Clark v. Chubb Grp Ins Co

• Court: Court of Appeals for the Sixth Circuit
• Decided: July 25, 2003
• Docket: 01-4178
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Clark et al. v. Chubb No. 01-4178 ELECTRONIC CITATION: 2003 FED App. 0250P (6th Cir.) Group of Ins. Cos. et al. File Name: 03a0250p.06 _________________ UNITED STATES COURT OF APPEALS COUNSEL FOR THE SIXTH CIRCUIT ARGUED: Paul W. Flowers, LAW OFFICE OF PAUL W. _________________ FLOWERS, Cleveland, Ohio, for Appellants. Robert D. Anderle, PORTER, WRIGHT, MORRIS & ARTHUR, JAMES CLARK and DONNA X Cleveland, Ohio, for Appellees. ON BRIEF: Paul W. CLARK, - Flowers, LAW OFFICE OF PAUL W. FLOWERS, Plaintiffs-Appellants, - Cleveland, Ohio, W. Craig Bashein, LAW OFFICES OF R. - No. 01-4178 WILLIAM BASHEIN, Cleveland, Ohio, for Appellants. - Robert D. Anderle, Daniel F. Gourash, Howard G. Strain, v. > PORTER, WRIGHT, MORRIS & ARTHUR, Cleveland, , - Ohio, for Appellees. CHUBB GROUP O F INSURANCE - _________________ COS. and FEDERAL - INSURANCE CO ., - OPINION Defendants-Appellees. - _________________ - N KAREN NELSON MOORE, Circuit Judge. The plaintiffs, Appeal from the United States District Court James and Donna Clark, appeal the district court’s grant of for the Northern District of Ohio at Cleveland. summary judgment to the defendants Federal Insurance No. 00-02989—Donald C. Nugent, District Judge. Company and Chubb Group of Insurance Companies (collectively “Federal”) and the district court’s denial of their Argued: March 11, 2003 motion for summary judgment. The Clarks allege that the injuries James Clark sustained in an automobile accident were Decided and Filed: July 25, 2003 covered under three policies of insurance issued by Federal to Clark’s employer, the Clark Rubber Company (“Clark Before: MOORE and CLAY, Circuit Judges; LAWSON, Rubber”). On appeal, the Clarks claim that the district court District Judge.* erred in holding that they did not comply with the prompt- notice and subrogation provisions in the insurance policies, and erred in holding that one of the policies was not a motor vehicle liability policy at all. Based on the facts of the case and for the reasons set forth * below, we REVERSE the district court’s judgment and The Honorable David M. Lawson, United States District Judge for REMAND this case in light of the Ohio Supreme Court’s the Eastern District of Michigan, sitting by designation.

1 No. 01-4178 Clark et al. v. Chubb 3 4 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

recent decision in Ferrando v. Auto-Owners Mutual pursue claims on behalf of the injured parties whom it Insurance Co., 781 N.E.2d 927 (Ohio 2002). insures. I. BACKGROUND II. ANALYSIS The parties have stipulated to the facts of this case. On A. Jurisdiction March 9, 1994, James Clark was involved in an automobile accident with David Sholtis. James Clark was an employee The district court had jurisdiction over this diversity case of Clark Rubber, which was insured at the time under three pursuant to 28 U.S.C. § 1332, because the Clarks are citizens different policies with Federal. First, Clark Rubber was of Ohio and Federal is an Indiana corporation that has its insured under a Business Auto policy (the “Auto” policy). principal place of business in New Jersey. See Lee-Lipstreu The Auto policy explicitly provided uninsured and under- v. Chubb Group of Ins. Cos., 329 F.3d 898, 899-900 (6th Cir. insured motorist (“UM/UIM”) insurance and had a UM/UIM 2003) (holding that federal courts have jurisdiction over per accident limit of $500,000 and an aggregate limit of actions by an insured against his or her own insurance $1,000,000. Second, Clark Rubber was insured under a company if the two are of diverse citizenship because such Comprehensive General Liability policy (the “CGL” policy) actions are not direct actions within the meaning of 28 U.S.C. with limits of $1,000,000. Lastly, Clark Rubber carried a § 1332(c)(1)). We have jurisdiction over the district court’s Commercial Excess Liability policy (the “Excess” policy) final judgment pursuant to 28 U.S.C. § 1291. with limits of $1,000,000. Each of these policies was issued for the period of March 23, 1993 to March 23, 1994 and was B. Standard of Review in effect at the time of the accident. The question in this case is whether the district court The Clarks settled with Sholtis and his automobile insurer, properly granted summary judgment to