IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

NATIONAL UNION FIRE INSURANCE : CIVIL ACTION

COMPANY OF PITTSBURGH, PA :

 :

v. :

 :

GENERAL STAR INDEMNITY COMPANY : NO. 04-1065

MEMORANDUM AND ORDER

Fullam, Sr. J. June 9, 2005

The parties have moved for summary judgment in this dispute

between primary and excess insurers. The insured is ATI, which

had a $ 250,000 self-insured retention. National Union is the

primary carrier with a limit of $ 1 million and General Star is

the excess carrier with a limit of $ 10 million. In 1997, one of

the insured’s drivers was involved in an accident with a

bicyclist named Bennyhoff. Ms. Bennyhoff filed suit in the

Philadelphia Court of Common Pleas, and on June 21, 2000, the

jury returned a verdict of approximately $ 2 million in her

favor. It is undisputed that neither ATI nor National Union

notified General Star of the existence of the lawsuit before the

verdict. In June 2000, there apparently were some attempts by a

third-party administrator to telephone General Star about the

verdict; although the nature of any such calls is disputed, the

parties agree that no written notice was given to General Star at

that time. 

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Two law firms, one selected by ATI and one by National

Union, prosecuted an appeal to the Pennsylvania Superior Court

after post-trial motions were denied. In connection with the

appeal, National Union bonded the entire amount of the judgment,

including the amount in excess of its policy limit. The Superior

Court affirmed the judgment in 2001, and the Supreme Court denied

a petition for allowance of appeal on April 22, 2003. Less than

one month earlier, on March 26, 2003, the servicing carrier for

National Union sent the first written notice of the claim to

General Star.

National Union filed this suit seeking to recover the amount

it paid in excess of its policy limit and certain costs

associated with the bond. I have concluded as a matter of law

that National Union cannot prevail and therefore judgment will be

entered in favor of General Star.

General Star’s policy provides in relevant part that:

(B) Insured’s Duties In The Event Of Occurrence, Claim

or Suit

(1) In the event of an occurrence covered hereunder

involving injuries or damages which, without regard to

legal liability, appears likely to involve this Policy,

written notice containing particulars sufficient to

identify the Insured and also reasonably obtainable

information with respect to the time, place and

circumstances thereof, and the names and addresses of

the injured and of available witnesses, shall be given

by or for the Insured to the Company or any of its

authorized agents as soon as practicable.

(2) If claim is made or suit is brought against the Insured

because of an occurrence which, without regard to legal

liability, appears likely to involve this Policy, the

Case 2:04-cv-01065-JF Document 16 Filed 06/09/05 Page 2 of 5
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Insured shall immediately forward to the Company every

demand, notice, summons or other process received by

him or his representative. 

Def. Ex. H. 

General Star received no written notice or copies of any

documents relating to the underlying lawsuit until March 2003. 

Even assuming that oral notice was given in 2000, and that no one

reasonably could have anticipated that the verdict would reach

the excess levels before the jury spoke, the policy unambiguously

requires written notice. Given the confused and fragmentary

nature of the evidence surrounding the claimed oral contacts, the

benefits of written notice are undeniable. There is no evidence

that General Star waived its right to written notice or acted in

a manner consistent with a party that has accepted oral notice. 

Both ATI and, especially, National Union are sophisticated

entities well able to comply with the demands of the policy. 

National Union contends that even if General Star did not

receive notice, it cannot establish prejudice. I am not

convinced that a showing of prejudice is necessary in this

context, but if it is, General Star has been prejudiced as a

matter of law. General Star was denied any right to participate

in the appeals or attempt to broker a settlement for less than

the full amount of the judgment. It is undisputed that National

Union and ATI did not pursue settlement discussions with the

plaintiff in the underlying action, instead choosing to focus

their efforts on appeal. Although General Star as an excess

Case 2:04-cv-01065-JF Document 16 Filed 06/09/05 Page 3 of 5
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insurer has fewer rights with regard to litigation decisions,

National Union and ATI effectively denied General Star any say in

the matter at all. Notice just before denial of the final appeal

was tantamount to no notice at all. National Union cannot deny

General Star any ability to influence the final amount paid to

the underlying plaintiff and then argue that General Star cannot

prove that its involvement would have changed the outcome. There

were no settlement discussions during the period before the

Superior Court ruled, which was the period during which such

discussions were most likely to bear fruit. This was not an

either/or situation: Settlement discussions would not have

hindered the ability to press the appeal, and General Star should

have had the opportunity to weigh in on the issue. 

An order follows.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

NATIONAL UNION FIRE INSURANCE : CIVIL ACTION

COMPANY OF PITTSBURGH, PA :

 :

v. :

 :

GENERAL STAR INDEMNITY COMPANY : NO. 04-1065

AND NOW, this 9th day of June 2005, upon consideration

of the motions for summary judgment, and following oral argument,

IT IS HEREBY ORDERED that JUDGMENT IS ENTERED IN FAVOR OF

DEFENDANT, GENERAL STAR INDEMNITY COMPANY AND AGAINST PLAINTIFF,

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. The

Clerk is directed to mark the case CLOSED.

BY THE COURT:

/s/John P. Fullam, Sr. J.

John P. Fullam, Sr. J.

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