Food Market Merchandising, Inc v. Scottsdale Indemnity Company
857 F.3d 783
8th Cir.2017Background
- Food Market Merchandising, Inc. (insured) was defended and indemnity-seeking under an Employment Practices "claims-made" policy issued by Scottsdale Indemnity; policy required written notice of any Claim "as soon as practicable, but in no event later than sixty (60) days after the end of the Policy Period."
- Former employee Spinner sued Food Market for unpaid commissions on January 13, 2014; partial summary judgment for Spinner was entered in June 2014 (not reduced to judgment) and the parties later settled in 2016.
- Food Market notified Scottsdale of the Spinner suit on August 22, 2014 (about seven months after suit was filed and during the policy period); Scottsdale tentatively denied coverage in September 2014 and formally denied in June 2015, citing untimely notice and scope exclusions.
- Food Market sued Scottsdale for breach of contract, bad faith, and declaratory relief; both parties moved for summary judgment and the district court granted judgment for Scottsdale, finding notice was not given "as soon as practicable," a condition precedent to coverage.
- On appeal the Eighth Circuit reviewed de novo and affirmed, concluding (1) no genuine factual dispute that seven-month delay was not "as soon as practicable," (2) the notice clause was unambiguous, and (3) Scottsdale did not waive the timeliness defense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of notice ("as soon as practicable") | Notice was timely because claim was made during policy period and thus within claims-made coverage window | Notice was untimely—insurer was not notified until ~7 months after suit filed and after insured litigated without involving insurer | Held: No genuine issue of material fact; seven-month delay without plausible reason was not "as soon as practicable" and defeats coverage (condition precedent) |
| Contract ambiguity over "as soon as practicable" phrase | Phrase is ambiguous and should be construed for insured | Phrase is unambiguous; read as condition precedent and requires prompt notice unless insured shows plausible reason for delay | Held: Unambiguous; phrase does not create a latent ambiguity and does not mean sole 60-day post-policy window; insured offered no justification creating factual dispute |
| Waiver of timeliness defense by insurer | Scottsdale tentatively denied on scope only, so it waived notice defense | Scottsdale’s denial letter explicitly cited untimely notice among reasons for denial; no waiver | Held: No waiver—insurer expressly relied on notice provision when denying coverage |
| Duty to defend vs. condition precedent language | Condition precedent affects only indemnity (rights to payment), not duty to defend | Condition precedent applies to insurer’s obligations under the coverage section, and timely notice is required to trigger duties | Held: Argument raised for first time on reply and not considered by appellate court; district court’s summary judgment stands |
Key Cases Cited
- Babinski v. American Family Ins. Group, 569 F.3d 349 (8th Cir. 2009) (standard of review and summary judgment principles in insurance contract interpretation)
- Cargill, Inc. v. Evanston Ins. Co., 642 N.W.2d 80 (Minn. Ct. App. 2002) (treated "as soon as practicable" as an unambiguous condition precedent and recognized factual questions where insured offers plausible reason for delay)
- DLH, Inc. v. Russ, 566 N.W.2d 60 (Minn. 1997) (standard for when summary judgment is appropriate—no genuine issue of material fact)
- George K. Baum & Co. v. Twin City Fire Ins. Co., 760 F.3d 795 (8th Cir. 2014) (distinguished: addressed ambiguity and later-liability notice issues under New York law)
- Sterling State Bank v. Virginia Sur. Co., 173 N.W.2d 342 (Minn. 1969) (noncompliance with a notice provision that is a condition precedent is fatal to recovery)