Compagnie des Bauxites de Guinee v. Argonaut-Midwest Ins. Co.

• Decision Date: 22 August 1989
• Docket Number: ARGONAUT-MIDWEST,No. 89-3025,No. 89-3063,89-3063,Nos. 89-3025,89-3025,s. 89-3025
• Citation: 880 F.2d 685
• Parties: COMPAGNIE des BAUXITES de GUINEE, a Delaware Corporation v.INSURANCE COMPANY, an Illinois Corporation; Zurich Insurance Company, a New York Corporation; American Guarantee and Liability Company, a New York Corporation; Hammermills Division of Universal Engineering Corporation, an Iowa Corporation, and Certain Underwriters at Lloyd's, London. Appeal of COMPAGNIE des BAUXITES de GUINEE, atAppeal of HAMMERMILLS DIVISION OF UNIVERSAL ENGINEERING CORPORATION, at
• Court: U.S. Court of Appeals — Third Circuit

Page 685

880 F.2d 685

COMPAGNIE des BAUXITES de GUINEE, a Delaware Corporation v. ARGONAUT-MIDWEST INSURANCE COMPANY, an Illinois Corporation Zurich Insurance Company, a New York Corporation; American Guarantee and Liability Company, a New York Corporation Hammermills Division of Universal Engineering Corporation an Iowa Corporation, and Certain Underwriters at Lloyd's, London Appeal of COMPAGNIE des BAUXITES de GUINEE, at No. 89-3025. Appeal of HAMMERMILLS DIVISION OF UNIVERSAL ENGINEERING CORPORATION, at No. 89-3063.

Nos. 89-3025, 89-3063.

United States Court of Appeals, Third Circuit.

Argued May 31, 1989.

Decided July 26, 1989.

Rehearing and Rehearing In Banc Denied Aug. 22, 1989.

Andrew M. Roman, Robert W. Doty (argued), Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for Compagnie des Bauxites de Guinee.

James A. Wood, Israel and Wood, P.C., Pittsburgh, Pa., for Argonaut-Midwest Ins. Co.

James J. Manley (argued), Burns, Manley & Little, P.C., Pittsburgh, Pa., for Zurich Ins. Co. and American Guarantee and Liability Co.

Donald W. Bebenek, Louis C. Long, Meyer, Darragh, Buckler, Bebenek & Eck, Pittsburgh, Pa., for Hammermills Div. of Universal Engineering Corp.

Thomas F. Weis, Weis & Weis, Pittsburgh, Pa., and Thomas F. Lucas (argued), Peterson, Ross, Schloerb & Seidel, Chicago, Ill., for Certain Underwriters at Lloyd's, London.

Before HIGGINBOTHAM, GREENBERG and HUTCHINSON, Circuit Judges.

OPINION OF THE COURT

HUTCHINSON, Circuit Judge.

I.

We are presented with yet another chapter in the continuing saga of insurance litigation involving these parties. Appellants Compagnie des Bauxites de Guinee (CBG) and Hammermills Division of Universal Engineering Corporation (Hammermills) appeal from two orders of the United States District Court for the Western District of Pennsylvania. The first, dated August 31, 1988, inter alia granted summary judgment to three of Hammermills's excess liability insurance carriers after determining that Hammermills failed to give them notice of CBG's claim within a reasonable time. The second, dated December 13, 1988, denied CBG's motion for reconsideration. On appeal, CBG and Hammermills argue that the district court erred in applying Illinois law under Pennsylvania's choice of law rules as set out in Griffith v. United Air Lines, 416 Pa. 1, 203 A.2d 796 (1964). Appellants also argue that the district court erred in holding that the excess liability insurance carriers were not provided with timely notice of CBG's claim by Hammermills. We conclude that the district court was correct in applying Illinois law under Pennsylvania's choice of law rules, as well as in its finding that Hammermills did not provide its excess carriers with timely notice of CBG's claim. We will therefore affirm.

II.

CBG, a Delaware corporation, has its principal place of business in the Republic of Guinea, West Africa, where it operates a bauxite ore processing facility. In 1970, CBG contracted with Hammermills, a subsidiary of Pettibone Corporation (Pettibone), ¹ for the purchase of equipment for that facility. ²

In September 1974, one of CBG's facilities sustained structural failure, allegedly as a result of design defects in the equipment supplied by Hammermills. In 1975, CBG filed suit against its own insurance companies, including its primary business interruption insurer, Insurance Company of North America (INA), in the United States District Court for the Western District of Pennsylvania. ³ In May 1977, CBG filed a request for arbitration of its claim for more than $23,000,000 in damages against Hammermills with the International Chamber of Commerce (ICC). Appendix to Brief of Appellant (App.) at 451A. In January 1978, CBG withdrew its arbitration request when it signed an agreement with Hammermills to toll the statute of limitations and preserve the status quo. Id. at 478A. The tolling agreement was renewed annually until May 1985, shortly after the district court awarded judgment for CBG in its business interruption litigation against INA. Armed with that decision, on May 23, 1985, CBG again sought ICC arbitration, this time demanding more than $44,000,000 from Hammermills in damages. ⁴ Id. at 522A.

