American Railcar Industries, Inc. v. Hartford Insurance Company of the Midwest et al
Filing
84
MEMORANDUM AND ORDER -...IT IS HEREBY ORDERED that defendant Hartford Insurance Company of the Midwest's motion for summary judgment is GRANTED. [Doc. 69] IT IS FURTHER ORDERED that plaintiff American Railcar, Inc.s motion for oral argument is DENIED as moot. [Doc. 81] A Judgment will accompany this Memorandum and Order.. Signed by District Judge Charles A. Shaw on 3/18/2016. (MRC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
AMERICAN RAILCAR INDUSTRIES,
INC.,
Plaintiff,
v.
HARTFORD INSURANCE COMPANY
OF THE MIDWEST, et al.,
Defendants.
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No. 4:13-CV-778 CAS
MEMORANDUM AND ORDER
This matter is before the Court on defendant Hartford Insurance Company of the
Midwest’s (“Hartford”) motion for summary judgment on the remaining count of plaintiff
American Railcar Industries, Inc.’s (“ARI”) complaint. ARI opposes the motion. The matter is
fully briefed and ready for decision. For the following reasons, the Court will grant defendant’s
motion for summary judgment.
I.
Background
This action arises out defendant Hartford’s alleged breach of an insurance contract with
plaintiff ARI, and Hartford’s alleged failure to act in furtherance of ARI’s best interests. In April
2008, an employee of ARI, George Tedder (“Mr. Tedder”), was injured at ARI’s facility in
Paragould, Arkansas. Another employee of ARI negligently operated a golf cart at the facility,
causing Mr. Tedder’s injury.
Mr. Tedder filed a workers’ compensation claim against ARI, and Hartford defended ARI
under the policy. The policy provided insurance coverage to ARI for workers’ compensation
claims and for employers liability claims not covered by workers’ compensation. Hartford
successfully argued that Mr. Tedder’s injuries occurred while he was on break, and therefore his
injuries were not compensable under Arkansas workers’ compensation law.
After ARI defeated the workers’ compensation claim, Mr. Tedder filed a tort action
against ARI in the United States District Court for the Eastern District of Arkansas (“Tedder
civil action”). Hartford did not defend or insure ARI in the Tedder civil action. The civil action
went to trial, and a jury awarded Mr. Tedder damages in the amount of $2,284,888.20. The
district court reduced the award to $1,547,388.20.
The Eighth Circuit Court of Appeals
affirmed. See Tedder v. American Railcar Indus., Inc., 739 F.3d 1104 (8th Cir. 2014).
In this case, ARI has sued Hartford claiming that it did not advise ARI that a successful
defense of Mr. Tedder’s workers’ compensation claim would increase ARI’s exposure to
damages in a tort action. ARI brought the action in four counts: Breach of Contract against
Hartford (Count I); Breach of Fiduciary Duty against Hartford and SRS (Count II); Breach of
Implied Covenant of Fair Dealing against Hartford (Count III); and Negligent Claims Handling
against Hartford and SRS (Count IV).1 Counts II through IV were dismissed on defendant’s
motion to dismiss. Hartford’s motion for summary judgment seeks judgment on the remaining
count, Count I, for breach of contract.
Hartford states it had no obligation to defend and indemnify ARI for Mr. Tedder’s civil
action under the employers liability policy because Mr. Tedder did not sustain injury within the
1
Initially, ARI named as a defendant in this case its lawyer in the underlying workers’
compensation claim, Mr. Randy P. Murphy. Mr. Murphy filed a motion to dismiss based on lack
of personal jurisdiction. After taking jurisdictional discovery, ARI dismissed its claims against
Mr. Murphy without prejudice. See Doc. 38.
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course and scope of his employment. Further, Hartford states that even if coverage existed, it
would be barred because ARI failed to timely notify it of Mr. Tedder’s civil action.
II.
