In Travelers Property Casualty Co. of America v Breeding Heavy Haulers, Inc., 2012 WL 1029459 (E.D.Ky. March 26, 2012), Breeding Heavy Haulers (“Breeding”) was insured for cargo loss and damage by Great American Insurance Co. (“Great American”). In October 2006 Breeding was hired by Process Systems to transport a crane from Tennessee to Kentucky. The crane fell off of Breeding’s trailer en route, and Breeding immediately gave notice to and demanded that Great American defend it. Great American refused the tender of defense.
Process Systems subsequently filed a claim with its own insurance carrier, Travelers. Travelers paid Process Systems $178,000 to cover the damages, and then Travelers filed a lawsuit asserting a subrogation claim against Breeding. Breeding then filed a third-party complaint against Great American. Great American moved to dismiss Breeding’s claim on the ground that it filed too late, specifically, more than two years after Breeding became aware of the claim.
Great American’s cargo insurance policy required Breeding to file any lawsuit against Great American based on the policy within two years of becoming aware of the claim. The court found that the alleged damage occurred in October 2006 and that Breeding’s third party complaint against Great American was not filed until 2010, more than two years after Breeding became aware of the claim. Accordingly, the court dismissed Breeding’s lawsuit against Great American, and Great American avoided liability.
Less than two months after Travelers v Breeding was decided another case also involving Great American was decided in Stevens Transport TL, Inc. v Great American Insurance Co., 2012 WL 1564207 (S.D.Ohio May 2, 2012). There Stevens Transport (“Stevens”), as a broker, agreed to arrange transportation for a shipment of butter moving from Ohio to California. Stevens re-brokered the load to FBT, and FBT brokered the load to Billings Transport for transportation. Billings Transport picked up the shipment but on October 14, 2008 was involved in an accident en route, resulting in the complete loss of the shipment. On May 1, 2009 Stevens paid the shipper, Land O’ Lakes, over $57,000 in satisfaction of the claim.
After paying Land O’ Lakes, Stevens promptly filed a lawsuit against FBT and Billings Transport and obtained a judgment against them on July 20, 2010. On December 20, 2010 Stevens obtained a “turnover order” from the court requiring Billings Transport to assign/transfer to Steven any claims it, Billings Transport, had against Great American. Included in the documents obtained by Stevens was a June 15, 2009 letter to Billings Transport from Great American denying coverage of the claim. As a result, Stevens filed a lawsuit against Great American on February 15, 2011.
Great American moved to dismiss the lawsuit on the basis of the contractual 2-year statute of limitation. The court held that the 2-year period began to run on October 14, 2008 when the accident occurred and Billings Transport became aware of the loss. Thus, the 2-year period expired on October 14, 2010; and, since Steven’s lawsuit was filed February 15, 2011, after the October 14, 2010 deadline, it was too late and dismissed.
Stevens v Great American is noteworthy not only because of the 2-year contractual limitation period, but also because of the status of Stevens as the subrogee of Billings Transport’s claim. As the subrogee of Billings Transport, Stevens acquired only those rights Billings Transport possessed. Thus, Stevens was bound by the terms of the cargo insurance policy between Billings Transport and Great American and, in addition, was bound by the fact that Billings Transport became aware of the claim when the accident occurred on October 14, 2008. Where someone, such as Stevens, obtains subrogation rights, it “steps into the shoes” of the subrogor, such as Billings Transport, and obtains only the subrogor’s rights and nothing greater.
The lessons to be learned from these two cases are (1) always give prompt written notice to your and any other cargo insurer of any and all claims or potential claims, (2) if the insurance company declines coverage do not “set it aside” to take care of it once the claim is resolved with the claimant and/or its insurance company, but rather determine if you have to challenge the denial of coverage immediately and, if yes, then file the necessary lawsuit, and (3) read and understand the policy you need, or may need, to rely upon.