Pettibone, which obtained insurance coverage for Hammermills and which presented claims on its behalf, did not notify its insurers of CBG's claim until June and July, 1985. ⁵ Pettibone's primary general liability insurance carrier was Argonaut-Midwest Insurance Company (Argonaut), an Illinois corporation with its principal place of business in Illinois. The first $5,000,000 excess layer of insurance coverage was provided by Zurich Insurance Company and American Guaranty & Liability Company (Zurich-American) and the second $5,000,000 excess layer by Underwriters at Lloyd's, London (Lloyd's). Argonaut and the excess carriers denied coverage based on late notice of claim and policy provisions excluding warranty-type claims.

On July 31, 1985, CBG brought the present diversity action under the Declaratory Judgment Act, 28 U.S.C.A. Secs. 2201-2202 (West Supp.1989), seeking a declaration against Hammermills, Argonaut and Zurich-American that its claims against Hammermills are covered by the relevant insurance policies. ⁶ Argonaut and Zurich-American cross-claimed against Hammermills, asserting, inter alia, that they were under no duty to defend Hammermills against CBG. ⁷ On May 5, 1986, CBG moved for partial summary judgment against Argonaut. On October 6, 1986, the district court granted CBG's motion for partial summary judgment, holding that, based on the policy's potential coverage of CBG's claims, Argonaut had an initial duty to defend Hammermills in the ICC arbitration proceedings. App. at 31A. The insurers filed motions for summary judgment and on April 20, 1988, CBG filed a motion for partial summary judgment.

On August 31, 1988, the district court, applying Illinois law, granted summary judgment for Zurich-American and Lloyd's on the late notice and policy exclusion issues and granted partial summary judgment for CBG against Argonaut on the duty to defend issue. Id. at 171A. The district court denied CBG's motion for reconsideration without opinion on December 13, 1988. Id. at 364A. CBG appealed from the district court's August 31 and December 13, 1988 orders on January 9, 1989. Id. at 366A-1. Hammermills joined in CBG's timely appeal pursuant to Federal Rule of Appellate Procedure 3(b). Id. at 366A-2.

III.

The district court had diversity jurisdiction over this action for declaratory relief pursuant to 28 U.S.C.A. Sec. 1332 (West Supp.1989). We have appellate jurisdiction pursuant to 28 U.S.C.A. Sec. 1291 (West Supp.1989). ⁸

We view a motion for reconsideration as the "functional equivalent of a Rule 59 motion ... to alter [or] amend a judgment." Venen v. Sweet, 758 F.2d 117, 122 (3d Cir.1985). A timely appeal from the denial of such a motion "brings up the underlying judgment for review." Quality Prefabrication v. Daniel J. Keating Co., 675 F.2d 77, 78 (3d Cir.1982). "Here, it is the underlying summary judgment ... that this court must review." Federal Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 348 (3d Cir.1986). "We must reverse unless it is plain that no genuine issue as to a material fact remains for trial and that the moving party is entitled to summary judgment as a matter of law." Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir.1987). We have plenary review over the summary judgment order. Rauscher, 807 F.2d at 349.

IV.

We must first address the issue of whether Iowa or Illinois law should be applied under Pennsylvania choice of law rules. CBG and Hammermills favor the application of Iowa law, which requires an insurer to show actual prejudice to avoid coverage, even if the insured's delay in giving notice is unexcused. Estate of Wade v. Continental Ins. Co., 514 F.2d 304, 305 (8th Cir.1975). The insurers favor Illinois law, which considers lack of prejudice only as a factor in determining whether late notice was reasonable, if the delay was excused or "relatively brief." Casualty Indem. Exch. v. Village of Crete, 731 F.2d 457, 459 (7th Cir.1984).

We must apply the choice of law rules of the forum state, Pennsylvania, to resolve this issue. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941); Shuder v. McDonald's Corp., 859 F.2d 266, 269 (3d Cir.1988). The Supreme Court of Pennsylvania has adopted a flexible approach which combines a relationship and interest analysis. Griffith v. United Air Lines, 416 Pa. 1, 203 A.2d 796 (1964). ⁹ As we have previously described it, the Griffith test "takes into account both the grouping of contacts [listed in the Restatement (Second) of Conflict of Laws Sec. 188(2) (1971) ] with the various concerned jurisdictions and the interests and policies that may be validly asserted by each jurisdiction." Melville v. American Home Assurance Co., 584 F.2d 1306, 1311 (3d Cir.1978). See also Mashuda v. Western Beef, Inc., 527 F.Supp. 887, 891 (W.D.Pa.1981) (Griffith requires analysis of "the significant contacts that the contract has with the various jurisdictions and the interest[s], if any, that the various jurisdictions have in the subject matter of the contract"). Under Griffith, "we must weigh the contacts on a qualitative scale according to their relation to the policies and interests underlying the [relevant] issue." Shields v. Consolidated Rail Corp., 810 F.2d 397, 400 (3d Cir.1987).

A.

In Griffith, the Supreme Court of Pennsylvania stated: "Contacts considered vital in determining the state of most significant relationship include place of injury, place of conduct, domicil of the parties, and the place where the relationship between the parties is centered." Griffith, 416 Pa. at 15, 203 A.2d at 802-03. The court in Griffith relied on Restatement (Second) of Conflict of Laws Sec. 379 (Tent. Draft No. 9 1964), stating that "torts should be governed by the local law of the...