Summary Judgment Standard
The standards applicable to summary judgment motions are well settled. Pursuant to
Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment if all
of the information before the court shows “there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law.” See Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Board of Educ., Island Trees v. Pico, 457 U.S. 853, 863 (1982). “Where the
unresolved issues are primarily legal rather than factual, summary judgment is particularly
appropriate.” Cearley v. General Am. Transp. Corp., 186 F.3d 887, 889 (8th Cir. 1999) (citing
Crain v. Board of Police Comm’rs, 920 F.2d 1402, 1405-06 (8th Cir. 1990)).
With this standard in mind, the Court accepts the following facts as true for purposes of
resolving the motion for summary judgment.
III.
Facts
The Underlying Incident
On April 24, 2008, Mr. Tedder was an employee of plaintiff ARI and worked at its
facilities in Paragould, Arkansas.
On that morning, Mr. Tedder was taking an employer-
mandated break. After being told to take his break, Mr. Tedder finished working on a pipe, then
took two steps to the break table and sat down. Mr. Tedder stated he often used the table to work
on parts and he characterized the table as a “combination break/work table.” Less than thirty
seconds after sitting down for his break, a fellow employee, Leon Pajek, lost control of a golf
cart he was driving and struck the table, pinning Mr. Tedder between the table and the pipe rack
on the shop wall and injuring his lower back.
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The Workers’ Compensation Case
Mr. Tedder filed a claim for workers’ compensation benefits with the Arkansas Workers’
Compensation Commission arising out of the incident. The workers’ compensation claim was
forwarded to Georgia Diemer (“Ms. Diemer”) at Specialty Risk Services (“SRS”). At the time
of Mr. Tedder’s workers’ compensation claim, SRS was a division of Hartford, and Ms. Diemer
was employed by Hartford.
At deposition, Ms. Diemer testified that she believed the claim would be noncompensable because Mr. Tedder was not working at the time of the incident, and under
Arkansas law, people on break are not “in the course of employment.” She testified that she
discussed this with ARI’s safety and environmental manager, Jerry Powers, who agreed with her
assessment. Ms. Diemer assigned the case to attorney Randy Murphy to represent ARI.
On December 19, 2008, a workers’ compensation hearing was held to determine the
compensability of Mr. Tedder’s claim under the Arkansas Workers’ Compensation Act.
Administrative Law Judge David Greenbaum determined that the claim was not compensable
because Mr. Tedder was on break at the time of the incident and was not performing
employment services.
Mr. Tedder appealed Judge Greenbaum’s ruling, and the Arkansas
Workers’ Compensation Commission affirmed. The Commission adopted Judge Greenbaum’s
ruling.
Mr. Tedder’s Civil Action and Notice to Hartford
On August 3, 2009, Mr. Tedder’s attorney forwarded a letter to ARI indicating he would
file civil suit in Arkansas if they did not reach a settlement regarding Mr. Tedder’s bodily injury.
The email was received at ARI by Diana Gould, the assistant of Michael Obertop, and was
forwarded to Mr. Obertop. At that time, Mr. Obertop was ARI’s director of SEC reporting,
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corporate secretary, and assistant treasurer. Mr. Obertop never notified Hartford of the civil tort
action. (ARI’s Resp. to Hartford’s SOF 22).
Less than a month later, on September 2, 2009, Mr. Tedder filed a civil suit in the United
States District Court for the Eastern District of Arkansas against ARI for the injuries he sustained
in the April 28, 2008 accident. Mr. Obertop does not recall notifying Hartford of the filing of the
complaint. During the time between the filing of the Tedder civil action through its trial, Mr.
Obertop does not recall notifying Hartford of the filing of the civil action against ARI.
On September 21, 2009, ARI’s counsel in the civil action, Robert Thompson, wrote a
letter to ARI’s counsel in the workers’ compensation case, Randy Murphy. Mr. Thompson
stated that he represented ARI in the civil action, and asked Mr. Murphy for any relevant
discovery he had obtained in the workers’ compensation case. Mr. Thompson referenced the
title of the civil tort action, the court, and the cause number.
According to ARI, during the administration of the workers’ compensation claim, Ms.
