National Railroad Passenger Corp. v. Lexington Ins.

• Decision Date: 25 August 2006
• Docket Number: Civil Action No. 04-1457(ESH).
• Citation: 445 F.Supp.2d 37
• Parties: NATIONAL RAILROAD PASSENGER CORPORATION, Plaintiff, v. LEXINGTON INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

445 F.Supp.2d 37

NATIONAL RAILROAD PASSENGER CORPORATION, Plaintiff, v. LEXINGTON INSURANCE COMPANY, et al., Defendants.

Civil Action No. 04-1457(ESH).

United States District Court, District of Columbia.

August 25, 2006.

William G. Ballaine, Landman, Corsi, Ballaine & Ford, P.C., New York City, for Plaintiff. Frederick J. Wilmer, Kissel & Pesce LLP, Tarrytown, NY, Shirlie Norris Lake, Eccleston and Wolf, P.C., Baltimore, MD, for Defendants.

MEMORANDUM OPINION AND ORDER

HUVELLE, District Judge.

On September 27, 1999, a Missouri jury awarded more than $20 million¹ to a plaintiff injured in an August 29, 1997 collision between the vehicle in which she was a passenger and an Amtrak train. Following the verdict, National Railroad Passenger Corporation ("Amtrak") notified its excess insurers—defendants Lexington Insurance Company, St. Paul Reinsurance Company Limited, Unionamerica Insurance Company Limited, and Certain Underwriters at Lloyd's, London subscribing to Lloyd's Excess Liability Claims Made Policy No. N00060A96—of the Missouri plaintiff's claim. When the insurers denied Amtrak's request for coverage, it filed suit. Before the Court is defendants' Motion for Summary Judgment, which seeks the dismissal of Amtrak's complaint on the ground that it failed to give timely notice of the Missouri case as required by each of the insurers' policies. For the reasons below, the Court will grant defendants' motion.

BACKGROUND

The facts underlying the present dispute are familiar and need not be repeated here, this being the third dispositive motion to have arisen from the parties' disagreement regarding insurance coverage. See Amtrak, 365 F.3d at 1107 (holding that the Missouri claim was not covered under an identical set of policies covering the period from October 1, 1997 to September 30, 1998); Nat'l R.R. Passenger Corp. v. Lexington Ins. Co., 357 F.Supp.2d 287 (D.D.C.2005) (holding that Amtrak's second suit seeking reimbursement under the policies covering the period from October 1, 1996 to September 30, 1997, was neither barred by the relevant statute of limitations nor the doctrine of lathes). At issue here are the requirements of the notice provisions common to each of the defendant insurers' contracts with the railroad² —provisions relating to both "Accidents" and "Claims." (Art. III, ¶ 3.)

Amtrak's notification obligations with regard to "Accidents"—defined as "event[s] which first commence[ ] at a specific time after the retroactive date ... and prior to the expiry date ... and of which the Insured's Claim Agent first becomes aware during the Policy Period ... and up to 120 days thereafter"—are set forth in Condition 3i) of the policies. (Art. III, 1I3i); Art. IV, ¶ 1.) Under that provision, the railroad was required to notify the insurers "within 120 days of the value being established ... of those Accidents on which a value on the [railroad's] liability equal to or greater than the [the agreements' threshold] amount . . . is established ...."³ (Art. III, ¶ 3i); see also Alves Decl. Ex. A at 001015 (Lexington Policy Art. II, ¶ 25) ("This policy shall not apply ... to any liability for any Claim arising from an Accident which has not been notified in accordance with Condition 3."); Miller Decl. Ex. A at 000752 (Lloyd's Policy Art. II, ¶ 23) (same).) In establishing an accident's value, Amtrak was to give "due consideration" to a number of factors, among them "the reasonable settlement or judgment value of the claimed or known injuries and/or property damage" and the railroad's "probable liability[.]" (Art. III, ¶ 4.)

Amtrak's notification obligations with regard to "Claims"—broadly defined as "that part of any written demand received by the [railroad] for damages covered by [the policies], including the service of suit, institution of arbitration proceedings or receipt of an attorney's lien"—are set forth in Condition 3ii) of the policies. (Art. III, ¶ 3ii); Art. IV, ¶ 8. Pursuant to that condition, Amtrak was required to "give immediate notice ... whenever [it] ha[d] information from which [it] should [have] reasonably conclude[d] that a Claim, alone or in a combination with any other Claims," equals or exceeds the agreements' threshold amounts.⁴ (Art. III, ¶ 3ii); see also Alves Decl. Ex. A at 001015 (Lexington Policy Art. II, ¶ 25); Miller Decl. Ex. A at 000752 (Lloyd's Policy Art. II, ¶ 23). "For the purpose of this Condition[,]" Amtrak was required to notify the insurers "on the assumption that [it was] liable and further [was] liable for any amount claimed." (Id.)

