American Inter-Fidelity Exchange v. American Re-Insurance Co., INTER-FIDELITY

• Decision Date: 01 March 1994
• Docket Number: INTER-FIDELITY,No. 93-2229,RE-INSURANCE,93-2229
• Citation: 17 F.3d 1018
• Parties: AMERICANEXCHANGE, Plaintiff-Appellant, v. AMERICANCOMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1018

17 F.3d 1018

AMERICAN INTER-FIDELITY EXCHANGE, Plaintiff-Appellant, v. AMERICAN RE-INSURANCE COMPANY, Defendant-Appellee.

No. 93-2229.

United States Court of Appeals Seventh Circuit.

Argued Jan. 5, 1994.

Decided March 1, 1994.

Robert D. Hawk, Robert D. Brown (argued), Spangler, Jennings & Dougherty, Merrillville, IN, for plaintiff-appellant.

Michael A. Pope (argued), Caesar A. Tabet, Kevin C. Clegg, Pope, Cahill & Devine, Chicago, IL, for defendant-appellee.

Before EASTERBROOK and RIPPLE, Circuit Judges, and MIHM, District Judge. ^*

EASTERBROOK, Circuit Judge.

Two reinsurance treaties between American Inter-Fidelity Exchange and American Re-Insurance Company provide that the reinsurer will reimburse the primary insurer for a portion of "net retained insurance liability." Does that term include sums the primary insurer pays to victims of accidents, and which the insured is obliged to reimburse yet does not? The district court answered "no" as a matter of law, dismissing the complaint under Fed.R.Civ.P. 12(b)(6). We are not so sure and remand for further proceedings.

According to the complaint, American Inter-Fidelity writes vehicular accident insurance and pays victims for their full loss, including deductibles for which the insureds are contractually responsible. It has been unable to collect from its insureds all sums they are required to pay. It asked the reinsurer for its contribution toward $846,256 in uncollected deductibles; the reinsurer refused, asserting that amounts that the insured remains legally required to reimburse are not "insurance" even if the carrier has actually paid the victim and cannot recoup (say, because the insured is bankrupt). The district court dismissed the complaint, concluding that "the scope of the [reinsurance] Agreement is no larger than the scope of the insurance policies underlying it" and that because the insurance policies do not compel American Inter-Fidelity to cover its customers' deductibles, these payments do not represent "insurance."

Before turning to American Inter-Fidelity's appeal, we must address two jurisdictional questions. Appellate jurisdiction comes first. The reinsurer filed a counterclaim seeking a declaratory judgment that it need not contribute toward the uncollected deductibles. The district judge concluded that the reinsurer is entitled to such a judgment but neglected to enter one. The judgment reads in full: "IT IS ORDERED AND ADJUDGED that defendant is entitled tojudgment [sic] as a matter of law on it [sic] Counterclaim against plaintiff, and the court GRANTS defendant's Motion for Judgment on the Pleadings." A "judgment" saying that one party is "entitled to judgment" is of little use; it implies that one must go somewhere else to find that judgment to which the party is "entitled." The judgment should award the relief to which the prevailing party is entitled, not simply announce an entitlement. We have remarked before--many times before--that when the prevailing party is entitled to a declaratory judgment, the district court must draft and enter such a judgment rather than assume that the opinion serves the purpose. E.g., Azeez v. Fairman, 795 F.2d 1296 (7th Cir.1986); Foremost Sales Promotions, Inc. v. Director, BATF, 812 F.2d 1044 (7th Cir.1987); American Interinsurance Exchange v. Occidental Fire & Casualty Co., 835 F.2d 157 (7th Cir.1987); Metropolitan Life Insurance Co. v. Cammon, 929 F.2d 1220 (7th Cir.1991); Transamerica Insurance Co. v. South, 975 F.2d 321, 325 (7th Cir.1992). Most of these cases add that when a district court holds that a party is entitled to declaratory relief but does not enter that relief, the decision is not "final" and therefore is not appealable--although Bankers Trust Co. v. Mallis, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978), provides an escape hatch when it is clear not only that the district court has finished with the case but also what the relief would be. See Frank Rosenberg, Inc. v. Tazewell County, 882 F.2d 1165, 1166 n. 1 (7th Cir.1989). After we alerted the parties to this problem at oral argument, they returned to the district court, which then entered a proper declaratory judgment. The original notice of appeal sufficed under Fed.R.App.P. 4(a)(2) to confer jurisdiction, see Metropolitan Life Insurance, 929 F.2d at 1222, so we may proceed--although not without remarking yet again that district judges can make litigation simpler for us, and cheaper for the parties, by scrupulously performing their obligations under Fed.R.Civ.P. 58 and 79.

Having explored our own jurisdiction, we must ensure that the district court also had jurisdiction. The complaint alleged that American Inter-Fidelity is an Indiana corporation with its principal place of business in Indiana and that American Re-Insurance is a Delaware corporation licensed to do business in Indiana. These allegations do not establish diversity of citizenship, because they do not reveal defendant's principal place of business. Belatedly realizing this omission, American Inter-Fidelity moved to amend its complaint to make the proper allegations of diversity; the district court denied this motion as "moot" because an amendment would be "useless given that the court is granting defendant's Motion for Judgment on the Pleadings." The court apparently believed that so long as it rules for the defendant on the merits, subject-matter jurisdiction is irrelevant. We have addressed that fallacy before: "The court's power to enter a judgment of any kind, in favor of either side, depends on the existence of" jurisdiction. Tisza v. Communications Workers, 953 F.2d 298, 300 (7th Cir.1992). See also Metropolitan Life Insurance, 929 F.2d at 1222-23. As it turns out, however, the pleadings already establish that the parties are of diverse citizenship. Defendant's counterclaim contains an independent set of jurisdictional allegations, including the information that American Re-Insurance has its principal place of business in New Jersey. Jurisdiction under 28 U.S.C. Sec. 1332 is secure, and we turn to the merits.

American Inter-Fidelity writes insurance for trucks engaged in interstate commerce and thus subject to the jurisdiction of the Interstate Commerce Commission and the Secretary of Transportation. According to 49 U.S.C. Sec. 10927(a)(1), the ICC may not issue a certificate of public interest, convenience, and necessity to a carrier out of compliance with financial responsibility regulations issued by the Secretary under Sec. 30 of the Motor Carrier Act of 1980, Pub.L. 96-296, 94 Stat. 820. Section 30 and the implementing regulations, 49 C.F.R. Part 387, require all truckers to have insurance that will reimburse victims of accidents up to specified limits--now $750,000 for ordinary cargo, $1 million for shipments of oil and hazardous waste, and $5 million for shipments of explosives, radioactive materials, and poison gas. 49 C.F.R. Sec. 387.9. The Secretary has devised a standard form of endorsement for insurance policies that complies with the regulations. 49 C.F.R. Sec. 387.15. Every insurer must use this endorsement or equivalent language. By this endorsement the insurer promises to pay the full judgment up to the regulatory minimum. See Empire Fire & Marine Insurance Co. v. Guaranty National Insurance Co., 868 F.2d 357 (10th Cir.1989). Thus if the policy promises $700,000 of insurance after the insured has paid a deductible of $50,000, the insurer nonetheless agrees to pay any victim a total of $750,000. Indeed, the insurer must pay the victim in full even if the loss from the accident does not exceed the deductible, a circumstance under which ordinary insurance does not kick in. It remains entitled to collect the deductible from its insured. The endorsement provides: "all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the...