Arrowood Indemnity Co. v. MacOn County Greyhound Park, Inc.
757 F. Supp. 2d 1219
M.D. Ala.2010Background
- MCGP carried a primary $1 million USF&G policy and an excess Big Shield policy for up to $5 million, the latter requiring timely notice to Arrowood.
- Ronnie Lawrence slipped in MCGP restroom in 2003, triggering occurrence and potential claim under the excess policy.
- Lawrence filed a state-court suit in 2005 seeking damages for back and neck injuries; his case valued at around $1 million by defendants' side over time.
- By 2007–2008, mediation and discovery indicated a high verdict was reasonably likely, with Lawrence demanding amounts near or exceeding the primary policy limits.
- Arrowood was not notified of the Lawrence suit until February 26, 2008, nearly two weeks after a $1.5 million verdict had been returned and after the verdict was affirmed on appeal.
- Arrowood filed this declaratory judgment action in October 2008 seeking to be relieved of indemnity due to late notice; Macon County cross-moved for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether late notice was unreasonable as a matter of law | Arrowood claims delayed notice violated VIII(5)(d) and was prejudicial. | MCGP asserts two-week post-verdict notice was timely under the policy and reasonable given facts. | Unreasonable delay as a matter of law; prejudice shown |
| Whether the savings clause shielded MCGP from prejudice | Savings clause protects only if delay caused by reasonable belief not covered; here belief was unreasonable. | Savings clause should protect if belief was reasonable and delay due to belief the claim wasn't covered. | Savings clause does not apply; delay unreasonable and not due to reasonable belief |
| Whether Arrowood was prejudiced by MCGP's failure to provide notice | Delay deprived Arrowood of settlement involvement and reserve setting. | No prejudice argument relies on potential actions; Arrowood's participation was possible if timely notified. | Arrowood prejudiced; contractual rights lost, prejudice established |
| Whether Arrowood properly refused to indemnify under the contract | Timely notice was not provided; thus indemnity should not apply. | If notice was timely, Arrowood would indemnify; delay defeats this. | Arrowood entitled to summary judgment; MCGP's breach established |
Key Cases Cited
- Pan American Fire & Cas. Co. v. DeKalb-Cherokee Counties Gas District, 266 So.2d 763 (Ala. 1972) (objective test for notice requirement under policy)
- Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852 (11th Cir. 1997) (insured's appraisal controls only if reasonable; excess carriers not entitled to notice of every claim)
- Midwest Employers Cas. Co. v. East Alabama Health Care, 695 So.2d 1169 (Ala. 1997) (prejudice required for excess insurer disclaimer)
- Lemuel v. Admiral Ins. Co., 414 F.Supp.2d 1037 (M.D. Ala. 2006) (prejudice analysis for late notice; reserves and settlement impact)
- Haston v. Transamerica Ins. Servs., 662 So.2d 1138 (Ala. 1995) (two factors for reasonableness: length of delay and reasons)
- Thomas, 334 So.2d 883 (Ala. 1976) (six-month delay unreasonable as a matter of law)