Genesis Ins. Co. v. Wausau Ins. Companies

• Decision Date: 21 August 2003
• Docket Number: No. 02-60807.,02-60807.
• Citation: 343 F.3d 733
• Parties: GENESIS INSURANCE COMPANY; President Riverboat Casino-Mississippi, Inc., Plaintiffs-Appellants, v. WAUSAU INSURANCE COMPANIES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

343 F.3d 733

GENESIS INSURANCE COMPANY; President Riverboat Casino-Mississippi, Inc., Plaintiffs-Appellants, v. WAUSAU INSURANCE COMPANIES, Defendant-Appellee.

No. 02-60807.

United States Court of Appeals, Fifth Circuit.

August 21, 2003.

Robert C. Galloway (argued), Butler, Snow, O'Mara, Stevens & Cannada, Gulfport, MS, for Genesis, Ins. Co.

Karen Korff Sawyer (argued), Bryant, Clark, Dukes, Blakeslee, Ramsay & Hamond, Gulfport, MS, for President Riverboat Casino-Mississippi, Inc.

Eugene Randolph Naylor, (argued), Charles Henry Russell, III, Wise, Carter, Child & Caraway, Jackson, MS, for Wausau Ins. Companies.

Appeal from the United States District Court for the Southern District of Mississippi.

Before JONES and BENAVIDES, Circuit Judges, and KAZEN,^* District Judge.

BENAVIDES, Circuit Judge:

I. BACKGROUND

On April 25, 1996, Edith Baker, a guest at The President Casino ("President"), in Biloxi, Mississippi, was struck by a casino-owned shuttle bus driven by a casino employee as she attempted to cross a drop-off area in front of the casino entrance. Baker had emerged from a walkway to the driver's left. The driver, whose view of the walkway was partially blocked by a six-foot chain link fence that was covered intermittently by banners or flags, did not see Baker as she stepped onto the drive. Baker was thrown 10 to 15 feet and suffered a variety of injuries, including a fractured skull, broken ribs, damage to a nerve that resulted in the permanent loss of smell and taste, and temporomandibular joint disfunction associated with damage to her jaw.

At the time of the accident, President was insured under a business automobile policy from Wausau Insurance Companies ("Wausau"). The casino immediately reported the accident to a Wausau representative and shortly thereafter Wausau retained a local independent adjuster to investigate. The adjuster completed his investigation and closed the Baker file on September 11, 1996. Baker had retained an attorney, but no settlement offer was extended.

On April 22, 1999, Baker filed a complaint in the Circuit Court of the Second Judicial District of Harrison County, Mississippi, against President and its shuttle driver, alleging negligence in the operation of President's shuttle bus as the proximate cause of her injuries. Pursuant to its policy, Wausau hired an attorney to defend President. Mediation was unsuccessful. On January 30, 2001, the trial court approved Baker's motion, unopposed by Wausau counsel, to amend her complaint to include an additional count for premises liability based upon the placement of the fence, the walkway, and the absence of warning signs and indicators in the vicinity of the crosswalk. The following day, Wausau sent President a letter reserving its right to deny coverage with respect to the premises liability claim. President then notified its comprehensive general liability ("CGL") insurer, Genesis Insurance Company ("Genesis"). Genesis promptly hired an attorney.

Trial was scheduled for March 5, 2001, and all motions for continuance were denied. On February 28, 2001, Genesis filed this action in the United States District Court for the Southern District of Mississippi, seeking a declaration that the Wausau policy covers the allegations in the state court Baker litigation in their entirety, with the Genesis policy providing only excess insurance over and above the $1,000,000 primary coverage afforded by the Wausau policy.

Negotiations between the parties with respect to the Baker litigation ensued. Defendants had concluded that they would stipulate to liability, leaving only the issue of damages for the jury. On March 2, 2001, a settlement of $400,000 was reached.¹ $200,000 was paid by Wausau, and $200,000 by Genesis and President (the Genesis policy contained a self-insured retention endorsement of $100,000). Genesis and President ("appellants") contend that their $200,000 payment was made with the specific understanding that all parties reserved their right to seek reimbursement from one another, as evidenced by a letter from Genesis to Wausau and the e-mails of Wausau employees.

Genesis and President filed a joint Motion for Summary Judgment, asserting that the unambiguous language of the Wausau policy provides coverage for the entirety of the Baker claim. The motion also alleged that Wausau was estopped from denying coverage because it undertook the claim and handled it exclusively from April 1996, until the end of January 2001, without issuing a non-waiver notice or a reservation of rights letter. Alleging "bad faith" on the part of Wausau, President and Genesis seek contractual and punitive damages. Wausau filed its own Motion for Summary Judgment on the grounds that President and Genesis voluntarily proffered payment for the Baker settlement, and are therefore barred from seeking reimbursement under the voluntary payment doctrine.

