American Emp. Ins. v. METRO REG. TRANSIT AUTH.

• Decision Date: 31 August 1992
• Docket Number: No. 92-CV-99.,92-CV-99.
• Parties: AMERICAN EMPLOYERS INSURANCE CO., Plaintiff, v. METRO REGIONAL TRANSIT AUTHORITY, Defendant.
• Court: U.S. District Court — Northern District of Ohio

802 F. Supp. 169

AMERICAN EMPLOYERS INSURANCE CO., Plaintiff, v. METRO REGIONAL TRANSIT AUTHORITY, Defendant.

No. 92-CV-99.

United States District Court, N.D. Ohio, E.D.

August 31, 1992.

COPYRIGHT MATERIAL OMITTED

Kevin J. Breen, Thompson, Hine & Flory, Akron, Ohio, Christopher M. Bechhold, Jack F. Fuchs, Thompson, Hine & Flory, Cincinnati, Ohio, for plaintiff.

Ronald B. Lee, Roetzel & Andress, Canton, Ohio, for defendant.

ORDER

SAM H. BELL, District Judge.

Currently pending before the court in the above-captioned cause are cross motions for summary judgment filed by plaintiff American Employers Insurance Co. (hereinafter American Employers) and defendant Metro Regional Transit Authority (hereinafter Metro) pursuant to Fed.R.Civ.P. 56. The within action was instituted with the filing of a complaint in this court on January 15, 1992 by American Employers, which seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 that it has no duty to defend or indemnify Metro with respect to a state court tort suit in which Metro is a named defendant. Metro is no longer a party to the state suit, having been dismissed by virtue of a decision of the state court granting summary judgment in its favor. See Poole v. Wright, case no. 89-12-3882 (Summit Cty. C.P. April 14, 1992). Metro has nonetheless submitted a claim to American Employers seeking reimbursement for costs and fees incurred in defending the tort suit and, as well, its fees presenting the within matter. In its complaint, American Employers contends that it has no obligation under the subject insurance policy to provide such costs and fees; Metro has counterclaimed that such an obligation does in fact exist. Each party requests judgment as a matter of law under Rule 56 as to both American Employers' declaratory judgment claim and Metro's counterclaim.

I. BACKGROUND

The procedural history of this cause has already been summarized by this court. See this court's April 15, 1992 Order denying Metro's motion to dismiss at 1-3. This summary need not be repeated here and the parties are thus respectfully referred to the court's prior order.

The parties to this cause have expended an enormous amount of effort in terms of time, cost, and legal fees in presenting the issue of whether American Employers owes Metro some $14,000 in defense costs. In support of their respective motions for summary judgment, American Employers and Metro have favored the court with a large cardboard box containing a four foot stack of documents weighing approximately 15 pounds. This multitudinous record is accompanied by some 150 pages of written memoranda replete with a plethora of string citations and redundancies.

A distillation of the voluminous record reveals the following undisputed relevant facts. On November 30, 1989, the vehicle accident which forms the basis of the state tort suit occurred. The decedent's estate filed the tort suit, a wrongful death action, on December 14, 1989. Metro was first named as a party defendant when the decedent's estate filed an amended complaint on July 19, 1991. At this time, Metro's insured, American Employers, had not yet been notified of the accident which occurred on November 30, 1989.

Following the filing of the amended complaint naming Metro as a party defendant, Metro did not immediately send notice to American Employers of the decedent's claim against it, nor did it send copies of the amended complaint and accompanying process to American Employers. Metro did not, in fact, send such notice to American Employers until November 13, 1991. Both parties are in agreement that November 13, 1991 is the date upon which American Employers was first given notice of the November 30, 1989 accident and of the filing of the amended complaint. The parties are also in agreement that American Employers was not sent copies of the amended complaint, summons, and process until that time.

The applicable insurance policy imposes certain timeliness requirements upon Metro. Specifically, the policy provides that the insured must send timely notice of the underlying "occurrence" giving rise to a claim and the claim itself. It also mandates that copies of legal documents comprising the claim must be sent immediately, and that the insured may not incur any expense in connection with a claim without American Employers' consent. The relevant provisions provide:

2. Duties In the Event of Occurrence, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "occurrence" which may result in a claim. Notice should include:

(1) How, when and where the "occurrence" took place; and

(2) The names and addresses of any injured persons and witnesses.

b. If a claim is made or "suit" is brought against any insured, you must see to it that we receive prompt written notice of the claim or "suit."

