Commercial Union Ins. Co. v. Walbrook Ins. Co., Ltd.

• Decision Date: 14 September 1994
• Docket Number: Nos. 94-1526,94-1561,s. 94-1526
• Citation: 41 F.3d 764
• Parties: COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, Appellant, v. WALBROOK INSURANCE CO., LTD., et al., Defendants, Appellees. COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, Appellee, v. NATIONAL CASUALTY CO., et al., Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 764

41 F.3d 764

COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, Appellant, v. WALBROOK INSURANCE CO., LTD., et al., Defendants, Appellees.

COMMERCIAL UNION INSURANCE COMPANY, Plaintiff, Appellee, v. NATIONAL CASUALTY CO., et al., Defendants, Appellants.

Nos. 94-1526, 94-1561.

United States Court of Appeals First Circuit.

Heard Sept. 14, 1994.

Decided Dec. 5, 1994.

James B. Dolan with whom Erin R. Boisvert, Badger, Dolan, Parker & Cohen, Boston, MA, Robert J. Brown, Mark A. DiTaranto, and Mendes & Mount, New York City, were on brief, for Walbrook Ins. Co., Ltd., et al.

Before SELYA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and STAHL, Circuit Judge.

STAHL, Circuit Judge.

For the second time, we examine issues arising out of a dispute between Commercial Union Insurance Company ("CU") and Walbrook Insurance et al. (collectively, "Weavers") concerning Weavers's obligation to indemnify CU under an insurance contract. On initial appeal, we reversed the district court's grant of summary judgment in favor of Weavers and remanded the case for further proceedings consistent with our opinion. Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047 (1st Cir.1993) ("Commercial Union I "). Both parties now challenge the district court's entry of judgment for CU and denial of cross-motions to amend or alter that judgment. Weavers has also moved to dismiss CU's appeal. We deny the motion to dismiss and affirm the entry of judgment below.

I. FACTUAL BACKGROUND AND PRIOR PROCEEDINGS

Between 1973 and 1975, a CU loss-prevention inspector conducted several safety inspections of the Peterson/Puritan aerosol-packing plant in Cumberland, Rhode Island. On January 17, 1976, a gas line exploded at the plant, killing four people and injuring several others. Two years later, victims filed several suits naming CU as defendant ("Peterson claims"). CU eventually settled the Peterson claims. CU expended $2,502,874.30 for defense and in settlement of the claims. Ultimately, CU obtained primary indemnification in the amount of $1,000,000 from American Employers Insurance Company ("American Employers"), CU's primary corporate insurer for the period July 1, 1976 through July 1, 1979. ¹

At the time of the explosion, the Travelers Insurance Company had issued to CU a primary corporate liability policy ("Travelers Policy") effective from January 1, 1976, to July 1, 1976. The Travelers Policy provided occurrence-based coverage ² during the policy period for up to $1 million of CU liability. The main body of the Travelers Policy specifically excluded occurrences involving malpractice by CU's engineers. This gap was partially filled by a separate Engineers Professional Liability Endorsement issued by Travelers ("Travelers EPL Endorsement"). The Travelers EPL Endorsement provided claims-based coverage. ³

As the Commercial Union I panel noted, the Travelers Policy and the Travelers EPL Endorsement left CU with a gap in its coverage with respect to occurrences resulting from engineer malpractice for which no claim was filed during the policy period. Consequently, at the time of the explosion, CU also carried an umbrella policy issued by Weavers The next section of the main body of the Weavers Umbrella, captioned "LIMIT OF LIABILITY," provided that Weavers would only be liable for the ultimate net loss in excess of either "(a) the limits of the underlying insurances as set out in the attached schedule in respect of each occurrence covered by said underlying insurances" or "(b) $25,000 ultimate net loss in respect of each occurrence not covered by said underlying insurances...."

                ("Weavers Umbrella"). 4  Under the first section of the main body of the Weavers Umbrella, captioned "COVERAGE," the policy expressly covered "all sums ... imposed upon [CU] by law ... or assumed under contract or agreement ... for damages on account of ... personal injuries, property damage, [or] advertising liability ... arising out of each occurrence happening anywhere in the world." 5
                

To the Weavers Umbrella was attached an EPL Endorsement ("Weavers EPL Endorsement"). The terms of the Weavers EPL Endorsement provided that it was to "include Engineers Professional Liability as more fully described in the underlying General Liability Policy/ies" (referencing the Travelers Policy) and that such coverage "is subject to the same warranties, terms and conditions ... as are contained in the said underlying policy/ies...." The parties agree that because this language specifically incorporates the provisions of the Travelers EPL Endorsement, the Weavers EPL Endorsement provided claims-based coverage.

