PCS Nitrogen Fertilizer, LP v. American Home Assurance Company

Filing 40

RULING granting Plaintiff's PCS Nitrogen Fertilizer, LP's 13 Motion for Partial Summary Judgment and denying Defendant American Home Assurance Company's 18 Motion for Summary Judgment. The Clerk of Court's Office shall terminate 30 Motion for Oral Argument, as it is now moot. Signed by Judge James J. Brady on 4/28/2014. (LLH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
PCS NITROGEN FERTILIZER, LP
CIVIL ACTION
VERSUS
NO. 13-170-JJB-RLB
AMERICAN HOME ASSURANCE
COMPANY
RULING
This matter is before the Court on the following motions: (1) Plaintiff PCS Nitrogen
Fertilizer, LP’s Motion [doc. 13] for Partial Summary Judgment, and (2) Defendant American
Home Assurance Company’s Motion [doc. 18] for Summary Judgment. Each motion has been
opposed by the relevant party. (Docs. 17 & 22). Jurisdiction is based on 28 U.S.C. § 1332. Oral
argument is not necessary. For the reasons provided herein, the Court: (1) GRANTS Plaintiff
PCS Nitrogen Fertilizer, LP’s Motion [doc. 13] for Partial Summary Judgment, and (2) DENIES
Defendant American Home Assurance Company’s Motion [doc. 18] for Summary Judgment.
Background
PCS Nitrogen Fertilizer, LP (“PCS”) filed the present lawsuit against American Home
Assurance Company (“AHAC”) in order to recoup defense costs that PCS incurred in a previous
lawsuit. AHAC is a Canadian insurance company that issued two comprehensive general liability
policies to Potash Corporation of Saskatchewan, Inc. (“Potash”)—PCS’s parent company. The
relevant policies included Policy No. 1235072, which provided coverage from June 30, 1998 to
June 30, 2001, and Policy No. 3813253, which provided coverage from June 30, 1997 to June
30, 1998. Among other things, these policies covered Potash’s subsidiaries, and at all relevant
times, PCS was a subsidiary of Potash. Moreover, the insurance policies covered the PCS
locations in the United States, including the location in Geismar, Louisiana.
1

On January 26, 2003, employees Dennis Price and Robert Sholar filed suit against PCS
for alleged damages arising under Louisiana law. Thereafter, PCS reported the suit to AHAC,
but AHAC denied both coverage and its duty to defend. Nevertheless, the plaintiff claims that
“[a] comparison of the [s]uit and the American Home Insurance Policies triggered the duty to
defend PCS . . . .” (Doc. 1-2, p. 2). As a result, PCS avers that AHAC breached its contractual
obligation to defend PCS in the prior lawsuit, and PCS seeks to recover those defense costs
incurred in the Price and Sholar litigation.
Subsequently, PCS filed a motion for partial summary judgment, seeking summary
judgment that AHAC owed a duty to defend. In opposition, the defendant claims that the
plaintiff failed to timely bring its claim, as the defendant asserts that the applicable Canadian
statute of limitation would bar the present lawsuit. In a similar vein, the defendant thereafter filed
a separate motion for summary judgment, seeking a judgment from this Court that the plaintiff’s
claim is barred by the applicable limitation period. As these motions for summary judgment are
interrelated, the Court will deal with them concurrently.
Analysis
1. Summary Judgment Standard
Summary judgment is proper when “the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.” Fed. Rule Civ. P.
56(a). The movant must demonstrate that there is no genuine issue of material fact for trial.
When the non-moving party has the burden of proof at trial, the movant need only demonstrate
that the record lacks sufficient evidentiary support for the non-moving party’s case. Celotex
Corp. v. Catrett, 477 U.S. 317, 325 (1986). The moving party can do this by showing that the
evidence is insufficient to prove the existence of one or more essential elements of the non-

