Commerce and Industry Insurance Company v. Century Surety Company

Filing 58

ORDER allocating cost of litigation between the parties pursuant to 51 Motion for Entry of Judgment under Rule 54(b); 52 Motion for Entry of Judgment under Rule 54(b). Signed by Judge Algenon L. Marbley on 3/22/2019. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
COMMERCE AND INDUSTRY
INSURANCE COMPANY
Plaintiff,
v.
CENTURY SURETY COMPANY,
Defendant.

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Case No. 2:16-CV-320
JUDGE ALGENON L. MARBLEY
Magistrate Judge Kimberly Jolson

OPINION & ORDER
This matter comes before the Court on the parties’ cross-Motions for Entry of Judgment.
(ECF Nos. 51, 52). This Court earlier decided the parties’ cross-Motions for Summary Judgment,
granting the motion of Defendant Century Surety Company and denying the motion of Plaintiff
Commerce and Industry Insurance Company (C&I). Only the question of costs remains. As set
forth below, this Court now allocates the costs of the litigation between the parties.
I.

BACKGROUND

The underlying event giving rise to this litigation was an ATV accident in Alaska. The
accident victim filed a personal injury lawsuit against various insured parties. Based on the
allegations in the underlying complaint, both insurance companies became involved in defending
those insured parties. The parties have resolved all of the underlying injury claims. This Court
has also resolved who should bear what percentages of the costs of defense. The parties now
dispute the dollar amount of those percentages of costs, as well as the amount owed by each
party in the form of prejudgment interest.

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A. Factual Background
1. Negligence Case
Kathryn Daniel was an engineer who worked in Port Heiden, Alaska, the site of an
environmental remediation project. (ECF No. 1 at 2). The general contractor on the project was
Weston Solutions, Inc.; Aniakchak Contractors, Inc., was a subcontractor that provided local
transportation. Id. On September 14, 2009, Ms. Daniel was riding home from a work-related
barbeque on the back of an ATV driven by Konan Lind, an employee of Aniakchak. Id.
The ATV crashed, and Ms. Daniel was injured. Id. She asserted claims against Mr. Lind as well
as against Weston and Aniakchak. Id. at 3. She later settled her claims against Mr. Lind and
Aniakchak, leaving Weston as the sole Defendant. Id. at 4.
Ms. Daniel’s case against Weston went to trial in the Superior Court of the State of
Alaska. Id. The jury returned a verdict for Weston, allocating one hundred percent of the fault
for the accident to Ms. Daniel and Mr. Lind. Id. Ms. Daniel’s claims were thus fully resolved.
2. The Insured Parties
C&I insured Weston, and Century insured Aniakchak. (ECF No. 36, Ex. 1). Both policies
contain identical language governing the extent to which acts of employees are covered: employees
are insured "for acts within the scope of their employment . . . or while performing duties related
to the conduct of [the] business." (ECF. No. 37-6 at 9, ECF No. 37-13 at 8). The complaint alleged
that Mr. Lind's work was directed and controlled by both companies. (ECF No. 37-4 at 18).
During the litigation surrounding Ms. Daniel’s claims, Century—as the insurer of
Aniakchak—also agreed to defend Mr. Lind. (ECF No. 36 at 4-5). Mr. Lind’s defense counsel
tendered defense to C&I as well, but C&I refused to participate in Mr. Lind’s defense. Id. at 5.

