Fireman's Fund Insurance Company v. Chartis Insurance Agency, Inc. et al

Filing 59

ORDER denying 38 Motion for Summary Judgment; granting 45 Motion for Summary Judgment; finding as moot 55 Motion for Leave to File Sur-rebuttal. Signed by District Judge Carlton W. Reeves on 3/13/2015. (kf)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
FIREMAN’S FUND INSURANCE COMPANY
PLAINTIFF
VS.

NO. 3:12-CV-657-CWR-FKB

ILLINOIS NATIONAL INSURANCE COMPANY

DEFENDANT

MEMORANDUM OPINION AND ORDER
Before the court are the parties’ separate motions for summary judgment on plaintiff’s
declaratory judgment action. Docket Nos. 38 and 45. The parties have filed responses to their
adversary’s motion, see Docket Nos. 47 and 52, and they have also filed rebuttals in support of
their respective motions. Docket Nos. 51 and 54. Having considered the motions and responses
and being fully advised in the premises, the court finds that the motion of Fireman’s Fund
Insurance Company (FFIC) is granted, and the motion of Illinois National Insurance Company
(INIC) is denied.
I.

Background
Some of the factual background in the current case has been summarized in this court’s

previous ruling in Fireman’s Fund Ins. Co. v. Chartis Ins. Agency, Inc., 3:12-CV-657-CWRFKB, 2013 WL 1305602 (S.D. Miss. Mar. 28, 2013), where the court granted the motion to
dismiss filed by Chartis Insurance Agency, the agent of INIC. The declaratory judgment action
and the current motions involve the parties’ disagreement about who is required to pay postjudgment interest—not an insignificant amount in light of the $4 million judgment obtained
against the parties’ insured, Intown Suites.

1

Intown Suites had a $1 million insurance policy with FFIC, and it maintained a $25
million policy of excess coverage with INIC. While the parties were in dispute as to which
insurer was required to pay the post-judgment interest on the judgment levied against Intown
Suites, FFIC paid approximately $539,000 in post-judgment interest. Fireman’s Fund Ins. Co.
v. Chartis Ins. Agency, Inc., 3:12cv657-CWR-FKB, 2013 WL 1305602, at *1 (S.D. Miss. March
28, 2013). Through the declaratory action, FFIC contends that INIC is responsible for most of
that amount—“specifically all post-judgment interest that accrued after its tender of October 20,
2009.” Id.
The FFIC policy states the following regarding coverage of post-judgment interest:
We will pay, with respect to any claim we investigate or settle, or any suit
against the insured we defend:
***
All interest on the full amount of any judgment that accrues after
entry of the judgment and before we have paid, offered to pay, or
deposited in court the part of the judgment that is within the
applicable limit of insurance.
Docket No. 40, Exhibit “B”, FFIC’s Insurance Policy at pp. FFIC 0142-0143 (hereinafter, “FFIC
Policy”). As for INIC, its relevant policy provides:
I.

INSURING AGREEMENT – COMMERCIAL UMBRELLA LIABILITY
A.

We will pay on behalf of the Insured those sums in excess of the
Retained Limit that the Insured becomes legally obligated to pay as
damages . . . .
....
The amount we will pay for damages is limited as described in
Section IV. Limits of Insurance.
***

IV.

LIMITS OF INSURANCE
2

M.

We will not make any payment under this policy unless and until:
1. the total applicable limits of Scheduled Underlying Insurance
have been exhausted by payment of Loss1 to which this policy
applies . . . .
When the Amount of Loss has been determined by an agreed
settlement or a final judgment, we will promptly pay on behalf of
the Insured the amount of such Loss falling within the terms of this
policy.

Docket No. 38-3, Exhibit “C”, INIC’s Umbrella Insurance Policy, at pp. FFIC 0337, 0340-41
(hereinafter, “INIC’s Policy”). Although INIC’s general coverage section does not expressly
mention payment of post-judgment interest, the terms of its “Defense” section specifically states:
C.

When we assume the defense of any Suit against the Insured that
seeks damages covered by this policy, we will:
1. Investigate, negotiate and settle the Suit as we deem expedient;
and
2. Pay the following supplementary payments to the extent that
such payments are not covered by Scheduled
Underlying Insurance or any applicable Other Insurance:
***
e.

Post-judgment interest that accrues after the entry of
judgment on that part of the judgment within the
applicable Limits of Insurance of this policy we pay and
before we have paid, offered to pay or deposited in court
that part of the judgment that is within the applicable
Limits of Insurance of this policy; and
***

D.

