National Union Fire Ins. Co. v. Showa Shipping Co., Ltd.
| Decision Date | 19 January 1995 |
| Docket Number | No. 93-15627,93-15627 |
| Citation | 47 F.3d 316 |
| Parties | NATIONAL UNION FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. SHOWA SHIPPING CO., LTD., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Sam D. Delich, Flynn, Delich & Wise, San Francisco, CA, for defendant-appellant.
Henry D. Dicum and Cory A. Birnberg, Birnberg & Associates, San Francisco, CA, for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of California.
Before: PREGERSON, WIGGINS, Circuit Judges; and FONG, * District Judge.
INTRODUCTION
Showa Shipping Co., Ltd. ("Showa") appeals the district court's judgment after a bench trial requiring Showa to indemnify National Union Fire Insurance Co. ("National Union") for funds National Union contributed to the settlement of a state wrongful death and injury action ("underlying action"). We REVERSE and REMAND.
On November 8, 1994, a truck tractor towing a flatbed semitrailer (chassis) driven by Roy Dale Hightower ("Hightower"), ran a stop sign and collided with a passenger vehicle causing the death of one passenger, Mary Luisa Campos, and seriously injuring her husband, Vincent Guerrero Campos (collectively "the Campos family").
Don Roberts Enterprises/Trucking ("Don Roberts") employed Hightower and owned the truck tractor. Flexi-Van Leasing, Inc. ("Flexi-Van") owned the trailer towed by the tractor. Flexi-Van had leased the trailer to Norton Lilly Management Corp. ("Norton Lilly"), which subsequently subleased it in 1974 to Showa, a foreign steamship carrier, (collectively Flexi-Van, Norton Lilly and Showa are designated as the "trailer parties"). At the time of the accident, both the lease and the sublease had expired by their terms. 1 Even though the sublease had expired, Showa retained the trailer and continued to use it to carry cargo for its customers.
Prior to the accident, Hightower and Don Roberts picked up the trailer from a warehouse. The trailer was carrying a Showa container. Don Roberts was in turn subhauling for Federal Produce Transportation, Inc. ("Federal"), a highway common carrier.
National Union issued a liability policy on the trailer to Norton Lilly (the "Norton Lilly policy"). 2 This policy provided coverage to users of the trailer with the express or implied permission of Norton Lilly. Flexi-Van was also insured by a policy issued by National Union. Showa obtained multi-peril marine insurance from Through Transport Mutual Insurance Corporation, Ltd. ("Through Transport"), which insured Showa with respect to the trailer. This policy covered product defects in the trailer and negligent entrustment, but did not cover liability for road accidents. The Showa policy named Norton Lilly as an additional insured.
In October 1985, the Campos family filed a lawsuit in the Superior Court for Santa Clara County (the "underlying action"). The lawsuit initially named Don Roberts, Federal and Hightower as defendants. Subsequently, the Campos family named Flexi-Van and "Showa, a Corporation" and served Flexi-Van. Showa was never served. Flexi-Van cross-complained against the named defendants as well as Norton Lilly. Norton Lilly in turn tendered its defense to Showa under the terms of its lease with Showa. Don Roberts cross-claimed against all the defendants. Federal cross-claimed against Don Roberts. Don Roberts filed a declaratory action against Flexi-Van, "Shawa" Corporation and other defendants in July, 1986 seeking a determination that the insurance policies of the other defendants also covered Don Roberts for its liability in the underlying action. Norton Lilly and National Union were added to the Don Roberts action. Showa also was not served in that action.
A settlement conference in the underlying action was convened in January, 1987. Showa's counsel did not "officially" attend the settlement conference, although he was outside in the hall. Showa and Through Transport advised Norton Lilly that they accepted its defense subject to the exclusions, rights and reservations of the Through Transport policy. However, Through Transport stated that it would not contribute any amounts on behalf of Showa nor Norton Lilly to the settlement of the underlying action. Norton Lilly turned down Through Transport's tender of defense.
