National Union Fire Insurance Company of Pittsburgh, PA v. Petco Petroleum Corp.
4:12-cv-00165
S.D. Miss.Nov 4, 2013Background
- Petco Petroleum Corp., an Indiana corporation with its principal place of business in Hinsdale, Illinois, purchased general liability and excess policies (2008–2009) through a Kansas broker (IMA) from National Union and Chubb.
- Petco operates wells in multiple states; majority of its employees, wells, and corporate functions (including insurance management) are in Illinois; it has a small Mississippi office where the injury at issue occurred.
- John Richardson, a Mississippi resident, was injured in Mississippi in September 2008 and sued Petco in federal court in Mississippi; Petco did not notify insurers of the suit until May 2012 (about nine months after suit was filed).
- National Union filed a declaratory judgment action seeking a ruling that it (and Chubb) had no duty to defend or indemnify because Petco’s notice was untimely; insurers moved for partial summary judgment on choice of law (Illinois, Kansas, or Mississippi).
- The central legal question was which state’s law governs whether an insurer must show prejudice to rely on a late-notice defense (Illinois: no prejudice required; Mississippi & Kansas: prejudice required).
- The court concluded that Illinois law governs the notice issue; insurers’ motions for partial summary judgment on choice of law were granted, and Richardson’s summary judgment motion was denied as to choice of law (with other relief denied without prejudice).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state law governs interpretation of the policies’ notice provision | Richardson (assignee of Petco) argued Mississippi law should apply because the injury and plaintiff are Mississippi-based and the tort occurred there | National Union and Chubb argued Illinois or Kansas law should apply (contacts point to Illinois: Petco HQ, premium payments, claim reporting) | Illinois law governs the notice issue (center of gravity in Illinois) |
| Whether insurer must prove prejudice to deny coverage for late notice | Richardson: Mississippi (and Kansas) law requires insurer to show prejudice, so insurers must prove prejudice | Insurers: Illinois law controls, which does not require proof of prejudice to deny coverage for unreasonable notice | Court applied Illinois law (no per se prejudice requirement) |
| Proper choice-of-law analysis: Restatement sections to apply | Richardson suggested Section 206 (place of performance) or Mississippi law should control | Insurers relied on Restatement §188 analysis (place of contracting, performance, subject matter, parties’ domiciles) and §193 inapplicable because risks scattered | Court applied §188 (center-of-gravity) and §6; §193 did not resolve issue because risks spanned multiple states |
| Enforceability of assignment/settlement and timeliness of notice as merits | Richardson sought declarations that Petco’s notice was reasonable and settlement/assignment enforceable against insurers | Insurers disputed assignment/enforceability and argued lack of timely notice defeats duties; court limited decision to choice of law | Court made no determination on assignment or merits; Richardson’s motions on those issues denied without prejudice |
Key Cases Cited
- Hartford Underwriters Ins. Co. v. Found. Health Servs., Inc., 524 F.3d 588 (5th Cir. 2008) (federal forum must apply forum state choice‑of‑law rules; explains center‑of‑gravity analysis)
- Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214 (5th Cir. 2005) (discusses application of Restatement §188 factors in insurance choice‑of‑law disputes)
- Zurich Am. Ins. Co. v. Goodwin, 920 So. 2d 427 (Miss. 2006) (Mississippi Supreme Court applying Restatement §188 and §6 in insurance contract choice‑of‑law analysis)
- Country Mut. Ins. Co. v. Livorsi Marine, Inc., 856 N.E.2d 338 (Ill. 2006) (Illinois holds insurer need not prove prejudice to rely on late‑notice defense)
- Atchison, Topeka & Santa Fe Ry. Co. v. Stonewall Ins. Co., 71 P.3d 1097 (Kan. 2003) (Kansas requires insurer to show prejudice from late notice)
- Capital City Ins. Co. v. Ringgold Timber Co., 898 So. 2d 680 (Miss. Ct. App. 2004) (Mississippi requires insurer to show prejudice for late‑notice defense)
- Harris v. American Motorist Ins. Co., 126 So. 2d 870 (Miss. 1961) (Mississippi precedent on prejudice requirement for notice defenses)