In the

United States Court of Appeals
              For the Seventh Circuit

No. 08-3316

JOHN F. C ASTRONOVO, Personally and as Administrator
of the Estate of Sandra S. Castronovo, Deceased,

                                              Plaintiff-Appellant,
                                v.


N ATIONAL U NION F IRE INSURANCE C OMPANY
OF P ITTSBURGH , PA,
                                     Defendant-Appellee.


             Appeal from the United States District Court
      for the Northern District of Indiana, Hammond Division.
       No. 2:06-cv-00142-JVB—Joseph Van Bokkelen, Judge.



        A RGUED M AY 15, 2009—D ECIDED JULY 6, 2009




   Before E ASTERBROOK, Chief Judge, and B AUER and
F LAUM, Circuit Judges.
  F LAUM, Circuit Judge. Plaintiff John Castronovo, as
assignee of Doug Lavery, Ltd. (“Lavery”) and Kenneth
Lively (“Lively”), sued National Union Fire Insurance
Company of Pittsburgh, PA (“National Union”) to collect
2                                               No. 08-3316

the unpaid balance of a $6 million consent judgment
entered against Lavery and Lively in the underlying
litigation. Plaintiff alleges that Lavery and Lively were
additional insureds under the National Union policy
and entitled to indemnification for that portion of the
consent judgment not satisfied by other insurers. On the
parties’ cross-motions, the district court entered sum-
mary judgment for National Union and against plaintiff
with respect to all claims, ruling that National Union is not
obligated to pay the balance of the consent judgment.
Plaintiff appealed, and we now affirm.


                      I. Background
    A. The Accident
  On February 3, 2003, Sandra Castronovo was stopped
for a red light at the intersection of U.S. Highways 421
and 30 in Wanatah, Indiana. A tractor trailer driven by
Kenneth Lively struck her car, causing it to spin out of
control and strike a semi-trailer. Tragically, Castronovo
died the next day.
  Lively was employed by Lavery. When the accident
occurred, Lively was acting in the scope of his employ-
ment, driving a semi-tractor owned by Lavery, and
hauling a trailer owned by GE Capital Corp., which GE
had leased to Greif Brothers Corp. (“Greif”). Lavery and
Greif were operating pursuant to an oral agreement
under which each could use the other’s trailers.
No. 08-3316                                               3

  B. The Insurance Policies
  Lavery was the named insured under a commercial
general liability insurance policy issued by Owners In-
surance Company with liability limits of $1 million. As
Lavery’s employee, Lively was an insured under the
Owners policy as well. Travelers Property Casualty
Company of America had issued a commercial auto-
mobile policy to Greif with liability limits of $2 million.
   Greif also was the named insured under a $25 million
National Union umbrella policy, which additionally
afforded coverage to certain permissive users of any
auto owned by, or loaned to, Greif. The Schedule of
Underlying Insurance in the National Union policy
listed the Travelers’ policy. The National Union policy
followed form to the Travelers policy for excess coverage
and also provided primary insurance for risks covered
by the National Union policy but not covered by any
underlying insurance. As a condition precedent to cover-
age, the policy required all insureds to notify National
Union of any demands against it and to obtain National
Union’s consent before voluntarily assuming any obliga-
tion.


  C. The Underlying Litigation
  Plaintiff John Castronovo, personally and as admin-
istrator of his wife’s estate, sued Lively, Lavery and GE
Capital for wrongful death in the underlying action
(Castronovo v. Lively, 2:03-cv-248 (N.D. Ind. filed June 18,
2003)). In March 2004, he added Greif as a defendant.
4                                             No. 08-3316

   Owners provided Lavery, Lively, and GE with a defense
at the outset of the litigation. Travelers later accepted
tender of GE’s defense from Owners under the terms of
the trailer lease agreement with Greif. Greif tendered
its defense to Travelers.
  In November 2004, plaintiff sent a global settlement
demand of $6.276 million to all defendants. In February
2005, Greif and GE filed a motion for summary judgment,
which Castronovo, Lively and Lavery opposed. Travelers
considered plaintiff’s case a “no pay situation” prior to
the district court’s ruling on the summary judgment
motion.
  National Union first learned of the underlying suit in
a March 2005 e-mail from Jeffrey Wood, Greif’s risk
management director, to David Bejbl of AIG Domestic
Claims (National Union’s claims administrator). Wood
stated that the claim had significant value, and he
added: “from our perspective there was no negligence
on the part of Greif but there is an argument that Greif’s
auto policy should be excess over the limits of Lavery
($1 million).” He closed by asking how Bejbl would like
Greif to handle the claim. In April 2005, Steven Tracy,
Travelers’ director of claim services, spoke with Michael
Mangino of AIG Domestic Claims about the suit. Accord-
ing to Tracy’s notes, Mangino stated he did not want a
copy of the case file until after the motion for summary
judgment was decided. AIG Domestic Claims representa-
tives, on behalf of National Union, continued to inquire
of Travelers regarding the progress of the summary
judgment motion.
No. 08-3316                                               5