2

moving party’s case. Id. A party must support its summary judgment position by “citing to
particular parts of materials in the record” or “showing that the materials cited do not establish
the absence or presence of a genuine dispute.” Fed. Rule Civ. P. 56(c)(1).
Although the court considers evidence in a light most favorable to the non-moving party,
the non-moving party must show that there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248–49 (1986). Conclusory allegations and unsubstantiated assertions
will not satisfy the non-moving party’s burden. Grimes v. Tex. Dep’t of Mental Health, 102 F.3d
137, 139–40 (5th Cir. 1996). Similarly, “[u]nsworn pleadings, memoranda or the like are not . . .
competent summary judgment evidence.” Larry v. White, 929 F.2d 206, 211 n.12 (5th Cir. 1991).
“In a motion for summary judgment, a federal district court is not called upon to make
credibility assessments of conflicting evidence.” Melancon v. Ascension Parish, 823 F. Supp.
401, 404 n.19 (M.D. La. 1993). “To the contrary, all evidence is considered in the light most
favorable to the non-movant.” Id. “Credibility determinations, the weighing of the evidence, and
the drawing of legitimate inferences from the facts are jury functions, not those of a judge.”
Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 151 (2000) (quoting Anderson, 477
U.S. at 255).
2. Choice of Law
At the outset, the Court must determine whether PCS timely filed its claim to recoup
defense costs. AHAC asserts that either Ontario’s or Saskatchewan’s law should apply to the
present matter, which would subject the plaintiff’s claim to either a two or six year statute of
limitation. However, the plaintiff avers that Louisiana’s prescriptive period should apply to the
matter at hand, and as a result, its claim would be subject to a ten-year prescriptive period. Thus,

3

the Court must first determine which prescriptive period/statute of limitation applies to the caseat-hand.
“A federal district court exercising diversity jurisdiction must apply the choice-of-law
provision of the forum state to determine which state’s substantive laws apply.” Alta Vista
Productions, LLC v. St. Paul Fire & Marine Ins. Co., 796 F. Supp. 2d 782, 785 (E.D. La. 2011)
(citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)). Louisiana Civil Code article 3549
provides in relevant part:
A. When the substantive law of this state would be applicable to the merits of an
action brought in this state, the prescription and peremption law of this state
applies.
B. When the substantive law of another state would be applicable to the merits of
an action brought in this state, the prescription and peremption law of this
state applies, except as specified below:
(1) If the action is barred under the law of this state, the action shall be
dismissed unless it would not be barred in the state whose law would
be applicable to the merits and maintenance of the action in this state
is warranted by compelling considerations of remedial justice.
(2) If the action is not barred under the law of this state, the action shall be
maintained unless it would be barred in the state whose law is
applicable to the merits and maintenance of the action in this state is
not warranted by the policies of this state and its relationship to the
parties or the dispute nor by any compelling considerations of remedial
justice.
According to this Louisiana choice-of-law provision, the applicable prescription period/statute of
limitation could depend on which state’s substantive law applies to the merits of the action.
Nevertheless, the Court need not conduct a conflicts-of-law inquiry, as regardless of
which substantive law applies in this case—Canada or Louisiana—the Court finds that
Louisiana’s ten-year prescription period will apply. First, assuming Louisiana substantive law
applies, as the plaintiff claims, then Civil Code Article 3549(A) provides that Louisiana’s tenyear prescriptive period would apply. There is no genuine issue of material fact that plaintiff
brought his claim within ten years of the defendant formally denying coverage in January 2004.
4

