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Auto-Owners Insurance Co v. Xtreme Auto Sales

February 7, 2011


The opinion of the court was delivered by: Judge Ronald A. Guzman


This is a declaratory judgment action involving whether Xtreme Auto Sales, Inc. ("Xtreme") violated the notice provision of its insurance policy with Auto-Owners Insurance Company ("Auto-Owners"). Before the Court are the cross motions for summary judgment of plaintiff Auto-Owners and defendants Kirk and June Wilkerson.*fn1

For the following reasons, the Court grants plaintiff's motion for summary judgment and denies defendants' cross motion.


A. Underlying Tort Litigation

On July 2, 2004, the Wilkersons and Ivan Totev were involved in an automobile accident in New Jersey. (Pl.'s LR 56.1(a)(3) Stmt. ¶ 1.) On June 19, 2006, the Wilkersons filed a personal injury action against Totev and Xtreme, the owner of the vehicle Totev was driving, for injuries and damages resulting from the accident ("Wilkerson action").*fn2 (Id. ¶ 2.) On the date of the accident, Xtreme had liability coverage with Auto-Owners in the amount of $1,000,000.00 per occurrence. (Id. ¶ 18.) In defense of the litigation, Xtreme mistakenly notified its subsequent carrier, National Casualty Company ("National"), who also mistakenly accepted the risk by attempting to enter a defense through attorneys retained in New Jersey. (Id. ¶ 10.)

On February 29, 2008, a default judgment was entered against Totev and Xtreme in the Wilkerson action for failure to timely answer or otherwise move as to the complaint. (Id. ¶ 9.) On April 10, 2008, Xtreme filed a motion to vacate the default, which was denied on May 9, 2008. (Id. ¶ 11.) On May 20, 2008, Xtreme filed a motion for reconsideration, which was denied on June 6, 2008. (Id. ¶ 12.) On June 9, 2008, a proof hearing was conducted in the Wilkerson action, at which time the court entered a $260,000.00 judgment in favor of the Wilkersons and against Xtreme and Totev.*fn3 (Id. ¶ 9.) Throughout these proceedings, Xtreme was represented by National. (Id. ¶ 10.) On June 20, 2008, Auto-Owners received its first notice of the Wilkerson action.

(Id. ¶ 23.) On or about July 16, 2008, National denied coverage for Xtreme for the Wilkerson action, but agreed to continue funding Xtreme's defense thorough August 20, 2008, to allow it to perfect an appeal. (Compl. ¶ 19.) On August 21, 2008, the appeal was denied. (Pl.'s LR 56.1(a)(3) Stmt. ¶ 14.) On September 15, 2008, Auto-Owners received a copy of the complaint. (Id. ¶ 24.)

B. Auto-Owners' Insurance Policy

The policy Auto-Owners issued to Xtreme states: NOTICE OF ACCIDENT, CLAIM OR SUIT. Upon the occurrence of an accident covered by this policy, the insured shall give immediate notice to the Company [Auto-Owners] or its authorized agent. Failure to give such notice shall not invalidate this insurance if it is shown that the insured could not reasonably give such notice. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and address of the injured persons, the owner or driver of the other automobile involved and available witnesses. The named insured shall promptly take at his expense all reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, but such expense shall not be recoverable under this insurance. If claim is made or suit is brought against the insured, the insured shall immediately forward to the Company [Auto-Owners] every demand, notice, summons or other process received by him or his representative.

(Id. ¶ 19; Pl.'s Ex. M4, Ins. Policy, at 70.) On November 18, 2008, Auto-Owners filed a complaint in this Court for a declaration that it has no duty to defend or indemnify Xtreme due to, among other things, lack of timely notice. (Pl.'s LR 56.1(a)(3) Stmt. ¶ 15.)


A. Legal Standard

Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The movant bears the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If the movant meets this burden, the non-movant cannot rest on conclusory pleadings but "must present sufficient evidence to show the existence of each element of its case on which it will bear the burden at trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86 (1986). To succeed on a summary judgment motion, the evidence must be such "that [no] reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering the motion, the court must view all evidence in the light most favorable to the non-movant. Id. at 255. Whether an insured's notice to ...

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