Intl Insurance Co v. RSR Corporation , 426 F.3d 281 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED OCTOBER 18, 2005
September 19, 2005
UNITED STATES COURT OF APPEALS
For the Fifth Circuit Charles R. Fulbruge III
Clerk
No. 04-10311
INTERNATIONAL INSURANCE CO.,
Plaintiff-Counter Defendant-Appellant,
VERSUS
RSR CORPORATION, ET AL,
Defendants,
RSR CORPORATION; QUEMETCO, INC.; QUEMETCO METALS LIMITED, INC.;
formerly known as MURPH METALS, INC.,
Defendants-Counter Claimants-Appellees.
Appeal from the United States District Court
For the Northern District of Texas
Before WIENER, BARKSDALE and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
The principal issues in this case are whether the jury’s
finding that a claim was made under a claims-made Environmental
Impairment Liability (“EIL”) insurance policy was (1) properly
guided by an instruction that defined a “claim” as “an assertion by
a third party ... that the insured is liable to it for damages....”;
and (2) supported by (a) undisputed facts and conclusions of law:
1
the substantial lead pollution on Harbor Island near Seattle
emanating from the insured’s lead smelting establishment; the
Environmental Protection Agency (“EPA”)’s listing of Harbor Island
on the National Priorities List; the liability of the insured under
the Comprehensive Environmental Response, Compensation and Liability
Act (“CERCLA”), 42 USCA §9601, et seq., to the EPA for the cost of
environmental remediation on Harbor Island; the virtual certainty
of further investigative or enforcement actions by the EPA in
respect to Harbor Island; and (b) the uncontested extrinsic evidence
that, under the parties’ interpretation of the insurance contract,
a claim was made by the EPA against the insured and reported to the
insurer during the policy period in respect to the lead pollution
on Harbor Island.
The EIL insurer, International Insurance Company
(“International”), appeals from a judgment based on the jury verdict
in favor of its insureds, RSR CORPORATION; QUEMETCO, INC.; QUEMETCO
METALS LIMITED, INC.; formerly known as MURPH METALS, INC.;
BESTOLIFE CORPORATION; and REVERE SMELTING & REFINING CORPORATION
OF NEW JERSEY (collectively,“RSR”), declaring that International is
obliged under the EIL policy to indemnify RSR for any remediation
costs and expenses RSR is obligated to pay to the EPA, with respect
to the EPA’s remediation of lead pollution at the Harbor Island
site. Applying Texas law to this diversity case, we affirm,
concluding that under the circumstances of this case the evidence
is sufficient to support the jury’s determination that a claim was
2
made against RSR by the EPA within the EIL policy coverage period;
and that the errors attributed to the district court in pre-trial
rulings and jury instructions were either not proven or harmless
because they could not have affected the outcome.
I. BACKGROUND
International Insurance Company is the successor-in-interest
of North River Insurance Company (“North River”), which issued the
EIL policy to RSR and other related entities in 1981. The EIL
policy had a policy period of September 4, 1981 to November 4, 1982,
with an extended reporting period until November 4, 1983. In
December 1982 the EPA announced in a press release that Harbor
Island would be placed on its proposed National Priorities List
(“NPL”). RSR notified North River orally and in writing of the
EPA’s placement of Harbor Island on the proposed NPL. On or about
January 6, 1983, RSR forwarded by way of its insurance broker, to
North River, a copy of the press release issued by the EPA dated
December 20, 1982. In the mid-to-late 1980's, North River’s counsel
requested from Clarice Davis, RSR’s counsel, the status of the
Harbor Island EPA matters to which RSR had given North River notice
under the EIL policy. RSR’s counsel complied with the request by
sending North River’s counsel status reports regarding EPA activity
relating to Harbor Island. On September 8, 1983 the EPA placed the
Harbor Island site on its final NPL. In the listing, the EPA
explained that “[p]ublication of sites on the final NPL will serve
as notice to any potentially responsible party (“PRP”) that the
3
Agency may initiate Fund-financed response actions.” 48 Fed. Reg.
40658-40673. In late 1983, RSR sold the Harbor Island lead smeltery
to Bergsoe Metals, which was owned by East Asiatic. On July 31,
1986 the EPA determined that Quemetco Realty, Inc., one of the RSR
entities, was a potentially responsible party with respect to the
environmental impairment of Harbor Island. The EPA requested
information from Quemetco as to the ownership of the site and the
activities being performed there along with other salient facts.
The letter stated that as a potentially responsible party, Quemetco
may be liable for all monies expended for corrective actions at the
site. On May 22, 2000 the EPA filed a CERCLA action against RSR in
federal district court for the Western District of Washington,
seeking recovery from RSR for response costs that the EPA expended
in remedial action at Harbor Island, as well as for any future costs
it expends at Harbor Island. The EPA seeks in excess of $8 million
in recovery of its response costs at Harbor Island. The complaint
was not served on RSR until the summer of 2000. At certain points
in time, RSR believed that the EPA would not hold it liable for the
Harbor Island response costs, because Bergsoe Metals, in purchasing
the lead smelting facility, had agreed to indemnify and reimburse
RSR for such costs; and RSR believed that a jury had found that East
Asiatic was the alter ego of Bergsoe Metals.
International filed this action in the federal district court
in the Northern District of Texas on February 2, 2000, seeking a
declaratory judgment that International was not obliged to indemnify
4
or reimburse RSR for CERCLA remediation costs at West Dallas; RSR
filed a counterclaim against International for a declaratory
judgment that it was entitled to coverage for the EPA’s costs of
environmental remediation of both West Dallas and Harbor Island; and
International amended its petition to request a declaratory judgment
that it was not required to afford coverage to RSR for the EPA’s
remediation costs at either West Dallas or Harbor Island.1
International moved for summary judgment contending that it was not
obligated to indemnify RSR for such remediation costs. The district
court denied International’s motion because issues of material fact
existed regarding whether the EPA had made a “claim” against RSR in
connection with the Harbor Island site during the policy period and
whether RSR had waived its right to coverage for the site.
At trial, two issues were submitted to the jury to decide in
answer to interrogatories; all other issues were reserved for
decision by the court. After the close of evidence, the jury
returned its verdict finding that the EPA made a claim upon RSR for
environmental response costs during the EIL policy coverage period;
and that International had not proved that RSR waived its right to
coverage under the EIL policy. Based on these findings and the
evidence introduced at trial the district court rendered a
1
The district court separately tried and rendered a
declaratory judgment pertaining to coverage issues under the EIL
policy in respect to the environmental impairment related to RSR’s
lead smeltery at West Dallas. International and RSR appealed from
the parts of the judgment adversely affecting each of them, and
those appeals will be decided in No. 03-11272 on our docket.
5
declaratory judgment decreeing that International was contractually
obligated to indemnify RSR against its liability to the EPA for the
costs of remediation under CERCLA of the environmental impairment
at Harbor Island. The district court denied International’s motions
for judgment as a matter of law and for a new trial. International
timely appealed.