Diemer was notified several times of Mr. Tedder’s intent to file a tort action. (ARI’s Resp. to
Hartford’s SOF 26-27).
ARI employee Jerry Powers “believes he called Diemer and told her about the civil tort
action.” (ARI’s SOF 25).
Hartford’s Assistant Vice President of the major case liability section, Lisa Roche,
testified that she reviewed Hartford’s claim records and confirmed that Hartford had no record of
any notice from ARI with respect to the Tedder civil action until Hartford received a letter from
attorney Herbert Beigel dated January 11, 2013. Hartford’s agent, Ms. Diemer, testified that she
received no notice of the Tedder civil action until after it had been taken to verdict.
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On November 30, 2009, ARI filed Rule 26 initial disclosures in the Tedder civil action.
In these disclosures, ARI stated it did not have any insurance that could be used to satisfy a
judgment in the case. The case was tried to a jury in April 2012. The jury reached a verdict in
favor of Tedder, awarding him $2,284,888.20.
The trial court reduced the judgment to
$1,547,388.20. The Eighth Circuit affirmed.
In response to Hartford’s interrogatory asking ARI to “[p]lease state whether [ARI] or
any representative of [ARI] ever requested that any of defendants defend or indemnify [ARI]
with respect to the civil lawsuit filed by George Tedder,” ARI responded:
Yes. A Notice of Loss and/or claim was transmitted by Plaintiff to Hartford
and/or SRS during the period of April to June 2008, pursuant to the policy at
issue, and a copy of the confirmed Notice of Loss and related documents are
being produced. In addition, Letters from Herbert Beigel, dated January 11, 2013
and February 13, 2013.
ARI’s Resp. to Interrogatory 12 (Hartford’s SOF, Ex. X).
The Insurance Coverage Action
On April 23, 2013, ARI filed the present action. ARI alleges that on June 12, 2008, it
gave notice of the claim to Hartford pursuant to the terms of the workers’ compensation and
employer’s liability insurance policy (the “policy”). Part One of the policy provided workers’
compensation insurance for compensable workers’ compensation claims; Part Two of the policy
provided employer liability insurance for certain claims against an employer for bodily injury
arising out of and in the course of an injured employee’s employment.
The only Count of ARI’s compliant remaining is Count I for breach of contract. In Count
I, ARI alleges a cause of action against Hartford: “. . . by refusing to provide coverage under
Part One of the policy in contesting the workers’ compensation claim, by refusing to provide
ARI with coverage for Tedder’s injuries under Part Two of the policy, and by refusing to provide
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a defense to the tort action under Part Two of the policy, Hartford breached its contract of
insurance with ARI.” (Compl. ¶ 44.)
The Policy
In relevant part, the policy provides:
PART ONE - WORKERS COMPENSATION INSURANCE
A.
How This Insurance Applies
This workers compensation insurance applies to bodily injury by accident
or bodily injury by disease. Bodily injury includes resulting death.
1.
Bodily injury by accident must occur during the policy period.
2.
Bodily injury by disease must be caused or aggravated by the
conditions of your employment. The employee’s last day of last
exposure to the conditions causing or aggravating such bodily
injury by disease must occur during the policy period.
B.
We Will Pay
We will pay promptly when due the benefits required of you by the
workers compensation law.
C.
We Will Defend
We have the right and duty to defend at our expense any claim, proceeding
or suit against you for benefits payable by this insurance. We have the
right to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered
by this insurance.
***
PART TWO – EMPLOYERS LIABILITY INSURANCE
A.
How This Insurance Applies
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1.
The bodily injury must arise out of and in the course of the injured
employee’s employment by you.
***
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B.
We Will Pay
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1.
for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed
against such third party as a result of injury to your employee;
2.
for care and loss of services; and
3.
for consequential bodily injury to a spouse, child, parent, brother
or sister of the injured employee;
Provided that these damages are the direct consequence of bodily injury
that arises out of and in the course of the injured employee’s employment
by you; and
4.
because of bodily injury to your employee that arises out of and in
the course of employment, claimed against you in a capacity other
than as employer.
