Fidelity & Casualty Co. v. Buck Kreihs Co. , 324 F. App'x 332 ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 20, 2009
No. 08-30954 Charles R. Fulbruge III
Summary Calendar Clerk
FIDELITY & CASUALTY COMPANY OF NEW YORK
Plaintiff
v.
BUCK KREIHS COMPANY INC
Defendant
_________________________________________________________
JIMMY LANG
Plaintiff
v.
EAGLE INC
Defendant
BUCK KREIHS COMPANY INC, as successor to Sank Inc and formerly
known as J.K.T. and Associates, Inc.
Defendant - Third-Party Plaintiff - Appellant
v.
CHICAGO INSURANCE COMPANY; INTERSTATE FIRE AND CASUALTY
COMPANY
Third-Party Defendants - Appellees
_______________________________________________________________
CHICAGO INSURANCE COMPANY; INTERSTATE FIRE AND CASUALTY
COMPANY
No. 08-30954
Plaintiffs - Appellees
v.
BUCK KREIHS COMPANY INC, as successor to Sank Inc and formerly
known as J.K.T. and Associates, Inc
Defendants - Appellants
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC Nos. 2:06-CV-2389, 2:06-CV-2311, 2:06-CV-2310
Before SMITH, STEWART, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Buck Kreihs Company Inc. (“Buck Kreihs”) appeals the district court’s
summary judgment in favor of Chicago Insurance Company (“Chicago”) and
Interstate Fire and Casualty Company (“Interstate”) (together “Insurers”) in a
declaratory judgment action to determine insurance coverage of asbestos-related
claims by former Buck Kreihs employees. We AFFIRM.
I. BACKGROUND
Buck Kreihs was incorporated in 1963 to perform maintenance and repairs
on ships docked in the Port of New Orleans. Over the past 10 years, the
company has become a defendant in a number of claims by former employees
arising out of exposure to asbestos. These claims span several decades, some
involving alleged exposures as far back as the 1960s.
In 1974, Buck Kreihs purchased policies of insurance, including
Comprehensive General Liability (“CGL”) and Employer’s Liability/Workmen’s
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
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No. 08-30954
Compensation (“Employer’s Liability”) policies, from Chicago and an excess
coverage policy from Interstate. The policies were in effect from March 1, 1974,
through January 15, 1975, part of the time during which the asbestos exposures
occurred. Interstate’s policy listed Buck Kreihs as the insured party and is on
a “following form” basis, incorporating the identical coverages, provisions, and
exclusions as the underlying CGL and Employer’s Liability policies issued by
Chicago.1
The CGL policy contains an exclusion of coverage for bodily injury to any
employees of Buck Kreihs. The Employer’s Liability policy excludes coverage of
claims for bodily injury by disease where the claims were not made or suit was
not filed within thirty-six months of the termination of the policy, which would
have been January 15, 1978. The CGL policy also incorporates this exclusion.
In August 2007, Chicago and Interstate sued for a declaratory judgment
determining that their policies do not provide coverage to Buck Kreihs regarding
a group of pending asbestos exposure cases involving former employees. Buck
Kreihs then filed a counter claim alleging the Insurers’ bad faith in handling the
claims.2 Chicago and Interstate moved for summary judgment and dismissal of
Buck Kreihs’s counterclaim. On October 9, 2007, the district court granted
summary judgment to Insurers on their declaratory judgment action, but denied
it as to dismissal of Buck Kreihs’s counterclaim. Relying on this court’s
interpretation of similar policies under Louisiana law in Riverwood International
Corporation v. Employers Insurance of Wasau, 420 F.3d 378 (5th Cir. 2005), as
well as recent decisions of the Louisiana courts, the district court concluded that
1
Buck Kreihs acknowledges that any claims excluded under the Chicago policies are
also excluded under the Interstate policy, and therefore we address only the language of the
Chicago policies.
2
The case was then consolidated with a declaratory action by another insurance
company, which has settled.
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No. 08-30954
the policies’ exclusion of coverage of “bodily injury by disease” unless the claim
is brought within thirty-six months of the end of the policy excluded coverage of
the asbestos-related suits. On September 16, 2008, the district court entered
final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.
II. DISCUSSION
A. Standard of Review
We review the district court’s grant of summary judgment de novo,
applying the same standards as the district court. Riverwood Int’l Corp., 420
F.3d at 382. Summary judgment is appropriate where “the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is
no genuine issue as to any material fact and that the movant is entitled to a
judgment as a matter of law.” F ED. R. C IV. P. 56(c).
B. The “Bodily Injury by Disease” Exclusion
“Under Louisiana law, an insurance policy is a contract between the
parties, and it should be construed according to the general rules of contract
interpretation set forth in the Civil Code.” Riverwood Int’l Corp., 420 F.3d at382 (citing La. Ins. Guar. Ass’n v. Interstate Fire & Cas. Co., 630 So.2d 759, 763
(La. 1994)). “Interpretation of a contract is the determination of the common
intent of the parties,” and “[w]hen the words of a contract are clear and explicit
and lead to no absurd consequences, no further interpretation may be made in
search of the parties’ intent.” L A. C IV. C ODE A NN. arts. 2045 and 2046 (1985).