II. ISSUES ON APPEAL
International raises six issues on appeal, contending that: (1)
The definition of “claim” in the district court’s jury charge was
legally erroneous because it did not require that the jury find, in
addition to an assertion by the EPA of RSR’s liability to it, that
the EPA demanded money or action from RSR; (2) the supplemental jury
instruction misled and confused the jury because it conflicted with
the definition of “claim” in the jury charge; (3) the evidence was
insufficient to support a jury finding that the EPA asserted that
RSR was liable to it for damages within the risks covered by the EIL
policy; (4) the district court abused its discretion in admitting
the testimony of John Morrison because it contained privileged
attorney-client communications; (5) the district court abused its
discretion in excluding an excerpt from the deposition of Donald
Brayer as evidence of his expert opinion; and (6) the jury’s finding
that RSR did not waive its right to coverage under the EIL policy
was contrary to the great weight and preponderance of the evidence.
6
III. ANALYSIS
A. The EIL Policy
The EIL policy provides two types of coverage relevant to this
case: (1) indemnification of the insured against liability for
environmental impairment damages; and (2) reimbursement of the
insured for costs and expenses of its voluntary cleanup operations
performed with the insurer’s consent.
First, in Insuring Agreement 1, the insurer agrees to indemnify
the insured against all sums that the insured shall be obligated to
pay for damages by reason of liability imposed on the insured by law
on account of:
(a) Personal injury;
(b) Property damage;
(c) Impairment or diminution or other interference with
any other environmental right or amenity protected by
law;
arising within the Territorial limits designated in the
Declarations [here, the United States] and caused by
Environmental impairment in connection with the Business
of the insured at the locations designated in the
Declarations in respect to which a claim has been made
against or other due notice has been received by the
insured during the Policy Period.
Second, in Insuring Agreement 3, the insurer promises to
reimburse the insured for costs and expenses of
operations outside the insured’s premises designed to
remove, neutralize, or clean up any substance released or
escaped which had caused Environmental impairment, or
could cause Environmental impairment if not removed,
neutralized, or cleaned up, to the extent that such costs
and expenses have been incurred or have become payable by
the insured as a result of a legal obligation or in the
endeavor to avert a loss covered by the Policy, provided
7
that such costs and expenses, except in respect of
emergency measures undertaken to avert loss, are incurred
with prior written consent of insurer, such consent not
to be unreasonably withheld.
The EIL policy does not explicitly define “claim.”2
Nevertheless, the policy limits coverage to sums the insured is
liable for because of environmental impairment causing personal
injury, property damage, damage to environmental rights “in respect
to which a claim has been made against or other due notice has been
received by the insured during the Policy Period.”(underline added).
And the policy contains a condition which provides: “Notification
of Claims: “The insured upon knowledge of any accident or occurrence
likely to give rise to a claim hereunder shall give written notice
to the Company or its nearest authorized representative as soon as
practicable.”(underline added).
The EIL policy coverage provisions correspond to the
recognition by a majority of federal and state courts that “damages”
2
The policy includes a provision labeled “definition of
claim” which fails to define the term comprehensively. That
provision merely states that a claim “comprises any single claim or
any series of claims from one or multiple claimants resulting from
the same isolated, repeated, or continuing environmental
impairment.” According to Todd I. Zuckerman and Mark C. Rasskoff,
2 ENVIRONMENTAL INSURANCE LITIGATION LAW AND PRACTICE § 11:3 (2001), one
commonly used EIL policy form specifically defined claim as
follows: “Claim means, whenever used in this policy, a demand
received by the insured for money or services, including the
service of suit or institution of arbitration proceedings against
the insured.” Id. § 11:3 at 11-4. “Reprinted with permission.
Copyright Insurance Services Office, Inc., 1984.” Id. at 11-3 n. 1.
Evidently, some companies in the insurance market regarding
pollution liability insurance were aware of the ambiguity of the
term “claim” and the need for an insurer to specifically define it
in the policy if the insurer wished it to be understood in the
sense most favorable to the insurance company.
8
under CERCLA include environmental response, remediation and cleanup
costs payable by insureds because of potential or actual legal
proceedings by the EPA or other third parties.3 For example, under
Texas law, environmental remediation or cleanup costs are “damages”
within the meaning of an insurance policy that provides indemnity
for all sums which the insured is obligated to pay by reason of
liability imposed by law for damages, whether incurred by the
federal government under CERCLA or by an individual who voluntarily
undertakes the task of cleaning up hazardous waste. SnyderGeneral,
113 F.3d at 539 (“[Environmental cleanup costs, whether incurred by
the government under CERCLA or by an individual who voluntarily
undertakes the task of cleaning up hazardous waste, are damages and
are thus covered by the language of Century’s policy.”); Bituminous,
75 F.3d at 1053 (“Under the Texas rule that uncertainties as to
insurance coverage ... should be decided in favor of the insured,
we conclude that government cleanup costs incurred in responding to
3
See SnyderGeneral Corp. v. Century Indem. Co., 113 F.3d 536,
539 (5th Cir. 1997); Bituminous Cas. Corp. v. Vacuum Tanks Inc., 75
F.3d 1048, 1053 (5th Cir. 1996); Independent Petrochemical Corp. v.
Aetna Cas. & Sur. Co., 944 F.2d 940, 946-47 (D.C. Cir. 1991); Aetna
Cas. and Sur. Co. v. Pintlar Corp., 948 F.2d 1507, 1511-12 (9th
Cir. 1991); United States Aviex Co. v. Travelers Ins. Co., 336
NW.2d 838, 843 (Mich. App. 1983)(distinction between government
recover for cleanup costs and natural resources damages “merely
fortuitous”); Anderson Dev. Co. v. Travelers Indem. Co., 49 F.3d
1128, 1133 (6th Cir. 1995)(“[R]esponse and environmental clean-up
costs mandated by EPA constitute damages. The fact that the
insurer cooperates and assumes the obligations to conduct the
clean-up, rather than forcing the EPA to incur the expenses of a
clean-up and then bring a coercive suit, does not change the bottom
line that a legal obligation exists.”); Morton Intern., Inc. v. G.
General Acc. Ins. Co. of Am., 629 A.2d 831, 845 (N.J. 1993); see
also 46 TEX. PRAC., ENVIRONMENTAL LAW § 33.8 (2d ed).
9
the dumping of hazardous waste on property, and imposed on the
insured by CERCLA, are covered by the language in the policy....”).
Today, a majority of courts have abandoned the technical
legal/equitable distinction between types of damages altogether and
have found that “damages” may include “response costs” “cleanup
costs” and costs of remediation under CERCLA; and that contamination
to air, soil and groundwater resulting from pollution can properly
be characterized as “property damage.”4
4
See, e.g., Gerrish Corp. v. Universal Underwriters Ins. Co.,
947 F.2d 1023 (2d Cir. 1991); New Castle County v. Hartford Acc. &
Indem., 933 F.2d 1162 (3d Cir. 1991); Avondale Indus. Inc. v.
