TIG INSURANCE COMPANY v. TYCO INTERNATIONAL, LTD. et al
MEMORANDUM re 188 MOTION to Clarify Court's January 23, 2013 Order filed by TIG Insurance Company Signed by Honorable A. Richard Caputo on 4/8/13. (jam)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
TIG INSURANCE COMPANY,
CIVIL ACTION NO. 3:08-CV-1584
TYCO INTERNATIONAL LTD.,
GRINNELL CORPORATION, and THE
BROOKLYN HOSPITAL CENTER, F/K/A
THE BROOKLYN HOSPITAL CALEDONIAN HOSPITAL,
Presently before the Court is the Motion for Clarification of the Court’s January 23,
2013 Order (Doc. 187) filed by Plaintiff TIG Insurance Company (“TIG”). (Doc. 188.) On
January 23, 2013, the Court entered an Order that, inter alia, denied a summary judgment
motion filed by Defendant SimplexGrinnell LP (“Grinnell”) (Doc. 115) and granted TIG’s
Motion for Summary Judgment on Exclusion 7 (Doc. 122). TIG now moves the Court to
clarify its Order to include the relief sought in Counts I and II of its Amended Complaint.
(Doc. 188 at ¶¶ 4, 9.) Specifically, TIG seeks a declaration that it owed no duty to idemnify
Grinnell for the Brooklyn Hospital settlement and reimbursement of the $7,840,699.69 it
paid in connection with the settlement, along with applicable interest, pursuant to the
parties’ 2008 Funding Agreement. (Id. at ¶¶ 4–9.) The parties agree that the Court’s
judgment established that TIG has no duty to idemnify Grinnell for the Brooklyn Hospital
settlement and is entitled to reimbursement in the amount of $7,840,699.69, pre-judgment
interest in the amount of $1,637,954.49, and post-judgment interest. (Doc. 189 at 2; Doc.
190 at 5; Doc. 193 at 2.) They disagree on what rate applies to the award of post-judgment
interest. For the reasons below, TIG’s motion will be granted in part and denied in part.
This action stems from a multi-day fire in May 1997 at a large document storage
warehouse complex in West Pittston, Pennsylvania, owned by Diversified Records Services,
Inc. (“Diversified”). In 1995, Grinnell, a subsidiary of Tyco International Ltd. (“Tyco”) that
installs, manufactures, and supplies automatic fire sprinkler systems, contracted to install
fire protection sprinkler systems at the Diversified complex. A fire started at the Diversified
complex on May 5, 1997 that lasted several days and destroyed three large warehouses
and millions of corporate documents. At the time of the fire, Grinnell’s sprinkler systems
were installed but were not turned on in one of the warehouses because the accompanying
alarm system had not yet been connected. Grinnell knew of the fire the day it happened.
Soon afterward, an adjuster for Grinnell’s third-party administrator reported to Grinnell’s
outside counsel that a conservative estimate of damage caused by the fire was about $8
million, a figure which was not altered in his final report of December 1997.
In May 1997, Tyco negotiated with insurers for its general liability program for the
1997–98 policy year. TIG issued Grinnell an excess liability policy, Policy No. XLX 914 12
65, for the period July 1, 1997 to July 1, 1998, with limits of $30 million excess of $90 million
(the “TIG Policy”). The TIG Policy provided coverage for losses arising out of occurrences
taking place during the policy period, but also included an “Extended Reporting Provision
for Occurrences Prior to this Policy Period” endorsement (“ERP”). The ERP provided
coverage for “claims1 first made” after July 1, 1997 “resulting from occurrence(s) that took
place during the period from 6/1/1993 to 7/1/1997" subject otherwise to the exclusions and
conditions of the policy. It also contained seven exclusions, two of which are relevant to this
case. Exclusion 7 excludes from coverage “[a]ny claims resulting from an occurrence2 of
The ERP defines a “claim” as a “written notice received by the Named Insured
[Tyco and its subsidiaries] of an intention to hold the Named Insured responsible
for any occurrence covered by this policy, and shall include the service of suit or
institution of arbitration proceedings against the Named Insured.”
