Liberty Mutual Insurance Company v. Fluor Enterprises, Inc. et al

Filing 257

ORDER AND REASONS granting Liberty Mutual Fire Insurance Company's Motion for Partial Summary Judgment Regarding Westchester's Duty to Pay Half of Defense Costs. Signed by Chief Judge Sarah S. Vance.(gec, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

LIBERTY MUTUAL FIRE INSURANCE
COMPANY

CIVIL ACTION

VERSUS

NO: 08-5166

FLUOR ENTERPRISES, INC. AND
KEITH MCLIN

SECTION: R

ORDER AND REASONS
Before the Court is plaintiff Liberty Mutual Fire Insurance
Company's motion for partial summary judgment regarding defendant
Westchester Fire Insurance Company's duty to pay defense costs.1
Finding that Liberty Mutual and Westchester were solidary
obligors with respect to their duties to defend a common insured,
and that no clear agreement discusses allocation of those defense
costs, the Court grants Liberty Mutual's motion in all respects.

I.

BACKGROUND
Pursuant to a contract with the Federal Emergency Management

Agency (FEMA), Fluor Enterprises managed the delivery and
installation of FEMA trailers following Hurricanes Katrina and
Rita. MMR Contractors was one of Fluor's haul-and-install
subcontractors under the FEMA contract. This case is a coverage

1

R. Doc. 171.

action in which insurers of both Fluor and MMR are seeking to
allocate costs following settlement of tort claims arising out of
an August 2006 FEMA trailer fire that badly injured Jean Joseph
and killed her friend, Bernard Mabry II.
At this stage in the proceedings, there is no dispute that
insurers Liberty Mutual and Westchester each bore an obligation
to defend Fluor and McLin2 after settlement in the Joseph lawsuit
exhausted both the limits of Fluor's Commercial General Liability
(CGL) policy with Continental Casualty Company, and the limits of
MMR’s CGL policy with Liberty Mutual, under which Fluor was
covered as an additional insured.3 Liberty Mutual voluntarily
assumed its duty to defend Fluor in the Mabry lawsuits under its
excess policy, while Westchester was found to owe a similar duty
in an earlier opinion issued by Judge McNamara, which the Court
adopts in extenso.4 Despite Judge McNamara’s ruling, Westchester

2

Where an insurer owes a duty to defend Fluor, it owes a
similar duty to defend McLin, an employee of a Fluor subsidiary.
Hereafter, the Court will denote obligations as to both Fluor and
McLin as obligations to "Fluor" only, for the sake of simplicity.
3

The issue of the parties’ duties to defend is distinct
from that of their respective obligations as to the sum paid in
settlement. “An insurer's obligation to defend is determined by
the petitioner's allegations and is broader than its exposure for
liability claims,” and thus, when “coverage is questionable, the
insurer must defend regardless of the outcome of the litigation.”
Jeansonne v. Quinn, 673 So. 2d 1100, 1103 (La. App. 5th Cir.
1996).
4

See R. Doc. 137 at 19 (order of Judge McNamara). Judge
McNamara's ruling did not address division of the defense costs,
as that issue was not raised.
2

has to this point refused to contribute to Fluor's defense in the
Mabry suits. From the date of the Joseph settlement and
exhaustion of Fluor's primary policies (December 30, 2008) to the
date that the Mabry lawsuits settled (March 29, 2010), Liberty
Mutual has spent $555,662.48 in defense of Fluor alone.
The Liberty Mutual excess policy contains a provision
entitling Liberty Mutual to subrogation in connection with
payments made to the insured, defense costs included:
If the insured has rights to recover all or part of any
payment we have made under this policy, those rights are
transferred to us. The insured will do all that is
necessary to secure such rights.5
In connection with the March 2010 Mabry settlements, Fluor
assigned to Liberty Mutual its claim against Westchester for
defense costs in the Mabry suits. Liberty Mutual now seeks a
judgment from this Court that Westchester is obligated to share
equally in these defense costs.

II.

STANDARD
Summary judgment is appropriate when “the pleadings, the

discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c)(2); Celotex Corp. v. Catrett, 477 U.S. 317,
5

R. Doc. 171-5 (LM-Umbrella at 40).
3

322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, the Court considers “all of the evidence in
the record but refrains from making credibility determinations or
weighing the evidence.” Delta & Pine Land Co. v. Nationwide
Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All
reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth
‘ultimate or conclusory facts and conclusions of law’ are
insufficient to either support or defeat a motion for summary
judgment.” Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216
(5th Cir. 1985) (quoting Wright & Miller, Fed. Prac. and Proc.
Civ. 2d § 2738 (1983)).
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th
Cir. 1991). The nonmoving party can then defeat the motion by
either countering with sufficient evidence of its own, or
“showing that the moving party’s evidence is so sheer that it may
not persuade the reasonable fact-finder to return a verdict in
favor of the moving party.” Id. at 1265.