Federal and properly the Personal Service Insurance Company (“Personal”) on denied the Clarks’ summary judgment motion. “This court October 28, 1994, for the limit of their liability policy, reviews a district court’s grant of summary judgment de $25,000. Clark received $12,500 and Donna Clark and their novo.” Plant v. Morton Int’l, Inc., 212 F.3d 929, 933 (6th two children received $12,500. It is undisputed that in Cir. 2000). Although the district court’s denial of a motion exchange for the proceeds of the settlement, the plaintiffs for summary judgment is usually treated as a nonappealable released both Sholtis and Personal from all liability in interlocutory order, when “an appeal from a denial of connection with this accident. James Clark has also summary judgment is presented in tandem with a grant of recovered $100,000 from his own automobile insurance summary judgment, this court has jurisdiction to review the policy and $100,000 from his homeowner’s policy, both propriety of the district court’s denial of summary judgment.” issued by Prudential. The Clarks admit that Federal did not Hamad v. Woodcrest Condo. Ass’n, 328 F.3d 224, 235 (6th receive notice of the accident or the Clarks’ claim until March Cir. 2003) (quotation omitted). The district court’s denial of 3, 2000. Each of the Federal policies contained clauses that summary judgment based on purely legal grounds is reviewed required insureds to notify Federal in case of an accident and de novo. Id. at 235-36. Summary judgment can be granted that gave Federal subrogation rights, namely, the rights to only when, taking all justifiable inferences in the nonmoving party’s favor, there is still no genuine issue of material fact No. 01-4178 Clark et al. v. Chubb 5 6 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

and the moving party is entitled to a judgment as a matter of judgment to Federal, the Ohio Supreme Court’s recent law. Plant, 212 F.3d at 934. decision in Ferrando makes it clear that breaches of prompt- notice and subrogation provisions are only considered C. An Overview of the Plaintiffs’ Claims presumptively prejudicial. Since the Clarks as of yet have had no opportunity to adduce evidence that might rebut this There are three policies at issue: the Auto policy, the CGL presumption, we remand this case to the district court so that policy, and the Excess policy. Although James Clark is not it might hear evidence on this point with respect to all three listed explicitly as an insured under any of the policies, of the policies at issue. Federal does not dispute that the Clarks are insureds pursuant to the Ohio Supreme Court’s decision in Scott-Pontzer v. D. The Auto Policy Liberty Mutual Fire Insurance Co., 710 N.E.2d 1116, 1120 (Ohio 1999).1 Considering the Clarks’ claims under each of The Clarks’ first claim is under the Auto policy. Federal the policies in turn, we ultimately conclude (as the district acknowledges that the Auto policy explicitly provides court did) that the Clarks have breached the prompt-notice UM/UIM insurance and does not dispute that the Clarks are and subrogation provisions in all three of the policies. insureds under it. Three parts of the Auto policy are relevant However, while the district court believed that these breaches here. First, the Auto policy has a general notification clause, alone were sufficient to justify the grant of summary which requires that insureds notify Federal “promptly”: 2. DUTIES IN THE EVENT OF ACCIDENT, 1 CLAIM, SUIT OR LOSS In Scott-Pontzer, the Ohio Supreme Court held that an employee, a. In the event of “accident”, claim, “suit” or “loss”, who was not acting within the scope of his em ploym ent at the tim e of his you must give us or our authorized representative injury, was no netheless an insured under his corporate em ployer’s commercial liability policy when the policy designated the corporation as prompt notice of the “accident” or “loss”. Include: the named insured, but defined “insured” to include “you” and “[i]f you (1) How, when and where the “accident” or “loss” are an individual, any family member.” Scott-Pontzer v. Libe rty Mut. Fire occurred; Ins. Co., 710 N.E .2d 1 116 , 1118 (O hio 199 9). T he O hio Supreme Co urt (2) The “insured’s” name and address; and reasoned that it “would be nonsensical to limit protection solely to the (3) To the extent possible, the names and addresses corp orate entity, since