Liberty Ins. Underwriters v. Guideone Specialty Mut. Ins. Co.

• Decision Date: 23 August 2022
• Docket Number: 2:20-CV-36-D
• Parties: LIBERTY INSURANCE UNDERWRITERS INC., Plaintiff, v. GUIDEONE SPECIALTY MUTUAL INSURANCE COMPANY, Defendant.
• Court: United States District Courts. 4th Circuit. Eastern District of North Carolina

LIBERTY INSURANCE UNDERWRITERS INC., Plaintiff, v. GUIDEONE SPECIALTY MUTUAL INSURANCE COMPANY, Defendant.

No. 2:20-CV-36-D

United States District Court, E.D. North Carolina, Northern Division

August 23, 2022

ORDER

JAMES C.DEVER III UNITED STATES DISTRICT JUDGE

On June 15, 2020, Liberty Insurance Underwriters Inc. (“Liberty”) filed an amended complaint against GuideOne Speciality Insurance seeking a declaratory judgment and equitable relief or contractual subrogation based on a settlement payment the two insurers made in an underlying lawsuit [D.E. 3]. On July 10, 2020, GuideOne Speciality Insurance answered and asserted counterclaims against Liberty for a declaratory judgment and equitable relief or contractual subrogation [D.E. 12]. On February 2, 2021, the parties jointly moved to substitute GuideOne Mutual Insurance Company as the named defendant in place of GuideOne Specially Insurance [D.E. 26]. On February 4,2021, the court granted the motion to substitute [D.E. 28]. On September 15, 2021 GuideOne Mutual Insurance Company (“GuideOne”) moved for summary judgment on its claims [D.E. 37] and filed a memorandum in support and statement of material facts [D.E 38]. That same day, Liberty moved for summary judgment on its claims [D.E. 41] and filed a memorandum in support and statement of material facts [D.E. 42]. Thereafter, each party responded [D.E. 45,48] and replied [D.E. 51, 54]. As explained below, the court grants GuideOne's motion for summary judgment and denies Liberty's motion for summary judgment.

I.

On November 10, 2017, Marco Lujan, a college soccer player filed suit against Chowan University (“Chowan”) and Lisa Bland, the head athletic trainer at Chowan, alleging claims concerning injuries he sustained during the Chowan University men's soccer team's August 15,2016 fitness assessment in high heat-index conditions. See GuideOne's Stat. Mat. Facts (“GuideOne SMF”) [D.E. 38-4] ¶¶ 13,16-23; Liberty's Stat. Mat. Facts (“Liberty SMF”) [D.E. 42-1] ¶¶ 1-8.

On August 15,2016, the relevant date in the underlying litigation (the “Lujan Action”), there were three relevant insurance policies in place between the two defendants, Chowan and Bland. Chowan had a commercial general liability insurance policy issued by GuideOne (“GuideOne CGL Policy”) that provided $1 million per occurrence and $3 million in the aggregate in liability coverage. See GuideOne SMF ¶ 3; Liberty SMF ¶¶ 9-10. Chowan also had a GuideOne commercial umbrella liability policy (“GuideOne Umberlla Policy”) that included a $5 million per occurrence liability coverage limit. See GuideOne SMF ¶ 4; Liberty SMF ¶¶ 14-15. Bland had a healthcare professional liability insurance policy issued by Liberty (“Liberty Policy”), with a $1 million per incident/occurrence coverage limit. See GuideOne SMF ¶ 10; Liberty SMF ¶¶ 20-21.

GuideOne provided Chowan's defense in the Lujan Action and Liberty provided Bland's defense. See GuideOne SMF ¶¶ 8-11; Liberty's Resp. to GuideOne [D.E. 48-1] ¶¶ 8-11. On August 1, 2019, the parties to the Lujan Action reached a Mediated Settlement Agreement. See GuideOne SMF ¶ 24; Liberty SMF ¶ 29. On September 5, 2019, Lujan signed a Release and Settlement Agreement, releasing his claims in the Lujan Action for $3 million. See GuideOne SMF ¶¶ 25, 29; Liberty SMF ¶ 30. GuideOne contributed $2.1 million to fund the settlement, which represented the $ 1 million per occurrence coverage limit of the GuideOne CGL Policy and apayment of $1.1 million pursuant to the GuideOne Umbrella Policy. Liberty contributed $900,000 to fund the settlement pursuant to the Liberty Policy. See GuideOne SMF ¶¶ 26-27; Liberty's Resp. to GuideOne [D.E. 48-1] ¶¶ 8-11. During discussions of the allocation of the settlement payments, Liberty asserted that any settlement amount above the $1 million GuideOne CGL Policy should be allocated pro rata between the GuideOne Umbrella Policy and the Liberty Policy and expressly reserved its rights to recover from GuideOne any amount Liberty paid above its pro rata share. See Liberty SMF¶¶26-77; [D.E. 42-2] 478-81. The Mediated Settlement Agreement also stated: “This settlement constitutes a resolution of all issues between Plaintiff and Defendants. The settlement agreement shall have no effect on any claims that Liberty has or may have against GuideOne or that GuideOne has or may have against Liberty. Both carriers expressly reserve and do not waive any rights either may have against the other from this litigation.” [D.E. 38-5] 403-04; see GuideOne SMF ¶ 28. Liberty then filed this action seeking $566,666 from GuideOne. [D.E. 3]. GuideOne counterclaimed seeking $100,000 from Liberty. [D.E. 12]. Both parties moved for summary judgment. See [D.E. 37,41].

