EMJ Corporation et al v. Hudson Specialty Insurance Company et al
Filing
178
MEMORANDUM OPINION. Signed by Senior Judge Glen H. Davidson on 3/11/15. (tab)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
EMJ CORPORATION and
WESTCHESTER FIRE INSURANCE COMPANY
v.
PLAINTIFFS
CIVIL ACTION NO.2: ll-cv-00228-GHD-JMV
HUDSON SPECIALTY INSURANCE COMPANY
DEFENDANT
MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT AND
DENYING PLAINTIFFS' MOTION FOR FURTHER RELIEF
Presently before the Court are a motion for judgment notwithstanding the verdict or
alternatively for new trial [168] filed by Defendant Hudson Specialty Insurance Company, as
well as a motion for further relief [165] filed by Plaintiffs EMJ Corporation and Westchester Fire
Insurance Company.
Upon due consideration, the Court finds that Defendant's motion for
judgment notwithstanding the verdict or alternatively for new trial [168] should be granted in
part and denied in part and Plaintiffs' motion for further relief [165] should be denied in its
entirety, as set forth below.
A. Federal Rule ofCivil Procedure 59 Standard
Both Defendant's motion for judgment notwithstanding the verdict or alternatively for a
new trial [168], as well as Plaintiffs' motion for further relief [165], constitute motions to alter or
amend the Court's judgment (and in Defendant's motion, alternatively, for a new trial) under
Rule 59 of the Federal Rules of Civil Procedure. See Komolafe v. Dewease, 87 F. App'x 385,
2004 WL 304198, at *1 (5th Cir. 2004) (per curiam) (citing Teal v. Eagle Fleet, Inc., 933 F.2d
341,347 n.3 (5th Cir. 1991) (post-judgment motion for new trial and/or for relief from judgment
was properly considered under Rule 59 because it was filed within the requisite Rule 59 time
period)); see also Heck v. Triche, 775 F.3d 265, 276-77 (5th Cir. 2014) (citing Osterneck v.
1
Ernst & Whinney, 489 U.S. 169, 176 & n.3, 109 S. Ct. 987, 103 L. Ed. 2d 146 (1989) ("a
postjudgment motion for discretionary or mandatory prejudgment interest is a Rule 59(e)
motion")).
"Rule 59(e) was added to the Federal Rules of Civil Procedure in 1946. Its draftsmen
had a clear and narrow aim. According to the accompanying Advisory Committee Report, the
Rule was adopted to 'mak[e] clear that the district court possesses the power' to rectify its own
mistakes in the period immediately following the entry of judgment." White v. NH Dep't of
Emp't Sec., 455 U.S. 445, 450, 102 S. Ct. 1162, 71 L. Ed. 2d 325 (1982) (quoting Fed. R. Civ. P.
59 advisory committee's note on 1946 am., 5 F.R.D. 433, 476 (1946)). In reconsidering its
judgment pursuant to Rule 59(e), the Court reconsiders matters properly encompassed in its
decision on the merits. See id. at 451, 102 S. Ct. 1162. Rule 59(e) " 'may not be used to
re1itigate old matters, or to raise arguments or present evidence that could have been raised prior
to the entry of judgment.''' Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5, 128 S. Ct.
2605, 171 L. Ed. 2d 570 (quoting 11 Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 2810.1 (2d ed. 1995) (footnotes omitted)).
Besides allowing a court to alter or amend its judgment, Rule 59 further allows a court to
"on motion, grant a new trial on all or some of the issues-and to any party- ... after a jury
trial, for any reason for which a new trial has heretofore been granted in an action at law in
federal court ...." Fed. R. Civ. P. 59(a)(1)(A). "A district court has discretion to grant a new
trial under Rule 59(a) of the Federal Rules of Civil Procedure when it is necessary to do so 'to
prevent an injustice.''' Jones v. Ruiz, 478 F. App'x 834, 835 (5th Cir. 2012) (per curiam)
(quoting United States v. Flores, 981 F.2d 231,237 (5th Cir. 1993)). Although Rule 59(a) does
not state appropriate grounds for a new trial, "[ a] new trial may be appropriate if the verdict is
2
against the weight of the evidence, the amount awarded is excessive, or the trial was unfair or
marred by prejudicial error." Scott v. Monsanto Co., 868 F.2d 786, 789 (5th Cir. 1989) (citation
omitted). "Courts do not grant new trials unless it is reasonably clear that prejudicial error has
crept into the record or that substantial justice has not been done, and the burden of showing
harmful error rests on the party seeking the new trial." Sibley v. Lemaire, 184 F.3d 481, 487 (5th
Cir. 1999).
B. Factual and Procedural Background
On or about February 15, 2005, EMJ Corporation ("EMJ") and Contract Steel
Construction, Inc. ("CSC") entered into a subcontractor agreement (the "Subcontract
Agreement") for the execution of work on a JC Penney Project in Southaven, Mississippi (the
"Project").
EM] was the general contractor on the Project.
CSC was the subcontractor,
performing, in relevant part, the installation of a steel stairway, which was designed and
constructed by another entity.
With regard to requisite liability insurance coverage, the
Subcontract Agreement provides in relevant part:
[CSC] shall maintain, at its own cost, such insurance as will
protect it and [EMJ] from ... any claim for bodily injury, ... both
physical and loss of use, which may arise from the Work or any
performance under the [s]ubcontract, whether such work or
performance are by [CSC] or its officers, agents, subcontractors,
suppliers, employees[,] or those with whom it controls for any part
of the Work. . .. This indemnification shall only be applicable to
the conduct attributable to [CSC] or anyone directly or indirectly
employed, contracted[,] or supervised by [CSC] or by anyone for
whose acts [CSC] may be liable.
