Northwest Pipe Company v. RLI Insurance Company et al
Filing
305
ORDER: The Court GRANTS ACE and Wausaus Motion 293 Re Proposed Form of Judgment. The Court concludes the proposed form of judgment submitted by ACE and Wausau should be revised to conform to this Opinion and Order. Accordingly, the Court directs the parties to confer and to submit to the Court no later than May 30, 2014, a form of judgment consistent with this Opinion and Order and the Courts prior rulings regarding RLIs duty to defend and allocation of Northwest Pipes defense co sts among Defendants. The proposed form of judgment should also include language that preserves Northwest Pipes unresolved claims for unpaid defense costs. To the extent that the parties disagree as to such form, they may simultaneously submit alternate forms of judgment together with a concise explanation supporting the entry of a particular version. Signed on 05/15/2014 by Judge Anna J. Brown. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
NORTHWEST PIPE COMPANY, fka
NORTHWEST PIPE & CASING COMPANY,
an Oregon corporation,
Plaintiff,
v.
RLI INSURANCE COMPANY, an
Illinois corporation, and
EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin
corporation,
Defendants.
________________________________
EMPLOYERS INSURANCE COMPANY
OF WAUSAU, a Wisconsin
corporation,
Counter-Claimant,
v.
NORTHWEST PIPE COMPANY, fka
NORTHWEST PIPE & CASING COMPANY,
an Oregon corporation,
Counter-Defendant.
________________________________
1 - OPINION AND ORDER
3:09-CV-01126-BR
OPINION AND ORDER
RLI INSURANCE COMPANY, an
Illinois corporation,
Third-Party Plaintiff,
v.
ACE FIRE UNDERWRITERS INSURANCE
COMPANY, a Pennsylvania company,
and ACE PROPERTY AND CASUALTY
INSURANCE COMPANY, a Pennsylvania
company,
Third-Party Defendants.
BROWN, Judge.
This matter comes before the Court on the Motion (#293) Re
Proposed Form of Judgment of Defendants ACE Fire Underwriters
Insurance Company and ACE Property and Casualty Insurance Company
(collectively referred to herein as ACE) and Employers Insurance
Company of Wausau.
For the reasons that follow, the Court GRANTS ACE and
Wausau’s Motion.
BACKGROUND
The Court previously ruled Defendant RLI Insurance Company
has a duty to defend Plaintiff Northwest Pipe and is required to
pay 43.27% of Northwest Pipe’s reasonable and necessary defense
costs.
Order (#62) issued Aug. 12, 2010; Order (#169) issued
Jun. 13, 2012, and Order (#233) issued July 11, 2013.
Pursuant to Order (#253), the Court ruled:
2 - OPINION AND ORDER
1.
RLI is required to reimburse Wausau and ACE for
RLI’s share of the reasonable and necessary
defense costs incurred by Wausau and ACE as of
December 1, 2012.
2.
As of December 1, 2012, Wausau incurred
$2,030,573.86 and ACE incurred $2,310,673.78 in
reasonable and necessary defense costs.
3.
Pursuant to the Ninth Circuit’s ruling in
Interstate Fire & Cas. Co. v. Underwriters at
Lloyd's, London, 139 F.3d 1234 (9th Cir. 1998),
RLI is obligated to pay prejudgment interest on
the defense costs that it owes to Wausau and ACE.
The Court also directed Wausau and ACE to file a form of
judgment at the conclusion of trial on the limited issue of the
commercial availability of insurance coverage without absolute
pollution exclusions.
Order (#253).
Pursuant to Stipulation
(#263), however, the parties resolved that dispute prior to
trial.
Subsequently, ACE and Wausau filed Motion (#293) on March
3, 2014, seeking entry of a Proposed Judgment (#293-3) as to
RLI’s obligation to reimburse ACE and Wausau for its proportional
share of defense costs and for prejudgment interest on those
amounts.
STANDARDS
Federal Rule of Civil Procedure 54(b) provides:
When an action presents more than one claim for relief
. . . or when multiple parties are involved, the court
may direct entry of a final judgment as to one or more,
but fewer than all, claims or parties only if the court
expressly determines that there is no just reason for
delay.
3 - OPINION AND ORDER
Pursuant to Rule 54(b), when the court has entered a final
judgment as to a particular claim, the court may sever this
partial judgment from the remaining claims and, therefore, make
that judgment immediately appealable if the court finds there is
“no just reason for delay.”
