Wells' Dairy v. Travelers Indem. Co. of Illinois

• Decision Date: 23 September 2004
• Docket Number: No. C01-4097-MWB.,C01-4097-MWB.
• Citation: 336 F.Supp.2d 906
• Parties: WELLS' DAIRY, INC., Plaintiff, v. TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Travelers Insurance Company, and Travelers Property Casualty Corporation, Defendants.
• Court: U.S. District Court — Northern District of Iowa

336 F.Supp.2d 906

WELLS' DAIRY, INC., Plaintiff, v. TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Travelers Insurance Company, and Travelers Property Casualty Corporation, Defendants.

No. C01-4097-MWB.

United States District Court, N.D. Iowa, Western Division.

September 23, 2004.

Adam S. Ryan, Arthur F. Foerster, Mary Rose Alexander, Rene M. Evlin, Latham & Watkins, Chicago, IL, Marvin S. Berenstein, Richard H. Moeller, Berenstein Moore Berenstein Heffernan & Moeller, LLP, Sioux City, IA, for Plaintiff.

Frank F. Coulom, Jr., Gerald P. Dwyer, Jr., Steven E. Goldman, Robinson & Cole, LLP, Hartford, CT, Jaki K. Samuelson, Whitfield & Eddy, PLC, Des Moines, IA, for Defendants.

AMENDED ORDER REGARDING MOTION BY DEFENDANT TRAVELERS INDEMNITY COMPANY OF ILLINOIS TO REVISE THE JANUARY 31, 2003, AND JULY 9, 2003 MEMORANDUM OPINIONS PURSUANT TO FED. R. CIV. P. 54(b) AND FOR REIMBURSEMENT OF CERTAIN DEFENSE COSTS

BENNETT, Chief Judge.

I. INTRODUCTION AND BACKGROUND

Plaintiff Wells' Dairy, Inc. ("Wells") filed a motion for partial summary judgment against defendants Travelers Indemnity Company of Illinois, Travelers Insurance Company, and Travelers Property Casualty Corporation (collectively "Travelers" unless otherwise indicated) on August 30, 2002. On January 31, 2003, the court granted that portion of Wells's motion in which it sought a declaration that Travelers has an obligation to defend Wells against lawsuits brought by two customers, Pillsbury Company ("Pillsbury") and Eskimo Pie Corporation ("Eskimo Pie").

Wells then filed its Motion To Enforce The Court's Order Of January 31, 2003 Regarding Travelers's Duty To Defend. In its motion, Wells requested that the court order Travelers to reimburse Wells for the costs of defense in the lawsuits brought by Pillsbury and Eskimo Pie through January 31, 2003, require Travelers to pay prejudgment interest for those costs, and require Travelers to reimburse Wells for its reasonable attorney's fees and expenses as those costs are incurred. On July 9, 2003, the court granted in part and denied in part Wells's Motion To Enforce The Court's Order Of January 31, 2003. The court ordered that Travelers reimburse Wells for the costs of Wells's defense in the lawsuits brought by Pillsbury and Eskimo Pie through January 31, 2003. The court further ordered Travelers to reimburse Wells for one-half of its reasonable attorney's fees and expenses as those costs are subsequently incurred.

Travelers has now filed its Motion To Revise The January 31, 2003 and July 9, 2003 Memorandum Opinions Pursuant To Fed.R.Civ.P. 54(b) and For Reimbursement of Certain Defense Cost Payments (# 165). In its motion, Travelers requests that the court: revise its January 31, 2003, opinion to hold that Travelers has no duty to defend or indemnify Wells regarding the Pillsbury state action after November 6, 2003; revise the July 9, 2003, opinion to release Travelers of any on-going duty to pay for Wells's defense; and, order that Wells reimburse Travelers for all payments of defense costs that were incurred after November 6, 2003, in the Pillsbury state action. Travelers contends that a summary judgment ruling in the Pillsbury state action by Iowa District Court Judge Scott, in which Judge Scott denied summary judgment to Wells on Pillsbury's breach of contract claim but granted summary judgment to Wells on Pillsbury's negligence claim, establishes, as a matter of law, that Pillsbury is not seeking damages because of damage to property other than certain Haagen-Dazs products which Wells did not produce. As a result, Travelers contends that it has no duty to defend or indemnify Wells against Pillsbury's remaining breach of contract claim. In response, Wells asserts that the Pillsbury state court decision is a tentative interlocutory ruling which does not provide a basis for terminating Travelers's duty to defend Wells in the Pillsbury state court action. Wells also argues that the Pillsbury ruling does not constitute new evidence such that would entitle Travelers to reconsideration under Federal Rule of Civil Procedure 54(d). Wells also argues that even if the court reconsiders its prior rulings, Travelers is still required to defend Wells in the Pillsbury state action because Pillsbury alleges damages "because of ...property damage."

