Exxon Corporation v. St Paul Fire ( 1998 )

REVISED
February 25, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-31309
EXXON CORPORATION,
Plaintiff-Appellee,
versus
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
December 5, 1997
Before REAVLEY, BARKSDALE, and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Appellant St. Paul Fire and Marine Insurance Company (“St. Paul”) appeals the denial of its
motion for summary judgment and the grant of appellee Exxon Corporation’s (“Exxon’s”) motion
for partial summary judgment. St. Paul contends that the district court erred in (1) its refusal to stay
this action pending the outcome of underlying state court personal injury actions, (2) its grant of
summary judgment in favor of Exxon on the attorney’s fees issue, and (3) its declaration that there
are five occurrences of injury under the insurance policy rather than one. In response, Exxon filed
a motion to dismiss the appeal. For the following reasons, we deny Exxon’s motion to dismiss the
appeal and we affirm the district court’s ruling regarding its grant of summary judgment in favor of
Exxon.
Factual Background
In April 1989, Exxon closed a surface impoundment at its gas treating facility in Flomaton,
Alabama. In order to dispose of the sludge that had accumulated at the facility, Exxon contracted
with Land Treatment Systems, Inc. (“LTS”) to receive the sludge at its waste facility near Morgan
City, Louisiana. Exxon entered into a Bareboat Charter Party with McDonough Marine Service,
a division of the Marmac Corporation (“Marmac”) for the transportation of the sludge. Under
the terms of the contract, Marmac provided insurance coverage to Exxon, naming Exxon as an
additional assured and Exxon provided hull, protection & indemnity (“P&I”), and water pollution
insurance. St. Paul was the insurance carrier.
The barge was manned by its captain and a deckhand. The barge was met by four
employees of LTS, who collected the sludge and transported it to the disposal site. Subsequently,
the two barge crewmembers and three of the LTS employees brought suit against Exxon claiming
that they had suffered personal injuries as the result of inhaling the fumes from the sludge. Exxon
notified St. Paul of the lawsuits, however, St. Paul denied coverage.
After settling one of the claims, Exxon and St. Paul agreed to settle their coverage dispute
and to jointly fund settlements or pay judgments in each of the five cases. After a second case
was settled pursuant to this agreement, a dispute arose between Exxon and St. Paul as to whether
St. Paul’s policy limit of $500,000 applied to the settlement agreement. Exxon then filed suit in
federal district court seeking a declaratory judgment against St. Paul, asking the court to
2
determine: (1) that the policy provided Exxon coverage for the five claims; (2) that the payment
of attorney’s fees in defending the claims did not reduce the policy’s limit of liability; (3) that each
of the five claims was a separate “occurrence” under the policy; and (4) that St. Paul breached its
duty of good faith and fair dealing.1 At the time Exxon filed its motion, three of the five actions
were still pending in Louisiana state court and St. Paul was not and is not a party to any of these
actions.2 Exxon’s federal suit was assigned to Judge Okla Jones, who ordered both parties to file
cross-motions for summary judgment on the coverage issue.3 Judge Jones died while the motion
was pending and Judge Stanford Duval was assigned to the case. On March 15, 1996, Judge
Duval granted Exxon’s motion for partial summary judgment and denied St. Paul’s. St. Paul then
filed a motion for a new trial and/or for rehearing and reconsideration and refiled its motion for a
stay pending judgment in the state court actions. The motion was denied. The court then ordered
the parties to file cross-motions for summary judgment on the issue of the number of occurrences.
On November 14, 1996 the court issued a final judgment in favor of Exxon on the coverage issue,
the effect of attorney’s fees on the limit, and the number of occurrences. St. Paul timely appealed
from the final judgment entered by the district court on November 15, 1996. Thereafter, Exxon
filed a motion to dismiss the appeal.
1
Two of the plaintiffs proceeded to trial together in Louisiana state court asserting claims
under Louisiana state law. In that case, Judge McNulty concluded that plaintiffs’ only remedy was
under maritime law. On appeal, the First Circuit Court of Appeals for Louisiana concluded that the
issue of whether plaintiffs were longshoremen was a question for the jury resulting in the possibility
that plaintiffs could recover under state law.