a corporation, itself, cannot occupy an automobile, suffer bodily injury or death, or operate a motor vehicle. Here, naming of any injured persons and witnesses. the corporation as the insured is meaningless unless the coverage extends b. Additionally, you and any other involved “insured” to some p erson or p ersons — including to the corporation's em ployees.” must: . . . Id. at 1119. Claims that involve an employee seeking coverage under his (2) Immediately send us copies of any request, or her employer’s commercial policies that rely on an ambiguous demand, order, notice, summons or legal paper provision defining who is an insured have com e to be kno wn as Sco tt- Pontzer claims. See Lee-Lipstreu v. Chubb Group of Ins. Cos., 329 F.3d received concerning the claim or “suit”. 898, 899 (6th C ir. 200 3) (describing further the nature of these Sco tt- (3) Cooperate with us in the investigation, Pontzer claims). settlement or defense of the claim or “suit.” W e note that all of the insurance policies in this case have the same sort of ambiguity regarding who is an insured as the policy in Sco tt- J.A. at 237-38. This notification clause was later amended to Pontzer referred to above, making it reasonable for the parties to assume that the C larks were, in fact, insureds under the po licy. require prompt notification of a potential settlement: No. 01-4178 Clark et al. v. Chubb 7 8 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

2. DUTIES IN THE EVENT OF ACCIDENT, The Ohio Supreme Court, in a decision issued after the CLAIM, SUIT OR LOSS is changed by adding the parties filed their appellate briefs (but before oral argument), following: has made clear the law that governs breaches of these types of ... notice and subrogation clauses. See Ferrando, 781 N.E.2d at c. A person seeking Uninsured Motorists Coverage 945-46. The Ohio Supreme Court explained its holdings as must also promptly notify us in writing of a tentative follows: settlement between the “insured” and the insurer of the vehicle described in paragraph F.3.b. of the Accordingly, we hold that when an insurer’s denial of definition of “uninsured motor vehicle” and allow us UIM coverage is premised on the insured’s breach of a 30 days to advance payment to that insured in an prompt-notice provision in a policy of insurance, the amount equal to the tentative settlement to preserve insurer is relieved of the obligation to provide coverage our rights against the insurer, owner or operator of if it is prejudiced by the insured’s unreasonable delay in such vehicle described in paragraph F.3.b. of the giving notice. An insured’s unreasonable delay in giving definition of “uninsured motor vehicle.” notice is presumed prejudicial to the insurer absent evidence to the contrary. J.A. at 246. Lastly, in addition to these notice clauses, the ... Auto policy also has a subrogation provision: As in cases involving a breach of a prompt-notice provision, a presumption of prejudice should be applied 5. TRANSFER OF RIGHTS OF RECOVERY when evaluating the effects of the breach of a consent-to- AGAINST OTHERS TO US settle or other subrogation-related provision. As in If any person or organization to or for whom we breach of prompt-notice cases, we find that the burden of make payment under this Coverage Form has rights presenting evidence to show a lack of prejudice should to recover damages from another, those rights are be on the insured who has failed to comply with the transferred to us. That person or organization must terms of the policy. An additional reason for applying a do everything necessary to secure our rights and presumption of prejudice with the burden of presenting must do nothing after “accident” or “loss” to impair evidence on the insured is that the General Assembly has them. specifically allowed a right of subrogation to providers of UIM coverage [in Ohio Rev. Code § 3937.18(j)]. J.A. at 238. Ibid. We believe that two aspects of Ferrando are essential Federal claims that the Clarks breached these provisions by to this case and thus are worth repeating. First, breaches of not promptly notifying Federal of their claim and by releasing notice and subrogation provisions serve to vitiate the both Sholtis and his insurance carrier from all liability, coverage provided by an insurance policy only if they are thereby destroying Federal’s subrogation right against them. prejudicial to the insurer. Second, breaches are presumed to The Clarks concede that they did not contact Federal until be prejudicial unless proven to be harmless by the insureds. March 3, 2000, roughly six years after the accident. They also admit that they fully released Sholtis and Personal from all liability — five years before notifying Federal. No. 01-4178 Clark et al. v. Chubb 9 10 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

