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McAlpin v. RLI Insurance Co.

September 5, 2007


The opinion of the court was delivered by: David G. Larimer United States District Judge


Plaintiff, Patrick W. McAlpin, commenced this action in New York State Supreme Court, Ontario County, in February 2004, seeking a declaration that defendant, RLI Insurance Co. ("RLI"), is obligated to defend and indemnify him for any and all claims arising out of an automobile accident ("the accident") in which he was involved on October 10, 2002. RLI removed the action to this Court on March 30, 2004, based on diversity of citizenship under 28 U.S.C. § 1332.*fn1

Both sides have moved for summary judgment. For the reasons that follow, plaintiff's motion is granted, and defendant's motion is denied.


The relevant facts are not in dispute. At the time of the accident, McAlpin was covered by two separate insurance policies. One of these, issued by Progressive Insurance Co. ("Progressive"), was a motor vehicle policy with an effective period of May 3, 2002 to November 3, 2002, providing up to $300,000 of liability coverage per occurrence. Dkt. #54 Ex. A. The other, issued by RLI, was a personal umbrella liability policy with an effective period of May 18, 2002 to May 18, 2003, providing up to $1,000,000 of coverage for claims in excess of any primary insurance held by McAlpin, such as his Progressive policy. Dkt. #53 Ex. G. McAlpin purchased both policies through the Hatch Leonard Naples, Inc. insurance agency ("Hatch Leonard").

On October 10, 2002, McAlpin was involved in a collision between the truck that he was driving and a motorcycle being ridden by Orlando O'Neill. O'Neill was injured in the accident. McAlpin called Hatch Leonard to inform them of the accident, apparently from a cellular telephone while he was still at the accident scene. See McAlpin Depo. Tr. (Dkt. #53 Ex. L) at 17. McAlpin testified that either he or Hatch Leonard then called Progressive. Id. at 18-19. A Progressive representative contacted McAlpin within about a day and came to McAlpin's office to take photographs of his truck. RLI was not contacted concerning the accident at this time.

In January 2003, O'Neill and his wife, Lori Moose, filed an action ("O'Neill action") against McAlpin in New York State Supreme Court, Ontario County, seeking damages for the injuries that O'Neill sustained in the accident and for loss of consortium. The ad damnum clause in the complaint in the O'Neill action alleged $2.5 million in damages.

After being notified of the existence of the O'Neill action, Progressive agreed to defend McAlpin and to indemnify him up to the limits of the Progressive policy.*fn2 McAlpin Decl. (Dkt. #68-1) ¶ 14; Michael Budd Decl. (Dkt. #54) ¶ 6. On June 10, 2003, a Progressive representative, John Modoski, sent RLI a faxed copy of the October 10, 2002 police report concerning the accident between plaintiff and O'Neill. Dkt. #60-2 at 3. The cover sheet stated that this related to a "new loss," and asked RLI's "assigned rep" to call Modoski for details. Id. at 2.

The following day, RLI's Casualty Claims Director, Frank C. White, Jr. sent a letter to McAlpin, stating that RLI "ha[d] received its first notice of loss by Orlando O'Neill on June 10, 2003." Dkt. #53 Ex. O. White asked McAlpin to submit to RLI "any copies of letters from [McAlpin's] primary personal insurance policy" concerning the loss. White stated that until RLI received those materials and certain other documents, it could not take a definitive position on whether it would provide coverage, adding, "RLI will investigate this loss under a complete reservation of rights, including but not limited to late notice of a loss." Id.

On July 28, 2003, White sent another letter to McAlpin stating that "RLI is denying coverage for violation of the policy conditions of late notice." Dkt. #53 Ex. P. Specifically, White quoted language in the RLI policy stating,

In the event of an Occurrence which is likely to involve this policy, or if you or anyone else covered under the policy is sued in connection with an Injury which may be covered under this policy, you or they must do the following:

1. Notify us or our agent as soon as possible;

2. Provide us with any Suit papers and any other documents which will help us to defend you or them ... .

Id. White noted that the "date of loss" was October 10, 2002, the O'Neill action was commenced on January 11, 2003, RLI had not received its "first notice" until June 10, 2003, and RLI did not receive a "copy of the suit" until June 26. Id.

RLI did not participate in McAlpin's defense in the O'Neill action. In March 2007, a jury awarded the plaintiffs in that action nearly $850,000. Since Progressive has indicated that it will indemnify plaintiff up to the full amount of the Progressive policy--$300,000--plaintiff seeks in this action, in effect, an order directing RLI to indemnify plaintiff for the $550,000 balance of the O'Neill award.


A. Summary Judgment: General Principles

A court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The Court determines which facts are material by considering the substantive law of the action, for only those "facts that might affect the outcome of the suit under the ...

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