Traveler’s Indem. Co., 887 F.2d 1200, 1206-07 (2d Cir. 1989); Port
of Portland v. Water Quality Ins. Syndicate, 549 F. Supp. 233 (D.
Or. 1982) aff’d in part and rev’d in part 796 F.2d 1188 (9th Cir
1986); Zuckerman and Rasskoff, 2 ENVIRONMENTAL INSURANCE LITIGATION LAW
AND PRACTICE at § 3.5.
In cases discussing environmental coverage, most courts have
found policies to cover an insured’s voluntary cleanup of the
contamination prior to government demand and money owed to the
government after it intervenes. See, e.g., Port of Portland, 549
F. Supp. 233; Metex Corp. v. Federal Ins. Co., 675 A.2d 220, (N.J.
1996); Weyerhaeuser Co. v. Aetna Casualty and Surety Co., 874 P.2d
142 (Wash. 1994) (en banc); Upjohn Co. v. New Hampshire Co., 444
N.W.2d 813, 819 (Mich. App. 1989), appeal granted in part, 435
Mich. 862 (Mich. App. 1990), and denied in part, 435 Mich. 864
(Mich. App. 1990), rev’d on other grounds, 438 Mich. 197, 476
N.W.2d 392 (1991) (explaining that it made “no different that the
insured took remedial action before being ordered to do so,” adding
that it was “clear from the damage caused by the spill that had
[the insured] not acted, the damages would have been much greater,”
and that such quick remedial action should be “encouraged”);
Broadwell Realty v. Fidelity & Cas. Co., 218 N.J. Super. 516, 528
A.2d 76 (N.J. App 1987); Compass Ins. Co. v. Cravens, Dargen & Co.,
748 P.2d 724 (Wyo. 1988).
A minority of courts have drawn distinctions between voluntary
cleanups, those mandated by administrative agencies and those
mandated by court order. See e.g., Certain Underwriters at Lloyd’s
of London v. Super. Ct., 16 P.3d 94, 103-05(Cal. 2001); Northern
Illinois Gas Co. v. Home Ins. Co., 777 N.E.2d 417, 421-22 (Ill.
App. 1st Dist. 2002).
10
Consequently, we conclude that our decisions in SnyderGeneral
and Bituminous apply with equal force to require coverage under
Insuring Agreement 1, when properly triggered, against damages
payable by the insured for environmental remediation under CERCLA
by the EPA. The EIL policy covers “all sums which the insured shall
be obligated to pay ... for damages by reason of the liability
imposed upon the insured by law on account of ... personal injury
... property damage ... [or] impairment of ... any other
environmental right....” Under the Texas rule that uncertainties
as to insurance coverage set out in the policy should be decided in
favor of the insured,5 we conclude that if a claim was made against
RSR within the policy period, the EPA’s costs of response, cleaning
and remediation imposed on RSR by CERCLA because of the lead
pollution at Harbor Island, are covered by this language in Insuring
Agreement 1 of the policy. Agreement 3 of the EIL policy provides
an ancillary type of first party insurance in the form of
“reimbursement [to the insured for its voluntary] costs and expenses
of operations outside [its] premises designed to remove, neutralize
or clean up any substances released” when undertaken with the prior
approval of the insurer. But in doing so, the policy manifests no
intent to create a technical category for “clean up,” “neutralizing”
or “removal” costs to be excluded from coverage for indemnity
against compulsory or involuntary liability to a third person for
damages under Agreement 1. Agreement 3 allows the insurer by
5
See Bituminous, 75 F.3d at 1053.
11
reimbursements to finance the insured’s immediate voluntary cleanup
efforts, which usually benefit both insureds and insurers by
mitigating delay, environmental damage, and remediation costs, but
also allows the insurer to exercise control over the insured’s
expenditures.
RSR seeks a declaratory judgment that it is entitled to
coverage under Insuring Agreement 1 for indemnity against any sum
it is held liable to pay in damages by the EPA under CERCLA because
of the lead pollution at Harbor Island. RSR has not performed any
voluntary operations to repair the environmental impairment of
Harbor Island and does not seek any reimbursement under Agreement
3.
The district court’s declaratory judgment and order denying
International’s motion to modify, alter and amend judgment are
consistent with our interpretation of the EIL policy, RSR’s
pleadings, the evidence of record, and the jury’s verdict. The
declaratory judgment, in pertinent part, decrees that:
“[International] is contractually obligated to indemnify RSR for any
remediation costs and expenses that RSR is or becomes obligated to
pay to the [EPA] with respect to the EPA’s remediation activity at
the Harbor Island site in Seattle, Washington ...” within the policy
limits and exclusions.
After the judgment was rendered, International moved to modify,
alter and amend it, contending that the judgment is overbroad and
grants RSR more relief than that to which it is entitled.
12
International contended that the only issues tried were the issues
submitted to the jury and that the issue of indemnification was not
before the court when the case went to trial. The district court
disagreed and pointed out that: In its counterclaim RSR specifically
sought a declaration that International was obligated to indemnify
RSR for claims arising out of the Harbor Island site. International
raised only the specific defenses submitted to the jury even though
the court had made it clear that International was to raise and try
any and all issues that could and should have been raised; and the
court also stated at that time that there was no need to piecemeal
the litigation any more than necessary. The district court in its
order stated: “Thus, the court disagrees with International that the
only issues tried were the issues submitted to the jury and that the
issue of indemnification was not before the court when the case went
to trial.”
Consequently, because the district court in approving the
pretrial order and in ruling on the motions for summary judgment
expressed the view that RSR was entitled to coverage for
indemnification against liability to the EPA only under Insuring
Agreement 3, we conclude that the district court in trying the issue
of indemnification that was not submitted to the jury may have
continued with that mistaken view of Insuring Agreements 1 and 3 or
realized that RSR is entitled to indemnification against EPA claims
under Agreement 1 instead of Agreement 3. In any event, we conclude
that the district court’s erroneous pre-trial contractual
13
interpretation error in this respect, if not corrected by the
district court itself, was harmless, because the district court
reached results in both its declaratory judgment and its post
judgment rulings that are consistent with the correct interpretation
of the policy.
B. Discussion of Issues
1. The District Court’s Jury Charge Defining “Claim” Was Not
Legally Erroneous; Does nNt Create Substantial and Ineradicable
Doubt Whether the Jury Was Properly Guided in its Deliberations;
and Could Not Have Incorrectly or Unjustly Affected the Outcome
of the Case.
International challenges the definition of the term “claim” the
district court provided to the jury in the jury instructions. The
district court arrived at the definition of “claim” it presented to
the jury by noting first that the insurance contract does not
contain a definition of “claim”; that Fifth Circuit precedent
providing that determination of whether a “claim” was made under a
claims-made policy that does not define the term requires a fact-
specific analysis on a case-by-case basis (citing Fed. Deposit Ins.