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit;"

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation, settlement or defense of the claim or "suit;"

(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

d. No insureds will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.

See Exhibit M to Deposition of Kent B. Weston at 6. In its memorandum in opposition to American Employers' motion for summary judgment, Metro concedes that it did not comply with the foregoing timeliness provisions in the policy. Id. at 1. Thus, whether Metro adequately complied with the timeliness requirements of the policy in sending reasonable notice of the requisite events to American Employers is no longer at issue in this case.¹

The majority of the briefing by the parties, rather, addresses the issue of whether American Employers suffered prejudice as a result of Metro's failure to send timely notice of the relevant events. The parties, initially, disagree as to where the burden of proof appropriately lies in demonstrating prejudice or the lack thereof; both parties essentially rely upon the same authority in reaching opposite conclusions in this regard. The court will address the burden of proof issue in a later portion of this opinion, as well as how this issue relates to the procedural burdens applied pursuant to the standards commonly utilized under Rule 56. For the present, the court will concentrate upon the relevant portions of the record cited by the parties which portions pertain to the issue of prejudice.

Interestingly, both American Employers and Metro rely in the main upon the same testimony elicited during discovery. The seminal testimony in this regard belongs to one Dennis W. Tackett, claims supervisor for American Employers. Each party cites to the following portion of Tackett's testimony in support of their respective positions (see Tackett Deposition at 46-48; 52-56).

American Employers contends that such testimony indisputably establishes prejudice resulting from the lateness of the notice. On the other hand, Metro contends that the same testimony establishes the opposite as a matter of law.

Both parties also rely upon the affidavit testimony of one Stephen F. Dobscha, claims representative for Progressive Insurance Company.² Dobscha sets forth in detail the manner in which Metro's counsel conducted its defense in the tort suit, indicating that counsel has performed competently and that he (Dobscha) "is satisfied with both the investigation of the claim performed by Metro and the defense of the claim to date by" Metro's counsel. Dobscha Affidavit at ¶ 15 (Exhibit C to Metro's Motion for Summary Judgment). Dobscha also testifies as to the adequacy of notice sent to Progressive and the satisfactory manner in which Metro cooperated with Progressive. Id. at ¶¶ 6-8. According to Metro, Dobscha's testimony regarding the adequacy of the defense ultimately provided for Metro buttresses Tackett's statements that there is nothing more or different American Employers could have done in providing a defense, thereby refuting any claim of prejudice resulting from untimely notice. In this regard, Metro also notes that the defense provided ultimately resulted in dismissal of Metro from the tort suit by way of summary judgment. On the other hand, American Employers maintains that prejudice is shown merely by the fact that Progressive was permitted an opportunity to defend and investigate while it was not.

Both American Employers and Metro, finally, rely upon the deposition testimony of one Kent B. Weston, director of claims and safety for Metro. Those portions of the Weston testimony relied upon by Metro relate to the thoroughness of investigation undertaken by Metro. Weston Deposition at 33-34. American Employers, on the other hand, points to the testimony of Weston which evinces that, while Progressive was given timely notice and thereby permitted to participate in the state proceeding, American Employers was not.³

II. ANALYSIS

The relevant rule of law which serves as an initial guide in the court's analysis has been stated as follows:

If an insured fails to give timely notice of a possible claim as required by the insurance policy, the insured is relieved of its obligations under the policy only if the delay prejudices the insurer.

West American Insurance Company v. Hardin, 59 Ohio App.3d 71, 571 N.E.2d 449 (Montgomery Cty. 1989) (first syllabus), jurisdictional motion overruled 42 Ohio St.3d 714, 538 N.E.2d 1065 (1989).⁴ The issue of whether American Employers has suffered prejudice as a result of Metro's failure to send timely notices under the policy is thus case dispositive.⁵ As one can readily ascertain from the discussion thus far, the parties are...