II.

Summary judgment is appropriate when, after reviewing the record as a whole, the court determines that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a); Scott v. Harris, 550 U.S. 372, 378, 380 (2007); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The party seeking summary judgment must initially demonstrate the absence of a genuine issue of material fact or the absence of evidence to support the nomnoving party's case. See Celotex Corp, v. Catrett, 477 U.S. 317,325 (1986). Once the moving party has met its burden, the nomnoving party may not rest on the allegations or denials in its pleading, see Anderson, 477 U.S. at 248-49, but “must come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Elec, Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis and quotation omitted). A trial court reviewing a motion for summary judgment should determine whether a genuine issue of material fact exists for trial. See Anderson, 477 U.S, at 249. In making this determination, the court must view the evidence and the inferences drawn therefrom in the light most favorable to the nonmoving party. See Harris, 550 U.S. at 378.

A genuine issue of material fact exists if there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. See Anderson, 477 U.S. at 249. “The mere existence of a scintilla of evidence in support of the [nonmoving party's] position [is] insufficient ....” Id. at 252; see Beale v. Hardy, 769 F.2d 213,214 (4th Cir. 1985) (“The nonmoving party, however, cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another.”). Only factual disputes that affect the outcome under substantive law properly preclude summary judgment. See Anderson, 477 U.S. at 248.

This court has subject-matter jurisdiction based on diversity jurisdiction See 28 U.S.C. § 1332; cf Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667,671-72 (1950). Thus, the court applies state substantive law and federal procedural rules. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards, 290 F.3d 699,710 (4th Cir. 2002).

Because this dispute requires interpreting a North Carolina insurance contract, the court applies North Carolina substantive law. Accordingly, this court must predict how the Supreme Court of North Carolina would rule on any disputed state-law issues. See Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365,369 (4th Cir. 2005). In doing so, the court must look first to opinions of the Supreme Court of North Carolina. See id.; Parkway 1046, LLC v. United States Home Corp., 961 F.3d 301,306 (4th Cir. 2020); Stable v. CTS Corp., 817 F.3d 96,100 (4th Cir. 2016). If there are no governing opinions from that court, this court may consider the opinions of the North Carolina Court of Appeals, treatises, and “the practices of other states.” Twin City Fire Ins. Co., 433 F.3d at 369 (quotation omitted).^[1] In predicting how the highest court of a state would address an issue, this court must “follow the decision of an intermediate state appellate court unless there is persuasive data that the highest court would decide differently.” Toloczko, 728 F.3d at 398 (quotation omitted); see Hicks v. Feiock, 485 U.S. 624,630 & n.3 (1988). Moreover, in predicting how the highest court of a state would address an issue, this court “should not create or expand a [s]tate's public policy.” Time Warner Ent-Advance/Newhouse P'ship v. Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314 (4th Cir. 2007) (alteration and quotation omitted); see Day & Zimmermann, Inc, v. Challoner, 423 U.S. 3,4 (1975) (per curiam); Wade v. Danek Med., Inc., 182 F.3d 281,286 (4th Cir. 1999).

“The interpretation of language used in an insurance policy is a question of law, governed by well-established rules of construction.” Trophy Tracks, Inc, v. Mass. Bay Ins. Co., 195 N.C. App. 734, 739, 673 S.E.2d 787, 790 (2009) (quotation omitted); see Wachovia Bank & Tr Co. v. Westchester Fire Ins. Co., 276 N.C. 348,354,172 S.E.2d 518,522 (1970); N.C. Fann Bureau Mut. Ins. Co. v. Mizell, 138 N.C.App. 530,532,530 S.E.2d 93,95 (2000). “[T]he intention of the parties as gathered from the language used in the policy is the polar star that must guide the courts in the interpretation of such instruments.” McDowell Motor Co. v. N.Y. Underwriters Ins. Co., 233 N.C. 251,253,63 S.E.2d 538,540 (1951). When interpreting an insurance policy, the court may consider “the character of the business of the insured and the usual hazards involved therein in ascertaining the intent of the parties.” Fulford v. Jenkins, 195 N.C.App. 402,409,672 S.E.2d 759,763 (2009) (quotation omitted); see McDowell Motor Co., 233 N.C. at 253, 63 S.E.2d at 540. A court must construe an insurance contract as a reasonable person in the position of the insured would have understood the insurance contract....