Nw. Pipe Co. v. Rli Ins. Co.

• Decision Date: 16 May 2014
• Docket Number: 3:09-CV-01126-BR
• Court: U.S. District Court — District of Oregon
• Parties: NORTHWEST PIPE COMPANY, fka NORTHWEST PIPE & CASING COMPANY, an Oregon corporation, Plaintiff, v. RLI INSURANCE COMPANY, an Illinois corporation, and EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation, Defendants. EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation, Counter-Claimant, v. NORTHWEST PIPE COMPANY, fka NORTHWEST PIPE & CASING COMPANY, an Oregon corporation, Counter-Defendant. RLI INSURANCE COMPANY, an Illinois corporation, Third-Party Plaintiff, v. ACE FIRE UNDERWRITERS INSURANCE COMPANY, a Pennsylvania company, and ACE PROPERTY AND CASUALTY INSURANCE COMPANY, a Pennsylvania company, Third-Party Defendants.

NORTHWEST PIPE COMPANY, fka NORTHWEST PIPE &

CASING COMPANY, an Oregon corporation, Plaintiff, v. RLI INSURANCE COMPANY, an Illinois corporation,and EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation, Defendants.

EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation, Counter-Claimant, v. NORTHWEST PIPE COMPANY, fka NORTHWEST PIPE &

CASING COMPANY, an Oregon corporation, Counter-Defendant.

RLI INSURANCE COMPANY, an Illinois corporation, Third-Party Plaintiff, v. ACE FIRE UNDERWRITERS INSURANCE COMPANY, a Pennsylvania company,and ACE PROPERTY ANDCASUALTY INSURANCE COMPANY, a Pennsylvania company, Third-Party Defendants.

3:09-CV-01126-BR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

DATED: May 16, 2014

OPINION AND ORDER

BROWN, Judge.

This matter comes before the Court on the Motion (#293) Re Proposed Form of Judgment of Defendants ACE Fire Underwriters Insurance Company and ACE Property and Casualty Insurance Company (collectively referred to herein as ACE) and Employers Insurance Company of Wausau.

For the reasons that follow, the Court GRANTS ACE and Wausau's Motion.

BACKGROUND

The Court previously ruled Defendant RLI Insurance Company has a duty to defend Plaintiff Northwest Pipe and is required to pay 43.27% of Northwest Pipe's reasonable and necessary defense costs. Order (#62) issued Aug. 12, 2010; Order (#169) issued Jun. 13, 2012, and Order (#233) issued July 11, 2013.

Pursuant to Order (#253), the Court ruled:

1. RLI is required to reimburse Wausau and ACE for RLI's share of the reasonable and necessary defense costs incurred by Wausau and ACE as of December 1, 2012.

2. As of December 1, 2012, Wausau incurred $2,030,573.86 and ACE incurred $2,310,673.78 in reasonable and necessary defense costs.

3. Pursuant to the Ninth Circuit's ruling in Interstate Fire & Cas. Co. v. Underwriters at Lloyd's, London, 139 F.3d 1234 (9th Cir. 1998), RLI is obligated to pay prejudgment interest on the defense costs that it owes to Wausau and ACE.

The Court also directed Wausau and ACE to file a form of judgment at the conclusion of trial on the limited issue of the commercial availability of insurance coverage without absolute pollution exclusions. Order (#253). Pursuant to Stipulation (#263), however, the parties resolved that dispute prior to trial. Subsequently, ACE and Wausau filed Motion (#293) on March 3, 2014, seeking entry of a Proposed Judgment (#293-3) as to RLI's obligation to reimburse ACE and Wausau for its proportional share of defense costs and for prejudgment interest on those amounts.

STANDARDS

Federal Rule of Civil Procedure 54(b) provides:

When an action presents more than one claim for relief . . . or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay.

Pursuant to Rule 54(b), when the court has entered a final judgment as to a particular claim, the court may sever this partial judgment from the remaining claims and, therefore, make that judgment immediately appealable if the court finds there is "no just reason for delay." James v. Price Stern Sloan, Inc., 283 F.3d 1064, 1068 n.6 (9th Cir. 2002). Because severance under Rule 54(b) is consistent with 28 U.S.C. § 1291 and only a final judgment may be severed, the district court has wide discretion to determine whether any just reasons for delay exist. The "issuance of a Rule 54(b) order is a fairly routine act that is reversed only in the rarest instances." Id. (the appellate court "accords a great deference to the district [court's]" determination of finality.). See also In re First T.D. & Inv., Inc., 253 F.3d 520, 531 (9th Cir. 2001). When exercising its discretion to determine whether any just reasons for delay exist, the court may consider the following factors:

[W]hether the claims under review were separable from the others . . . and whether the nature of the claims already determined was such that no appellate court would have to decide the same issues more than once even if there were subsequent appeals.

