Arrowood Indemnity Company v. Macon County Greyhound Park, Inc. et al

Filing 56

MEMORANDUM OPINION AND ORDER: Plaintiff Arrowood's 47 Motion for Summary Judgment is GRANTED as further set out in the order. Defendant MCGP's 46 Motion for Summary Judgment is DENIED as further set out in the order. The Court will enter a separate final judgment consistent with this Memorandum Opinion and Order. Signed by Hon. Chief Judge Mark E. Fuller on 12/3/2010. (dmn)

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Arrowood Indemnity Company v. Macon County Greyhound Park, Inc. et al Doc. 56 IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION A R R O W O O D INDEMNITY COM PA N Y P la in tif f , v. M A C O N COUNTY GREYHOUND P A R K , INC. D e f e n d a n t. ) ) ) ) ) ) ) ) ) ) ) C A S E NO. 3:08-cv-812-MEF (D e s ig n a te d for Publication) M E M O R A N D U M OPINION AND ORDER I . INTRODUCTION A rro w o o d Indemnity Company ("Arrowood") brings this declaratory judgment a c tio n against Macon County Greyhound Park, Inc. ("MCGP"), asking this Court to d e c la re that Arrowood, as MCGP's excess-liability insurer, is not liable to indemnify M C G P on the underlying bodily-injury judgment against MCGP. (Doc. # 2). The parties h a v e filed cross Motions for Summary Judgment. (Docs. # 46, 47). For the reasons set o u t below, Arrowood's Motion for Summary Judgment is GRANTED, and MCGP's M o tio n for Summary Judgment is DENIED. II. JURISDICTION AND VENUE T h is Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. 1 3 3 2 (a ), based on the diversity of the parties and an amount in controversy in excess of Dockets.Justia.com $75,000. The parties do not assert that this Court lacks personal jurisdiction over them, a n d there is no dispute that venue is proper pursuant to 28 U.S.C. 1391(b). II I . LEGAL STANDARD S u m m a ry judgment pursuant to Federal Rule of Civil Procedure 56(c) is a p p ro p ria te "if the pleadings, depositions, answers to interrogatories, and admissions on f ile , together with the affidavits, if any, show that there is no genuine issue as to any m a te ria l fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The movant "always bears the initial re s p o n s ib ility of informing the district court of the basis for its motion, and identifying th o s e portions of `the pleadings, depositions, answers to interrogatories, and admissions o n file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323. The movant can meet this burden by p re s e n tin g evidence showing there is no dispute of material fact, or by showing the nonm o v in g party has failed to present evidence in support of some element of its case on w h ic h it bears the ultimate burden of proof. Id. at 322-23. O n c e the moving party has met its burden, Rule 56(e) "requires the nonmoving p a rty to go beyond the pleadings and by [its] own affidavits, or by the `depositions, a n s w e rs to interrogatories, and admissions on file,' designate `specific facts showing that th e re is a genuine issue for trial.'" Id. at 324. The Court must draw all justifiable in f e re n c e s from the evidence in the non-moving party's favor. Anderson v. Liberty Lobby, 2 Inc., 477 U.S. 242, 255 (1986). After the nonmoving party has responded to the motion f o r summary judgment, the court must grant summary judgment if there is no genuine is su e of material fact and the moving party is entitled to judgment as a matter of law. See F e d . R. Civ. P. 56(c). IV . FACTS 1 AND PROCEDURAL HISTORY In 2003, Ronnie Lawrence ("Lawrence"), a patron of MCGP, slipped and fell w h ile using the restroom at MCGP. (Doc. # 46 Ex. A, Attachment C). At the time, M C G P carried a primary-liability commercial insurance policy issued by United States F id e lity & Guarantee Company ("primary-liability policy" or "USF&G policy"), which p ro v id e d up to $1 million of coverage per occurrence. (Doc # 46 Ex. A, Attachment A). MCGP also carried an excess-liability policy, which is the subject of the present suit. The B ig Shield Commercial Catastrophe Liability Policy ("excess-liability policy"), issued by A rro w o o d 's predecessor, provided up to $5 million in coverage beyond the coverage p ro v id e d by the USF&G policy. (Doc. # 46 Ex. A, Attachment B). In order to seek c o v e ra g e under the excess-liability policy, MCGP was required to: a ) see to it that [Arrowood is] notified as soon as practicable of an " o c c u rre n c e " or an offense which may result in a claim or "suit." To the e x te n t possible, notice should include: 1) How, when, and where the "occurrence" or offense took p la c e ; The facts set out here are drawn from Arrowood's Complaint for Declaratory Judgment (Doc. #2), MCGP's Answer and Counterclaim (Doc. # 32), MCGP's Motion for Summary Judgment (Doc. # 46) and relevant responses and replies, and Arrowood's Motion for Summary Judgment (Doc. # 47) and relevant responses and replies. 