Court of Appeals of Wisconsin.

ROBERT H. SHUGARTS, II AND JUDITH LYNN SHUGARTS, PLAINTIFFS-APPELLANTS,

v.

DENNIS M. MOHR, PROGRESSIVE CASUALTY INSURANCE COMPANY/ARTISAN, TRUCKERS CASUALTY COMPANY AND WISCONSIN MUNICIPAL MUTUAL INSURANCE COMPANY, DEFENDANTS,

ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, DEFENDANT-RESPONDENT.

Appeal No. 2016AP983

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Cir. Ct. No. 2013CV377

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DATED AND FILED March 14, 2017

APPEAL from a judgment of the circuit court for Eau Claire County: MICHAEL A. SCHUMACHER, Judge. Affirmed.

Before Stark, P.J., Hruz and Seidl, JJ.

Opinion

STARK, P.J.

 

¶1 Robert H. Shugarts, II, was injured in an automobile accident. More than four years after the accident and over one year after commencing a lawsuit against the other driver and that driver’s insurer, Shugarts wrote to his underinsured motorist (UIM) carrier, Allstate Property and Casualty Insurance Company, notifying it of an underinsured motorist claim arising from the accident. The circuit court ultimately granted Allstate summary judgment, concluding as a matter of law that Shugarts failed to provide Allstate with timely notice of his UIM claim, and that Shugarts had not rebutted the presumption that Allstate was prejudiced by the untimely notice. We agree with the circuit court’s conclusions. We therefore affirm the judgment dismissing Shugarts’ UIM claim against Allstate.

 

 

BACKGROUND

¶2 Shugarts was employed as a deputy sheriff in Eau Claire County. On October 11, 2010, Shugarts was injured when his squad car was struck by a vehicle driven by Dennis Mohr. At the time of the accident, Mohr’s vehicle was insured by Progressive Casualty Insurance Company. Shugarts’ county-owned squad car was insured under a policy issued by Wisconsin Municipal Mutual Insurance Company (WMMIC), which included UIM coverage. Shugarts and his wife, Judith Shugarts, had a personal automobile insurance policy through Allstate, which also included UIM coverage.1

 

¶3 In November 2011, Shugarts retained an attorney and sent a notice of retainer to Progressive. Progressive denied coverage in January 2012, asserting its policy excluded coverage for Shugarts’ claim because Mohr intentionally struck Shugarts’ vehicle. In April 2013, through new counsel, Shugarts wrote to Progressive and offered to settle the case for $600,000. In response, Progressive continued to assert that its policy excluded coverage for Shugarts’ claim.

 

¶4 As a result, Shugarts commenced the instant lawsuit against Mohr and Progressive in June 2013. Although Progressive continued to deny coverage, in August 2013, it offered Shugarts $10,000 to settle the case. At that point, Progressive also provided a Declarations Page indicating Mohr’s policy had a bodily injury liability limit of $50,000 per person.

 

¶5 In July 2014, Shugarts filed a second amended summons and third amended complaint, naming WMMIC as a defendant. Shugarts alleged WMMIC was “liable for … underinsured motorist coverage arising out of the operation of” Shugarts’ squad car. WMMIC moved to dismiss, and later moved for summary judgment, arguing Shugarts was not an insured under its policy for purposes of UIM coverage.

 

¶6 Progressive subsequently changed its coverage position. On October 13, 2014, it offered to settle Shugarts’ claim for its full bodily injury liability limit of $50,000. Approximately two weeks later, on October 28, 2014, Shugarts’ attorney’s firm sent a notice of retainer to Allstate, advising it Shugarts had retained counsel to represent him “with regard to injuries he sustained in an automobile accident which occurred on October 11, 2010.” During the ensuing months, staff from Shugarts’ attorney’s firm continued to correspond with Allstate regarding Shugarts’ UIM claim. On February 9, 2015, counsel sent Allstate a notice, pursuant to Vogt v. Schroeder, 129 Wis. 2d 3, 383 N.W.2d 876 (1986), that Progressive had offered to settle Shugarts’ claim for its $50,000 bodily injury liability limit.

 

¶7 In March 2015, Shugarts filed a third amended summons and fourth amended complaint, naming Allstate as a defendant and asserting it was required to provide him with UIM coverage. Allstate answered the complaint in April 2015, asserting as an affirmative defense that “[t]here is no coverage available to the plaintiffs under the Allstate policy given the failure of the plaintiffs to provide timely notice of their intention to make a claim as a result of the subject accident as required under the Allstate policy.” Allstate subsequently moved for summary judgment on the same ground.

 

¶8 The circuit court granted Allstate’s motion, concluding, as a matter of law, that Shugarts “failed to provide timely notice to Allstate of the accident … whether the notice requirement comes under the liability section of the policy, the UIM section of the policy or the statutory provisions.” The court further concluded the case law cited by Shugarts “did not declare that providing notice of an accident in an underinsured motorist claim is not necessary ….” The court acknowledged Shugarts may have failed to notify Allstate sooner because he believed there was “no need to resort to this policy.” However, the court stated any failure to provide notice for that reason was “not reasonable.” Finally, the court concluded Shugarts had failed to rebut the presumption that Allstate was prejudiced by the untimely notice. Shugarts now appeals.2

 

 

STANDARDS OF REVIEW

¶9 We independently review a grant of summary judgment, using the same methodology as the circuit court. Hardy v. Hoefferle, 2007 WI App 264, ¶6, 306 Wis. 2d 513, 743 N.W.2d 843. Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2) (2009-10).3

 

¶10 Our goal in interpreting an insurance policy is to give effect to the parties’ intent. American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶23, 268 Wis. 2d 16, 673 N.W.2d 65. We construe a policy as it would be understood by a reasonable person in the position of the insured. Id. Unambiguous policy language is enforced as written. Marnholtz v. Church Mut. Ins. Co., 2012 WI App 53, ¶10, 341 Wis. 2d 478, 815 N.W.2d 708. However, we construe ambiguous policy language against the insurer and in favor of coverage. Id. Policy language is ambiguous if it is reasonably susceptible to more than one interpretation. Id.

 

¶11 Here, the circuit court determined Allstate was entitled to summary judgment because: (1) Shugarts did not provide timely notice of his UIM claim; and (2) Shugarts failed to rebut the presumption that Allstate was prejudiced by the lack of timely notice. Whether an insured provided timely notice to its insurer is typically a question of fact, but it may be decided as a matter of law under circumstances where “no judge or jury could reasonably find that notice was timely, or conversely, untimely.” Neff v. Pierzina, 2001 WI 95, ¶40, 245 Wis. 2d 285, 629 N.W.2d 177; see also RTE Corp. v. Maryland Cas. Co., 74 Wis. 2d 614, 629, 247 N.W.2d 171 (1976). Similarly, whether an insurer was prejudiced by untimely notice generally presents a factual question, but it may be resolved as a matter of law where the facts are not in dispute. Neff, 245 Wis. 2d 285, ¶¶47-48.