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C&I did agree to defend the allegations against Weston. (ECF No. 37 at 7). Weston’s
defense counsel also tendered defense to Century, on the basis that the Century Policy included
additional coverage for Weston. (ECF No. 36 at 5). Century agreed that it might be responsible
for some of Weston’s coverage, but because C&I and Century could not agree as to the extent to
which the policies interacted, C&I defended Weston alone. (ECF No. 37 at 7).
3. Procedural Background
C&I filed litigation against Century seeking reimbursement for 100% of defense costs
C&I incurred in defending Weston. Century counterclaimed for 100% of the defense costs
Century incurred in defending Mr. Lind. The parties then filed cross-motions for summary
judgment (ECF No. 36, 37). The Court denied C&I’s motion for summary judgment and granted
Century’s motion for summary judgment. (ECF No. 49). This Court ordered Century and C&I to
allocate the costs of defending Weston on a pro rata basis according to limits of both parties. Id.
at 9. This Court also found that C&I is 100% liable for the cost of defending Lind. Id. at 11. The
parties then filed cross-motions for entry of judgment.
III. ANALYSIS
A. Motion for Reconsideration
Century first alleges that C&I’s Motion for Entry of Judgment is in fact a Motion for
Reconsideration in disguise. Century argues that C&I’s introduction of new arguments and
calculations in their Motion constitutes an impermissible Motion for Reconsideration, and that
this Court should accordingly accept Century’s calculations.
Under Federal Rule of Civil Procedure 59(e), a court will reconsider its own prior
decision “if the moving party demonstrates: (1) a clear error of law; (2) newly discovered
evidence that was not previously available to the parties; or (3) an intervening change in

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controlling law.” Owner-Operator Indep. Drivers Ass’n, Inc. v. Arctic Express, Inc., 288
F.Supp.2d 895, 900 (S.D. Ohio 2003). Courts may also alter or amend a judgment when
necessary “to prevent manifest injustice.” GenCorp., Inc. v. Am. Int’l Underwriters, 178 F.3d
804, 834 (6th Cir. 1999). Because C&I has not alleged any of these elements in their Motion for
Entry of Judgment, this Court declines to understand this filing as a Motion for Reconsideration,
and will instead address the parties’ cross-Motions for Entry of Judgment in tandem.
B. Defense of Weston
1. Duty to Defend
In its order on summary judgment, this Court ruled that Century and C&I must share the
defense cost of Weston on a pro rata basis (ECF No. 49 at 9). The question for determining the
amount each party must pay is when Century’s duty to defend Watson was triggered. As
discussed in this Court’s earlier Opinion and Order (ECF No. 49 at 5), Alaska state law governs
this analysis.
There are three letters relevant here. The first is a letter dated February 26, 2013. This
letter was sent by Weston to Kevin Fitzgerald, an attorney for Aniakchak. The second is a letter
dated March 26, 2013. This letter was set by Mr. Fitzgerald in reply to Weston’s February 26
letter. Century was copied on this response letter. The third letter is dated October 14, 2013, and
was sent by Weston to Susan Weller, at Century. This letter contained a formal tender offer.
C&I argues that Century’s duty to defend was triggered no later than March 26, 2013,
because by that date, Century had knowledge of “all of the relevant facts giving rise to its
coverage obligations to Weston.” (ECF 52 at 3). C&I points to the February 26th letter sent to
the defense counsel retained by Century demanding indemnity and asserting a right to coverage.
C&I argues this qualifies as a document providing knowledge of the relevant facts of the case.

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Id. C&I contends that the latest possible date that Century saw this letter and thus gained
knowledge was March 26, 2013, when the retained defense counsel copied Century on his
response letter to C&I. Id. C&I also presents a deposition statement of a litigation specialist
affiliated with Century stating that she thought that Weston believed it was entitled to coverage
based upon their initial letter. Id. C&I asserts that this demonstrates Century representatives read
the letter and thus Century understood all of the facts giving rise to litigation, triggering
Century’s duty to defend under Alaska law. Id.
Century argues that the date triggering their duty to defend is October 14, 2013, because
that was the date Weston explicitly tendered its defense to Century. (ECF No. 53 at 5). First,
Century points to the February 26th letter sent to C&I, which expressly states that Weston needs
to contact the insurer and make a tender of defense. Id. Century then points to the fact that
Weston later explicitly tendered its defense in the letter sent to Century dated October 14, 2013.
Under Alaska law, an insurer’s duty to defend arises when the “‘vagaries of law and fact’
are sufficient to create the potential that an insured will incur covered liability.” Williams v.
GEICO Cas. Co., 301 P.3d 1220, 1225 (Alaska 2013) (citing Makarka ex rel. Makarka v. Great
Am. Ins. Co., 14 P.3d 964, 969 (Alaska 2000)). These facts may be shown “either on the face of
the complaint or through facts the insurer knew or could have reasonably ascertained that would
bring an otherwise uncovered complaint within the policy’s coverage.”
The “vagaries of law and fact” indicate that Century’s duty to defend was triggered on
March 26, 2013, for three reasons. First, in their Motion for Summary Judgment, Century
indicates that they agreed with C&I that their coverage may apply to the accident at issue. (ECF
No. 36 at 5). This indicates that Century “reasonably ascertained” that a covered claim might
arise out of this fact pattern. Second, because of the response letter written by Century’s retained

