Taira Lynn Marine Ltd. No. 5 L.L.C. v. Water Quality Insurance Syndicate ( 2011 )

Case: 09-30878 Document: 00511424310 Page: 1 Date Filed: 03/25/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 25, 2011
No. 09-30878 Lyle W. Cayce
Clerk
In re: In The Matter of the Complaint of TAIRA LYNN MARINE LIMITED
NUMBER 5 L.L.C., as Owner of the Motor Vessel Barry, for Exoneration from
or Limitation of Liability
------------------------------
TAIRA LYNN MARINE LIMITED NUMBER 5 L.L.C.,
Plaintiff
v.
WATER QUALITY INSURANCE SYNDICATE,
Defendant – Appellant/Cross-Appellee
v.
ZURICH INSURANCE CO; XL SPECIALTY INSURANCE CO; NATIONAL
UNION FIRE INSURANCE COMPANY OF LOUISIANA,
Defendants – Appellees/Cross-Appellants
------------------------------------------------------------------------------------------------------------
KIRBY INLAND MARINE INC,
Plaintiff
v.
ZURICH INSURANCE CO; XL SPECIALTY INSURANCE CO; NATIONAL
UNION FIRE INSURANCE COMPANY OF LOUISIANA,
Defendants – Appellees/Cross-Appellants
v.
Case: 09-30878 Document: 00511424310 Page: 2 Date Filed: 03/25/2011
No. 09-30878
WATER QUALITY INSURANCE SYNDICATE,
Defendant – Appellant/Cross-Appellee
------------------------------------------------------------------------------------------------------------
In re: In the Matter of the Complaint of KIRBY INLAND MARINE L.P., as
Owner of the T/B Kirby 31801, for Exoneration From or Limitation of
Liability
---------------------------------
KIRBY INLAND MARINE L.P.,
Plaintiff
v.
WATER QUALITY INSURANCE SYNDICATE,
Defendant – Appellant/Cross-Appellee
v.
ZURICH INSURANCE CO; XL SPECIALTY INSURANCE CO; NATIONAL
UNION FIRE INSURANCE COMPANY OF LOUISIANA,
Defendants – Appellees/Cross-Appellants
------------------------------------------------------------------------------------------------------------
TAIRA LYNN MARINE INC,
Plaintiff
v.
WATER QUALITY INSURANCE SYNDICATE,
Defendant – Appellant/Cross-Appellee
v.
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No. 09-30878
ZURICH INSURANCE CO; XL SPECIALTY INSURANCE CO; NATIONAL
UNION FIRE INSURANCE COMPANY OF LOUISIANA,
Defendants – Appellees/Cross-Appellants
Appeals from the United States District Court
for the Western District of Louisiana
USDC No. 6:01-CV-1420
Before BARKSDALE, CLEMENT, and PRADO, Circuit Judges.
PER CURIAM:*
In this insurance dispute, Water Quality Insurance Syndicate (“WQIS”)
appeals the district court’s grant of summary judgment in favor of National
Union Fire Insurance Company of Louisiana (“National Union”). We affirm.
I. BACKGROUND
On July 19, 2001, the M/V MR. BARRY and its tow, the T/B KIRBY 31801,
allided with the Louisa Bridge in St. Mary Parish, Louisiana. Taira Lynn
Marine, Inc. (“Taira Lynn”) owned and operated the tug, and Kirby Inland
Marine, L.P. (“Kirby Inland”) owned the barge. As a result of the allision, over
three million pounds of the barge’s cargo, a gaseous mixture of propane and
propylene, was released into the environment. St. Mary and Iberia Parishes
declared states of emergency, and the Louisiana State Police Hazardous
Materials Division ordered a mandatory evacuation of all businesses and
residents in the area for several days. Hundreds of claims were filed against
*
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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Taira Lynn and Kirby Inland for personal injury, property damage, economic
loss,1 and recovery of hazardous materials response costs. Those claims were
brought under the Oil Pollution Act of 1990 (“OPA”), 33 U.S.C. §§ 2701–2761;
the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (“CERCLA”), 42 U.S.C. §§ 9601–9675; state law; and general maritime
law.