 

 

DISCUSSION

¶12 In support of its position that Shugarts failed to provide timely notice of his UIM claim, Allstate first cites a notice provision that appears in “Part I” of Shugarts’ policy, which is entitled

Automobile Liability Insurance

Bodily Injury—Coverage AA

Property Damage—Coverage BB

The notice provision in Part I states:

What To Do In Case of An Auto Accident Or Claim

If a person insured has an auto accident, we must be notified of all details as soon as reasonably possible. If a person insured is sued as the result of an auto accident, we must be notified immediately.

 

¶13 As Shugarts observes, this notice provision appears in the section of the policy relating to liability coverage. However, the policy contains a separate section, Part VII, pertaining to UIM coverage. Parts I and VII contain separate insuring agreements, definitions, exclusions, and liability limits. In addition, Part VII contains its own notice provision. Furthermore, Part I contains an exclusion stating “[t]his coverage” does not apply to liability for “a non-owned auto while being used in any business or occupation of a person insured.” Under these circumstances, we agree with Shugarts that a reasonable insured reading Allstate’s policy could reasonably conclude the notice provision in Part I was not applicable to a UIM claim arising out of Shugarts’ use of his non-owned squad car.

 

¶14 We therefore turn to the notice provision in Part VII of the policy, which provides:

Proof of Claim; Medical Reports

As soon as possible, you or any other person making claim must give us written proof of claim. It must include all details we may need to determine the amounts payable. We may also require any person making claim to submit to examination under oath and sign the transcript.

The insured person may be required to take medical examinations by physicians we choose, as often as we reasonably require. We must be given authorization to obtain medical reports and copies of records.

As relevant here, this provision requires the insured, or any other person making a claim, to give Allstate “written proof of claim” “[a]s soon as possible.”

 

¶15 Shugarts argues he satisfied this requirement by sending Allstate a notice of retainer on October 28, 2014, just over two weeks after Progressive offered its full policy limits in settlement of Shugarts’ claim against Progressive and Mohr. Shugarts emphasizes that the notice he provided on that date complied with the principles set forth in Vogt and Ranes v. American Family Mutual Insurance Co., 219 Wis. 2d 49, 580 N.W.2d 197 (1998).4

 

¶16 In Vogt, the plaintiff (Vogt) had been a passenger in his own vehicle during a collision with a vehicle driven by the defendant (Schroeder). Vogt, 129 Wis. 2d at 7. It was undisputed that Schroeder was “primarily, perhaps wholly, liable” for the accident. Id. It was also undisputed that Vogt’s damages exceeded Schroeder’s insurance policy limit of $15,000. Id. Schroeder’s insurer offered to pay its policy limit in exchange for a release of itself and Schroeder. Id. at 8. Vogt wanted to accept that offer and then pursue a UIM claim under his own automobile insurance policy. Id. However, Vogt’s insurer refused to approve the settlement “unless it [could] be accomplished without impairing [the insurer’s] possible right of subrogation against … Schroeder.” Id.

 

¶17 On appeal, our supreme court framed the issue as “whether an underinsurer has a right of subrogation against an underinsured tortfeasor when the underinsurer makes a partial payment of its insured’s damages.” Id. at 7. The court answered that question in the affirmative, holding that an underinsurer “has the right of subrogation against the tortfeasor and his insurer to the extent that the underinsurer has paid benefits to its own insured … prior to the release of [the] tortfeasor … and his insurance company ….” Id. at 17. In other words, the underinsurer has a right of subrogation “as long as it substitutes its funds for those proferred [sic] by the tortfeasor’s insurer.” Pitts v. Revocable Trust of Knueppel, 2005 WI 95, ¶35, 282 Wis. 2d 550, 698 N.W.2d 761 (citing Vogt, 129 Wis. 2d at 17-19). “However, if the underinsurer chooses simply to consent to the settlement, it forfeits its right to subrogation.” Id. (citing Vogt, 129 Wis. 2d at 20-21).

 

¶18 The Vogt court adopted a procedure to allow an underinsurer to “intervene in the settlement process.” Pitts, 282 Wis. 2d 550, ¶38. Specifically, the court held that an underinsurer is entitled to notice of the proposed settlement, and a period of time in which to assess the case and decide whether to protect its subrogation rights by paying underinsurance benefits to its insured. Vogt, 129 Wis. 2d at 20-21.

 

¶19 In Ranes, the issue was whether an insured’s failure to give the notice of settlement required by Vogt necessarily barred UIM coverage. Ranes, 219 Wis. 2d 49, ¶¶1-3. Our supreme court held that, under those circumstances, UIM coverage was not barred unless the underinsurer was prejudiced by the lack of notice. Id., ¶3. However, the court concluded failure to provide a Vogt notice gave rise to a rebuttable presumption that the underinsurer was prejudiced. Id.

 

¶20 As the preceding summary shows, Vogt and Ranes pertain to the notice an insured is required to give his or her UIM carrier before entering into a settlement with an underinsured driver and that driver’s insurer. Vogt and Ranes do not, however, address whether a UIM insured may be required under his or her policy to provide notice of a UIM claim before such a settlement is proposed. Neither Vogt nor Ranes stands for the proposition that providing a Vogt notice is all that is required of a UIM insured, in the face of a policy provision setting forth a different notice requirement.

 

¶21 Shugarts argues Vogt and Ranes demonstrate that a settlement offer, not the underlying accident, is the trigger for a UIM carrier’s subrogation rights.5 Be that as it may, the issue in this case is not when Allstate’s subrogation rights were triggered or affected; the issue is whether Shugarts provided Allstate with proof of his UIM claim within the time period required by Shugarts’ policy. We therefore reject Shugarts’ argument that, by providing Allstate with notice of his claim after receiving a settlement offer from Progressive, Shugarts also necessarily complied with the policy’s proof of claim provision.

 

¶22 Shugarts next argues it is not possible to give notice of a UIM claim until the other driver’s liability insurer has offered its policy limits because, until that point, the UIM carrier has no obligation to pay benefits to its insured. In support of this argument, Shugarts cites various statutory definitions of the term “claim,” none of which have any relation to UIM insurance, asserting each of them “indicate[s] the existence of an obligation, debt, need, or entitlement to something being provided.” See WIS. STAT. §§ 20.931(1)(b), 242.01(3), 427.103(1), 632.875(3)(a), 895.07(1)(c). In a related argument, amicus curiae the Wisconsin Association for Justice (WAJ) asserts a UIM claim does not accrue “until there is a settlement of the claim against the tortfeasor in the underlying action.” WAJ relies on Yocherer v. Farmers Insurance Exchange, 2002 WI 41, ¶1, 252 Wis. 2d 114, 643 N.W.2d 457, which held that

[f]or actions seeking coverage under an underinsured motorist policy, the statute of limitations begins to run from the date of loss, which is the date on which a final resolution is reached in the underlying claim against the tortfeasor, be it through denial of that claim, settlement, judgment, execution of releases, or other form of resolution, whichever is the latest.

