Utah Power & Light Co. v. Federal Ins. Co.

• Decision Date: 26 January 1993
• Docket Number: Nos. 91-4120,91-4121,s. 91-4120
• Citation: 983 F.2d 1549
• Parties: UTAH POWER & LIGHT COMPANY, Plaintiff-Appellee, v. FEDERAL INSURANCE COMPANY, Defendant, International Insurance Company; Twin City Fire Insurance Company; First State Insurance Company, Defendants-Third-Party-Plaintiffs-Appellants, St. Paul Surplus Lines Insurance Company; Allianz Underwriters Insurance Company, fka Allianz Underwriters, Incorporated; California Union Insurance Company, Defendants-Appellees, Alexander & Alexander; Emery Mining Corporation, Third-Party-Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1549

983 F.2d 1549

UTAH POWER & LIGHT COMPANY, Plaintiff-Appellee, v. FEDERAL INSURANCE COMPANY, Defendant International Insurance Company; Twin City Fire Insurance Company; First State Insurance Company Defendants-Third-Party-Plaintiffs-Appellants St. Paul Surplus Lines Insurance Company; Allianz Underwriters Insurance Company, fka Allianz Underwriters, Incorporated; California Union Insurance Company Defendants-Appellees, Alexander & Alexander; Emery Mining Corporation, Third-Party-Defendants-Appellees.

Nos. 91-4120, 91-4121.

United States Court of Appeals, Tenth Circuit.

Jan. 26, 1993.

P. Keith Nelson (Michael P. Zaccheo and Christian W. Nelson, of Richards, Brandt, Miller & Nelson, with him on the briefs), of Richards, Brandt, Miller & Nelson, Salt Lake City, UT, for defendant-third-party-plaintiff-appellant Intern. Ins. Co.

Shawn McGarry (Carman E. Kipp and William W. Barrett, of Kipp & Christian, P.C., with her on the briefs), of Kipp & Christian, P.C., Salt Lake City, UT, for defendants-third-party-plaintiffs-appellants Twin City Fire Ins. Co. and First State Ins. Co.

Terry M. Plant (John N. Braithwaite, of Hanson, Epperson & Smith, with him on the brief), of Hanson, Epperson & Smith, Salt Lake City, UT, for third-party-defendant-appellee Alexander & Alexander.

Stephen B. Nebeker (Paul D. Newman, of Ray, Quinney & Nebeker, and Raymond J. Etcheverry and Kent O. Roche, of Parsons, Behle & Latimer, with him on the brief), of Ray, Quinney & Nebeker, Salt Lake City, UT, for plaintiff-appellee Utah Power & Light Co. and third-party-defendant-appellee Emery Mining Corp.

George E. Sayre (Edward M. Laine, of Oppenheimer, Wolff & Donnelly, St. Paul, MN; and B. Lloyd Poelman, Daniel Bay Gibbons, and Von G. Keetch, of Kirton, McConkie & Poelman, Salt Lake City, UT, with him on the brief), Sedgwick, Detert, Moran & Arnold, San Francisco, CA, for defendants-appellees St. Paul Surplus Lines Ins. Co., Allianz Underwriters Ins. Co. and California Union Ins. Co.

Before SEYMOUR, MOORE, and TACHA, Circuit Judges.

TACHA, Circuit Judge.

In this action for declaratory relief, appellants seek review of a series of district court orders granting appellees' motions for partial summary judgment over a two-year period. In accordance with these rulings and others, the district court entered a Final Judgment and Stay of Proceedings pursuant to Fed.R.Civ.P. 54(b), and this appeal followed. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm.

BACKGROUND

In December 1984, a fire in the Wilberg Mine in central Utah killed twenty-seven miners. Utah Power & Light Company ("UP & L") owned the mine which the Emery Mining Corporation ("Emery") operated pursuant to a Coal Mining Agreement. The agreement required Emery, who employed the miners, to insure and indemnify UP & L from claims arising out of Emery's operation of the mine. The miners' estates brought wrongful death actions against UP & L that were consolidated under the caption Janice Faye Carter, et al. v. Utah Power & Light Company, Civ. No. 68596 (4th Dist.Ct., Ut.Co., Utah). In March 1987, UP & L settled all of the Carter claims for approximately $22 million.

At the time of the fire, UP & L had liability insurance with St. Paul Surplus Lines Insurance Co. ("St. Paul"), Allianz Underwriters Insurance Co. ("Allianz"), and California Union Insurance Co. ("Cal Union") (collectively the "UP & L Insurers"). At the same time, Emery had liability insurance with Federal Insurance Co. ("Federal"), International Insurance Co. ("International"), Twin City Fire Insurance Co. ("Twin City"), and First State Insurance Co. ("First State") (collectively the "Emery Insurers"). Of the Emery Insurers, Federal provided primary coverage and International provided the first layer of excess coverage.

