U.S. Fire Ins. Co. v. Green Bay Packaging, Inc.

Decision Date05 October 1999
Docket NumberNo. 97-C-791.,97-C-791.
Citation66 F.Supp.2d 987
PartiesU.S. FIRE INSURANCE COMPANY, Plaintiff, v. GREEN BAY PACKAGING, INC., Defendant.
CourtU.S. District Court — Eastern District of Wisconsin

Wm. J. Katt, Milwaukee, WI, for Plaintiff.

Gregory B. Conway, Green Bay, WI, for Defendant.

DECISION AND ORDER

ADELMAN, District Judge.

Plaintiff United States Fire Insurance Company ("U.S.Fire") seeks a declaration that it need not indemnify defendant Green Bay Packaging, Inc. ("Green Bay") under an excess liability insurance policy for a payment Green Bay was required to make to satisfy a judgment. Green Bay counterclaims, also seeking a declaration as to U.S. Fire's obligations under the policy and alleging that U.S. Fire breached its duty to defend Green Bay. Jurisdiction is based on diversity of citizenship. U.S. Fire now moves for summary judgment.

I. FACTUAL BACKGROUND
A. The Insurance Policy

Green Bay carried its primary liability insurance through Wausau Insurance Company. The Wausau policy provided liability coverage up to a limit of $1,000,000 per occurrence and $2,000,000 in the aggregate, with a $250,000 deductible. Green Bay also held an umbrella policy from Viking Insurance Company, which was transferred to U.S. Fire. The umbrella policy obligated U.S. Fire to indemnify Green Bay for covered damages in excess of primary coverage.

The excess policy provided coverage for "damages arising out of an `occurrence' which are in excess of the underlying insurance ...." An "occurrence" includes "[a]n offense that results in `Personal Injury.'" "Personal injury" includes "oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services." (Conway Aff., Ex. 9.)

The policy obligates the insured to provide notice to U.S. Fire as follows:

E. Duties in the Event of Occurrence, Claim or Suit.

(1) "You" must notify "us" as soon as practicable of an "occurrence" which may result in a claim under this policy.

....

(2) If a claim is made or "suit" is brought against any "insured" that is reasonably likely to involve this policy, you must notify "us" in writing of the claim or "suit" as soon as practicable.

(3) You and any other involved "insureds" must:

(a) immediately send us copies of any demands, notices, summons or legal papers received in connection with the claim or a "suit."

(Id.)

The above language was modified by the following endorsement to the policy:

NOTICE OF OCCURRENCE

It is hereby understood and agreed that knowledge of an occurrence is not deemed to have taken place until the insured's insurance manager or person designated for insurance functions is advised of such an occurrence.

Mr. Robert A. VanderHeyden, 1700 N. Webster Ave., Green Bay, WI 54307-9017.

(Id.)

The policy also includes the following "Defense Settlement" provision:

For damages covered by this policy, but not covered by any other insurance or underlying insurance, we have these obligations:

A. We will defend any "suit" seeking damages covered by this policy.

(Id.)

B. The Underlying Lawsuit

In 1989 Green Bay sued in Oklahoma state court two former employees, Terry Jenkins and Mark Wojciehowski, and a company Jenkins had formed. The defendants counterclaimed, alleging various causes of action including the following:

6. That ... plaintiff has engaged in various acts designed to drive the defendant, JENKINS, out of business ....

....

11. That the acts of the plaintiff ... against the defendant, JENKINS, have been libelous and slanderous, to both the personal reputation of the defendant, JENKINS, and to his reputation in his trade and profession.

WHEREFORE premises considered, the defendant, JENKINS, prays that he have and recover judgment as and against the plaintiff, GREEN BAY PACKAGING, INC., for actual damages in excess of Ten Thousand ($10,000) dollars for their economic damage to him, and for punitive damages in excess of Ten Thousand ($10,000) dollars, for their oppressive actions, constituting unfair trade, restraint of trade, predatory trade practices, and libel and slander.

(Conway Aff., Ex. 7.)