 

¶23 These arguments are inconsistent with our supreme court’s decision in Martinson v. American Family Mutual Insurance Co., 63 Wis. 2d 14, 216 N.W.2d 34 (1974). There, the court was asked to determine whether an insured had provided his uninsured motorist carrier with timely proof of claim, as required by his policy. See id. at 19-20. Similar to the proof of claim provision in Shugarts’ policy, see supra ¶14, the proof of claim provision in Martinson required the insured, or any other person making a claim, to “give to the company written proof of claim” “[a]s soon as practicable[.]” Martinson, 63 Wis. 2d at 19. The Martinson court concluded the insured had failed to comply with that provision. In so doing, the court stated a proof of claim condition like the one in the insured’s policy “requires the filing of the claim as soon as practicable after the incident giving rise to the claim. It does not mean the claim should be filed as soon as practicable after the liability of the insurer has been established.” Id. at 21 (emphasis added). The court emphasized that the purpose of a proof of claim provision “is to afford proper information to the insurance company as to the facts regarding the loss and its liability, in order to make it possible for it to adjust and determine the extent of the loss.” Id. at 20 (quoting 8 BLASHFIELD, AUTOMOBILE LAW AND PRACTICE, INSURANCE, § 331.1, pp. 145-46).

 

¶24 Thus, under Martinson, Shugarts was required to provide Allstate with proof of his UIM claim as soon as possible after the incident giving rise to the claim. See id. at 21. Under the circumstances of this case, we conclude it was possible for Shugarts to provide proof of claim in January 2012, when Progressive denied coverage for his claim against Mohr. At the very latest, Shugarts should have provided proof of claim in August 2013, when he learned that Progressive’s policy limit was only $50,000. At that point, Shugarts was claiming he had incurred over $46,000 in medical expenses, over $645,000 in lost wages, and $17,750 in lost retirement benefits. He had offered to settle his claim against Progressive and Mohr for $600,000. Under these circumstances, when Shugarts learned in August 2013 that Progressive’s policy limit was only $50,000, he necessarily knew that, regardless of what settlement offer Progressive might ultimately make, the amount paid would be insufficient to cover his losses. Shugarts therefore knew, at that point, that he would ultimately have a UIM claim against Allstate.6 That knowledge was sufficient to trigger Shugarts’ duty to provide Allstate with proof of claim, as required by the policy.7

 

¶25 Shugarts nevertheless argues “there exists a public policy reason why notice need not be given until the policy limits have been tendered.” Shugarts contends that if an insured is required to provide proof of claim to his or her UIM carrier before the tortfeasor’s insurer offers to settle for its full policy limit, personal injury attorneys will need to change their practice and provide UIM insurers with proof of claim at the same time they provide notice to tortfeasors’ liability insurers. According to Shugarts, if UIM insurers are entitled to notice at the same time as tortfeasors’ liability insurers, UIM carriers will have an incentive to work with tortfeasors’ liability insurers to minimize their insureds’ recovery of damages. This argument is unpersuasive. Shugarts points to no evidence suggesting that requiring an insured to provide notice to a UIM carrier once he or she is aware of the existence of a UIM claim will result in a sweeping change in the way UIM claims are handled. Moreover, a UIM carrier has a duty of good faith and fair dealing toward its insured, see Danner v. Auto-Owners Ins., 2001 WI 90, ¶59, 245 Wis. 2d 49, 629 N.W.2d 159, which would prevent it from teaming up with a tortfeasor and his or her liability insurer to the insured’s detriment.

 

¶26 For the foregoing reasons, we agree with the circuit court that Shugarts failed to provide timely proof of claim, as required by the Allstate policy. That conclusion, however, does not end our inquiry. Rather, under WIS. STAT. § 631.81(1),

Provided notice or proof of loss is furnished as soon as reasonably possible and within one year after the time it was required by the policy, failure to furnish such notice or proof within the time required by the policy does not invalidate or reduce a claim unless the insurer is prejudiced thereby and it was reasonably possible to meet the time limit.

“The decisions interpreting WIS. STAT. § 631.81(1) hold that when the insured fails to give notice within one year after the time required by the policy, ‘there is a rebuttable presumption of prejudice and the burden of proof shifts to the claimant to prove that the insurer was not prejudiced by the untimely notice.’ ” Neff, 245 Wis. 2d 285, ¶43 (quoting Gerrard Realty Corp. v. American States Ins. Co., 89 Wis. 2d 130, 146-47, 277 N.W.2d 863 (1979)).

 

¶27 We have concluded the proof of claim provision in Shugarts’ policy required him to provide Allstate with proof of claim, at the latest, by August 2013. Shugarts concedes he did not provide Allstate with any notice of his UIM claim until October 28, 2014, when his attorney’s office sent Allstate a notice of retainer.8 Because that notice was sent more than one year after the time required by the policy, there is a rebuttable presumption Allstate was prejudiced by the untimely notice, and Shugarts has the burden to prove Allstate was not prejudiced. See id.

 

¶28 “Prejudice to the insurer in this context is a serious impairment of the insurer’s ability to investigate, evaluate, or settle a claim, determine coverage, or present an effective defense, resulting from the unexcused failure of the insured to provide timely notice.” Id., ¶44. Timely notice is important to an insurer so that it can investigate the circumstances of an accident, contact witnesses while they are still available and while their memories are still fresh, and locate unknown witnesses. Id., ¶59. In addition, over time, witnesses may “become entrenched in a position because they have calculated the legal effect of their answers.” Id. Even where the insured has conducted an investigation close in time to the underlying accident, an insurer may still be prejudiced by the loss of the opportunity to perform its own investigation. See id., ¶¶62-67; see also Kreckel v. Walbridge Aldinger Co., 2006 WI App 168, ¶¶17-18, 295 Wis. 2d 649, 712 N.W.2d 508; Phoenix Contractors, Inc. v. Affiliated Capital Corp., 2004 WI App 103, ¶¶19-21, 273 Wis. 2d 736, 681 N.W.2d 310.

 

¶29 Shugarts argues he has rebutted the presumption of prejudice because: (1) Shugarts and his wife are alive and can be deposed; (2) “[u]pon information and belief,” Mohr is alive and can be deposed; (3) to date, no depositions of any medical providers, law enforcement officers, or other witnesses have been taken, and, “[u]pon information and belief,” those individuals remain alive and available to be deposed; (4) all of the medical facilities that provided treatment to Shugarts remain in existence; (5) Shugarts has provided Allstate with medical records, and if other records are needed, Allstate can request them; and (6) Allstate can conduct an independent medical examination (IME) of Shugarts, if it wishes to do so.

