. Mich. 2003) (interpreting such language to require notice when 4 The difference between the policies respective notice provisions reflects the general distinction between primary and excess insurance policies. Since excess coverage is contingent on exhaustion of primary or underlying policies, excess insurers generally do not require notification of occurrences until the excess policy is reasonably likely to be implicated. Consequently, insurance policies for excess coverage grant the insured some discretion in evaluating the case. Santos v. Farmers Ins. Exch., No. 07-11229, 2008 U.S. Dist. LEXIS 13238, at *11-12 (E.D. Mich. Feb. 22, 2008) (applying Michigan law). 11 [the insured] had information before it from which it may in the sense of could reasonably conclude that it is likely to involve its insurers ). Lumbermens could have used any of these formulations when drafting the Excess Policy s notice provision, but chose not to do so. Instead, as noted, the policy only requires notice when it appears likely that a claim will involve excess coverage. Thus, under the express terms of the Excess Policy s notice provision, defendants were required to provide notice to Lumbermens only when a claim or occurrence appeared probable as in more likely than not to exceed the primary policy s $2 million limits. See Black s Law Dictionary 925 (6th ed. 1991) (defining likely to mean of such nature or so circumstantial as to make something probable and having better chance of existing or occurring than not ); Moll v. Abbott Labs., 506 N.W.2d 816, 827 (Mich. 1993) (same). In light of these express terms, we find no error in the district court s conclusion that, as a matter of law, defendants provided timely notice of the Shore claim to Lumbermens within the meaning of the Excess Policy. The undisputed evidence shows that, upon receiving timely notice of the Shore claim, defendants primary insurer and third-party claims administrator conducted an investigation and retained outside counsel to assist with assessing and defending the claim. The third-party claims administrator and defense counsel thereafter repeatedly evaluated defendants potential exposure, and issued a number of reports and assessments of the underlying claim, each of which emphasized that Shore bore primary responsibility for the accident. Reserves for the underlying claim were never raised above $1 million for losses (well within the primary policy s limits), and at no point prior to trial did anyone (other than plaintiff s counsel) indicate that a finding of liability was likely or more probable than not. To the 12 contrary, the claims administrator and defense counsel repeatedly emphasized that, at the very most, Shore had a 30% chance of prevailing, and that even if Shore prevailed, any recovery would be tempered by Connecticut s modified comparative fault statute. In the face of such repeated, consistent, and unequivocal assessments all of which directly bear on whether it appeared likely that Shore s claim would reach the Excess policy we find no error in the district court s grant of summary judgment in defendants favor. Lumbermens argues that, at the very least, questions of fact remain as to the reasonableness of defendants reliance on the advice that it received regarding the underlying claim. Lumbermens has failed, however, to point to any evidence that calls into question the reasonableness of such advice, and no evidence indicates that defendants ever subjectively believed that it appeared likely that the Excess Policy would be implicated. Indeed, the record indicates that the advice that defendants received, which consistently indicated that the claim was unlikely to involve the Excess Policy, was tempered by and took into account the concerns that Lumbermens raised. Although Lumbermens makes much of the fact that it was immediately apparent that Shore suffered serious injuries from the accident, such an approach oversimplif[ies] the issue of [defendants ] notice requirement, Aetna Cas. & Sur., 10 F. Supp. 2d at 829, particularly given that our assessment of whether defendants notice was untimely under that provision necessarily turns on the strength of Shore s negligence claim, not on the nature or extent of Shore s injuries. Under such circumstances, and in light of the fact that insurers cannot us[e] hindsight to support a late notice defense, Aetna Cas. & Sur., 10 F. Supp. 2d at 809, it was objectively reasonable for defendants to rely on the advice that they received indicating that the underlying claim was not likely to trigger the Excess Policy. 