In February 1985, UP & L tendered the defense of the Carter action to both the Emery and UP & L Insurers. Federal agreed to defend UP & L under a reservation of rights and approved UP & L's retention of counsel. Throughout 1985 and half of 1986, UP & L provided litigation status reports to both the Emery and UP & L Insurers. During 1986, UP & L began urging the Emery Insurers to settle the Carter claims, but the Emery Insurers insisted that the UP & L Insurers be involved in the settlement negotiations. In June 1986, UP & L requested settlement authority for the first time, but both lines of insurers were ultimately unwilling to provide significant authority. In December 1986, Federal tendered its $500,000 policy limit, and advised UP & L that it would no longer make interim payments for the defense costs.

In January 1987, UP & L decided to settle the Carter claims with its own funds and filed this declaratory judgment action against both the Emery and UP & L Insurers claiming bad faith and seeking coverage and indemnification for any judgment entered against UP & L in the Carter action. UP & L continued settlement negotiations, and on March 6, 1987 it notified both lines of insurers that it intended to settle the Carter claims for approximately $22 million and sought the insurers' consent by March 11, 1987. UP & L received no response by that date and proceeded to settle the claims. On March 19, 1987, UP & L notified both lines of insurers of the settlement and sought funding for it. International tendered its policy limit of $10 million, subject to certain conditions, in exchange for a dismissal of the bad faith portion of the declaratory judgment action.

In response to UP & L's declaratory judgment action, International raised affirmative defenses based on fraud, misrepresentation, and omission and filed a counterclaim against UP & L, and a third-party complaint against Emery, for rescission of its insurance contract. International also filed a counterclaim against UP & L alleging that the amount of the Carter settlement was unreasonable and a third-party complaint against insurance broker Alexander & Alexander ("A & A") for negligently providing services. In addition, both the Emery and UP & L Insurers filed cross-claims against each other arguing that if any insurers were liable for coverage, it was the other line of insurers.

During the next three years the district court entered numerous orders granting partial summary judgment. The following five rulings are contested on appeal. On April 21, 1989, the court ruled that International is barred from contesting the reasonableness of the Carter settlement. See Utah Power & Light Co. v. Federal Ins. Co., 711 F.Supp. 1544 (D.Utah 1989). On May 8, 1990, the court rejected the Emery Insurers' "other insurance" defenses and ruled that the Emery Insurers were primarily liable for the amount of the Carter settlement. In an August 13, 1990 order, the court ruled that UP & L is an insured under the International policy issued to Emery as the named insured. By an August 10, 1990 ruling and an April 26, 1991 memorandum decision, the court rejected International's defenses and claims based on fraud, misrepresentation, and omission. On April 26, 1991, the court entered a memorandum decision dismissing with prejudice all of International's claims against A & A. In accordance with these rulings, the court entered a Final Judgment and Stay of Proceedings on June 19, 1991 which included a declaratory judgment that UP & L is an insured under the International policy and that International is obligated to pay its $10 million policy limit to UP & L.

International raises five issues on appeal, arguing that the district court erred in granting summary judgment in finding that: (1) UP & L is an insured under International's policy; (2) International waived and is estopped from raising defenses and claims based on misrepresentation and omission; (3) International is barred from contesting the reasonableness of UP & L's settlement of the Carter cases; (4) International is primarily liable relative to the UP & L Insurers; and (5) there is no support for International's negligence claims against A & A. Twin City and First State join International in arguing that they are not primarily liable relative to the UP & L Insurers.

DISCUSSION

On appeal, we review the grant of summary judgment de novo, using the same standards applied by the district court. Osgood v. State Farm Mut. Auto. Ins. Co., 848 F.2d 141, 143 (10th Cir.1988). Summary judgment is appropriate "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 moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986).

The substantive law regarding a claim will identify which facts are material in a motion for summary judgment, and only factual disputes that might affect the outcome of the case under governing law will preclude entry of summary judgment. Id. at 248, 106 S.Ct. at 2510. In applying this standard, we view the evidence, and all reasonable inferences derived from the evidence, in the light most favorable to the party opposing the motion. Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990).

In this diversity case governed by Utah law, we must ascertain and apply Utah law such that we reach the same result that the Utah courts would reach. Adams-Arapahoe Sch. Dist. No. 28-J v. GAF Corp., 959 F.2d 868, 870 (10th Cir.1992). We review de novo the district court's rulings with respect to Utah law. See Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991). Under Utah law, insurance policies are construed using general contract principles. Bergera v. Ideal Nat'l Life Ins. Co., 524 P.2d 599, 600 (Utah 1974). The interpretation of an unambiguous contract is a question of law to be determined by the court and may be decided on summary...