  In summer 2005, coverage counsel hired by Owners
inquired about coverage for Lavery and Lively under
Travelers’ policy. Travelers denied coverage for Lavery.
Travelers suggested there was no coverage under the
Travelers policy for Lively because Lively was not
hauling Greif’s load when the accident occurred, but it
did not give a definitive answer as to Lively. Travelers
indicated that its position would depend on how the
court ruled on Greif’s summary judgment motion.
  Owners filed a motion to intervene in the underlying
action on July 15, 2005, and it filed a complaint for inter-
pleader on July 29. On August 10, Owners deposited
$996,116, the remaining limits of its policy, with the
court, and it asked to be absolved of any further duty
to defend or indemnify Lavery and Lively.
  By July 2005, Lavery and Lively were exploring a consent
agreement in exchange for a covenant not to execute
against their personal assets. In furtherance of that agree-
ment, plaintiff gave Lavery’s and Lively’s defense
counsel an exemplar agreement and case law for addi-
tional language to be included in the documents.
  Lavery and Lively did not notify National Union of their
coverage discussions with Travelers or their negotiations
for a consent judgment. Moreover, Travelers did not
advise National Union of its coverage discussions with
Lavery and Lively.
  In late August 2005, Lavery and Lively finalized and
executed their consent judgment agreement in the
amount of $6 million. The Marshall County Superior
Court, Probate Division, authorized plaintiff to enter into
6                                               No. 08-3316

the agreement, whereby Lavery and Lively would assign
their interests against applicable insurance carriers for the
amount of the consent judgment in excess of the funds
Owners had paid into court. Castronovo executed an
unconditional covenant not to enforce the consent judg-
ment against Lavery’s and Lively’s personal assets. The
parties signed the agreement and filed it with the district
court on September 1. On September 7, the court approved
the consent judgment and entered judgment for plaintiff
and against Lavery and Lively for $6 million. National
Union’s first notice of the consent judgment came on
September 12, in a letter from Greif’s counsel.
  Travelers later determined that Lavery and Lively were
insureds under its policy. On October 18, 2005, Travelers
paid Castronovo its policy limits of $2 million. On
October 24, the funds that Owners had deposited with
the court were released to plaintiff.
  National Union then refused to pay the excess amount.
National Union argued that it was never asked to
defend Lavery or Lively and did not know about the
proposed consent judgment until after it was approved,
and therefore it was not liable for any excess over Travel-
ers’ $2 million limits. A balance of $3,003,883 remains
unpaid.


    D. The Instant Coverage Litigation
  In April 2006, Castronovo—as Lavery’s and Lively’s
assignee—filed the instant action against National Union
to collect the unpaid balance under the settlement agree-
No. 08-3316                                               7

ment. Castronovo claimed that National Union wrongly
failed to defend or investigate plaintiff’s claim, engaged
in unfair claim practices, and breached its contract obliga-
tion of good faith.
  National Union denied those claims. It filed a counter-
claim for a declaration that it had no obligation to
Castronovo as the assignee of Lavery and Lively under
the umbrella policy because the insureds had breached
certain policy conditions.
  The district court entered summary judgment for Na-
tional Union. The court applied Ohio law because Ohio
had the most intimate contacts to the facts, and it ruled
that Lavery and Lively materially breached a condition
precedent to coverage under the National Union policy
by failing to obtain National Union’s agreement prior
to entering into the consent judgment. In finding breach
of a condition precedent, the court rejected plaintiff’s
argument that: (1) National Union had a duty to defend
and provide coverage to Lavery and Lively; (2) it
breached that duty; and (3) as a consequence, it waived
compliance with, and was estopped from, asserting the
consent clause as a bar to coverage.