At the time of the allision, Taira Lynn held three relevant insurance
policies. The first was a primary protection and indemnity policy jointly issued
by Zurich American Insurance Company and XL Specialty Insurance Company
(the “Primary Policy”). The Primary Policy had a $1 million coverage limit,
inclusive of defense costs. The second, issued by WQIS, was a marine indemnity
and reimbursement policy covering certain pollution liabilities (the “Pollution
Policy”). The third was a bumbershoot liability policy, also known as a first-
layer excess policy, issued by National Union (the “Excess Policy”).
The Pollution Policy contained the following “Insuring Provisions”:
ARTICLE A
This Article provides coverage for specified liabilities arising
from the discharge or substantial threat of a discharge of oil, as
follows:
....
ARTICLE B
This Article provides coverage for specified liabilities arising
from the release or threatened release of a hazardous substance,
as follows:
1
In an earlier appeal, we invalidated fourteen of the economic-loss claims because the
claimants had not suffered physical damage to a proprietary interest. See In re Taira Lynn
Marine Ltd. No. 5, LLC, 444 F.3d 371 (5th Cir. 2006).
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(1) Liability imposed under Section 107(a)(1) of [CERCLA] . . . ;
(2) Liability to any State or any political subdivision thereof
imposed under the laws of such State or political subdivision,
but only if and to the extent that such liabilities would have
been imposed on the Assured under Section 107(a)(1) of
CERCLA . . . ;
(3) Liability to a third party arising from the sudden, accidental
and unintentional discharge, spillage, leakage, emission or
release of a hazardous substance into or upon the navigable
waters of the United States or adjoining shorelines for
damages, as follows:
(a) injury to, or economic losses resulting from, the
destruction of or damage to real property, personal
property or natural resources;
(b) loss of subsistence use of natural resources that have
been injured, destroyed, or lost; or
(c) liability to a third party for loss, damage, cost, liability
or expense which would have been recoverable by such
a third party under ARTICLE B . . . had the third party
been an Assured under this policy; and
(4) Costs and expenses incurred by the Assured for actions taken
with the prior approval of WQIS to avoid or mitigate the
liabilities insured against under this ARTICLE B . . . .
ARTICLE C
This Article provides coverage for specified defense costs, as
follows:
Costs and expenses incurred by the Assured with the prior
consent of WQIS for investigation of, or defense against, any
liabilities covered under ARTICLES A and B . . . of the Policy.
According to the Pollution Policy’s Vessel Schedule, the tug was covered up
to $5 million under Article A and $10 million under Article B. The amount of
coverage under Article C was not limited.
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After coverage under the Primary Policy had been exhausted, WQIS
declined to cover certain defense and settlement costs under the Pollution
Policy, and National Union paid those costs instead. In particular, National
Union paid: (1) $75,000 to Jay’s Seafood, Inc. (“Jay’s Seafood”) to settle its claim
against Taira Lynn for property damage, economic losses, and response and
removal costs; (2) $32,500 to Twin Brothers Marine, L.L.C. (“Twin Brothers”)
to settle its claim against Taira Lynn for economic losses; (3) $1,259,356.03 to
Taira Lynn’s defense counsel, Liskow & Lewis; (4) $269,431 to Preis & Roy
and $83,310.74 to Nicoletti Hornig & Sweeney, both for claims-settlement
services for Taira Lynn; and (5) $102,702.12 to Kirby Inland’s defense counsel,
Frilot Partridge.
National Union brought suit against WQIS, seeking reimbursement for
the above payments. National Union and WQIS then filed cross-motions for
summary judgment, and the district court granted summary judgment in favor
of National Union for Taira Lynn’s defense costs. In its order, the court found
that the propane/propylene that had been released into the environment as
a result of the allision was a hazardous substance under CERCLA, thereby
triggering coverage under the Pollution Policy for the liabilities specified in
Articles B and C.2 National Union then filed a motion to alter the judgment,
requesting reimbursement for the Jay’s Seafood settlement payment, the Twin
Brothers settlement payment, and Kirby Inland’s defense costs, and seeking
prejudgment interest on the entire award. The court granted that motion
without comment.