The district court granted summary judgment in favor of Wausau. In a Memorandum Opinion dated June 18, 2001, it concluded that under the voluntary payment doctrine, President and Genesis gave up their claims against Wausau when they voluntarily settled the Baker litigation. The court dismissed President and Genesis's summary judgment motion as moot. President and Genesis appealed to this court.

II. STANDARD OF REVIEW

A district court's grant of summary judgment is reviewed de novo. Rivers v. Central and S.W. Corporation, 186 F.3d 681, 682 (5th Cir.1999). Summary judgment is appropriate, when, viewing the evidence in the light most favorable to the nonmoving party, the record reflects that no genuine issue of any material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). See also Transitional Learning Comty. at Galveston, Inc. v. U.S. Office of Pers. Mgmt., 220 F.3d 427, 429 (5th Cir.2000). A material fact is one that "might affect the outcome of the suit under the governing law," and a "dispute about a material fact is `genuine' ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Sulzer Carbomedics, Inc. v. Oregon Cardio-Devices, Inc., 257 F.3d 449, 456 (5th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The record before the court must be considered in the light most favorable to the nonmovants, President & Genesis. Sulzer Carbomedics, Inc., 257 F.3d at 456.

In a diversity action such as this one, federal courts are bound to apply the choice of law rules of the forum state in which the court sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The outcome of diversity litigation in a district court should be the same as if the case had been tried in the forum state's court. Siciliano v. Hudson, 1996 WL 407562, *2 (N.D.Miss.1996). See also Guaranty Trust Co. v. York, 326 U.S. 99, 109-110, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). The parties agree, and Mississippi choice of law dictates that the laws of the state of Mississippi apply. See Boardman v. United Services Auto. Ass'n, 470 So.2d 1024, 1032 (Miss.1985); Guaranty Nat. Ins. Co. v. Azrock Industries Inc., 211 F.3d 239, 243 (5th Cir.2000). We therefore attempt to ascertain what Mississippi's highest court would decide if faced with the issues presented in this case. See United Nat'l Ins. Co. v. SST Fitness Corp., 309 F.3d 914, 917 (6th Cir.2002).

III. DISCUSSION

A. The Volunteer Doctrine

Genesis and President ask us to determine (1) whether the volunteer doctrine bars them from recovering the monies they contributed to the Baker settlement, (2) whether Wausau breached its contract of insurance with President by denying coverage for the premises liability claim, and (3) whether Wausau breached the contract in bad faith.

The district court held that Genesis and President had waived their right to recover the payments they made in the Baker settlement on the basis of the volunteer doctrine, a common-law construct that has been consistently followed in Mississippi. The rule establishes that:

[A] voluntary payment can not be recovered back, and a voluntary payment within the meaning of this rule is a payment made without compulsion, fraud, mistake of fact, or agreement to repay a demand which the payor does not owe, and which is not enforceable against him, instead of invoking the remedy or defense which the law affords against such demand.

McDaniel Bros. Constr. Co., Inc. v. Burk-Hallman Co., 253 Miss. 417, 175 So.2d 603, 605 (1965). Accord Presley v. American Guarantee & Liability Ins. Co., 237 Miss. 807, 116 So.2d 410, 416 (1959); McLean v. Love, 172 Miss. 168, 157 So. 361, 362 (1934). Finding that President and Genesis were not compelled to contribute to the Baker litigation, laboring under a mistake of fact, or had entered into an agreement with Wausau to reserve their rights to dispute coverage, the district court concluded that President and Genesis were barred from seeking reimbursement by the volunteer doctrine. Because we are convinced that an issue of fact remains as to whether there was an agreement between the parties to subsequently litigate the coverage issue, we reverse the district court's grant of summary judgment.

1. Was there an agreement to litigate coverage following settlement?

A mutual agreement between President, Wausau, and Genesis to litigate their respective liabilities among themselves after settling the Baker litigation would preclude the application of the volunteer doctrine. See McLean, 157 So. at 362. Accord McDaniel Bros. Constr. Co., 175 So.2d at 605; Presley, 116 So.2d at 416. Genesis contends that its reservation of rights letter, combined with Wausau's internal e-mails, indicate the presence of an agreement.

The district court concluded that the settlement with Baker took place "in lieu" of a legal determination of the parties' respective obligations under their policies. The court premised its...