335 F.3d 429 (5th Cir. 2003), 02-40524, American Indem. Lloyds v. Travelers Property & Cas. Ins. Co.

Docket Nº:02-40524
Citation:335 F.3d 429
Party Name:American Indem. Lloyds v. Travelers Property & Cas. Ins. Co.
Case Date:June 23, 2003
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 429

335 F.3d 429 (5th Cir. 2003)

AMERICAN INDEMNITY LLOYDS, Plaintiff-Appellant,

v.

TRAVELERS PROPERTY & CASUALTY INS. CO., Defendant-Appellee.

No. 02-40524.

United States Court of Appeals, Fifth Circuit

June 23, 2003

Page 430

Richard Markham Ramsey, Joseph W. Gagnon (argued), Ramsey & Murray, Houston, TX, for Plaintiff-Appellant.

David Norman Kitner (argued), Strasburger & Price, Dallas, TX, Matthew William

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Baab, McElroy, Sullivan, Ryan & Miller, Austin, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before GARWOOD, JONES and STEWART, Circuit Judges.

GARWOOD, Circuit Judge:

In this Texas law diversity case, plaintiff-appellant American Indemnity Lloyds (AIL) seeks to recover from defendant-appellee Travelers Property & Casualty (TPC) one-half of the sums AIL paid in settlement and expended in defense of a personal injury damage suit against a contractor who was both the named insured in TPC's policy and an additional insured in AIL's policy. The named insured in AIL's policy was the subcontractor whose employee had brought the underlying suit for on-the-job injuries which were within the scope of the subcontractor's agreement to indemnify the contractor, TPC's named insured. AIL appeals the district court's summary judgment dismissing its suit with prejudice. We affirm.

Facts and Proceedings Below

In September 1994 the subcontractor, Elite Masonry, Inc. (Elite), entered into a subcontract with the contractor, Caddell Construction Company, Inc. (Caddell), by which Elite agreed to provide masonry services to Caddell in connection with Caddell's work on the construction of a prison in Beaumont, Texas. Article XII(a) of the subcontract is an indemnity provision which provides that:

"[Elite] agrees to indemnify [Caddell] against and hold [Caddell] harmless from any and all claims, demands, liabilities, losses, expenses, suits and actions (including attorneys fees) for or on account of any injury to any person ... which may arise (or which may be alleged to have arisen) out of or in connection with the work covered by this Subcontract, even though such injury ... may be (or may be alleged to be) attributable in part to negligence or other fault on the part of [Caddell] or its officers, agents or employees. This obligation to indemnify and hold [Caddell] harmless shall not be enforceable if, and only if, it be determined by judicial proceedings that the injury, death, or damage complained of was attributable solely to the fault or negligence of [Caddell] or its officers, agents, or employees. [Elite] agrees to defend all claims, suits, and actions against [Caddell] (in which connection [Elite] shall employ attorneys acceptable to [Caddell]) on account of any injury, death or damage and shall reimburse [Caddell] for all expenses, including reasonable attorney fees, incurred by reason of such claim, suit or action or incurred in seeking indemnity or other recovery from [Elite] hereunder." (emphasis added).

The subcontract's Article XII(b) required that Elite "procure at [its] expense prior to commencement of any work hereunder, and ... maintain for the duration of this subcontract, public liability insurance and also such employer's liability or workmen's compensation insurance as may be necessary to ensure the liability of the parties hereto for any injuries to [Elite's] employees." The subcontract has no requirement that Caddell procure or maintain any insurance.

On March 16, 1996, Mariano Alas (Alas), an employee of Elite, was injured while performing work pursuant to the subcontract. Some time in early 1998 Alas, individually and as next friend of his minor children, filed suit for damages against Elite and Caddell in respect to the injuries he had thus received, claiming negligence and gross negligence.

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At the time of Alas's injury, and when his suit was filed, Elite was the named insured under a commercial general liability insurance policy issued by AIL having primary limits of $1,000,000. Caddell was then an additional insured under this AIL policy. 1 Caddell was also then the named insured under a commercial general liability insurance policy issued by Aetna Casualty & Surety Company (Aetna) and having primary limits of $1,000,000. Elite was not an insured, named or otherwise, under the Aetna Policy. There is no allegation or evidence that prior to Alas's injury AIL was aware of the existence of the Aetna policy. At some point after March 16, 1998, TPC, pursuant to its purchase of some or all of Aetna Casualty lines of insurance, succeeded to all of Aetna rights and obligations under the Aetna policy. Each of the two policies--the AIL policy and the Aetna/TPC policy--contained identical "other insurance" clauses. 2 The parties do not dispute that the AIL policy's "insured contract" provisions 3 afforded

