Institute for Shipboard Educ. v. Cigna Worldwide Ins. Co., 954

• Decision Date: 08 April 1994
• Docket Number: No. 954,D,954
• Citation: 22 F.3d 414
• Parties: 91 Ed. Law Rep. 40 INSTITUTE FOR SHIPBOARD EDUCATION, Plaintiff-Appellee, v. CIGNA WORLDWIDE INSURANCE CO., Defendant-Appellant. ocket 93-7863.
• Court: U.S. Court of Appeals — Second Circuit

Page 414

22 F.3d 414

91 Ed. Law Rep. 40

INSTITUTE FOR SHIPBOARD EDUCATION, Plaintiff-Appellee, v. CIGNA WORLDWIDE INSURANCE CO., Defendant-Appellant.

No. 954, Docket 93-7863.

United States Court of Appeals, Second Circuit.

Argued Jan. 12, 1994.

Decided April 8, 1994.

Bradford Cooke, New York City (Donald Joseph Cayea, Levitan, Frieland & Cayea, of counsel), for defendant-appellant.

Martin Domb, New York City (Terence Gargan, Elizabeth A. McCoy, Hill, Betts & Nash, of counsel), for plaintiff-appellee.

Before NEWMAN, Chief Judge, WINTER, Circuit Judge, and McCURN, Senior District Judge. ^*

McCURN, Senior District Judge:

INTRODUCTION

The Institute for Shipboard Education ("ISE"), on behalf of its insurer Steamship Mutual Underwriting Association (Bermuda) Ltd. ("P & I Club"), commenced this action in the Southern District of New York against Cigna Worldwide Insurance Company ("Cigna") seeking indemnification and contribution for the $1.2 million settlement of an underlying wrongful death action. Upon cross-motions for summary judgment, based upon agreed facts and stipulated exhibits, the district court issued an opinion dated May 4, 1993, Institute for Shipboard Educ. v. Cigna Worldwide Ins. Co., 821 F.Supp. 181 (S.D.N.Y.1993) (hereinafter referred to as "ISE I "); a Memorandum-Decision dated July 9, 1993, 1993 WL 267360 (unpublished) (hereinafter referred to as "ISE II "); and a July 29, 1993, judgment awarding ISE $1,546,450 in damages. This appeal followed.

BACKGROUND

The settlement that precipitated the instant action for contribution and indemnification resulted from a civil suit filed in the United States District Court for the Western District of Pennsylvania (Ziegler, J.) (hereinafter referred to as "Burgbacher action" or "Burgbacher") by the parents of Michael Burgbacher who died from an allergic reaction to medication that he was required to take as a condition of his employment with ISE. See ISE I, 821 F.Supp. at 184; Joint Appendix at A337. ¹ Michael's parents based their suit upon Pennsylvania law; the Jones Act, 46 U.S.C.App. Sec. 688; the Death on the High Seas Act ("DOHSA"), 46 U.S.C.App. Secs. 761-767; and general maritime law. ² Specifically, Burgbacher's parents alleged that the defendants were negligent in employing an incompetent physician, providing decedent with medicine which caused illness, failing to warn of risks of the medication The defendants in the Burgbacher action filed a motion for summary judgment contending that

failing to monitor the medication, failing to diagnose the illness, and failing to provide decedent with a safe place to work. See A338 (citing Complaint at p 12).

(1) plaintiffs' exclusive remedy lies under the workmens' compensation laws of California; (2) the decedent was not a seaman and thus the Jones Act is inapplicable; (3) a survival action, if applicable, must be brought under general maritime law, and not the law of Pennsylvania; and (4) decedent's father is a non-dependent parent and should be dismissed as a plaintiff.

See A338.

The district court filed a written opinion disposing of this motion on April 18, 1988. With respect to the Jones Act claim, the court noted that the "[p]laintiffs acknowledge that discovery has led to the conclusion that the decedent was not a seaman and they have agreed to dismiss th[is] claim ... and to dismiss Sea Wise Foundation as a defendant." See A340-A341. In addition, the court found that the "[p]laintiffs' remedies are not limited to the workmen's compensation laws of the state of California." See A340. Thus, the court held that the plaintiffs could maintain a suit in admiralty for damages under DOHSA and a survival action under the Pennsylvania Survival Act, 42 Pa.C.S.A. Sec. 8302. See A340, A342.

Subsequent to this decision, the parties entered into settlement negotiations which ultimately resulted in a $1.2 million settlement in favor of Burgbacher's parents. The P & I Club made the entire settlement payment. See A11-A12. Thereafter, ISE, on behalf of the P & I Club, commenced the present action seeking contribution and indemnification from Cigna and defense costs.