3 1 2) The names and addresses of any injured persons and w itn e sse s ; and 3) The nature and location of any injury or damage arising out of the " o c c u rre n c e " or offense. . . (Doc. # 46 Ex. A, Attachment B at 14). The policy also provided that: d ) If a claim is made or a "suit" is brought against any insured when such c la im or "suit" is reasonably likely to involve this policy, you must: 1 ) Immediately record the specifics of the claim or "suit" and the d a te received; and 2) Notify us as soon as practicable. Id. at 1415. In the event that MCGP did not give appropriate notice to Arrowood, the policy p ro v id e d the following savings clause: c ) Your rights under this policy shall not be prejudiced if you fail to give u s notice of an "occurrence," offense, or claim solely due to your re a s o n a b le and documented belief that the "occurrence," offense, or claim is not covered under this policy. Id . at 14. The policy defines the word "occurrence" as "an accident, including continuous o r repeated exposure to substantially the same general harmful conditions." Id. at 11. "Suit" is defined as "a civil proceeding in which damages because of `bodily injury' . . . to which this insurance applies are alleged." Id. at 12. In 2005, Lawrence filed a lawsuit in the Circuit Court of Macon County, Alabama (" th e Lawrence suit"), seeking damages for the back and neck injuries he suffered after f a llin g on MCGP's premises. (Doc. # 46 Ex. A, Attachment C). USF&G and the p rim a ry-lia b ility policy's third-party administrator American Specialty Insurance 4 Services, Inc. ("American Specialty") handled the investigation and defense of this suit. (Doc. # 46 Ex. A 8). During the pendency of the Lawrence lawsuit, Lee Yates (" Y a te s " ), MCGP's Chief Financial Officer, was given periodic updates on the case by D a v id Wells ("Wells"), counsel selected by American Specialty. (Doc. # 46 Ex. A, A tta c h m e n ts DF). In his letter to Yates dated July 19, 2005, Wells indicated that, in his o p in io n , the Lawrence suit was "a case of questionable liability which I believe is d e f e n d a b le ." (Doc. # 46 Ex. A, Attachment D at 3). In his letter to Yates dated August 2 3 , 2005, Wells again asserted that the Lawrence suit was one of questionable liability, b a s e d on highly questionable causation. (Doc. # 46 Ex. A, Attachment E at 3). In his le tte r dated February 17, 2006, Wells described Lawrence's deposition and the holes that h e saw in Lawrence's testimony. (Doc. # 46 Ex. A, Attachment F). None of these letters p la c e d a numerical value on the Lawrence suit or discussed the potential applicability of th e Arrowood policy to the Lawrence suit. During the years 2005, 2006, and 2007, Yates met with Crawford E. McInnis (" M c In n is " ), MCGP's insurance agent. (Doc. # 46 Ex. B 3, 7, 8). During those m e e tin g s , Yates and McInnis reviewed loss runs provided by American Specialty. Id. 8. T h e s e loss runs indicated that American Specialty and USF&G had set aside only $13,000 in claim reserves for the bodily injury damages expected in the Lawrence suit. (Doc. # 46 E x . B, Attachment C). McInnis states in his affidavit that the claims reserves established b y insurance carriers are "indicative" of the monetary exposure the carrier believes a 5 claim poses. (Doc. # 46 Ex. B 8). In 2007, American Specialty transferred the defense of the case to attorney Stanley G ra y ("Gray"). (Doc. # 46 Ex. A 12). There is no evidence that Gray informed Yates o f the progress of the Lawrence suit after Gray's firm took over the defense of the L a w re n c e suit. Id. However, the suit continued to progress, and further developments in th e case indicated that a high verdict was reasonably likely. For example, Lawrence consistently valued his case at about $1 million.2 At the A p ril 11, 2007 mediation, Lawrence initially demanded $1.5 million to settle the case. (Doc. # 48 Ex. B, Attachment 8). Lawrence refused to make a reduced offer at that time. Id. A second mediation was held September 21, 2007. (Doc. # 48 