National Union Fire Ins. Co. v. Circle, Inc., Civ. A. No. 88-837.
| Decision Date | 11 January 1990 |
| Docket Number | Civ. A. No. 88-837. |
| Citation | 731 F. Supp. 750 |
| Court | U.S. District Court — Eastern District of Louisiana |
| Parties | NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PENNSYLVANIA v. CIRCLE, INC. |
Clayton G. Ramsey, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for plaintiff.
John M. Page, Jr. and David S. Kelly, Lemle & Kelleher, New Orleans, La., for defendants Circle, Inc., Grillot Co., Inc. and Cirlot Co.
Pursuant to an agreement between the parties, this matter was submitted to the Court for disposition on July 21, 1989. On that date the parties jointly submitted exhibits, depositions and a list of factual stipulations. Each side also presented the Court with a trial memorandum of facts and law.
Plaintiff, National Union Fire Insurance Company of Pittsburgh, Pennsylvania (hereinafter "National Union"), filed its complaint with this Court on February 26, 1988. Jurisdiction is based on diversity of citizenship. In its amended complaint, National Union alleged that the defendants, Circle, Inc., Grillot Co., Inc. and Cirlot Co. (hereinafter collectively referred to as "the assureds"), refused to pay monies that they owed National Union pursuant to a retention premium agreement. On April 21, 1988, the assureds filed their answer denying these allegations and added the affirmative defense of set-off in their amended answer filed June 19, 1989.
The case was originally docketed as a 2-3 day jury trial but the assureds subsequently waived their request for a trial by jury. The parties agreed instead to submit the matter for disposition by the Court as described above.
The pertinent facts in this case are largely uncontested and are contained in the joint stipulation submitted to the Court. The following is a brief summary of these undisputed facts.
1. National Union issued certain general liability, auto and worker's compensation policies to the assureds, effective from December 1, 1979 through December 1, 1982.
2. In connection with the issuance of the aforesaid policies, National Union and the assureds entered into a written agreement whereby the premium for the insurance coverages would be computed and adjusted in accordance with the provisions of the "Retention Premium Agreement-Three Year Plan," (hereinafter "retention agreement").
3. To date the assureds have timely paid $535,173 in premiums for the said policies.
4. On or about September 9, 1980, Willie M. Smith died as a result of a fall which occurred while he was working on board the dredge "Mr. Joe" on the Mississippi River, near Sunshine, Louisiana.
5. As a consequence of the death of Willie M. Smith, his heirs, beneficiaries, representatives and/or survivors commenced a suit for wrongful death/survivor's damages in the United States District Court for the Eastern District of Louisiana, styled "Shirley Louise Smith, etc., et al versus Cirlot Company and National Union Fire Insurance Company, et al," C.A. No. 81-1046, in which suit both National Union and one or more of the assureds were named as defendants.
6. National Union, in the course of the aforesaid Smith litigation, engaged three separate counsel to represent its various interests in the case and engaged a fourth to provide a defense to the assureds under a reservation of rights to deny coverage under the policies.
7. In consequence of National Union's reservation of rights, the assureds engaged counsel to represent their interest in the Smith litigation and incurred therein $16,556.80 in legal fees and out-of-pocket litigation expenses.
8. In due course and before trial, the Smith litigation was compromised and settled and the parties thereto, including the plaintiffs and the defendants, executed a "Receipt and Release" (hereinafter "release agreement"), as drafted by one of National Union's counsel.
9. National Union funded all or a portion of the Smith settlement and the assureds contributed no sums to the settlement.
10. On or about July 24, 1980, Bao Van Nguyen, while in the employ of Geosource, Inc. and while working as a welder aboard the D/B SUZY ANN, was fatally injured.
11. As a consequence of the death of Bao Van Nguyen, his heirs, beneficiaries, representatives and/or survivors commenced a suit for wrongful death/survivor's damages in the United States District Court for the Eastern District of Louisiana, styled "Bien Nguyen, et al versus D/B SUZY ANN, et al," C.A. No. 80-4480, in which suit both National Union and the assureds were named as defendants.