Subcontract Agreement [1-1] at 2 ~ 5. In accordance with the Subcontract Agreement, CSC took
out insurance policies, including one from Hudson Specialty Insurance Company ("Hudson
Specialty"), Policy No. CSPI-UM-00507 (the "Hudson Policy"). In relevant part, the Hudson
Policy provides that an insured under the policy includes
3
[a]ny person or organization for whom you [CSC] have agreed in
writing prior to any "occurrence" or "offense" to provide insurance
such as is afforded by this policy, but only with respect to
operations performed by you [CSC] or on your behalf, or facilities
owned or used by you [CSC].
Hudson Policy [1-4] at 22, § III(2)(f).
Thereafter, CSC installed a steel stairway at the Project and tendered the installation of
the stairway to EMJ, which accepted it. Approximately two weeks later, JC Penney apparently
engaged Professional Services Industries, Inc. to inspect an entrance canopy at the construction
site. John Meeker, an employee of Professional Services Industries, Inc., was assigned the job.
In the course of conducting the inspection, Meeker fell while descending the steel stairway
previously installed by CSC. Meeker sustained injuries that rendered him a paraplegic.
On or about April 24, 2008, Meeker and his wife sued CSC, EMJ, and others in the
Circuit Court of Desoto County in an action styled John Meeker et al. v.
J.c. Penney Corp.,
Inc.,
et al., Civil Action No. CV2008-0148, seeking damages for Meeker's personal injuries.
Apparently, the claims asserted included allegations that the steps, as installed, were too steep to
be safely navigated and lacked an anti-slip surface application. The state-court judge dismissed
the claims by the Meekers against CSC, as well as a cross-claim by EMJ against CSC for
indemnity. In his opinion, the state-court judge explained that under Mississippi law once a
contractor or owner accepts the work of a subcontractor or contractor, liability for injuries related
to the work accepted shifts to the party accepting the work, regardless of the subcontractor's
negligent performance of the contract. Consequently, the state-court judge held that CSC owed
no duty to Meeker and that only EMJ could owe such a duty to Meeker. The state-court judge
further found that that the responsibility for applying a non-slip coating to the steps was outside
the scope of CSC's contractual obligations; thus, CSC was found to have no liability to Meeker
4
on that basis, as well.
According to Plaintiffs, the Meekers' remaining allegation in the
underlying state-court litigation was one for unspecified "independent" or "sole" negligence of
EMJ. This Court notes that the state-court judge expressly reserved ruling on whether EMJ
might nevertheless allocate fault to CSC at the state-court trial. After CSC was dismissed from
the state-court case, the state-court judge stayed the proceeding pending EMJ's appeal of the
state-court rulings to the Mississippi Court of Appeals. That court affirmed the state court's
granting of summary judgment to Csc. See EMJ Corp. v. Contract Steel Constr., Inc., 81 So. 3d
295, 299-300 (Miss. Ct. App. 2012). Subsequently, the Meekers' claims against EMJ were
settled and the state case dismissed.
The nature of the settlement is set forth in the stipulated facts of the Pretrial Order [145]
and is summarized as follows. On October 21, 2012, the Meekers settled their claims against
EMJ for the total amount of $5,000,000. Pretrial Order [145] at 9, ~ 9(a)(14). Of the $5,000,000
settlement in the underlying state-court litigation, $1,000,000 was paid by Zurich American
Insurance Company, under whose commercial liability insurance policy EMJ was a named
insured, and $4,000,000 was paid by Westchester, under whose commercial umbrella liability
policy EMJ was a named insured. Id. at 9-10,
~
9(a)(15). The Zurich American Insurance
Company policy had a $1,000,000 per-occurrence limit. Id. at 9-1 0, ~ 9(a)( 16).
On November 28, 2011, Plaintiffs EMJ and Westchester Fire Insurance Company
("Westchester") (collectively, "Plaintiffs") filed this action for a declaratory judgment against
Hudson Specialty in this Court. l Plaintiffs sought a declaration of the rights and obligations of
all persons interested under the Hudson Policy, pursuant to Rule 57 of the Federal Rules of Civil
Procedure; the United States Declaratory Judgment Act, 28 U.S.C. § 2201; and otherwise.
I Amerisure Mutual Insurance Company was also originally named as a defendant, but was subsequently
terminated from the case per the mutual agreement of the parties.
5
Diversity jurisdiction existed in this case, as Plaintiffs and Hudson Specialty were completely
diverse and the amount in controversy exceeded the jurisdictional threshold. The parties agreed
that Mississippi law governed the action.
Plaintiffs sought a finding that EMJ was owed coverage as an additional insured under
the Hudson Policy and that Hudson Specialty was the primary insurer. Hudson Specialty sought
a determination that EMJ was not an additional insured under the Hudson Policy and that
coverage did not exist under the Hudson Policy.