Ex. B, Attachment 8). Lawrence again demanded $1.5 million. Id. On January 28, 2008, Lawrence's counsel in d ic a te d that he would settle the case for $950,000. (Doc. # 48 Ex. B, Attachment 16). The evidence also demonstrates that those involved in the Lawrence suit u n d e rs to o d Macon County to be a venue in which high jury verdicts were common. Wells documented his belief that "six and seven figure verdicts are routine in Macon There is some evidence that an employee of MCGP did in fact know that Lawrence was demanding over $1 million to settle his lawsuit. Gray sent a letter dated January 25, 2008 to Lewis Bennefield, an employee of MCGP, which reads "the plaintiff was seeking an amount in excess of the policy limits of $1,000,000." (Doc. 48 Ex. B, Attachment 15). The letter indicates it was also sent to Milton McGregor, MCGP's owner. Id. A handwritten note on the letter indicates it was also given to Yates. Id. However, Yates indicated in his deposition that he didn't recall reading the letter and that he believed the matter had been handled by someone else. (Doc. 48 Ex. B at 12122). 6 2 County." (Doc. # 48 Ex. B, Attachment 7). Gray warned American Specialty that "a jury c o u ld return a verdict of $400,000 or more. . . . [T]his is a plaintiff oriented venue." (Doc. # 46 Ex. D, Attachment B). Well's post-mediation report for the April 11, 2007 m e d ia tio n session related the mediator's belief that due to MCGP's financial prosperity, h e would not be surprised to see a substantial verdict for Lawrence in the case, falling s o m e w h e re between $400,000 and $750,000.3 (Doc. # 48 Ex. B, Attachment 7). C o m m u n ic a tio n s between American Specialty employees demonstrates that they also w e re wary of the venue. (See Doc. # 48 Ex. B, Attachment 9, "You don't want to try a p u n itiv e damages case in Alabama.") On February 14, 2008, the jury returned a $1.5 million verdict in favor of L a w re n c e and against MCGP. (Doc. # 46 Ex. A, Attachment G). This amount exceeded th e USF&G policy limits by $500,000. MCPG sent notice of the verdict in the Lawrence s u it to Arrowood's Claims Executive by letter dated February 26, 2008, nearly two weeks a f te r the verdict was returned. Id. On September 29, 2008, MCGP appealed the verdict in the Lawrence suit. (Doc. # 46 Ex. A 15). The Macon County Circuit Court required M C G P to post an appeal bond in the amount of $2 million. Id. USF&G posted $1 m illio n , the maximum amount of liability coverage provided by the USF&G policy. Id. MCGP asked Arrowood to post the remaining $1 million, but Arrowood refused to do so 3 Whether or not the mediator actually related these statements is irrelevant. The information was contained in a post-mediation report from defense counsel to American Specialty. If MCGP had kept apprised of the Lawrence case, it too would have had the benefit of the post-mediation report. 7 on the basis that it had not received timely notice of the Lawrence suit, as required by the e x c e s s -lia b ility policy. Id. On October 3, 2008, Arrowood filed this declaratory judgment action, asking the C o u rt to declare that, due to MCGP's failure to give timely notice of the Lawrence suit, A rro w o o d is not obligated under the policy to indemnify MCGP for the judgment re n d e re d in the Lawrence suit.4 (Doc. # 2). At the request of the parties, the Court stayed th e declaratory judgment action pending the outcome of the appeal in the Lawrence suit. (Doc. # 13). The Alabama Supreme Court affirmed the judgment in the Lawrence case, a n d denied MCGP's motion for rehearing. (Doc. # 26). A f te r losing on appeal in the Lawrence case, MCGP filed an Answer and C o u n te rc la im in the declaratory judgment action. (Doc. # 32). Count One of the C o u n te rc la im seeks compensatory damages for Arrowood's alleged breach of its contract w ith MCGP. Id. Count Two sought compensatory and punitive damages for Arrowood's a lle g e d breach of the duty of good faith and fair dealing. Id. Count Two of the C o u n te rc la im has since been dismissed without prejudice pursuant to the stipulation of th e parties. (Doc. # 42). Arrowood answered MCGP's Counterclaim, raising several a f f irm a tiv e defenses. (Doc. # 37). MCGP filed for summary judgment on April 8, 2010, requesting that the Court Lawrence was originally joined as a defendant in this suit. (Doc. # 2). He was dismissed from the suit without court order pursuant to the parties' Joint Stipulation of Dismissal. (Doc. # 36). 