Except as provided in Paragraph A. above, we will have no duty to
defend any Suit against the Insured.

Id. at pp. FFIC 0338-0339.
1

Loss means those sums actually paid as judgments. See INIC’s Policy, at pp. FFIC 0356.

3

On October 20, 2009, one month after trial and while post-trial motions were pending,
FFIC sent a letter to INIC, stating, “[W]e hereby tender our limits to [INIC] so that you can
attempt to resolve the case within your limits.” Docket No. 38-4, Exhibit D. On October 26,
2009, INIC responded in its own letter to FFIC, in which it acknowledged that FFIC had
tendered its policy limits, but that “[INIC] would not agree to accept [FFIC’s] tender of its
policy limits.” Docket No. 38-5, Exhibit E. INIC also stated that its policy did not require it to
accept the tender. Id.
On December 8, 2009, INIC sent a proposal letter to Intown Suites to pay for a portion of
Intown Suites’ appeal bond subject to a reservation of rights. Docket No. 38-6, Exhibit F. Intown
Suites agreed to the proposal, which specifically stated that INIC was not agreeing to defend
Intown Suites on appeal and that INIC did not “owe any obligation to fund any part of the appeal
bond.”2 Id. at 2. According to FFIC, INIC posted a bond for $3.75 million. Additionally, FFIC
contends that INIC was involved in the appeal of the case, including editing, reviewing, and
advising counsel for Intown Suites on substantive issues discussed in the briefs. See Docket No.
47-2, at 4, 22-7. Before Final Judgment was rendered in the underlying suit, FFIC also points out
that INIC had several discussions with FFIC regarding potential settlement, however, INIC was
not pleased with any of the underlying plaintiff’s offers regarding settlement. Docket No. 47-1,
at 4.
After the underlying judgment was affirmed on appeal, on July 7, 2011, INIC issued a
letter informing FFIC that it was required to pay the interest that accrued after judgment. Docket
No. 38-7, Exhibit G. In an email the next day, FFIC stated that it “will pay all post-judgment

2

According to FFIC, INIC insisted that an appeal be filed in the first place. Docket No. 47-2, at 4.
Additionally, on January 31, 2011, INIC engaged in more settlement talks with the plaintiffs in the
underlying action to resolve the case. Id.

4

interest given our policy language.” Docket No. 38-8, Exhibit H. That same day INIC issued a
letter to FFIC confirming this agreement.3 Docket No. 38-9, Exhibit I. INIC then issued its check
for $3 million on August 5, 2011. Docket No. 20-3, at 3. Shortly thereafter, however, FFIC
changed its position and, on August 10, 2011, it sent an email to INIC intimating that since FFIC
tendered or “offered to pay” its limits on October 10, 2009, any duty to pay post judgment
interest had ended on that date.4 Docket No. 38-10, Exhibit J.
On September 1, 2011, FFIC promised to pay all post-judgment interest, including that
which followed October 20, 2009, in order to protect the insured, but warned INIC that it would
seek repayment for the entire amount of interest after October 20, 2009.5 Docket No. 38-11,
Exhibit K.
II. Present Arguments
INIC first argues that Texas law must apply to the interpretation of the insurance policies
at issue. Docket No. 39, at 9. Under Texas law, summary judgment should be granted in its
favor, INIC claims.
INIC offers several reasons why FFIC is obligated to pay interest. It first proffers that,
under FFIC’s policy, FFIC’s post-judgment interest obligations did not terminate because it did
not “pay or offer to pay the amount of the judgment within its $1 million limits” in a way which
comports with Texas law. Id. 12 (quotations omitted). INIC reasons that “actual production of
the funds” constitutes a tender under Texas law, which FFIC did not do. Id. at 13 (citing Texas
The letter also mentioned that representatives from both parties discussed on the phone FFIC’s
agreement to pay post-judgment interests. Id.
3

4

FFIC calculated post-judgment interest from the date of the judgment, September 28, 2009,
through October 20, 2009, to be $17,643.76. Id.
FFIC’s second amended verified complaint stated that it paid $539,285.36 in post-judgment
interest in August 2011. Docket No. 20, 6-7.
5

