First Nat. Life Ins. Co. v. California Pacific Life Ins. Co., 88-7246
| Decision Date | 28 June 1989 |
| Docket Number | No. 88-7246,88-7246 |
| Citation | 876 F.2d 877 |
| Parties | FIRST NATIONAL LIFE INSURANCE COMPANY, Plaintiff-Appellant, v. CALIFORNIA PACIFIC LIFE INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Alvin T. Prestwood, Capouano, Wampold, Prestwood & Sansone, PA, Montgomery, Ala., for plaintiff-appellant.
Robert W. Bradford, Jr., Hill, Hill, Carter, Franco, Cole & Black, Montgomery, Ala., for defendant-appellee.
Appeal from the United States District Court for the Middle District of Alabama.
Before TJOFLAT and CLARK, Circuit Judges, and ACKER *, District judge.
This appeal involves a dispute between insurance companies over which one is required to provide coverage to a claimant. The dispute arises from a reinsurance agreement which requires arbitration of any disputes between the parties. The principal issues on appeal are whether summary judgment was improper and whether factual inaccuracies contained in the affidavit of the chief counsel of one insurance company requires setting aside the court's summary judgment order.
Continental Association of Resolute Employers ("CARE") is a California association of small and medium size insurance companies. It provides its members with various services including access to group insurance policies. These group insurance policies are termed "CARE Plans." California Pacific Life Insurance Services (CPIS) is an insurance agency and a wholly owned subsidiary of CARE. CPIS markets and sells, but does not underwrite, the insurance policies that make up CARE Plans. California Pacific Life (CPL), which is also a wholly owned subsidiary of CARE, issues various types of insurance policies used in CARE Plans. Thus, CARE and its subsidiary, CPIS, provide the administrative and marketing services necessary to sell "CARE Plans" that CPL underwrites.
CARE and CPIS, however, also utilize other insurance companies' policies in CARE Plans. In particular, on March 23, 1982, CPIS and CARE entered into a Group Insurance Marketing and Administration Agreement ("Marketing Agreement") with First National Life Insurance ("FNL") for group insurance marketing and administrative services. FNL is an Alabama corporation that issues various types of insurance policies. Under the Marketing Agreement, CPIS was to market CARE Plans that FNL underwrites. The Marketing Agreement originally did not include the state of Texas. It was later expanded to include Texas by a November 29, 1982 amendment to the Agreement. Record, Vol. 1, Tab 14. FNL thereafter issued policies which CARE and CPIS marketed in Texas.
On March 1, 1983, FNL and CPL entered into the Reinsurance and Assumption Agreement ("Reinsurance Agreement") under which certain CARE plans listed in an attached schedule were transferred from CPL to FNL effective January 1, 1983. Record, Vol. 1, Tab 14, Exh. B. CPL remained financially responsible for all insured losses occurring prior to January 1, 1983. After this date, FNL held all rights, privileges and prerogatives in the listed CARE policies that were in force. FNL, however, did not assume CPL's liability for claims based upon representations made or actions taken by CPL employees. CPL agreed to indemnify FNL in such instances. Finally, the Reinsurance Agreement provided for arbitration of all disputes arising out of the coverage under these transferred policies.
The CARE policy in dispute was issued to Cascio Riding Stables ("Cascio") in Aubrey, Texas. FNL asserts that in December 1981, a CPIS representative wrongfully extended insurance coverage under a CPL policy to Cynthia Coffman ("Coffman"), a sister of the representative's wife. FNL asserts that the representative knew that the Coffman sisters are the daughters of Cascio's owners and were ineligible for insurance because they were not Cascio employees. CPL claims, however, that the representative was an agent for Security Benefit Life Insurance Company (SBL) and that SBL issued the Cascio policy.
Coffman suffered an automobile injury in 1983 and sought coverage under the Cascio policy. FNL investigated the claim and refused coverage. Coffman then filed suit in federal district court in New Mexico ("New Mexico lawsuit") on July 3, 1986 against CPIS and FNL. CPIS filed a cross-claim in the New Mexico lawsuit claiming FNL was responsible for coverage.
On April 24, 1987, FNL filed a petition and request for an order compelling arbitration against CPL in federal district court in Alabama ("Alabama lawsuit"). FNL alleged that pursuant to the Reinsurance Agreement CPL must indemnify and defend FNL under the policy that CPIS issued to Cascio which purportedly covers Coffman's claim.