The TIG Policy incorporates the definition of “occurrence” used in the underlying
AIG umbrella policy, which defines “occurrence” as “an accident, including
continuous or repeated exposure to conditions, which results in Bodily Injury or
Property Damage neither expected nor anticipated from the standpoint of the
Insured.” (Pl.’s SMF at ¶¶ 54–56.)
which the Named Insured had actual or constructive notice prior to the commencement of
coverage under this policy.”
In 1998 and 1999, various entities that stored documents with Diversified sued
Diversified and Grinnell in the Court of Common Pleas of Luzerne County, Pennsylvania
for losses associated with the fire (the “Underlying Actions”). Diversified and its property
insurer also sued Grinnell in the same court for damage to the warehouse complex and
business interruption costs (the “Diversified Action”). The Underlying Actions and the
Diversified Action were consolidated into a single action (the “Consolidated Action” and the
“Consolidated Action Suits”). A two-phase trial was held for the Consolidated Action, with
the liability trial for two lead cases, brought by First Union Corporation (“First Union”) and
Mobil Oil Corporation (“Mobil”), beginning in September 2002. During the trial, Diversified
and Grinnell entered into an agreement whereby Grinnell became responsible for all liability.
On October 18, 2002, the jury returned a liability verdict, assessing 60% fault to Diversified
and 40% fault to Grinnell. The jury awarded $20,534,963 in damages to First Union on
December 13, 2002, and $20,750,653 to Mobil on January 17, 2003. After both judgments
were affirmed by the Superior Court of Pennsylvania in 2005, Grinnell’s primary and first
level excess insurers for the 1996–97 policy year paid judgments of $32,979,909.57 to First
Union and $31,631,905.00 to Mobil on August 15, 2006. Grinnell’s insurers for the 1996–97
policy year paid approximately $67.4 million in settling or resolving the Consolidated Action
Suits. Following these payments, the remaining amount left within the first $60 million in
coverage for the 1996–97 insurance policies was approximately $9.7 million.
In 1999, the Brooklyn Hospital Center (“Brooklyn Hospital”) sued Diversified in New
York state court for damages resulting from the destruction of its documents in the fire
(“Brooklyn Hospital claim”). Grinnell was added as a third-party defendant to the complaint
in 2000. The suit was transferred to the Court of Common Pleas of Luzerne County and
docketed there in 2003, but was not joined in the Consolidated Action. Following the
resolution of the Consolidated Action Suits, the Brooklyn Hospital claim was the only
remaining claim arising from the Fire. Pursuant to a stipulation that they entered into on
October 4, 2002, Brooklyn Hospital and Grinnell agreed to accept the liability verdict in the
First Union and Mobil trials. The stipulation also provided that if Grinnell was found liable
in those cases, it would accept complete responsibility for any damage verdict rendered in
Brooklyn Hospital’s favor in a later proceeding.
On February 2, 2007, Brooklyn Hospital filed a subsequent complaint against Grinnell
to recover damages it allegedly sustained due to the fire. TIG was notified of the Brooklyn
Hospital claim on August 14, 2007. Grinnell asked TIG to participate in resolving the claim
on September 26, 2007, but TIG reserved its rights on January 30, 2008. TIG sent a
supplemental reservation of rights letter on March 28, 2008, stating that it was reserving its
rights based on Exclusion 7 of the ERP. On May 14, 2008, TIG commenced this diversity
action under 28 U.S.C. § 1332, seeking a determination of its rights or obligations owed
under the TIG Policy.
On October 1, 2008, the Brooklyn Hospital claim settled in principle for $20.5 million.
Grinnell’s primary and first layer excess insurers agreed to pay the first $9.1 million of the
settlement, and Grinnell and TIG agreed to pay the remainder. Pursuant to the parties’
Funding Agreement, Grinnell paid $3,563,954.40 and TIG paid $7,840,699.69, with each
party’s portion being subject to the resolution of the coverage dispute in this action. (Doc.
189, Ex. A at ¶¶ 1, 5.)
