Pennsylvania National Mutual Casualty Insurance v. Southeastern Environmental Infrastructure, LLC ( 2011 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 1, 2011
No. 09-15541 JOHN LEY
________________________ CLERK
D. C. Docket No. 06-00667-CV-SLB
PENNSYLVANIA NATIONAL MUTUAL
CASUALTY INSURANCE COMPANY,
Plaintiff-Appellant-
Counter-Defendant-
Cross-Appellee,
versus
SOUTHEASTERN ENVIRONMENTAL INFRASTRUCTURE, LLC,
Defendant-Appellee-
Counter-Claimant-
Cross-Appellant,
LARRY RIVERS,
Defendant-Appellee-
Cross-Appellant.
________________________
Appeals from the United States District Court
for the Northern District of Alabama
_________________________
(March 1, 2011)
Before TJOFLAT, ANDERSON and ALARCÓN,* Circuit Judges.
PER CURIAM:
In this declaratory judgment action regarding insurance coverage,
Pennsylvania National Mutual Casualty Insurance Company (“Penn National”),
Southeastern Environmental Infrastructure (“SEI”), and Larry Rivers all appeal
portions of several of the district court’s orders. We address the arguments in turn
and affirm.
I. DISCUSSION
A. Bad Faith
In the district court, SEI raised several claims alleging bad faith on the part
of Penn National. On cross-appeal, SEI narrowed its argument to a bad faith claim
based on the enhanced obligation of good faith as set forth in L & S Roofing
Supply Co. v. St. Paul Fire & Marine Ins. Co., 521 So. 2d 1298 (Ala. 1987). That
enhanced duty requires the insurance company to properly investigate the claim,
retain competent counsel, keep the insured informed of the case’s progress, and not
act in any way that would be to the detriment of the insured. Id. at 1303. SEI’s
*
Honorable Arthur L. Alarcón, United States Circuit Judge for the Ninth Circuit,
sitting by designation
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argument that Penn National’s investigation was insufficient is conclusory, and
thus without merit. SEI appears to argue on appeal that Penn National should have
settled with Rivers. However, under Alabama law, it is the insured’s obligation to
fund a settlement when an insurance company is defending under a reservation of
rights, as was the case here. Id. at 1303; see also Mitchum v. Hudgens, 533 So. 2d
194, 201-02 (Ala. 1988) (contrasting differences in settlement negotiations when
insurer defends under a reservation of rights and when insured has relinquished
control of defense). SEI had a representative at the mediation and SEI’s own
separate counsel was involved in all of the relevant negotiations. SEI could have
settled but Penn National was not obligated to provide the funds. Therefore, Penn
National’s failure to settle with its own funds did not amount to bad faith.
B. Post-Judgment Interest
With respect to the post-judgment interest awarded by the district court, both
Penn National (on direct appeal) and Rivers (on cross-appeal) assert challenges.
The particular arguments asserted in brief by each party have been carefully
considered, but found unpersuasive. Any other arguments are deemed abandoned.
We cannot conclude that either party has pointed to error in the district court’s
judgment in this regard.
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C. The Underlying Insurance
Rivers argues on cross-appeal that the district court erred when it held that
Penn National was liable only for the amount of the judgment in excess of the
million dollar underlying insurance limit. Rivers argues that because the umbrella
policy, when belatedly delivered, did not include a schedule of underlying
insurance, Penn National could not enforce the underlying insurance limit. We
readily reject Rivers’ argument. When the umbrella policy was delivered, it was
obvious to everyone that it was excess insurance over and above the limits of
liability in the CGL policy.
Rivers also argues that the district court erred in applying the “underlying
insurance limit,” asserting that the correct underlying insurance limit should have
been the $10,000 retained limit. We readily reject Rivers’ argument in this regard.
The policy language is clear. The policy expressly provides “The limits of
insurance in any policy of underlying insurance will apply even if . . . (a) the
‘underlying insurer’ claims the insured failed to comply with any condition of the
policy.” The policy language also provides “If the policies of ‘underlying
insurance’ do not apply to the occurrence’ or ‘offense’, the amount stated in the
Declarations as the ‘retained limit’” is the “applicable underlying limit.” Under the
first quoted policy language, it is clear that the limits of underlying insurance apply
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notwithstanding the fact that there was no coverage under the CGL policy because
of the lack of notice. Similarly, the second quote from the policy language means
only that the retained limit applies when the underlying insurance does not apply at
all to the occurrence. The underlying insurance here (the CGL policy) clearly
applied to the occurrence, but simply provided no coverage because of the lack of
notice.
We also reject Rivers “drop down argument.” This argument is precluded
by the express language of the policy, to-wit: “The limits of insurance in any policy
of underlying insurance will apply even if . . . (a) the ‘underlying insurer’ claims
the insured failed to comply with any condition of the policy.”
Other arguments challenging the district court’s application of the
underlying insurance limit are wholly without merit. They are rejected without
need for discussion.
D. Independent Contractor
We reject as wholly without merit Penn’s argument on direct appeal that the
district court erred in concluding that Rivers was an independent contractor.
E. Notice
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Penn National argues that SEI’s late notification of the accident voided
coverage under the umbrella policy. We reject Penn National’s attempt to hold SEI
to conditions of a policy that it had not received at the time of the accident.
SEI and Rivers on cross-appeal challenge the district court’s holding that the
underlying CGL policy provided no coverage because of the belated notice. They
argue that the district court erred when it held that Penn National did not waive the
policy condition of giving prompt notice by not including it in the first two
reservation of rights letters. We disagree. The district court properly interpreted
Penn National’s reservation of rights letters to preserve the notice issue. See
Shelby Steel Fabricators v. U.S. F. & G., 569 So. 2d 309 (Ala. 1990) (interpreting
similarly broad language in reservation of rights letter to not waive later discovered
issues). SEI and Rivers also argue that the district court erred when it held that
SEI’s notice to Penn National under the CGL was late. Alabama courts look at
both the length of the delay and the reason for the delay. Southern Guar. Ins. Co. v.
Thomas, 334 So. 2d 879 (Ala. 1976). SEI’s reason for the delay – that it did not
think it would be sued – has been specifically rejected. Id. at 884. The same court
in Thomas held that a six month delay in notifying the insurance company of the
accident was unreasonable. Id. Therefore, the district court did not err.
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F. Discovery
On cross-appeal, SEI argues that the district court erred when it denied SEI’s
request for discovery before the court decided on Penn National's motion for
summary judgment. The district court denied SEI’s request because it thought that
the sought-after manuals had no bearing on its decision. Because SEI’s one-page
argument that the court abused its discretion does not explain how the district court
erred when it made that determination, we reject it.
II. CONCLUSION
We have carefully considered, and have heard oral argument with respect to,
the numerous issues raised by the several parties on direct appeal and cross-appeal.
We conclude that none of the challenges to the district court’s rulings have merit.
Accordingly, the judgment of the district court is
AFFIRMED
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