On Appeal From the United States District Court For the Western District of Pennsylvania (D.C. Civ. No. 97-cv-02083) District Judge: Honorable Donald J. Lee
Before: Becker, Chief Judge,*fn1 Scirica *fn2
and McKEE, Circuit Judges.
The opinion of the court was delivered by: Becker, Chief Judge
Argued: September 18, 2002
In this insurance coverage dispute, plaintiff Dennis Brooks seeks coverage from defendant American Centennial Insurance Company ("ACI") for an injury he suffered while loading heavy machinery onto a truck owned by Eazor Express, for which ACI provided excess insurance coverage. Although Brooks suffered his injury in 1981, his case alleging negligence against Eazor, which he brought in the Court of Common Pleas of Allegheny County, Pennsylvania, did not go to trial until 1993. By that time, Eazor had ceased to exist. Brooks therefore sought recovery from ACI pursuant to Pennsylvania's Direct Action statute, which allows him to "stand in the shoes" of Eazor to assert against ACI any claim which Eazor could have asserted. Due to an odd combination of circumstances, no defense was offered at Brooks's trial, where he won a judgment of $5,979,482.80. While $1 million was the responsibility of (and was paid by) lower-level carriers, the balance was payable by ACI.
ACI refused to pay, however, arguing that its policy conditioned coverage upon prompt notice of any impending claim, and representing that it first learned of Brooks's suit in July of 1996, fully three years after Brooks won his verdict. It offered as evidence the testimony of Luann Petrellis, a corporate representative who worked in ACI's claims department. She testified that ACI's records showed no notice of Brooks's claim prior to 1996, and that ACI had no third-party agents authorized to receive notice of claims on ACI's behalf. The District Court granted summary judgment to ACI, finding that Brooks had failed to produce any evidence to counter Petrellis's testimony, and that Brooks's late notice had prejudiced ACI.
Although we agree that ACI was prejudiced when no defense was presented at trial, we conclude that the District Court erred in holding, on summary judgment, that ACI did not receive timely notice of Brooks's claim. Although Petrellis stated that ACI's records reflected no timely notice from Brooks, she based her opinion on her review of Eazor's underwriting files, which ACI obtained from The Underwriters, Inc. ("TUI"). TUI, at times relevant, acted as ACI's "managing agent." The record suggests that TUI had been in close communication with Darrah (the company that assembled Eazor's insurance package) and North Star (a lower-level insurer), both of which knew of Brooks's claim. Pursuant to the controlling decision in Brakeman v. Potomac Ins. Co., 371 A.2d 193 (Pa. 1977), ACI bears the burden of proving that TUI's files did not alert it to Brooks's claim. We conclude that ACI cannot carry that burden, as exemplified by the fact that Petrellis admitted at trial that "there at one time may have been a much more extensive [TUI] file. I don't know. . . . Things could have been moved. Ultimately, what we got is what we got." (A241-42.) Viewing the evidence, more fully discussed infra, in the light most favorable to Brooks, we are satisfied that a reasonable person could conclude that Petrellis failed to review all of TUI's documents, some of which might have reflected notice of Brooks's claim. We will therefore reverse the District Court's grant of summary judgment, and remand for further proceedings.
I. Facts and Procedural History
Eazor Express ("Eazor") was a trucking company headquartered in Pittsburgh, Pennsylvania. On July 28, 1981, Brooks, an employee of Gulf Oil Corp., was one of several men loading heavy industrial field pumps onto an Eazor truck. Although Brooks initially used a forklift to hoist the pumps onto the truck and to push them toward the front of the trailer, that method caused cracking in the wooden pallets under the pumps. Ben Palmer, Brooks's supervisor, therefore instructed Brooks and several of his co-workers to lift and slide the pumps manually. Brooks and two others succeeded in moving two 600-pound pumps, but when they attempted to move an 850-pound pump, the pump slid off the hand cart and fell over, pushing the hand cart into Brooks's stomach and throwing him against the wall of the trailer. Brooks has been disabled since the date of the accident. Numerous treating physicians, as well as physicians who examined him in connection with his receipt of workers' compensation benefits and Social Security total disability benefits, have confirmed that condition.
At the time of Brooks's accident, which he alleged to be the result of Eazor's negligence, Eazor maintained multi-layered general liability coverage for personal injury claims. The first layer was a self-insured retention ("SIR") of $150,000 per claim. Lloyd's of London provided coverage for claims between $150,000 and $350,000. North Star Reinsurance Corporation ("North Star") provided the next layer of coverage, which protected against claims ranging from $350,000 to $1 million. (A283.) Eazor's final layer of coverage, which was provided by ACI, is the policy at issue in the case at bar. It covered claims ranging from $1 million to $5 million. Since Interstate Commerce Commission trucking regulations required Eazor to maintain self-insurance for claims up to $100,000, Eazor arranged for an insurance certificate to be issued by Guarantee Insurance Company ("Guarantee"). (A388.) Under that arrangement, Eazor paid premiums to North Star, which in turn agreed to hold Guarantee harmless for any claim made pursuant to the certificate. (A456.)
In 1984, Eazor's creditors filed a petition for its liquidation in the United States Bankruptcy Court for the Western District of Pennsylvania. Eazor ceased operations in 1985, and its bankruptcy case was closed in 1991. Although Brooks filed his Complaint against Eazor and Goulds (the pump manufacturer) in 1983, fully a year before Eazor declared bankruptcy, his case did not proceed to trial until May of 1993; during the intervening decade, the litigation was rife with delay, miscommunication, and confusion. Brooks submits that, because of his back injury and ongoing pain arising therefrom, he has been unable to return to his job at Gulf and cannot hold any other job that involves heavy lifting or other manual labor. (A732.) Indeed, as of 1993, he contended that it was nearly impossible for him to do regular household chores, and that his injury had played a role in the deterioration of his marriage. (A729.)
Brooks brought suit by Praecipe for Writ of Summons in the Court of Common Pleas of Allegheny County, Pennsylvania, against Eazor and Goulds. Against Eazor, Brooks alleged negligence in maintaining the interior of the trailer into which he was loading pumps at the time of his injury. As to Goulds, the pump manufacturer, he claimed that the pallets on which the pumps rested were structurally inadequate, and that Goulds negligently failed to warn him of the dangerous condition. (A852, 856.) Eazor initially retained attorney James Elder to defend it, but once Eazor entered into bankruptcy and ceased operations, it apparently stopped paying Elder's fees and Elder sought to withdraw from the case. (A865.) He withdrew in 1989, and during the pendency of Eazor's bankruptcy, there seems to have been little activity concerning Brooks's claim.
Following the conclusion of the bankruptcy proceedings in 1991, Brooks began to pursue his claim more actively. In 1992, Guarantee Insurance, in coordination with North Star, retained Robert Weinheimer as counsel for the defunct Eazor. Weinheimer obtained an extension of a September 1992 trial date and received the court's permission to reopen discovery. However, as Guarantee was trying to settle the matter and wished to minimize its legal costs, it instructed Weinheimer not to defend actively against Eazor's claim. (A687-690.) Thus, no answer was ever filed, ...