American Intern. Specialty Lines v. Canal Indem.

• Decision Date: 15 December 2003
• Docket Number: No. 02-31029.,02-31029.
• Citation: 352 F.3d 254
• Parties: AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, Plaintiff-Appellee-Cross-Appellant, v. CANAL INDEMNITY COMPANY, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

352 F.3d 254

AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, Plaintiff-Appellee-Cross-Appellant, v. CANAL INDEMNITY COMPANY, Defendant-Appellant-Cross-Appellee.

No. 02-31029.

United States Court of Appeals, Fifth Circuit.

Filed December 15, 2003.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Robert I. Siegel (argued), Nathan L. Schrantz, Hoffman, Siegel, Seydel, Bienvenu, Centola & Cordes, New Orleans, LA, for American Intern. Specialty Lines Ins. Co.

J. Douglas Sutter, Charles W. Kelly (argued), Kelly, Sutter, Mount & Kendrick, Houston, TX, for Canal Indem. Co.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before HIGGINBOTHAM, STEWART and CLEMENT, Circuit Judges.

CARL E. STEWART, Circuit Judge:

The central question presented by this diversity action is the effect, under Louisiana law, of disparate "other insurance" clauses on the obligations of two automobile liability insurance carriers to contribute to the payment of claims made by their common insured. The losses at issue, for pollution-related damages and claims expenses, stem from two accidents involving insured diesel transport trucks. Primary carrier Canal Indemnity Company ("Canal") appeals from the district court's partial summary judgment ruling in favor of American International Specialty Lines Insurance Company ("AISLIC") denying proration of the co-insurers' coverage responsibilities for the second accident. Canal also appeals the district court's determination that AISLIC's payment of the claim made for the first accident did not waive AISLIC's right to later rely on the terms of the same policy to contest its liability for the losses sustained by their insured. AISLIC cross-appeals the district court's entry of final judgment determining that it was not entitled to reclaim the sums it paid to Canal in contribution for the prior similar claim by the same insured for the first accident. Erie-bound, for the following reasons, we affirm the district court's rulings on the issues of allocation of coverage liability and waiver, reverse the district court's judgment denying reimbursement, and render judgment in favor of AISLIC.

FACTUAL AND PROCEDURAL HISTORY

The pertinent underlying facts are undisputed. On December 14, 1998, an employee of Travis Fixed Based Operation and Service Corporation ("Travis") fell asleep while driving a Travis truck through Comal County, Texas, causing the truck to flip over and spill hundreds of gallons of diesel fuel, resulting in pollution and clean-up losses ("Comal County loss"). In June of 1999, another Travis truck driven by one of its employees was involved in a serious accident in Bexar County, Texas, also resulting in the accidental discharge of diesel fuel and leading to claims for pollution-related damages ("Bexar County loss"). Both accidents occurred during the effective periods of insurance policies issued by Canal and AISLIC in favor of Travis. Canal's policy provided "Basic Automobile Liability" coverage to Travis with a combined single limit of $1,000,000. Travis was also insured by AISLIC through a "Supplemental Environmental Automobile Liability" policy with a per occurrence and aggregate limit of $2,000,000 for any claims presented during the policy period.

Although both policies afforded coverage for the type of property damage, bodily injury, pollution-related damage, and claims expenses caused by the two accidents, each of the policies contained clauses purporting to limit or eliminate the insurers' respective liabilities in certain circumstances for losses covered by "other insurance."¹ Canal's policy contained a "pro rata" "other insurance" clause that provided in pertinent part:

6. Other Insurance: The insurance afforded by this policy is primary insurance, except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the company's liability under the policy shall not be reduced by the existence of such other insurance.

When both this insurance and other insurance apply on the same basis, whether primary, excess, or contingent, the company shall not be liable under this policy for a greater proportion of the loss than that stated in the applicable contribution provision below. (emphasis added).

By contrast, AISLIC's policy included an "escape" clause, which provided:

Section II — EXCLUSIONS:

This insurance does not apply to any of the following: ... 11. Bodily injury, Property Damages, Cleanup Costs, or Claims Expenses covered by any other valid and collectible insurance. (emphasis added).