II. LEGAL ANALYSIS

A. Federal Rule of Civil Procedure 54(b)

Under Federal Rule of Civil Procedure 54(b), a court may reconsider any order not certified for appeal when the order in question did not resolve all the claims of all the parties in the action. Rule 54(b) provides as follows:

(b) Judgment Upon Multiple Claims or Involving Multiple Parties. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

FED. R. CIV. P. 54(b). Motions to reconsider are governed by Rule 54(b) when such motions are filed after an interlocutory order and before the entry of a "final judgment." See Gridley v. Cleveland Pneumatic Co., 127 F.R.D. 102, 103 (M.D.Pa.1989). District courts have considerable discretion in deciding whether to grant a motion to reconsider an interlocutory order. The exact standard applicable to the granting of a motion under Rule 54(b) is not clear, though it is typically held to be less exacting than would be a motion under Federal Rule of Civil Procedure 59(e), which is in turn less exacting than the standards enunciated in Federal Rule of Civil procedure 60(b). See M.K. v. Tenet, 196 F.Supp.2d 8, 12 (D.D.C.2001); Persistence Software, Inc. v. Object People, Inc., 200 F.R.D. 626, 627 (N.D.Cal.2001). Though less exacting, courts have looked to the kinds of consideration under those rules for guidance. Bragg v. Robertson, 183 F.R.D. 494, 496 (S.D.W.Va.1998).

This court has held that courts retain the power to reconsider and revise an order denying summary judgment, which is also interlocutory in nature, up until the time a final judgment is entered. See Kaydon Acquisition Corp. v. Custum Mfg., Inc., 317 F.Supp.2d 896, 903 (N.D.Iowa 2004); Longstreth v. Copple, 189 F.R.D. 401, 403 (N.D.Iowa 1999). Therefore, the court has the authority "`to correct, reconsider, alter, or amend the challenged portions of its [summary judgment ruling], should the court decide that it is appropriate or necessary to do so.'" Kaydon Acquisition Corp., 317 F.Supp.2d at 903 (quoting Helm Financial Corp. v. Iowa N. Ry. Co., 214 F.Supp.2d 934, 999 (N.D.Iowa 2002)). Thus, the court has the power to reconsider and revise its previous orders in this matter.

B. Standard For Terminating Duty To Defend

Wells asserts that the summary judgment ruling in the Pillsbury state action does not meet the high standards for terminating Travelers's duty to defend because the Pillsbury summary judgment is a tentative interlocutory ruling. Travelers asserts that the summary judgment ruling in the Pillsbury state action eliminated all potentially covered claims and therefore it is not obligated to continue to fund Wells' defense in that action other than the defense costs associated with defending Wells against an appeal or motion to reconsider on that part of the summary judgment decision granting summary judgment to Wells on Pillsbury's negligence claim.¹

The Iowa Supreme Court has described an insurer's general duty to defend this way:

An insurer's duty to defend is separate from its duty to indemnify; the duty to defend is broader than the duty to indemnify. The duty to defend arises "whenever there is potential or possible liability to indemnify the insured based on the facts appearing at the outset of the case." In other words, the duty to defend rests solely on whether the petition contains any allegations that arguably or potentially bring the action within the policy coverage. If any claim alleged against the insured can rationally be said to fall within such coverage, the insurer must defend the entire action. In case of doubt as to whether the petition alleges a claim that is covered by the policy, the doubt is resolved in favor of the insured.

Employers Mut. Cas. Co. v. Cedar Rapids Television Co., 552 N.W.2d 639, 641 (Iowa 1996) (quoting A.Y. McDonald Indus., Inc. v. Insurance Co. of N. Am., 475 N.W.2d 607, 627 (Iowa 1991) (en banc) (citations omitted) (emphasis added in Employers Mut. Cas. Co.)). In determining whether there was a duty to defend in this case, the court looked "first and primarily to the petition for the `facts at the outset of the case.'" First Newton Nat'l Bank v. General Cas. Co., 426 N.W.2d 618, 623 (Iowa 1988) (quoting McAndrews v. Farm Bureau Mut. Ins. Co., 349 N.W.2d 117, 119 (Iowa 1984)).

No Iowa appellate court has ruled on the ability of an insurer to withdraw its defense following the dismissal of claims within the policy's coverage. Other jurisdictions, however, have adopted a rule that an insurer can withdraw from a defense after all arguably covered claims have been extinguished. Lockwood Int'l, B.V. v. Volm Bag Co., Inc., 273 F.3d 741, 744 (7th Cir.2001) (holding that "if in the course of litigation the covered claims fall out of the case through settlement or otherwise, the insurer's duty to defend his insured ceases."); Harborside Refrigerated Serv.,...