Corp. v. Mijalis, 15 F.3d 1314, 1331 (5th Cir. 1994)); and finally,
that Texas law instructs that insurance contracts are construed
strictly against the insurer if a term has more than one possible
meaning (citing Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d
455, 458 (Tex. 1997) and Adams v. John Hancock Mutual Life Ins.
Co., 797 F. Supp. 563, 567 (W.D. Tex. 1992)).
Thus, the district court found that, because the word “claim”
14
is ambiguous and not defined in the policy, Texas law required it
to apply that meaning of the word which is most favorable to the
insured. Accordingly, the district court instructed the jury that:
[T]he term “claim” means an assertion by a third party,
that in the opinion of the third party, the insured is
liable to it for damages within the risks covered by the
policy, whether or not there is reason to believe that
there actually is liability. An insured’s mere awareness
of a potential claim is not a claim. A claim does not
require the institution of formal proceedings.
There are three requirements that must be met to successfully
challenge a jury instruction.6 First, the challenger must
demonstrate that the charge as a whole creates “substantial and
ineradicable doubt whether the jury has been properly guided in its
deliberations.”7 Second, even if the jury instructions were
erroneous, we will not reverse if we determine, based upon the
entire record, that the challenged instruction could not have
affected the outcome of the case.8 Third, the appellant must show
that any proposed instruction it contends should have been given was
offered to the district court and correctly stated the law.
“Perfection is not required as long as the instructions were
generally correct and any error was harmless.”9 In sum, “[g]reat
latitude is shown the trial court regarding jury instructions.”
6
Taita Chem. Co. Ltd. v. Westlake Styrene, LP, 351 F.3d 663,
667 (5th Cir. 2001)(citing Mijalis 15 F.3d at 1318; Bender v.
Brumley, 1 F.3d 271, 276-77 (5th Cir. 1993)).
7
Mijalis, 15 F.3d at 1318 (quoting Bender, 1 F.3d at 276-
277).
8
Id.; Taita Chem., 351 F.3d at 667 (citing Bank One, Texas,
N.A. v. Taylor, 970 F.2d 16, 30 (5th Cir. 1992)).
9
Taita Chem., 351 F.3d at 667.
15
Federal Deposit Ins. Corp. v. Wheat, 970 F.2d 124, 130 (5th Cir.
1992).
In this diversity case the district court and this court must
apply the substantive insurance law of Texas. Erie v. Tompkins, 304
U.S. 64, 78-79 (1938); Am. Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d
319, 328 (5th Cir. 2001). Texas courts interpret insurance policies
according to the rules of contractual construction. Kelley-
Coppeledge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex.
1998). In applying these rules, a court’s primary concern is to
ascertain the parties’ intent as expressed in the language of the
policy. Id. Thus, the district court was required to give effect
to all contractual provisions so that none will be rendered
meaningless. Id. The undefined terms in an insurance policy are
to be given their ordinary and generally accepted meaning unless the
policy shows that the words were meant in a technical or different
sense. Sport Supply Group Inc. v. Columbia Cas. Co., 335 F.3d 453,
461 (5th Cir. 2003). If the contract is worded so that it can be
given a definite meaning, it is unambiguous and a judge must
construe it as a matter of law. Id. When a contract is reasonably
susceptible of more than one meaning, however, it is ambiguous and
a court should adopt a construction that favors the insured. Id.
at 461; Nat’l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d
552, 555 (Tex. 1991). Specifically, when a word or clause has more
than one meaning, the meaning favoring the insured must be applied.
TIG Specialty Ins. Co. v. Pinkmonkey.com Inc., 375 F.3d 365, 369-70
(5th Cir. 2004). Whether an insurance contract is ambiguous is a
16
question of law for the court to decide by looking at the contract
as a whole in light of the circumstances present when the contract
was entered. Kelley-Coppeledge, 980 S.W.2d at 464.
In applying the foregoing Texas rules, we reach substantially
the same results as did the district court. Standing alone, the
term “claim” is susceptible of more than one meaning.10 Lawyers
commonly use “claim” as a noun in at least three different senses:
(1) The aggregate of operative facts giving rise to a right
enforceable by a court; (2) The assertion of an existing right, such
as a right to payment or to an equitable remedy; (3) A demand for
money, property, or a legal remedy.11 Lay persons also use “claim”
as a noun having more than one meaning: (1) A demand for something
due or believed to be due; (2) A right to something, such as a title
to a debt, privilege or thing in the possession of another; (3) An
assertion open to challenge.12 The EIL policy does not expressly or
by implication specify which meaning is intended. Consequently, the
policy itself is also susceptible of more than one interpretation.
Accordingly, we construe the ambiguous noun “claim” using its
ordinary meaning that is most favorable to the insured in this case,
that is, as the “assertion of a right” to hold the insured liable.
10
“The word ‘claim,’ to adapt a felicitous phrase of Justice
Frankfurter, is one of those ‘words of many-hued meanings [which]
derive their scope from the use to which they are put.’” MGIC
Indem. Corp. v. Home State Sav. Ass’n, 797 F.2d 285, 288 (6th Cir.
1986) (quoting Powell v. U.S. Cartridge Co., 339 U.S. 497, 529
(1950) (Frankfurter, J. dissenting)).
11
See BLACK’S LAW DICTIONARY 264 (8th ed. 2004).
12
See MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 210 (10th ed. 1998).
17
This is essentially the meaning that the district court adopted when
it defined “claim” in the jury charge as “an assertion by a third
party, that in the opinion of the third party, the insured is liable
to it for damages within the risks covered by the policy[.]”
The Second Circuit Court of Appeals and a highly respected
insurance law treatise have adopted similar definitions in
construing the undefined term “claim” in claims-made policies
insuring against environmental liability. See American Insurance
Co. v. Fairchild Industries, Inc., 56 F.3d 435, 439 (2d Cir.
1995)(“Giving the term its ordinary meaning, a claim is an assertion
by a third party that in the opinion of that party the insured may
be liable to it for damages within the risks covered by the
policy.”)(emphasis added); Andy Warhol Foundation for Visual Arts,
Inc. v. Federal Ins. Co., 189 F.3d 208, 215 (2d Cir. 1999); See COUCH
ON INSURANCE § 191.10 (3d ed. 2000):
[A] “claim” is an assertion by a third party that, in the
opinion of that party, the insured may be liable to it
for damages within the risk covered by a policy, whether
or not there is reason to believe that there actually is
liability. Further, a claim may be made without
institution of formal proceeding. Virtually any
assertion of exposure to liability within the risk
covered by an insurance policy is a claim, unless the
assertion is made in circumstances so unusual that they
negate possibility of formal proceeding involving defense
costs as well as liability.
(footnotes omitted; emphasis added)(citing Fairchild, 56 F.3d at
435).
International contends that the district court’s jury
instruction was legally erroneous because it did not require the
jury to find that the EPA had made a demand of any kind on RSR. In
18
order to show that this is the conclusion that the district court
should have reached, however, International must demonstrate, at a
minimum, that the district court’s jury charge did not properly
guide the jury according to the controlling law of Texas. Having
failed to consider or discuss the jury instruction at issue in
relation to Texas law, International is not in a position to
demonstrate error in either the district court’s contractual
interpretation or the jury instruction derived therefrom.
