391 F.3d 639 (5th Cir. 2004), 03-20983, Royal Ins. Co. of America v. Hartford Underwriters Ins. Co.

Docket Nº:03-20983.
Citation:391 F.3d 639
Case Date:November 17, 2004
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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391 F.3d 639 (5th Cir. 2004)




No. 03-20983.

United States Court of Appeals, Fifth Circuit

November 17, 2004

Gerald John Brown, Hilary Channing Borow, Jay W. Brown, Beirne, Maynard &

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Parsons, Houston, TX, for Plaintiff-Appellant.

John H. Marks, Jr., William Scott Hastings, Christopher M. LaVigne, Locke, Liddell & Sapp, Dallas, TX, for Defendant-Appellee.

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

Before JONES, SMITH and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:

Two insurance companies dispute whether their coverage of claims against a nursing home is primary, excess or pro rata. The district court held that one insurance company's coverage was primary and the other insurance company's coverage was excess. Based on Fifth Circuit precedent concerning Texas law, we disagree and hold that both policies offer primary coverage, which must be prorated. Accordingly, we REVERSE and REMAND for proceedings consistent with this opinion.


In the underlying suit, the estate and surviving family members of deceased nursing home resident, Lawrence Knutson, brought a wrongful death and survivor action against Riverside Healthcare, Inc. ("Riverside"), for negligence, gross negligence, and employee neglect.

Riverside was the named insured under a primary Commercial General Liability and Health Care Professional Liability policy issued by Hartford Underwriters Insurance Company ("Hartford"), as well as a primary Commercial General Liability/Resident Health Care Facility Professional Liability policy issued by Royal Insurance Company of America ("Royal"). Because the plaintiffs' original complaint did not obviously trigger Hartford's policy, initially only Royal was notified of the lawsuit. However, the plaintiffs later amended their complaint to trigger coverage under Hartford's policy.

In mid-November 2000, approximately six weeks after the plaintiffs filed their amended complaint, Royal notified Hartford of the underlying suit, expecting Hartford to join in the defense and participate in a mediation scheduled for December 7, 2000. Hartford declined to join in the defense or mediation, maintaining that it had insufficient notice and time to prepare. Royal proceeded with the mediation and settled the case for approximately $950,000, plus $4,770 for the plaintiffs' costs (within the one million dollar limit of Royal's policy). Royal also paid $132,516.64 for defense costs and fees. Royal made a demand to Hartford for contribution, which Hartford refused. Royal then brought this insurance subrogation action against Hartford to recover half the settlement costs.

The instant appeal arises from the district court's conclusions that (a) the insurers' Professional Liability (PL) rather than Comprehensive General Liability (CGL) coverages pertain to the underlying claim, and (b) Royal's coverage is primary, while Hartford's coverage, because of its "other insurance" provision, is excess (and thus not triggered here). Both companies provided consecutive-year primary insurance policies with limits in the amount of one million dollars each to Riverside for periods covering the underlying action. Both policies provided coverage under identical Commercial General Liability provisions, which afforded pro rata distribution of liability. However, the policies' respective Professional Liability provisions contained differing "Other Insurance" clauses: Royal's clause provided for pro rata coverage;1

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Hartford's clause provided for "excess coverage."2 Resolution of the parties' dispute turns first on whether the underlying suit is governed by CGL or PL provisions. If CGL provisions apply, then liability is undisputedly pro rata, but if PL provisions apply, the companies' respective liability depends on the interrelation of the "other insurance" provisions. While we agree with the district court that PL provisions apply to the underlying suit, we disagree with the court's conflicts determination.

Standard of Review

This court reviews a district court's grant of summary judgment de novo, applying the same standards as the district court. Mongrue v. Monsanto Co., 249 F.3d 422, 428 (5th Cir. 2001). Interpretation of an insurance policy is a question of law. Gladney v. Paul Revere Life Ins. Co., 895 F.2d 238, 241 (5th Cir. 1990).


I. PL vs. CGL Coverage

The district court correctly applied PL...

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