8 4 grant summary judgment in its favor both on Arrowood's declaratory judgment and on M C G P 's Counterclaim for breach of contract. (Doc. # 46). Arrowood filed for summary ju d g m e n t the same day, requesting that the Court grant summary judgment in its favor on b o th the request for declaratory judgment and MCGP's counterclaim for breach of c o n tra c t. (Doc. # 47). A limited scheduling order has been entered in this case, but the m a tte r has not yet been set for trial. (Doc. # 40). DISCUSSION I . Arguments of the Parties: T h e core of this dispute turns on three provisions in the excess-liability policy. As e x p la in e d infra, the excess-liability policy required MCGP to give notice to Arrowood, as s o o n as practicable, of any occurrence that might result in a claim or suit. (Doc. # 46 Ex. A , Attachment B at 15). The policy also required MCGP to give notice of a suit or claim if that suit or claim was reasonably likely to involve the excess-liability policy. If notice w a s not given as required by the policy, Arrowood would have no duty to indemnify u n le s s MCGP's failure to give notice was based on a "reasonable and documented belief" th a t the occurrence or claim was not covered under the excess-liability policy. Arrowood a rg u e s that as a matter of law, MCGP's notice of the Lawrence suit was not sufficient u n d e r either clause of the policy, and therefore Arrowood is not legally bound to in d e m n if y MCGP. (Doc. # 47). MCGP argues that as a matter of law, the notice it gave A rro w o o d was sufficient and that Arrowood is legally bound to indemnify MCGP. (Doc. 9 # 46). MCGP also argues that, because it gave sufficient notice and Arrowood s u b s e q u e n tly refused to indemnify MCGP, Arrowood has, as a matter of law, breached th e insurance contract between the parties. (Doc. # 46). It is undisputed that the earliest, and only, notice given to Arrowood of the L a w re n c e suit occurred two weeks after the verdict had been returned in that case. A rro w o o d claims that notice after a verdict had been returned was not "as soon as p ra c tic a b le " as required by the policy. Arrowood also argues that MCGP cannot establish a documented belief that the excess-liability policy would not be implicated by the L a w re n c e suit and therefore cannot receive the protection of the policy's savings clause. MCGP argues that they had no reason to believe that the Lawrence suit would in any way im p lic a te the excess-liability policy until a verdict exceeding the primary-liability policy w a s returned. Therefore, they argue that notice given two weeks after a verdict had been re tu rn e d in the Lawrence case was as soon as practicable. II. Late Notice: U n d e r Alabama law, the phrase "as soon as practicable," when used in the context o f notice, is construed to require notice "within a reasonable time in view of the facts and c irc u m s ta n c e s of the case." Progressive Specialty Ins. Co. v. Steele ex rel. Steele, 985 So. 2 d 932, 941 (Ala. Civ. App. 2007); Haston v. Transamerica Ins. Servs., 662 So. 2d 1138, 1 1 4 1 (Ala. 1995); State Farm Fire & Gas Co. v. Wiggins, 972 F. Supp. 570, 573 (M.D. A la . 1997). When determining whether or not a delay in giving notice was reasonable, 10 only two factors may be considered: the length of the delay and the reasons given for the d e la y. Haston, 662 So. 2d at 1141 ("Under Alabama law there are only two factors to be c o n s id e re d in determining the reasonableness of a delay in giving notice to an insurer: the le n g th of delay and the reasons for the delay.") (emphasis in original). If there are d is p u te d facts, "the question of the reasonableness of a delay in giving notice is a question o f fact for the jury." Id. However, if there is no reasonable excuse offered for a delay in g iv in g notice, the issue may be decided as a matter of law. Id. Even if the delay is found to be unreasonable, an excess insurer cannot disclaim liability for an insured's violation o f the notice provisions unless the excess insurer can show that the delay caused p re ju d ic e . Midwest Emp'rs Cas. Co. v. E. Ala. Health Care, 695 So. 2d 1169, 1173 (Ala. 1 9 9 7 ); Lemuel v. Admiral Ins. Co., 414 F. Supp. 2d 1037 (M.D. Ala. 2006), aff'd sub n o m . Lemuel v. Lifestar Response of Ala., Inc., No. 06-11155, 2007 WL 578097 (11th C ir. 2007). A. Unreasonable Delay: T h e re are three relevant provisions of the insurance policy that affect MCGP's d u ty to give Arrowood