These twin principles apply equally to breaches of notice In this case, we hold that both the prompt-notice and the provisions and subrogation provisions.2 subrogation provisions were breached. First, we turn to the prompt-notice provisions. The Ohio Supreme Court affirmed Ferrando has essentially laid out a two-part inquiry in Ferrando the earlier notion that “[a] provision in an describing how courts should handle breaches of prompt- insurance policy requiring ‘prompt’ notice to the insurer notice and subrogation clauses. First, a court must determine requires notice within a reasonable time in light of all the whether the provision was breached. If the relevant provision surrounding facts and circumstances.” Ruby v. Midwestern was breached, a court must then ask whether the insurer was Indem. Co., 532 N.E.2d 730, 732 (Ohio 1988) (cited in prejudiced by the breach. Id. at 947. These inquiries are to Ferrando, 781 N.E.2d at 947). The plaintiffs here notified be kept “separate and distinct” (i.e., one does not determine Federal in March of 2000, but the accident occurred in 1994. whether a provision was breached by looking to whether there Recognizing the apparent unreasonableness of the six-year was any resultant prejudice from the breach). Id. at 949. delay, the Clarks argue that we must consider that delay in light of the fact that the Clarks’ claim against Federal only became viable because of the 1999 Scott-Pontzer decision, which was handed down five years after the accident and only 2 W e note that the state of the law before Ferrando was somewhat nine months before notice was given. We, however, have unclear. It appears that before Ferrando, any breach of a subrogation already rejected this argument. See Lepley v. Hartford Acc. provision prevented an insured from recovering under an insurance & Indem. Co., No. 01-4304, __ F.3d __, 2003 WL 21487313 policy, at least in the context where an insured never even informs the (6th Cir. June 30, 2003). In Lepley, the plaintiff argued “that insurer of a prospective se ttlement. See Bogan v. Progre ssive Cas. Ins. prior to the Scott-Pontzer decision, she had no reason to Co., 521 N.E.2d 447, syllabus para. 4 (O hio 198 8); see also Ferrando v. Auto-Ow ners Mu t. Ins. Co., 781 N.E.2d 927, 945 (Ohio 2002) (noting that believe that she would be covered under the policies, and she under “paragraph four of the syllabus o f Bogan . . . there is no need to claims that Hartford [in any event] would have denied her inquire into insurer prejudice when such a [subrogation] clause is claim.” Id. at *6. We stated that “Lepley may be correct that breached”). Ferrando’s overruling of this aspect of Bogan Hartford would have denied coverage, but Lepley could have incontrovertibly was a change in the way Ohio law treated breaches of litigated the matter” and that “[a]waiting a favorable Ohio subrogation-related insurance clauses. See Tha cker v. Cen t. Mut. Ins. Co., N o. 02 CA 9, 20 03 W L 1145449, at *6-*7 (Ohio Ct. App.–4th Dist. Mar. Supreme Court decision is not a reasonable excuse for 11, 2003) (noting that “under Bogan, settlement withou t an op portunity delaying notice and failing to preserve subrogation rights.” for the insurer to exercise its subrogation rights was a per se bar to Id. In light of Lepley, we must hold that the Clarks have coverage under the policy” so that the Bogan court’s “analysis contained breached the notice clauses of the Auto policy. no prejudice component,” and that all “this changed with the Supreme Court of Ohio's decision in Ferrando”). It is similarly clear that the Clarks have breached the The Ohio Supreme Court’s decision in Ferrando was not a departure from Ohio preceden t in its treatme nt of promp t-notice p rovisio ns, as it subrogation provision of the Auto policy. The policy was clear even before Ferrando that a breach of a prompt-notice explicitly requires that the plaintiffs do nothing to impair provision did no t necessarily preclude cove rage. Instead, the breach of Federal’s right to subrogation, and the Clarks here admit that the provision had to be preju dicial. See Ruby v. Midwestern Indem. Co., they released the tortfeasor and his insurance company several 532 N.E.2d 730, 732 (Ohio 1988 ) (finding “ample evidence that [the years before Federal was even notified of the accident. This insurer] was prejudiced by the delay” in the case at bar, but noting that prejudice could be presumed if there was an “[u]nreasonable delay in the is a clear breach of the insurance agreement. giving of notice”). No. 01-4178 Clark et al. v. Chubb 11 12 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

