National Union Fire Insurance Company of Pittsburgh, PA v. Petco Petroleum Corp.
2:13-cv-00307
S.D. Miss.Nov 4, 2013Background
- Petco Petroleum Corp., an Indiana corporation with principal place of business in Hinsdale, Illinois, bought general liability and excess/umbrella policies (2008–2009) through a Kansas broker (IMA); policies issued by National Union and Chubb.
- Petco operates wells in multiple states; most employees, wells, and corporate functions (including insurance handling) are in Illinois; a small regional office and ~50–60 wells are in Mississippi.
- John R. Richardson (Mississippi resident) was injured in Mississippi in Sept. 2008 and sued Petco in Mississippi federal court (Underlying Action); suit filed Aug. 2011.
- Petco notified the insurers of Richardson’s claim in May 2012 (about nine months after suit was filed); insurers denied coverage for late notice.
- National Union filed this federal declaratory-judgment action (originally in N.D. Ill., transferred to S.D. Miss.) seeking a declaration that Illinois, Kansas, or Mississippi law should govern the notice/prejudice issue; parties cross-moved for summary judgment on choice of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state law governs whether an insurer must show prejudice for late notice? | National Union/Chubb: Illinois law governs and allows insurer to avoid coverage without showing prejudice. | Richardson/Petco: Mississippi or Kansas law governs and requires insurer to prove prejudice from late notice. | Illinois law governs the notice/prejudice issue. |
| Whether Restatement §193 fixes choice of law (principal location of risk)? | Insurers: point to Illinois endorsements and delivery to Illinois HQ. | Richardson: policies and endorsements were mailed to Kansas broker; risks are scattered. | §193 inapplicable because risks are scattered across multiple states. |
| Application of Restatement §188 factors (place of contracting, negotiation, performance, subject, parties) | Insurers: emphasize delivery/acceptance at Illinois HQ and performance there (premiums, claims handling). | Richardson: emphasize broker in Kansas and injury in Mississippi. | §188 factors (esp. place of performance, subject matter, place of business) point to Illinois as center of gravity. |
| Whether §6 factors (public policy, interests of states, predictability) rebut §188 presumption | Richardson: Mississippi has strong interest (injury occurred there; claimant is Mississippian). | Insurers: Illinois has greater interest (Petco headquartered and performs insurance functions there); uniformity favors Illinois. | §6 does not rebut presumption; Illinois interest is superior and public policy objection fails. |
Key Cases Cited
- Country Mut. Ins. Co. v. Livorsi Marine, Inc., 856 N.E.2d 338 (Ill. 2006) (Illinois law: lack of reasonable notice can bar recovery without insurer prejudice)
- Capital City Ins. Co. v. Ringgold Timber Co., 898 So. 2d 680 (Miss. Ct. App. 2004) (Mississippi law: insurer must show prejudice to deny coverage for late notice)
- Atchison, Topeka & Santa Fe Ry. Co. v. Stonewall Ins. Co., 71 P.3d 1097 (Kan. 2003) (Kansas law: insurer must demonstrate prejudice for late notice to bar coverage)
- Hartford Underwriters Ins. Co. v. Found. Health Servs., Inc., 524 F.3d 588 (5th Cir. 2008) (forum choice-of-law rules applied; discusses Restatement approach)
- Zurich Am. Ins. Co. v. Goodwin, 920 So. 2d 427 (Miss. 2006) (Mississippi Supreme Court: applies Restatement §§188 and 6 in insurance choice-of-law disputes)
- Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214 (5th Cir. 2005) (factors for applying Restatement §188 in contract/insurance choice-of-law analysis)