Thus, if Louisiana’s substantive law were to apply, then it is clear that Louisiana’s ten-year
prescription period would not bar the plaintiff’s action.
Furthermore, even if Canadian law were to apply to the merits of this case, this Court
finds that as a matter of law, Louisiana’s ten-year prescriptive period would still apply in the
present matter. As aforementioned, Article 3549(B) provides that:
B. When the substantive law of another state would be applicable to the merits of
an action brought in this state, the prescription and peremption law of this
state applies, except as specified below:
…
(2) If the action is not barred under the law of this state, the action shall be
maintained unless it would be barred in the state whose law is
applicable to the merits and maintenance of the action in this state is
not warranted by the policies of this state and its relationship to the
parties or the dispute nor by any compelling considerations of remedial
justice.
If Canadian law applied, then Article 3549(B)(2) would still mandate that Louisiana’s ten-year
prescriptive period applies, and not bar the present suit, unless: (1) Canadian law barred the suit,
(2) “maintenance of the action in this state is not warranted by the policies of this state and its
relationship to the parties or the dispute,” and (3) “maintenance of the action in this state is not
warranted . . . by any compelling considerations of remedial justice.” La. Civ. Code art.
3549(B)(2). All of these requirements must be satisfied in order to displace Louisiana’s
prescription period. La. Civ. Code art. 3549 rev. cmt. (g).
Article 3549 sets a “high standard for displacing Louisiana’s law of prescription.”
Marchesani v. Pellerin-Milnor Corp., 269 F.3d 481, 491 (5th Cir. 2001). Revision Comment (g)
provides the following in relation to displacing Louisiana’s law of prescription:
(g) Actions not barred under Louisiana law: The rule and its exception. The
opening sentence of subparagraph (2) of the second paragraph of this Article
reaffirms the basic rule of the lex fori for actions that have been filed timely under
Louisiana prescription or peremption law. Here the rationale for following that
rule is that entertaining such actions promotes whatever substantive policies
5

this state has in not providing for a shorter prescriptive period and preserves
to the plaintiff the opportunity to fully pursue his judicial remedies as long as
he does so within the time specified by the law of this state. These substantive
and procedural policies underlying Louisiana prescription law are entitled to
preference in a Louisiana court, unless it is amply demonstrated that neither
set of policies is actually implicated in the particular case and that the
opposing substantive policies of another state, that of the lex causae, are
implicated more intimately. Only then may Louisiana law be displaced.
These are essentially the three grounds for the exception to the rule of the lex fori
which is enunciated in the balance of subparagraph (2). Again, all three grounds
must be satisfied before this exception is utilized. Before dismissing an action that
has been timely filed under Louisiana law, the court must be satisfied that the
action has prescribed in the state of the lex causae, and that neither the substantive
nor the procedural or remedial policies of the forum state would be served by
maintaining the action. Only then would the policy of providing a forum be
outweighed by the policy of discouraging forum shopping. The very fact that all
three hurdles must be overcome before this exception is utilized indicates that this
exception is not expected to be applied often.
La. Civ. Code art. 3549 rev. cmt. (g) (emphasis added). The revision comments also point out
that the “burden of displacing Louisiana law will be heavier in cases where Louisiana law
provides for a longer prescriptive period,” such as is the case here. La. Civ. Code art. 3549 rev.
cmt. (d).
The defendant contends that under either Ontario or Saskatchewan law, the plaintiff’s
claim would be time barred, as Ontario provides for a two-year limitation period and
Saskatchewan provides for a six-year limitation period.1 Nevertheless, to apply either of the
Canadian statutes of limitation in this case—where the Louisiana ten-year prescription period
would not bar the action—the defendant must show that “maintenance of the action in this state
1

There is also an argument that the plaintiff’s claim is barred under a provision of the insurance contract, which
requires “every action or proceeding against the Insurer [to] be commenced within one year next after the date of
such judgment” against the Insured. (Doc. 22, p. 10, Doc. 28, p. 3). The defendant contends that this bars the
plaintiff’s suit, as it failed to file suit within one year of the jury verdict in the underlying litigation. (Doc. 28, p. 3).
At the outset, the Court has doubts whether this provision applies to the present situation. Regardless, if the
provision applies, it still does not bar the plaintiff’s claim, as the Court did not enter judgment in the underlying
litigation until February 14, 2012, and that judgment did not become final until the Fifth Circuit issued its mandate
on September 13, 2013. Dennis Price, et al. v. PCS Nitrogen Fertilizer, LP, et al., No. 3:03-cv-00153, M.D. La., at
R. Doc. 188 & 216. The plaintiff filed the present suit in January 2013, well within a year of this Court entering
judgment and before that judgment actually became final. Therefore, this argument is unavailing.