4

If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in
the record is insufficient with respect to an essential element
of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The
burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts
showing that a genuine issue exists. See id. at 324.

The

nonmovant may not rest upon the pleadings, but must identify
specific facts that establish a genuine issue for trial. Id. at
325. See also Little, 37 F.3d at 1075 (“Rule 56 ‘mandates the
entry of summary judgment, after adequate time for discovery and
upon motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential to
that party’s case, and on which that party will bear the burden
of proof at trial.’”) (quoting Celotex, 477 U.S. at 332).

5

III. DISCUSSION
Under Louisiana law, an obligation can be either joint,6
several,7 or solidary.8 Solidary obligations render each obligor
liable for the entire performance. La. C.C. art. 1794. Each
solidary obligor is responsible for his virile portion, and one
who has rendered the whole performance may claim from the other
obligors the virile portion of each, but no more. La. C.C. art.
1804. Solidarity shall not be presumed, however, and it arises
only from a clear expression of the parties' intent or from
operation of the law. La. C.C. art. 1796.
In this case, both Liberty Mutual and Westchester owed a
duty to defend Fluor in the Mabry lawsuits once Fluor's primary
policies were exhausted. Liberty Mutual asserts that this "shared
obligation makes them solidary obligors” and entitles Liberty
Mutual to contribution from Westchester for the costs it incurred

6

“When each of different obligors owes a separate
performance to one obligee, the obligation is several for the
obligors.... A several obligation produces the same effects as a
separate obligation owed to each obligee by an obligor or by
each obligor to an obligee.” La. C.C. art. 1787.
7

“When different obligors owe together just one
performance to one obligee, but neither is bound for the whole,
the obligation is joint for the obligors. When one obligor owes
just one performance intended for the common benefit of different
obligees, neither of whom is entitled to the whole performance,
the obligation is joint for the obligees.” La. C.C. art. 1788.
8

“An obligation is solidary for the obligees when it
gives each obligee the right to demand the whole performance from
the common obligor.” La. C.C. art. 1790.
6

defending Fluor in the Mabry lawsuits.9 Were the obligations
several instead of solidary, however, they would be governed by
general contract law, Fremin v. Collins, 194 So. 2d 470, 474 (La.
App. 4th Cir. 1967); Travelers Ins. Co. v. Acme General
Contractors, Inc., 152 So. 2d 642, 643 (La. App. 2d Cir. 1963),
and Liberty Mutual would not be entitled to contribution from
Westchester, absent a contractual relationship between those
parties.
In Louisiana, “a solidary obligation exists when the
obligors (1) are obliged to the same thing, (2) so that each may
be compelled for the whole,10 and (3) when payment by one
exonerates the other from liability toward the creditor.” Bellard
v. Am. Cent. Ins. Co., 980 So. 2d 654, 663-664 (La. 2008) (citing
Hoefly v. Government Employees Ins. Co., 418 So. 2d 575, 576 (La.
1982)). Applying these prerequisites, the Louisiana Supreme Court
has found solidary liability to exist between an uninsured
motorist carrier and the employer and/or its workers'
compensation insurer, Bellard, 980 So. 2d 654; between an
uninsured motorist carrier and a tortfeasor, see Hoefly, 418 So.

9

R. Doc. 171-1 at 6.

10

This is not to say that solidary obligors must be
liable for the entirety of the debt. See Bellard v. Am. Cent.
Ins. Co., 980 So. 2d 654, 666 (La. 2008) (“[P]arties may be
solidarily liable although their liability is in different
amounts.”) (citing Am. Bank and Trust Co. v. Blue Bird Restaurant
& Lounge, Inc., 290 So. 2d 302, 306 (La. 1974); Narcise v. Ill.
Central Gulf Railroad Co., 427 So. 2d 1192 (La. 1983)).
7