Consequently, International has fallen far short of showing that
there is a substantial and ineradicable doubt whether the jury had
been properly guided in its deliberations.
International’s whole argument is a misdirected attempt to show
that the definition of “claim” in the jury instruction is
inconsistent with the decisions of courts applying the law of states
other than Texas to factual situations and insurance policy
provisions markedly different from those at issue in the present
case. In fact, after examining those cases carefully and noting
their distinguishing features, we conclude that they are consistent
with the district court’s decision here and contradict, rather than
support, International’s argument.
International relies first on a decision by the Iowa Supreme
Court, Dico, Inc. v. Employers Insurance of Wausau, 581 N.W.2d 607
(Iowa 1998), applying Iowa law to interpret the undefined term
“claim” in a Commercial General Liability (“CGL”)occurrence policy.
The case is distinguishable from our case for many reasons. The
case was not governed by Texas law. The policy involved was not a
19
claims-made policy. The question was not whether a claim had been
made under a claims-made policy. The question was whether the
insured properly notified the insurer of a claim by a third party
under an occurrence policy.
More significantly, although the Iowa court adopted in that
case the narrowest definition of “claim,” i.e., as a demand, from
a dictionary without expressly consulting state law, that definition
was the one most favorable to Dico, the insured. The court tacitly
recognized that “claim” was ambiguous in rejecting the insurer’s
“broad reading of the term” without giving any other reason. Id.
at 613. Thus, besides being distinguishable on many grounds, Dico
does not conflict with our decision here. In the final analysis,
it is simply another case in which the court construed the ambiguous
term “claim” to have the meaning most favorable to the insured in
that particular case. Thus, International’s reliance on Dico is
misplaced.
International also misplaces its reliance on our cases deciding
whether the Federal Deposit Insurance Corporation’s (“FDIC”)
communications to regulated banks and bankers under Louisiana law
amounted to “claims” triggering coverage under claims-made Directors
and Officers Liability insurance policies (“D&O policies”). See
Federal Deposit Ins. Corp. v. Booth, 82 F.3d 670, 675-76 (5th Cir.
1996); Mijalis, 15 F.3d at 1314; Federal Deposit Ins. Corp. v.
Barham, 995 F.2d 600, 604 (5th Cir. 1993). Those decisions are not
controlling or directly applicable because they are based on
Louisiana, not Texas, law and deal with different species of claims-
20
made insurance policies,13 policy provisions and types of factual
patterns.14
Nonetheless, Mijalis, Barham and Booth are not inconsistent
with the district court’s definition of “claim” in its jury
instruction in our case. A careful examination of the reasoning in
those cases reveals that the court did not mechanically apply a
simplistic one-word definition of “claim” or “demand” in deciding
whether a claim had been made in each case. Instead, the court
engaged in a detailed examination of each case, including the facts,
policy provisions, relationship of the parties, and the specific
nature and timing of the FDIC’s communication to the bank and
bankers. The district court in the present case acknowledged its
awareness of this court’s analytical process in Mijalis, et al., and
took that into account, along with the Texas law governing insurance
contractual interpretation, in preparing its jury instructions.
In reviewing our decisions in those FDIC cases, we discovered
several insights into this court’s evaluation of the FDIC’s actions
13
That is, D&O policies as opposed to the EIL policy at issue
here.
14
The D&O policy cases present a situation of much greater
complexity than we confront in the present case, which helps
explain why communication between the FDIC and the officers and
directors of a bank would not necessarily constitute a “claim.”
In the FDIC cases, the FDIC plays two roles, first as a
regulator that communicates frequently with the regulated banks,
directors and officers, and second, as the receiver and enforcer of
the bank’s right to hold the former directors and officers liable
for losses caused by their breach of fiduciary duties. Thus, the
FDIC may issue regulatory communications to the bank and its
officers and directors for some time after a loss or liability
actually has occurred without knowledge of the loss. Hence, it may
be ambiguous whether any given communication refers to a loss
constituting a claim.
21
and communications in respect to whether they constituted claims
under the claims-made D & O policies. First, a “claim” or “demand”
does not have to be explicit but may be inferred from the acts and
communications of the third party; the more difficult cases will
turn on whether those elements add up to an implied claim or
demand.15 Second, the dictionary definitions of “claim” or “demand”
usually are too indeterminate to serve as the actual tools for
deciding whether an implied claim or demand was made. In each case
the court was required to go beyond those definitions and to
undertake an intensive, detailed examination of the specific facts,
the meaning and purpose of the particular insurance policy
provisions, the relationships between the parties, the applicable
law defining the rights and obligations of the actors, and any other
relevant factor. Finally, the court in the FDIC-D&O cases, after
weighing these factors, determined whether a claim was made by
asking whether the act or communication at issue referred with
15
Thus, as we observed in Mijalis, “whether a given demand is
a ‘claim’ within the meaning of a claims-made policy requires a
fact-specific analysis ... conducted on a case-by-case basis.
Other [than lawsuits,] communications to the insured may or may not
rise to the level of claims depending on their content.” 15 F.3d at
1331 (citing MGIC Indem. Corp. v. Central Bank, 838 F.2d 1382, 1388
(5th Cir. 1988) (“[T]he given set of facts will determine on a
case-by-case basis when a ‘claim’ is ‘made’ for the purposes of a
given D&O policy[.]”)).
As Mijalis and MGIC suggest, close inspection of the D&O cases
shows that a “claim,” as well as a “demand,” may be implicit or
explicit. In fact, while some communications are clearly “claims”
on their faces, such as lawsuits or fully expressed requests for
recompense, in Barham, Mijalis and Booth the court undertook an
intensive analysis of the specific facts with respect to how they
related to important features of the particular insurance policy
and legal rule at issue in order to classify each communication as
an implied “claim” or “demand,” or as just an “act” or
“communication.”
22
sufficient definiteness to a covered loss, i.e. a liability arising
from the directors’ and officers’ conduct specified by the policy,
that had accrued or was sufficiently imminent, and upon which the
FDIC, as receiver of the bank, had a legal right to obtain judgment
against the insureds based on that liability at the time of the
FDIC’s act or communication.16
16
For example, in Barham, the court’s most cogent reasons for
deciding that a bank’s letter agreement with the OCC was not a
“claim” were: “[T]he 1982 letter makes no reference to a loss which
[the bank] may sustain as a result of its failure to comply with
certain banking regulations[.]” 995 F.2d at 605. Later in
Mijalis, the court quoted that Barham passage and held that “the
cease and desist order, the notice of charges, and the other
demands for corrective action” did not rise to the level of a
claim. The Mijalis court explained that:
The term “claim” is intimately connected with the term
“loss” in the insuring clause, and it appears as part of
the definition of “loss” as well.... It is clear that
the policy envisions “claims” as being closely related to
legal obligations to pay money[.] ... [The FDIC
communications to the bank] are the same sort of general
demands for regulatory compliance as the one before the
Barham court. None of these documents clearly refers to
an insured loss that the Bank would or might sustain if
it did not abide by the FDIC’s mandates. Even specific
formal demands for corrective action do not rise to the
level of “claims” unless coupled with indications that
demands for payment will be made.