2
Since that time, one additional action has been settled. Currently, there are two unsettled
actions.
3
According to St. Paul, Judge Jones was unaware that the First Circuit Court of Appeals had
reversed Judge McNulty’s ruling.
3
Exxon’s Motion to Dismiss
Before addressing the substance of St. Paul’s claim, we must first address Exxon’s motion
to dismiss St. Paul’s appeal. Exxon argues that St. Paul’s appeal should be dismissed because the
district court orders dated August 9, 1995 and June 5, 1996 refusing to stay the action were
interlocutory orders not immediately subject to appellate review. Because of the district court’s entry
of a final judgment in this matter on November 15, 1996, however, Exxon’s argument is
unpersuasive. It is a well-settled rule of law that an appeal from a final judgment raises all antecedent
issues previously decided. Dickinson v. Auto Center Manufacturing Company, 733 F.2d 1092, 1102
(5th Cir. 1983). Thus, once a final judgment is entered, all earlier non-final orders affecting that
judgment may properly be appealed. Exxon argues in the alternative that should this court accept
jurisdiction over St. Paul’s appeal, it must nonetheless dismiss St. Paul’s appeal for untimeliness.
Exxon grounds this argument upon its own flawed timeline, failing to note once again that St. Paul
is appealing the final judgment and not the interlocutory orders. Exxon’s argument is without merit.
St. Paul’s appeal based on the district court’s final judgment is timely.4 We therefore conclude that
we have appellate jurisdiction over this case.
St. Paul’s Claims
We now turn to the district court’s denial of St. Paul’s motion to stay the federal court
proceedings and its grant of partial summary judgment to Exxon. St. Paul argued before the district
court that it would be more appropriate for the issues of coverage, policy interpretation, and bad faith
to be litigated in each of the state court proceedings before entering the federal litigation phase of this
claim. The district court denied that motion and we affirm its decision. Further, the district court
4
Fed. R. App. P. 4(a)(1).
4
awarded partial summary judgment to Exxon regarding the issue of whether attorney’s fees are
covered under the policy. We also affirm this ruling.
5
Standard of Review
We note the proper standards of review for both aspects of this claim. The district court’s
action on a request for a stay is a matter of judgment and it is reviewed by the Court of Appeals only
for abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 115 S. Ct. 2137 (1995). We review
a district court's grant of summary judgment de novo, applying the same standard of review as would
the district court. See, e.g., Melton v. Teachers Ins. & Annuity Ass'n of Am., 114 F.3d 557, 559 (5th
Cir.1997); Dawkins v. Sears Roebuck and Co., 109 F.3d 241, 242 (5th Cir.1997) (citing Cockerhan
v. Kerr-McGee Chem. Corp., 23 F.3d 101, 104 (5th Cir.1995)). Summary judgment should be
granted if there is no genuine issue of material fact and the moving party is entitled to judgment as
a matter of law. Kinsey v. Farmland Industries, Inc., 39 F.3d 603 (5th Cir. 1994) (quoting
Fed.R.Civ.P. 56(c)).
St. Paul’s Motion to Stay
St. Paul sought to stay the instant proceedings based on the Supreme Court’s decision in
Wilton. In that case, the Supreme Court upheld a district court’s decision to stay a federal
declaratory judgment action in favor of pending state court litigation on parallel issues in order to
avoid piecemeal litigation and to prevent forum shopping. In the instant case, St. Paul argued before
the district court that the issue of coverage was not ripe for summary judgment because Exxon’s
negligence had not yet been determined in the state court proceedings. St. Paul further argues on
appeal that though the “specific issues of coverage for Exxon and St. Paul’s alleged bad faith were
not present in the state court personal injury actions, what the state court had to say about the basis
of Exxon’s liability, if any, would not only be relevant to, but potentially dispositive of, Exxon’s
contention that it could only be liable in the capacity of a vessel owner.”