***
D.
We Will Defend
We have the right and duty to defend, at our expense, any claim,
proceeding or suit against you for damages payable by this insurance. We
have the right to investigate and settle these claims, proceedings and suits.
We have no duty to defend a claim, proceeding or suit that is not covered
by this insurance. We have no duty to defend or continue defending after
we have paid our applicable limit of liability under this insurance.
***
I.
Actions Against Us
There will be no right of action against us under this insurance unless:
1.
You have complied with all the terms of this policy; and
2.
The amount you owe has been determined with our consent or by
actual trial and final judgment.
***
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PART FOUR – YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
***
3.
Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4.
Cooperate with us and assist us, as we may request, in the investigation,
settlement or defense of any claim, proceeding or suit.
***
6.
Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
***
IV.
Discussion
Defendant’s motion for summary judgment argues that summary judgment should be
entered in its favor on Count I on the grounds that: (1) Hartford had no duty to defend or
indemnify ARI under Part Two of its workers’ compensation and employers liability policy for
the Tedder civil action because Mr. Tedder did not sustain a bodily injury within the course and
scope of his employment; and (2) ARI’s late notice of the Tedder civil action bars coverage if it
existed.1 Plaintiff responds that coverage existed under Part Two of its policy because under
Arkansas common law, Mr. Tedder was acting in the course of his employment when the injury
occurred. Plaintiff also argues it provided notice of the Tedder civil action to Hartford, and
1
In its opening brief, Hartford assumed ARI would argue that Hartford breached its contract
because Hartford should have advised ARI that a successful defense of the workers’
compensation claim would increase ARI’s exposure to damages in a tort action. ARI did not
respond to this issue on summary judgment. The Court has found no law requiring an insurance
company to not defend a case or to pay an uncovered claim so that its insured might be spared
exposure to a more costly claim.
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Hartford waived its right to further notice by abandoning ARI’s defense after succeeding on the
workers’ compensation claim.
A.
Coverage for Mr. Tedder’s Civil Action
Hartford moves for summary judgment, stating that under Arkansas law, Hartford had no
contractual obligation to defend or indemnify ARI for Tedder’s civil action. ARI responds that
Arkansas common law construes the language of the employers liability coverage (Part Two) in
its plain and popular sense, and would provide coverage because Mr. Tedder was acting within
his course of employment when he was injured.
ARI states that outside the workers’
compensation context, Arkansas law provides that if the employee was acting in furtherance of
his employer’s interest, and was not engaged in an exclusively personal act, then he was within
the course of his employment. ARI cites Orkin Exterminating Co. v. Wheeling Pipeline, Inc.,
567 S.W.2d 117, 119 (Ark. 1978), for support.
ARI’s argument is defeated by more recent Arkansas cases in which its courts have stated
that the test for determining whether an employee was performing “employment services” is the
same as the test for determining whether an employee was acting within the “course of
employment.” Under Arkansas workers’ compensation statutes, a compensable injury is one
arising out of and in the course of employment and which requires medical services or results in
disability or death. See Ark. Code. Ann. 11-9-102(4)(A)(i). A compensable injury does not
include an injury inflicted upon the employee at a time when employment services were not
being performed. Id. at 11-9-102(4)(B)(iii). See Trezza v. USA Truck Inc., 445 S.W.3d 521,
523 (Ark. Ct. App. 2014). The Arkansas Supreme Court has interpreted the term “employment
services” in this workers compensation context as the performance of something that is generally
required by an employer. “We use the same test to determine whether an employee was
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performing ‘employment services’ as we do when determining whether an employee was acting
within ‘the course of employment.’” Id. (citing Cook v. AFB Freight Sys., Inc., 194 S.W.3d 794
(Ark. 2004)). “The test is whether the injury occurred within the time and space boundaries of
the employment, when the employee was carrying out the employer’s purpose or advancing the
employer’s interest directly or indirectly.” Id.