Id. at 1332-33. (citing Barham, 995 F.2d at 604). In Booth, the
FDIC’s letter to bank directors warned that “failure to take
corrective action ... could result in civil money penalties being
recommended and/or more severe enforcement actions being
recommended to the FDIC [board.]” 82 F.3d at 675. After
discussing the court’s use of the process in the previous cases,
the court concluded “that a letter suggesting that, in the future,
charges may be filed against the Directors, if they do not comply
with regulations, is too tenuous to constitute a claim. We
conclude that the FDIC correspondence does not rise to the level of
a claim against the Directors.” Id. at 677. Thus, the court used
the same process to determine that the communications did not refer
to a loss that the bank may sustain because that possible future
loss was too tenuous.
23
Consequently, we conclude that the district court’s approach
in preparing the jury instructions here was consistent with the
fact-specific, case by case analysis used by this court to determine
whether the FDIC actions and communications at issue in Mijalis,
Barham and Booth were “claims” under the D & O policies. Thus,
those FDIC-D&O cases tend to corroborate, rather than point to any
material deficiency in, the district court’s analysis and efforts
to make the jury instructions relevant to the particular case at
hand.
For these reasons, we find that beyond any substantial doubt
the jury in this case was properly guided in its deliberations.
Because International did not show that the jury instruction was
wrong under Texas law and because the authorities that International
relies upon in challenging the jury instruction are inapposite, we
find no error in the district court’s instruction to the jury, much
less error that would leave “substantial and ineradicable doubt” as
to whether the jury was properly instructed. Because we find no
error in the district court’s instruction, it is not necessary that
we address RSR’s contention that International is estopped from
making this challenge because it accepted the instruction.
2. The Supplemental Jury Charge Did Not Involve a Risk of
Misleading or Confusing the Jury So Great as to Constitute
Reversible Error.
Second, International challenges the district court’s
additional jury instruction on the definition of a “claim” that
followed Question No. 1 of the Court’s charge and stated:
24
In ascertaining the answer to this question, you are
instructed to consider all the facts and circumstances
surrounding the EIL policy, as well as the conduct of the
parties. I have defined “claim” for you above in the
definitions section of this Charge. I further instruct
you that the meaning of “claim” derives its scope from
the use to which it is put by the parties involved in
this case. In other words, the meaning of “claim” must
be considered in the context of the EIL Policy itself and
as applied in the context of this environmental
litigation. Evidence that the parties (or their
predecessors) and/or the EPA considered there to be a
claim, while by no means determinative, is probative of
the definition of claim contemplated by the parties.
International objects to the supplemental jury instruction on
the grounds that it was misleading to the jury. We do not agree.
The evidence presented to the jury on this issue tended to show both
the circumstances surrounding the contract and how the parties
interpreted or treated it in respect to whether a claim had been
made. The supplemental instruction properly guided the jury in the
appropriate use of the evidence for those purposes.
Under Texas law, because the parties themselves are in the best
position to know what was intended by the language used by them, the
construction placed on an ambiguous contract by the parties will
govern the court’s interpretation of the agreement. Kelly v. Rio
Grande Computerland Group, 128 S.W.3d 759, 768 (Tex. 2004); James
Stewart & Co. v. Law, 233 S.W.2d 558, 561 (Tex. 1950); Droemer v.
Transit Mix Concrete of Gonzales, Inc., 457 S.W.2d 332, 335 (Tex.
Civ. App. 1970); Danaho Refining Co. v. Dietz, 398 S.W.2d 307, 311
(Tex. Civ. App. 1966); Anchor Cas. Co. v. Robertson Transport Co.,
389 S.W.2d 135, 139 (Tex. Civ. App. 1965); RESTATEMENT (SECOND) OF
CONTRACTS § 202, cmt. g (1981)(“The parties to an agreement know best
what they mean, and their action under it is often the strongest
25
evidence of their meaning.”). Thus, the evidence of the course of
dealing and performance of the contract was admissible and properly
could be considered by the jury as an indication of the construction
that the parties themselves put on the crucial term “claim.” Kelly,
128 S.W.3d at 768; James Stewart, 233 S.W.2d at 561; Droemer, 457
S.W.2d at 335; Danaho Refining, 398 S.W.2d at 311; Anchor Cas., 389
S.W.2d at 139.
Further, under Texas law, the insured was entitled to have the
jury take into consideration the surrounding circumstances in
determining the crucial factual issue of whether the EPA, in effect,
asserted that RSR was liable to it for damages within the risks
covered by the policy when it placed the Harbor Island site
including RSR’s lead smelting facility on the National Priorities
List. See Nat’l Union Fire, 907 S.W.2d at 521 (explaining that
“[e]xtrinsic evidence may, indeed, be admissible to give the words
of a contract meaning consistent with that to which they are
reasonably susceptible, i.e. to ‘interpret’ contractual terms”);
Mijalis, 15 F.3d at 1331 (explaining that to decide whether a
communication is a “claim” “requires a fact-specific analysis
conducted on a case-by-case basis”). Furthermore, when a term in
a contract has more than one reasonable interpretation, as the term
“claim” does here, a court may examine extrinsic evidence to
determine the parties’ intended meaning, such as the parties’
interpretation of the contract. Kelly, 128 S.W.3d at 768.
International has not demonstrated that the charge as a whole
creates “substantial and ineradicable doubt whether the jury has
26
been properly guided in its deliberations.” Mijalis, 15 F.3d at
1318. Moreover, even if the jury instruction was erroneous, we
would not reverse because we determine, based upon the entire
record, that the challenged instruction could not have affected the
outcome of the case. Id.
3.The Jury’s Verdict Was Supported by Legally Sufficient
Evidence.
International argues alternatively that, if we find no error
in the district court’s jury charges, the judgment still should be
reversed because the record contains no legally sufficient evidence
to support the jury’s verdict that the EPA made a claim upon RSR
during the policy period. Specifically, International contends that
the evidence is not sufficient to support a reasonable jury’s
finding that the EPA asserted that, in its opinion, RSR was liable
to the EPA for CERCLA damages due to lead pollution at Harbor
Island.
We review de novo the district court’s denial of a motion for
judgment as a matter of law, applying the same standard as the
district court.17 But when a case is tried by a jury, a Rule 50(a)
motion is a challenge to the legal sufficiency of the evidence.18
In resolving such challenges, we draw all reasonable inferences and
resolve all credibility determinations in the light most favorable
17
Cozzo v. Tangipahoa Parish Council-President Gov’t, 279 F.3d
273, 280 (5th Cir. 2002).
18
Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir. 2000).
