Granite State Ins. Co. v. Clearwater Ins. Co.

• Decision Date: 02 April 2015
• Docket Number: No. 14-1494-cv,14-1494-cv
• Parties: GRANITE STATE INSURANCE COMPANY, Plaintiff-Appellant, v. CLEARWATER INSURANCE COMPANY, FKA Skandia America Reinsurance Corporation, FKA Odyssey Reinsurance Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

GRANITE STATE INSURANCE COMPANY, Plaintiff-Appellant, v. CLEARWATER INSURANCE COMPANY, FKA Skandia America Reinsurance Corporation,FKA Odyssey Reinsurance Corporation, Defendant-Appellee.

No. 14-1494-cv

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

April 2, 2015

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 2^nd day of April, two thousand fifteen.

PRESENT: PIERRE N. LEVAL, ROBERT D. SACK CHRISTOPHER F. DRONEY, Circuit Judges.

FOR APPELLANT:

EDWARD P. KRUGMAN, (Stuart Cotton, Mound Cotton Wollan & Greengrass, New York, NY; William Goldsmith, AIG Property Casualty, New York, NY, on the brief), Cahill Gordon & Reindel LLP, New York, NY.

FOR APPELLEE:

DAVID C. FREDERICK, (Derek T. Ho, Jeremy S. Newman, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.; James I. Rubin, Julie Rodriguez Aldort, Catherine E. Isely, Butler Rubin Saltarelli & Boyd LLP, Chicago, IL, on the brief), Kellogg,Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, DC.

Appeal from a judgment of the United States District Court for the Southern District of New York (Eaton, J.).¹

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Plaintiff-appellant Granite State Insurance Company appeals the district court's grant of summary judgment to defendant-appellee Clearwater Insurance Company. We assume the parties' familiarity with the underlying facts, to which we refer only as necessary to explain our decision.

Granite State brought this diversity action seeking damages for failure to pay claims under reinsurance certificates issued by Clearwater. Granite State's claims against Clearwater relate to underlying liabilities that Granite State incurred as the insurer of a company that entered into two settlement agreements to resolve a large number of asbestos-related personal injury claims. Clearwater refused to pay Granite State's claims, alleging that Granite State violated provisions of the reinsurance certificates that required, inter alia, prompt notice "of any event or development which [Granite State] reasonably believe[d] might result in a claim against [Clearwater]." J.A. 505, 507. The district court found that Granite State's notice to Clearwater under the reinsurance certificates at issue was untimely. We agree.²

The remaining disputed question is whether, in the absence of a choice of law provision in the reinsurance certificates, a New York court would apply the substantive law of New York or of Illinois in determining the effect of Granite State's failure to give timely notice. The relevant New York law is that lateness of notice without a showing of prejudice is not sufficient to defeat an insurer's claim against a reinsurer. Unigard Sec. Ins. Co. v. N. River Ins. Co., 594 N.E.2d 571, 575 (N.Y. 1992). The most relevant authorities in Illinois law are a decision of the Seventh Circuit from 1942 and two recent trial court decisions, one from a federal district court in Illinois and one from an Illinois state court, both agreeing with the earlier Seventh Circuit decision that the lateness of the insurer's notice to the reinsurer defeats the insurer's claim, regardless of whether the reinsurer was prejudiced by the lateness. Keehn v. Excess Ins. Co. of Am., 129 F.2d 503, 504-06 (7th Cir. 1942); Allstate Ins. Co. v. Emp'rs Reins. Corp., 441 F. Supp. 2d 865, 875 (N.D. Ill. 2005); Cas. Ins. Co. v. Constitution Reins. Co., No. 91 L 14732 (Ill. Cir. Ct. Cook Cnty. Jan. 22, 1996); see also 22A John Bourdeau et al., Illinois Law and Practice Insurance § 570 (2015) ("The failure of the reinsured to give the reinsurer notice of a loss inaccordance with the terms of the reinsurance contract constitutes a bar to recovery by the reinsured against the reinsurer, notwithstanding that such contract does not designate the provision requiring notice as a condition precedent nor contain a declaration of forfeiture for noncompliance . . . .").

The question for us is whether the New York court would find the law of Illinois to be unsettled on the question (given the absence of a decision of Illinois's highest court) and therefore apply the law of New York, or would find on the basis of the decisions recited above that the law of Illinois is settled in a manner that conflicts with New York's law and apply Illinois law because - as the parties agree - the most significant contacts favor application of Illinois law.

In resolving the disagreement, we are not writing on a blank page, as another panel of this Court recently addressed this precise issue in an appeal brought by affiliates of the parties here. AIU Ins. Co. v. TIG Ins. Co., 577 F. App'x 24 (2d Cir. 2014) (summary orde...