Subsection (a) of the Weavers EPL Endorsement captioned "LIMIT OF LIABILITY," provided that Weavers would only be liable for the ultimate net loss in excess of "[t]he limits of the underlying insurances as set out in the attached schedule in respect of each occurrence covered by said underlying insurances." If the liability was not covered by another policy, subsection (b) of the Weavers EPL Endorsement ("Liability Amendment") provided coverage for "the excess of ... $25,000 ultimate nett [sic] loss in respect of each occurrence not covered by said underlying insurances but in respect of engineering services liability $250,000 ultimate nett [sic] loss [for] each occurrence not covered by said underlying insurances." In effect, subsection (b) provides for a deductible when the Umbrella "drops down" to provide coverage not covered under the underlying policy ("$250,000 deductible"). An attachment captioned "Schedule of Underlying Insurances" lists the Travelers Policy.

Initially, Travelers undertook the defense of the Peterson claims. Then, in 1982, CU determined that it had not made its claim for coverage during the Travelers Policy period. Accordingly, CU released Travelers from any further obligations in connection with the explosion. Weavers then informed CU that its Umbrella would not cover the Peterson claims. In November 1982, CU brought the present action, seeking a judicial declaration as to whether the Weavers Umbrella covered the Peterson claims.

Following extensive discovery, both parties sought summary judgment. CU argued that the main body of the Weavers Umbrella covered EPL claims on an occurrence basis and that the Weavers EPL Endorsement provided additional coverage on a claims basis. Weavers argued that the Weavers EPL Endorsement was the sole source of EPL coverage and, because the EPL Endorsement was claims-based, there was, accordingly, no coverage under either the Weavers Umbrella or the Weavers EPL Endorsement. The district court largely adopted the latter reading On appeal, the Commercial Union I panel reversed. Interpreting the various policy provisions, the panel concluded that the main body of the Weavers Umbrella provided occurrence-based EPL coverage and thus covered the Peterson claims. Commercial Union I, 7 F.3d at 1049. Consequently, the panel ordered that the judgment in favor of Weavers be vacated and that judgment be entered for CU, in proceedings consistent with the panel's opinion. Weavers's petition for rehearing and rehearing en banc was denied.

and granted Weavers's motion for summary judgment.

In this appeal, we are asked to review issues arising from the subsequent proceedings before the district court. CU moved that the district court enter judgment for $1,502,874.30 plus interest ⁶ to be calculated at 12%, the prejudgment interest rate for contractual disputes under Massachusetts law. In its response, Weavers argued that the $1,502,874.30 was subject to the $250,000 deductible and that prejudgment interest should be determined by reference to federal law. As to the prejudgment-interest issue, Weavers argued in the alternative that if state law applied, the correct Massachusetts statute set the rate at 6%. The district court, finding that the Commercial Union I panel had "rested judgment upon" the validity of the $250,000 deductible, applied the deductible, ordered entry of judgment for CU in the amount of $1,252,874.30, found state law to govern interest, and ordered that prejudgment interest be calculated at the rate of 12%. The district court entered judgment for $2,749,326.48.

Pursuant to Fed.R.Civ.P. 59, both parties filed motions seeking to alter or amend the judgment. The district court denied both motions. ⁷ CU appealed, and Weavers cross appealed. CU requested that Weavers post a bond pursuant to Fed.R.Civ.P. 62. When Weavers refused, CU obtained an execution. CU then received payment from all defendants except Walbrook and Slater, Walker and has accepted checks totaling $2,314,758.61. CU refused to execute a satisfaction of judgment. Weavers moved to dismiss CU's appeal. The motion to dismiss was denied without prejudice pending reconsideration by this panel.

II. DISCUSSION

Where, as here, the issues on appeal involve pure questions of law, our review is de novo. ⁸ See, e.g., Villafane-Neriz v. Federal Deposit Ins. Corp., 20 F.3d 35, 39 (1st Cir.1994). On appeal, CU makes two principal arguments: (1) that the district court erred in stacking the $250,000 deductible on top of the payment received from American Employers; and (2) that Weavers waived its right to argue for alternate relief in application of the deductible. In its cross appeal, Weavers argues: (1) that the district court erred in applying state law to award prejudgment interest; and, in the alternative, (2) that, if state law applies, the district court applied the incorrect law. On its motion to dismiss CU's appeal, Weavers argues that, in executing the district court's judgment, CU waived its right to appeal. We first address Weavers's motion to dismiss, then CU's appeal and, finally, Weavers's cross appeal.

A. Weavers's Motion to Dismiss

In its motion to dismiss, Weavers argues that, because CU executed judgment Our analysis must start with United States v. Hougham, 364 U.S. 310, 312, 81 S.Ct. 13, 15-16, 5 L.Ed.2d 8 (1960), in which ...