Opinion ID: 1573620
Heading Depth: 1
Heading Rank: 2

Heading: Related Litigation

Text: After the default judgment was entered in her favor, Mildred Lemuel filed a garnishment action in state court, claiming that Admiral, as Lifestar's primary insurer, was liable for a portion of the $5,000,000 default judgment against Lifestar. Markel American Insurance Company (Markel) was Lifestar's excess-insurance carrier. Admiral responded to Lemuel's garnishment action by removing the action to the United States District Court for the Middle District of Alabama and by filing a declaratory-judgment action in the federal court, seeking a judgment declaring that it was not liable for the default judgment. See Lemuel v. Admiral Ins. Co ., CV-03-1101, and Admiral Ins. Co. v. Lemuel, CV-03-D-1102-N. In its declaratory-judgment action, Admiral argued that, contrary to the terms of its policy with Lifestar, Lifestar failed to notify it of Mildred Lemuel's action until after the default judgment had been entered and that, because of the delay in notice, Admiral was not required to pay any portion of the default judgment. Markel, which did not receive notice of the Lemuel action until almost a year after Admiral, also filed a declaratory-judgment action in federal court seeking a declaration that Lifestar's untimely notice constitutes a breach of the notice provision of its policy with Lifestar. See Markel American Ins. Co. v. Lifestar Response of Alabama, Inc., d/b/a Care Ambulance, CV-04-D-942-N. The federal district court consolidated the three cases. On January 23, 2006, the federal district court concluded that the default judgment was not covered under the applicable insurance policies and granted the summary-judgment motions filed by Admiral and Markel. Lemuel v. Admiral Ins. Co., 414 F.Supp.2d 1037 (M.D.Ala.2006). In its opinion, the court defined the substantive issue as whether Lifestar gave timely notice of Lemuel's claims and legal action to Admiral and Markel, in light of the express conditions in the policies that the insured give notice `as soon as practicable/possible' and [that it] forward suit `papers immediately.' 414 F.Supp.2d at 1048. The first issue addressed by the court was a choice-of-law question. Lemuel and Lifestar contended that the parties to the Admiral policy contractually agreed that New York law would govern. Alternatively, they argued that Alabama's application of the principle of lex loci contractus would yield the same result  i.e., New York law would govern  because the insurance contract was issued and delivered in New York. Admiral contended that an equally valid argument could be made for applying Alabama law because Lifestar is an Alabama corporation doing business in Alabama or, in the alternative, an exception to the principle of lex loci contractus applies because performance and coverage of the policy was to occur in Alabama. The federal district court concluded that there was no conflict between New York law and Alabama law as to the issues disputed and that when there is no conflict the court did not have to determine which state's law governed. The court determined that under the law of both states when an insurance policy contains as a condition precedent to coverage that the insured provide prompt notice of a claim or an action, the insured must comply with that condition in a timely manner and that, absent a valid reason for the untimely delay, the notice is deemed unreasonable. The federal district court stated that the date Lifestar had actual notice of the Lemuel action was a pivotal factual issue in determining whether Lifestar timely notified Admiral and Markel of the Lemuel action. Admiral asserted that Lifestar, as a party in the state court proceedings, was barred by the doctrines of collateral estoppel and/or res judicata from relitigating the findings of the state court as to the date Lifestar received notice of the litigation in the Lemuel action. According to Admiral, because this Court affirmed the Montgomery Circuit Court's judgment, which was based, in part, on a finding that Lifestar received actual notice of Lemuel's complaint on January 7, 2003, the federal district court was bound by that finding, and Lifestar could not relitigate the issue in the federal proceedings. Lifestar argued that neither collateral estoppel nor res judicata precluded it from demonstrating when it actually received notice that Lemuel's complaint was filed against Lifestar. The federal district court stated that it was bound by 28 U.S.C. § 1738, the full-faith-and-credit doctrine, to give a state court judgment the same preclusive effect that would be given the judgment under the law of the state in which the judgment was entered. The court determined that under Alabama law the doctrine of collateral estoppel did not apply. However, the court held that the doctrine of res judicata did apply and that Lifestar was bound by the state court's finding as set out in Lifestar Response of Alabama, Inc. v. Lemuel, supra , that Lifestar received notice of the Lemuel action on January 7, 2003. The federal district court further held that because Lifestar was notified of the Lemuel action on January 7, 2003, and because it did not notify Admiral until June 3, 2003, nearly 5 months after it received notice, Lifestar had failed to timely notify Admiral under the terms of the insurance policy. Similarly, Markel was not timely notified because Lifestar did not notify it of the Lemuel action until May 12, 2004. Lifestar appealed the federal district court's decision to the United States Court of Appeals for the Eleventh Circuit. While the appeal was pending, Lifestar settled its claim against Markel for $25,000. On January 9, 2007, the Eleventh Circuit affirmed the federal district court's summary judgment for Admiral and Markel. Lemuel v. Lifestar Response of Alabama, Inc., (No. 06-11155, Jan. 9, 2007, 11th Cir.2007)(not selected for publication in the Federal Reporter). In 2005, Lifestar sued, in Bergen County, New Jersey, its insurance agent, Capacity Coverage Company of New Jersey, Inc., for failing to give the insurance carriers timely notice of the Lemuel action. See Lifestar Response of Alabama, Inc. d/b/a Care Ambulance v. Capacity Coverage Co. of New Jersey, Inc., CV-3951-05. Ultimately, that case was settled for $100,000.