 

¶30 However, it is undisputed that Allstate had no opportunity to conduct any investigation until more than four years after the underlying accident, and more than one year after Shugarts commenced the instant lawsuit. Regardless of whether some witnesses are currently available for deposition and medical records are available for inspection, Allstate was deprived of the opportunity to conduct an investigation and interview witnesses while their memories of the underlying events were still comparatively fresh and before they became entrenched in their positions. Moreover, Shugarts’ assertion “upon information and belief” that certain witnesses are available to be deposed is not supported by citations to the record and appears to be purely speculative. In addition, Shugarts fails to account for the fact that Allstate was deprived of the opportunity to conduct a meaningful investigation into Shugarts’ medical issues and participate in settlement negotiations to resolve this matter at an earlier stage. On these facts, we conclude, as a matter of law, that Shugarts has failed to meet his burden to rebut the presumption that Allstate was prejudiced by his failure to timely provide proof of his UIM claim.

 

¶31 The three cases Shugarts cites in support of his argument that Allstate was not prejudiced are distinguishable. In Fireman’s Fund Insurance Co. v. Bradley Corp., 2003 WI 33, ¶¶61-63, 261 Wis. 2d 4, 660 N.W.2d 666, our supreme court concluded as a matter of law that an insurer suffered no prejudice due to its insured’s failure to provide timely notice of a lawsuit based on testimony from the insurer’s litigation manager that, even if the insurer had received notice at an earlier time, it would not have handled matters differently and would not have conducted any further investigation. Here, in contrast, Shugarts has presented no evidence establishing that Allstate would not have handled matters differently or conducted its own investigation had it been provided with timely proof of Shugarts’ UIM claim.

 

¶32 In Rentmeester v. Wisconsin Lawyers Mutual Insurance Co., 164 Wis. 2d 1, 3-4, 9, 473 N.W.2d 160 (Ct. App. 1991), we upheld the circuit court’s conclusion that no prejudice existed when an attorney failed to provide notice of claim to his malpractice insurer within one year after the time required by the policy. We relied, in part, on the fact that two trial attorneys had testified the insurer “was not prejudiced in preparing a legal malpractice defense, and all rights of discovery, the availability of evidence and preparation for trial were unaffected by the delay in notice.” Id. at 9. Shugarts has not cited similar evidence in this case supporting his claim that Allstate was not prejudiced.

 

¶33 In International Flavors & Fragrances, Inc. v. Valley Forge Insurance Co., 2007 WI App 187, ¶13, 304 Wis. 2d 732, 738 N.W.2d 159, we concluded an insured had rebutted the presumption that its insurer was prejudiced by the insured’s failure to provide timely notice of a lawsuit because the record showed the insurer “had the opportunity to enter the litigation, investigate, conduct discovery, and participate in decision making.” Id., ¶13. We specifically rejected the insurer’s argument that it was prejudiced because the late notice prevented it from participating in strategic decisions regarding the discovery that was conducted before it entered the case. Id., ¶20. However, the insurer in International Flavors apparently did not argue it had been prejudiced by the delay in notice due to any degradation in witnesses’ recollections or their entrenchment in certain positions. Here, Allstate specifically argues it was prejudiced based on those factors.

 

¶34 Finally, Shugarts argues in his reply brief that, even assuming he should have provided Allstate with proof of his UIM claim in August 2013, at that point nearly three years had elapsed since the accident date. Accordingly, he asserts any investigation undertaken in August 2013 would not have been close in time to the accident in any event. However, in making this argument Shugarts ignores the presumption that Allstate was prejudiced by his late notice and his burden to rebut that presumption. An investigation conducted in August 2013 would have been closer in time to the accident than an investigation conducted after Shugarts finally notified Allstate of his UIM claim more than one year later in October 2014. Shugarts provides no evidence to support a conclusion that the same witnesses who were available in August 2013 remained available in October 2014, or that they would have provided the same testimony in October 2014 as in August 2013. Shugarts simply has not cited any evidence that would support a conclusion Allstate was not prejudiced by his failure to provide timely proof of his UIM claim. As such, Shugarts has failed, as a matter of law, to rebut the presumption that Allstate was prejudiced. Accordingly, we affirm the summary judgment dismissing Shugarts’ UIM claim against Allstate.

 

By the Court.—Judgment affirmed.

 

Recommended for publication in the official reports.

 

All Citations

Slip Copy, 2017 WL 1017364

 

 

Footnotes

1

For the remainder of this opinion, we refer to Robert and Judith Shugarts, collectively, as “Shugarts.”

2

The circuit court also granted summary judgment in favor of WMMIC. Shugarts’ appeal initially challenged both the judgment dismissing his claim against WMMIC and the judgment dismissing his claim against Allstate. However, Shugarts subsequently notified this court he was voluntarily dismissing that portion of his appeal pertaining to WMMIC. We therefore address his appellate arguments only as they pertain to his claim against Allstate.

3

Unless otherwise noted, all references to the Wisconsin Statutes are to the 2009-10 version, which was in effect during the policy period at issue in this case.

4

Although Shugarts sent Allstate a notice of retainer on October 28, 2014, he did not send a Vogt notice until February 9, 2015. See Vogt v. Schroeder, 129 Wis. 2d 3, 383 N.W.2d 876 (1986). Thus, contrary to Shugarts’ assertion, he did not actually comply with Vogt on October 28, 2014. This fact, however, is not material to our resolution of this appeal. See infra ¶¶20-21, 27 n.8.

5

Shugarts also asserts that, before the underinsured driver’s liability insurer has made a settlement offer, a UIM carrier “has no standing of any kind to appear in litigation because its subrogation rights have not been affected, and it is not a party in interest or a subrogated party under Wisconsin law.” However, Shugarts cites no legal authority in support of this assertion, and we therefore decline to consider it. See State v. Pettit, 171 Wis. 2d 627, 646-47, 492 N.W.2d 633 (Ct. App. 1992).

6

At the time of Shugarts’ accident, WIS. STAT. § 632.32(d) defined “underinsured motorist coverage” as coverage “for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of underinsured motor vehicles.” The term “underinsured motor vehicle” was defined, as relevant here, as a motor vehicle for which “[t]he limits under the bodily injury liability insurance policy … are less than the amount needed to fully compensate the insured for his or her damages.” Sec. 632.32(2)(e)3. A policy endorsement attached to Shugarts’ policy contained the same definition.

7

Shugarts suggests he did not provide Allstate with proof of claim prior to October 2014 because, before that time, he believed he was entitled to UIM coverage under the WMMIC policy. However, we agree with the circuit court that any failure to provide proof of claim on those grounds was unreasonable. Shugarts’ erroneous belief that he would also be entitled to UIM coverage under a different policy does not excuse him from complying with the proof of claim requirement in the Allstate policy.

8

Notably, the Allstate policy required Shugarts to provide “written proof of claim.” In Martinson v. American Family Mutual Insurance Co., 63 Wis. 2d 14, 20-21, 216 N.W.2d 34 (1974), our supreme court explained that “[t]he notice of accident, occurrence or loss provision of the general policy provisions is distinct and different from the proof of claims requirements of the uninsured motorist endorsement ….” The court elaborated:

As used in a policy of automobile insurance, notice of loss and proofs of loss are distinct concepts, and they have different purposes and functions. The provisions for notice of loss refer to information to the insurance company of the loss of, or damage to, the insured automobile, while the clause pertaining to proofs of loss usually requires a statement of loss, signed and sworn to by the insured, containing specified information.