Having determined that the prompt-notice and subrogation F-02-012, 2003 WL 257407, at *1 (Ohio Ct. App.–6th Dist. provisions were breached, however, we find ourselves unable Feb. 4, 2003).3 to proceed on the “prejudice” component of the Ferrando analysis. Under Ferrando, the breach of the prompt-notice E. The CGL Policy and subrogation provisions is presumed to be prejudicial, and the plaintiffs have the obligation of overcoming that We now turn to the second policy at issue in this case, the presumption with persuasive evidence. Here, however, the comprehensive general liability (“CGL”) policy. Ultimately, Clarks as of yet have had no chance to prove that Federal was we draw the same conclusion with regard to the CGL policy not prejudiced by the Clarks’ breaches of the prompt-notice that we drew in our analysis of the Auto policy. While the and subrogation provisions. Without the benefit of Ferrando, Clarks have breached the prompt-notice and subrogation the district judge ended his analysis when he concluded that provisions of the CGL policy, it is unclear whether the the Clarks had breached the two provisions; he assumed that breaches have been prejudicial to Federal. For that reason, we any breach in the notice and subrogation provisions remand this claim as well to the district court for further foreclosed the Clarks’ claim. proceedings.

Although the plaintiffs have not rebutted the presumption The CGL policy does not, by its text, provide UM/UIM of prejudice at this point in the litigation, it is certainly coverage. However, under the version of OHIO REV . CODE possible that, now informed of Ferrando’s standards, they ANN . § 3937.18 in existence at the time the policy covering could adduce evidence to this effect on remand. We therefore Clark’s accident was issued (and therefore the version legally remand this case to the district court so that it may determine, relevant here, see Wolfe v. Wolfe, 725 N.E.2d 261, 266 (Ohio as an initial matter, whether the plaintiffs can overcome the 2000)), insurers were required to offer UM/UIM coverage presumption of prejudice that attaches to their breaches of the prompt-notice and subrogation provisions. We note that this has been the procedure in several post-Ferrando Ohio cases 3 where the factfinding was conducted before Ferrando was Our decisio n to rem and this case is in no way inconsistent with our decision in Lepley, where we dismissed the plaintiff’s case after decided; many courts have remanded Scott-Pontzer cases to determining that the prompt-notice provision in the policy was breached the trial court for further proceedings, reasoning that it would and that the plaintiff had no t shown the bre ach to be no n-prejudicial. See be manifestly unjust to dismiss the plaintiffs’ claims before Lepley v. Hartford Acc. & Indem. Co., No. 01-4304, __ F.3 d __ , 20 03 W L they had an opportunity to show that their breaches of notice 21487 313, at *6-*7 (6th Cir. June 30, 2003 ). and subrogation provisions were non-prejudicial. See, e.g., The distinguishing feature abo ut Lepley is that in Lepley the district Marshall v. Colonial Ins. Co. of Cal., No. 80868, 2003 WL court had already analyze d the p rejud ice issue and had stated in its opinion that Lepley offered “no evidence to show that the more than 21054784, at *4 (Ohio Ct. App.–11th Dist. May 12, 2003); fourteen-year delay in receiving [notice] did not prejudice the Contrucci v. Nationwide Mut. Fire Ins. Co., No. defendants.” Id. at *6. Here, however, the district court did not examine 2002CA00403, 2003 WL 1958247, at *3 (Ohio Ct. App.–5th the issue of p rejud ice, believing that it was unnecessary. Given that the Dist. Apr. 21, 2003); Brozovic v. St. Paul Fire & Marine Ins. purpo se of our remanding this case is to insure that the plaintiffs have, at Co., No. F-02-012, 2003 WL 252483, at *4 (Ohio Ct. some point in the litigation, an opportunity to show that their breaches of the prompt-notice and subrogation provisions are non-prejudicial, we find App.–8th Dist. Feb. 6, 2003); Cincinnati Ins. Co. v. Carroll, Lepley’s dismissal of the plaintiff’s claim co mpletely consonant with our decision to remand the case here. No. 01-4178 Clark et al. v. Chubb 13 14 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

