Certain London Mkt v. PA Nat Mtl Cslty Ins ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit July 14, 2004
Charles R. Fulbruge III
No. 03-60664 Clerk
CERTAIN LONDON MARKET INSURANCE COMPANIES; ET AL
Plaintiffs,
CERTAIN LONDON MARKET INSURANCE COMPANIES, ALLIANZ INSURANCE
COMPANY and ZURICH AMERICAN INSURANCE COMPANY
Plaintiffs-Appellants,
VERSUS
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY; ET AL
Defendants,
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY
Defendant-Appellee
Appeal from the United States District Court
For the Northern District of Mississippi, Eastern Division
(01-CV-179)
Before HIGGINBOTHAM, DENNIS, and CLEMENT Circuit Judges.
PER CURIAM:*
Certain London Market Insurance Companies, Allianz Insurance
Company and Zurich American Insurance Company (“Certain London”)
*
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opinion should not be published and is not precedent except under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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appeal the district court’s judgment in favor of Pennsylvania
National Mutual Casualty Insurance Company (“Pennsylvania
National”) declaring that it was not required to defend or
indemnify Certain London under the insurance policy involved in
this case. We AFFIRM.
I. BACKGROUND
In March 1998, Performance Fiberglass & Linings
(“Performance”) purchased a Commercial General Liability policy
(the “Policy”) from Pennsylvania National. The following month,
Performance entered into a Master Work Agreement for Construction
and Field Services (“MWA”) with Kerr-McGee. Under the MWA,
Performance agreed to perform certain rubber lining and fiberglass
work for Kerr-McGee at Kerr-McGee’s electrolytic plant in Hamilton,
Mississippi. The MWA contained a provision that required
Performance to indemnify Kerr McGee “from and against any and all
losses, damages, bodily injuries. . .directly or indirectly arising
out of” Performance’s work under the MWA.
Two of Performance’s employees were seriously injured while
they were relining a tank at Kerr-McGee’s facility. These
employees sued Kerr-McGee alleging that Kerr-McGee was liable for
their injuries due to its negligence. Kerr-McGee demanded that
Performance and its insurer, Pennsylvania National, defend and
indemnify Kerr-McGee in these two lawsuits. When Performance and
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Pennsylvania National refused, Kerr-McGee and its insurers, Certain
London, settled the two lawsuits brought by the injured employees.
After the settlements, Certain London filed this declaratory
judgment action against Performance and Pennsylvania National
seeking indemnity from Performance and coverage under the Policy
from Pennsylvania National for the costs associated with settling
the two employees’ lawsuits.2 Following a one-day bench trial, the
district court ruled in favor of Pennsylvania National, concluding
that because the indemnity provision in the MWA was invalid under
Mississippi law it could not be an “insured contract” under the
Policy. Certain London timely appealed.
II. ANALYSIS
“The standard of review for bench trials is well-established:
‘findings of fact are reviewed for clear error; legal issues de
novo.’” See Gebreyesus v. FC Schaffer & Assoc’s, Inc., 204 F.3d
639, 642 (5th Cir. 2000)(quoting F.D.I.C. v. McFarland, 33 F.3d
532, 536 (5th Cir. 1994)). Questions of contract interpretation
are legal issues and are reviewed de novo. See Am. Totalisator
Co., Inc. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir. 1993).
The parties agree that the MWA is a construction contract
governed by Mississippi law, and that certain indemnity agreements
2
Kerr-McGee was subsequently joined as a plaintiff, but both
Kerr-McGee and Performance were dismissed as parties by the
district court prior to trial and are not parties to this appeal.
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in construction contracts are void under Mississippi law as against
public policy. See MISS. CODE ANN. §31-5-41 (2004). The parties
also agree that Kerr-McGee was not a named insured under the Policy
and that the Policy contains a contractual liability exclusion,
which excludes from coverage any agreement or contract under which
Performance “assumes liability,” for another party unless that
agreement is an “insured contract.” Thus, the parties agree that
Certain London is only entitled to coverage under the Policy if
Performance’s agreement to indemnify Kerr-McGee in the MWA is an
“insured contract” under the Policy and if that indemnity agreement
is valid under Mississippi law.
The Policy defines an “insured contract” in relevant part as:
“[t]hat part of any other contract or agreement pertaining to
[Performance’s] business. . .under which [Performance] assumes the
tort liability of another party.” Tort liability is defined as “a
liability that would be imposed by law in the absence of any
contract or agreement.” Therefore, any provision in the MWA
requiring Performance to indemnify Kerr-McGee is an “insured
contract” only if Performance is assuming Kerr-McGee’s tort
liability under that provision.
But Certain London has not proven that Performance assumed any
of Kerr-McGee’s tort liability. First, Certain London has not
established that Kerr-McGee would have any tort liability for
Performance’s negligence. In fact, Certain London admits in this
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case that Kerr-McGee had no liability for Performance’s negligence
and that it only settled the employees’ lawsuits as a “business
decision.”3
Second, the only other tort liability besides its own
liability that Performance could have assumed under the indemnity
provision of the MWA that would also be an “insured contract” under
the Policy is tort liability arising from Kerr-McGee’s own
negligence. However, in a construction contract, “every covenant,
promise and/or agreement contained therein to indemnify or hold
harmless another person from that person’s own negligence is void
as against public policy” under Mississippi law. See MISS. CODE.
ANN. 31-5-41 (2004); Crosby v. Gen. Tire & Rubber Co., 543 F.2d
1128 (5th Cir. 1976). Therefore, there is no valid basis for
establishing tort liability necessary to constitute an “insured
contract” under the Policy. Accordingly, the district court’s
grant of summary judgment in favor of Pennsylvania National is
AFFIRMED.4
3
Moreover, Performance and its employees were designated by the
MWA as “independent contractors.” Because there is no vicarious
liability under Mississippi law for the acts of independent
contractors, see Carr v. Crabtree, 55 So. 2d 408 (Miss. 1951),
Kerr-McGee could not have any liability for Performance’s negligent
acts.
4
In its reply brief, Certain London also argues that it is
entitled to coverage under a second exception to the Policy’s
contractual liability exclusion. That exception would permit
coverage for Performance’s agreements to assume another’s tort
liability “[t]hat the insured would have in the absence of the
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AFFIRMED
contract or agreement.” However, this argument is waived because
Certain London failed to raise it before the district court. See
Forbush v. J.C. Penny Co., 98 F.3d 817, 822 (5th Cir. 1996).
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