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defense counsel. Counsel sent this letter to Weston and copied other counsel at Century. This
letter details the events and claims at the center of this dispute. In addition to discussing the
events in question, the letter also mentions several legal claims. (ECF No. 37, Ex. 8). Given the
contents of this letter, and the fact that it was sent by counsel, by this date Century “reasonably
ascertained” their potential liability with respect to the matters discussed.
Third, Century can be understood to have the required knowledge because of statements
made by Susan Weller during her deposition. Ms. Weller was a litigation specialist for a
company that handles claims on Century’s behalf. During her deposition, Ms. Weller stated that
through discussions with counsel, the author of the February 26th letter, she understood that
Weston believed it was entitled to coverage. (ECF No. 35, Ex. 1 at 42:5-10). Ms. Weller also
testified that this conversation took place before counsel wrote the February 26th letter. Id. at
41:18-25. Ms. Weller’s testimony indicates Century had the requisite notice before they received
the response letter, confirming that Century had knowledge of the “vagaries” by March 26, 2013
at the latest. As a result, this Court finds that Century’s duty to defend Weston was triggered on
March 26, 2013.
2. Pro Rata Cost
With March 26, 2013 as the start date, this Court must now determine the amount that
Century owes C&I for the defense of Weston. Per this Court’s earlier Opinion and Order, the
parties are to divide the costs of Weston’s defense on a pro rata basis according to their
respective policy limits. (ECF No. 49 at 9). C&I has a policy limit of $2 million per occurrence
while Century has a policy limit of $1 million per occurrence.
C&I argues that that, with a $2 million limit per occurrence, they are responsible for twothirds of Weston’s defense costs. (ECF No. 52 at 3). Century asserts that it exhausted its policy

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limit on May 19, 2015. (ECF No. 53 at 6). Century also asserts that its defense of Weston began
October 14, 2013, the date of the formal tender of defense. Id.
The initial burden is on the insurer to prove that a potential area of coverage is, in fact,
excluded from coverage. This is true for each of the states whose law is implicated in this case
(Alaska, Ohio, Pennsylvania). See Easy Corner, Inc. v. State Natl. Ins. Co., Inc., 154 F. Supp. 3d
151, 154 (E.D. Pa. 2016) (citing Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197 (3rd Cir.
2001)); Herr v. Underwriters at Lloyds of London, 97 F. Supp. 379, 381 (D. Alaska 1951);
Burlington Ins. Co. v. PMI Am., Inc., 862 F. Supp. 2d 719, 738 (S.D. Ohio 2012) (citing
Continental Ins. Co. v. Louis Marx & Co., 64 Ohio St.2d 399, 401, 415 N.E.2d 315 (1980)).
Century has provided evidence demonstrating their $1 million policy limit was exhausted
on May 19, 2015. See ECF No. 35, Ex. 17. Thus, as above, Century’s duty to defend was
triggered on March 26, 2013, and the policy was exhausted May 19, 2015. Century must
reimburse C&I for one-third of the cost to defend Weston between those dates. The total cost of
the defense for that period of time was $1,040,305.59, as indicated by C&I. (ECF No. 52 Ex. B,
Ex. A). Diving that amount by one third shows that Century owes C&I $346,765.43.
The Court ORDERS Century to reimburse C&I in the amount of $346,765.43, one-third
of the $1,040,305.59 cost to defend Weston.
B. Defense of Lind
The next question is how much C&I must reimburse Century for the defense of Lind. The
parties dispute the amount owed, but as this Court stated in its earlier Opinion & Order, this is
not a question of duty but a question of apportionment. (ECF No. 49 at 11). In its Opinion and
Order, this Court noted that under both Alaska and Pennsylvania law, when one policy contains
an “other insurance” clause and the other contains a “primary insurance” clause, the primary