Trial commenced in the case sub judice on September 22, 2014. Due to the odd nature of
this case, which presented several questions of law for the Court to answer, and only one
question for the jury, the Court made detailed rulings which are incorporated herein by reference
and made a part of this memorandum opinion. See Ct.'s Order Ruling on Matters of Law in the
Case Sub Judice [157]. In sum, the Court ruled that the pertinent Hudson Policy provisions were
ambiguous in part and unambiguous in part. Specifically, the Court held the following: (1) based
on the clear terms of the "additional insured" provision, CSC agreed in writing (that is, in the
Subcontract Agreement) to provide insurance, such as this afforded by the Hudson Policy, to
EMJ; (2) Meeker's fall, which is the subject of this litigation, was a bodily injury constituting an
"occurrence" as defined under the Hudson Policy; (3) "the writing" (the Subcontract Agreement)
was entered into prior to the "occurrence" (Meeker'S fall); and (4) the phrase "but only with
respect to operations performed by you or on your behalf, or facilities owned or used by you"
was ambiguous and presented a question for the jury that would determine whether coverage for
Meeker's injury was precluded under the Hudson Policy. The Court further held as a matter of
law that the judgment of the Circuit Court of Desoto County, Mississippi be afforded full faith
and credit and read to the jury the statements of that judgment which were essential to the
6
judgment and thus binding on the case sub judice. The Court further held as a matter oflaw that
if the jury found that the phrase "with respect to operations performed by you or on your behalf
or facilities owned or used by you" applied to the circumstances of this case, no named exclusion
barred coverage for Meeker's accident. Subsequently, the jury returned a verdict that the phrase
"with respect to operations performed by you or on your behalf or facilities owned or used by
you" did apply, and thus, that coverage was available to EMJ under the Hudson Policy for
Meeker's accident. The Court's next task was to determine the amount of coverage afforded by
the Hudson Policy for Meeker's accident.
As a threshold matter, the Court determined as a matter of law that Westchester paid the
settlement in the underlying state-court litigation for Meeker's fall because it had a legal
obligation to do so-not voluntarily-and that Westchester properly undertook the settlement.
The Court further held that breach of duty or failure to settle within the policy limits was not at
issue in this case, and that any claim that Hudson Specialty acted with bad faith in refusing to
acknowledge EMJ's insured status was not supported by the proof. Finally, the Court held as a
matter of law that based on the Hudson Policy terms, the Subcontract Agreement, and the
Certificate of Liability Insurance issued by CSC to EM] pursuant to the terms of the Subcontract
Agreement, the Hudson Policy was a primary policy and the Westchester Policy was an excess
policy, and as such, the Court ordered Hudson Specialty to fully reimburse Westchester for the
$4,000,000 Westchester paid in settlement ofthe underlying state-court litigation.
These detailed rulings were necessarily expedited, given the curious posture of the case
as a jury trial replete with legal questions and the parties' refusal to consent to a non-jury trial.
The Court has used the opportunity provided by Rule 59 to carefully consider the parties'
arguments and reexamine its rulings at trial and all authorities bearing on this matter. In so
7
doing, the Court finds that its rulings were properly determined as a matter of law on the issue of
coverage for EMJ under the Hudson Policy, but that the Court should reevaluate the amount of
coverage available under the Hudson Policy and Westchester Policy for the subject accident.
C. Analysis and Discussion
Plaintiffs brought this declaratory judgment action, inter alia, to obtain a declaration from
the Court that Westchester was entitled to contribution from Hudson Specialty for the amount
Westchester paid on behalf of EMJ in the settlement of the underlying state-court litigation
concerning Meeker's fall.
"Contribution is purely an equitable remedy. Its aim is the prevention of injustice, pure
and simple." Williams v. Owen, 613 So. 2d 829, 835 (Miss. 1993) (citations omitted). "[O]ne
who is compelled to satisfy, or pay more than his just share of such common burden or
obligation, is entitled to contribution from the others to obtain from them payment of their
respective shares." Celotex Corp. v. Campbell Roofing & Metal Works, Inc., 352 So. 2d 1316,
1318 (Miss. 1977).
Where one of two or more potentially liable insurers pays a loss,
whether in satisfaction of a judgment or in settlement of a claim, it
may then seek payment from the other insurers of their fair share
of the loss.
In the insurance context, the right to contribution among insurers
arises in two basic circumstances: I} an insurer of a joint tortfeasor
has paid all, or greater than its share, of a loss; 2} a single insured
is covered by concurrent or "double" insurance, and one insurer
paid all, or greater than its share, of a loss.
Steven Plitt, Daniel Maldonado, Joshua D. Rogers & Jordan R. Plitt, Couch on Insurance 3d §
217:4 (2014) (footnotes omitted). "In the context of multiple concurrent insurance, contribution
is only appropriate where the policies insure the same entities, the same interests in the same
8
property, and the same risks." Id. 3d § 218:3 (2014) (footnotes omitted). "For coverage to be
concurrent for purposes of contribution, it must be at the same level-primary to primary or
excess to excess." Am. Family Mut. Ins. Co. v. Regent Ins. Co., 846 N.W.2d 170, 193 (Neb.
2014) (citing 2 Allan D. Windt, Insurance Claims & Disputes: Representation of Insurance
Companies and Insureds § 7:4 (6th ed. 2013)).
An insurance policy is a contract between the insurer and the insured, with the rights and
duties set out by the provisions of the insurance policy; as such, an insurance policy is a contract
subject to the general rules of contract interpretation. ACS Constr. Co. of Miss. v. CGU, 332
F.3d 885, 888 (5th Cir. 2003) (citing Clark v. State Farm Mut. Auto. Ins. Co., 725 So. 2d 779,
781 (Miss. 1998)); Haney v. Cant'! Cas. Co., No. 3:08cv482-DPJ-JCS, 2010 WL 235025, at *2
(S.D. Miss. Jan. 15,2010) (citing Sennett v.
us.
Fid. & Guar. Co., 757 So. 2d 206, 212 (Miss.