5

Employers Ins. Ass’n v. Underwriting Members of Lloyds, 836 F. Supp. 398 (S.D. Tex. 1993)).
INIC also argues that FFIC’s “offer to pay” was insufficient under Texas law. Id. at 15 (arguing
that “[u]nder Texas law relating to supplementary payment provisions like the one in Fireman’s
Fund’s policy, an insurer must offer its policy limits in addition to the amount of post-judgment
interest owed at the time in order to end its continuing liability for accruing post-judgment
interest.” (citing Texas Farmers Ins. Co. v. Miller, 03-97-00233-CV, 1997 WL 746027 (Tex.
App. Dec. 4, 1997))). The tender letter was insufficient because it was not communicated to the
insured plaintiffs in the underlying judgment, INIC urges. Id. at 16 (citing Richmond v. Nobel
Ins. Co., 22 F. App’x 246, 247 (4th Cir. 2001)). Finally, INIC claims that its post-judgment
interest obligations were not triggered under the clear language of its own policy. Id. at 18
(arguing that, under its own policy, INIC’s defense obligations are not triggered until Fireman’s
Fund actually pays its policy limits).
In response, FFIC says that because Mississippi law and Texas law do not conflict, then
Mississippi law should be applied. Docket No. 47, at 8 (citing Mumblow v. Monrow
Broadcasting, Inc., 401 F.3d 616, 620 (5th Cir. 2005) (“‘[i]f the laws of the states do not conflict,
then no choice-of-law analysis is necessary,’ and we simply apply the law of the forum state.”)).
FFIC asserts that the policy provisions’ language in the Texas case that INIC uses in support of
summary judgment differs from that of FFIC’s supplementary payment provision policy. Id. at 9.
FFIC claims that it does not have to actually deposit money because its policy did not require it
to do so (unlike the policy provisions considered in the Texas case used in Defendant’s brief). Id.
at 11. FFIC maintains that under the plain language of its policy, FFIC’s responsibility to pay
post-judgment interest ended on October 20, 2009, when it offered its policy limits. Id. FFIC
acknowledges that only one case cited by Defendant actually contained the same “offer to pay”

6

policy language as FFIC, Texas Farmers Ins. Co. v. Miller, however, FFIC insists that the Court
should not consider this case because, pursuant to rule 47.5.4 of the Fifth Circuit Rules, the
Miller decision is not controlling precedent.6 Id. at 12-13.
Additionally, FFIC contends that INIC’s assertion that FFIC’s offer should have been
made to the underlying plaintiffs lacks authority, because INIC uses Tennessee and Virginia law
to support its argument.7 Id. at 15. FFIC also claims that the post-judgment interest incorporated
into the final judgment falls within the “loss” covered by INIC’s commercial umbrella liability
policy. Id. at 17-18. According to FFIC, the plain language of the INIC policy requires INIC to
pay post-judgment interest incurred after October 20, 2009. Finally, FFIC argues that if summary
judgment is not granted in its favor, the court should not grant summary judgment in favor of
INIC because there are genuine issues of material fact concerning whether INIC assumed a duty
to defend the lawsuit against Intown Suites during its appeal.8 Id. at 21-23.
In its response, INIC reiterates the same arguments from its motion for summary
judgment brief. INIC rebuts, however, FFIC’s claim that it assumed the defense of Intown Suites
or that it assumed Intown Suites’ appeal. Docket No. 51, at 17.
III. Standard of Review

6

Although FFIC claims that the Court should ignore this case, it attempts to distinguish the facts
in Miller from the present case to support its claim that Miller is inapplicable. Id. at 13-14. In Miller,
FFIC argues, there were no excess carriers involved; the insurer’s prejudgment offers were insufficient to
stop the accrual interest because they were conditioned upon the insured’s release; and, finally, the
insurer’s offer did not include any amount of interest that had accrued to that date. Id. at 14.
7

FFIC adds that INIC should be estopped from making this argument because INIC implicitly
acknowledged the offer’s validity when INIC conveyed FFIC’s policy limits of $1 million to the
underlying plaintiffs. Id. at 16.
FFIC argues that the plain language of INIC’s defense provisions of its policy provide that INIC
will pay post-judgment interest in cases in which it assumes defense.
8

7

Summary judgment is appropriate 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.R.Civ.P. 56(a). A party seeking to avoid summary judgment must identify admissible
evidence in the record showing a fact dispute. Id. at 56(c)(1). “In cases like this, where the
relevant facts are not in dispute and the critical questions turn purely on legal rights and
relationships, summary judgment is appropriately considered.” National Union Fire Ins. Co. of
Pittsburgh, PA v. Petco Petroleum Co., No. 4:12-CV-165-CWR-LRA, 2013 WL 5937430, at *3
(S.D. Miss. Nov. 4, 2013)(citation omitted). The Court must “view the evidence and draw
reasonable inferences in the light most favorable to the non-movant.” Maddox v. Townsend and
Sons, Inc., 639 F.3d 214, 216 (5th Cir. 2011) (citation omitted).
IV. Discussion
i.