27
to the nonmoving party.19 Thus, we will reverse the denial of a
Rule 50(a) motion only if the evidence points so strongly and so
overwhelmingly in favor of the nonmoving party that no reasonable
juror could return a contrary verdict.20 A jury verdict must be
upheld unless “there is no legally sufficient evidentiary basis for
a reasonable jury to find” as the jury did. FED. R. CIV. P.
50(a)(1); Hiltgen v. Sumrall, 47 F.3d 695, 700 (5th Cir. 1995).
This court has consistently applied this standard to show
appropriate deference for the jury’s determination. As we have
explained:
A jury may draw reasonable inferences from the evidence,
and those inferences may constitute sufficient proof to
support a verdict. On appeal we are bound to view the
evidence and all reasonable inferences in the light most
favorable to the jury’s determination. Even though we
might have reached a different conclusion if we had been
the trier of fact, we are not free to re-weigh the
evidence or to re-evaluate credibility of witnesses. We
must not substitute for the jury’s reasonable factual
inferences other inferences that we may regard as more
reasonable.
Id. (citing Rideau v. Parkem Indus. Serv.s, Inc., 917 F.2d 892,
897 (5th Cir. 1990)).
In this case, the district court, in denying International’s
motion for judgment as a matter of law, explained:
[T]he jury heard evidence from various witnesses about
the significance of a pollution site being placed on the
National Priority List by the Environmental Protection
Agency and what such a listing meant for RSR. The
significance of such action by the EPA cannot be
19
Reeves v. Sanderson Plumbing Prods. Inc., 530 U.S. 133, 150
(2000).
20
Cousin v. Trans Union Corp., 246 F.3d 359, 366 (5th Cir.
2001).
28
separated from the fact that the policies at issue were
intended for environmental impairment liability
protection, and thus is the context in which the policies
are to be understood.
Considering the record in this case, we agree with the district
court and conclude that the jury’s verdict is supported by legally
sufficient evidence, which included the undisputed fact that the
RSR smeltery caused substantial lead pollution on Harbor Island and
near Seattle, the EPA’s placement of the insured’s lead smeltery on
the National Priorities List, the undisputed liability of the
insured to the EPA for environmental impairment under CERCLA, the
virtual certainty of further investigative and enforcement actions
by the EPA, and the actions and communications indicating that the
counsel and other representatives of both parties had concluded that
a timely claim had been made under the policy.
Indeed, the EPA’s Final NPL, which included the “Harbor Island
Lead” site among other sites selected because of their “known
releases or threatened releases of hazardous substances, pollutants
and contaminants,” expressly stated that: “The Agency will decide
on a site-by-site basis whether to take enforcement action or
proceed directly with Fund-financed response actions and seek
recovery of response costs after cleanup.” 48 Fed. Reg. 40658-40673
(emphasis added).
It is frequently observed that even though placement of a site
on the NPL is simply the first step in a process,21 it guarantees
more detailed study and drastically increases the likelihood of
21
Eagle-Picher Industries v. EPA, 759 F.2d 922, 932 (D.C. Cir
1985).
29
costly enforcement action.22 Moreover, placement on the NPL has
immediate significant adverse consequences for the owner of a listed
property.23 The regulations provide for a removal of a site from
the NPL, “where no further response is appropriate.”24 Before a
delisting can occur, the EPA must consult and obtain the state’s
approval, publish a list of intent to delist in the Federal Register
and a major local newspaper, and allow public comment for at least
30 days.25
In addition, the jury reasonably could have concluded that
according to the parties action and mutual construction of their
contract a timely claim had been made, triggering coverage under the
policy. At trial, John Walter Morrison, counsel employed by North
River to evaluate coverage issues under the policies, testified that
22
Carus Chemical Company v. EPA, 395 F.3d 434, 437 (D.C. Cir.
2005); see Mead Corp. V. Browner, 100 F.3d 152, 155 (D.C. Cir
1996); DANIEL RIESEL, ENVIRONMENTAL ENFORCEMENT: CIVIL AND CRIMINAL, §
12.02[1](2005)(citing Eagle-Picher, 759 F.2d at 920).
23
Carus, 395 F.3d at 437 (citing Mead Corp. v. Browner, 100
F.3d 152, 155 (D.C. Cir 1996)(costs in business reputation,
property value and increased probability of remediation); RIESEL, at
§ 12.02[1] (citing SCA Services of Indiana v. Thomas, 634 F. Supp.
1355, 1361-66 (N.D. Ind. 1986)(recognizing the damage to business
reputation and loss of value in property that results from listing
on the NPL); B&B Tritech, Inc. v. EPA, 957 F.2d 882, 883 (D.C. Cir.
1992)(placement on the NPL has “considerable costs”); see Mead
Corp. v. Browner, 100 F.3d 152, 155 (D.C. Cir 1996)(“This circuit
has clearly recognized the harmful effects of being linked to a
site placed on the NPL. Bd. of Regents of Univ. of Wash. v. EPA,
86 F.3d 1214, 1217 (D.C.Cir.1996)); see also Kent County, Delaware
Levy Court v. EPA, 963 F.2d 391, 394 (D.C. Cir. 1992) (damage to
business reputation, loss of property value and other considerable
costs).
24
REISEL, ENVIRONMENTAL ENFORCEMENT, at § 12.02[2][d](citing CFR §
300.425(e)).
25
Id.
30
when the EPA placed Harbor Island on the NPL the insurer and the
insured considered that it was a virtual certainty that the
government would either require RSR to conduct cleanup operations
or make reimbursement for an EPA-financed cleanup. He further
testified that he told RSR that North River treated the EPA’s site
listing of Harbor Island as a claim and that he was not
misrepresenting his client’s position when he did so. He stated
that: “We viewed it as a claim against the insured, RSR, and that
RSR in turn had made claim under the policy for the claim made
against it.” Clarice Davis, RSR’s retained counsel at that time,
testified that she heard Mr. Morrison say that North River
acknowledged that a claim had been made, and that “we discussed all
of those matters as claims that we had noticed under that policy.”
John De Paul, an RSR officer, testified that when Mr. Morrison and
Mr. Melton, another North River representative, talked to him and
others at RSR “they talked about it being a claim.... Every one
referred to it as a claim.” Jack Wachtendorf, then RSR’s insurance
broker, testified that he “absolutely” took the proposed NPL listing
to be a claim made under the policy and that North River never said
that they did not consider it to be a claim. RSR’s Vice President
for Environmental Affairs, Gerald Dumas, testified that when a
company is placed on the Superfund list, it means the EPA intends
to take some action against the company for some type of
environmental damage. When asked whether the EPA always follows
through and takes action if a company is listed, he responded,
“Well, I can——in relating to cases that we’ve been involved with,
31
I would say yes.”
Given the breadth of coverage provisions of the EIL policy, the
absence of any contractual definition of “claim,” the legal rules
regarding the construction of insurance policies in favor of the
insured, and the gravity of the EPA’s assertions regarding RSR’s
Harbor Island lead facilities (and the potentially enormous monetary
exposure associated therewith), RSR presented sufficient evidence
to the jury of an assertion of the government’s right to hold RSR
strictly liable under CERCLA for damages and environmental
impairment.