James v. Price Stern Sloan, Inc.,
283 F.3d 1064, 1068 n.6 (9th Cir. 2002).
Because severance under
Rule 54(b) is consistent with 28 U.S.C. § 1291 and only a final
judgment may be severed, the district court has wide discretion
to determine whether any just reasons for delay exist.
The
“issuance of a Rule 54(b) order is a fairly routine act that is
reversed only in the rarest instances.”
Id. (the appellate court
“accords a great deference to the district [court’s]”
determination of finality.).
See also In re First T.D. & Inv.,
Inc., 253 F.3d 520, 531 (9th Cir. 2001).
When exercising its
discretion to determine whether any just reasons for delay exist,
the court may consider the following factors:
[W]hether the claims under review were separable from
the others . . . and whether the nature of the claims
already determined was such that no appellate court
would have to decide the same issues more than once
even if there were subsequent appeals.
AmerisourceBergen Corp. v. Dialysist West, Inc., 445 F.3d 1132,
1137-38 (9th Cir. 2006)(quoting Curtiss-Wright Corp. v. Gen.
Elec. Co., 446 U.S. 1, 8 (1980), superseded on other grounds by
AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946,
954 (9th Cir. 2006)).
4 - OPINION AND ORDER
Nevertheless, the possibility of piecemeal
appeals “does not necessarily mean that a Rule 54(b)
certification would be improper.”
Curtiss-Wright Corp., 446 U.S.
at 8.
DISCUSSION
RLI objects to the Motion of ACE and Wausau on the grounds
that (1) entry of judgment is premature because the judgment does
not dispose of all claims or all parties in this litigation and
is, therefore, contrary to Rule 54(b) and (2) even if the Court
grants the Motion, prejudgment interest should be calculated
differently; i.e., not from the time the defense costs were paid,
but instead from the time that RLI received proof of the defense
cost payments made by ACE and Wausau.
I.
No Just Reason for Delay.
RLI contends this case is not ripe for entry of a final
judgment as to its obligation to reimburse ACE and Wausau for its
share of the reasonable and necessary costs paid by ACE and
Wausau for Northwest Pipe’s defense.
RLI argues Rule 54(b) does
not permit entry of a final judgment because unresolved claims
remain between the parties.
For example, Northwest Pipe has
unresolved claims against all Defendants for past and ongoing
damages as well as declaratory relief.
RLI contends entry of a
final judgment at this time would allow the case to proceed in a
piecemeal fashion because RLI would appeal the judgment and the
5 - OPINION AND ORDER
remaining, unresolved claims would continue to be litigated in
this forum.
Courts in other jurisdictions, however, have found judgments
involving an insurer’s duty to defend are separate and distinct
enough from the duty to indemnify that judgments deciding the
duty to defend are appropriate under Rule 54(b).
For example, in
National Union Fire Insurance Company of Pittsburgh, PA. v.
AARPO, Inc., the district court stated:
Pursuant to Rule 54(b), the Court, having determined
that there is no just reason for delay, directs that
the judgment dismissing the third-party complaint be
entered as the final judgment on the issue of ERC's
duty to defend the United Insurance Agencies and
associated underlying defendants. Although granting
final judgment to a severable dispute within an ongoing
case is disfavored, it is appropriate here to avoid the
potential injustice of a delayed appeal.
The issue decided here relating to the third-party
defendant's duty to defend is separate and distinct
from the remaining claims concerning defendants'
liability to plaintiffs. This opinion addresses a
question of law that is not free from doubt. Should
review of this Order be delayed until the underlying
claims are decided and should this Court's holding be
reversed, United Insurance Agencies might be prejudiced
by the delay by losing a defense to which it was
entitled due to its inability to pay.
No. 97 Civ. 1438(JSM), 1999 WL 14010, at *5 (S.D.N.Y. Jan. 14,
1999) (citations omitted).
Similarly, in Continental Insurance Company v. Del Astra
Industries, Inc., the district court sua sponte granted partial
summary judgment for the insured and ruled the insurer had a duty
to defend under the policies.
6 - OPINION AND ORDER
811 F. Supp. 1410, 1411 (N.D. Cal.
1993)(rev’d on other grounds).
