Opinion ID: 2769803
Heading Depth: 3
Heading Rank: 2

Heading: Contractual Relationship

Text: Westchester next makes a number of arguments drawing attention to the contractual relationship between PALS and Northwest. Westchester first proposes this case is unlike the negligent driver situation (where this doctrine most often arises) because PALS injured its “contracting partner” in the context of a “private contractual relationship.” Westchester neglects to demonstrate how this fact undermines the doctrine’s application. The ordinance protects “any non-owned property in the care, custody and control of the operator on the airport,” see Clark County Code § 20.10.020(c) (emphasis added), giving no regard to the presence or absence of an ongoing business relationship. Westchester mainly contends the compulsory insurance doctrine does not apply “where injured parties have some other avenue available . . . to recover compensation” or where it is not “‘wholly outside the ability of the injured person’ to secure performance by the tortfeasor of policy conditions such as notice and cooperation.” (Quoting Royal Indem., 193 F.2d at 453). We do not disagree with this reasoning as a logical matter, but the record here does not suggest Northwest had any other unexplored avenue of compensation for the damages sought here or any 4 Westchester also reasons the Clark County ordinance “does not apply to a broad class of actors analogous to parties seeking a license to sell propane to the public at retail, operating a public warehouse, providing taxicab services to the public or operating a motor vehicle on public roads,” but we do not understand (and Westchester does not explain) how the number of prospective insureds is relevant to the rationale behind the compulsory insurance doctrine. -10- effective means of securing PALS’s compliance with the policy conditions. The simple existence of a continuing business relationship with PALS did not necessarily give Northwest control over whether the policy conditions were met. First, to the extent Westchester claims Northwest had “its own insurance,” Northwest actually recovered only part of its loss, and the district court took this source of compensation into account, awarding Northwest only for the uncompensated portion of damages—$4,089,446.32. Second, Westchester asserts Northwest must have known the identity of PALS’s insurer and could have supplied notice itself because, under their agreement, Northwest was contractually entitled to know the identity of PALS’s insurer. Relying only on these contractual rights, Westchester faults Northwest for failing to provide earlier notice to Westchester when “Northwest was fully aware of who PALS’ insurer was, and fully able to give Westchester notice.” Yet Westchester provides no record citation to support this assertion, and we find no indication in the record that Northwest actually succeeded in obtaining this information from PALS. Third, although Northwest did continue its business relationship with PALS, it is wrong to assume, as Westchester does, that Northwest could have leveraged its business as PALS’s customer or its contractual rights to prod PALS into satisfying the policy conditions. Westchester even suggests Northwest should have threatened to terminate its business agreement with PALS. There is no evidence of undue delay or laxity on Northwest’s part. And given PALS’s and its owner’s proven record of failing to respond to communications, court summonses, civil complaints, and subpoenas (all of which led to two unfavorable default judgments), we cannot assume Northwest could have done more to ensure PALS’s cooperation even if it had learned sooner of Westchester’s policy. Nor is it reasonable to assume Northwest could walk away and terminate its business relationship with PALS outright, even if it was within Northwest’s contractual rights to do so. -11- Throughout late 2003 and early 2004, Northwest and its insurer made Westchester aware of Northwest’s claim, requested Westchester’s coverage position, and provided considerable documentation of the incident. After reviewing Northwest’s claim and information, Westchester agreed the incident occurred within the scope of the policy, identifying the only defects as being the absence of notice from PALS and PALS’s lack of cooperation. By summer 2004, Westchester determined the claim was not covered due to lack of notice from PALS. Thereafter, Westchester did not respond to Northwest’s June 30, 2004, request for a coverage position or Northwest’s November 15, 2004, letter informing Westchester of the Minnesota state court litigation and the impending possibility of a default judgment. On this record, we find little fault with Northwest’s communication with Westchester. Neither the Minnesota Supreme Court nor any other court we could find has considered whether to apply the compulsory insurance doctrine in circumstances as unusual as those presented here. Yet the doctrine has been applied with significant consistency across multiple jurisdictions. Applying the reasoning and principles from those cases, we predict the Minnesota Supreme Court would find in Northwest’s favor. We do not perceive a principled reason why the Minnesota Supreme Court would place this case outside the rationale of Minnesota’s compulsory insurance doctrine. Finally, this doctrine exists at a balance point between the interests of the injured party in recovering and the insurer in obtaining prompt notice and cooperation. That being the case, it is certainly relevant in our assessment of this unusual scenario that (1) beginning soon after Northwest learned of the Westchester policy and over a year before Northwest filed suit, Northwest gave Westchester actual notice of its claim, the lawsuit, and the possibility of a default judgment, and (2) it was Westchester who spurned the notice from Northwest, discontinued communications, and, despite its actual knowledge, chose not to participate in the Minnesota litigation. -12-