Issue of whether the law of Mississippi or Texas should apply
The first issue to be resolved is whether Mississippi or Texas law governs this suit. In a

diversity action,9 the Court applies the choice of law rules of the forum state to determine which
state’s substantive law applies. Hartford Underwriters Ins. Co. v. Found. Health Servs. Inc., 524
F.3d 588, 593 (5th Cir. 2008). Under the law of the forum state, Mississippi, a choice of law
analysis is necessary “only when there is a true conflict between the laws of two states, each
having an interest in the litigation.” Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 432 (Miss.
2006)). Stated another way, “[i]f the laws of the states do not conflict, then no choice-of-law
9

FFIC is a corporation organized under the laws of the State of California with its principal place
of business in the State of California, while INIC is a corporation organized under the laws of the State of
Illinois, with its principal place of business is in Illinois. When this action was filed, Chartis was a party
and its principal place of business is in the State of New York. Diversity jurisdiction of this court has
been properly invoked, see Title 28, Section 1332, and FFIC brings this action under the Declaratory
Judgment Act, Title 28, Section 2201, which provides in part that ‘[i]n a case of actual controversy within
its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare
the rights and other legal relations of any interested party seeking such declaration, whether or not further
relief is or could be sought.”

8

analysis is necessary,” and the law of the forum state will apply. Schneider Nat. Transp. v. Ford
Motor Co., 280 F.3d 532, 536 (5th Cir. 2002) (citations omitted). Both parties have indicated that
there is no applicable Mississippi or Texas law at odds in this case. Because Mississippi is the
forum state, its laws will be applied.
ii.

Dispute between the primary and excess insurance carriers as to the payment of
post-judgment interest
Under Mississippi law, an insurance contract must be interpreted according to its terms.

Foreman v. Continental Casualty Co., 770 F.2d 487, 489 (5th Cir.1985). “The construction of an
insurance contract is limited to an examination of the ‘written terms’ of the policy itself.”
Nationwide Mut. Ins. Co. v. Yelverton, 417 F. Supp. 2d 817, 820 (S.D. Miss. 2006) (citing
Employers Mut. Casualty Co. v. Nosser, 250 Miss. 542, 553 (1964)). “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.” Id. (citing Cherry v. Anthony, Gibbs, Sage, 501 So.2d 416, 419 (Miss. 1987)). “If an
insurance contract is clear and unambiguous, the language therein must be given its plain
meaning.” Id. (citing Gulf Nat’l Bank v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th
Cir. 1983)).
The Court finds that post-judgment interest accrued after October 20, 2009 (the date
through which FFIC paid post-judgment interest) should be assessed against INIC. Under a
plain reading of both policies, once FFIC paid its policy limit and interest on judgment in excess
of its policy limit, INIC—as excess liability insurer—became liable for post-judgment interest
that accrued following the date of payment by FFIC. Although FFIC’s “tender” of its policy
limits on October 20, 2009, was not an “actual payment,” its policy specifically relieved itself of
any obligation to pay post-judgment interest once it “offered to pay.” See FFIC Policy at pp.
9

FFIC 0142-0143 (agreeing to pay post-judgment interest that accrued “after entry of the
judgment and before [it has] paid, offered to pay, or deposited in court the part of the judgment
that is within the applicable limit of insurance.” (emphasis added)). FFIC’s October 20, 2009
letter sent to Defendant stating that it was tendering its policy limits is sufficient to satisfy an
“offer to pay” under the terms of FFIC’s policy. Therefore, FFIC is correct that after October 20,
2009, it no longer had an obligation to pay post-judgment interest. Moreover, the Court agrees
with FFIC’s position that the post-judgment interest incorporated in the final judgment falls
within the “loss” covered by INIC’s “Limits of Insurance” section of its policy, which states,
[w]hen the Amount of Loss has been determined by an agreed settlement
or a final judgment, we will promptly pay on behalf of the Insured the
amount of such Loss falling within the terms of this policy.
INIC’s Policy at pp. FFIC 0341. As such, INIC is liable for all post-judgment interest accrued
after October 20, 2009.10
FFIC’s motion for summary judgment is granted and the motion for summary judgment
filed by INIC is denied.
SO ORDERED, this the 13th day of March, 2015.
s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

10

Because the Court finds that INIC is liable for post-judgment interest accrued after October 20,
2009, based on its tender of its policy, whether INIC assumed the defense of the appeal is no longer a
genuine issue.

10