6
The district court concluded that Exxon was acting as “vessel owner” and that there was a
“causal connection” between the insured vessel and the injuries suffered which entitled Exxon to
coverage for the personal injury claims asserted by the five plaintiffs. However, on appeal, St. Paul
contends that the district court reversibly erred in deciding this issue prior to a determination of
liability in the state court actions. Exxon rejects this argument, asserting that St. Paul’s contention
is not supported by law and if adopted by the court, would preclude a determination of liability in the
three claims that have already been settled.
St. Paul’s suggestion that determination of Exxon’s liability in the state court suits is a
prerequisite to a determination of coverage in this case is not supported by law. Indeed, the district
court found the instant case distinguishable from Wilton because the federal and state causes of action
do not encompass the same issues. This circuit has clearly held that in order to consider the propriety
of a stay pending disposition of state court actions, the federal and st ate cases must be parallel,
meaning t hat they involve the same parties and the same issues. Hartford Accident & Indemnity
Company v. Costa Lines Cargo Services, Inc., 903 F.2d 352, 360 (5th Cir. 1990) (internal citations
omitted); Mendiola v. Hart, 561 F.2d 1207, 1208 (5th Cir. 1977). As Exxon notes, there are no
parallel state court proceedings where the issues of coverage, policy interpretation, and bad faith are
being litigated. The underlying state court proceedings are strictly personal injury actions to which
St. Paul is not a party. Thus, we conclude that the district court was well within its discretion in
refusing to stay the instant proceedings.
Exxon maintains that a finding of liability is not necessary for it to recover under an insurance
policy of this type. In an attempt to establish that a determination of actual liability is not required
to recover under an indemnification policy, Exxon relies on Wisconsin Barge Line, Inc. v. Barge
7
Chem 300, 546 F.2d 1125 (5th Cir. 1977) and Terra Resources v. Lake Charles Dredging & Towing,
695 F.2d 828 (5th Cir. 1983). In these cases, this court recognized that the general rule requiring “an
indemnitee . . . [to] establish actual liability on his part to recover from an indemnitor” is not absolute
and that an indemnitee may recover indemnity if he is able to demonstrate that he has either (1)
tendered the defense of the action to the indemnitor, (2) the claim for indemnity is founded upon
judgment, or (3) the indemnitee’s claim is based upon a written contract of insurance or
indemnification. Id. at 832.
The instant case readily falls within the third exception to the general rule—that Exxon’s claim
is based upon a written contract for insurance or indemnification. The insurance policy in question
specifically provides that:
It is agreed that if the Assured, as ship owners, shall have become
liable to pay, and shall have in fact paid, any sum or sums in respect
of any respo nsibility, claim, demand, damages and/or expenses or
shall become liable for and shall pay any other loss arising from or
occasioned by . . . loss of life or personal injury . . . We will . . . pay
to the Assured such proportion of the sum or sums so paid for such
loss . . .
There can be no question that Exxon already has become liable to pay damages to three of the five
plaintiffs in the underlying personal injury actions as the result of settlement agreements. Thus, a loss
has been suffered that is covered by the terms of the insurance contract and under that contract, St.
Paul is required to indemnify Exxon for its damages.
Attorney’s Fees under the Insurance Policy
The second major element of St. Paul’s appeal centers on the issue of attorney’s fees. In its
motion for summary judgment, St. Paul sought a declaration as a matter of law that the insurance
policy in question provides for the deduction of attorney’s fees and defense costs from the policy
8
limit. Exxon opposed St. Paul’s motion and contended that the plain language of the policy does not
provide for the deduction of attorney’s fees and defense costs. In denying St. Paul’s motion for
summary judgment, the court essentially treated Exxon’s opposition of St. Paul’s motion as a cross-
motion for summary judgment and entered judgment in favor of Exxon. On appeal, St. Paul argues
that the district court (1) improperly entered summary judgment in favor of Exxon when it had not
requested such action and (2) erred in construing the policy to exclude attorney’s fees and defense
costs from the aggregate limit.