Defendants contend that Amtrak's September 27, 1999 notification of the Missouri verdict—which followed the collision by more than two years—was untimely under Condition 3, thus barring recovery of the $7.5 million in excess coverage available under the policies. (See Defs.' Mem. in Supp. at 1; Defs.' Stmt. of Undisputed Mat. Facts ¶ 27 ("Defs.' Stmt.").) While arguing that the railroad failed to satisfy the requirements of both Condition 3i) and Condition 3ii), the insurers focus primarily on the argument that Amtrak violated the latter provision by not giving notice of the Missouri plaintiff's January 21, 1999 written settlement demand of $6.5 million—a demand exceeding the reporting threshold of each policy. (See Defs.' Mem. in Supp. at 18-24.)

ANALYSIS

"An insurance policy is a contract between the insured and the insurer, and in construing it [a court] must first look to the language of the contract." Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d 965, 968 (D.C.1999).⁵ When that language is ambiguous, "[e]xtrinsic evidence of the parties' subjective intent may be resorted to[,]" 1010 Potomac Assocs. v. Grocery Mfrs. of America, 485 A.2d 199, 205 (D.C.1984), and any doubts are resolved in a manner "consistent with the reasonable expectations of the purchaser of the policy." Smalls v. State Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C.1996). When that language is not ambiguous, however, the policy must be enforced as written, absent a statute or public policy to the contrary. Cameron, 733 A.2d at 968-69 (citing In re Corriea, 719 A.2d 1234, 1239 (D.C.1998)); 1010 Potomac Assocs., 485 A.2d at 205 ("The first step in contract interpretation is determining what a reasonable person in the position of the parties would have thought the disputed language meant.... The writing must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms"—"[i]f the document is facially unambiguous, its language should be relied upon as providing the best objective manifestation of the parties' intent.") (internal citations omitted). "A contract is ambiguous only if reasonable people may fairly and honestly differ in their construction of the terms because the terms are susceptible of more than one meaning. A contract is not ambiguous merely because the parties disagree over its meaning." Nat'l R.R. Passenger Corp. v. Lexington Ins. Co., 2003 WL 24045159, at *5 (internal quotations omitted).

I. Condition 3ii)

Amtrak does not dispute its receipt of the January 21, 1999 letter demanding $6.5 million for settlement of the Missouri suit, which had been served on Amtrak on January 20, 1998. (See Pl.'s Opp'n at 11, 34; Williams Interview Ex. G (letter); Defs.' Stmt. ¶ 2.) Rather, the railroad contends that Condition 3ii) required "immediate" notification of the insurers only where a claim should reasonably have been valued over the relevant thresholds—$2.5 million for the Lloyd's and Unionamerica/St. Paul policies, or $5 million for the Lexington policy. (Pl.'s Opp'n at 33-34; see also supra n. 4.) As the Missouri plaintiff's claim never merited a valuation of $2.5 million or more, Amtrak argues, the requirements of Condition 3ii) were not triggered "prior to the date on which the jury rendered its shocking verdict." (Pl.'s Opp'n at 34.) In providing that the railroad was to "notify [the insurers] on the assumption that [it was] liable and further [was] liable for any amount claimed" (Art. III, ¶ 3ii)), Amtrak maintains that the policy required only that it inform the insurers of the specific amount demanded by a claimant "at such time as [it] `should reasonably conclude' a claim's value exceeds the reporting threshold." (Pl.'s Opp'n at 36.)

Amtrak's reading of Condition 3ii) cannot be reconciled with the provision's language, which unambiguously required the railroad to give notice of the Missouri suit upon receipt of the plaintiff's $6.5 million demand. "For the purpose of Condition 3.ii)," the railroad was obligated to assume that it was liable for the entirety of the demand in determining whether the amount of the claim exceeded the notification thresholds applicable under each of the policies. (See Art. III, ¶ 3ii) ("For the purpose of this Condition 3.ii) the Insured will notify Underwriters on the assumption that the Insured is liable and further is liable for any amount claimed.").) As the demand was in excess of these amounts, "immediate" notice was required as of January 21, 1999. (See id.) The railroad's contention that there was not, on that date, "information from which [it] should [have] reasonably conclude[d]" that the Missouri plaintiff's claim exceeded the notification thresholds is misplaced. (See id.) In the absence of an express demand, Condition 3ii) would require a determination as to whether Amtrak should have reasonably concluded that the Missouri claim exceeded reporting levels based on other information in its possession. This is not such a case, however. Properly read, Condition 3ii) directs Amtrak to look no further than "any amount claimed" in those cases where a specific sum is demanded. (See id.) Notice was accordingly required upon the railroad's receipt of the Missouri plaintiff's January 21 demand letter.

Plaintiff's contrary interpretation obscures the difference between Condition 3i) and Condition 3ii). The notification requirement of Condition 3i) turns upon the probable ...