2
The district court also found that the propane/propylene was not an “oil” under the
OPA and, therefore, that Article A of the Pollution Policy did not provide coverage.
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WQIS appeals. It contends that it is not obligated under the Pollution
Policy to reimburse National Union for the payments National Union made on
Taira Lynn’s behalf. It concedes on appeal that the propane/propylene was a
“hazardous substance.” 3
II. STANDARD OF REVIEW
“We review a district court’s grant of summary judgment de novo.”
Offshore Drilling Co. v. Gulf Copper & Mfg. Corp., 604 F.3d 221, 225 (5th Cir.
2010) (citation omitted). We apply “the same standards as the district court”
and “may affirm on any grounds supported by the record.” Wells v. SmithKline
Beecham Corp., 601 F.3d 375, 378 (5th Cir. 2010) (footnotes omitted). Summary
judgment is proper when “the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.”
F ED. R. C IV. P. 56(a).
III. ANALYSIS
“The interpretation of a marine policy of insurance is governed by relevant
state law, which in this case is Louisiana law.” Cal-Dive Int’l, Inc. v. Seabright
Ins. Co., 627 F.3d 110, 113 (5th Cir. 2010). “Under Louisiana law, an insurance
policy is a contract between the parties and should be interpreted according to
the general rules of interpretation of contracts prescribed in the Louisiana
Civil Code.” Nunez v. Allstate Ins. Co., 604 F.3d 840, 844–45 (5th Cir. 2010)
(citation omitted). “An insurance contract must be construed according to
the entirety of its terms and conditions as set forth in the policy.” Id. at 845(citation omitted). “‘The words of a contract must be given their generally
3
National Union filed a cross-appeal. It conceded at oral argument, however, that it
is not seeking to alter the judgment.
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prevailing meaning.’” Id. (quoting L A. C IV. C ODE A NN. art. 2047). “When 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.” Id.(citing L A. C IV. C ODE A NN. art. 2046).
A. The Two Settlement Payments
Although the district court did not state the reasons for its decision, it
implicitly found that the two settlement payments to Jay’s Seafood and Twin
Brothers are covered by Article B of the Pollution Policy. WQIS makes only
one argument on appeal: it contends that the Pollution Policy does not cover
the settlement payments because neither settled claim was cognizable under
CERCLA. This argument has no basis in the language of the Pollution Policy.
Unlike §§ 1 and 2 of Article B, § 3(a) and (b) of Article B do not condition
coverage on the existence of liability under CERCLA. Rather, § 3(a) and (b)
cover certain specified “[l]iabilit[ies] to a third party arising from the sudden,
accidental and unintentional discharge . . . of a hazardous substance” without
regard to whether the liability arises under CERCLA. In addition, because
§ 3(a) and (b) are not limited to CERCLA claims, neither are §§ 3(c) and 4,
because both piggyback on the other sections of Article B, including § 3(a) and
(b). Thus, it does not matter whether the Jay’s Seafood and Twin Brothers
claims were valid under CERCLA, and we affirm the district court’s grant of
summary judgment in favor of National Union with respect to the settlement
payments.
B. Taira Lynn’s Defense Costs
The district court found that Taira Lynn’s defense costs are covered by
Article C, which requires WQIS to reimburse “[c]osts and expenses incurred by
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[Taira Lynn] with the prior consent of WQIS for investigation of, or defense
against, any liabilities covered under ARTICLES A and B . . . of the Policy.”
On appeal, WQIS makes four arguments against coverage, none of which are
availing.4
First, WQIS argues that National Union has failed to show that the costs
at issue arose from the defense of claims that were cognizable under CERCLA.