2000)); Miss. Ins. Guar. Ass 'n v. Blakeney, 54 So. 3d 203, 205 (Miss. 2011). "Under Mississippi
law, the construction of an insurance contract is limited to examining the policy." Am. States
Ins. Co. v. Natchez Steam Laundry, 131 F.3d 551, 555 (5th Cir. 1998) (citing Emp'rs Mut. Cas.
Co. v. Nasser, 164 So. 2d 426, 430 (Miss. 1964)). "A policy must be considered as a whole,
with all relevant clauses together." US. Fid. & Guar. Co. v. Martin, 998 So. 2d 956, 963 (Miss.
2008). "'No rule of construction requires or permits [Mississippi courts] to make a contract
differing from that made by the parties themselves, or to enlarge an insurance company's
obligations where the provisions of its policy are clear.' " Leonard v. Nationwide Mut. Ins. Co.,
499 F.3d 419,429 (5th Cir. 2007) (quoting State Auto. Mut. Ins. Co. ofColumbus v. Glover, 176
So. 2d 256, 258 (Miss. 1965)). "The policy itself is the sole manifestation of the parties' intent,
and no extrinsic evidence is permitted absent a finding by a court that the language is ambiguous
and cannot be understood from a reading of the policy as a whole." Am. States Ins. Co., 164 So.
9
2d at 555 (citing Great N. Nekoosa Corp. v. Aetna Cas. & Sur. Co., 921 F. Supp. 401, 406 (N.D.
Miss. 1996)). "Ambiguity arises when a term or provision is susceptible to more than one
reasonable meaning, but can also result from 'internal conflict' between policy provisions that
renders uncertain the meaning of the policy as a whole." Id. (quoting Miss. Farm Bureau Mut.
Ins. Co. v. Walters, 908 So. 2d 765, 769 (Miss. 2005)).
The Court finds that the extent of coverage (including the Hudson Policy's priority vis-a
vis the Westchester Policy) can be determined by unambiguous policy terms and thus that the
Court must not look to the terms of the underlying Subcontract Agreement that required the
purchase of insurance coverage or to the Certificate of Liability Insurance to determine priority
of coverage. See Queen Ins. Co. ofAm. v. Delta Gin Co., 48 So. 2d 866, 867-78 (Miss. 1950)
("[P]arol evidence cannot be admitted to alter or change the specific terms of an insurance
policy, or to extend it so as to cover property not intended in the description, but it is admissible
for the purpose of showing what property was intended to be described therein where such
description is not absolutely clear from the language of the policy.")?
2 The Court notes that this is in contrast to its earlier ruling that the extent of coverage was controlled by
relevant policy terms, as well as the terms of the Subcontract Agreement and Certificate of Liability Insurance CSC
issued to EMJ. For the reasons stated above, the Court fmds that that ruling must be revised accordingly. However,
even if the Certificate of Liability Insurance could be properly considered in the coverage determination, that
Certificate states that it is "issued as a matter of information only and confers no rights upon the certificate holder"
and
does not amend, extend[,] or alter the coverage afforded by the policies below.
Insurers Affording Coverage:
Insurer A: Amerisure Insurance Company
Insurer B: A G C W C T
Insurer C: S1. Paul Insurance Company
Insurer D: Hudson Specialty Ins[urance] Company
Certificate of Liab. Ins. [1-6] at 1. Finally, the Court notes that that Certificate of Liability Insurance designates the
Hudson Policy as an excess/umbrella policy. Therefore, even if the Court did consider the Certificate of Liability
Insurance in this determination, the result would not be changed.
10
An exception would be if the insurance policy itself expressly provided that the tenns of
the Subcontract Agreement would detennine whether the coverage afforded was primary or
excess. See, e.g., Stout v. 1 E. 66th Street Corp., 911 N.Y.S.2d 696 (Table), 2010 WL 2572655,
at *24 (N.Y. Sup. Ct. June 28, 2010) (discussing case that "looked to the underlying
subcontractor's insurance procurement provisions to detennine whether the general contractor's
coverage as an additional insured under the subcontractor's policy was primary or excess,
because the insurance policy expressly provided that the tenns of the subcontract would
detennine whether the additional insured coverage was primary or excess").
Thus, the
Subcontract Agreement--or Certificate of Liability Insurance-would be detenninative of the
priority of the coverage afforded to additional insureds under the insurance policy only if the
insurance policy, like the Subcontract Agreement (or Certificate of Liability Insurance),
contained a provision defining the priority of the coverage provided to additional insureds by
reference to the requirements of the Subcontract Agreement.
The Hudson Policy does not define the priority of the coverage afforded to additional
insureds by reference to the requirements of the underlying Subcontract Agreement or Certificate
of Liability Insurance. In fact, the Hudson Policy explicitly provides: "This policy contains all
the agreements between you and us concerning the insurance afforded," Hudson Policy [1-4] at
24, § V(4), thus stating the policy itself contained the full expression of the parties' intent with
respect to coverage.
"Thus, the extent of coverage ... is controlled by the relevant policy tenns, not by the
tenns of the underlying [Subcontract Agreement] that required the named insured to purchase
coverage." See Time Warner Cable ofNY.C. v. NH Ins. Co., 866 N.Y.S.2d 96 (Table), 2008
WL 2279753, at *3 (N.Y. Sup. Ct. May 27, 2008). Accordingly, the Court must review and
11
consider the relevant policy terms, including the "other insurance" provisions, to determine the
extent of coverage.
See Am. Family Mut. Ins. Co., 846 N.W.2d at 193 (citing Universal
Underwriters v. CNA Ins., 706 A.2d 217,218 (N.J. Sup. Ct. 1998)).