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Elite with both indemnity and defense coverage for such amounts as Elite might be obligated, under the indemnity provisions of the subcontract, to pay Caddell as reimbursement for payments made by Caddell to discharge or settle the claims made against Caddell in the Alas lawsuit. See, e.g., Gibson & Associates, Inc. v. Home Ins. Co., 966 F.Supp. 468, 475-77 (N.D.Tex.1997). But these "insured contract" provisions of AIL's policy at least arguably did not afford Elite indemnity coverage for such amounts as Elite might be obligated, under the subcontract's indemnity clause, to pay Caddell as reimbursement for attorney's fees and expenses incurred by Caddell in defense of Alas's claims against Caddell in the Alas lawsuit.

The parties likewise do not dispute that the Aetna/TPC policy subrogated TPC to Caddell's rights against Elite under the subcontract's indemnity clause to the extent of any payments TPC would make under its policy to indemnify or defend Caddell in respect to the claims against Caddell in the Alas lawsuit. 4

TPC initially undertook the defense of Caddell in the Alas lawsuit. Pursuant to demand by TPC, AIL in October 1998 assumed the defense of and agreed to indemnify Caddell in the Alas lawsuit, and TPC thereafter withdrew from that representation. 5 At some time prior to May 2, 2000

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(just when is not reflected in the record), the Alas plaintiffs nonsuited Elite, leaving Caddell as the sole defendant. 6

After assuming the defense of Alas's suit, AIL kept TPC advised of the progress of the case. On July 12, 2000, AIL placed TPC on notice of AIL's position that the AIL policy and the Aetna/TPC policy provided concurrent primary coverage for Caddell in the Alas lawsuit and that AIL took the position that it "has and retains the right to seek contribution from" TPC for "all amounts it [AIL] has paid and will pay in defense and settlement of this claim." TPC did not respond, and declined AIL's invitation to participate in negotiations to settle the Alas lawsuit. On July 25, 2000, AIL settled the Alas suit for a total of $625,000, the entirety of which sum was paid by AIL. It was stipulated in the present suit that this was a reasonable settlement and that AIL reasonably expended $230,163.71 in legal fees and costs in the defense of Caddell in the Alas suit. Following the Alas suit settlement, AIL demanded that TPC reimburse it half the $625,000 AIL paid to settle the Alas suit and half AIL's attorneys' fees and costs incurred in connection with its defense of Caddell in that case. TPC did not respond to those demands.

In June 2001, AIL filed this suit against TPC in the district court below, predicating jurisdiction on diversity of citizenship. It sought declaratory judgment that it was entitled to recover from TPC one-half the sums AIL had paid to settle and to defend Caddell in the Alas lawsuit; it also sought a money judgment against TPC for those sums. AIL alleged it was entitled to such relief based on the "other insurance" provisions common to its policy and the Aetna/TPC policy (see note 2, supra).

At a pretrial conference, the parties and the district court agreed that each party would file a summary judgment motion after an initial discovery period and that the case would be decided on the basis of those motions. AIL's motion relied upon the "other insurance" clauses, whereas TPC's motion was based on the subcontract's indemnity provision. As indicated above, most of the relevant facts were stipulated, including the provisions of the subcontract and the fact "there was no judicial determination of fault or negligence in the Alas lawsuit." TPC took the position that "[t]here was no adjudication of fault" respecting the Alas injury "prior or subsequent to settlement" of the Alas lawsuit. AIL at no time alleged that there had ever been, in the Alas lawsuit or otherwise, any judicial determination of fault in respect to Alas's injury alleged in the Alas lawsuit, nor did AIL allege that it had ever previously sought to have such a determination made; nor did it seek to have any such determination made in the instant suit. Rather, AIL took the position below that "the issue of fault as to Caddell, Elite and the plaintiff in the underlying case is not before this court. Because the underlying case was settled, a determination of fault at this stage is impossible"

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and "the issue of fault, as a practical matter, cannot be determined at this point."

The district court granted TPC's motion for summary judgment. On its appeal to this Court AIL argues that the district court erred in holding that the indemnity provision was controlling.

Discussion

As the material facts are not in genuine dispute and only questions of law are presented on this appeal, our review is de novo. Mowbray v. Cameron County, Texas, 274 F.3d 269, 278-79 (5th Cir. 2001).

AIL contends that by virtue...

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