whenever they offered a motor-vehicle insurance policy. See to the parking-attendant provision in the case at bar, “did not OHIO REV . CODE ANN . § 3937.18(A) (1994); see also Gyori create automobile liability coverage”). As a result, it would v. Johnston Coca-Cola Bottling Group, Inc., 669 N.E.2d 824 not be inappropriate for us to conclude that the CGL policy (Ohio 1996) (interpreting the statute before the 1997 changes was not a motor-vehicle policy within the meaning of former made to it in H.B. 261); Linko v. Indem. Ins. Co. of N. Am., OHIO REV . CODE ANN . § 3937.18. Nevertheless, we decline 739 N.E.2d 338 (Ohio 2000) (same). Federal does not to do so at this time, because this very issue is currently dispute that UM/UIM coverage was not offered properly pending before the Ohio Supreme Court. See Burkhart v. under Linko and Gyori or that James Clark was an insured CNA Ins. Co., No. 2001CA00265, 2002 WL 316224 (Ohio under the CGL policy.4 Federal instead argues that it never Ct. App.–5th Dist. Feb. 25, 2002), accepted for review, 770 had any obligation to offer UM/UIM coverage because the N.E.2d 1048 (Ohio July 3, 2002) (argued April 15, 2003). CGL policy was not a motor-vehicle policy within the Burkhart involves precisely the same question presented here, meaning of the statute. whether “parking attendant” and “mobile equipment” exceptions to a commercial policy’s general exclusion of At first glance the CGL policy does not appear to be a automobile coverage are sufficient to render the policy a motor-vehicle policy; it categorically excludes automobile motor-vehicle policy within the meaning of former OHIO coverage. However, there are two exceptions to that general REV . CODE ANN . § 3937.18. Because the Ohio Supreme exclusion, one providing coverage in cases of property Court’s decision in Burkhart will definitively resolve this damage arising out of the operation of mobile equipment (the issue and because a remand is already in order in this case, we “mobile equipment” exception), and the other providing choose not to rule upon this issue at this time, allowing the liability coverage for incidents arising out of the parking of district court below to reexamine it on remand with the automobiles on or next to the company’s premises (the benefit of the Ohio Supreme Court’s decision in Burkhart, “parking attendant” exception). The Clarks have expressly which by then will have been decided.5 abandoned the argument that the mobile-equipment exception is sufficient to turn the CGL policy into a motor-vehicle We now turn to Federal’s arguments that the Clarks cannot policy, see Appellant Br. at 20-21 n.5, and we have squarely recover under the CGL policy because they have breached the rejected the argument that a parking-attendant exception can prompt-notice and subrogation provisions therein. The CGL transform an insurance policy into a motor-vehicle policy policy contains the following provisions: within the meaning of OHIO REV . CODE ANN . § 3937.18, see Lee-Lipstreu, 329 F.3d at 903 (holding “that the ‘parking attendant’ provision in the Federal policy,” which is identical

4 Federal does dispute that Donna Clark was an insured under the CGL policy. Because the district court did not rule on this question and 5 because we have already decided to remand this case to the district court The district court is bound to follow our decision in Lee-Lipstreu for it to address the Clarks’ claim under the Auto policy, we decline to unless our decision is rejected by the Ohio Supreme Co urt. All of our address this issue. W e leave this issue to the district court to handle in the decisions in diversity cases are efforts to apply state law; we welcome first instance on remand. clarificatio ns of state law by the Ohio Supreme Court. No. 01-4178 Clark et al. v. Chubb 15 16 Clark et al. v. Chubb No. 01-4178 Group of Ins. Cos. et al. Group of Ins. Cos. et al.

