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JEFFERSON INS. CO. v. FORTRESS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


September 25, 1984

JEFFERSON INSURANCE COMPANY OF NEW YORK, Plaintiff, against FORTRESS RE, INC., and CALVERT FIRE INSURANCE COMPANY, Defendants.

The opinion of the court was delivered by: HAIGHT

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

Plaintiff has moved for reargument of my July 11, 1984 Memorandum Opinion and Order dismissing its claims under a contract of reinsurance. Since the facts are adequately presented there, I will not restate them.

 In that opinion I held that a decision rendered in a prior action between the same parties, reported as Fortress Re, Inc. v. Jefferson Insurance Co. of New York, 465 F. Supp. 333 (E.D.N.C. 1978), aff'd, 628 F.2d 860 (4th Cir. 1979), collaterally estopped plaintiff from contesting the issue of whether its failure to provide timely notice of an accident likely to involve defendants' reinsurance relieved defendants of their obligations under the reinsurance contract. Plaintiff now calls to my attention a 1981 decision by the North Carolina Supreme Court, Great American Insurance Co. v. C.G. Tate Construction Co., 303 N.C. 387, 279 S.E.2d 769 (1981), which, plaintiff claims, substantially altered the interpretation of insurance contract notice provisions in North Carolina. It argues that this superseding change in law should remove any collateral estoppel effect which the 1978 Eastern District of North Carolina decision might have had and that the law established in Great American requires that I reverse my decision on the motion.

 I refuse to alter the result of my July opinion. Assuming arguendo that the Great American case controls here, I find that its application would not change the result reached in that opinion. The Great American court adopted a "prejudice" test for determining whether a long, unexcused delay in providing notice to an insurer removed the obligation to insure under a contract requiring notice "as soon as practicable." Under the new test, if an insured demonstrates that it acted in good faith in giving tardy notice, the insurer must demonstrate that "its ability to investigate and defend was materially prejudiced by the delay" in order to escape liability. 279 S.E.2d at 776.

 In this action, the reinsurer was not informed of the claim until after the action on which it was based had been settled. By that time, the reinsurer had no opportunity to investigate or defend; its liability was presented as a fait accompli. There could be no plainer example of the prejudice which the Great American court held relieves the insurer of liability.

 Inthis circumstance, further arugment is pointless. Applying Great American will not change the outcome of the motion. The motion to reargue is denied.

 It is SO ORDERED.

19840925

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