Arkansas courts have consistently used the same test to determine whether an employee
was performing employment services as they do when determining whether an employee was
acting within the course and scope of employment. In an opinion expressly overruling all
inconsistent prior opinions, the Arkansas Supreme Court said:
Since 1993, we have twice been called upon to construe the statutory language
found in [the workers’ compensation statutes]. We have held that an employee is
performing “employment services” when he or she “is doing something that is
generally required by his or her employer . . . .” We use the same test to
determine whether an employee was performing “employment services” as we do
when determining whether an employee was acting within “the course of
employment.” The test is whether the injury occurred “within the time and space
boundaries of the employment, when the employee [was] carrying out the
employer’s purpose or advancing the employer’s interest directly or indirectly.”
Collins v. Excel Specialty Prods., 69 S.W.3d 14, 18 (Ark. 2002) (internal citations omitted).
Arkansas courts have held that an employee is not advancing his employer’s interest and
is not acting in the course of his employment when taking a mandated break. Id. (affirming
Workers’ Compensation Commission’s finding that trucker injured on thirty-four hour restart
was off work and not required to do anything and injury was not compensable); see also Cook,
194 S.W.3d at 795 (affirming Commission’s finding that trucker injured while taking a mandated
eight-hour overnight rest break not compensable).
Arkansas courts, however, distinguish cases in which an employee is on a bathroom
break or in the process of returning to work from a break. For example, in Mitchell v. Tyson
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Poultry, Inc., 292 S.W.3d 848, 849 (Ark. Ct. App. 2009), an employee was fatally injured while
returning to the office to obtain instructions after he had finished his break. The Court found that
the decedent had finished his break and was performing the employment service of returning to
the office when the fatal injury occurred. Because he was finished with his break and on his way
to receive further instructions, he was within the time and space boundaries of his employment.
Id. at 850 (citing Wal-Mart Stores, Inc. v. Sands, 91 S.W.3d 93 (Ark. Ct. App. 2002) (finding
employee preparing to return to work from a break by returning her purse to her locker when
injury occurred was within the time and space boundaries of employment and carrying out
employer’s purpose)); see also Texarkana Sch. Dist. v. Conner, 284 S.W.3d 57, 60 (Ark. 2008)
(upholding Commission’s finding that employee returning to work and attempting to open a
parking gate was providing a benefit to his employer); Pifer v. Single Source Transport., 69
S.W.3d 1, 5 (Ark. 2002) (“We note that the activity of seeking toilet facilities, although personal
in nature, has been generally recognized as a necessity such that accidents occurring while an
employee is on the way to or from toilet facilities, or while he or she is engaged in relieving
himself or herself, arise within the course of employment.”).
In response to summary judgment, ARI argues that whether an employee is acting in the
course of employment is different in the context of Arkansas workers’ compensation statutes and
under Arkansas common law. (ARI Resp. at 8-9.) The Court has found no support for this
proposition. It has found no case law holding that the contractual phrase “in the course of the
injured employee’s employment” in Part Two of the policy should be interpreted differently
from the identical phrase in Arkansas workers’ compensation statutes. It would be inconsistent
if Part One of the policy defined “course of employment” under the workers’ compensation
statutes as providing no coverage for employee breaks; but Part Two of the policy defined
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“course of employment” under Arkansas common law as providing coverage for employee
breaks. Because the language in Part One as borrowed from Arkansas workers’ compensation
statutes and Part Two is the same, the Court will give it the same interpretation. See generally
Devine v. Great Divide Ins. Co., 350 P.3d 782, 786-89 (Alaska 2015) (discussing phrase “in the
course of employment” in context of workers compensation/employers liability insurance
policies versus commercial general liability policies).
As stated by the Arkansas Supreme Court in Collins, “the test is whether the injury
occurred within the time and space boundaries of the employment, when the employee was
carrying out the employer’s purpose or advancing the employer’s interest directly or indirectly.”