In Count I of its Amended Complaint, TIG seeks a judgment declaring that it has no
duty to indemnify Grinnell for its loss in the Brooklyn Hospital settlement. Count II requests
the Court to order Grinnell to reimburse TIG for its portion of the settlement payment, plus
interest. (Doc. 61 at 5–6.) Grinnell raises two counterclaims against TIG. Count I seeks
for the Court to declare that Grinnell’s loss in the Brooklyn Hospital settlement is covered
under the TIG Policy, and Count II requests the Court to order TIG to reimburse Grinnell’s
portion of the settlement payment, plus interest, pursuant to TIG’s breach of contract. (Doc.
62 at 8–9.) On June 11, 2012, the parties filed cross-motions for summary judgment. Oral
argument was held on these motions on October 24, 2012. On January 23, 2013, the Court
entered a Memorandum (Doc. 186) and Order (Doc. 187) that, inter alia, denied Grinnell’s
Motion for Summary Judgment (Doc. 115) and granted TIG’s Motion for Summary
Judgment on Exclusion 7 (Doc. 122). The Court entered judgment in favor of TIG and
against Grinnell on Counts I and II of TIG’s Amended Complaint and Counts I and II of
Grinnell’s Counterclaim. (Doc. 187 at ¶¶ 5–6.)
On February 19, 2013, TIG filed its Motion for Clarification of the Court’s January 23,
2013 Order. (Doc. 188.) TIG asks the Court to clarify its Order to include the relief specific
sought in Counts I and II of its Amended Complaint: (1) a declaration that it owed no duty
to idemnify Grinnell for the Brooklyn Hospital settlement and (2) reimbursement of the
$7,840,699.69 it paid in the settlement, along with applicable pre-judgment and postjudgment interest, pursuant to the parties’ 2008 Funding Agreement. (Id. at ¶¶ 4–9.) The
motion has been fully briefed and is ripe for the Court’s disposition.
I. Legal Standard
Federal Rule of Civil Procedure 60(a) allows a court to “correct a clerical mistake
or mistake arising from oversight or omission whenever one is found in a judgment,
order, or other part of the record.” Fed. R. Civ. P. 60(a). Rule 60(a) can only be invoked
to correct errors that are “mechanical in nature, apparent on the record, and not
involving an error of substantive judgment.” Pfizer Inc. v. Uprichard, 422 F.3d 124, 130
(3d Cir. 2005) (citing Mack Trucks, Inc. v. Int’l Union, UAW, 856 F.2d 579, 594 (3d Cir.
1981)). “The judgment may be corrected [under Rule 60(a)] by including interest if this
is a matter of right . . . .” 11 Wright, Miller & Kane, Federal Practice & Procedure § 2854
(citing Glick v. White Motor Co., 458 F.2d 1287 (3d Cir. 1972)). “‘[T]he relevant test for
the applicability of Rule 60(a) is whether the change affects substantive rights of the
parties and is therefore beyond the scope of Rule 60(a) or is instead a clerical error, a
copying or computational mistake, which is correctable under the Rule.’” Pfizer, 422 F.3d
at 130 (citing In re W. Tex. Mktg., 12 F.3d 497, 504 (5th Cir. 1994)).
II. TIG’s Motion for Clarification of the Court’s January 23, 2013 Order (Doc. 188)
TIG asks the Court to clarify its Order to include the relief sought in Counts I and
II of the Amended Complaint. (Doc. 188 at ¶¶ 4, 9.) Specifically, TIG seeks (1) a
declaration that it owed no duty to idemnify Grinnell for the Brooklyn Hospital settlement
and (2) reimbursement of the $7,840,699.69 it paid in connection with the settlement,
along with applicable pre-judgment and post-judgment interest, pursuant to the parties’
2008 Funding Agreement. (Id. at ¶¶ 4–9.) The parties agree that the Court’s judgment
established that TIG has no duty to idemnify Grinnell for the Brooklyn Hospital
settlement and is entitled to reimbursement in the amount of $7,840,699.69, prejudgment interest in the amount of $1,637,954.49, and post-judgment interest. (Doc.
189 at 2; Doc. 190 at 5; Doc. 193 at 2.) However, they disagree on what rate applies to
the award of post-judgment interest.
A. Pre-Judgment Interest
In diversity cases, state law determines the award of pre-judgment interest.