The court concluded Rule 54(b)
permitted it to direct the entry of a final judgment because the
insurer’s duty to defend “is separable from the claims remaining
in the lawsuit” and “judicial economy is served by immediate
appeal of the Court’s grant of partial summary judgment.”
Id.
The court reasoned “[a]n appellate court ruling that Continental
has no duty to defend would significantly reduce the scope of
issues for trial and would conserve judicial and party
resources.”
Id.
The Court finds the reasoning in National Union and Del
Astra persuasive and applicable here as the issue of allocation
of defense costs amongst RLI, ACE, and Wausau are substantively
different from the remaining claims.
The Court notes this case
has been pending since 2009 and is not likely to be resolved
fully in the immediate future.
In fact, the parties represented
to the Court at oral argument on April 28, 2014, that they expect
full resolution of this case will likely take more than six more
months.
It would, therefore, be prudent for any appellate review
of the Court’s allocation rulings to take place as soon as
practicable in order to avoid prejudice to any party, the risk of
which increases the longer the disputes over defense-cost
allocation remain pending.
Accordingly, in the exercise of its discretion, the Court
concludes there is not a just reason for delay in the entry of a
7 - OPINION AND ORDER
final judgment that adjudicates the relative responsibility among
RLI, Wausau, and ACE for Northwest Pipe’s reasonable and
necessary defense costs.
II.
Calculation of Prejudgment Interest.
As noted, the Court has ruled ACE and Wausau may recover
prejudgment interest on the amounts of defense costs owed by RLI.
Although RLI has stipulated to the amount of reasonable and
necessary defense costs for which ACE and Wausau seek
reimbursement, RLI objects to the period of time for which ACE
and Wausau seek prejudgment interest.
ACE and Wausau contend
prejudgment interest should begin to accrue on each payment on
the date that ACE or Wausau made the payments.
RLI, however,
contends prejudgment interest should only be calculated from the
time that ACE and Wausau provided copies of the underlying
defense bills to RLI as proof of their payments.
As noted, the Court previously ruled prejudgment interest on
the amounts owed by RLI to ACE and Wausau should be calculated in
accordance with the Ninth Circuit’s holding in Interstate Fire.
In that case Interstate Fire & Casualty Company sought
reimbursement from Underwriters at Lloyd’s, London, and the
insured for a settlement payment made by Interstate Fire.
F.3d 1234 (9th Cir. 1998).
The Ninth Circuit summarized the
prejudgment interest law in Oregon as follows:
8 - OPINION AND ORDER
139
Under Oregon law, prejudgment interest begins to accrue
when monies become due. See Or. Rev. Stat.
82.010(1)(a) (1995).
* * *
[P]ayments [become] due among competing insurers as
soon as an insurer [becomes] obligated to make payments
under the terms of its policy - not later when
contribution [is] demanded of it. Hartford Fire Ins.
Co. v. Aetna Ins. Co., 270 Or. 226, 527 P.2d 406, 412
(1974).
Id. at 1240.
See also Precision Seed Cleaners v. Country Mut.
Ins. Co., No. 03:10–cv–01023–HZ, 2013 WL 5524689, at *29 (D. Or.
Oct. 1, 2013)(“[A] court may award prejudgment interest only when
the exact amount, and the time from which interest should run, is
ascertained or easily ascertainable.”)(citing Farhang v.
Kariminaser, 230 Or. App. 554, 556 (2009)).
Applying this rule, the Interstate Fire court concluded “all
three parties were obligated to contribute to the settlement
fund, if at all, on August 19, 1986 [the date on which Interstate
contributed to the settlement fund].
Thus, the money was due
(and the interest began to accrue) on that date.”
1240.
139 F.3d at
The court rejected the defendants’ argument that the
amount owed was neither ascertained nor ascertainable.
The court
noted “an amount may be ascertained or ascertainable even if
litigants disagree about whether and how to divide that amount.”
Id. (citations omitted).
The court reasoned even though the
parties “continuously disagreed about who should pay and why,
they . . . never disputed the amount in question,” and,
9 - OPINION AND ORDER
accordingly, the court affirmed the district court’s calculation
of prejudgment interest.
Id.
Similarly here, although RLI has disputed its liability to
pay Northwest Pipe’s defense costs, there is not a dispute about
the amount of defense costs on which to base prejudgment
interest.