The parties then cross-moved for summary judgment. The district court began its analysis of these motions by stating that resolution of the issue of Cigna's liability for the underlying settlement required the court to engage in a two part inquiry. ³ First, the court had to determine "[w]hether Cigna's policy, when read as a whole but viewed in isolation from other insurance policies held by ISE, covers the Burgbacher claim." ISE I, 821 F.Supp. at 186-87. Second, if this question were answered in the affirmative, the court then would have to determine "[h]ow that policy stands in relation to the P & I Club policy held by ISE." Id. at 187. After analyzing the relevant provisions of the two insurance policies, the court determined, inter alia, that "(1) ISE was covered for the Burgbacher settlement under Coverage B of the Cigna policy; (2) Cigna and the P & I Club provided double insurance for the Burgbacher claim; (3) the Cigna policy was primary; [and] (4) ISE properly preserved its claim against Cigna; ..." Id. at 193.

Subsequent to the court's decision in ISE I, Cigna filed an application presenting the court with an additional question: "[h]ow did the P & I Club policy stand in relation to a second Cigna policy, which provided umbrella insurance ("the Cigna umbrella policy") to [ISE]?" ISE II, 1993 WL 267360, at * 1 (A909). In answer to this question, the court found that the "other insurance" clauses in the P & I Club Policy and in the Cigna umbrella policy were mutually repugnant because the intent of each was to be excess to all other insurance policies. Id. at * 2 (A912-A913). Therefore, the court concluded that the liability for the $200,000 in excess of the $1 million limitation of the primary Cigna policy must be apportioned between the P & I Club and Cigna on an equal share basis. ⁴ This appeal followed.

DISCUSSION

I. Standard of Review

As we recently reiterated, "[o]n the appeal of a grant of summary judgment, this

                Court must conduct a de novo review of the record applying the same standard as did the district court."  Pitchell v. Callan, 13 F.3d 545, 547 (2d Cir.1994) (citing Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 967 F.2d 742, 746 (2d Cir.1992)).  In this regard, summary judgment is appropriate "[i]f the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."   Fed.R.Civ.P. 56(c).  There can be no genuine issue of fact " 'unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.' "  In re Chateaugay Corp., 10 F.3d 944, 957 (2d Cir.1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (citation omitted)).  Moreover, in deciding whether such a genuine issue exists, the court must "[e]xamine the evidence in the light most favorable to the party opposing the motion, and resolve ambiguities and draw reasonable inferences against the moving party."  Id. (citing Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987))
                

II. The Effect of the Settlement

Before reaching the merits of the present dispute, the court must, as a preliminary matter, determine whether Cigna is bound by the $1.2 million settlement despite the fact that it did not participate in the Burgbacher action. ISE asserts that Cigna is so bound because Cigna failed in its duty to defend ISE. See ISE's Brief at 20-21. To the contrary, Cigna argues that defense of the Burgbacher action was never tendered to it and, thus, it cannot be bound by the settlement. See Cigna's Reply Brief at 10.

In B & E Convalescent Ctr. v. State Compensation Ins. Fund, 8 Cal.App.4th 78, 92, 9 Cal.Rptr.2d 894, 902 (Ct.App.1992), the court addressed the issue of whether an insurance company had a duty to defend its insured under the "employer's liability" portion of its policy. The court stated that because the injured employee had

[s]tated valid civil causes of action for injuries arising within the course and scope of her employment, [the insurance company] had a duty, under the "employer's liability" portion of the policy to defend if (1) there was a potential for coverage or (2) [the employer/insured] had a reasonable expectation of coverage in light of the nature and kind of risks covered by the policy.

Id. (citing Gray v. Zurich Ins. Co., 65 Cal.2d 263, 274-75, [54 Cal.Rptr. 104, 110-11, 419 P.2d 168, 174-75] (1966)) (emphasis added).

The court then explained that

[a] potential for coverage would exist if, based on the allegations of [the employee's] complaint, together with any other information available to [the insurance company], there was a possibility of coverage under the policy's insuring language which was not excluded by any express provision within the policy ... This is a question which is not judged on the basis of hindsight but, rather, from all of the information available to the insurer at the time of the tender of the defense.

Id. (citation omitted) (footnote omitted) (emphasis added).

In the present case, prior to Burgbacher's parents instituting their civil suit, Cigna had paid Burgbacher's father $6,500 pursuant to Coverage A--Workers' Compensation--of its policy. See ISE's Brief at 9. Having done so, Cigna apparently believed that this was the extent of its liability under the policy. Based upon the well-settled rule that generally workers' compensation is an employee's exclusive remedy against her employer for injuries suffered in the course of employment, we find that, at least at the time the Burgbacher action was commenced, it was reasonable for Cigna to believe that...