Jarvis v. Johnson, 668 F.2d 740, 746–47 (3d Cir. 1982). Under Pennsylvania law, prejudgment interest is awardable as a matter of right in contract actions. Fernandez v.
Levin, 548 A.2d 1191, 1193 (Pa. 1988); Kaiser v. Old Republic Ins. Co., 741 A.2d 748,
755 (Pa. Super. 1999). Therefore, the Court may correct its January 23, 2013 Order by
including pre-judgment interest. See 11 Wright, Miller & Kane, Federal Practice &
Procedure § 2854 (citing Glick v. White Motor Co., 458 F.2d 1287 (3d Cir. 1972)).
The parties agree that, pursuant to the Court’s January 23, 2012 Order and the
Funding Agreement,3 TIG is entitled to $1,637,954.49 in pre-judgment interest. (Doc.
189 at 2; Doc. 190 at 5; Doc. 193 at 2.) (Doc. 191 at ¶ 4.) Accordingly, the Court will
Paragraph 6 of the Funding Agreement provides: “Nothing in this Agreement
shall preclude or provide a basis for any Party to claim interest on amounts
indicated in paragraph (a) and (b), except that any interest otherwise
recoverable shall begin to run on the date of payment at 5% per annum
(simple).” (Doc. 189, Ex. A at ¶ 6.) Paragraph 5(a) states that if Grinnell
establishes that it is entitled to coverage under the TIG Policy for the Brooklyn
Hospital claim, TIG will reimburse the $3,563,954.40 paid by Grinnell as part of
the Brooklyn Hospital settlement. (Id. at ¶ 5(a).) Paragraph 5(b) provides that if
Grinnell fails to establish that it is entitled to coverage, it will reimburse TIG for
the $7,840,699.69 paid by TIG as part of the settlement. (Id. at ¶ 5(b).)
award TIG $1,637,954.49 in pre-judgment interest.
B. Post-Judgment Interest
Post-judgment interest is statutorily mandated for all judgments in federal court.
28 U.S.C. § 1961; Dunn v. HOVIC, 13 F.3d 58, 62 (3d Cir. 1993); Pierce Assocs., Inc. v.
The Nemours Found., 865 F.2d 530, 548 (3d Cir. 1988). The statute provides that:
Interest shall be allowed on any money judgment in a civil case recovered
in a district court. . . . Such interest shall be calculated from the date of the
entry of the judgment, at a rate equal to the weekly average 1-year
constant maturity Treasury yield, as published by the Board of Governors
of the Federal Reserve System, for the calendar week preceding the date
of the judgment.4
28 U.S.C. § 1961(a). Therefore, the Court may correct its January 23, 2013 Order by
including post-judgment interest. See 11 Wright, Miller & Kane, Federal Practice &
Procedure § 2854 (citing Glick v. White Motor Co., 458 F.2d 1287 (3d Cir. 1972)).
Based on the language of Paragraph 6 of the Funding Agreement, which provides
that “any interest otherwise recoverable shall begin to run on the date of payment at 5%
per annum (simple),” TIG contends that post-judgment interest should be assessed on
its portion of the Brooklyn Hospital settlement at 5% per annum. (Doc. 189 at 6–7.)
Grinnell, however, argues that the federal statutory post-judgment interest rate should
be applied to TIG’s judgment award because the parties did not express their intent to
stipulate to a different post-judgment rate through “clear, unambiguous, and unequivocal
language.” (Doc. 190 at 7.)
As both parties correctly note, the United States Court of Appeals for the Third
Circuit has not addressed the issue of whether parties may contractually agree to a postjudgment interest rate different than that set forth in § 1961. (Doc. 189 at 5–6; Doc. 190
at 7.) However, several circuit courts have allowed parties to do so, provided that they
have expressed their intent through “clear, unambiguous and unequivocal [contractual]
language.” See Jack Henry & Assocs. v. BSC, Inc., 487 F. App’x 246, 259–60 (6th Cir.
For the week ending January 18, 2013, this rate was 0.14%. See Selected
Interest Rates (Weekly)—H.15, Board of Governors of the Federal Reserve
System, available at http://www.federalreserve.gov/releases/h15.