2d 575; between a railroad company liable to its employee under
the Federal Employer's Liability Act and a tortfeasor, Narcise v.
Ill. Cent. Gulf R.R. Co., 427 So. 2d 1192 (La. 1983); and between
an employer and a third party tortfeasor, Williams v. Sewerage &
Water Board of New Orleans, 611 So.2d 1383 (La. 1993). In each
instance, the Court emphasized that “it is the coextensiveness of
the obligations for the same debt which creates the solidarity of
the obligation.”11 Bellard, 980 So. 2d at 664 (citing Hoefly, 418
So. 2d at 576; Williams, 611 So. 2d at 1386; Narcise, 427 So. 2d
at 1195).
In this case, Liberty Mutual and Westchester both are liable
for the whole of Fluor’s defense costs in the Mabry lawsuits. But
Liberty Mutual bore the additional obligation of defending its
named insured, MMR, in the same matter - an obligation that
Westchester did not have. Thus, Westchester argues that it cannot
be liable for the “whole performance,” since Liberty Mutual's
"performance" includes the defense of MMR. Certainly, Westchester
is not liable for any portion of the defense of a party that it
did not insure. But the sum spent in Fluor's defense represents
an obligation to which Liberty Mutual and Westchester (1) are

11

Contrary to Liberty Mutual's assertions, see R. Doc.
224 at 9, "[a]n obligation may be solidary though it derives from
a different source for each obligor." Bellard, 980 So. 2d at 665
(quoting La. C.C. art. 1797). Thus, that Liberty Mutual's and
Westchester's obligations derive from different contracts is of
no moment.
8

both obliged (2) for the whole (3) such that either's provision
of a defense would exonerate the other from liability to Fluor
for that defense. See Bellard, 980 So. 2d at 663-664 (listing
three prerequisites for solidary liability). Thus, Westchester is
liable for its virile portion of expenses pertaining to the
defense of Fluor alone. See Jensen v. Snellings, 1991 U.S. Dist.
LEXIS 2356, at *7 (E.D. La. 1991) (finding insurers “solidary
obligors to their mutual insured” when, “with respect to the
defense obligations, the policies are identical”). Cf. Bellard,
980 So. 2d at 666 (“To the extent the elements of damage
recoverable from the uninsured motorist carrier and the workers’
compensation insurer are co-extensive, the uninsured motorist
carrier and the workers' compensation insurer are solidarily
liable.”); Narcise, 427 So. 2d at 1195 (“While one item of
damages may be recoverable against one debtor and not the other,
the parties are liable in solido as to every item for which
plaintiff can compel payment from either.”).
Westchester seems to have assumed that Liberty Mutual’s
defense of MMR and defense of Fluor are not separable. This is,
of course, an incorrect assumption. Liberty Mutual’s duties to
defend MMR and Fluor are conceptually distinct, and there were
separate costs for each representation. Fluor chose its own
counsel, and in the time between the settlements of the Joseph
and the Mabry lawsuits, Liberty Mutual paid $555,662.48 to

9

Fluor’s counsel for the defense of Fluor exclusively. Fluor’s
counsel did not defend MMR or any other parties in the underlying
litigation. Because Liberty Mutual and Westchester are solidary
obligors with respect to their duties to defend Fluor, and
because Liberty Mutual rendered the whole performance, it is now
subrogated to the rights of the obligee and entitled to its
virile portion from Westchester.
Finally, the Court must decide how these defense costs are
to be allocated. When a solidary obligation arises from a
contract, “virile portions are equal in the absence of agreement
or judgment to the contrary.” La. C.C. art. 1804. Although
Liberty Mutual’s and Westchester’s policies both contain “other
insurance” provisions that address allocation among insurers in
the case of a loss, at least one Louisiana court has found that
defense costs are not included within the ambit of losses to
which such clauses apply. See Vaughn v. Franklin, 785 So. 2d 79,
89 (La. App. 1st Cir. 2001) (finding that an “other insurance”
clause applies only to indemnification and “has nothing to do
with defense costs”). Westchester has not provided the Court with
any cases to the contrary, asserting merely that an insurer’s
duty to defend “is found in the insuring agreement and is a loss
under same.” Westchester has pointed to no policy provision that
supports this argument and has referred to a single page of its
policy that is inapposite to this issue. Accordingly, it has

10

given the court no reason to find that the “other insurance”
provisions apply to defense costs.
When insurers owe a co-equal duty to defend, they also share
the cost of that defense equally, absent a clear agreement to the
contrary. See La. C.C. art. 1804. Thus, the Court finds that
Westchester is to share equally in the cost, borne by Liberty
Mutual, of defending Fluor following settlement of the Joseph
lawsuit.

VI.

CONCLUSION
For the foregoing reasons, the Court GRANTS Liberty

Mutual's motion in all respects.

New Orleans, Louisiana, this 27th day of January, 2012.
__

_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

11