Soon after the settlement conference, Don Roberts, Federal, Norton Lilly, Flexi-Van, and their insurers settled with the Campos family. Don Roberts' insurer, Colonial Penn, contributed its policy limit of $600,000. National Union contributed $500,000 from its policy naming Norton Lilly as an insured. Home Insurance Co. contributed $25,000 from its policy naming Federal as an insured. National Union also contributed $2,000 from its policy naming Flexi-Van as an insured.
On May 24, 1988, National Union filed a declaratory judgment action in Superior Court for the State of California, City and County of San Francisco, seeking indemnity from Showa for the funds contributed by National Union to the settlement of the underlying litigation. Showa removed the case to the United States District Court for the Northern District of California on the basis of diversity of citizenship, 28 U.S.C. Sec. 1332. 3
Several pre-trial motions were filed in the instant case. In its first motion for summary judgment, Showa asserted that it was an unnamed, permissive insured under the National Union policy covering Norton Lilly, and thus National Union was barred from seeking subrogation from Showa. According to Showa, Showa was a permissive user under the policy because its use of the trailer was authorized by Norton Lilly. National Union argued that Showa was not a permissive user because it did not use the trailer in a manner approved by the named insured, Norton Lilly. On February 5, 1991, the district court accepted the principle that an insurer cannot be subrogated to a claim against an unnamed insured on any occurrence covered by the policy, but agreed with National Union that Showa had not met its burden of proof in showing that it was a permissive user under the Norton Lilly policy. The lease between Showa and Norton Lilly required that any interchange of the trailer by Showa be made pursuant to a written interchange agreement. 4 Since Showa was unable to produce such a written interchange agreement, the district court denied Showa's motion. 5
Subsequently in the course of the litigation, the parties filed cross-motions for summary judgment again arguing the issue of whether Showa was a permissive insured under the National Union policy issued to Norton Lilly. The district court reaffirmed its earlier holding: to qualify as a permissive insured, Showa would be required to produce a written interchange agreement with Don Roberts (the "July 27, 1992 Order"). According to the court, such an agreement was required by the lease and by ICC standards. The district court also concluded that Showa's liability could not be predicated on the terms of the expired written lease.
Following a bench trial, the district court issued a written order holding that National Union had met its burden of proof in establishing its right to equitable indemnity under California law. The court held that to meet its burden, National Union must prove that 1) its contribution to the settlement of the underlying litigation was reasonable in light of its potential liability to the Campos family, and 2) Showa also had exposure to the Campos family so that it would be equitable to impose the burden of contribution on Showa. The district court held that it need not determine whether Norton Lilly or Showa were actually at fault with respect to the Campos family accident; rather, potential liability was a sufficient basis for a claim of equitable indemnity by National Union. The district court concluded that National Union met this standard by showing that both it and Showa were potentially liable to the Campos family under the Campos family negligent entrustment theory. The district court found that the evidentiary record confirmed that Hightower "had a history of driving violations and was not fit to drive a tractor trailer." While neither Showa nor Norton Lilly were directly responsible for entrusting the trailer to Hightower, "both ... committ[ed] arguably negligent acts which allowed Hightower to take possession of the trailer...." 6 Since both Showa and Norton Lilly were potentially liable in the underlying action, National Union's participation in the settlement was reasonable. The district court concluded that Showa, as a potential joint tortfeasor, was required to share equally in the cost of settling the underlying action.
In an Order filed April 9, 1993, the district court found that National Union was entitled to pre-judgment interest under California Civil Code Sec. 3287(a), reasoning that the damages were capable of being made certain as of the date National Union settled the underlying action.
Showa has challenged the district court's interpretation of several points of California law. We will address each issue raised on appeal in turn.
The district court apparently disposed of Showa's permissive use claim on summary judgment. A grant of summary judgment is reviewed de novo. Jones v. Union Pacific R.R., 968 F.2d 937, 940 (9th Cir.1992).
In ruling on the parties' cross motions for summary judgment, the district court held that Showa was not a permissive user under the policy because it did not produce a written interchange agreement between itself and Don Roberts. The district court found that even though the written contract which required an interchange agreement had expired, Showa could be a permissive user only if it allowed use of the trailer pursuant to a written interchange agreement. The district court's rationale...
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