DUTIES IN THE EVENT OF OCCURRENCE, CLAIM breached the above prompt-notice and subrogation provisions OR SUIT in the CGL policy. The Clarks argue that the prompt-notice a. You must see to it that we are modified6 as soon as and subrogation provisions that appear in the CGL policy do practicable of an occurrence which may result in a not apply to the UM/UIM coverage that arises by operation of claim law. We, however, rejected this argument in Lepley, where ... we made the distinction between conditions precedent, which c. You and any other involved insured must: do “carry over” into coverage implied from an insurance (1) immediately send us copies of any demands, policy, and liability exclusions, which do not “carry over” notices, summonses or legal papers received in into implied coverage. This distinction was necessary to connection with the claim or suit; reconcile the Ohio Supreme Court’s holding that scope-of- (2) authorize us to obtain records and other employment exclusions in a written policy did not apply to information; UM/UIM coverage that arose as a matter of law under that (3) cooperate with us in the investigation, policy, see Scott-Pontzer, 710 N.E.2d at 1120, with the settlement or defense of the claims or suit; and obvious fact that some provisions of the written policy (such (4) assist us, upon our request, in the enforcement as the definition of who an insured is under the policy) must of any right against any person or organization also apply to implied UM/UIM coverage — as otherwise even which may be liable to the insured because of parties with absolutely no connection to Federal that were injury or damage to which this insurance may injured by an underinsured motorist could recover under also apply. Federal’s policy. Lepley concluded that notice and subrogation clauses were conditions precedent (rather than J.A. at 259. liability exclusions), and held that “notice and subrogation clauses are valid and enforceable preconditions to an OUR RIGHT TO RECOVER PAYMENT insured’s duty to provide underinsured motorist coverage If the insured has rights to recover all or part of any even where UM/UIM coverage arises as a matter of law.” payment we have made under this insurance, those rights Lepley, __ F.3d __, 2003 WL 21487313, at *4 (quotation and are transferred to us. The insured must do nothing after brackets omitted). Under Lepley, notice and subrogation loss to impair them. At our request, the insured will provisions do apply to implied UM/UIM coverage, and we bring suit or transfer those rights to us and help us reject the Clarks’ contentions to the contrary. enforce them. Having concluded that the prompt-notice and subrogation J.A. at 261. provisions do apply to the UM/UIM coverage that arises by operation of law under the CGL policy and having determined For the same reasons that we concluded that the Clarks had that the Clarks did in fact breach those provisions, we find breached the prompt-notice and subrogation provisions in the ourselves again unable to determine whether the breaches Auto policy, we must also conclude that the Clarks had were prejudicial because the district court ended its analysis after determining the issue of breach. Because the Clarks should be given the chance to show that the breaches were in 6 Presumably this was meant to read ‘notified.’ No. 01-4178 Clark et al. v. Chubb 17 Group of Ins. Cos. et al.

fact not prejudicial, we remand this issue to the district court for further proceedings. F. The Excess Policy Having remanded this case on the issues of whether the Clarks should recover on the Auto and CGL policies, we do not address the Clarks’ claim under the excess policy. In order to recover under the excess policy, the policy apparently requires the Clarks to have recovered under one of the other policies and to have exhausted the limits of the other policy. The district court, having concluded that the Clarks could not recover under either of the two other policies, did not address the excess policy. Because the district court did not rule on the excess policy, we decline to do so as well, leaving this matter for the district court to address on remand. III. CONCLUSION For the foregoing reasons, we REVERSE the district court’s judgment and REMAND this case for further proceedings consistent with this opinion.