AmerisourceBergen Corp. v. Dialysist West, Inc., 445 F.3d 1132, 1137-38 (9th Cir. 2006)(quoting Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 (1980), superseded on other grounds by AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 954 (9th Cir. 2006)). Nevertheless, the possibility of piecemealappeals "does not necessarily mean that a Rule 54(b) certification would be improper." Curtiss-Wright Corp., 446 U.S. at 8.

DISCUSSION

RLI objects to the Motion of ACE and Wausau on the grounds that (1) entry of judgment is premature because the judgment does not dispose of all claims or all parties in this litigation and is, therefore, contrary to Rule 54(b) and (2) even if the Court grants the Motion, prejudgment interest should be calculated differently; i.e., not from the time the defense costs were paid, but instead from the time that RLI received proof of the defense cost payments made by ACE and Wausau.

I. No Just Reason for Delay.

RLI contends this case is not ripe for entry of a final judgment as to its obligation to reimburse ACE and Wausau for its share of the reasonable and necessary costs paid by ACE and Wausau for Northwest Pipe's defense. RLI argues Rule 54(b) does not permit entry of a final judgment because unresolved claims remain between the parties. For example, Northwest Pipe has unresolved claims against all Defendants for past and ongoing damages as well as declaratory relief. RLI contends entry of a final judgment at this time would allow the case to proceed in a piecemeal fashion because RLI would appeal the judgment and theremaining, unresolved claims would continue to be litigated in this forum.

Courts in other jurisdictions, however, have found judgments involving an insurer's duty to defend are separate and distinct enough from the duty to indemnify that judgments deciding the duty to defend are appropriate under Rule 54(b). For example, in National Union Fire Insurance Company of Pittsburgh, PA. v. AARPO, Inc., the district court stated:

Pursuant to Rule 54(b), the Court, having determined that there is no just reason for delay, directs that the judgment dismissing the third-party complaint be entered as the final judgment on the issue of ERC's duty to defend the United Insurance Agencies and associated underlying defendants. Although granting final judgment to a severable dispute within an ongoing case is disfavored, it is appropriate here to avoid the potential injustice of a delayed appeal.

The issue decided here relating to the third-party defendant's duty to defend is separate and distinct from the remaining claims concerning defendants' liability to plaintiffs. This opinion addresses a question of law that is not free from doubt. Should review of this Order be delayed until the underlying claims are decided and should this Court's holding be reversed, United Insurance Agencies might be prejudiced by the delay by losing a defense to which it was entitled due to its inability to pay.

No. 97 Civ. 1438(JSM), 1999 WL 14010, at *5 (S.D.N.Y. Jan. 14, 1999) (citations omitted).

Similarly, in Continental Insurance Company v. Del Astra Industries, Inc., the district court sua sponte granted partial summary judgment for the insured and ruled the insurer had a duty to defend under the policies. 811 F. Supp. 1410, 1411 (N.D. Cal.1993)(rev'd on other grounds). The court concluded Rule 54(b) permitted it to direct the entry of a final judgment because the insurer's duty to defend "is separable from the claims remaining in the lawsuit" and "judicial economy is served by immediate appeal of the Court's grant of partial summary judgment." Id. The court reasoned "[a]n appellate court ruling that Continental has no duty to defend would significantly reduce the scope of issues for trial and would conserve judicial and party resources." Id.

The Court finds the reasoning in National Union and Del Astra persuasive and applicable here as the issue of allocation of defense costs amongst RLI, ACE, and Wausau are substantively different from the remaining claims. The Court notes this case has been pending since 2009 and is not likely to be resolved fully in the immediate future. In fact, the parties represented to the Court at oral argument on April 28, 2014, that they expect full resolution of this case will likely take more than six more months. It would, therefore, be prudent for any appellate review of the Court's allocation rulings to take place as soon as practicable in order to avoid prejudice to any party, the risk of which increases the longer the disputes over defense-cost allocation remain pending.

Accordingly, in the exercise of its discretion, the Court concludes there is not a just reason for delay in the entry of afinal judgment that adjudicates the relative responsibility among RLI, Wausau, and ACE for Northwest Pipe's reasonable and necessary defense costs.

II. Calculation of Prejudgment Interest.

As noted, the Court has ruled ACE and Wausau may recover prejudgment interest on the amounts of defense costs owed by RLI. Although RLI has stipulated to the amount of reasonable and necessary defense costs for which ACE and Wausau seek reimbursement, RLI objects to the period of time for which ACE and Wausau seek prejudgment interest. ACE and Wausau contend prejudgment interest should begin to accrue on each payment on the date that ACE or Wausau made the payments. RLI, however, contends prejudgment interest should only be calculated from the time that ACE and Wausau provided copies of the underlying defense bills to RLI as proof of their payments.

As noted, the Court previously ruled prejudgment interest on the amounts owed by RLI to ACE and Wausau should be calculated in accordance with the Ninth Circuit's holding in Interstate Fire. In that case Interstate Fire & Casualty Company sought reimbursement from Underwriters at Lloyd's,...