13 In short, we are satisfied that defendants notice was timely, and see no error in the district court s grant of summary judgment dismissing Lumbermens action. For that reason, we need not address the district court s alternative ruling that Lumbermens failed to show actual and material prejudice. CONCLUSION For the foregoing reasons, we AFFIRM the judgment of the district court. 14 Lumbermens Mutual Casualty Co. v. RGIS Inventory Specialists, LLC, No. 09-0753-cv 1 KEARSE, Circuit Judge, dissenting: I 2 respectfully dissent from the maj ority' s decision to 3 affirm the district court's grant of summary judgment dismissing 4 this 5 Company 6 defendants RGIS Inventory Specialists, LLC., et al. 7 "RGIS") , 8 insurance 9 Liability Coverage" action ( II brought by Lumbermens") were not policy plaintiff seeking entitled with to a Lumbermens declaratory coverage Lumbermens Mutual for Casualty judgment that (collectively under their "Commercial excess Catastrophe (the "Policy"), which was to provide up to $25 10 million coverage if 11 primary insurance policy were 12 that 13 accident- -in which a vehicle driven by an RGIS employee struck 14 pedestrian Robert Shore, leaving Shore brain damaged and unable to 15 walk, talk, or use the right side of his body--and a February 10, 16 2005 lawsuit on behalf of Shore based on that accident, RGIS' s 17 notice to Lurnbermens on January 14, 2008 was not timely. I have 18 several difficulties with the majority's analysis of the relevant 19 Policy provisions and its conclusion that 20 nearly five years after the accident and literally on the eve of 21 trial, was timely. with respect the $2 million coverage provided in RGIS! s to an exhausted. April 8, 2003 Lumbermens contended catastrophic RGIS' s notice, traffic given The 1 Policy, which made timely notice a precondition to 2 Lumbermens's duty to provide RGIS with excess coverage, provided, 3 in pertinent part, as follows: You must see to it that we are notified as soon as practicable of an "occurrence". whenever it appears likely it will result in a claim involving this Coverage Part . a. 4 5 6 7 8 Notice of an a claim. 9 10 b. 11 II occurrence II is not notice of ¢ If a claim is made or "suit" is brought against any insured, you must 12 13 2) 14 Notify us as soon as practicable. You must see to it that we receive written notice of the claim or II sui til as soon as practicable whenever it appears likely that such claim or "suit" will involve this Coverage Part. 15 16 17 18 19 (Emphases added,) 20 [c]ooperate with 21 the investigation or settlement of any [such] claim." The Policy also provided that RGIS "must . [LumbermensJ and with the underlying insurer in 22 The maj ori ty holds that these terms did not require RGIS 23 to notify Lumbermens of the accident because RGIS believed--based 24 principally on 25 witnessed the accident that RGIS's driver had been driving safely 26 and 27 comparati ve 28 Shore's injuries. 29 by emphasizing 30 requires 31 involve excess coverage," Majority Opinion ante at 12, and stating was not (a) the opinions of negligent, and negligence- that notice (b) it the police officer who had Connecticut would not be principles found liable of for The majority reaches its conclusion principally the word when it "will, II 'appears 2 stating likely' that that "the policy only a claim 'will' 1 that "at no point prior to trial did anyone 2 counsel) 3 'more probable than not,'" 4 id. 5 "directly 6 claim would reach the Excess policy" indicate (stating 7 that that b [ore] In my a finding id. RGIS' s on the liability was at 13 belief whether view, of it (other than [Shore's] 'likely' (emphasis added); that it appeared would 'likely' or see also "prevail [] " that Shore's (emphases added)). majority's rationale both ignores the 8 normal breadth of the word lIinvolve[s]" and confuses the concepts 9 of claim and liability. The Policy does not say that notice is to 10 be given when it appears likely that the insured will be 'liable' 11 for an amount involving the excess coverage. 