Union Ins. Co. v. Travelers Indem. Co. of Conn.

• Decision Date: 29 September 2018
• Docket Number: CIVIL ACTION NO. 3:09-CV-283 HTW-LRA
• Citation: 350 F.Supp.3d 563
• Parties: UNION INSURANCE COMPANY, as Successor in Interest to Great River Insurance Company, Plaintiff v. The TRAVELERS INDEMNITY COMPANY OF CONNECTICUT, Fidelity and Guaranty Insurance Underwriters, Inc., and United States Fidelity and Guaranty Company, Defendants
• Court: U.S. District Court — Southern District of Mississippi

350 F.Supp.3d 563

UNION INSURANCE COMPANY, as Successor in Interest to Great River Insurance Company, Plaintiff

v.The TRAVELERS INDEMNITY COMPANY OF CONNECTICUT, Fidelity and Guaranty Insurance Underwriters, Inc., and United States Fidelity and Guaranty Company, Defendants

CIVIL ACTION NO. 3:09-CV-283 HTW-LRA

United States District Court, S.D. Mississippi.

Signed September 29, 2018

J. Stephen Wright, James C. Martin, Wright & Martin, LLP, Ridgeland, MS, for Plaintiff.

Lee Ann C. Thigpen, Carroll, Warren & Parker, PLLC, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

HENRY T. WINGATE, UNITED STATES DISTRICT JUDGE

Before this court are the opposing motions for summary judgment filed by the plaintiff and the defendant.The Travelers Indemnity Company of Connecticut and its subsidiaries filed a motion for summary judgment under the auspices of Rule 56 of the Federal Rules of Civil Procedure¹ .In their motion these defendants contend that there are no material facts in dispute and, as a matter of law, it owes no funds to the plaintiff, Union Insurance Company.Travelers seeks a declaratory judgment in its favor barring Union's claims against it.[doc. no. 31].

Union Insurance Company("Union") also filed a motion for summary judgment, asserting that Union is entitled to judgment in its favor, as a matter of law, and asks the court to issue a declaratory judgment that Travelers is required to pay the amounts for which Union has sued.[doc. no. 33].The motions of both parties, in reliance upon Rule 56 of the Federal Rules of Civil Procedure, contend that there are no genuine issues of material fact.

At the heart of this dispute is Union's effort to obtain contribution from Traveler's for a claim paid by Union, and for which Travelers was partly liable.Travelers admits that it has some liability under the policy in question, but disagrees that it owes any amount over what it has already agreed to pay, the amount Travelers claims to be its proportionate share of a $1 million dollar policy limit.

FACTUAL AND PROCEDURAL BACKGROUND

I.PARTIES AND JURISDICTION

Plaintiff Union is an Iowa insurance company with corporate headquarters and its principal place of business located in Urbandale, Iowa.Union acknowledges that it is a successor in interest to Great River Insurance Company, the company that wrote the polices at issue here -- policies insuring Custom Aggregates & Grinding, Inc.("Custom"), against liability claims.

DefendantsTravelers Indemnity Company of Connecticut, Fidelity & Guaranty Insurance Underwriters, Inc., and United States Fidelity & Guaranty Company are subsidiaries of the Travelers Companies, Inc., which is a Connecticut insurance holding company with its corporate headquarters and principal place of business located in Hartford, Connecticut.The Traveler's Entities will be referred to collectively as "Travelers".

As authorized by Title 28 U.S.C. § 1332 (a),²this court has subject matter jurisdiction over plaintiff's claims and related motions based on diversity of citizenship.The parties are completely diverse and the amount in controversy exceeds $75,000, exclusive of interest and costs, as Union's complaint demands declaratory judgment regarding an alleged debt of $291,450.Venue is proper pursuant to 28 U.S.C. § 1391.In this diversity action, the substantive laws of the State of Mississippi apply.Klaxon Co. v. Stentor Elec. Mfrg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477(1941).See alsoBoardman v. United Services Auto, Ass'n , 470 So.2d 1024, 1032(Miss.1985);Guaranty Nat. Ins. Co. v. Azrock Industries, Inc. , 211 F.3d 239, 243(5th Cir.2000).

II.STIPULATED FACTS

On August 16, 2004, Clifford Gatlin("Gatlin"), who had been employed as a sandblaster and foundry worker, filed a lawsuit in the Circuit Court of Hinds County, Mississippi.Gatlin alleged that his work environment had been contaminated with silica dust, causing him to develop silicosis, a serious health condition caused by exposure to inhaling silica dust over a period of time.Gatlin sued, in Hinds County Circuit Court, his employer and other defendants, including Custom Aggregates & Grinding, Inc.("Custom").Custom was one of the companies that had supplied to Gatlin's employer sandblasting material that allegedly contained the injurious silica.