In order to understand the district court’s grant of summary judgment in this instance, it is
important to examine the underlying policy implications that govern such relief. Federal Rule of Civil
Procedure 56 provides the requirements for submission of a motion for, and subsequent grant of
summary judgment. The Advisory Committee Notes to the rules indicate that the policy goal that
animates Rule 56 is the prompt disposition of cases when there is no genuine issue of any material
fact for the court to consider. In order to achieve this goal, the rule thus requires a court, under the
proper conditions, to grant the relief to which a party is entitled even if the party has not demanded
such relief. In Matter of Caravan Refrigerated Cargo, Inc., this court further explained the role of
a district court in granting summary judgment. This court noted that “a district court may grant
summary judgment for the non-movant sua sponte.” 864 F.2d 388, 393 (5th Cir. 1989). The court
further suggested that “when ‘one party moves for summary judgment the district court, in an
appropriate case, may grant summary judgment against the movant, even though the opposite party
has not actually filed a motion for summary judgment.’” Id. at 393 (internal citation omitted). The
doctrine of this Circuit, permitting the grant of summary judgment, in the appropriate case, when
there is no genuine need for trial—even if such action was not requested in the summary judgment
9
papers—is compatible with the purpose of the rule. Examination of the ruling of the district court
in the instant case indicates that it, too, was compatible with this Circuit’s precedent as well as the
underlying purpose of the rule. Thus, we hold that the district court’s grant of summary judgment
was proper.
That Exxon did not file a proper motion for summary judgment does not preclude the district
court in the instant action from granting summary judgment in its favor. St. Paul contends, however,
that in order for the district court to grant summary judgment to a non-moving party pursuant to Rule
56(c), there must be (1) no issue of material fact that precludes summary judgment and (2) the court
must provide proper notice to the adverse party of its intention to grant summary judgment against
it. St. Paul maintains that the district court’s finding of ambiguity in the insurance policy indicates
that there was a genuine material issue of fact. We find this argument without merit. The
interpretation of the policy is a purely legal issue which turns on specific policy language. What the
policy does or does not say is not a factual, but a legal dispute. St. Paul alleges that it was not
provided notice of the district court’s intention to render summary judgment on the attorney’s fees
issue as required by Rule 56(c), thus depriving it of the opportunity to submit affidavits and other
materials that would demonstrate the existence of genuine issues of material fact precluding summary
judgment. As Exxon points out, St. Paul had ample opportunity to present all evidence of disputed
issues of material fact. The fact that St. Paul did not object to the district court’s action or request
a new trial or rehearing on its motion indicates that St. Paul had no further evidence to present or
argument to make regarding any material dispute of fact.
The second element of St. Paul’s argument involving the grant of summary judgment is the
district court’s interpretation of the insurance policy. St. Paul cont ends that the policy contains a
10
separate duty to defend and that the district court erred in treating it as if it were a standard liability
policy. The indemnity policy in question defines the amount that the insurer will pay in the following
terms:
We will, subject to the reservations herein mentioned, pay to the
Assured such proportion of the sum or sums so paid, for such loss, as
our respective subscriptions bear to the policy value of the ship hereby
insured, and in case the liability of the Assured has been contested,
with the consent in writing of two-thirds of the Underwriters on the
ship hereby insured in the amount, we will, subject to the conditions
of the policy, also pay a like proportion of the costs which the
Assured shall thereby become liable for and shall pay.
In paragraph 10 entitled “Limit of Liability,” the P&I policy provides,
Notwithstanding anything contained herein to the contrary, it is understood
and agreed t hat the total aggregate limit of liability of this Section III is
$500,000. Or hull value, whichever is greater, all claims, costs and expenses
arising out of any one accident or occurrence regardless of the number of
vessels or coverages involved. Irrespective of this limit, the limit as respects
an Additional Assured will not exceed the limit agreed to in the Charter Party.
It is further understood and agreed any applicable deductible amount is to be
included within the aggregate limit amount.
