St. Paul Mercury Ins. Co. v. Fair Grounds Corp.

• Decision Date: 01 October 1997
• Docket Number: No. 96-31293,96-31293
• Citation: 123 F.3d 336
• Parties: ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff, v. FAIR GROUNDS CORPORATION, et al., Defendants. FAIR GROUNDS CORPORATION, Defendant-Appellee, v. UNITED NATIONAL INSURANCE COMPANY, Defendant-Appellant. UNITED NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. FAIR GROUNDS CORPORATION, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 336

123 F.3d 336

ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff, v. FAIR GROUNDS CORPORATION, et al., Defendants.

FAIR GROUNDS CORPORATION, Defendant-Appellee, v. UNITED NATIONAL INSURANCE COMPANY, Defendant-Appellant.

UNITED NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. FAIR GROUNDS CORPORATION, Defendant-Appellee.

No. 96-31293

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Oct. 1, 1997.

Joseph Lee McReynolds, Robert Emmett Kerrigan, Jr., Deutsch, Kerrigan & Stiles, New Orleans, LA, for Plaintiff-Appellant.

T. Peter Breslin, P.J. Stakelvm, III, Chehardy, Sherman, Ellis, Breslin & Murray, Metairie, LA, for Defendant-Appellee.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before WIENER, BARKSDALE and EMILIO M. GARZA, Circuit Judges.

WIENER, Circuit Judge:

In this insurance coverage case, we must decide whether an exclusion clause in a comprehensive general liability (CGL) policy issued by Plaintiff-Appellant United National Insurance Company (United) to Defendant-Appellee Fair Grounds Corporation (FGC) applies to particular third-party property that was destroyed in a fire on FGC's premises. Concluding that the third-party property in question does not fall within the purview of the "care, custody, or control" exclusion of the policy issued by United to FGC, we affirm.

I. FACTS AND PROCEEDINGS

In December 1993, a fire destroyed the Clubhouse, Grandstands, and Jockey's Room at FGC's racetrack in New Orleans, Louisiana. The fire damaged or destroyed the contents of the burned buildings, including a significant amount of property owned by third-parties. At the time of the fire, FGC had in effect a $2 million CGL policy, ¹ issued by United, but that policy excluded from coverage, inter alia, any damage to third party "personal property" in the "care, custody, or control" of FGC. At issue here is the applicability of that exclusion to (1) the computerized wagering equipment, known as the Totalisator System, owned by Autotote Systems, Inc. (Autotote), and (2) the racing equipment owned by sixty-one jockeys. ²

Autotote's own property insurer, St. Paul Mercury Insurance Company (St. Paul), paid Autotote over $1 million for its losses and filed suit in the district court against FGC asserting Autotote's subrogation rights. ³ In turn, FGC tendered Autotote's (and other third-party) claims to United, which denied coverage and filed suit in the district court seeking a declaration of non-coverage, based on the "care, custody, or control" exclusion, for all third-party property damaged or destroyed in the fire. A number of the third-parties also filed suit against FGC, which eventually paid over $205,000 to settle most of those claims. The district court consolidated In August 1995, United moved for summary judgment in the declaratory judgment suit. FGC filed a cross-motion for summary judgment and sought reimbursement from United for the amounts paid to third-parties in settlement of their claims. ⁴ The district court concluded, inter alia, that the property owned by Autotote and the jockeys was not in the "care, custody, or control" of FGC so that the exclusion did not apply to defeat United's coverage.

United's declaratory judgment suit with St. Paul's subrogation suit.

United filed a motion for new trial or, alternatively, to amend a finding of fact, disputing the district court's finding that FGC did not maintain or derive a monetary benefit from Autotote's property--a finding which undergirded the district court's determination of coverage. Before ruling on United's motion, however, the district judge transferred the case to a newly appointed district judge who ultimately denied the motion. The St. Paul litigation subsequently settled, but United specifically reserved its right to appeal the district court's determination of coverage.

United appealed, asserting that the district court erred in determining that the property owned by Autotote and the jockeys was not in the "care, custody, or control" of FGC and therefore is not excluded from coverage under the policy issued to FGC. In short, United urges us to hold that the subject property is excluded from coverage.