notice of the Lawrence suit. Each will be discussed in turn. i. Provision VIII(5)(a): T h e first provision, VIII(5)(a), quoted in its entirety above, requires MCGP to n o tif y Arrowood "as soon as practicable" of an occurrence, defined as an accident, which m a y result in a claim or suit. (Doc. # 46 Ex. A, Attachment B at 14). The parties do not 11 dispute that Lawrence's accident in the MCGP restroom falls within the definition of " o c c u rre n c e " as used in the excess-liability policy. Therefore, MCGP's duty to give n o tic e may have been triggered when an executive officer of MCGP became aware of L a w re n c e 's accident. (See Doc. # 46 Ex. A, Attachment B at 14). The undisputed e v id e n c e is that on February 3, 2003, MCGP employees wrote up an Incident Report, a M e d ic a l Report, and an Offense Report in response to Lawrence's accident. (Doc. # 48 E x . F). However, the excess-liability policy requires notice as soon as practicable of an o c c u rre n c e only when the occurrence is known to "an `executive officer' or the `e m p lo ye e ' designated by you to give such notice, if you are a corporation." (Doc. # 46 E x . A, Attachment B at 14). Neither side has submitted evidence regarding when, if at a n y time before the Lawrence suit was filed, an executive knew about Lawrence's a c c id e n t. In fact, Yates indicated in his deposition that he is not typically informed of an a c c id e n t unless and until an injured patron "go[es] beyond" simply filing an incident re p o rt. (Doc. # 48 Ex. A at 21). There is no evidence before this Court that Lawrence to o k any action with respect to his claim until he filed a lawsuit in February, 2005. As s u c h , this Court cannot reach the conclusion that MCGP's duty to notify Arrowood was trig g e re d under the above cited policy provision. If the Court cannot conclude as a matter o f law that MCGP's duty to notify had been triggered under this provision, the Court also c a n n o t conclude that MCGP was, as a matter of law, either reasonable or unreasonable in 12 giving notice to Arrowood under this provision of the policy. ii. Provision VIII(5)(d): T h e re is, however, a second provision of the excess-liability policy which could trig g e r MCGP's duty to give notice. This provision, VIII(5)(d), applies specifically to c la im s made or suits brought against the insured, and not to occurrences or offenses. (Doc. # 46 Ex. A, Attachment B at 14). Unlike provision VIII(5)(a) discussed above, p ro v is io n VIII(5)(d) only requires notice as soon as practicable of claims or suits that are " re a s o n a b ly likely to involve" the excess-liability policy. Id. This language has not been c o n s tru e d by an Alabama court to date. However, the Alabama Supreme Court has f o u n d , even in the absence of similar policy language, that the test for whether notice is n e c e s s a ry under the policy is "not a subjective one measured merely by the good faith of th e insured, but is an objective one." Pan Am. Fire & Cas. Co. v. DeKalb-Cherokee C n ty s . Gas District, 266 So. 2d 763, 771 (Ala. 1972) (citing 45 C.J.S. Insurance 1056).5 T h e re f o re , the insured's subjective belief that the accident will not implicate the insurance p o lic y "is not of itself an excuse for failure to give notice of the accident to the insurer." Id. H o w e v e r, under Alabama law, the reasons for the delay in giving notice are one of The Pan American case arose in the context of an appeal from the trial court's decision that a primary insurer had a duty to defend its insured against suit arising from the explosion of a gas heater. Pan Am. Fire, 266 So. 2d at 764. While certain aspects of Alabama law differ between cases involving primary insurers and excess insurers, this Court has no reason to believe that Alabama courts would apply this point of law differently between the two categories of insurers. See Midwest Emp'rs, 695 So. 2d at 1173. 