12 notice when it appears likely that an occurrence "will result in A 13 claim involving" 14 claim is 15 "such claim or 'suit' will involve" the excess coverage 16 added) . 17 grossly 18 App. 19 Illinois law); 20 Syndicate, Inc., 267 Mich. App. 21 n.5 ("Illinois rules of insurance policy interpretation are 22 substantially similar to those of Michigan"), 23 seeking more than $2 million "involve[s] the excess coverage, made or a suit In my view, inflated, If is brought where Kerr v. the and requires notice when a and it (2005) 24 The 25 likely" 26 evaluating 27 agree I majority Illinois Central language the although confers case, to me out on ~ 708, that the Majority that - If Co., appear 283 Ill. (applying Prime Insurance 706 N.W.2d 426, 432 a claim or a suit more than $2 million. the insured Opinion "whenever "some ante it appears discretion" at cannot be the end of 3 - (emphases ("Kerr") LLC v. 714 n.5, likely that "do not R. R. (1996) Property Group, points appears claimed damages 3d 574,584,670 N.E.2d 759,767 see Royal Rather, it requires 12 the n.4. in I analysis. 1 See Aetna Casualty & Surety Co. v. Dow Chemical Co., 10 F.Supp.2d 2 800, 3 when the insured "' had information or had formed an opinion at a 4 particular 5 "rubbery language . . 6 or discretion in forming a judgment about when 7 implicated" 8 marks omitted) 9 not mean total or unfettered discretion. 809 10 11 12 13 14 15 16 17 18 (E.D. Mich. time that 1998) a ("Aetna") claim would (a requirement for notice implicate' the policy" designed to give the insured (quoting policy language; (emphasis added)). other ~ is leeway . protection is internal quotation Plainly, "some" discretion does [W]hen 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 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 to it by the insurer, i . e., whether the insured acted unreasonably under the circumstances. 19 Kerr, 283 Ill. App. 3d at 580, 670 N.E.2d at 764 (emphasis added) 20 (internal 21 requiring notice when it "appears that an occurrence is likely to 22 involve indemnityll) 23 consideration must be given to the insured's 24 evaluation of 25 insured 26 consider the insured's evaluation of the case to the exclusion of 27 all else," rather than "in light of all the circumstances." 28 at 581, 670 N.E.2d at 764-65 (emphasis added) . 29 simply roll the dice with the insurer's funds, hiding behind the 30 statistical probabilities it has assigned to the case outcome." 31 Id. at 586, 670 N.E.2d at 768. quotation by marks (considering (emphasis in original) . the case its omitted) excess a provision . some "Although investigation and in light of the discretion granted the insurer," - 4 - the court should "not Id. "An insured cannot 1 I do not read the applying indicate 4 "implicate[s) ," an excess insurance policy depends upon whether or 5 not the insured believes it will ultimately be found liable. 6 Aetna, 7 required the insured to "give notice when it has 'knowledge of any 8 occurrence 9 10 F.Supp.2d at 807, language that the court found "substantially 10 similar" to policy language requiring the insured "to give notice 11 when 12 conclude that an occurrence covered hereunder involves injuries or 13 damages 14 liable, is likely to involve this Policy.' 15 original emphases omitted). 16 of 17 likelihood of a finding of liability. 18 interested in every accident, '" but they are interested "'in those 19 that may be serious enough to involve [them]. '" 20 Insurance 21 Mich. 22 Allstate 23 271-72 (1999), which was applying Illinois law) . 24 for example, it likely 'has in claim; the Exchange, 2008) In a suit "involve[s)," to or In the court considered an excess policy that to the give Co., this event focus No. (applying Ins. or issue here rise to a claim hereunder, '" information from which the Assured may reasonably which, the claim at and 3 a those law interpreting notice whether similar to Michigan 2 that clauses cases 306 case, that the Assured Id. II held (emphasis added; Some focus must be on the magnitude cannot 07-11229, Michigan reasonably 2008 law; was plain be solely on the "'Excess insurers are not Santos v. Farmers WL 506351, quoting I 11. App . 