Collins, 69 S.W.3d at 18. Viewing the facts in the light most favorable to ARI, Mr. Tedder was
taking an employer-mandated break when he was injured. After being told to break, Mr. Tedder
finished working on a pipe. Then he took two steps to the break table and sat down in the
immediate vicinity of his work area. He was injured less than thirty seconds later as the golf cart
driven by Mr. Pajek went out of control and hit the break table. It is undisputed that Mr. Tedder
was taking a break from work and was not performing any employment related services when he
was injured. On this record under Arkansas law, the Court finds the injury occurred outside the
time and space boundaries of employment when Mr. Tedder was not carrying out ARI’s purpose
or advancing ARI’s interest. The Court finds that under Arkansas law, Mr. Tedder’s injury did
not arise out of and in the course of his employment by ARI, and thus was not covered under
Part Two of the policy. The Court will grant defendant’s motion to for summary judgment on
this point.
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B.
ARI’s Notice to Hartford of Mr. Tedder’s Civil Action
Hartford argues that even if coverage existed, it had no duty to defend Tedder’s civil
action because proper notice was not given by ARI. ARI responds that it had given Hartford
notice of Mr. Tedder’s injury, and Hartford had additional notice that Mr. Tedder was going to
file a civil suit.
Viewed in the light most favorable to ARI, the facts surrounding notice are as follows:
Mr. Tedder was injured on April 24, 2008. ARI gave prompt notice to Hartford of Mr. Tedder’s
injury. (ARI SOF ¶¶ 8-9.) On June 6, 2008, Mr. Tedder filed a workers’ compensation claim.
(Hartford SOF ¶ 43.) On June 12, 2008, ARI gave notice of the claim to Hartford pursuant to the
terms of the workers’ compensation and employer’s liability insurance policy. (Id. ¶ 44.)
According to the notes of Hartford’s agent responsible for administering the workers’
compensation claim, Ms. Diemer, Hartford knew that Mr. Tedder intended to pursue a civil tort
claim against ARI if his workers’ compensation claim was denied. (ARI SOF ¶¶ 14, 17.)
On September 2, 2009, Mr. Tedder filed his civil action in federal court in Arkansas.
ARI points to a letter dated September 21, 2009 from its attorney in the Tedder civil action,
Robert Thompson, to its attorney in the workers’ compensation action, Mr. Murphy, as giving
notice to Hartford of the civil action. In the letter, Mr. Thompson states that he represents ARI
in the Tedder civil action and that he seeks any relevant discovery Mr. Murphy obtained in the
workers’ compensation action. (ARI SOF, Ex. 7.)
With respect to any direct conversation between ARI and Hartford regarding Mr.
Tedder’s filing of his civil action, ARI’s employee Jerry Powers testified at deposition that “I
know I think Georgia [Diemer] and I had a conversation about, hey, this has gone civil . . . .”
(Powers Dep. at 37.) He later stated that he “cannot recall with certainty,” but “probably talked
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about [the Tedder civil action]” in a conversation with Ms. Diemer after it had been filed. (Id. at
44.) When asked whether he was talking to Ms. Diemer to report the claim to Hartford or
whether the conversation was an aside when talking about something else, Mr. Powers stated it
was “just a conversation. It wasn’t to report it . . . .” (Powers Dep. at 41).
The Tedder civil action was tried to a jury in April 2012. The jury rendered its verdict on
April 11, 2012, and the district court ruled on post-judgment motions on December 5, 2012.
Hartford received a letter requesting coverage for the Tedder civil action from ARI’s present
counsel, Herbert Beigel, on January 11, 2013.
Hartford has filed the affidavit of its Assistant Vice President of the major case liability
section, Lisa Roche, who confirmed that after reviewing the claim records, Hartford has no
record of any notice from ARI with respect to the Tedder civil action until it received Mr.
Beigel’s letter dated January 11, 2013. (Hartford SOF, Ex. V.)
The policy states, in relevant part:
PART TWO – EMPLOYERS LIABILITY INSURANCE
***
I.
Actions Against Us
There will be no right of action against us under this insurance unless:
1.
You have complied with all the terms of this policy; . . .
***
PART FOUR – YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
***
3.
Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
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4.
