Cincinnati Ins. Co. v. Grand Pointe, LLC
| Decision Date | 10 August 2007 |
| Docket Number | No. 1:05-CV-161.,No. 1:05-CV-157.,1:05-CV-161.,1:05-CV-157. |
| Citation | 501 F.Supp.2d 1145 |
| Parties | CINCINNATI INSURANCE COMPANY, Plaintiff, v. GRAND POINTE, LLC, et al, Defendants. RLI Insurance Company, Plaintiff, v. Grand Pointe, LLC, et al, Defendants. |
| Court | U.S. District Court — Eastern District of Tennessee |
Amy F. Noland, John M. Neal, Neal Law Firm, Knoxville, TN, Cameron S. Hill, Baker, Donelson, Bearman, Caldwell & Berkowitz, Chattanooga, TN, David W. McDowell, Baker, Donelson, Bearman, Caldwell & Berkowitz, Birmingham, AL, for Plaintiffs.
Ronald J. Berke, Berke, Berke & Berke, Chattanooga, TN, for. Defendants.
Previously, the Court granted Plaintiff RLI Insurance Company's ("RLI") motion for summary judgment and declared it did not have a duty to defend or indemnify Defendants Grand Pointe, LLC; Century Construction of Tennessee, LLC, a Tennessee Limited Liability Company; Century Construction of Tennessee, LLC, an Alabama Limited Liability Company; Southern Century, LLC; CEMC IV, L.P.; Clifford Byrd Harbour, III; and Robert H. Chandler (collectively "Defendants" or "Insureds") in connection with an Alabama lawsuit ("Underlying Lawsuit") (Court File Nos. 114 & 115).1 In doing so, the Court resolved the principle dispute between the parties. However, some matters remained unresolved. Specifically, RLI states in its complaint it "is entitled to reimbursement for all costs, fees, and expenses incurred by it in defending the insureds [Defendants] in the Underlying Lawsuit" (1:05-CV-157, Court File No. 1 at 7): Pursuant to 28 U.S.C. § 636(b)(1), the Court referred this matter to United States Magistrate Judge Susan K. Lee ("magistrate judge") on August 17, 2006 for a report and recommendation concerning a determination of the reimbursement of fees and expenses (Court File No. 118).2
Thereafter, the magistrate judge entered a schedule for submission of dispositive motions (Court File No. 136). Subsequently, RLI filed a motion for summary judgment as to the issue of reimbursement of fees and expenses (1:05-CV-157, Court File No. 57) (1:06-CV-161, Court File No. 143). The magistrate judge issued a report and recommendation ("R & R") concerning this motion as well as two procedural motions3 on June 12, 2007 (Court File No. 165). In the R & R the magistrate judge recommended the Court grant RLI's motion for summary judgment and award it $481,512.36, as well as prejudgment interest, as reimbursement for fees and expenses incurred in defending Defendants in the Underlying Lawsuit (Id.). The magistrate judge also ordered that within five (5) days after the issuance of the R & R, RLI file a supplemental statement calculating the amount of prejudgment interest it seeks at a rate of five (5) percent simple interest per annum beginning on August 11, 2006, the date of the Court's order declaring RLI had no duty to defend or indemnify Defendants as a matter of law (Id.). RLI filed the supplement within the required time period, on June 19, 2007 (Court File No. 166).
On June 26, 2007, Defendants timely filed objections to the R & R, as well as a supporting memorandum; arguing the magistrate judge erred in finding RLI is entitled to summary judgment on this issue and in recommending the Court award a judgment in RLI's favor (Court File Nos. 167 & 168). RLI filed a response to Defendants' objections (Court File No. 169). Subsequently, the magistrate judge filed a supplemental report and recommendation ("supplemental R & R"), which found RLI's calculation to be correct and recommended RLI be awarded prejudgment interest in the amount of $19,662.64 (Court File No. 170). Neither party filed objections to the supplemental R & R.
This Court must conduct a de novo review of those portions of the R & R to which objection is made and may accept, reject, or modify, in whole or in part, the magistrate judge's findings or recommendations. 28 U.S.C. § 636(b)(1)(C).
The Court has already outlined the applicable facts at length in its previous memorandum opinions (Court File Nos. 105,114 & 162). Additionally, as neither party objects to the magistrate judge's factual findings, the Court will ACCEPT and ADOPT by reference the magistrate judge's statements of the procedural and factual background contained in her R & R (Court File No. 165 at 3-11).4
The Court finds the magistrate judge correctly stated the relevant issue in this matter: "May an insurer seek reimbursement from an insured for defense costs and settlement funds paid on behalf of the insured when it is subsequently determined the insurer owed no duty to defend or indemnify the insured, and the insurance policy does not expressly provide for a right of reimbursement?" (Court File No. 165 at 11). The Magistrate judge thoroughly and exhaustively considered this issue of first impression under Tennessee law in her forty-two (42) page R & R. After an extensive analysis, including an explanation of both the majority and minority approaches,5 the magistrate judge reasonably concluded Tennessee would follow the majority approach which allows reimbursement.6 Therefore, the magistrate judge recommended RLI be awarded a judgment against all Defendants, jointly and severally, for the costs and expenses RLI incurred in defending them when it, in fact, did not have a duty to defend.