6

is not warranted by the policies of this state and its relationship to the parties or the dispute,” and
“maintenance of the action in this state is not warranted . . . by any compelling considerations of
remedial justice.” La. Civ. Code art. 3549(B)(2). This is a heavy burden under the circumstances,
and the plaintiff fails to make a sufficient showing to convince this Court that it should displace
Louisiana’s ten-year prescriptive period. See La. Civ. Code art. 3549 rev. cmt. (d). The defendant
attempts to cite to this Court’s previous decision in Extex Production, Inc. v. Mid-Continent
Casualty Co. for the proposition that Ontario’s or Saskatchewan’s substantive law and statute of
limitation should apply to the present matter. 2008 WL 191650 (M.D. La. Jan. 22, 2008).
However, in Extex, this Court was looking at whether to dismiss or transfer a particular case, and
not analyzing a conflict of law issue, such as in the present matter. The Court is not persuaded
that its prior ruling in Extex has any bearing or weight as to the matter presently in front of the
Court.
In accordance with the applicable Louisiana conflict of law provisions, this Court must
apply the Louisiana ten-year prescriptive period in this action, regardless of whether Canada’s or
Louisiana’s substantive law would apply to the merits. Furthermore, there is no genuine issue of
material fact that the plaintiff filed its claim within the applicable ten-year period, and thus, the
plaintiff’s claim is presently valid and not time barred.
3. Duty to Defend
As the Court has determined that the plaintiff’s claim is not barred, it next must
determine whether the plaintiff has established that there is no genuine issue of material fact
regarding the defendant’s duty to defend. To determine if the defendant owed this duty to
defend, the Court will be tasked with interpreting the insurance contract issued by the defendant.
Similar to above, the Court is first tasked with determining which substantive law applies—

7

Canadian or Louisiana law. Here, however, the issue is much more straightforward, as there is no
real conflict of law between the Louisiana and Canadian substantive law regarding the
interpretation of contracts, and the parties appear to agree on this assertion.2 A threshold question
in any choice of law analysis is “whether there is a true conflict, a false conflict, or no conflict
among the laws of the states that have a connection to the contract.” In re East Cameron
Partners, L.P., 2011 WL 4625368, at *4 (Bankr. W.D. La. Sept. 30, 2011) (citing In re
Combustion, Inc., 960 F. Supp. 1056, 1067 (W.D. La. 1997); Tolliver v. Naor, 115 F. Supp. 2d
697, 701 (E.D. La. 2000)). “If the laws of two states are substantially identical, then no choiceof-law analysis is necessary and the court simply applies the law of the forum state.” Id. (citing
Schneider Nat. Transport v. Ford Motor Co., 280 F.3d 532, 536 (5th Cir. 2002); W.R. Grace and
Co. v. Continental Cas. Co., 896 F.2d 865, 874 (5th Cir. 1990)). Therefore, as there is no real
conflict between the laws of Canada and Louisiana on the interpretation of contracts and an
insurer’s duty to defend, the Court will not conduct a choice-of-law analysis and will simply
apply Louisiana’s law with regard to these issues.
“Generally the insurer’s obligation to defend suits against its insured is broader than its
liability for damage claims.” Yount v. Maisano, 627 So. 2d 148, 153 (La. 1993). “The insurer’s
duty to defend suits brought against its insured is determined by the allegations of the injured
plaintiff’s petition, with the insurer being obligated to furnish a defense unless the petition
unambiguously excludes coverage.” Arceneaux v. Amstar Corp., 66 So. 3d 438, 450 (La. 2011)
(emphasis added). Courts must apply the “eight-corners rule” to determine if an insurer owed a
duty to defend, looking to the “four corners” of the insurance policy and the “four corners” of the
plaintiff’s petition. North American Treatment Systems, Inc. v. Scottsdale Ins. Co., 943 So. 2d
2

Based on the briefs, the parties only argue regarding the difference in Louisiana’s and Canada’s law on
prescription/statute of limitation. However, there is no argument regarding any differences in the laws on
interpreting contracts or an insurer’s duty to defend under an insurance contract.