II. ANALYSIS

A. JURISDICTION

FGC contends that United's appeal is premature for want of a certification for entry of a final judgment, pursuant to Federal Rule of Civil Procedure 54(b), as the district court did not dispose of all issues in this matter on summary judgment. ⁵ Shortly after FGC filed its appellate brief, however, United obtained a Rule 54(b) certificate from the district court. We have previously recognized that a premature notice of appeal is effective if Rule 54(b) certification is subsequently granted. ⁶ In addition, a declaratory judgment is reviewable as a final judgment, ⁷ and further necessary or proper relief based on that declaratory judgment may be granted subsequently. ⁸ We therefore conclude that we have appellate jurisdiction to hear the instant case. ⁹

B. STANDARDS OF REVIEW

We review de novo the district court's grant or denial of a motion for summary judgment, viewing the facts and all reasonable inferences therefrom in the light most favorable to the non-moving party. ¹⁰ Summary judgment is proper if 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 In addition, United appeals the district court's denial of its motion for new trial or, alternatively, to amend a finding of fact. United's motion is a peculiar one to say the least. As no trial was held in the district court, it cannot logically be called a motion for new trial. Alternatively, United asked the district court to amend a finding of fact, pursuant to Federal Rule of Civil Procedure 52(b), but that rule likewise contemplates an underlying trial. Based on the content of United's motion, however, we conclude that it is more properly construed as a request for reconsideration of the district court's entry of summary judgment. ¹² Moreover, as the Federal Rules of Civil Procedure do not recognize a general motion for reconsideration, we shall treat United's motion as a Rule 59(e) motion to alter or amend a judgment. We review the district court's denial of a Rule 59(e) motion for an abuse of discretion. ¹³ Under that standard, the district court's decision need only be reasonable. ¹⁴ We turn now to the merits of the appeal.

moving party is entitled to judgment as a matter of law." ¹¹

C. AUTOTOTE'S PROPERTY

1. The Totalisator Service Agreement

Autotote's property consisted of certain computerized wagering equipment, known as the Totalisator System, which had been installed at the racetrack. Autotote and FGC had entered into a "Totalisator Service Agreement" (the Agreement), pursuant to which Autotote agreed to provide to FGC "totalisator services utilizing [Autotote's] computer programs and equipment for all wagering held at the RACETRACK." As compensation for Autotote's services, FGC agreed to pay Autotote, inter alia, 45% of the gross monies wagered through the Totalisator System. The Agreement explicitly provided that the Totalisator System would at all times be and remain the property of and under the exclusive control of Autotote. ¹⁵

United asserts that the Totalisator System was nevertheless in the "care, custody, or control" of FGC such that the exclusion applies to defeat coverage of that property. Specifically, United relies on the provisions of the Agreement that (1) obligate FGC adequately to safeguard Autotote's property and (2) prohibit Autotote from removing the equipment during the term of the Agreement or using it for any other purpose when wagering was scheduled.

2. Was Autotote's property in the "care, custody, or control" of FGC?

According to Louisiana law, a provision that attempts to narrow the insurer's obligation, such as an exclusion clause, is strictly construed against the insurer. ¹⁶ The Louisiana Supreme Court recently defined "care, custody, or control" for purposes of an exclusion clause in the context of a CGL policy and announced two distinct circumstances in which the insured is deemed to have "care, custody, or control" of property such that the exclusion applies to defeat coverage:

The first, and most common, circumstance usually occurs where the insured is either a contractor or subcontractor who has been sued by the owner of the property upon which work was being performed, or is a party with whom property has been placed for use or repair.

The second circumstance under which the insured will be held to have "care, custody, or control" of the property occurs where the insured has a proprietary interest in or derives monetary benefit from the property. ¹⁷

United does not argue that Autotote's property was in the "care, custody, or control" of FGC as contemplated by first circumstance, i.e., contractor or subcontractor relationship. That leaves for us to determine only whether FGC had a proprietary interest in or derived a monetary benefit from Autotote's property. And, as United concedes that FGC had no proprietary interest in Autotote's property, the issue stated most narrowly is whether FGC derived a monetary benefit from Autotote's property. We conclude, as did the district court, that it did not.

There is no question but that FGC could not operate its racetrack business profitably or effectively without the services provided by Autotote and, concomitantly, that Autotote could not fulfill its contractual obligation to provide FGC with computerized wagering services without using its Totalisator System--including its tangible movable (personal) property--on FGC's premises. But FGC did not derive a monetary benefit from Autotote's property itself. Rather, the financial benefit that FGC derived from Autotote's property was nothing more than the indirect business symbiosis of its Agreement with...