Cont'l Cas. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 09 February 2016
• Docket Number: 15–1623.,Nos. 15–1547,s. 15–1547
• Citation: 812 F.3d 1147
• Parties: CONTINENTAL CASUALTY COMPANY, Plaintiff–Appellee v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant Continental Casualty Company, Plaintiff–Appellee v. National Union Fire Insurance Company of Pittsburgh, PA, Defendant–Appellant The Valspar Corporation, Intervenor Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

812 F.3d 1147

CONTINENTAL CASUALTY COMPANY, Plaintiff–Appellee
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant

Continental Casualty Company, Plaintiff–Appellee
v.
National Union Fire Insurance Company of Pittsburgh, PA, Defendant–Appellant

The Valspar Corporation, Intervenor Defendant.

Nos. 15–1547
15–1623.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 19, 2015.
Filed: Feb. 9, 2016.

812 F.3d 1148

Andrew J. Detherage, Indianapolis, IN, (Christopher L. Lynch, Minneapolis, MN, L. Rachel Lerman, Los Angeles, CA, John P. Fischer, Jr., Indianapolis, IN, on the brief), for Plaintiff–Appellee.

Dale O. Thornsjo, Lance D. Meyer, Minneapolis, MN, for Defendant.

Karen Ventrell, Washington, DC, (Jeanne H. Unger, Minneapolis, MN, on the brief), for Plaintiff–Appellee.

Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.

RILEY, Chief Judge.

This is a diversity case involving a maker of paints and other coatings—The Valspar Corporation, a Delaware and Minnesota citizen—and two of its insurers—Continental Casualty Company, an Illinois citizen, and National Union Fire Insurance Company of Pittsburgh, PA, a Pennsylvania and New York citizen. See 28 U.S.C. § 1332(a)(1), (c)(1). The district court¹ ordered National Union to pay part of the costs Continental incurred to defend Valspar against several lawsuits. Valspar intervened and now appeals because it has agreements with National Union under which Valspar might be required to reimburse anything National Union pays Continental. We affirm.

I. BACKGROUND

Valspar bought primary general liability insurance from various companies over the years. In 2005 and 2006, Valspar faced lawsuits claiming damages from benzene in its products, triggering policies it bought from Continental and National Union, along with five other primary insurers. Continental agreed to defend Valspar, reserving its rights to have the other insurers contribute to paying the costs.

National Union refused to contribute, explaining it had a "fronting arrangement" with Valspar, which meant Valspar was responsible for its own defense costs and National Union was not obliged to defend it. Continental sued for declarations that National Union had a duty to defend Valspar and owed Continental National Union's share of the defense costs. Valspar intervened, arguing that in light of National Union's asserted right to pass its costs to Valspar, a nominal right of Continental to contribution from National Union would really be a right to contribution from Valspar, to which Continental was not entitled. National Union then cross-claimed for a declaration Valspar must indemnify National Union against any contribution Continental wins, as well as damages against Valspar for anticipatorily breaching its indemnity obligations.²

On cross-motions for summary judgment, the district court held National Union had a duty to defend Valspar and to contribute to the defense costs and Valspar did not have a duty to contribute to the defense costs directly (as opposed to potentially having to reimburse National Union). The district court therefore ordered National Union to pay a seventh of Continental's defense costs. Valspar appeals.³ The district court granted Valspar's

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motion to enter partial final judgment, see Fed.R.Civ.P. 54(b), so we have jurisdiction under 28 U.S.C. § 1291.

II. DISCUSSION

Contract interpretation and the propriety of summary judgment are legal issues we review de novo. See, e.g., Hot Stuff Foods, LLC v. Hous. Cas. Co., 771 F.3d 1071, 1074 (8th Cir.2014). No one disputes Minnesota law governs, so it does. See BBSerCo, Inc. v. Metrix Co., 324 F.3d 955, 960 n. 3 (8th Cir.2003) (noting the law of the forum state applies by default if the parties do not raise the issue).

The parties agree the general rule under Minnesota law comes from Cargill, Inc. v. Ace American Insurance Co.: "a primary insurer that has a duty to defend, and whose policy is triggered for defense purposes, has an equitable right to seek contribution for defense costs from any other insurer who also has a duty to defend the insured, and whose policy has been triggered for defense purposes." Cargill, Inc. v. Ace Am. Ins. Co., 784 N.W.2d 341, 354 (Minn.2010). Valspar advances four main reasons why that rule does not apply between Continental and National Union in this case: (1) National Union did not have a duty to defend Valspar within the meaning of Cargill; (2) Valspar might ultimately need to pay National Union's contribution; (3) Continental agreed not to try to recover its defense costs from Valspar; and (4) Continental failed timely to pay some of the defense costs. In the alternative, Valspar argues the amount National Union is required to contribute should account for amounts Valspar spent on its own defense. We address each point in turn.

A. Continental's Right to Contribution from National Union

1. National Union's Duty To Defend Valspar

After a thorough analysis of various documents relating to Valspar's policies with National Union, the district court held National Union assumed and retained a duty to defend Valspar.⁴ The bottom line was that the policies said "[National Union] will have the right and duty to defend" Valspar against civil proceedings for damages, and National Union nowhere explicitly or implicitly disclaimed that duty. See, e.g., Eng'g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 704 (Minn.2013) ( "Where the language of an insurance policy ‘is clear and unambiguous,’ we effectuate the intent of the parties by ‘interpret[ing] the policy according to plain, ordinary sense.’ " (alteration

812 F.3d 1150

in original) (quoting Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn.2008) )). Provisions in several agreements did oblige Valspar to pay or reimburse National Union (or its claims adjuster) for some defense costs, but those obligations did not relieve National Union from its duty to defend, the district court explained, because the duty to defend is not only the "mere obligation to pay for defense costs."

Valspar challenges that last point—the district court's recognition of a duty to defend which is broader than the responsibility for paying defense costs. Valspar faults the district court for basing its understanding of the duty to defend on excess-carrier cases distinguishing that duty from insurers' duty to reimburse defense costs, because "[a]n excess insurer's duty to reimburse an insured ... is, of course, very different from the broad duty to defend." Yet that was the district court's point: Valspar taking responsibility for paying its own defense while leaving other aspects of its insurance arrangement with National Union in place was much like an insurer agreeing to reimburse its insured's defense costs but not actually to conduct the defense. So the district court cited cases explaining how the duty to defend includes more than paying for the defense to demonstrate that Valspar's responsibility for defense costs did not negate National Union's duty to defend. See, e.g., Liberty Mut. Ins. v. Pella Corp., 650 F.3d 1161, 1172 (8th Cir.2011) (explaining the duty to defend "also requires the insurer to conduct and take control of the whole defense"). We see no problem with the district court's logic, and Valspar points to nothing suggesting the district court's analogy was inapt—such as any agreement under which Valspar's defense responsibilities extended beyond just paying costs.⁵

But even if National Union retained some part of its duty to defend, Valspar maintains, that "vestige" was not enough to justify contribution because it did not include a duty to pay defense costs. Under Cargill, an insurer has a right to equitable contribution when "more than one primary insurer covers the same risk and an insurer discharges a common obligation also belonging to another insurer. " Cargill, 784 N.W.2d at 353 (emphasis added). According to Valspar, National Union did not share any "common obligation" discharged by Continental, "because an insurer with NO duty to pay defense costs clearly has no burden in common with insurers having a duty to pay them in full."

It is not quite right to say National Union did not need to pay defense costs. As the district court carefully reasoned—and Valspar does not dispute—although Valspar was ultimately financially responsible for certain defense costs under its...