8

429, 443–44 (La. App. 1 Cir. 2006) (citing Vaughn v. Franklin, 785 So. 2d 79, 84 (La. App. 1
Cir. 2001)). “[E]ven though a plaintiff’s petition may allege numerous claims for which coverage
is excluded under an insurer’s policy, a duty to defend may nonetheless exist if there is at least a
single allegation in the petition under which coverage is not unambiguously excluded.” Id.
(citing Employees Insurance Representatives, Inc. v. Employers Reinsurance Corporation, 653
So. 2d 27, 29 (1995)).
It its motion, the plaintiff presents the relevant allegations from the petition in the
underlying Dennis Price and Robert Sholar litigation, as well as the accompanying insurance
contract provisions which it claims give rise to the defendant’s duty to defend. (See doc. 13-2, p.
9–17). Based on the reasons provided in the plaintiff’s motion, the Court finds that the
allegations in the underlying litigation would give rise to a duty to defend by the defendant. In its
opposition, the defendant does not refute the plaintiff’s argument that the allegations in the
complaint would give rise to a duty to defend. Instead, the defendant argues that: (1) the plaintiff
filed its claim too late,3 (2) the plaintiff failed to satisfy the self-insured retention obligations
(SIRs) that are a condition precedent to coverage, and (3) AHAC’s policies apply in excess of
coverage afforded by the plaintiff’s other insurers and no coverage is owed unless those other
policies are exhausted.
a. Satisfaction of SIRs
Turning first to the defendant’s contention that the plaintiff failed to satisfy the SIRs, the
Court finds that the SIRs were a condition precedent to coverage. First, Policy No. 1235072
provided that “[e]xcept as otherwise specified, the Insured shall retain and be responsible for the
first $100,000 of the total amount of all sums payable,” and that “[t]he insurer’s obligation to pay
damages on behalf of the Insured applies only to the amount of such damages in excess of any
3

This argument is unavailing, as has been shown above.

9

specified self insured retention or deductible amount.” (Doc. 13-7, p. 15). Policy No. 3813253
included a similar provision, except that the insured was required to “retain and be responsible
for the first $50,000.” (Doc. 13-6, p. 15). In its reply, the plaintiff submits the Satisfaction of
Judgment from the underlying litigation, which provides that the plaintiff paid the sum of
$678,549.26 to satisfy the judgment in the Price and Sholar litigation. (Doc. 23-2, p. 1).
However, based on this, the defendant goes on to argue that PCS “did not exhaust any SIR until
it paid the judgment against it in the underlying case on September 18, 2013, and thus, PCS is
not entitled to recover any defense costs incurred before that date. (Doc. 32, p. 1).
As the plaintiff points to in its supplemental memorandum, the only issue before this
Court on the plaintiff’s motion for partial summary judgment is whether the defendant ever owed
a duty to defend based on the provisions of the insurance contract. The Satisfaction of Judgment
establishes that there is no genuine issue of material fact that the plaintiff satisfied the SIRs at
some point, and as a result, the plaintiff satisfied its condition precedent at some point. When the
SIRs were satisfied and how much defense costs are recoverable still remain an issue in this case
and will be decided at a later date. The Court emphasizes that its ruling today only finds that the
defendant, at some point, owed a duty to defend based on the allegations in the underlying
litigation.
Furthermore, in its sur-reply, the defendant requests that this Court grant AHAC relief
under Rule 56(d) of the Federal Rules of Civil Procedure if the plaintiff wishes to present
evidence that it satisfied the SIRs before September 18, 2013. Based on the plaintiff’s briefing, it
does appear that the plaintiff will attempt to present such evidence. (See doc. 37, p. 2 n.5).
Nevertheless, the Magistrate Judge recently granted an extension of the discovery deadlines,