3 d 77 9 , it should be from 790 , the at Tribune *4 (E.D. Co. v. 715 N.E.2d 263, outset that the 25 accident was serious enough to result in a claim of more than $2 26 million, the limit of RGIS's primary insurance. 27 of the accident noted that Shore had sustained two broken legs, - 5 - The police report 1 possible internal injuries, and possible brain damage. 2 complaint, filed in February 2005, alleged that Shore had suffered 3 II 4 including 5 "severe and massive head trauma resulting in a comatose state and 6 prolonged 7 Shore's lawsuit ("Cella") prepared a litigation report for RGIS in 8 May 2007 9 injury expert "estimate[d] Mr. Shore's total life care cost at an 10 estimated $3,706,132.00" and that although RGIS had not retained 11 an expert, Cella was "certain that any life care plan will provide 12 estimates 13 that Shore "cannot walk or talk any longer," that 14 constant care for all [activities of daily life] ," that "his loss 15 of is 16 consider how painful the actual incident was, as well as the pain 17 of rehabilitation and his current disability, 18 "estimate[d] that Mr. Shore's non-economic damages [we]re at least 19 equal 20 value. 21 the Cella report totaled more than $7,400,000. 22 found as much as 23 entitled to recover more than $3,700,OOO--i.e., nearly twice the 24 coverage The Cella report 25 concluded 26 substantial damages award, there is considerable value to settling 27 this claim short of trial." serious and painful inj uries, "injuries II his The (the "Cella report") in the economic injuries law to firm his retained to and defend damages Moreover, range." and in terms of II that II noting [h] e requires Ita jury will the Cella report settlement and jury Thus, Shore r s damages as estimated by Even if Shore were 50% responsible for the accident, provided by RGIS! s IIgi ven back," II which noted that Shore's economic- significant," (Emphasis added.) that, II millions of dollars enjoyment his some of which may be permanent, neck," unconsciousness." life's to to Shore's the primary insurer. risk, - 6 - no matter how he would be slight I of a At the ensuing mediation session in June 2007, the Cella 1 Shore's attorneys 2 report's damages estimate proved not far off. 3 initially demanded $9.5 million, and by the end of the session had 4 lowered their demand to $7.5 million. 5 was informed by one of its advisors who had attended the session 6 that he thought the case could be set tIed for 7 was 8 carrier never offered Shore more than $100,000. 9 which commenced on January 15, no settlement, of the insureds 2008, suit, II $4M- $SM. and their There II primary At the trial, one day after RGIS finally 10 notified 11 responsible and awarded Shore more than $11.1 million. 12 Lumbermens The however. On the following day, RGIS the jury found Despite the pretrial predictions of RGIS not ultimately be found liable, S 100% advisors that 13 RGIS 14 observations in the Cella report that suggested a more cautious 15 assessment. 16 the opinion of Police Officer Quicquaro, 17 accident and believed that RGIS's driver was not at fault, 18 Cella report 19 that Officer Quicquaro reached will not likely be admissible at 20 trial II because Cella did "not believe Officer Quicquaro will be 21 qualified as an expert witness and because many of the conclusions 22 reached by Officer Quicquaro are the ultimate issues that will be 23 before the jury." 24 involved in the accident had testified in his deposition that he 25 was traveling no 26 Shore, the Cella report noted that 27 28 would I RGIS there had been For example, although the predictions drew heavily on stated that who had witnessed the the "many of the conclusions and opinions Further, although the RGIS employee who was faster than 30 miles per hour when he struck there are several entries in the plaintiff's medical records that the car, which struck Mr. Shore, was - 7 - 1 2 3 traveling at, or about, 40 miles per hour. The records also indicate at several locations that the plaintiff was thrown some 40 to 50 feet upon impact. 