Id. (quoting 8 BLASHFIELD, AUTOMOBILE LAW AND PRACTICE, INSURANCE, § 331.1, pp. 145-46). We question whether Shugarts’ October 28, 2014 notice of retainer qualified as a “proof of claim,” under this definition. However, because the parties do not raise the issue, and because its resolution ultimately does not affect the disposition of this appeal, we assume, without deciding, that the October 28, 2014 notice of retainer sufficed as a valid proof of claim.

We also observe that, while Allstate concedes Shugarts “first sent notice of loss to Allstate in a letter dated October 28, 2014,” Allstate also contends it “first received notice of the loss in January 2015.” However, as Shugarts notes, the mailing of a letter creates a rebuttable presumption that the letter was delivered and received, which “shifts to the challenging party the burden of presenting credible evidence of non-receipt.” State ex rel. Flores v. State, 183 Wis. 2d 587, 612-13, 516 N.W.2d 362 (1994). Allstate does not point to any evidence that it did not receive the October 28, 2014 correspondence. Regardless, the parties’ apparent dispute about whether (or when) Allstate received that correspondence is not a genuine issue of material fact barring summary judgment because, even accepting Shugarts’ position that the letter was mailed and received in October 2014, we nevertheless conclude it was untimely.

United States District Court,

W.D. Arkansas, Fayetteville Division.

BNSF Logistics, LLC, Plaintiff,

v.

Pennsylvania Manufacturers Association Insurance Company and National Indemnity Company, Defendants.

and

Pennsylvania Manufacturers Associated Insurance Company, Third Party Plaintiff,

v.

Saint Trans, Inc., Third Party Defendant.

CASE NO. 5:16-CV-05067

|

Signed 02/22/2017

Attorneys and Law Firms

Gordon S. Rather, Jr., Wright, Lindsey & Jennings LLP, Little Rock, AR, Paul D. Morris, Wright, Lindsey & Jennings LLP, Rogers, AR, Joseph Barrett Deacon, Jr., Whitney Deacon Lloyd, Deacon Law Firm, P.A., Fayetteville, AR, for Plaintiff/Third Party Defendant.

Ashleigh Phillips, Munson, Rowlett, Moore & Boone, P.A., William Cody Kees, Bequette & Billingsley, P.A., Little Rock, AR, Don Allen Taylor, Davis, Wright, Clark, Butt & Carithers, PLC, William Fitzgerald Clark, Davis Law Firm, Fayetteville, AR, for Defendants/Third Party Plaintiff.

 

 

MEMORANDUM OPINION AND ORDER

TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE

*1 Currently before the Court are two Motions for Summary Judgment, which have now been fully briefed and are ripe for decision. One Motion was filed by Defendant Pennsylvania Manufacturers Association Insurance Company (“PMAIC”) and the other was filed by Defendant National Indemnity Company (“NIC”). In deciding these Motions, the Court reviewed the following:

? PMAIC’s Motion for Summary Judgment (Doc. 34), Brief in Support (Doc. 35), and Statement of Facts (Doc. 36); Plaintiff BNSF Logistics, LLC’s (“BNSF”) Response in Opposition (Doc. 41) and Statement of Facts (Doc. 42); and PMAIC’s Reply (Doc. 46); and

? NIC’s Motion for Summary Judgment (Doc. 37), Brief in Support (Doc. 38), and Statement of Facts (Doc. 39); BNSF’s Response in Opposition (Doc. 43) and Statement of Facts (Doc. 44); and NIC’s Reply (Doc. 47).

 

For the reasons explained herein, the Court GRANTS both Motions.

 

 

1. BACKGROUND

This lawsuit stems from a single-vehicle accident involving a tractor-trailer that was carrying infant formula from Michigan to Arizona. The infant formula was manufactured by Abbott Laboratories (“Abbott”) and shipped from its facility in Michigan. The tractor-trailer was driven by an employee of Third Party Defendant Saint Trans, Inc. (“Saint Trans”), which is a transportation company. On December 17, 2014, while the tractor-trailer was in transit, somewhere around Las Cruces, New Mexico, the truck overturned, and the infant formula spilled out onto the highway and surrounding area.

 

To understand the parties’ relationship to the issues here, it is necessary to explain exactly how Abbott’s infant formula ended up in Saint Trans’ tractor-trailer. Beginning in October of 2014, Abbott entered into a “Third Party Logistics Provider Agreement” with Plaintiff BNSF, (Doc. 34-1), through which BNSF agreed to serve as Abbott’s property broker. This role required BNSF to arrange for the transportation of Abbott’s products across state lines, by contracting with motor carriers that would agree to transport the products to their assigned destinations, while “exercis[ing] standard industry shipping and material handling practices to protect Abbott product integrity.” Id. at p. 3.

 

Here, BNSF hired a transportation company called Red Rose Trans, Inc. (“Red Rose”) to perform the delivery. BNSF had previously entered into a Carrier Agreement (Doc. 34-3) with Red Rose that stated, quite explicitly, that Red Rose agreed it would “not broker, interline, co-broker, assign or trip lease loads with another party and shall transport all tendered loads … on equipment insured, placarded and controlled by [Red Rose].” Id. at p. 1. Red Rose also agreed “to transport all shipments provided under this Agreement without delay,” to “furnish all equipment necessary or required for the performance of its obligations,” to “utilize only competent, able and licensed personnel,” and to “have full control of such personnel.” Id. In addition, Red Rose understood it was “to be named on the bill of lading as the carrier of record” and was to submit a signed proof of delivery to BNSF, as well as any invoices.” Id.

 

*2 Red Rose then entered into a “Spot Contract” with BNSF for the delivery of the infant formula. See Doc. 34-4. This Spot Contract set forth the particulars of the delivery, including the date and time that Red Rose’s driver would collect the cargo from Abbott in Sturgis, Michigan, and the expected date and time the cargo was to arrive at the Central Arizona Distribution Center in Casa Grande, Arizona. Id. at p. 1. According to the Spot Contract, Red Rose’s driver was required to sign the bill of lading, and the bill of lading was to list Red Rose as the carrier. Id. at p. 2. Also, the Spot Contract reminded Red Rose that it was not permitted to “re-broker, sub-broker, subcontract, assign, interline, or warehouse any shipments hereunder without the prior written consent from [BNSF].” Id. at p. 2.

 

As the reader has surely surmised, Red Rose did not transport the infant formula on that ill-fated day. Instead, in apparent disregard of both the Carrier Agreement and the Spot Contract, Red Rose subcontracted the delivery to another trucking company, Saint Trans, whose driver picked up the formula from Abbott, signed the bill of lading, and proceeded to drive the product to Arizona, along the way overturning his tractor-trailer and causing the cargo to be strewn across the New Mexico highway.