The Westchester Policy per-occurrence coverage limit is $25,000,000, whereas the
Hudson Policy per-occurrence coverage limit is $5,000,000. See Hudson Policy [1-4] at 1,
Decls.; Westchester Policy [1-3] at 1, Decls. EMJ is the named insured under the Westchester
Policy and is an additional insured under the Hudson Policy. Both the Hudson Policy and
Westchester Policy are self-described commercial umbrella liability policies and excess policies.
An umbrella policy that is truly excess incurs liability only after the exhaustion of a primary
policy. See Guidant Mut. Ins. Co. v. Indem. Ins. Co. ofNorth Am., 13 So. 3d 1270, 1279 (Miss.
2009).3 "[U]mbrella policies are 'parasitic' in that they require that the insured maintain and
exhaust an underlying primary policy." Dickau v. Vt. Mut. Ins. Co., --- A.3d ----, 2014 WL
7448496, at *3 (Me. Dec. 31,2014) (citing Peerless Indem. Ins. Co. v. Frost, 723 F.3d 12, 18
(1st Cir. 2013); 15 Lee R. Russ & Thomas F. Segalia, Couch on Insurance 3d § 220:32 (2005 &
Supp.2009)). "The secondary nature of umbrella coverage, covering only catastrophic losses, is
reflected in its premiums, which are ordinarily quite low." Id., 2014 WL 7448496, at *3 (citing
Apodaca v. Allstate Ins. Co., 255 P.3d 1099, 1103 (Colo. 2011); Globe Indem. Co. v. Jordan,
634 A.2d 1279, 1284 (Me. 1993); Trinity Universal Ins. Co. v. Metzger, 360 So. 2d 960, 962
(Ala. 1978)); accord Am. Family Mut. Ins. Co., 846 N.W.2d 170, 193-94.
The Westchester Policy defines its "underlying insurance" as follows:
3 See generally Allstate Ins. Co. v. Am. Hardware Mut. Ins. Co., 865 F.2d 592 (4th Cir. 1989); Towne
Realty, Inc. v. Safeco Ins. Co. ofAm., 854 F.2d 1264 (11 th Cir. 1988); Allstate Ins. Co. v. Emp 'rs Liab. Assur. Corp.,
445 F.2d 1278 (5th Cir.l971); Am. Family Mut. Ins. Co., 846 N.W.2d at 194; Allstate Ins. Co. v. Exec. Car & Truck,
494 So. 2d 487 (Fla. 1986); u.s. Fire Ins. v. Md. Cas., 447 A.2d 896 (Md. Ct. App. 1982); Prudential Prop. Cas.
Ins. Co. v. N H Ins. Co., 395 A.2d 923 (N.J. Sup. Ct. 1978); NFU v. Farm & City Ins. Co., 689 N.W.2d 619 (S.D.
2004).
12
[t]he policies listed in Schedule A - Schedule of Underlying
Insurance and any other policies purchased or issued for any newly
acquired or formed organization not more restrictive than the
terms, conditions, endorsements, and limits of liability of the
policies listed in Schedule A and to be maintained by you in
accordance with Condition M of this policy.
Westchester Policy [1-3] at 50, § IV(M). The Westchester Schedule of Underlying Insurance
states that the underlying commercial general liability insurance is by Zurich American
Insurance Company for a per-occurrence limit of $1,000,000. Id. at 6, Schedule of Underlying
Insurance.
The Hudson Policy provides in pertinent part: "We will pay on behalf of the insured that
portion of the 'ultimate net loss' in excess of the 'retained limit' because of 'bodily injury' ... to
which this insurance applies." Hudson Policy [1-4J at 14, § I, Coverage A(I)(a). The "when
loss payable" provision states as follows:
Our liability for any portion of "ultimate net loss" will not apply
until the insured or any "underlying insurer" is obligated to
actually pay the full and complete amount of the "retained limit."
When "ultimate net loss" has been finally determined, the insured
may make claim for payment under this policy as soon as
practicable therafter. Such insured[']s obligation to pay any
amount of "ultimate net loss" must have been finally determined
either by judgment against the insured after actual trial or by
written agreement of the insured, the claimant or the claimants'
legal representative and us.
Id. at 26, § V(18).
The Hudson Policy defines "ultimate net loss" in pertinent part as "the total amount of
damages for which the insured is legally liable in payment of 'bodily injury.' " !d. at 29, §
VI(20). The Hudson Policy defines "retained limit" in pertinent part as "[t]he sum of amounts
applicable to any 'claim' or 'suit' from: '[uJnderlying insurance,' whether such 'underlying
insurance' is collectible or not; ... and [oJther collectible primary insurance[.]" Id.
13
The attached Hudson Schedule of Underlying Insurance references two insurance
policies: Amerisure Commercial General Liability Policy No. CPP138489203005, which
provided coverage for occurrence, products-completed operations, and personal and advertising
injury, as well as Amerisure Automobile Liability Policy No. CAI38489103005, which provided
coverage for owned automobiles, non-owned automobiles, and hired automobiles. Id. at 12,
Schedule of Underlying Insurance.
Additionally, the Hudson Policy defines "underlying
insurance" as "the coverage{s) afforded under insurance policies designated in Item 5 of the
Dec1aration[s] and any renewals or replacements of those policies," and defines "underlying
insurer" as "any company issuing any policy of 'underlying insurance.' " Id. at 29, § VI(25-26).