13 5 the two factors that can be considered by the Court in determining whether the delay was re a s o n a b le . See Haston, 662 So. 2d at 1141. Therefore, MCGP's belief that the L a w re n c e suit was not reasonably likely to involve the excess-liability policy is pertinent to the Court's determination of whether delay was reasonable, as that belief is the sole re a s o n that MCGP provides for the delay. However, MCGP's belief is not determinative o f the issue unless, as measured by an objective standard, MCGP's belief was r e a s o n a b le .6 G e n e ra lly, the question of whether a delay in giving notice was reasonable is a q u e s tio n for the jury. Id. However, if "no reasonable excuse [is] offered for a delay in g iv in g notice, the issue may be decided as a matter of law." Id.; S. Guar. Ins. Co. v. T h o m a s , 334 So. 2d 879, 8823 (Ala. 1976) ("[w]here the facts are undisputed and only o n e conclusion is reasonably possible, the question whether or not the insured under a lia b ility policy complied with the requirements of notice is a question of law for the c o u rt." ) The only excuse given by MCGP for the delay in notice is that MCGP could not The Eleventh Circuit, although applying Georgia law, agrees with the underlying policy reasons for the application of this standard, despite MCGP's argument to the contrary. See Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852, 86061 (11th Cir. 1997). The Court recognized that notice to an excess insurer is generally only required when the claim is reasonably likely to involve the excess policy, as excess carriers "are not interested in receiving notice of every claim against their insureds." Id. at 860. Therefore, someone will have to make a determination of whether or not the policy is reasonably likely to be implicated. Id. "The insured's appraisal will have to control unless, as a matter of law, it is unreasonable." Id. So, the insured's appraisal is pertinent to the inquiry, but only to the extent that the insured's appraisal is not unreasonable as a matter of law. The Eleventh Circuit was not applying a purely subjective standard, as the insured's beliefs regarding the application of the excess policy was not determinative of the inquiry. Id. The insured's belief was only controlling if it was reasonable. 14 6 have reasonably foreseen that the Lawrence suit would involve the excess-liability policy. However, considering the information that was available to MCGP regarding the L a w re n c e suit, the Court finds that MCGP's belief that the Lawrence suit would not im p lic a te the excess-liability policy was objectively unreasonable. Therefore, MCGP has p re s e n te d no reasonable excuse for the delay in giving notice to Arrowood. The facts regarding MCGP's knowledge about the value of Lawrence suit are u n d is p u te d . Lawrence filed his complaint in state court on February 3, 2005. This c o m p la in t contained no indication of the amount of damages involved, only that both c o m p e n s a to ry and punitive damages would be sought. (Doc. # 46 Ex. A, Attachment C). Yates communicated with Wells about the case via letter from February 23, 2005 until at le a s t July 29, 2006. (Doc. # 46 Ex. A, Attachment DF; Doc. # 48 Ex. B, Attachment 3 at 6 0 6 8 ). None of these letters provide an overall evaluation of the Lawrence suit, and n o n e mention anything about an excess-liability policy. At most, the letters discuss in d iv id u a l medical records and the documented cost of specific procedures that Lawrence re c e iv e d . (See Doc. # 48 Ex. B, Attachment 3 at 60, 68). While Wells continued to send status reports about the case to American Specialty, in c lu d in g a pre- and post-mediation report, Yates did not receive copies of any of these le tte rs. There is no evidence that Yates or any other representative of MCGP received a n y information about the case from the attorneys defending it between the summer of 2 0 0 6 and February 2008 when the verdict in the Lawrence case was returned. 15 An insured's failure to keep apprised of claims pending against it is no excuse for f a ilu re to give an excess-liability insurer notice, however. Accordingly, this Court must a ls o review the information about the case that was available to MCGP, regardless of w h e th e r or not MCGP was actually aware of the information. Lawrence consistently valued his case at about $1 million. At the April 11, 2007 m e d ia tio n , Lawrence initially demanded $1.5 million to settle the case. (Doc. # 48 Ex. B , Attachment 8). Lawrence refused to make a reduced offer at that time. Id. A second m e d ia tio n was held September 21, 2007. (Doc. # 48 Ex. B, Attachment 8). Lawrence a g a in demanded $1.5 million. Id. On January 28, 2008, Lawrence's counsel indicated th a t he would settle the case for $950,000. (Doc. # 48 Ex. B, Attachment 16). Several parties involved in the Lawrence suit understood Macon County to be a v e n u e where high jury verdicts were not uncommon. Wells documented his belief that " s ix and seven figure verdicts