The Reinsurance Agreement provides in pertinent part that:
It is understood and agreed that only the contractual obligations of CP Life under policies reinsured hereunder are assumed by FNL. FNL does not assume any other liability of CP Life regarding the policies reinsured hereunder resulting from any representations made in the sale thereof, or actions taken in connection therewith, by CP Life its servants, agents, and/or employees. In this regard, CP Life agrees to indemnify and hold FNL harmless from any and all liability, cost or expense arising from any such representation made or action taken by CP Life, its servants, agents and/or employees, or any other claims known or unknown, the basis of which originated prior to the effective date of this Agreement. 1
Reinsurance Agreement, Clause 12 (emphasis added). FNL claims that because CPL wrongfully issued the Cascio policy, CPL must indemnify FNL pursuant to this provision in the Reinsurance Agreement. Further, because the indemnification dispute arises under the Reinsurance Agreement, FNL argues that it must be arbitrated.
In the Alabama lawsuit, both parties filed motions for summary judgment. CPL submitted copies of the Marketing Agreement and its amendments and the Reinsurance Agreement. Id. at Exh. A, B. CPL also entered the sworn affidavit of Mr. Stephen Sirota, CPL's general counsel. Regarding the disputed Cascio policy, Sirota stated that:
CPL did not have any policies in effect which covered anyone in the state of Texas and specifically never issued a policy which covered Cascio Riding Stables, its employees or dependents. To the contrary, the policy covering employees of Cascio Riding Stables was issued directly by FNL and, therefore, could not have been assumed by FNL pursuant to the Reinsurance Agreement.
Record, Vol. 1, Tab 14, Exh. 1 (emphasis added).
In support of its motion for summary judgment FNL submitted copies of the Reinsurance Agreement and the Cascio complaint and CPIS cross-complaint from the New Mexico lawsuit. FNL argued that the assertions CPIS made in its cross-complaint raise an issue of fact regarding whether CPL has any connection with the Cascio policy. In particular, FNL points to CPIS's statement in its cross-complaint that:
On the basis of information Plaintiff Cynthia Coffman provided on her application for insurance dated December 27, 1981, she was insured as an employee of Cascio Stables under a group policy with [CPL]. Effective January 1, 1983, FNL assumed all insureds covered under the [CPL] policy, including Plaintiff. By virtue of this contractual agreement between FNL and the previous carrier, FNL is solely liable for the type of loss allegedly incurred by the Plaintiff.
This statement contradicts Sirota's affidavit because Sirota asserted that FNL directly issued the Cascio policy rather than assumed it under the Reinsurance Agreement.
On October 14, 1987, the district court issued an order requiring both parties to submit all evidence before October 26, 1987. On November 23, 1987 the court set a pretrial conference for January 8, 1988.
On December 18, 1987, the district court held argument on the summary judgment motions during which FNL alleges that it pointed out the discrepancies between Sirota's affidavit and CPIS's cross-claim to the district court. 2 On the same day, FNL filed a motion requesting permission to submit a counter-affidavit on the summary judgment motion.
On January 8, 1988, the district court denied FNL's motion to submit a counter-affidavit and granted CPL's motion for summary judgment. In its order, the district court held that pursuant to the Marketing Agreement, FNL directly issued the CARE policy to Cascio. The court held that CPL was not a party to this transaction and that CPL did not have any policies in effect in Texas at the time the Reinsurance Agreement was entered in March 1983. The court stated that:
The undisputed evidence before this Court clearly demonstrates that CPL was not a party to the agreement under which insurance coverage issued by FNL was extended in Texas to Cascio Riding Stables and its employees. CPL is a party to an agreement with FNL which contains an arbitration provision. However, that agreement is for the reinsurance and assumption of CPL policies by FNL. CPL did not issue any policies in Texas or to the Cascio Riding Stables.
Record, Vol. 1, Tab 26 at 8. The court, therefore, granted CPL's motion for summary judgment and denied arbitration. 3
FNL filed a motion for a new trial or to alter or amend the judgment based on FNL's excusable neglect or CPL's misconduct in failing to correct the factual inaccuracies in Sirota's affidavit. FNL attached the affidavits of Randall K. Hunter, FNL's Chairman and President, and Alvin T. Prestwood, FNL's attorney in the New Mexico suit, to its motion. In response to FNL's motion, CPL for the first time acknowledged the erroneous statement in Sirota's affidavit:
For the benefit of the court's knowledge, there was one inadvertent misstatement on the Sirota affidavit. Upon his initial investigation, it was...
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