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Tuesday, October 29, 2013

Ind. Decisions - 7th Circuit decides one Indiana case today, a partial reversal

In NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., and LEXINGTON INSURANCE COMPANY v. MEAD JOHNSON & COMPANY LLC, et al. (SD Ind., Young), a 17-page opinion, Judge Posner writes:

Before us are consolidated appeals in a pair of diversity suits governed, the parties agree, by Indiana law. One suit pits two insurance companies, National Union and Lexington (both subsidiaries of American International Group), against Mead Johnson, which purchased liability coverage from them. The other suit is just between National Union and Mead Johnson. We can ignore the procedural tangle reflected in the caption.

Mead Johnson had purchased a primary Commercial General Liability policy (a standard policy issued by many insurance companies) from National Union. The policy has a limit of $2 million for liability for what is called “personal and advertising injury.” Mead also has an excess liability policy from Lexington (a policy that kicks in when an insured’s liability exceeds the limit in his primary policy) that has a limit of $25 million. The insurance companies sought and obtained (on motions for summary judgment) declaratory judgments that they have no duty to pay claims that Mead Johnson filed with them regarding two tort suits against it. So Mead has appealed. * * *

[ILB: From an interesting passage on p. 6] Remarkably, in its opening brief on behalf of its client Mead Johnson, the well‐known law firm of Cadwalader, Wickersham & Taft argued that the amendment does apply to claims and suits as well as to occurrences, because the caption of the amendment is “Duties in the Event of Occurrence, Offense, Claim or Suit.” That is a misrepresentation. * * * Cadwalader’s frivolous interpretation, though exposed in the insurance companies’ brief, is repeated in Mead Johnson’s reply brief and was defended by Cadwalader’s lawyer for Mead at the oral argument. That a major law firm would engage in such shenanigans distresses us. The firm’s argument regarding the amendment to the National Union insurance policy is censurable, and we hereby censure it. * * *

[ILB: Beginning on p. 9] There would be no need for an evidentiary hearing on the issue of the harm done to the insurers by Mead Johnson‘s untimely notice of PBM’s suit had the district judge been correct in ruling that when untimely notice is given to insurer (in this case insurers) by an insured after the trial in the underlying suit, the presumption of harm becomes irrebuttable— in other words, that when notice is that late the insurer is off the hook. Period. * * * The Indiana Supreme Court has never so ruled. It has always described the presumption as rebuttable. Delay could be forever, yet the insured be unharmed.

The judge was misled by two decisions of Indiana’s intermediate appellate court that treat the presumption of harm from late notice as unrebuttable if notice isn’t given until after the suit against the insured has been tried. Allstate Ins. Co. v. Kepchar, 592 N.E.2d 694, 699 (Ind. App. 1992); Milwaukee Guardian Ins., Inc. v. Reichhart, 479 N.E.2d 1340, 1343 (Ind. App. 1985). They do so on the ground that the loss of the insurer’s opportunity to make decisions on the conduct of the trial, a loss that is irrevocable once the trial takes place, deprives the insurer of a valuable right. But that deprivation is not a tangible injury—a loss for which damages can be awarded—nor, if the insurer could have done no better in managing the defense at trial than the insured did, even a cause of injury. The two decisions we just cited thus are inconsistent with Miller, and so we would not expect the Indiana Supreme Court to approve them. * * *

To summarize, the grant of summary judgment in favor of the insurers in the suit relating to the PBM litigation is reversed and that case remanded for further proceedings consistent with this opinion, while the judgment in favor of National Union in the suit arising from the class action against Mead Johnson is affirmed.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Posted by Marcia Oddi on October 29, 2013 01:16 PM
Posted to Ind. (7th Cir.) Decisions