The policies referenced in Item 5 of the Declarations are Amerisure Commercial General
Liability Policy No. CPP 13 8489200, which covered occurrence, products-completed operations,
and personal and advertising injury, as well as Amerisure Automobile Liability Policy No.
CA138489100, which covered owned automobiles, non-owned automobiles, and hired
automobiles. Id. at I, Decls.; 2, Schedule of Underlying Insurance. Thus, the "underlying
insurance" referred to in the Hudson Policy are the aforementioned Amerisure commercial
general liability policies and automobile liability policies.
See id. at 19, § 1, Coverage
B(1 )(a)(3)(a).
By the terms of the Hudson Policy, primary coverage must be exhausted before any
excess coverage under the Hudson Policy may be accessible. See Empire Indem. Ins. Co. v. NIS
Corp., 571 F. App'x 344. 349 (5th Cir. 2014) (per curiam).
The parties are apparently in
agreement that the aforementioned Amerisure insurance policies-though clearly "underlying
insurance" of the Hudson Policy- are not "applicable to any 'claim' or 'suit' " for purposes of
the "retained limit." See Hudson Policy [1-4] at 29, § VI(20). Therefore, the Court examines
14
whether Hudson Policy coverage is impacted by "[t]he sum of amounts applicable to any 'claim'
or 'suit' from ... [o]ther collectible primary insurance[.]" See Hudson Policy [1-4] at at 29, §
VI(20). It is clear to this Court that "other collectible primary insurance" includes the Zurich
American Insurance Company policy, which paid $1,000,000 toward the settlement of the
underlying state-court litigation in exhaustion of its per-occurrence policy limit.
Plaintiffs
maintain that only the Zurich American Insurance Company policy was applicable other
collectible primary insurance for purposes of the retained limit.
Hudson Specialty argues that
CSC and EM]'s other subcontractors were required to provide EM] with certain primary
insurance coverage, but that Plaintiffs never possessed or reviewed such policies and instead
examined only EMJ's own policies and those of CSC. See Def.'s Mem. Br. Supp. Post-Trial
Mot. [169] at 6-7. However, Hudson Specialty does not point to any other applicable collectible
primary insurance and thus fails to rebut Plaintiffs' argument concerning collectible primary
insurance. Accordingly, the Court finds that Hudson Specialty's argument in this respect is not
well taken.
The Court finds that when the Westchester Policy and the Hudson Policy are viewed side
by side, they both provide coverage for Meeker's fall as excess umbrella policies, as detailed
below. The Court can determine the right to contribution between these two insurers on the
record before it. Accordingly, the Court must review and consider the relevant policy terms, and
particularly, the "other insurance" provisions, to determine the extent of coverage. See Am.
Family Mut. Ins. Co., 846 N.W.2d at 193 (citing Universal Underwriters, 706 A.2d at 218
("[W]here two carriers have responsibility for a claim, the other insurance clause of each policy
must be examined to determine whether there exists language which may govern the contribution
each party should make.")).
15
United States District Judge Tom S. Lee has succinctly set forth the basics of "other
insurance" clauses under Mississippi law:
Often, . . . policies contain "other insurance" clauses which,
generally speaking, are of three types: escape, excess[,] and
prorata. Escape clauses provide that the policy affords no
coverage at all when there is other valid and collectible insurance.
Excess clauses provide that the insurer's liability shall be only the
amount by which the loss exceeds the coverage of all other valid
and collectible insurance, up to the limits of the excess policy.
And pro rata clauses provide that the insurer will pay its prorata
share ofthe loss, usually in the proportion to which the limits of its
policy bear to the aggregate limits of all valid and collectible
insurance. The courts have refused to enforce conflicting "other
insurance" clauses literally, because giving full effect to such
clauses would allow both insurers to avoid liability altogether.
Travelers Indem. Co. v. Chappell, 246 So. 2d 498, 503 (Miss.
1971). Rather, at least so long as the clauses are identical (or of
the same type), the courts have held them to be conflicting and
repugnant so as to cancel each other out, in which case the liability
under the policies is prorated as it would be if neither policy
addressed the "other insurance" situation. Id.
Farmers Ins. Exch. v. Hartford Cas. Ins. Co., 907 F. Supp. 234,237 (S.D. Miss. 1995).
The "other insurance" provision in the Westchester Policy is as follows:
If there is any other collectible insurance available to the "Insured"
(whether such insurance is stated to be primary, contributing,
excess[,] or contingent) that covers a loss that is also covered by
this policy, the insurance provided by this policy will apply in
excess of, and shall not contribute with, such insurance. This
Condition H does not apply to any insurance policy purchased
specifically (and which is so specified in such insurance policy) to
apply in excess ofthis policy.
Westchester Policy [1-3] at 54, Conditions(H).
The "other insurance" provision in the Hudson Policy states in pertinent part as follows:
If other valid and collectible insurance is available to the insured
for "ultimate n[ e]t loss" we cover under this policy, our obligations
under this policy is limited as follows:
16
As this insurance is excess over any other insurance, whether
primary, excess, contingent[,] or on any other basis, except such
insurance as is specifically purchased to apply in excess of this
policy's Limit of Insurance, we will pay only our share of the
amount of "ultimate net loss," if any, that exceeds the sum of[] (1)
[t]he total amount that all such other insurance would pay for the
loss in the absence of this insurance; and (2) [t]he total of all
deductible and self-insured amounts under this or any other
insurance.
Hudson Policy [1-4] at 25, § V(10)(a)(1)-(2).