12. National Union, in the course of the aforesaid Nguyen litigation, engaged its own counsel to represent its interest in the case and engaged separate counsel to provide a defense to the assureds under a reservation of rights to deny coverage under the policies.
13. In consequence of National Union's reservation of rights, the assureds engaged counsel to represent their interest in the Nguyen litigation, and incurred therein $21,915.54 in legal fees and out-of-pocket litigation expenses.
14. National Union funded a portion of the Nguyen settlement and the assureds contributed approximately $2,000 toward the settlement.
15. In due course and before trial the Nguyen litigation was compromised and settled, the plaintiffs therein executing a "Receipt, Release and Indemnity Agreement" in the form drafted by National Union's attorneys.
16. Taking into account the $535,173 in premiums paid by the assureds as set out in paragraph 3, above, and performing the calculations contemplated by the "Retention Premium Agreement-Three Year Plan" based upon the assureds' loss experience under the policies, including the assureds' loss experience in the Smith case referenced in Paragraphs 4 through 9, above, yields the sum of $280,230, which sum represents the amount of retention premiums claimed herein by National Union from the assureds.
17. Performing the same calculations based on all of the same assumptions as are referenced in Paragraph 16, above, but excluding the assureds' "loss experience" in the Smith case, yields the sum of $66,116, which sum represents the amount of retention premiums recognized by the assureds to be owed to National Union, but the assureds contend the said $66,116 figure is subject to a further reduction — by way of set-off — for the $21,915.54 in legal fees and out-of-pocket litigation expenses which the assureds incurred in the Nguyen matter; National Union does not contest the amount claimed by the assureds as legal fees and out-of-pocket expenses in Nguyen, but it does dispute the assureds' right to obtain a set-off against the $66,116 figure.
18. National Union did not pay or reimburse the legal fees or out-of-pocket litigation expenses incurred by the assureds in the Smith and Nguyen cases as particularized in Paragraphs 7 and 13, above.
19. The assureds were invoiced by National Union for some $280,630 in allegedly due premiums on or about August 29, 1984, but declined to pay on advice of counsel.
The central question that these facts present to the Court is whether National Union may include the "loss experience" of the Smith settlement in the computations of their year-end retention agreement with the assureds or whether the language of the Smith release agreement prohibits National Union from incorporating the Smith "loss" into their calculations.
The assureds contend that National Union may not use the Smith "loss" in their retention agreement calculation. They base this on what they consider to be the clear and unambiguous language of the release agreement confected in connection with the settlement of the Smith litigation. Both National Union and the assureds were defendants in the Smith case and representatives of each signed the release agreement. The assureds specifically point to the section of the release agreement which reads:
IT IS UNDERSTOOD AND AGREED that in consideration of the aforesaid sums paid in hand to the plaintiffs, Cirlot Company ... and National Union Fire Insurance Company ... do hereby and without limitation release, remise, and forever discharge each and all of the other parties to this Receipt and Release ... from any and all rights, claims, liens, demands, remedies, or causes of action of whatever nature arising out of or in any way connected, either directly or indirectly, with the death of Willie M. Smith ..., including but not limited to ... all other claims and demands, without limitation, which were or could have been made by the parties in the aforementioned proceedings, it being the intention of the undersigned parties to fully settle, compromise, discharge, release and relinquish any and all claims which they or any of them have or may have against each other as a result of the death of Willie M. Smith....
As stated, the assureds declare that the above language clearly prohibits National Union from applying the Smith "lo...
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National Union Fire Ins. Co. of Pittsburgh, Pa. v. Circle, Inc.
...National Union allegedly breached its contractual duty to defend. After a bench trial, the district court rendered judgment for National Union, 731 F.Supp. 750, and the Assureds appealed. We affirm in part and reverse in part and A. The Retention Premium Agreement and the Smith Litigation N......