As noted, RLI stipulated to the calculation of the
amounts that ACE and Wausau paid as “reasonable and necessary
defense costs.”
Thus, RLI, in effect, concedes the amounts are
ascertained or ascertainable.
Moreover, the fact that RLI denied
its duty to defend Northwest Pipe and, therefore, did not receive
evidence of the underlying defense costs until ACE and Wausau
demanded RLI pay its share does not mean the amounts were not
ascertainable earlier.
If ACE and Wausau were able to ascertain
the amounts payable at the time they made the payments (amounts
RLI now stipulates to), there is nothing that would have
prevented RLI from doing so at that time.
RLI’s reliance on Precision Seed to support its argument is
not persuasive.
In Precision Seed the insured sought payment
from its insurer for seed inventory and property destroyed in a
fire.
The district court concluded the plaintiff was entitled to
prejudgment interest on the loss payment for the property because
the record contained evidence as to the nature of the property
that was destroyed in the fire and the value of the property at
that time.
Id., at *29.
10- OPINION AND ORDER
The court also found, however, that the
plaintiff was not entitled to prejudgment interest on the seed
inventory because a factual dispute remained regarding the amount
of seed that was lost, and, therefore, the amount of the loss was
not “ascertained or ascertainable by simple computation or by
reference to industry standards.”
Id., at *27.
Thus, the
reasoning in Precision Seed on which RLI relies is not applicable
here because whether the amount of seed loss was ascertainable
was at issue in Precision Seed, and, therefore, it was not clear
that any prejudgment interest was due at all.
As noted, the
costs in this case were ascertainable at the time Northwest
Pipe’s defense costs were paid by ACE and Wausau.
RLI does not discuss that portion of the Precision Seed
decision applicable to the calculation of prejudgment interest.
The Precision Seed court concluded prejudgment interest should be
computed on the property loss that was ascertainable as of the
date of default (i.e., the date when the insurer owed payment for
the loss).
As stated in Interstate Fire, in a case such as this
that involves contribution claims among insurers, “payments
[become] due among competing insurers as soon as an insurer
[becomes] obligated to make payments under the terms of its
policy - not later when contribution [is] demanded of it.”
139
F.3d at 1240.
Based on the Court’s prior ruling that RLI has a duty to
defend Northwest Pipe, RLI was obligated to pay its proportional
11- OPINION AND ORDER
share of Northwest Pipe’s defense costs when the defense costs
became due.1
Accordingly, at the time that ACE and Wausau paid
Northwest Pipe’s defense costs, RLI was obligated to pay its
proportional share of those costs.
Because it did not do so,
RLI’s debt arose on the dates that ACE and Wausau made payments
covering RLI’s share.
The underlying purpose of prejudgment
interest is to provide “a disincentive to debtors to delay
settling their accounts.”
SDS Lumber Co. v. Allendale Mut. Ins.
Co., 563 F. Supp. 608, 611 (D. Or. 1983).
Accordingly, the Court concludes prejudgment interest on the
stipulated amount of defense costs paid by ACE and Wausau through
December 1, 2013, should be calculated as of the dates the
defense costs were paid by ACE and Wausau.
CONCLUSION
For these reasons, the Court GRANTS ACE and Wausau’s Motion
(#293) Re Proposed Form of Judgment.
The Court concludes the proposed form of judgment submitted
by ACE and Wausau should be revised to conform to this Opinion
and Order.
Accordingly, the Court directs the parties to confer
and to submit to the Court no later than May 30, 2014, a form of
1
RLI does not contend the defense costs sought by ACE and
Wausau were incurred before RLI’s defense obligation arose.
12- OPINION AND ORDER
judgment consistent with this Opinion and Order and the Court’s
prior rulings regarding RLI’s duty to defend and allocation of
Northwest Pipe’s defense costs among Defendants.
The proposed
form of judgment should also include language that preserves
Northwest Pipe’s unresolved claims for unpaid defense costs.
To
the extent that the parties disagree as to such form, they may
simultaneously submit alternate forms of judgment together with a
concise explanation supporting the entry of a particular version.
IT IS SO ORDERED.
DATED this 16th day of May, 2014.
/s/ Anna J. Brown
ANNA J. BROWN
United States District Judge
13- OPINION AND ORDER
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