R.W. Beck & Associates v. City and Borough of Sitka

• Decision Date: 28 June 1994
• Docket Number: 92-36627,Nos. 92-36558,s. 92-36558
• Citation: 27 F.3d 1475
• Parties: R.W. BECK & ASSOC., et al., Plaintiffs, v. CITY AND BOROUGH OF SITKA, Defendant, and PROVIDENCE WASHINGTON INSURANCE COMPANY, Defendant-Appellant, v. WESTERN WORLD INSURANCE COMPANY, Defendant-Appellee. ADMIRAL INSURANCE COMPANY, et al., Plaintiffs-Appellees, v. ESTATE OF McKinley NICHOLAS, et al., Defendants. R.W. BECK & ASSOC., et al., Plaintiffs, v. CITY AND BOROUGH OF SITKA, Defendant-Appellant, and PROVIDENCE WASHINGTON INSURANCE COMPANY, Defendant, v. WESTERN WORLD INSURANCE COMPANY, Defendant-Appellee. ADMIRAL INSURANCE COMPANY, et al., Plaintiffs-Appellees, v. ESTATE OF McKinley NICHOLAS, et al., Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1475

27 F.3d 1475

R.W. BECK & ASSOC., et al., Plaintiffs, v. CITY AND BOROUGH OF SITKA, Defendant, and PROVIDENCE WASHINGTON INSURANCE COMPANY, Defendant-Appellant, v. WESTERN WORLD INSURANCE COMPANY, Defendant-Appellee.

ADMIRAL INSURANCE COMPANY, et al., Plaintiffs-Appellees, v. ESTATE OF McKinley NICHOLAS, et al., Defendants.

R.W. BECK & ASSOC., et al., Plaintiffs, v. CITY AND BOROUGH OF SITKA, Defendant-Appellant, and PROVIDENCE WASHINGTON INSURANCE COMPANY, Defendant, v. WESTERN WORLD INSURANCE COMPANY, Defendant-Appellee.

ADMIRAL INSURANCE COMPANY, et al., Plaintiffs-Appellees, v. ESTATE OF McKinley NICHOLAS, et al., Defendants.

Nos. 92-36558, 92-36627.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 31, 1994.

Decided June 28, 1994.

Meredith A. Ahearn, Hagans, Brown, Gibbs & Moran, Robert L. Eastaugh, Delaney, Wiles, Hayes, Reitman & Brubaker, Inc., Anchorage, AK, for defendants-appellants.

Earl M. Sutherland, Hughes Thorsness Gantz Powell & Brundin, Anchorage, AK, for defendants-appellees.

James B. Wright, Timothy M. Lynch, Anchorage, AK, for plaintiffs-appellees.

Appeals from the United States District Court for the District of Alaska, H. Russel Holland, Chief Judge, Presiding.

Before: WRIGHT, REAVLEY ^* and LEAVY, Circuit Judges.

Opinion by Judge REAVLEY.

REAVLEY, Circuit Judge:

These consolidated appeals arise from an insurance dispute among the City and Borough of Sitka, Alaska (Sitka) and three insurance companies: Western World Insurance Company (Western), Providence Washington Insurance Company (Providence), and Admiral Insurance Company (Admiral). The district court disposed of the various coverage disputes by summary judgment. We reverse the judgment to the extent that it absolves Western of excess liability coverage.

FACTUAL AND PROCEDURAL BACKGROUND

Sitka owned and operated Blue Lake Dam. It hired R.W. Beck & Associates (Beck) and Alaska Aquatic Dive Center, Inc. (Aquatic) to perform certain services on the dam. On April 20, 1983 McKinley Nicholas, the president of Aquatic, died while making an underwater inspection of the dam. At the time, Sitka had a primary insurance policy with Providence and an excess liability policy with Western. Sitka was also named as an additional insured on an Admiral primary policy issued to Aquatic. Nicholas' widow and estate (collectively "the estate") brought a Beck brought suit in federal court against Sitka to pursue a claim for contractual indemnity for the losses occasioned by the death of Nicholas. Western, Providence and Admiral became parties to the suit. Over a decade after the tragic death of Nicholas, we are once again called upon to resolve insurance coverage disputes. This is the third appeal of the federal action to this court. We previously ruled in unpublished opinions that Beck was entitled to contractual indemnity from Sitka, and that the engineering services exclusion in the Admiral policy did not apply to the estate's claim. ¹ The district court had ruled that Sitka was entitled to indemnity from Beck, and as a result Beck proceeded to settle the estate's claims on behalf of both Beck and Sitka. After this court reversed the district court and ruled that Beck was entitled to contractual indemnity from Sitka, the district court entered judgment in favor of Beck. Providence, Admiral, Western and Sitka ² all paid substantial sums to satisfy the Beck judgment, and continued to litigate among themselves various insurance coverage issues. The district court adjudicated a number of these issues by ruling on motions and cross-motions for summary judgment, and entering final judgments pursuant to Fed.R.Civ.P. 54(b).

wrongful death suit in Alaska state court against Beck and Sitka, and obtained a substantial judgment against both.