We conclude that the district court properly determined that the insurance
policies at issue do not provide coverage to Buck Kreihs for the asbestos-related
claims of its former employees.
1. Applicability of the Employer’s Liability policy
The Employer’s Liability policy issued by Chicago provides the following
relevant coverage, subject to the policy’s exclusions and limitations:
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No. 08-30954
Coverage B – Employer’s Liability: To pay on behalf of the insured
all sums which the insured shall become legally obligated to pay as
damages because of bodily injury by accident or disease . . .
sustained in the United States of America, its territories or
possessions, or Canada by his employment by the insured either in
operations in a State designated in Territorial Limits or in
operations necessary or incidental thereto.
In addition, the policy contains several exclusions, including the following:
This insurance does not apply:
...
(e) Under Coverage B, to bodily injury by disease unless prior to
thirty-six months after the end of the Policy Period written claim is
made or suit is brought against the Insured for damages because of
such injury or death resulting therefrom . . . .
This exclusion (“Exclusion (e)”) was also added to the CGL policy, as discussed
below. The Employer’s Liability policy defines bodily injury by accident and by
disease as follows:
(c) Bodily Injury by Accident; Bodily Injury by Disease.
The contraction by disease is not an accident within the meaning of
the word “accident” in the term “bodily injury by accident” and only
such disease as results directly from a bodily injury by accident is
included within the term “bodily injury by accident”. The term
“bodily injury by disease” includes only such disease as is not
included within the term “bodily injury by accident”.
Buck Kreihs argues that the thirty-six-month reporting requirement of
Exclusion (e) does not apply to the employees’ asbestos-related diseases because
those claims are instead “bodily injury by accident,” the accident being the
impact of asbestos fibers on the workers’ lungs. However, our court previously
rejected this argument in interpreting an identical definition and materially
indistinguishable thirty-six-month reporting requirement under Louisiana law.
See Riverwood Int’l Corp., 420 F.3d at 382-85. In Riverwood, we held that “the
only reasonable interpretation of the [p]olicies is that an asbestos-related disease
is not a ‘bodily injury by accident’ but is rather a ‘bodily injury by disease.’
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No. 08-30954
Accordingly, the thirty-six month exclusion provision applies.” Id. at 385.
Comparing the instant policies to those interpreted in Riverwood,3 we find no
material differences and thus the holding of Riverwood controls this appeal. The
thirty-six month reporting requirement of Exclusion (e) applies.4 Because none
of the underlying claims at issue were asserted prior to January 15, 1978, thirty-
six months after the policies’ termination, the district court correctly held that
there is no coverage under the Employer’s Liability policy. We now turn to
consider the CGL policy, which we similarly conclude does not provide coverage
for the asbestos-related claims.
2. Applicability of the CGL Policy
The CGL policy contains several exclusions of coverage, including the
following:
This insurance does not apply:
....
(j) to bodily injury to any employee of the insured arising out
of and in the course of his employment by the insured or to any
3
Both the definition of “Bodily Injury by Accident; Bodily Injury by Disease” and the
thirty-six month bodily injury by disease reporting requirement in the policies at issue in
Riverwood are identical to those contained in the Employer’s Liability policy Chicago issued
to Buck Kreihs. See Riverwood, 420 F.3d at 380 n.2, 382-83.
4
Buck Kreihs argues that Riverwood is not applicable either because its interpretation
of Louisiana law is contradicted by the holdings of Louisiana courts or because its holding was
in conflict with prior Fifth Circuit case law on the question. However, the Fifth Circuit cases
Buck Kreihs points to address what the “bodily injury” is and when it occurs in the context of
asbestos-related diseases. See Guaranty Nat’l Ins. Co. v. Azrock Indus. Inc., 211 F.3d 239, 249-
50 (5th Cir. 2000) (concluding under Texas law that personal injury caused when individual
was exposed to asbestos, not when the disease manifested itself); Ducre v. Executive Officers
of Halter Marine, 752 F.2d 976, 993-94 (5th Cir. 1985) (holding that “exposure theory” applied
to determine when injury occurred in silicon-exposure context); Porter v. American Optical
Group, 641 F.2d 1128, 1144-45 (5th Cir. 1981) (rejecting “manifestation theory” and adopting
“injurious exposure” theory to determine when employee’s “bodily injury” occurred for
insurance purposes). Those cases did not address the question presented in Riverwood,
whether asbestos-related disease, acknowledged to be a “bodily injury,” was one “by disease”
or “by accident.” Further, Buck Kreihs points to no intervening change in Louisiana law since
Riverwood that renders its holding clearly wrong.
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No. 08-30954
obligation of the insured to indemnify another because of damages
arising out of such injury.