 

After the accident, BNSF asked both Red Rose and Saint Trans to pay Abbott directly for the damaged cargo, but both companies refused. So BNSF assumed primary responsibility and paid Abbott the full amount of its loss, totaling $121,523.32, and pursued both Red Rose and Saint Trans for reimbursement. It turned out that both trucking companies were insured. Saint Trans was insured by Defendant PMAIC, to whom notice was provided on January 8, 2015, of the accident and the resulting damage to the cargo. On January 27, 2015, PMAIC’s agent sent a letter to Saint Trans denying coverage, but offering the following caveat:

This Denial of Coverage is not exclusive but is rather the specific reasons of which PMAIC is presently aware. By virtue of this correspondence, PMAIC intends to reserve their rights on all grounds, not only those set forth in this letter. PMAIC expressly reserves the right to supplement, amend, modify or expand this Denial of Coverage for any additional reason as it may apply to any new facts or circumstances.

In the event you have any other information or documentation, which you want us to consider, immediately forward such information to our office. In the event any additional information or documentation would suggest that coverage would be afforded under the Terms and Conditions of this Policy, PMAIC expressly reserves the right to assert other and further grounds for denial in response to such information.

(Doc. 34-7, pp. 2-3).

 

Red Rose was insured by Defendant NIC. However, the record is devoid of documentation to suggest that Red Rose submitted BNSF’s claim for damages to NIC after the accident. Instead, the Amended Complaint claims that NIC was made aware of the facts giving rise to the instant action “at least [in] March 2015 ….” (Doc. 21, p. 2). But NIC’s Answer admits only that “it assigned Claim No. 70-30-334798 to its investigation of the claim,” but does not admit it was aware as of March. (Doc. 27, p. 2, ¶ 6).

 

After some period of time, BNSF determined that it was unable to adequately resolve its claim for reimbursement and filed a lawsuit against both Red Rose and Saint Trans—but not PMAIC or NIC—on June 11, 2015, in the Circuit Court of Washington County, Arkansas (“the state court case”). In the state court case, BNSF sued the trucking companies, jointly and severally, for the damages that BNSF sustained in connection with the loss of Abbott’s infant formula shipment. The complaint specifically alleged that Red Rose was liable to BNSF on the following three causes of action: (1) breach of contract, due to Red Rose’s decision to rebroker and reassign the delivery of the cargo to Saint Trans; (2) negligent hiring of Saint Trans; and (3) vicarious liability—on a respondeat superior theory—because Red Rose assumed responsibility for Saint Trans’ driver when Red Rose “agreed to be, and was listed as, the carrier for the load that was destroyed,” (Doc. 34-2, p. 7). The state court complaint also asserted a single claim for common-law negligence against Saint Trans.

 

*3 On July 30, 2015, BNSF moved for default judgment against both Red Rose and Saint Trans in state court. (Doc. 34-9). Neither defendant had filed an answer or other responsive pleading. On August 18, 2015, the state court entered judgment in BNSF’s favor, finding that the complaint was properly served upon Red Rose and Saint Trans, that both companies failed to appear and defend themselves in the lawsuit, and that “[d]efendant Red Rose is liable to plaintiff BNSF for breach of contract, negligent hiring of defendant Saint Trans, as well as negligent training, supervision and entrustment of the cargo to defendant Saint Trans all of which directly and proximately caused the damages and losses sustained by plaintiff BNSF in the total amount of $121,523.32.” (Doc. 3-1, p. 2). The court further determined that “defendant Saint Trans is liable to BNSF for negligence in failing to safely transport and deliver the cargo which directly and proximately caused the damages and losses sustained by plaintiff BNSF in the total amount of $121,523.32.” Id. at pp. 2-3. BNSF received awards of pre- and post-judgment interest, as well as attorneys’ fees in the amount of $12,236.50. Id. at p. 3.

 

On February 17, 2016, approximately six months after default judgment entered, BNSF filed a lawsuit in state court against PMAIC only, seeking to collect on the default judgment under Ark. Code Ann. § 23-89-101. This provision of the Arkansas Code allows a party that has been injured by a insured person to maintain a direct cause of action against the insurer. In doing so, the injured party may seek to collect, by way of subrogation, the amount of the judgment that was entered against the insured through the coverage afforded by the insurance policy. See id.

 

On March 17, 2016, PMAIC removed the case to this Court, asserting federal diversity jurisdiction. Several months later, on July 19, 2016, PMAIC filed a Third Party Complaint against Saint Trans, (Doc. 15), seeking a declaratory judgment that the policy of insurance issued by PMAIC to Saint Trans affords no coverage. Saint Trans never responded to the Third Party Complaint, and the Clerk’s Office entered a default. See Doc. 49. On July 27, 2016, BNSF filed an Amended Complaint and added NIC as a new Defendant, asserting against it a demand for payment of its default judgment pursuant to Ark. Code Ann. § 23-89-101, and contending that NIC should pay jointly and severally with PMAIC, according to the limits of the policies of insurance at issue.

 

The Court issued an Amended Case Management Order (Doc. 30) on September 14, 2016, setting forth deadlines by which the parties could file motions for summary judgment as to the issue of coverage. Both PMAIC’s and NIC’s Motions were filed on the same date. Now that the Motions are ready for resolution, the Court will begin its discussion by reviewing the applicable legal standard, followed by an analysis of the merits of PMAIC’s Motion first, and NIC’s Motion second.

 

 

1. LEGAL STANDARD

The standard of review for summary judgment is well established. Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The Court must review the facts in the light most favorable to the opposing party and give that party the benefit of any inferences that logically can be drawn from those facts. Canada v. Union Elec. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1997). The moving party bears the burden of proving the absence of a genuine dispute of material fact and that it is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nat’l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999). Once the moving party has met its burden, the non-moving party must “come forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. P. 56(c)).

 

In order for there to be a genuine issue of material fact, the non-moving party must produce evidence “such that a reasonable jury could return a verdict for the nonmoving party.” Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “The nonmoving party must do more than rely on allegations or denials in the pleadings, and the court should grant summary judgment if any essential element of the prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial.” Register v. Honeywell Fed. Mfg. & Techs., LLC, 397 F.3d 1130, 1136 (8th Cir. 2005) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)).

 

 

III. DISCUSSION

1. PMAIC’s Motion for Summary Judgment

*4 PMAIC believes it is entitled to summary judgment because the policy of insurance it issued to Saint Trans does not cover the loss that was the subject of BNSF’s default judgment. The relevant Policy is located at Doc. 4-1. PMAIC argues that no coverage is owed because: (1) the cargo at issue was not “Covered Property,” as that term is defined in the Policy; (2) no “approved” bill of lading was issued by Saint Trans for the shipment of the cargo at issue; and (3) Saint Trans failed to comply with a condition precedent to coverage, namely, that it notify PMAIC of any pending legal action connected with a claim. As the Court finds that summary judgment is appropriate based on the third argument above, this Order will not discuss the first and second arguments concerning the interpretation of the Policy’s language.