By its terms, the Westchester Policy is excess against all other insurance policies "except
such insurance as is specifically purchased to apply in excess of this policy's Limit of
Insurance." See id. Courts have interpreted such language to refer to "a higher-level policy that
specifically designates the subject policy as underlying insurance." See Bovis Lend Lease LMB,
Inc. v. Great Am. Ins. Co., 53 A.D.3d 140, 152 (N.Y. App. Div. 2008); Nat'l Farmers Union
Prop. & Cas. Co. v. Farm & City Ins. Co., 689 N.W.2d 619, 623 (S.D. 2004); Treder ex rei.
Weigel v. LST, L.P., 679 N.W.2d 555,561 (Wis. Ct. App. 2004), review denied 684 N.W.2d 137
(Wis. 2004); Allstate Ins. Co. v. Frank B. Hall & Co., 770 P.2d 1342, 1347 (Colo.
ct. App.
1989). Thus, by the plain language of the Westchester Policy, it is an excess policy, even with
respect to another existing excess policy, unless that other existing excess policy specifically
references the Westchester Policy and states that it is excess to the Westchester Policy. The
Hudson Policy does not refer to the Westchester Policy by name. A reasonable construction of
the Westchester Policy is that it is excess to the Hudson Policy.
The Hudson Policy specifically provides that it is excess against all other insurance
policies, even excess insurance policies, unless the particular excess insurance policy "is
specifically purchased to apply in excess of this policy's Limit of Insurance," in which case, "we
will pay only our share of the amount of 'ultimate net loss,' if any, ...." See Hudson Policy [1
17
4] at 25, § V(10)(a). By the plain language of the Hudson Policy, it is an excess policy even with
respect to another existing excess policy, unless that other existing excess policy specifically
references the Hudson Policy and states that it is excess to the Hudson Policy. The Westchester
Policy does not refer to the Hudson Policy by name. A reasonable construction of the Hudson
Policy is that it is excess to the Westchester Policy.4
Clearly, from the perspective of the insured, a "reasonable construction" of the two
policies yields a conflict. Viewed from the perspective of the insured, the Hudson Policy
provides coverage for the underlying suit if the Westchester Policy does not exist, and vice versa.
The Hudson Policy and Westchester Policy were both designed to be true excess policies;
by the clear policy terms, neither policy was designed to provide primary coverage.
See
Caldwell Freight Lines, Inc. v. Lumbermens Mut. Cas. Co., 947 So. 2d 948, 956-57 (Miss.
2007); Titan Indem. Co. v. Estes, 825 So. 2d 651, 655, 657, 658 (Miss. 2002). See also Markel
Am. Ins. Co. v. Travelers Cas. & Sur. Co., 2010 WL 2732881, at *5, *6 (S.D. Ind. July 7, 2010);
Hovis Lend Lease LMH, Inc., 53 A.D.3d at 155. Since both Westchester and Hudson Specialty
have contracted to cover the same risk on the same level and have employed essentially mirrorimage excess clauses in their respective "other insurance" clauses, the excess coverage clauses
are deemed to cancel each other out and each carrier is required to contribute ratably in such
proportion as its policy limit bears to the total of all policy limits at the same level. See Hovis
Lend Lease LMH, Inc., 53 A.D.3d at 155-56.
4 The Court notes that although the "other insurance" clause in the Hudson Policy contains the terms "we
will pay only our share," these terms do not convert it to a pro rata clause. Pro rata specifically means contribution
by equal shares.
18
The interaction of two policies containing excess insurance clauses creates circularity and
could provide a windfall to whichever insurer's policy is read first. The Mississippi Supreme
Court has explained:
The view most often accepted is to the effect that when there is a
conflict in the policies, escape v. escape, escape v. excess or excess
v. excess, the two policies are indistinguishable in meaning and
intent, (and therefore) one cannot rationally choose between them
and must, therefore, be held to be mutually repugnant and must be
disregarded.
Travelers Indem. Co., 246 So. 2d at 504 (citing cases) (quotation marks and citations omitted).
"When such is the case, the liability under the two policies is 'prorated between the two
insurance policies in the ration of the limits of liability fixed in each policy which bears to the
total limits in all of the policies covering the risk.'" Cant'! Cas. Co. v. Coregis Ins. Co., 213 F.
Supp. 2d 673, 679 (S.D. Miss. 2002) (quoting Blue Cross & Blue Shield ofMiss., Inc. v. Larson,
485 So. 2d 1071, 1073 (Miss. 1986) (citing Travelers, 246 So. 2d at 503)).
The Westchester Policy requires Westchester to pay
on behalf of the "Insured" those sums in excess of the "Retained
Limit" which the "Insured" by reason of liability imposed by law,
or assumed by the "Insured" under contract prior to the
"Occurrence," shall become legally obligated to pay as damages
for: "Bodily Injury" ... arising out of an "Occurrence" during the
POLICY PERIOD ... .
Westchester Policy [1-3] at 47, § I(1)(a).
The Westchester Policy further provides:
"Retained Limit" means whichever of the following is applicable:
(1) with respect to any "Occurrence" that is covered by
"Underlying Insurance" or any other insurance, the total of the
applicable limits of the "Underlying Insurance" plus the applicable
limits of any other insurance; or
19
(2) with respect to any "Occurrence" that is not covered by
"Underlying Insurance" or any other insurance, the amount of the
Self-Insured Retention stated in Item 4(e) of the Declarations ....
Id. at 50, § IV, ~ K.
The Westchester Policy additionally provides: "The 'Limits of Insurance' shown in the
Declarations and the rules below fix the most we will pay . . . ."