10

such that discovery must be completed by May 30, 2014. (Doc. 39). In light of this extension, if
the defendant needs additional relief, it should file a motion asking for such relief at that time.
b. “Other Insurance” Provision
Next, AHAC contends that “PCS’s motion is premature because the record is devoid of
any evidence that any other insurance available to cover the defense costs that PCS seeks to
recover from AHAC either does not exist or has exhausted.” (Doc. 17, p. 1). Both insurance
policies provide that:
The insurer shall not be liable if at the time of an occurrence covered by this
Policy there is any other insurance which would have attached if this insurance
had not been effected, except that this insurance shall apply only as excess and in
no event as contributing insurance and then only after all such other insurance has
been exhausted.
(Doc. 13-6, p. 17; doc. 13-7, p. 17). The defendant contends that “if PCS had any other insurance
available to cover the defense costs it incurred in connection with the [u]nderlying [a]ction,
AHAC would step into the shoes of an excess insurer and would have no duty to defend unless
and until all of the other insurance has been exhausted.” (Doc. 17, p. 13).
However, this “other insurance” term does not provide, through clear and unambiguous
language, that AHAC does not have a duty to defend unless any other insurance policies have
been exhausted. Instead, the provision merely provides that the insurer shall only be liable as
“excess” and only after the other insurance has been exhausted. “Courts have widely recognized
that an excess insurer may specify in the insurance policy that it has a duty to defend only if the
primary insurer has exhausted its policy limit.” Lamarque Ford, Inc. v. Federal Ins. Co., 2011
WL 2020566, at *5 (E.D. La. May 24, 2011) (citing Caldwell Freight Lines, Inc. v. Lumbermens
Mut. Cas. Co., Inc., 947 So. 2d 948, 958–59 (Miss. 2007)). But, the language at issue here does
not specify that AHAC does not have a duty to defend “unless and until all of the other insurance

11

has been exhausted.” Rather, it sets out the sharing of liability between multiple insurance
policies that the plaintiff may have possessed at the time of an occurrence.
As mentioned above, the insurer’s obligation to defend suits is broader than its liability
for damage claims. Yount, 627 So. 2d at 153. Having a duty to defend does not depend on the
insurer’s ultimate liability. The insurance policies issued by AHAC do not specifically exclude
its duty to defend unless all other, primary insurance policies have been exhausted. (See doc. 136, p. 4; doc. 13-7, p. 4). Instead, the policies provide that AHAC will “defend in the name and on
behalf of the Insured and at the cost of the Insurer any civil action which may at any time be
brought against the Insured, even if said action be groundless, false or fraudulent, on account of
such bodily injury, personal injury or property damage.” Id. Accordingly, because the polices do
not specifically exclude AHAC’s duty to defend, the “other insurance” provision does not
establish a genuine issue of material fact regarding whether AHAC owed a duty to defend to the
plaintiff.
Consequently, based on the Court’s review, the Court finds that there is no genuine issue
of material fact that the defendant owed the plaintiff a duty to defend at some point based on the
allegations in the underlying litigation. This is the only determination that the plaintiff sought in
its motion for partial summary judgment. The extent of this duty to defend, the timing, and the
amount of defense costs that can possibly be recovered must still be decided. Nevertheless, the
Court must grant the plaintiff’s motion for partial summary judgment, as there is no genuine
issue of material fact that AHAC, at some point in time, owed the plaintiff a duty to defend.
Conclusion
Therefore, the Court: (1) GRANTS Plaintiff PCS Nitrogen Fertilizer, LP’s Motion [doc.
13] for Partial Summary Judgment, and (2) DENIES Defendant American Home Assurance

12

Company’s Motion [doc. 18] for Summary Judgment. The Clerk of Court’s office shall also
TERMINATE Document 30, as it is now moot.
Signed in Baton Rouge, Louisiana, on April 28, 2014.





JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

13