 

The Court agrees that Saint Trans failed to comply with a condition precedent to coverage, and summary judgment on the issue of coverage should be granted on that basis. In the Policy, under the heading “Loss Conditions,” there appears a sub-heading entitled “Duties in the Event of Loss,” after which are listed ten obligations that the insured “must see … are done.” (Doc. 4-1, p. 11). The ninth numbered duty is as follows:

Immediately send us copies of any demands, notices, summonses, or legal papers received in connection with the claim or suit.

Id. Later on in the policy, under the heading entitled “General Conditions,” a sub-heading called “Legal Action Against Us” clarifies that no legal action may be brought against PMAIC for coverage under the Policy unless “[t]here has been full compliance with all the terms of this Coverage Part….” Id. at p. 12. Reading these two sections of the Policy together, the contract unambiguously provides that the insured has a duty to provide notice of a pending legal action to PMAIC, and that providing such notice is a condition precedent to coverage. Compare to Kimbrell v. Union Standard Ins. Co., 207 F.3d 535, 537 (8th Cir. 2000) (analyzing similar notice language in a policy of insurance and finding that it constituted a condition precedent); see also Fireman’s Fund Ins. Co. v. Care Mgmt., 2010 Ark. 110, at *10-11 (“In sum, it is well-settled law in Arkansas that an insured must strictly comply with an insurance-policy provision requiring timely notice where that provision is a condition precedent to recovery. Failure to do so constitutes a forfeiture of the right to recover from the insurance company, regardless of whether the insurance company was prejudiced by the failure.”); Ramey v. State Farm Mut. Auto. Ins. Co., 54 Ark. App. 307, 309-10 (1996) (“As a general rule, there can be no waiver of an insured’s noncompliance with such a [notice] provision where the insurer does not have knowledge of all the material facts…. The purpose of provisions requiring the insured to inform the insurer of suits filed is to afford the insurer the opportunity to defend on the merits of the case.” (internal citation omitted)).

 

Here, PMAIC maintains, and BNSF does not dispute, that Saint Trans failed to provide PMAIC with notice of the lawsuit that BNSF filed against Saint Trans in state court, and, further, that PMAIC first learned about this lawsuit after default judgment had been entered in the underlying action. BNSF argues instead that Saint Trans’ failure to give notice to PMAIC should not be considered by the Court to be “a material fact,” (BNSF’s Statement of Facts in Response, Doc. 42, p. 3, ¶ 28), given that “Saint Trans was relieved of its obligation to inform PMA[IC] of the service of a summons because PMA[IC] had already denied coverage to Saint Trans,” (Doc. 41, p. 8). In other words, BNSF argues that the failure to provide notice is a non-issue because PMAIC waived the notice obligation when it notified Saint Trans that it was denying coverage for the claim.

 

*5 BNSF cites to an Arkansas Supreme Court case called Dixie Auto Ins. Co. v. Goudy, 238 Ark. 432, 436 (1964), for the proposition that PMAIC’s denial of coverage should constitute a waiver of Saint Trans’ notice requirement. Upon reviewing that case, however, the Court finds that the decision was factually driven, and the facts in the case at bar do not lead to the same conclusion. In Dixie Auto, there was a car accident caused by Dixie Auto’s insured, which resulted in damage and injuries to the other driver. Id. at 433. The insured gave notice to Dixie Auto of the accident and of the other party’s claim for damages, but never put the insurance company on notice of the filing of the lawsuit. Id. at 436. After a default judgment was entered against the insured, he filed suit against Dixie Auto, demanding coverage. Certain exhibits introduced in the coverage trial showed that Dixie Auto had previously advised the insured in a letter that “there would be no coverage,” and that it would contact the attorney for the accident victim to advise that “there is no coverage.” Id. The Court noted that Dixie Auto “did not contend it counteracted or modified the above reports” with any explicit reservations of its rights. Id.

 

Under those circumstances, the Court found that the insurer had waived the notice requirement under the policy, as “there was substantial evidence to sustain a finding that [Dixie Auto] disclaimed all liability,” id., and there was a further finding that it “would have been a vain and useless thing” to require the insured to give notice to Dixie Auto about the state court lawsuit, id. at. 437.

 

In contrast to the above facts, PMAIC conveyed to Saint Trans that it did not waive the notice requirement of the Policy. In the January 27, 2015 letter from PMAIC to Saint Trans, the insurance company included the following language:

This Denial of Coverage is not exclusive but is rather the specific reasons of which PMAIC is presently aware. By virtue of this correspondence, PMAIC intends to reserve their rights on all grounds, not only those set forth in this letter. PMAIC expressly reserves the right to supplement, amend, modify or expand this Denial of Coverage for any additional reason as it may apply to any new facts or circumstances.

In the event you have any other information or documentation, which you want us to consider, immediately forward such information to our office. In the event any additional information or documentation would suggest that coverage would be afforded under the Terms and Conditions of this Policy, PMAIC expressly reserves the right to assert other and further grounds for denial in response to such information.

(Doc. 34-7, pp. 2-3 (emphasis added)).

 

BNSF points to other letters that PMAIC sent to it—not to Saint Trans—regarding PMAIC’s refusal to pay for the loss, and BNSF argues that these statements, which in PMAIC’s view unequivocally deny the possibility of coverage, should inure to the benefit of Saint Trans and create a waiver of Saint Trans’ notice obligations under the contract.

 

Ordinarily, waiver is presented as an affirmative defense to a cause of action. See Fed. R. Civ. P. 8(c). Here, it is being asserted by BNSF in response to PMAIC’s Motion for Summary Judgment. The Court will therefore examine the facts that support BNSF’s waiver argument in the light most favorable to BNSF, considering its position as non-movant on summary judgment, and will give BNSF the benefit of any inferences that may be drawn from these facts. See Union Elec., 135 F.3d at 1212-13.

 

According to the Eighth Circuit’s decision in Kimbrell v. Union Standard Insurance Co., which clarified the pronouncements made in Dixie Auto, when an insured “can show that the insurer’s denial of coverage induced the failure to comply with the notice provisions,” the insurer may be estopped from disclaiming liability due to the insured’s failure to comply with the insurance policy’s notice requirements—particularly if the insurer previously made unequivocal statements to the insured in which it denied “all coverage.” 207 F.3d at 538. But in order to find that an insurance company waived its insured’s contractual notice obligation, at least some evidence must show that the insurer “intentionally relinquished a known right”—namely, the right to require its insured to give it notice of a pending lawsuit. Id. In some cases, the communications between an insurer and its insured could establish a waiver. But when an insurer’s “denial letter, which specifically disavow[s] an intent to waive any of the policy provisions,” is sent to the insured, this evidence “cannot support a finding of waiver.” Id.