4 While the Cella report indicated the belief that those records 5 would not be admissible in Shore's case-in-chief, it stated that 6 "they may come 7 Officer Quicquaro on his estimate that the defendant was driving 8 reasonabl y . " 9 had no time to react to the appearance of Shorej but according to into evidence on cross examination to undermine In addition, RGIS' s driver had told the police he 10 the Cella report, the accident occurred halfway down a hill. And 11 at whatever speed the RGIS driver was actually traveling, it seems 12 clear that he did not apply his brakes before striking Shore, as 13 the Cella report noted that IIthere [we]re no skid marks. II 14 These are not just factors that should be considered in 15 determining whether RGIS abused its discretion in declining to 16 give Lumbermens notice of Shore's claim; they also are pertinent 17 to whether Lumbermens was prejudiced by RGIS's failure to give it 18 notice in time to assess the litigation risk and participate in 19 the 20 unnecessary 21 prejudiced by the lack of notice, 22 insurer is a 23 whether there has been an unreasonable delay in giving notice of 24 an accident to the insurer 'as soon as practicable.'" 25 Cummins, 26 ~,Wehner settlement discussions. 27 (1951) 28 633698, to address Al though the maj ori ty views it as the question of whether Lumbermens was "prejudice to the rights of the necessary element to be considered in determining 330 Mich. v. 286, Foster, 292-93, 331 47 N.W.2d 612, Mich. 615 Weller v. (1951); ~, 113,117,49 N.W.2d 87,89 (same); Sudul v. Coregis Insurance Co., No. 214715, 2001 WL at *4 (Mich. App. 2001) - 8 - (considering whether an excess 1 insurer was prejudiced before concluding that it had "received the 2 requisite notice") 3 767 4 determining the reasonableness of notice."). ("Prejudice 5 The i Kerr, 283 Ill. App. 3d at 584, 670 N.E.2d at to the district that court is a rejected delayed as to consider "speculati [vel the If 7 depriving it of the opportunity to participate in the settlement 8 discussions. 9 negotiations from which Lumbermens was excluded. however, prejudiced in contention is clear, notice factor 6 It the insurer that Lumbermens by there were settlement It is also clear 10 that the Policy required RGIS to cooperate with Lumbermens and the 11 primary 12 report had recommended settling Shore's claim rather than going to 13 trial, and that after the mediation session an advisor opined to 14 RGIS that the matter might be settled for as little as $4 million. 15 As 16 damages 17 $7,400,000, 18 attempt to secure a settlement. 19 the 20 constitute prejudice, Associated Indemnity Corp. v. Dow Chemical 21 Co., 248 F.Supp.2d 629, 650-51 (E.D. Mich. 2003) 22 judgment to the excess insurer on the basis of untimely notice), 23 and in the circumstances of the present case, 24 Lumbermens' s 25 matter of law. 26 27 insurer RGIS's in "settlement primary policy were estimated Lumbermens of ceiling even by surely any was RGIS's would claim, $2 that If million, attorneys have had an the and as Cella Shore s exceeding incent i ve The majority opinion, to A "late notice [that] prevented insurers from participating in settlement negotiations" claim of prejudice I may (granting summary I do not see how can properly be rejected as a in disagreeing with this dissent, notes that the Aetna court, dealing with a policy requirement for - 9 - 1 notice of any claim that was likely to involve the policy "lin the 2 event 3 F.Supp.2d at 807, 4 to involve' 5 insured 6 exhausted. " 7 First, the policy clause lI'in the event that the Assured should be 8 held 9 principally on the amount of the claim and not on the likelihood 10 of a finding of liability; that clause is not the equivalent of a 11 condition that the insured be likely to be held liable. 12 whatever the focus of that clause, 13 district 14 judgment--or 15 against the insurers. 16 17 that the Assured be held liable, III Aetna, IIconcluded that an occurrence would be 10 'likely the excess policy only in those instances where the reasonably liable should concluded that the primary policy would be Majority Opinion ante at 11. f (emphasis " court any here, other mine), the Aetna form of For the above reasons, I focuses I the notice requirement it is clear that, court judgment did as not a unlike the grant matter Second, summary of law-- would vacate the judgment of the district court and remand the matter for trial. - 10 - have two responses.
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