                       II. Analysis
  On appeal, plaintiff does not dispute that Ohio law
applies, nor does he challenge that, if National Union
was able to assert the consent clause as a bar to cover-
age, the district court’s conclusion that the assignees
materially breached a condition precedent to coverage was
8                                             No. 08-3316

correct. However, plaintiff argues that the district court
erred in rejecting the argument that National Union was
estopped from asserting the consent clause as a bar to
coverage. Accordingly, we must examine whether
National Union breached a duty to defend, thereby
estopping it from asserting the consent clause. We
conduct our review of the district court’s ruling on sum-
mary judgment de novo, construing facts and drawing
inferences in the light most favorable to the plaintiff.
Cooper-Schut v. Visteon Auto. Sys., 

, 425 (7th
Cir. 2004).
  As mentioned, the umbrella policy at issue required
National Union to defend a lawsuit alleging a covered
risk under two circumstances—when all applicable under-
lying policy limits have been exhausted by the payment of
claims (vertical coverage), or when the National Union
policy is the only policy that applies to the risk alleged
(horizontal coverage). Specifically, the policy provisions
state:
    II. Defense
        A. We shall have the right and duty to defend any
        claim or suit seeking damages covered by the
        terms and conditions of this policy when:
            1. The applicable Limits of Insurance of the
            underlying policies listed in the Schedule of
            Underlying Insurance and the Limits of Insur-
            ance of any other underlying insurance pro-
            viding coverage to the Insured have been
            exhausted by payment of claims to which this
            policy applies; or
No. 08-3316                                                 9

              2. Damages are sought for Bodily Injury . . .
              covered by this policy but not covered by
              any underlying insurance listed in the Sched-
              ule of Underlying Insurance or any other
              underlying insurance providing coverage to
              the Insured.
  Plaintiff focuses his argument on Section II.A.2, the
“horizontal” coverage provision.1 According to plaintiff,
Travelers’ denial of coverage made the underlying suit
one in which damages were being sought for injuries
“covered by this policy but not covered by any under-
lying insurance” within the meaning of II.A.2., triggering
National Union’s duty to defend. Yet, as the district court
stated, plaintiff’s argument is problematic because even
assuming that Travelers’ denial of coverage could
trigger National Union’s duty to defend, there were
two underlying insurers, and Owners provided coverage
to Lavery and Lively.
  Plaintiff now argues that Owners paid its policy limits
into court and had no further duty to defend and Travelers
refused to defend, and that Owners did not provide
coverage for damages in excess of its $1,000,000 policy
limits. Therefore, plaintiff reasons, no underlying insurance



1
  Plaintiff acknowledges that Section II.A.1 does not help him
because the duty to defend under that Section does not arise
until the limits of the underlying coverage are paid. The
limits of the coverage provided by Owners and Travelers
were not paid until October 2005, after the district court had
approved the consent judgment.
10                                             No. 08-3316

covered the damages above Owners’ limits. Plaintiff
contends National Union should have provided Lavery
and Lively a defense for damages in excess of $1,000,000.
  Plaintiff’s argument fails because the Section II.A.1
“vertical” coverage provision and the Section II.A.2
“horizontal” coverage provision are mutually exclusive.
Under paragraph II.A, the vertical and horizontal defense
obligations are presented disjunctively, applying only
when “[t]he applicable Limits of Insurance of the underly-
ing policies . . . have been exhausted . . . ; or [d]amages
are sought for Bodily Injury . . . covered by this policy
but not covered by any underlying insurance.” The extent
of underlying policy limits is immaterial under the
latter horizontal coverage provision; the relevant
inquiry is whether “any underlying insurance” applies to
the risk or occurrence alleged. If so, then the horizontal
coverage provision cannot be implicated. See Monsler v.
Cincinnati Cas. Co., 

, 1209 (Ohio Ct. App.
1991) (umbrella policies do not provide both excess and
umbrella coverage for the same alleged occurrence). As
plaintiff concedes, Owners was the primary insurer for
Lavery and provided coverage to Lavery and Lively in
the underlying litigation. Travelers’ apparent denial of a
defense to Lavery and Lively did not create a defense
obligation on the part of National Union.
  Even if Travelers’ denial of coverage implicated the
horizontal defense provision of National Union’s policy,
National Union did not owe a duty to defend Lavery
and Lively because they never requested a defense.
Plaintiff argues that National Union breached its con-
No. 08-3316                                             11

tract and denied coverage to its insureds when it failed
to act and failed to investigate after it received informa-
tion about the claim from an authorized agent of Greif.
However, under Ohio law, an insurer’s duty to defend
is triggered by the insured’s demand that the insurer
provide a defense to a claim of alleged liability. Twin
Maples Veterinary Hosp. v. Cincinnati Ins. Co., 

, 1030 (Ohio Ct. App. 2005). Here, there was no
request for a defense, so there was no duty to act.
  National Union did not have a duty to defend and
provide coverage to Lavery and Lively. Therefore, it
did not breach any duty, and it was not estopped from
asserting the consent clause as a bar to coverage. It was
able to assert the consent clause, and Lavery and Lively
materially breached a condition precedent to coverage
under the National Union policy by failing to obtain
National Union’s agreement prior to entering into the
consent judgment. National Union is not obligated to
indemnify Lavery and Lively under the consent judgment.


                     III. Conclusion
 We A FFIRM the decision of the district court.




                           7-6-09