2012) (“the federal rule applies unless the contract includes ‘language expressing an
intent that a particular interest rate apply to judgments or judgment debs’ that is ‘clear,
unambiguous[,] and unequivocal.”) (citing FCS Advisors, Inc. v. Fair Fin. Co., 605 F.3d
144, 148 (2d Cir. 2010)); see also Kanawha-Gauley Cola & Coke Co. v. Pittston
Minerals Grp., Inc., ___ F. App’x ___, 2012 WL 6622708, *6 (4th Cir. Dec. 20, 2012)
(applying federal interest rate in absence of “clear, unambiguous, and unequivocal
language” in parties’ agreement); In re Riebesell, 586 F.3d 782, 794–95 (10th Cir. 2009).
TIG argues that Paragraph 6 of the Funding Agreement “clearly articulates the
parties’ intent” to apply a 5% per annum interest rate for any interest awarded because
its language makes “no distinction between prejudgment and post-judgment interest.”
(Doc. 189 at 6–7.) Grinnell counters that because the parties did not distinguish
between pre-judgment and post-judgment interest or reference post-interest judgment
whatsoever, they have not exhibited “clear, unambiguous, and unequivocal” intent to
contract around the federal statutory post-judgment interest rate. (Doc. 190 at 11–12.)
Assuming, arguendo, that Third Circuit jurisprudence permits parties to
contractually agree to a post-judgment interest rate different than that set forth in §
1961, the Court finds that the parties have not demonstrated the intent necessary to do
so here. Particularly persuasive, in the Court’s view, are the decisions of several circuit
courts that have determined that a contractual provision must explicitly refer to postjudgment interest in order to override § 1961. Compare Westinghouse Credit Corp. v.
D’Urso, 371 F.3d 96, 102 (2d Cir. 2004) (applying federal rate where contractual
language stated that a different interest rate would apply “from the date payment was
due to the date payment is made”) and Jack Henry, 487 F. App’x at 259–60 (holding that
a provision stating “[a]mounts outstanding after the due date are subject to an interest
charge to day of payment” was insufficiently clear to displace the federal rate), with
Hymel v. UNC, Inc., 994 F.2d 260, 265–66 (5th Cir. 1993) (finding contract language
providing that “all past due interest and/or principal shall bear interest from maturity until
paid, both before and after judgment” to be sufficiently clear). Therefore, TIG shall
receive post-judgment interest on $9,478,654.185 at a rate of 0.14%, to be computed
daily, until the judgment is paid in full, and shall be compounded annually, as provided
by 28 U.S.C. § 1961(b).6 See Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d at 59,
63 (3d Cir. 1986) (“post-judgment interest under 28 U.S.C. § 1961 provides for postjudgment interest and that that interest should be calculated on the amount of the district
court's judgment [ ] plus prejudgment interest.”)
In sum, TIG’s motion will be granted insofar as it requests the Court to amend its
January 23, 2013 Order to declare that TIG owed no duty to idemnify Grinnell for the
Brooklyn Hospital settlement and order Grinnell to reimburse the $7,840,699.69 paid by
TIG in connection with the Brooklyn Hospital settlement, along with pre-judgment
interest of $1,637,954.49 and post-judgment interest. However, TIG’s motion will be
denied to the extent that it seeks the Court to impose 5% post-judgment interest.
Grinnell will be ordered to reimburse TIG $7,840,699.69, along with $1,637,954.49 in
pre-judgment interest, and pay 0.14% post-judgment interest on $9,478,654.18, to be
computed daily and compounded annually, until the judgment is paid in full pursuant to
28 U.S.C. § 1961. These actions are consistent with the Court’s January 23, 2013 Order
entering judgment in TIG’s favor on Counts I and II of its Amended Complaint.
For the aforementioned reasons, TIG’s Motion for Clarification of the Court’s January
23, 2013 Order (Doc. 188) will be granted in part and denied in part.
An appropriate order follows.
April 8, 2013
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge
$7,840,699.69 + $1,637,954.49 = $9,478,654.18.
28 U.S.C. § 1961(b) provides that post-judgment interest “shall be computed
daily to the date of payment . . . and shall be compounded annually.”
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