Id. at 47, § 1(2). The
Declarations, as well as the rules stated in Section V, Limits of Insurance, provide that
Westchester will pay a per-occurrence limit of $25,000,000 and a general aggregate limit of
$25,000,000. Id. at 1, Decls.; 51, § V.
The Hudson Policy requires Hudson Specialty to pay "on behalf of the insured that
portion of the 'ultimate net loss' in excess of the 'retained limit' because of 'bodily injury' ... to
which this insurance applies." Hudson Policy [1-4] at 14, § I, Coverage A(1)(a). The Hudson
Policy defines "ultimate net loss" in pertinent part as follows:
[t]he total amount of damages for which the insured is legally
liable in payment of "bodily injury" .... "Ultimate net loss" must
be fully determined as shown in Condition 18. - When Loss
Payable. "Ultimate net loss" will be reduced by any recoveries or
salvages which have been paid or will be collected, but the amount
of "ultimate net loss" will not include any expenses incurred by
any insured, by us or by any "underlying insurer." However, if the
limits of liability of any "underlying insurance" applicable to a
"claim" or "suit" to which this insurance applies are reduced or
exhausted by the payment of expenses then "ultimate net loss"
includes all expenses incurred by us which are allocated to the
"claim" or file and such expenses of the "underlying insurer."
"Ultimate net loss" does not include any expenses incurred by any
"insured."
Id. at 29, § VI(24).
The Hudson Policy defines "retained limit" in pertinent part as follows:
[t]he greater of:
The sum of amounts applicable to any "claim" or "suit" from:
20
[1] "[u]nderlying insurance," whether such "underlying
insurance" is collectible or not; or
[2] "[0 ]ther collectible primary insurance[.]"
Id. at 29, § VI(20).
The Hudson Policy further provides: "This policy does not afford such person or
organization limits of insurance in excess of the lesser of: (1) [t]he minimum limit of insurance
you agreed to provide; or (2) [t]he limit of insurance under this policy." Id., § III(2)(t)(1)-(2).
The policy limits the amount Hudson Specialty will pay for "ultimate net loss" to that described
in Section IV, which provides in pertinent part: "The limits of insurance shown in Item 4 of the
Declarations and the rules below fix the most we will pay ...." !d. at 14, § I, Coverage A(I)(a);
23, § N(I). Item 4 of the Declarations provides a per-occurrence limit of $5,000,000 and a
policy aggregate limit of $5,000,000. Id. at 1, Decls. Section IV further provides in pertinent
part: "The Policy Aggregate Limit stated in Item 4 ofthe Declarations is the most we will pay for
all 'ultimate net loss' under Coverage A and Coverage B combined . . . ." and "the Each
Occurrence Limit stated in Item 4 of the Declarations is the most we will pay for all 'ultimate net
loss' because of injury and damage arising out of each 'occurrence.' " Id. at 23, § IV(2)(a), (c).
The Hudson Policy further provides:
Our liability for any portion of "ultimate net loss" will not apply
until the insured or any "underlying insurer" is obligated to
actually pay the full and complete amount of the "retained limit."
When "ultimate net loss" has been finally determined, the insured
may make claim for payment under this policy as soon as
practicable thereafter. Such insured[']s obligation to pay any
amount of "ultimate net loss" must have been finally determined
either by judgment against the insured after actual trial or by
written agreement of the insured, the claimant[,] or the claimants'
legal representative and us.
Id. at 26, § V(18).
21
Because both the Westchester Policy and the Hudson Policy are true excess policies, each
insurer owes its share pursuant to the umbrella/excess coverage language of its respective policy.
As the excess insurer, Westchester paid $4,000,000 in settlement in the underlying state-court
litigation. The Westchester Policy provides $25,000,000 per-occurrence excess coverage; the
Hudson Policy provides $5,000,000 per-occurrence excess coverage. Of the total $30,000,000
excess coverage available under the two policies, Hudson Specialty has one-sixth of the
obligation to pay the $4,000,000; Westchester has five-sixths of the obligation to pay the
$4,000,000. Accordingly, Hudson Specialty must now pay to Westchester $666,666.67. 5
Plaintiffs' Motion for Further Relief
Briefly, the Court addresses the motion for pre-judgment interest [165] filed by Plaintiffs.
Although Plaintiffs requested pre-judgment interest in their prayer for relief in the complaint [1]
and again reiterated this request at the close of trial in this cause, Plaintiffs failed to request pre
judgment interest in the Pretrial Order [145]. The Court is of the opinion that this request is not
well taken and that prejudgment interest should not be awarded in this case.
D. Conclusion
In sum, the Court finds that Defendant Hudson Specialty Insurance Company's motion
for judgment notwithstanding the verdict or alternatively for new trial [168] should be
GRANTED IN PART AND DENIED IN PART. Specifically, judgment should be entered in
favor of Plaintiffs EM] Corporation and Westchester Fire Insurance Company against Defendant
Hudson Specialty Insurance Company in the amount of $666,666.67 plus posHudgment interest
at the rate of 0.25% and costs.
5 The Court reiterates that it can only detennine the amount of coverage available on the insurance
policies in the existing record and can only enter judgment against those insurers that are parties to this litigation.
Furthennore, the reason the Court is able to apportion the loss with regard to the respective policy limits is that those
policy limits are in the record in the case sub judice.
22
The Court additionally finds that Plaintiffs' motion for further relief [165] should be
DENIED in its entirety.
An order and fin~dgment in accordance with this opinion shall issue this day.
THIS, the
/1 day of March, 2015.
SENIOR u.S. DISTRICT JUDGE
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?