Sentry Insurance a Mutual Company v. Ironshore Specialty Insurance Company, 1:15-cv-00093

Background

December 4, 2010: Tractor-trailer driven by Stafford employee Levon Alls was struck from behind; claimant Martha Edins died. Stafford and Alls had $1M primary policies with Sentry; Stafford had a $4M excess policy with Ironshore (attachment $2M).
Stafford notified Ironshore of the occurrence shortly after the accident; Ironshore’s administrator acknowledged then closed its file as liability appeared remote. Stafford sent a second notice in January 2011; Ironshore assigned a claim number but took no further action.
A wrongful-death suit was filed in May 2011; Sentry defended under the primary policies, retained counsel, and defense counsels consistently valued the case below the $2M excess attachment point.
Settlement negotiations included plaintiff demands up to $2M and defense offers well under $1M; trial in May 2014 resulted in a $4,018,000 verdict (reduced by comparative fault to $3,013,500), producing an excess exposure above Sentry’s $1M limit.
Ironshore refused coverage asserting (1) Sentry acted negligently or in bad faith in refusing to settle within primary limits, and (2) Stafford gave untimely notice of the lawsuit as to the excess policy. Sentry paid excess-shared amounts and sued Ironshore for reimbursement; cross-motions for summary judgment followed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Sentry negligently or in bad faith refused to settle within primary limits	Sentry acted reasonably relying on competent counsel who valued the case below excess attachment	Ironshore says Sentry unreasonably declined settlement, exposing insured to excess judgment	Held for Sentry — no evidence Sentry acted negligently or in bad faith; defenses valued case under attachment point and engaged in negotiations
Whether Stafford’s notice to Ironshore was timely under excess policy	Notice was reasonable because insured relied on attorneys’ evaluations and prior occurrence notices; Ironshore had acknowledged and closed file	Notice of the suit (first given after verdict) was untimely and discharged Ironshore’s duty to defend/indemnify	Held for Sentry — under Evanston standard, insured reasonably concluded claim was not "reasonably likely" to involve excess coverage; delay was justified
Construction of notice provisions (paragraphs 2 and 3)	Paragraph 3’s duty to send copies is limited to claims "reasonably likely" to involve the policy (ties back to ¶2)	Paragraph 3 requires copies of all demands/complaints regardless of likelihood	Held for Sentry — paragraph 3 refers back to paragraph 2; Ironshore’s broader reading rejected
Effect of the Commercial Automobile Liability Limitation Endorsement on notice	Endorsement does not import more stringent notice terms from primary into excess when primary covers the loss; excess policy terms control	Endorsement makes excess follow the primary policy’s more stringent notice requirement (requiring immediate notice of suits)	Held for Sentry — endorsement interpreted to limit coverage breadth, not to impose primary policy notice terms on excess insurer; ambiguous reading resolved for insured

Key Cases Cited

Adickes v. S.H. Kress & Co., 398 U.S. 144 (standard for summary judgment)
Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burdens)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment and burden of proof)
Evanston Ins. Co. v. Stonewall Surplus Lines Ins. Co., 111 F.3d 852 (insured may reasonably delay notice to excess insurer when competent counsel valuation makes excess involvement not "reasonably likely")
Cotton States Mut. Ins. Co. v. Brightman, 276 Ga. 683 (standard for insurer negligence in failing to settle)