(emphasis added) (“Exclusion (j)”). The CGL policy’s definition of “Insured”
includes Buck Kreihs and also “any executive officer, director or stockholder
thereof while acting within the scope of his duties as such.”
Insurers argue that the CGL does not provide coverage to the asbestos-
related claims because Exclusion (j) specifically excludes bodily injury to any
employee arising out of his employment by Buck Kreihs, and that, in any event,
Exclusion (e) also excludes coverage under this policy. Buck Kreihs contends
that the CGL applies because the policy provides coverage for actions against
Buck Kreihs’s executives under the definition of “Insured” and, at the time the
coverage was contracted Louisiana allowed actions by former employees against
their employer’s executive officers. See Sanders v. Ashland Oil, Inc., 656 So.2d
643, 648-49 (La. Ct. App. 1995) (holding similar employee injury exclusion was
inapplicable as to claims against company’s owner because employees were not
employed by the owner personally, only by the company, and the owner fell
under the policy’s definition of Insured). Buck Kreihs asserts that Exclusion (e)
should not be interpreted to exclude coverage under the CGL policy because the
CGL policy does not adopt the definitions of the Employer’s Liability policy and
therefore Exclusion (e) creates ambiguities that must be resolved in favor of
coverage.
We need not decide whether the definition of “Insured” and then-existing
Louisiana actions against executives potentially implicate the CGL policy,
because the CGL includes Exclusion (e) of the Employer’s Liability policy.
Assuming that the CGL policy is potentially applicable because of the viability
of actions asserted against executive officers of Buck Kreihs, we conclude that
Exclusion (e) excludes coverage of the asbestos-related employee claims under
this policy as well.
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No. 08-30954
The CGL policy also incorporates several exclusions from the Employer’s
Liability policy, including:
This insurance does not apply:
....
(e) Under Coverage B,5 to bodily injury by disease unless prior to
thirty-six months after the end of the Policy Period written claim is
made or suit is brought against the Insured for damages because of
such injury or death resulting therefrom. . . .
The CGL policy does not contain a definition of the term “bodily injury by
disease” and does not contain a provision adopting the definitions of the
Employer’s Liability policy.
“Each provision in a contract must be interpreted in light of the other
provisions so that each is given the meaning suggested by the contract as a
whole.” L A. C IV. C ODE art 2050. We see no reason that “bodily injury by disease”
should be defined one way in the Employer’s Liability policy and another in the
CGL policy, particularly as Buck Kreihs urges that we consider both policies
together as a cohesive whole. Arguably the interpretation of the phrase and
applicability of Riverwood is a closer question in the CGL policy because, unlike
the Employer’s Liability policy, it is not tied to workers compensation law, which
was part of the rationale of the Riverwood court in adopting a technical
definition of “accident” over the common definition to find the asbestos-related
claims to be bodily injury “by disease” rather than “by accident.” Riverwood Int’l
Corp., 420 F.3d at 383; L A. C IV. C ODE art. 2047 (requiring words in a contract to
be given their generally prevailing meaning, except that technical terms must
be given their technical meaning when the contract involves a technical matter).
However, Exclusion (e) is not an original, freestanding provision of the CGL, but
was instead attached, along with eight other exclusions, verbatim from the
5
In the Employers Liability policy, Coverage B refers to Employer’s Liability, as
opposed to Coverage A: Workmen’s Compensation.
8
No. 08-30954
Employer’s Liability policy. If in adding Exclusion (e) to the CGL policy the
parties had intended “bodily injury by disease” to mean something different from
what it means in the Employer’s Liability policy from which it was adopted, they
would have defined the provision as necessary to make that distinction.
C. Public Policy
Finally, Buck Kreihs argues that the Chicago policies cannot be
interpreted to exclude coverage of the former employees’ asbestos claims because
the exclusions and limitations that Insurers invoke conflict with public policy.
Insurers counter that Buck Kreihs must be held to a reasonable expectation of
coverage standard in light of the plain language of the policies. Insurers further
note that there is no evidence that Buck Kreihs attempted to obtain coverage for
long-term exposure.
“Unless there is a conflict with statutory provisions or public policy,
insurers are entitled to limit their liability and to impose and enforce reasonable
conditions upon the policy obligations they contractually assume.” Anderson v.
Ichinose, 760 So. 2d 302, 306 (La. 1999). Louisiana courts have rejected the
proposition that the application of a defined-length reporting requirement, such
as the thirty-six-month period in Exclusion (e), contradicts public policy. See
Hubbs v. Anco Insulations, Inc., 747 So. 2d 804, 806-07 (La. Ct. App. 1999)
(holding thirty-six-month reporting requirement in exclusion of coverage for
bodily injury by disease did not violate public policy because there was no
evidence that insured reasonably expected coverage for long-term exposure
claims, relying on Anderson, 760 So. 2d at 304, n.3, n.4); cf. Anderson, 760 So. 2d
at 306-07 (holding that there was no public policy violation by professional-
liability insurance policy provision requiring claims to be made and reported
during the policy period).
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No. 08-30954
III. CONCLUSION
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
10