Castronovo v. National Union Fire Ins. Co. of Pit. Pa.
| Decision Date | 06 July 2009 |
| Docket Number | No. 08-3316.,08-3316. |
| Citation | 571 F.3d 667 |
| Parties | John F. CASTRONOVO, Personally and as Administrator of the Estate of Sandra S. Castronovo, Deceased, Plaintiff-Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Timothy S. Schafer (argued), Attorney, Schafer & Schafer, Merrillville, IN, for Plaintiff-Appellant.
Chip G. Schoneberger (argued), Attorney, Bates & Carey LLP, Chicago, IL, for Defendant-Appellee.
Before EASTERBROOK, Chief Judge, and BAUER and FLAUM, Circuit Judges.
Plaintiff John Castronovo, as assignee of Doug Lavery, Ltd. ("Lavery") and Kenneth Lively ("Lively"), sued National Union Fire Insurance Company of Pittsburgh, PA ("National Union") to collect the unpaid balance of a $6 million consent judgment entered against Lavery and Lively in the underlying litigation. Plaintiff alleges that Lavery and Lively were additional insureds under the National Union policy and entitled to indemnification for that portion of the consent judgment not satisfied by other insurers. On the parties' cross-motions, the district court entered summary judgment for National Union and against plaintiff with respect to all claims, ruling that National Union is not obligated to pay the balance of the consent judgment. Plaintiff appealed, and we now affirm.
On February 3, 2003, Sandra Castronovo was stopped for a red light at the intersection of U.S. Highways 421 and 30 in Wanatah, Indiana. A tractor trailer driven by Kenneth Lively struck her car, causing it to spin out of control and strike a semi-trailer. Tragically, Castronovo died the next day.
Lively was employed by Lavery. When the accident occurred, Lively was acting in the scope of his employment, driving a semi-tractor owned by Lavery, and hauling a trailer owned by GE Capital Corp., which GE had leased to Greif Brothers Corp. ("Greif"). Lavery and Greif were operating pursuant to an oral agreement under which each could use the other's trailers.
Lavery was the named insured under a commercial general liability insurance policy issued by Owners Insurance Company with liability limits of $1 million. As Lavery's employee, Lively was an insured under the Owners policy as well. Travelers Property Casualty Company of America had issued a commercial automobile policy to Greif with liability limits of $2 million.
Greif also was the named insured under a $25 million National Union umbrella policy, which additionally afforded coverage to certain permissive users of any auto owned by, or loaned to, Greif. The Schedule of Underlying Insurance in the National Union policy listed the Travelers' policy. The National Union policy followed form to the Travelers policy for excess coverage and also provided primary insurance for risks covered by the National Union policy but not covered by any underlying insurance. As a condition precedent to coverage, the policy required all insureds to notify National Union of any demands against it and to obtain National Union's consent before voluntarily assuming any obligation.
Plaintiff John Castronovo, personally and as administrator of his wife's estate, sued Lively, Lavery and GE Capital for wrongful death in the underlying action (Castronovo v. Lively, 2:03-cv-248 (N.D. Ind. filed June 18, 2003)). In March 2004, he added Greif as a defendant.
Owners provided Lavery, Lively, and GE with a defense at the outset of the litigation. Travelers later accepted tender of GE's defense from Owners under the terms of the trailer lease agreement with Greif. Greif tendered its defense to Travelers.
In November 2004, plaintiff sent a global settlement demand of $6.276 million to all defendants. In February 2005, Greif and GE filed a motion for summary judgment, which Castronovo, Lively and Lavery opposed. Travelers considered plaintiff's case a "no pay situation" prior to the district court's ruling on the summary judgment motion.
National Union first learned of the underlying suit in a March 2005 e-mail from Jeffrey Wood, Greif's risk management director, to David Bejbl of AIG Domestic Claims (National Union's claims administrator). Wood stated that the claim had significant value, and he added: "from our perspective there was no negligence on the part of Greif but there is an argument that Greif's auto policy should be excess over the limits of Lavery ($1 million)." He closed by asking how Bejbl would like Greif to handle the claim. In April 2005, Steven Tracy, Travelers' director of claim services, spoke with Michael Mangino of AIG Domestic Claims about the suit. According to Tracy's notes, Mangino stated he did not want a copy of the case file until after the motion for summary judgment was decided. AIG Domestic Claims representatives, on behalf of National Union, continued to inquire of Travelers regarding the progress of the summary judgment motion.
In summer 2005, coverage counsel hired by Owners inquired about coverage for Lavery and Lively under Travelers' policy. Travelers denied coverage for Lavery. Travelers suggested there was no coverage under the Travelers policy for Lively because Lively was not hauling Greif's load when the accident occurred, but it did not give a definitive answer as to Lively. Travelers indicated that its position would depend on how the court ruled on Greif's summary judgment motion.
Owners filed a motion to intervene in the underlying action on July 15, 2005, and it filed a complaint for inter-pleader on July 29. On August 10, Owners deposited $996,116, the remaining limits of its policy, with the court, and it asked to be absolved of any further duty to defend or indemnify Lavery and Lively.
By July 2005, Lavery and Lively were exploring a consent agreement in exchange for a covenant not to execute against their personal assets. In furtherance of that agreement, plaintiff gave Lavery's and Lively's defense counsel an exemplar agreement and case law for additional language to be included in the documents.
Lavery and Lively did not notify National Union of their coverage discussions with Travelers or their negotiations for a consent judgment. Moreover, Travelers did not advise National Union of its coverage discussions with Lavery and Lively.
In late August 2005, Lavery and Lively finalized and executed their consent judgment agreement in the amount of $6 million. The Marshall County Superior Court, Probate Division, authorized plaintiff to enter into the agreement, whereby Lavery and Lively would assign their interests against applicable insurance carriers for the amount of the consent judgment in excess of the funds Owners had paid into court. Castronovo executed an unconditional covenant not to enforce the consent judgment against Lavery's and Lively's personal assets. The parties signed the agreement and filed it with the district court on September 1. On September 7, the court approved the consent judgment and entered judgment for plaintiff and against Lavery and Lively for $6 million. National Union's first notice of the consent judgment came on September 12, in a letter from Greif's counsel.
Travelers later determined that Lavery and Lively were insureds under its policy. On October 18, 2005, Travelers paid Castronovo its policy limits of $2 million. On October 24, the funds that Owners had deposited with the court were released to plaintiff.
National Union then refused to pay the excess amount. National Union argued that it was never asked to defend Lavery or Lively and did not know about the proposed consent judgment until after it was approved, and therefore it was not liable for any excess over Travelers' $2 million limits. A balance of $3,003,883 remains unpaid.
In April 2006, Castronovo—as Lavery's and Lively's assignee—filed the instant action against National Union to collect the unpaid balance under the settlement agreement. Castronovo claimed that National Union wrongly failed to defend or investigate plaintiff's claim, engaged in unfair claim practices, and breached its...
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