Opinion ID: 145306
Heading Depth: 3
Heading Rank: 2

Heading: Continental's Suit Against Atlantic

Text: On May 8, 2007, Continental, as a judgment creditor, sued Atlantic for a declaratory judgment that Atlantic was obligated to indemnify Wodraska and, therefore, to satisfy Continental's default judgment. Continental sued under Section 3420(a)(2), which allows an injured party, in its capacity as a judgment creditor, to sue the insurer of the defaulted party in some circumstances. After discovery, Continental and Atlantic cross-moved for summary judgment. In a June 4, 2009 memorandum decision, the district court awarded summary judgment to Atlantic because Continental's action is barred by Wodraska's failure to timely notify Atlantic of the claim. Continental, the injured party, relied on Wodraska, the insured, to provide notice to Atlantic, the insurer. Because Wodraska was the only party to notify Atlantic of the claim ... Continental's rights are derivative of Wodraska's. Wodraska's notice was untimely under the Policy as a matter of law, and Continental therefore cannot recover in this action. Continental Ins. Co. v. Atlantic Cas. Ins. Co., No. 07 Civ. 3635 (DC), 2009 WL 1564144,  (S.D.N.Y. June 4, 2009). The district court acknowledged that Section 3420(a) authorizes an injured party who has obtained a judgment against the party responsible for the injury ... to institute a direct action against the insurer of the party against whom the judgment was obtained. Id. at  (internal quotation marks omitted). The court also agreed that in some circumstances the injured party may have greater rights than the insured. For example, even where the insured fails to give notice to the insurer of a claim as required by a policy, courts may still permit the injured party to recover. Id. at . However, [w]here the insured is the first to give notice of a claim to the insurer, ... then the injured party's rights are considered to be derivative of the insured's vis-a-vis the insurer. In [such a] scenario, where the insured's notice is untimely and the insurer disclaims coverage based on untimely notice, an injured party will be unable to recover under Section 3420 against the insurer because of the insured's untimely notice. Thus it is critical, in assessing a claim brought under Section 3420, to determine which partythe injured party or the insuredfirst notified the insurer of the claim. Id. (citations and footnote omitted). The court noted, It is an anomaly of the Section 3420 caselaw, then, that an injured party is better off if the insured gives no notice than late notice. Id. at  n. 3. On June 15, 2009, Continental moved for reconsideration, arguing that the summary judgment decision overlooked the fact that Continental had provided independent notice of its claim to Atlantic on November 18, 2004. In an August 13 memorandum decision, the court conceded that error, but did not change its previous decision. It said that its previous decision was based entirely on the fact that Wodraska, the insured, was the first to provide notice of the claim to Atlantic.... [B]ecause Wodraska was the first to provide notice, any notice Continental provided after Wodraska provided notice was superfluous.... It is, therefore, wholly irrelevant that Continental provided notice to Atlantic after Wodraska. Continental Ins. Co. v. Atlantic Cas. Ins. Co., No. 07 Civ. 3635 (DC), 2009 WL 2476538, -2 (S.D.N.Y. Aug.13, 2009) (citations omitted).