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Jordan v. Maxfield & Oberton Holdings, LLC

United States District Court, S.D. Mississippi, Northern Division

February 23, 2018

MEAGHIN JORDAN, ET AL. PLAINTIFFS
v.
MAXFIELD & OBERTON HOLDINGS LLC, ET AL. DEFENDANTS

          ORDER

          Carlton W. Reeves UNITED STATES DISTRICT JUDGE

         The present question is whether Maxfield & Oberton Holdings (M&O) or its insurers received timely notice of Braylon Jordan's “claim.” Disputed issues of material fact precluded summary judgment. See Docket No. 224. The parties then stipulated that the matter should be adjudicated on the papers rather than at trial. Great American and Indian Harbor subsequently settled the coverage dispute, but the notice issue must be adjudicated as to Evanston and Scottsdale.[1] The Court will dispense with a factual recitation given the parties' familiarity with this long-running case.

         Pretermitting the more difficult issue of whether the newspaper article discussing Jordan's injuries should have been treated as a claim, the great weight of the evidence reveals that both insured and insurers alike actually received and recorded the information as a claim made during the 2011-2012 policy period.

         I. Background

         None of the insurance policies define “claim, ”[2] so the parties have sought guidance from New York law.[3] Judge Winter's explanation is useful and thorough:

Giving the term its ordinary meaning, a claim is an assertion by a third party that in the opinion of that party the insured may be liable to it for damages within the risks covered by the policy. It “must relate to an assertion of legally cognizable damage, and must be a type of demand that can be defended, settled and paid by the insurer.” Evanston Ins. Co. v. GAB Business Servs., Inc., 132 A.D.2d 180, 185, 521 N.Y.S.2d 692, 695 (1st Dep't 1987) (interpreting a standard “claim” provision). A claim may be made without the institution of a formal proceeding. . . . A third person's assertion of liability is a claim, moreover, whether or not there is reason to believe that there actually is liability. Unless the assertion is made in circumstances so unusual that they negate the possibility of a formal proceeding involving defense costs as well as liability, virtually any assertion of an exposure to liability within the risks covered by an insurance policy is a claim.

Am. Ins. Co. v. Fairchild Indus., Inc., 56 F.3d 435, 439 (2d Cir. 1995) (emphasis added). “[T]he determination of whether a given demand is a ‘claim' within the meaning of a claims made policy requires a fact-specific analysis to be conducted on a case-by-case basis.” F.D.I.C. v. Mijalis, 15 F.3d 1314, 1331 (5th Cir. 1994) (citation omitted).

         Also helpful is a basic understanding for why, exactly, insurance companies require prompt notices of claims. “A notice provision in an insurance policy is essential to giving the insurance company the chance to settle or litigate claims for which it ultimately might be liable.” State of Miss. v. Richardson, 817 F.2d 1203, 1207 (5th Cir. 1987) (citations, quotation marks, and brackets omitted). The Fifth Circuit continued, “timely notice enables the insurer to investigate a claim against the insured which may be covered by the policy; to itself decide whether the claim should be settled without litigation, and, if not, to prepare its defense.” Id. New York law is similar. See Security Mutual Ins. Co. of New York v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440-41 (1972) (“Notice provisions in insurance policies afford the insurer an opportunity to protect itself, and the giving of the required notice is a condition to the insurer's liability. . . . [T]he insured . . . must exercise reasonable care and diligence to keep himself informed of accidents out of which claims for damages may arise.”).

         II. Discussion

         A. M&O and Great American

         The evidence reveals that M&O met and exceeded these fundamental standards of insurance law. On April 24, 2012, M&O saw a day-old news article about severe injuries its product may have caused Braylon Jordan.[4] It expected a demand for damages to arise and immediately notified its insurers. An insurance company cannot expect more from its insured.

         Primary insurer Great American responded reasonably at the time: it opened a claim file for Braylon Jordan, gave it a claim number, repeatedly noted in its internal file that there were “no issue[s] regarding coverage, ” and said the same thing to the excess insurance companies. So it is curious that in this litigation that Great American and its counterparts now contend that the article about Jordan's injuries amounted only to notice of an “occurrence.”[5]

         The argument is difficult to credit. Great American received M&O's correspondence at E&Sclaims@galc.com, not E&Soccurrences@galc.com. Before the policy period ended, Great American worked with M&O, M&O's insurance agent (Marsh), and the excess insurers to coordinate files and make sure they had a full list of all known claimants. Another claimant's emailed-in newspaper article was fully defended and settled by Great American, M&O testified. And, tellingly, on April 25, 2012-just one day after receiving the Braylon Jordan article-Great American declined to renew M&O's policy because of “claims activity.” This despite the fact that at that time, it hadn't received any actual “claims”-according to its after-the-fact, rigid definition of the term.

         This course of conduct indicates that Great American treated news of Braylon Jordan's injuries as a claim. It would be of little value to compile and organize dozens of non-claims into spreadsheets. And it is incredible to cite “claims activity” while non-renewing a policy with no claims made. (Great American could have cited “occurrence activity” in its denial if it truly considered all of these notices to be occurrences.) No, the common-sense view is that Great American treated the article, and others like it, as claims.

         The evidence is not wholly favorable to M&O. In the same memo where Great American's employee noted no coverage issues, she also announced her “plan” to “monitor to see if a claim is presented.” Before the end of the policy period, Great American told M&O's insurance agent that “[n]o formal claims have yet been presented by any Claimants ...


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