Cooperate with us and assist us, as we may request, in the investigation,
settlement or defense of any claim, proceeding or suit.
***
6.
Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
“Arkansas courts apply the general rule that where an insurance policy provides that the
giving of notice of a loss, claim, or lawsuit is a condition precedent to recovery, the insured must
strictly comply with the notice requirement, or risk forfeiting the right to recover from the
insurance company.” Fireman’s Fund Ins. Co. v. Care Mgmt., Inc., 361 S.W.3d 800, 803 (Ark.
2010). “The insurance company need not show that it was prejudiced by any delays in or lack of
notification.” Id.; see also id. at n.1 (acknowledging that may states are taking the “modern
approach” and requiring a showing of prejudice more frequently, but “declin[ing] at this time to
overturn our long line of precedent. In Arkansas, a condition precedent is still a condition
precedent.”). On the other hand, if notice is not a condition precedent to recovery, the insurance
company must show it was prejudiced by the delay in notice. Id. at 10.
Here, notice is a condition precedent to recovery under the policy. The policy states that
ARI will have no right of action against Hartford under the policy unless ARI “complied with all
the terms of this policy.” (Policy at Part Two, I.) One of the terms of the policy is that ARI had
the duty to “[p]romptly give [Hartford] all notices, demands and legal papers related to the
injury, claim, proceeding or suit.” (Id. at Part Four, 3.) While it is true that ARI gave notice to
Hartford of Mr. Tedder’s injury and the filing of his workers’ compensation claim, ARI did not
promptly give Hartford notice, demands and legal papers related to the Tedder civil action.
Instead, ARI hired its own counsel to defend the case. ARI did not request coverage for the
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Tedder civil action until after it had been tried and a verdict had been reached. Hartford’s
records indicate they received no notice from ARI with respect to the Tedder civil action until it
received Mr. Beigel’s letter dated January 11, 2013
Mr. Powers’ testimony that he thought he mentioned the Tedder civil action on the phone
to Ms. Diemer is speculative. He stated that he could not recall the conversation with certainty,
and when asked whether he was assuming he had talked to Ms. Diemer, Powers responded,
“Yes.” (Powers Dep. at 44.) “As with any summary judgment motion, while we are required to
make all reasonable inferences in favor of the non-moving party, we do not resort to
speculation.” Brown v. Fortner, 518 F.3d 552, 558 (8th Cir. 2008) (citing Twymon v. Wells
Fargo & Co., 462 F.3d925, 934 (8th Cir. 2006)). Even if the Court assumes that during a
telephone conversation, Mr. Powers mentioned to Ms. Diemer that the Tedder case had “gone
civil,” the Court is unable to find that this alone meets ARI’s duty to promptly gave Hartford all
notices, demands and legal papers related to Mr. Tedder’s injury, claim, proceeding or suit.
(Policy, Part Four, 3.) Mr. Powers acknowledged that the conversation was “just a conversation”
and “[i]t wasn’t to report it.” (Powers Dep. at 41.)
The Court finds that ARI’s failure to timely notify Hartford of the filing of the Tedder
civil action and tender Tedder’s civil complaint constituted a breach of the policy and would bar
coverage even if it existed.2
2
Because the Court finds ARI’s failed to provide prompt notice to Hartford of the filing of the
Tedder civil action, the Court rejects ARI’s theory that Hartford should have accepted the
defense or issued a reservation of rights. It is impossible to require this of an insurer that has not
been provided notice of a suit.
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V.
Conclusion
For the foregoing reasons, the Court will grant defendant Hartford Insurance Company of
the Midwest’s motion for summary judgment.
Accordingly,
IT IS HEREBY ORDERED that defendant Hartford Insurance Company of the
Midwest’s motion for summary judgment is GRANTED. [Doc. 69]
IT IS FURTHER ORDERED that plaintiff American Railcar, Inc.’s motion for oral
argument is DENIED as moot. [Doc. 81]
A Judgment will accompany this Memorandum and Order.
__________________________________
CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Dated this18th day of March, 2016.
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