4. The District Court Did Not Abuse Its Discretion When It Held
that John Morrison’s Testimony Was Not Protected by the Attorney-
Client Privilege.
International argues that the district court abused its
discretion in allowing Mr. John Walter Morrison, former counsel of
North River, to testify that during the policy period he on behalf
of North River communicated to RSR that the insurance company
considered the EPA placement of the Harbor Island site on the
Superfund List as a claim against RSR under the EIL policy.
International contends that the district court abused its
discretion when it overruled International’s objection to the
admission of Mr. Morrison’s testimony as a violation of
International’s attorney-client privilege. We do not agree. The
attorney-client privilege protects from disclosure confidential
communications between a client and his or her attorney “made for
the purpose of facilitating the rendition of professional legal
32
services to the client....” Huie v. DeShazo, 922 S.W.2d 923 (Tex.
1986)(quoting TEX. R. CIV. EVID. 503(b)).”26 Mr. Morrison’s testimony
did not disclose any “confidential communications” between North
River and him as its attorney. His testimony described the
communications between himself and the attorneys and agents of RSR
and his independent inference and conclusion based upon them, viz.,
that he as North River’s representative and his counterparts
representing RSR treated the NPL’s inclusion of the Harbor Island
site as a claim by EPA against RSR.27
5. The District Court Did Not Abuse Its Discretion When It Did
Not Allow International to Present to the Jury Excerpts from
Donal Brayer’s Deposition.
International argues that the district court abused its
discretion by refusing to allow International to introduce an
excerpt of the deposition of Donald Brayer, an insurance expert
retained by RSR whom neither RSR nor International had designated
to be called as a witness at trial. Consequently, Mr. Brayer was
26
We review the district court’s ruling on the admissibility
of evidence for an abuse of discretion. United States v. Wilson,
322 F.3d 353, 359 (5th Cir. 2003). The availability of a privilege
in a diversity case is governed by the law of the forum state.
FED. R. EVID. 501; Miller v. Transamerica Press, 621 F.2d 721, 724
(5th Cir. 1980).
27
A communication is only “confidential” for the purposes of
the attorney-client privilege if it is not intended to be disclosed
to a third party. TEX. R. EVID. 503(a)(5). Insofar as the record
discloses the communications and treatment of the claim between RSR
and North River to which Mr. Morrison testified was within the
intention of North River. North River had an opportunity at trial
to introduce further evidence controverting Mr. Morrison’s
testimony and his authority to act for it in treating the NPL
inclusion as a claim. But North River claimed that evidence was
privileged also and opted not to introduce it.
33
not present or immediately available. Before offering the
deposition excerpt, International had not intended to call him as
a witness. In the excerpt, Mr. Brayer had testified to his
definition of a claim under an insurance policy. RSR objected to
the introduction of the deposition excerpt on grounds of unfair
prejudice because it had not arranged for Mr. Brayer to be present,
relying on International’s expressed intention not to call him.
The district court has broad discretion in assessing
admissibility under the rule providing for exclusion of relevant
evidence if its probative value is substantially outweighed by
danger of unfair prejudice, confusion of issues or misleading jury.
United States v. Morris, 79 F.3d 409 (5th Cir. 1996). The trial
judge’s assessment of relative probative value of evidence and
unfair prejudice is generally accorded great deference because of
his or her first-hand exposure to evidence and familiarity with the
course of the trial proceedings. United States v. Briscoe, 896 F.2d
1476 (7th Cir. 1990). Given the circumstances, the district court
did not abuse its discretion in finding that the danger of unfair
prejudice to the opposing party outweighed the probative value of
the evidence and concluding that the excerpt should be excluded.
See Geiserman v. McDonald, 893 F.2d 787, 791 (5th Cir. 1990).
6. The District Court Did Not Abuse Its Discretion When It Denied
International’s Motion for a New Trial.
Finally, International urges that it is entitled to reversal
of the judgment because the jury’s finding that RSR had not waived
34
its right to coverage under the EIL policy was against the great
weight of the evidence and shows a seriously erroneous result.
Under Texas law, a waiver occurs when a party intentionally
relinquishes a known right or intentionally engages in conduct that
is inconsistent with claiming a known right. Emscor Mfg., Inc. v.
Alliance, Ins. Group, 879 S.W.2d 894, 917 (Tex. App. - Houston [14th
Dist.]). The words or the conduct of the parties must
“unequivocally manifest” the parties’ intent to no longer assert the
right. Enterprise Laredo Assoc. v. Hachar’s Inc., 839 S.W.2d 822,
835 (Tex. App - San Antonio 1992, writ denied).
International argues that RSR’s prior conduct is inconsistent
with its current assertion of a right to coverage under the EIL
policies for the Harbor Island claim because Howard Myers, RSR’s
General Counsel, in letters to North River in 1995, indicated that
it did not intend to make a claim regarding the Harbor Island site.
Mr. Myers testified, however, that at the time he had hopes
that RSR would be indemnified by Bergsoe/East Asiatic, making it
unnecessary for RSR to call upon International for indemnification
under the policy. He explained that he did not intend to waive any
of RSR’s rights but simply expressed his expectation that an
insurance claim would not be necessary.
We review a district court’s ruling on a motion for new trial
for abuse of discretion. Dawson v. Wal-Mart Stores, Inc., 978 F.2d
205, 208 (5th Cir. 1992) (citing Munn v. Algee, 924 F.2d 568, 577
(5th Cir. ), cert. denied, 502 U.S. 900, (1991); Conway v. Chemical
Leaman Tank Lines, Inc., 610 F.2d 360, 362 (5th Cir. 1980) (citing
35
Spurlin v. General Motors Corp., 528 F.2d 612 (5th Cir. 1976)). As
a reviewing court we give great deference to the district court
ruling when it has denied the new trial motion and upheld the jury’s
verdict. Dawson, 978 F.2d at 208; Munn, 924 F.2d at 577; Jones v.
Wal-Mart Stores, Inc., 870 F.2d 982, 986 (5th Cir. 1989); Conway,
610 F.2d at 362 (citing Valley View Cattle Co. v. Iowa Beef
Processors, 548 F.2d 1219 (5th Cir.), cert. denied, 434 U.S. 855
(1977)). “New trials should not be granted on evidentiary grounds
unless, at a minimum, the verdict is against the great weight of the
evidence.” Conway, 610 F.2d at 363.
Based on the conflicting evidence, the district court found
that a reasonable jury could have found that RSR did not permanently
and unequivocally waive its right to recover from International.
Accordingly, the district court denied International’s motion for
a new trial. Applying the applicable deferential standard, we
cannot say that the district court abused its discretion, and we
therefore affirm its ruling. Based on the evidence, a reasonable
jury could have found that RSR did not permanently and unequivocally
waive its right to recover from International.
CONCLUSION
For these reasons, the judgment of the district court is
AFFIRMED.
36