are routine in Macon County" in his pre-mediation report d a te d April 4, 2007. (Doc. # 48 Ex. B, Attachment 7). Gray warned American Specialty in his pre-trial report dated August 10, 2007 that "a jury could return a verdict of $ 4 0 0 ,0 0 0 or more. . . . [T]his is a plaintiff oriented venue." (Doc. # 46 Ex. D, Attachment A ). Well's post-mediation report for the April 11, 2007 mediation session related the m e d ia to r's belief that due to MCGP's financial prosperity, he would not be surprised to s e e a substantial Plaintiff's verdict in the case, falling somewhere between $400,000 and $ 7 5 0 ,0 0 0 . (Doc. # 48 Ex. B, Attachment 8). Communications between American 16 Specialty employees dated April 17 and 18, 2007 demonstrate that they also were wary of th e venue. (See Doc. # 48 Ex. B, Attachment 9, "You don't want to try a punitive d a m a g e s case in Alabama.") Considering all of the information available to MCGP regarding the value of the L a w re n c e suit, MCGP's belief that the suit would not implicate the excess-liability policy w a s objectively unreasonable. Lawrence consistently demanded near or in excess of the p rim a ry-lia b ility policy limits to settle his case. Additionally, Lawrence sought punitive d a m a g e s in a county that MCGP's attorneys believed to be a liberal, plaintiff oriented v e n u e . In other words, while MCGP may not have agreed with Lawrence's assessment of h is case, a verdict that high was within the realm of possibility. Therefore, MCGP has n o t presented the Court with an objectively reasonable excuse for its delayed notice to A rro w o o d . M C G P argues in its Motion that Lawrence's demands in excess of the primarylia b ility policy limits did not create a duty to notify Arrowood. (Doc. # 45 at 1920). In s u p p o rt of this argument, it analogizes a settlement demand to an ad damnum clause in a c o m p la in t, which the Eleventh and Fifth Circuits have held do not, in and of themselves, trig g e r a duty to notify. See Evanston Ins., 111 F.3d at 861; Harbor Ins. Co. v. Trammell C ro w Co., 854 F.2d 94, 99 (5th Cir. 1988). This Court does not agree with MCGP's a n a lo g y. A settlement demand made at mediation, after considerable discovery has been c o m p le te d , is a significantly better measure of the value of a case than the ad damnum 17 clause of a complaint. Additionally, Lawrence's settlement demand was not inconsistent w ith defense counsel's experience with Macon County juries. This case is therefore d is tin g u is h a b le from Evanston, in which the demands made by the plaintiff in the u n d e rlyin g suit were "not consistent with the evaluations of those associated with the case a t that time." 111 F.3d at 861. M C G P also argues that it didn't have a duty to notify because neither it's insurance a g e n t McInnis nor it's defense attorneys Wells and Gray advised it to give notice to A rro w o o d . However, an insured cannot rely on the appraisals of its agents and attorneys w h e n the insured itself is not apprised at all of the progress of the case. It is the insured's b u rd e n to notify the excess-liability insurer if necessary, and MCGP was not entitled to re ly solely on the evaluations of defense attorneys and insurance agents. Additionally, M C G P has presented no evidence that its attorneys even knew an excess policy existed. In fact, the undisputed evidence is to the contrary. In an email dated February 17, 2008, C h a m p Lyons, trial counsel for Lawrence, asks Gray whether MCGP had an excess c a rrie r. (Doc. # 48 Exhibit D). Gray responds that he "know[s] of no excess carrier." Id. By the time it became obvious that the excess carrier needed to be notified about the L a w re n c e suit, MCGP had stopped receiving any updates on the case. Therefore, it c a n n o t claim to have relied on its attorney's evaluations. An insured cannot claim to have re lie d on evaluations of the case of which it was not aware. The fact that MCGP presented no reasonable excuse for its delayed notice is 18 sufficient to find that MCGP's notice was unreasonable as a matter of law. Haston, 662 S o . 