 

*6 After considering the evidence submitted by the parties concerning the issue of waiver, it is clear from PMAIC’s correspondence with Saint Trans that it did not waive the notice requirement, and the Court finds that there is no genuine, material dispute of fact as to this point. Instead, PMAIC’s January 27, 2015 letter to Saint Trans put it on notice that PMAIC had “reserve[d] their rights on all grounds” and advised Saint Trans to “immediately forward” any other information or documentation concerning the claim. (Doc. 34-7). Not only that, PMAIC’s January 23, 2015 letter to BNSF, in which PMAIC refused “to accept responsibility for the cargo,” contained an explicit statement to the effect that “PMAIC reserve[d] all rights and [did] not waive any duties or obligations of the Insured.” (Doc. 42-2 (emphasis added)). PMAIC continued to correspond with BNSF after January of 2015 and participated in the investigation of the damaged cargo, but on March 6, 2015, sent an email to BNSF, noting that “coverage for this loss was declined” and that the company “will not be involved in the disposition of the Salvage or payment of the charges.” (Doc. 42-4). What is important to distinguish, however, between PMAIC’s various communications with BNSF and PMAIC’s letter to Saint Trans, is that PMAIC made a point of informing its insured that it did not waive the notice requirement. Further, any statements PMAIC made directly to BNSF cannot possibly waive Saint Trans’ requirements under the contract.

 

Examining the evidence in light of the Policy’s notice requirement, the Court finds as a matter of law that it would not have been a “vain and useless thing” for Saint Trans to apprise PMAIC as to the existence of the state court lawsuit involving Red Rose and BNSF. Summary judgment is therefore granted in PMAIC’s favor, due to the fact that Saint Trans failed to comply with a condition precedent to coverage, and PMAIC did not waive its right to the fulfillment of this condition.

 

 

1. NIC’s Motion for Summary Judgment

NIC’s Motion for Summary Judgment rests on three arguments. The first is that the underlying state court judgment is void ab initio because NIC’s insured, Red Rose, was never properly served with the complaint. The second argument is that Red Rose’s Policy did not cover the Saint Trans truck that was involved in the accident, and that is the subject of the state court judgment. The third argument is that Ark. Code Ann. § 23-89-101, upon which BNSF has relied in bringing a direct action for subrogation against NIC, only applies to insurance policies that are “issued or delivered in this state,” and NIC maintains that its Policy was neither issued nor delivered in Arkansas. As the Court finds that summary judgment is appropriate based on the third argument alone, this Order will not discuss the first and second arguments

 

NIC contends that the case against it should be dismissed because the Policy was neither issued nor delivered in Arkansas, and Ark. Code Ann. § 23-89-101 requires that a direct action for coverage be brought only with respect to a “policy of insurance issued or delivered in this state.” Ark. Code Ann. § 23-89-101 (a). In response, BNSF, which maintains its principal office in Arkansas, fails to offer any proof to counter NIC’s assertion that Red Rose’s Policy was issued in Nebraska and delivered in Indiana. Instead, BNSF argues that perhaps the Court should construe the Policy as having been issued or delivered in Arkansas simply because NIC is registered to do business in Arkansas. See Doc. 43, p. 7. The Court rejects this argument, as it is entirely unsupported by citations to legal authorities, and the statute quite clearly refers to the policy as being “issued or delivered” in Arkansas, and not to the issuing insurance company being registered in the state.

 

The legislative intent of § 23-89-101 has been discussed in other cases. For example, the Eighth Circuit in Ferrell v. West Bend Mutual Insurance Co. observed that the statute “permits those Arkansas residents who have been issued or presented with policies in Arkansas to sue their insurers in Arkansas, rather than some other jurisdiction, and prevents insurance companies from using forum selection clauses to require Arkansas policyholders to litigate in inconvenient forums.” 393 F.3d 786, 792 (8th Cir. 2005). In Ferrell, certain Arkansas tomato growers sued Hi-Tech Film, Inc., a company that manufactured a plastic film that was intended to prevent soil from splashing onto plants and causing blight. Id. at 789. According to the tomato growers, the film was ineffective and actually caused damage to their crops. Id. A jury decided the matter of liability in the growers’ favor, and the growers obtained a judgment against Hi-Tech for damages and attorney’s fees. Id. With judgment in hand, the growers then filed a direct action in the District Court for the Western District of Arkansas1 against Hi-Tech’s insurer, West Bend Mutual Insurance, seeking subrogation under § 23-89-101, and requesting a bench trial on the issue of coverage. Interestingly, the Eighth Circuit’s opinion noted that the tomato growers, “[r]ecognizing that the Hi-Tech policy was neither issued nor delivered in Arkansas, … abandoned at trial their reliance on the direct action statute,” but proceeded to trial on their alternative argument “that the insurance policy’s express language provided a basis for the action.” Id. at 792.

 

*7 In comparing the Ferrell case to the instant one, it appears that BNSF, though apparently an Arkansas citizen, must also come to terms with the fact that it is not permitted to bring this subrogation action under § 23-89-101, since there is no material dispute of fact that Arkansas was not the place of issuance or delivery of NIC’s Policy. The argument does not end there, however. In similar fashion to the tomato growers in Ferrell, BNSF also contends that the Policy itself provides a separate basis for bringing this direct action. See Doc. 43, p. 6. The provision that BNSF relies on is found in an endorsement to the Policy,2 which states that NIC “agrees to pay … any final judgment recovered against the insured for bodily injury to or death of any person, or loss of or damage to property of others.” (Doc. 38-3, p. 31). On first glance, this provision would appear to create a separate basis for BNSF to bring its coverage action, except that it is cabined by the following parenthetical: “(excluding … property transported by the insured, designated as cargo).” Id. (emphasis added). Flipping to the portion of the Policy describing “Cargo Coverage,” it provides that “[n]o one may bring any legal action against us under this coverage unless … (c) With respect to your liability for ‘loss’ to ‘cargo’ owned by others, there has been an ‘agreed settlement’ or a final judgment against you obtained after an actual trial.” Id. at p. 83 (emphasis added).

 

Because the state court judgment was issued following Saint Trans’ default, not after an actual trial, it is clear that the Policy fails to provide a separate legal basis for bringing this subrogation action. Without such a basis, the Court is left with no option but to grant summary judgment to NIC on this issue. No direct subrogation action may be brought concerning this NIC Policy—in Arkansas, under § 23-89-101—and the case against NIC must be dismissed on that basis.

 

 

1. CONCLUSION

In light of the above reasoning, IT IS ORDERED that Defendant Pennsylvania Manufacturers Association Insurance Company’s Motion for Summary Judgment (Doc. 34) is GRANTED, and Defendant National Indemnity Company’s Motion for Summary Judgment (Doc. 37) is also GRANTED. Although the Third Party Complaint (Doc. 15) is still technically pending, it seeks the same relief as has been awarded in this Order, and therefore, the Court deems IT IS SO ORDERED it MOOT and DISMISSED. Judgment will enter accordingly.

 

IT IS SO ORDERED on this 22nd day of February, 2017.

 

All Citations

Slip Copy, 2017 WL 707494

 

 

Footnotes

1

The Hon. Harry F. Barnes presiding.

2

An endorsement “becomes a part of the insurance contract as if it were actually incorporated therein.” Schultz v. Farm Bureau Mut. Ins. Co., 328 Ark. 64, 71 (1997).