The case was tried to a jury in January 1994. The jury found against Green Bay on all of its claims, and, on Terry Jenkins's counterclaim, found in pertinent as follows:

3. To Terry Jenkins for interference with a business relationship:

a. actual damages — $1,500,000

b. punitive damages — $1,500,000

4. To Terry Jenkins for defamation:

a. actual damages — $1,500,000

b. punitive damages — $1,500,000

(Christensen Aff., Ex. 4.)

Green Bay appealed and the Oklahoma Court of Appeals reversed and set aside Jenkins's entire award. Jenkins then appealed to the Oklahoma Supreme Court, which on October 29, 1996, ruled in part as follows:

II. Defamation Theory of Liability

Testimony was presented at trial concerning statements of Green Bay management and employees. The testimony related statements that Jenkins and his company were on the edge of business ruin and statements which implied that Jenkins could not be trusted to deliver on orders.

Green Bay asserts that the statements merely expressed opinion and were not defamatory. That issue, however, need not be addressed because the statements were also the basis of Jenkins's interference claim against Green Bay. In addition, the same evidence was presented to establish damages without regard to whether the damages were caused by interference or by defamation.

Only a single cause of action can be predicated on the same set of facts, but different remedies and theories of liability may be presented in support of each claim alleged. Jenkins asserted only one cause of action made by Green Bay management and employees. He pressed that cause of action under alternative theories of intentional infliction of emotional distress, interference with business relations, and defamation.

Jenkins['s] defamation claim was an alternative theory of relief, not a separate cause of action. Thus, he was entitled to a damage award for one cause of action not two. Jenkins['s] award of damages on his defamation claim is reversed. On remand, the trial court is directed to enter judgment for Jenkins only on his interference claim in the amount of $1.5 million actual damages, and $1.5 million punitive damages.

(Conway Aff., Ex. 13 (citation omitted).)

The Supreme Court also held that Green Bay had to pay Jenkins's attorneys fees and remanded the case to the trial court for determination of the amount. On May 18, 1998, the trial court approved an award of $2,300,000. Green Bay appealed and the matter is presently pending in the Oklahoma Court of Appeals.

On December 3, 1996, Green Bay paid Jenkins just over $4,759,245, representing a combination of compensatory and punitive damages, costs and interest.

C. Duty to Defend

On January 27, 1997, Wausau paid approximately $2,000,000 — its policy limits — to Green Bay as indemnification for Jenkins's judgment. This payment relieved Wausau of any further obligation to Green Bay. On February 26, 1997, Green Bay tendered a defense to U.S. Fire of the remainder of the Jenkins lawsuit. At this point the only remaining issue in the suit was attorneys fees. U.S. Fire refused to defend Green Bay and brought the present declaratory action.

D. Notice

Green Bay was served with Jenkins's counterclaim in 1990, but did not notify Wausau or U.S. Fire of it until 1994, shortly after the adverse verdict. Green Bay states that the reason it did not notify its insurers of the counterclaim was because its attorneys considered it to be largely meritless, having a potential value of less than the $250,000 deductible on the Wausau policy. Green Bay was aware, however, that Jenkins was seeking damages in excess of $4,000,000.

Green Bay's insurance managers did not know about Jenkins's counterclaim until after the verdict although other Green Bay executives were aware of the counterclaim soon after it was filed.

Ellen Marion, a claims specialist for U.S. Fire, testified in a deposition in the present case that she had no reason to believe Green Bay's counsel in the Oklahoma case was not competent; that U.S. Fire did not generally defend cases where it provided excess coverage but relied on the primary carrier to do so; that as an excess carrier U.S. Fire retained counsel to monitor pending actions against insureds about ten percent of the time and that monitoring counsel usually reviewed documents but was not directly involved in the case. Marion also testified that, had U.S. Fire received advance notice of the counterclaim, it would have made an independent decision as to the merits of the claim rather than relying on Green Bay's assessment.

II. APPLICABLE LAW
A. Summary Judgment Standard

Summary judgment is appropriate where 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 moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[M]aterial facts are those facts which, under the relevant substantive law, `might affect the outcome of the suit.'" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute over such material facts is "genuine" if the evidence is such that a reasonable trier of fact could find in favor of the non-moving party. Id. Thus, a genuine issue of material fact does not exist unless "there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Id. at 249, 106 S.Ct. 2505.

The moving party has the burden of establishing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); see ...

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