2d at 1141 ("But if there is no reasonable excuse offered for a delay in giving notice, th e issue may be decided as a matter of law."). However, the second factor the Court can c o n s id e r-- th e length of the delay--also weighs in favor of finding MCGP's delay u n re a s o n a b le . The Court need not determine the exact point in time at which MCGP's d u ty to notify arose. However, by September 2007, MCGP had available to it substantial e v id e n c e that a verdict greater than the USF&G policy limits was reasonably likely. Therefore, at a minimum, the delay in giving notice to Arrowood was longer than five m o n th s . Alabama courts have previously found delays of six months, eight months, and one ye a r to be unreasonable as a matter of law. See id.; Thomas, 334 So. 2d at 883 (Ala. 1 9 7 6 ) (holding a six-month delay without excuse unreasonable as a matter of law); Pharr v . Cont'l Cas. Co., 429 So. 2d 1018, 1019 (Ala. 1983) (holding an eight-month delay w ith o u t excuse unreasonable as a matter of law); Correll v. Fireman's Fund Ins. Cos., 5 2 9 So. 2d 1006, 1009 (Ala. 1988). The lengthy delay and lack of reasonable excuse p re s e n te d by MCGP cause this Court to find that MCGP's delay in giving notice to A rro w o o d was unreasonable as a matter of law. ii. The Savings Clause: T h e excess-liability policy provides that even if MCGP failed to give notice to A rro w o o d , MCGP's rights would not be prejudiced under the policy if MCGP failed to 19 give notice "solely due to [its] reasonable and document belief that the `occurrence,' o f f e n s e , or claim is not covered under this policy." (Doc. # 46 Ex. A, Attachment B at 1 4 ). The Court has already found that MCGP's belief that the Lawrence suit was not g o in g to be covered under this policy was an unreasonable belief. Therefore, MCGP c a n n o t obtain the protection afforded by the savings clause. B. Prejudice to Arrowood: A rro w o o d , as an excess insurer, cannot disclaim liability under a policy solely b a s e d on the insured's failure to give notice. Midwest Emp'rs, 695 So. 2d at 1173 (Ala. 1 9 9 7 ); Lemuel , 414 F. Supp. 2d 1037 (M.D. Ala. 2006). In order to disclaim liability, A rro w o o d would also need to demonstrate that it was prejudiced by the failure to give n o tic e . The excess-liability policy gives Arrowood the right to "investigate any `o c c u rre n c e ' or offense and settle any claim or `suit' that might result." (Doc. # 46 Ex. A, A tta c h m e n t B at 1). Arrowood irretrievably lost its contractual right to participate in the s e ttle m e n t negotiations when MCGP failed to give notice of the Lawrence suit, despite L a w re n c e 's demands for an amount over the USF&G policy limits months before trial. Such a loss has been held, as a matter of law, to constitute prejudice to an excess-liability c a rrie r under Alabama law. See Lemuel, 414 F. Supp. 2d at 1069. Additionally, without notice, Arrowood was unable to set reserves for the L a w re n c e case. MCGP argues that the inability to set reserves did not prejudice A rro w o o d , as there is no evidence that Arrowood would have set a reserve of $500,000, 20 the amount MCGP demands Arrowood pay. This Court is unpersuaded by MCGP's a rg u m e n t. Arrowood need not demonstrate that it would have set the correct reserve in o rd e r to demonstrate prejudice. It's inability to choose what reserve to set, in conjunction w ith its inability to participate in the settlement of the case, amounts to prejudice as a m a tte r of law.7 III. MCGP's Breach of Contract Counterclaim: M C G P 's argues in its Counterclaim for Breach of Contract that because MCGP's n o tic e was reasonable, Arrowood has wrongfully refused to pay benefits to MCGP. (Doc. # 32). However, as the Court indicated above, MCGP's delay in giving notice was, as a m a tte r of law, unreasonable. Therefore, Arrowood's refusal to pay is not wrongful. Therefore, Arrowood is entitled to judgment as a matter of law on MCGP's counterclaim a s well. MCGP also argues that there is no evidence that Arrowood would have done anything differently had notice been given on time, and therefore that Arrowood cannot demonstrate prejudice. The Lemuel court dismissed a similar argument, finding it to be "unsupported and speculative at best," and insufficient to overcome a finding that the excess insurer's contractual rights had been lost due to the delayed notice. 414 F. Supp. 2d at 1069. 21 7 For the foregoing reasons, it is ORDERED that: P la in tif f Arrowood's Motion for Summary Judgment is GRANTED. Defendant M C G P 's Motion for Summary Judgment is DENIED. The Court will enter a separate final judgment consistent with this Memorandum O p in io n and Order. DONE this 3 rd day of December, 2010. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE 22

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