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issuer is 100% responsible for the cost of the defense. (ECF No. 49 at 11). This Court, citing
such language in the policies at issue here, found that Century’s policy is excess to the C&I
policy for the defense of Lind. Id. at 12. Because Century’s insurance is considered “other
insurance” or “excess insurance”, C&I owes Century for the full cost of defending Lind.
Thus, as to the costs of defending Lind, the Court ORDERS C&I to reimburse Century
for the full cost of defending Lind: $442,295.44.
C. Prejudgment Interest
Both parties ask for prejudgment interest. In the Sixth Circuit, prejudgment interest is
collectible in contract disputes. The recovery rate is the law of the state under whose laws the
contract was concluded. Fed. Deposit Ins. Corp. v. First Heights Bank, FSB, 229 F.3d 528, 534542. There are three states relevant here: Alaska, Ohio, and Pennsylvania.
1. Prejudgment Interest Owed to C&I for The Defense of Weston
For the defense of Weston, Alaska law controls. Under Alaska law, prejudgment interest
is allowed in all civil cases. State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152, 1158
(Alaska 1989) (citing Farnsworth v. Steiner, 638 P.2d 181, 183-85 (Alaska 1981)). C&I argues
for a 5% interest rate on prejudgment interest for cases of breach of contract and argues that the
interest accrues from the date of the breach. (ECF No. 52 at 6). Century initially argues for a
10.5% interest rate, but later concedes and allows for a 5% interest rate calculation in this case,
in the interest of bring the matter to a close. (ECF No. 53 at 8). Both parties agree the starting
date for this calculation is May 19, 2015. (ECF No. 52 at 6, n.2; ECF No. 53 at 8).
For the defense of Weston, Century owes C&I $346,765.43. In addition to this amount,
Century owes C&I prejudgment interest at a rate of 5% accruing daily beginning with May 19,

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2015. As of March 22, 2019, which is 1404 days later, this amount totals $66,692.97. Thus, the
Court ORDERS Century to pay C&I $ $66,692.97 in prejudgment interest.
2. Prejudgment Interests owed to Century for The Defense of Lind
Under Pennsylvania law, prejudgment interest is available in breach of contract actions
and it accrues at the time performance was due. Northland Ins. Co. v. Lincoln Gen. Ins. Co., No.
04-3472, 2005 WL 2813945 at *4 (3rd Cir. 2005) (unpublished). Pennsylvania law also limits the
applicable interest for prejudgment interests in cases of this nature to 6%. Bodek and Rhodes,
Inc. v. Bob Lanier Enterprises, Inc., 15-3421, 2016 WL 398079, at *7 (E.D. Pa. Feb. 2, 2016)
(citing 41 Pa. Stat. Ann. §202 (West)). As above, both parties stipulate that the starting date for
calculation of prejudgment interest is May 19, 2015. (ECF No. 52 at 6, n.2). Additionally, both
parties agree to the statutorily-limited 6% interest rate. (ECF No. 52 at 6; ECF No. 53 at 8).
As above, C&I owes Century $444,295.44 for the defense of Lind, and 1404 days elapsed
between May 19, 2015 and the entry of this judgment. C&I thus owes Century $102,540.95 in
prejudgment interest for the defense of Lind. Thus, the Court ORDERS C&I to pay Century
$102,540.95 in prejudgment interest.
IV. CONCLUSION
For the reasons discussed above, this Court finds that Century’s duty to defend was
triggered on March 26, 2013, and that its policy was exhausted on May 19, 2013. Accordingly,
this Court hereby ORDERS the parties to reimburse each other in the following amounts,
current as of March 22, 2019:

*Century shall reimburse C&I $346,765.43 for the defense of Weston.
*C&I shall reimburse Century $442.295.44 for the defense of Lind.

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*Century shall pay C&I prejudgment interest in the amount of 66,692.97.
*C&I shall pay Century prejudgment interest in the amount of 102,540.95.

IT IS SO ORDERED.

s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: March 22, 2019

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