Immediately following the first accident in Comal County, Canal initially reimbursed Travis for the $23,058.54 in pollution clean-up costs Travis incurred in connection with the diesel spill. Canal then turned around and demanded $11,529.95 in contribution from AISLIC. At AISLIC, claims supervisor Cheryl Honeycutt consulted with Janet Rittenberry, the AISLIC underwriter for the Supplemental Liability Policy, who informed Honeycutt that the AISLIC policy afforded primary coverage for "clean up of oil spills," and that the policy applied in all 50 states. Although Honeycutt was unable to actually obtain a copy of the AISLIC policy to review, she nevertheless caused AISLIC to issue a check to Canal for the entire sum of $11,529.35 in February of 1999. AISLIC had a change of heart regarding its coverage position, however, when later presented with Travis's claims for the Bexar County loss. As it had done for the Comal County loss, Travis submitted its claims for pollution-related clean-up costs to both AISLIC and Canal. This time, a different adjuster for AISLIC, Claims Director D'Ann Gentemann, handled Travis's claims and obtained the AISLIC policy. Upon reviewing the policy, Gentemann concluded that the policy's "escape" clause² meant that AISLIC had no liability for claims covered by other policies of insurance. Gentemann also obtained a copy of the Canal policy and determined that its pollution exclusion did not apply to sudden and accidental pollution occurrences such as the Bexar County loss. It was at that time that Gentemann discovered that AISLIC had paid the Comal County claim in error and concluded that the existence of Canal's coverage at all pertinent times meant that the AISLIC policy afforded only a supplemental layer of coverage to that provided by Canal for either of the two losses. Accordingly, Gentemann issued a formal letter denying coverage for the Bexar County claim, citing the "escape" clause in AISLIC's policy with Travis.

On November 11, 2000, AISLIC filed a diversity action against Canal in federal district court, seeking a declaration of coverage liability for the 1999 Bexar County loss. AISLIC contended that its policy's escape clause expressly excluded coverage for claims covered by "other insurance" and therefore Canal, as primary carrier, bore sole responsibility up to its policy limits for the loss. Canal answered and counterclaimed that, under Louisiana law, the "other insurance" clauses in the carriers' respective policies were mutually repugnant and thus void in toto, requiring the court to disregard the clauses and pro rate liability for the loss among the insurers. In July of 2001, AISLIC amended its complaint to include an additional claim seeking reimbursement of the sums it paid under the same policy to Canal for the 1998 Comal County loss. AISLIC moved for summary judgment on the coverage liability issue, which the district court granted. Applying Louisiana law, the district court concluded that (1) Canal was primarily liable for the Bexar County loss without contribution from AISLIC prior to exhaustion of Canal's policy limits; and (2) AISLIC had not waived its right to contest coverage for the Bexar County loss by having reimbursed Canal for part of the Comal County loss. AISLIC's reimbursement claim was tried to the bench on September 5, 2002. In its memorandum order of September 17, 2002, the district court denied AISLIC's claim that it was entitled to recoup the sums it paid to Canal in reimbursement for the earlier Comal County loss, citing Louisiana Civil Code article 1949, and entered final judgment in favor of Canal on that claim.

In this appeal, Canal challenges the district court's rulings denying proration of the insurance carriers' respective coverage obligations to Travis for the Bexar County loss and rejecting Canal's assertion that AISLIC had waived its right to contest its responsibility for that loss by having paid the prior similar claim. AISLIC cross-appeals the district court's denial of its right to reimbursement for the Comal County loss.

DISCUSSION

I. Standard of Review

We review the grant of summary judgment de novo, applying the same legal standards as the district court applied to determine whether summary judgment was appropriate. Flock v. Scripto-Tokai Corp., 319 F.3d 231, 236 (5th Cir.2003)(citing Ramirez v. City of San Antonio, 312 F.3d 178, 181 (5th Cir.2002)). A district court's determination of state law is also reviewed de novo, Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991), as is its interpretation of an insurance policy. Potomac Ins. Co. of Ill. v. Jayhawk Med. Acceptance Corp., 198 F.3d 548, 550 (5th Cir.2000). A summary judgment motion is properly granted only when, viewing the evidence in the light most favorable to the nonmoving party, the record indicates that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

We review a district court's bench trial conclusions of law de novo and its findings of fact for clear error. Kona Tech. Corp. v. S. Pac....