During the relevant period during which Custom was supplying materials to Gatlin's employer and during which time Gatlin was an employee there, Custom was insured by the following four companies: 1) Great River Insurance Company(whose successor in interest is Union); 2) The Travelers Indemnity Company of Connecticut; 3) Zurich North America; and 4) Kemper Insurance Company(collectively, "Insurers").These insurers had policies in effect with Custom at different times over the relevant period.None was in effect concurrently.Each annual policy, regardless of which insurer issued it, carried primary liability limits of One Million Dollars.

All four of these insurers entered into a joint defense agreement whereby each insurer agreed to contribute to the legal fees and expenses incurred by Custom in defense of the Gatlin lawsuit.The four companies agreed to a formula, which was included in the joint defense agreement, that allocated a percentage for each insurer to pay based on the proportionate length of time of coverage that each had provided to Custom during the relevant period (also referred to as "time on the risk").The continuing tort, it was determined, spanned approximately 104 months.The Insurers agreed to a percentage allocation of costs/liability as follows: Great River/Union 22.86%; Kemper 22.86%; Zurich 5.71%; and Travelers 48.57 %.³The various subsidiaries and affiliates of the Travelers Companies had insured Custom for the longest period, and therefore, Travelers was obligated to pay the largest part of the settlement or verdict.

On July 13, 2007, the Insurers were informed that trial was set for October 15, 2007.⁴With mediation scheduled for September 27, 2007, and the trial less than a month away, Travelers and its adjusters, together with Union and the other carriers insuring Custom, pursued a potential settlement, with each carrier attempting to obtain authority for a total from all carriers of 1.5 million dollars.Travelers was a participant in this effort and on September 24, 2007, the adjuster for Travelers, Claudette Savwoir, informed the other insurers that she had requested authority for her share of up to 1.5 million dollars from her superiors.This, according to Union, was proof that up to that point, Travelers considered a settlement above one million to be within policy limits.

Travelers though, contends that around the time of mediation, Travelers and the other insurers discussed several legal arguments and defenses that had not been, but needed to be, developed.This, Travelers submits, is proof that Travelers did not believe a settlement valuation above $1,000,000 was reasonable.

The parties participated in mediation on September 27, 2007, but were unable to settle the claims against Custom.Custom's co-defendant, Precision Packaging, settled with the plaintiffs at the mediation, on confidential terms.At the conclusion of the mediation, Custom was the only remaining defendant.

On September 28, 2007, Travelers' adjuster, Claudette Savwoir authored an email to defense counsel, Forman, Perry, Watkins, Krutz & Tardy, regarding several legal defenses and arguments that Travelers was pushing and that Travelers said should have been developed a long time ago.On October 1, 2007, Claudette Savwoir and Gerald Begley, in-house counsel for Travelers, called Custom's representative Suzy McDonald and advised it was Traveler's position that only $1 million in total indemnity was available to Custom for the Gatlin lawsuit.

On October 2, 2007, Custom's defense counsel made to Gatlin an offer of $1,000.000, which was rejected.Negotiations continued over the next several days.On October 3, 2007, a member of the defense team from Forman, Perry, Watkins, Krutz & Tardy emailed Travelers' counselGerald Begley that Custom had actually sold a lot more sand to Gatlin's employer than plaintiff knew about and that Gatlin's demands would go higher once this error was realized.On October 4, 2007, with the trial set for eleven days later on October 15, 2007, Travelers issued a "Policy Limit Notification Letter" to Custom, reiterating its position that a single per occurrence limit of one million dollars total was available from all carriers collectively, and informing all involved that Travelers would only offer 48.57 % of one million dollars or $485,700.While Travelers agreed to continue to honor its defense obligations, Travelers stated it did not agree to indemnify Custom for any amount above its 48.57 % share of the $1 million dollar limit.

On October 9, less than a week from the date of trial, which was set for October 15, settlement was reached between Custom and Gatlin, for the sum of $1.75 million dollars.Although the carriers had earlier agreed on the percentage each should pay, they disagreed on the combined policy limit and, therefore, on the sum to which each insurer's percentage should be applied.Union, Zurich and Kemper considered that the entire $1,750,000.00 settlement agreement was within combined policy limit.Travelers took the position that the carriers' liability was limited to a total of one million dollars.Travelers, then, instead of contributing a 48.57 % share of the 1.75 million dollar settlement amount, for a total of $849,975.00, limited its settlement contribution to $485,700.00, or 48.57% of its one million dollar policy limit, a difference of $364,275.00.

Kemper paid its proportionate share of the 1.75 million dollars under the formula.Union and Zurich, though, paid more than what they believed to be the just shares they owed pursuant to the allocation agreement.According to Union's amended complaint [doc. no. 8 at pp. 5-6], these...