This argument is merely another version of WQIS’s flawed argument with
respect to the settlement payments. The plain language of Article C extends
coverage to defense costs relating to “any liabilities covered under [Article B],”
which includes liabilities covered under § 3(a) and (b) of Article B. Because
§ 3(a) and (b) do not demand the existence of a valid claim under CERCLA,
Article C does not either.
Second, WQIS contends that Taira Lynn’s defense costs are not covered
because they were incurred, at least in part, to defend against personal-injury
claims. Such claims are expressly excluded from coverage by Part III of the
Pollution Policy, which states that “this Policy does not provide coverage for
any liability, loss, damage, cost or expense arising from . . . [l]oss of life, bodily
injury, mental anguish or any other emotional, physical or mental illness.”
But WQIS, which bears the burden of proving the applicability of the policy
exclusion, has failed to identify the specific claims that should be excluded
on this basis. See Martco Ltd. P’ship v. Wellons, Inc., 588 F.3d 864, 880 (5th
Cir. 2009) (citing Doerr v. Mobil Oil Corp., 774 So. 2d 119, 124 (La. 2000))
4
In the proceedings below, WQIS also argued that Article C does not provide coverage
because (1) Taira Lynn had not obtained WQIS’s prior approval, and (2) Taira Lynn had not
“incurred” the expenses because National Union had paid them directly. WQIS does not make
either argument on appeal.
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(stating that under Louisiana law, “[the insurer] bears the burden of proving
the applicability of an exclusionary clause within [an insurance policy]”);
Tunstall v. Stierwald, 809 So. 2d 916, 921 (La. 2002) (“The insurer . . . bears the
burden of showing policy limits or exclusions.”). Therefore, WQIS’s exclusion
argument fails.
Third, WQIS contends that National Union, in its proof to the district
court, submitted only summaries of Taira Lynn’s defense costs and therefore
failed to prove that it is entitled to reimbursement. Federal Rule of Evidence
1006 provides:
The contents of voluminous writings, recordings, or photographs
which cannot conveniently be examined in court may be presented
in the form of a chart, summary, or calculation. The originals, or
duplicates, shall be made available for examination or copying, or
both, by other parties at reasonable time and place. The court may
order that they be produced in court.
In this case, the record shows that National Union submitted summaries of
the voluminous billing records of the three law firms involved in Taira Lynn’s
defense and, in its motion for summary judgment, advised the district court
that “the supporting documentation for the summaries included as Exhibits
‘11,’ ‘28,’ ‘29,’ ‘30,’ ‘32,’ and ‘33’ were too voluminous to reproduce herewith,
but will be made available to the Court and the parties upon request.” WQIS
did not object to the summaries in the district court. It also did not request or
attempt to review the voluminous supporting invoices. By failing to timely
object to the summaries or to seek to inspect the underlying records, WQIS
has waived its objection. See Ecuadorian Plaintiffs v. Chevron Corp., 619
F.3d 373, 377 n.2 (5th Cir. 2010) (citations omitted) (“[T]he plaintiffs did not
advance this [evidentiary] argument before the district court, and thus it is
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waived.”); Sumitomo Bank of Cal. v. Prod. Promotions, Inc., 717 F.2d 215,
218–19 (5th Cir. 1983) (upholding the admission of summaries where the
opposing party failed to object on the basis of Rule 1006 and did not request
to review the underlying documents).
Finally, WQIS argues that National Union had an obligation under the
Excess Policy to pay Taira Lynn’s defense costs and is therefore not entitled
to reimbursement from any other insurer. We disagree. The Excess Policy
straightforwardly states:
If other valid and collectible insurance with any other Insurer is
available to the Assured covering a loss also covered by this Policy,
other than insurance that is in excess of the insurance afforded by
this Policy, the insurance afforded by this Policy shall be in excess
of and shall not contribute with such other insurance . . . .