The district court ruled, inter alia, that (1) the Western excess policy did not cover the Beck indemnity claim, (2) certain fees and costs awarded to Beck were covered by "supplementary payments" provisions in the Admiral and Providence policies, while certain other fees and costs were not covered by these provisions, and (3) Providence breached its obligation of good faith and fair dealing to Sitka by refusing to tender its policy limits in response to a settlement offer made by the estate after it had won a state court judgment in excess of the primary policy limits. Each of these rulings is contested on appeal. The district court engaged in the difficult task of awarding dollar judgments to reflect the coverage and liability rulings. The ultimate effect of the final judgments was to make Western whole by awarding it the amount it had earlier paid to satisfy the Beck claim (along with prejudgment interest), while imposing substantial dollar judgments on Admiral, Providence and Sitka.

DISCUSSION

We review de novo a district court's grant of summary judgment. 20th Century Ins. Co. v. Liberty Mut. Ins. Co., 965 F.2d 747, 749 (9th Cir.1992). "Under Rule 56(c), summary judgment is proper when the pleadings and discovery, read in the light most favorable to the nonmoving party, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Id. at 750. Under Alaska law which applies to this diversity case, "[t]he construction of an insurance contract is a matter for the court, unless its interpretation is dependent upon the resolution of controverted facts." O'Neill Investigations, Inc. v. Illinois Employers Ins. of Wausau, 636 P.2d 1170, 1173 (Alaska 1981).

A. The Western Excess Policy

The district court ruled that the Western excess liability policy did not cover the contract indemnity claim made by Beck against Sitka. Sitka and Western cross-moved for summary judgment on this issue. As a "following form" umbrella policy, the Western policy covered only claims for which there was underlying primary coverage. The This policy shall not apply to liability assumed by the insured under any contract or agreement unless such liability is covered by valid and collectible underlying insurance as described in the schedule of underlying policies, and then only for such hazards for which coverage is afforded under said underlying policies.

Western contractual liability endorsement provided:

Sitka argues that both the Providence and Admiral policies provided such underlying primary coverage.

1. The Admiral Policy

Sitka argues that the Admiral policy was an underlying policy covering Sitka's contractual liability, and that Western's excess policy therefore covered the Beck claim. The Admiral policy covered Sitka as a named insured against contractually assumed liability. The Western contractual liability endorsement states that it will not provide coverage for contract liability "unless such liability is covered by valid and collectible underlying insurance as described in the schedule of underlying policies...." The Admiral policy was not included in the schedule of underlying policies. Sitka argues that the use of the word "as" in the Western policy is ambiguous and could mean "such as" the policies listed in the schedule. We find this argument an attempt to create an ambiguity where none exists. "Where the terms of the policy are clear and unambiguous, we will, of course, give effect to the language." Werley v. United Serv. Automobile Ass'n, 498 P.2d 112, 116 (Alaska 1972).

We agree with the district court that the Western policy unambiguously provided that coverage only extends to claims covered by primary policies listed in the schedule. Sitka's proposed interpretation of the policy is not only inconsistent with the plain words of the policy, but is also strained and unreasonable, since such an interpretation would obligate Western to provide excess coverage for all underlying policies, whether known or unknown to Western. Courts "should not do violence to the plain terms of a[n] [insurance] contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract." Jarvis v. Aetna Casualty & Sur. Co., 633 P.2d 1359, 1363 (Alaska 1981).

Sitka also argues that its position is supported by Conditions H and N of the municipalities amendatory endorsement of the Western policy. Condition H addresses other insurance and provides that "[i]f other collectible insurance with any other insurer is available to the insured covering a loss covered hereunder ... the insurance hereunder shall be in excess of, and not contribute with, such other insurance." Condition N is a warranty by the insured "that underlying policy(ies) listed in Schedule A, or renewals or replacements thereof not more restrictive in coverage, shall be maintained in force during the currency of this policy...." Read in their entirety ³ these conditions, like other conditions stated in this part of the policy, were intended to protect the excess

carrier and were not intended to expand coverage. They do not alter or vary the requirement in the contractual liability endorsement that contractual liability coverage extends only to claims covered by policies listed in the schedule.

2. The Providence Policy

Sitka had one-year policies with Western and Providence running from July 1, 1982 to July 1, 1983. The Providence policy (unlike the Admiral policy) was listed in the schedule of underlying policies in the Western policy, but it did not have a contractual liability provision. As the Providence and Western policies were written, the Western policy did not cover the contract indemnity claim by Beck, since there was no contract liability coverage in the scheduled primary Providence policy. However, in October of 1984, after the Providence policy had expired and after the estate had obtained a favorable jury verdict, Sitka and Providence agreed to a "voluntary reformation" of the...