Sybron Transition Corp. v. Security Insurance

107 F.3d 1250
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 27, 1997
DocketNo. 95-4084
StatusPublished
Cited by1 cases

This text of 107 F.3d 1250 (Sybron Transition Corp. v. Security Insurance) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sybron Transition Corp. v. Security Insurance, 107 F.3d 1250 (7th Cir. 1997).

Opinion

RIPPLE, Circuit Judge.

Sybron Transition Corporation and Kerr Manufacturing Corporation (collectively “Sy-bron”) brought this action seeking a determination of their rights under various insurance policies. Hartford Insurance Group (“Hartford”) denied liability on the ground that Sybron’s notice to Hartford of the underlying claim was late as a matter of law. Hartford also counterclaimed for the $500,000 that it had contributed toward the settlement of the underlying claim. The district court entered summary judgment in favor of Hartford on both claims. We affirm.

I

BACKGROUND

Kerr Manufacturing Corporation was sued in Pennsylvania federal and state courts by the estate of Dr. Alan Press in August 1989. Dr. Press had died ifi 1988 from mesothelioma, allegedly caused by exposure to asbestos-containing products that had been manufactured by Kerr.1 Dr. Press had been exposed to the products while he was a student at the University of Pennsylvania Dental School from 1969 to 1973. During that time period, Sybron had been covered by three insurance companies: Hartford had provided coverage between 1971 and 1974; Security Insurance Company of Hartford (“Security”) had provided coverage between 1968 and 1971; and Insurance Company of North America (“INA”) had provided excess coverage in 1969 and in 1970.

On August 7,1989, Sybron notified Security of the Press claims. As a result, Security undertook the legal defense of Sybron. In May 1991, Sybron, at the request of Security, notified Hartford of the Press suits.2 Just prior to the notification, Hartford had received a copy of Security’s letter to Sybron, in which Security requested that Sybron notify Hartford of the Press claims. Hartford then received from Security other materials related to the case.

In April 1992, Sybron, Hartford and Security agreed to settle the Press claims. A lump sum of $1.3 million was paid to the estate. Security and Hartford each contributed $500,000 to the settlement. Sybron paid the remaining $300,000. Sybron and its insurers agreed to disburse these funds subject to the terms of a “PARTIAL FUNDING AND NON-WAIVER AGREEMENT” (hereinafter “Settlement Agreement”). In that document, Hartford, Security and Sy-bron agreed to reserve all available rights and defenses:

SECURITY, HARTFORD, and SYBRON agree that the defense of the PRESS LITIGATION extended by SECURITY to SY-BRON, and the contribution made fey pursuant to paragraph 1 of this agreement, do not constitute any admission of coverage, liability, obligation, of [sic] duty under any [-330]*-330policy issued by SECURITY or HARTFORD to SYBRON, and this agreement and the payments referenced herein will never be used as evidence as to the meaning or construction of the SECURITY or HARTFORD policies.... SECURITY, HARTFORD and SYBRON expressly reserve all rights and defenses available to them, including the right to seek recovery from SYBRON, each other, or any other insurance carrier, for any sums paid in settlement of the PRESS LITIGATION.

R.35, Ex.G at 1-2 para. 2. The Settlement Agreement also provided that it “shall be construed pursuant to the law of Connecticut.” Id. at 2 para. 11.

Sybron then sued Security, INA and Hartford in Wisconsin state court seeking a determination of its rights with respect to each of its insurers. After removal to federal court, Hartford moved for summary judgment. Hartford claimed that, because Sybron had failed to provide notice of the Press claims within a reasonable time, a condition precedent to coverage under the Hartford policies was not fulfilled.3 Hartford subsequently moved for summary judgment on its $500,000 counterclaim, in which it sought the return of the $500,000 it had contributed to the Press settlement.

Sybron responded that whether its notice to Hartford was late is an issue for a jury to decide. Moreover, Sybron, assuming ar-guendo that it had failed to provide timely notice, asserted several other defenses. First, it claimed that Hartford could not rely on untimely notification because Hartford was not prejudiced by the delay. In Sybron’s view, lack of prejudice, which the parties agree is a proper defense under Connecticut law, was one of the “available” defenses reserved in the Settlement Agreement. Second, Sybron claimed that Hartford had waived its late-notice defense by failing to disclaim coverage earlier, by monitoring the Press litigation, and by negotiating and settling the Press claims. Third, Sybron insisted, Hartford was estopped from asserting untimely notice because of the prior statements of Schmalz. Sybron also urged the district court to deny summary judgment on the counterclaim. Sy-bron asserted that Hartford had purposefully failed to inform Sybron, before executing the Settlement Agreement, of its intent to raise subsequently the late-notice defense. As a result, charged Sybron, Hartford had breached the duty of good faith and fair dealing.

The district court granted summary judgment to Hartford on the original claim and on the counterclaim. The court held that New York law governed the dispute because New York is the state with the most significant relationship to the Hartford policies and the parties. The court further held that, under New York law, Sybron’s 22-month delay was unreasonable as a matter of law. The court then disposed of Sybron’s first defense, lack of prejudice, on the ground that New York does not recognize such an exception to the notice requirement. The court rejected Sybron’s attempt to inject Connecticut law into the case through the Settlement Agreement. In this case, the court noted, the insurance policies must be construed, not the Settlement Agreement. The latter contract, said the court, merely reserves defenses; it does not create them. Because Sybron’s defenses all relate to coverage under the Hartford policies, the court held that those defenses, and their availability, are governed by New York law.

The district court also decided that Sybron had faded to raise a triable issue with respect to waiver, estoppel or bad faith. Consequently, the court granted Hartford’s summary judgment motion with respect to Sy-[-329]*-329bron’s original declaratory judgment claim. In addition, because the court had determined that Sybron had forfeited coverage, it granted summary judgment to Hartford on the counterclaim. The court then directed that final judgment be entered in Hartford’s favor pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. Sybron now appeals that judgment. '

II

DISCUSSION

We review de novo the district court’s decision to grant summary judgment. Andersen v. Chrysler Corp., 99 F.3d 846, 855 (7th Cir.1996). Summary judgment is appropriate if the record demonstrates “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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Viewing the evidence in the light most favorable to the non-moving party, we must determine whether there is evidence on which a reasonable jury could find for that party.

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