Article C of the Pollution Policy covers all of Taira Lynn’s defense costs, and
therefore, according to the above language, coverage under the Excess Policy
was not triggered. Furthermore, we note that the “Schedule of Underlying
[Insurance]” in the Excess Policy lists a policy for “Vessel Pollution Liability:
OPA and CERCLA” with a liability limit of $5 million under “Article A” and $10
million under “Article B.”5 This is a reference to the Pollution Policy, meaning
that the Excess Policy specifically contemplated that its coverage would be
secondary to coverage under the Pollution Policy. There is no language in the
Pollution Policy that contradicts this finding, and thus we reject WQIS’s last
argument and affirm the district court’s grant of summary judgment in favor
of National Union with respect to Taira Lynn’s defense costs.
5
The original version of the Excess Policy only listed a liability limit of $5 million per
occurrence, but the policy’s first endorsement, which was effective at the time of the allision,
brought the coverage limits into accord with the Pollution Policy.
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C. Kirby Inland’s Defense Costs
The district court, without explanation, found that the costs of Kirby
Inland’s defense are covered by the Pollution Policy. WQIS asserts that the
policy does not cover those costs because Kirby Inland is not identified as an
“Assured” in the policy and the T/B KIRBY 31801 is not listed on the policy’s
vessel schedule as one of the insured vessels. National Union counters that
Kirby Inland qualifies as an “additional Assured” under “Endorsement No. 1”
of the Pollution Policy. The endorsement states, in pertinent part:
(a) Where a Vessel insured hereunder is working or performing
services pursuant to a contract between the owner or operator of the
Vessel (the Assured) and an entity or person not insured hereunder,
if the Assured agrees and it is required by the contract, the entity
or person with whom the Assured is in contractual privity is hereby
named as an additional Assured hereunder, but only to the extent
required by the contract.
The record contains a copy of the charter agreement between Taira Lynn and
Kirby Inland. This agreement required Taira Lynn to obtain certain types
of insurance to protect Kirby Inland from liability, and it specifically required
Taira Lynn to obtain a “Pollution Liability” insurance policy from WQIS “or
its equivalent” with at least $5 million of coverage. After listing the coverage
requirements, the charter agreement states as follows:
Owner [Taira Lynn] shall cause Charter [Kirby Inland], its parent,
subsidiaries and affiliates, and Clients for whom Charterer may be
working to be named as additional assureds . . . with full waiver of
subrogation in favor of Charterer and Clients for whom Charter
may be working in each of the aforesaid policies. . . . It is specifically
understood and agreed that Owner shall name Charterer, its
parent, subsidiaries and affiliates and Clients for whom Charterer
may be working as additional assureds on all insurance required
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hereunder for the purpose of complying with Owner’s indemnity
obligations hereunder.
(emphasis added). This contract satisfies the requirements of Endorsement
No. 1, and we therefore find that Kirby Inland was an “additional Assured”
under the Pollution Policy. Thus, Kirby Inland’s defense costs are covered to
the same extent as Taira Lynn’s defense costs under Article C, and we affirm
the district court’s grant of summary judgment in favor of National Union with
respect to Kirby Inland’s defense costs.
D. Prejudgment Interest
The district court also awarded prejudgment interest on the costs and
expenses owed by WQIS. WQIS appealed the resolution of the motion, but did
not submit any argument to us regarding the interest award. Thus, WQIS has
waived its challenge to this portion of the award by failing to brief it. Cuadra
v. Hous. Indep. Sch. Dist., 626 F.3d 808, 812 n.5 (5th Cir. 2010) (citation
omitted); see also F ED. R. A PP. P. 28(a)(9)(A) (requiring a party to present its
argument “with citations to the authorities and parts of the record on which
the appellant relies”).
IV. CONCLUSION
We affirm the district court’s grant of summary judgment regarding
Taira Lynn’s defense costs, Kirby Inland’s defense costs, the Jay’s Seafood and
Twin Brothers settlement payments, and prejudgment interest.6
AFFIRMED.
6
Because we find that National Union is entitled to reimbursement for all of the
payments it made on Taira Lynn’s behalf, we need not address National Union’s alternate
argument that the propane/propylene mixture was an “oil” under the OPA and, as a result,
that Article A of the Pollution Policy provides coverage.
13