Facts

Plaintiff Home Depot U.S.A. sells products manufactured by nonparty Woodstream Corporation, including the Victor Electronic Model m240 rat trap. On or about November 11, 2013, Home Depot customer Cheyenne Angle was injured in a Home Depot store while examining a rat trap. Battery-operated rat traps were supplied to Home Depot without batteries. The rat trap Angle handled, however, was placed on the shelf with batteries installed. While holding the trap inside the store, Angle placed his fingers inside the trap and suffered an electric shock. A Home Depot employee, observing that the rat trap's packaging appeared to be worn, concluded that a customer had returned the trap with batteries installed and that the trap was then restocked in that condition.

Within one week of the incident, Home Depot was made aware that Angle claimed to have been diagnosed with nerve damage, and that he intended to make a claim against Home Depot. In June 2014, Home Depot received a letter from Angle's counsel suggesting that Home Depot was negligent in placing the trap back on the shelf with the batteries installed. Angel subsequently filed suit against Home Depot in November 2015 and served Home Depot with the complaint in February 2016.

Woodstream was the named insured on a primary $1 million products liability insurance policy issued by defendant Twin City Fire Insurance Company and an excess policy issued by defendant National Union Fire Insurance Company of Pittsburg, Pa.

On May 12, 2017, Home Depot tendered the case to Twin City. Home Depot notified National Union on May 18, 2017, four days before a scheduled mediation and eight days before trial. After mediation, and after the trial was continued, Home Depot rejected a $5.5 million settlement demand from Angle and agreed to binding arbitration. As part of the stipulation to arbitrate, Home Depot agreed to pay Angle no less than $3 million and no more than $9 million. The arbitrator ultimately found in Angle's favor and awarded him over $12 million.

Home Depot then demanded that National Union help fund the $9 million award to Angle. National Union declined coverage, citing Home Depot's untimely notice to National Union and coverage exclusions in the Twin City policy. The National Union policy required insureds to provide National Union with notice "as soon as practicable of an occurrence that may result in a claim or suit under the policy." The underlying Twin City policy excluded any failure to make inspections that the vendor had agreed to make or normally undertook to make in the usual course of business, in connection with the distribution or sale of the Woodstream products. Home Depot's standard procedures required that all returned merchandise be inspected to ensure that they were unused prior to placing them back on the shelf.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that its May 2017 notice to defendant National Union comported with the policy's notice requirements because there was no evidence that, prior to May 2017, plaintiff had any reason to believe that Angle's claim would exceed $1 million, thus exhausting the Twin City primary policy and potentially implicating the National Union excess policy.

DEFENDANT'S CONTENTIONS: Defendant National Union contended that it was prejudiced by unreasonably late notice, which precluded coverage under the National Union excess policy. Although plaintiff knew as early as 2013 that Angle would be filing some type of claim, and was served with Angle's complaint in early 2016, plaintiff did not notify defendant National Union of Angle's injury or claims until days before trial in May 2017. Defendant National Union asserted that the rat trap that injured Angle was only restocked on the Home Depot shelf because plaintiff failed to follow its own inspection procedures, and thus the inspection exclusion under the Twin City policy applied. Defendant National Union argued that plaintiff could not possibly have followed its own standard inspection procedures because, if it had, then the rat trap would not have been placed back on the shelf in a used, energized, and unsalable condition.

Result

The court granted defendant National Union's motion for summary judgment.