Defendants' specific written objections to the R & R include:7 (1) Alabama law, which does not allow reimbursement, governs RLI's right to reimbursement, (2) the relevant issue should be certified to the Tennessee Supreme Court, (3) Tennessee would follow the minority approach regarding the relevant' issue, (4) even if Tennessee were to apply the majority position, RLI would not be entitled to reimbursement of any fees paid after Defendants objected to RLI's claim for reimbursement, (5) even if Tennessee were to apply the majority position, RLI would not be entitled to reimbursement of settlement monies,8 (6) Tennessee law does not support a finding of an implied-in-law contract,9 (7) the policy language prevents RLI from unilaterally altering the policy,10 (8) RLI is not entitled to a judgment against Defendant Robert Chandler since he is not a named insured under the policy, nor is he jointly and severally liable,11 and (9) since the Court finds Tennessee law governs the issues in this case, Alabama law does not govern the issue of joint and several liability (Court File Nos. 167 & 168).12 With the exception of the last objection, which is without merit, these are essentially the same arguments Defendants have made throughout the pendency of this matter (Court File Nos. 153 & 158). The magistrate judge comprehensively considered and adequately disposed of these objections in her R & R. After performing a de novo review, by carefully reviewing the record, the arguments of the parties, and the applicable law, the Court finds the magistrate judge's findings to be supported by the weight of the evidence and her legal analysis to be correct under the relevant law. Additionally, the Court finds the magistrate judge's findings of fact and legal analysis to be correct in her supplemental R & R; which dealt with the issue of prejudgment interest.13 Accordingly, the Court ADOPTS the magistrate judge's R & R and supplemental R & R and fully incorporates both in this memorandum as the Court's opinion.
Therefore, for the foregoing reasons, the Court will ACCEPT and ADOPT the magistrate judge's findings of fact, conclusions of law, and recommendations contained in her R & R (Court File No. 165) and supplemental R & R (Court File No. 170) and will enter a JUDGMENT ORDER which:
(1) GRANTS RLI's motion for summary judgment (1:05-CV-161, Court File No. 143) (1:05-CV-157, Court File No. 57);
(2) AWARDS RLI $481,512.36 for fees, costs, expenses, and indemnity provided by RLI to Defendants in connection with the Underlying Lawsuit;
(3) AWARDS RLI pre-judgment interest in the amount of $19,662.64 (calculated at a rate of 5% per annum from August 11, 2006 to June 12, 2007);
(4) ORDERS all Defendants, as defined herein, are jointly and severally liable for these awards;
(5) GRANTS Defendants' motion for leave to file a second response brief (1:05-CV-161 Court File No. 160) (1:05-CV-157, Court File No. 74);
(6) DENIES as MOOT RLI's motion to strike Defendants' supplemental response (1:05-CV-161, Court File No: 159) (1:05-CV-157, Court File No. 73);14 and
(7) ORDERS the Clerk to CLOSE Case number 1:05-CV-161 and Case number 1:05-CV157, as the accompanying Order resolves all remaining issues in this matter.15
An Order shall enter.
JUDGMENT ORDERBased on the reasons stated in the accompanying memorandum opinion, the Court ACCEPTS and ADOPTS the magistrate judge's findings of fact, conclusions of law, and recommendations contained in her report and recommendation (Court File No. 165)1 and supplemental report and recommendation (Court File No. 170) and enters this JUDGMENT ORDER which:
(1) GRANTS Plaintiff RLI Insurance Company's ("RLI") motion for summary judgment. (1:05-CV-161, Court File No. 143) (1:05-CV-157, Court File No. 57);
(2) AWARDS RLI $481,512.36 for fees, costs, expenses, and indemnity provided by RLI to Defendants Grand Pointe, LLC; Century Construction of Tennessee, LLC, a Tennessee Limited Liability Company; Century Construction of Tennessee, LLC, an Alabama Limited Liability Company; Southern Century, LLC; CEMC IV, L.P.; Clifford Byrd Harbour, III; and Robert H. Chandler's (collectively "Defendants") in connection with the Underlying Lawsuit;
(3) AWARDS RLI pre-judgment interest in the amount of $19,662.64 (calculated at a rate of 5% per annum from August 11, 2006 to June 12, 2007);
(4) ORDERS all Defendants, as defined herein, are jointly and severally liable for these awards;
(5) GRANTS Defendants' motion...
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