In the subject case, the district court held that “because the policy language does not explicitly include
‘fees’ or ‘costs in defending this claim’ in this clause and because the costs of defense are couched
in terms of the insurer ‘also paying’ these costs,” the policy limit was not comprehensive and did not
include all defense costs and expenses. On appeal, St. Paul asserts that this holding was in error and
that legal costs are a part of the policy limits to be included in the exhaustion of protection and
indemnity or liability policies. See Taylor v. Lloyd’s Underwriters of London, 1994 WL 118303
(E.D. La. March 25, 1994). Louisiana state courts have held that, “[i]t is the general law and practice
in Protection and Indemnity insurance for legal expenses incurred in defending a liability covered by
the policy to be treated as part of the overall claim. That claim [inclusive of legal expenses] is limited
11
by the amount insured in the primary policy.” See id. (citing Leslie Buglass, Marine Insurance and
General Average in the United States, 415 (3rd Ed. 1991)). Moreover, this circuit has previously
held that “indemnification agreements contemplate payment for attorney’s fees incurred in litigation
with third parties concerning the matter indemnified against, regardless of whether they say so.” E.C.
Ernst, Inc. v. Manhattan Construction Co., 551 F.2d 1026, 1037 (5th Cir. 1977) (holding that the
term “costs” is broad enough to encompass recovery of relevant attorney’s fees). Inclusion of
attorney’s fees is presumed to have been the intent of the drafter unless the agreement explicitly says
otherwise. Id. at 1038.
Exxon brings to our attention Offshore Logistic Services, Inc. v. Mutual Marine Office, Inc.,
462 F. Supp. 485, 495 (E.D. La. 1978), to support the contention that the issue of deductiblity of
defense costs from the limit of liability in a marine protection and indemnity policy must be decided
by analyzing the specific policy language. Exxon further argues that if such a policy provision is
found to be ambiguous, it is to be construed against the drafter and in favor of the insured. Reynolds
v. Select Properties, Ltd., 634 So. 2d 1180, 1183 (La. 1994). Because both limit of liability clauses
in the policy in question are silent as to the deductibility of attorney’s fees and defense costs, the
ambiguity is to be construed in favor of the insured and a provision which seeks to narrow an
insurer’s obligation is to be construed against the insurer. Id. Therefore, we affirm the district
court’s holding and conclude that St. Paul’s position that attorney’s fees can be deducted from the
policy limit is not supported by the words of the insurance policy itself.
The Number of Occurrences or Accidents Covered under the Policy
St. Paul’s third and final argument asks us to decide whether the district court erred in
determining that the perso nal injuries underlying this action constituted five (5) occurrences or
12
accidents within the insurance policy. St. Paul contends that the district court erred in affording
Exxon “special interpretation of this policy favoring coverage.” St. Paul suggests that the number
of occurrences should be determined by the causes rather than the injury. Under this reasoning, St.
Paul would have the court determine that there was one (1) occurrence rather than five (5). St. Paul
argues that the district court’s holding is in error particularly because of Exxon’s size and concurrent
“deep pockets,” which would allow it to provide for uncovered claims. The district court was not
persuaded by this argument and noted that in the case of Lombard v. Sewerage and Water Board of
New Orleans, 284 So. 2d 905 (La. 1973), the Louisiana Supreme Court interpreted the term
occurrence in just such a repeated exposure situation. That court determined that “when the separate
property of each plaintiff was damaged by a series of events, one occurrence was involved insofar as
each property owner was concerned.” Id. at 915. Comparing the facts in Reynolds v.
Transcontinental Insurance Company, 1995 W.L. 16795 (E.D. La. Jan. 17, 1995) to those in the
instant case, Exxon argues that because the alleged injuries were discrete and occurred over a period
of time, they should properly be considered separate occurrences. Further, Exxon argues, because
the St. Paul policy contains no definition of occurrence, the ambiguity of the contract should be
resolved in favor of the insured. We find this argument persuasive and conclude that the district court
did not err in its interpretation of the policy.
13
Conclusion
Exxon’s motion to dismiss St. Paul’s appeal is denied. We find that the district court’s
denial of St. Paul’s motion to stay the federal proceedings, as well as its grant of partial summary
judgment to Exxon were proper. For the foregoing reasons, we AFFIRM the judgment of the
district court.
14