Nat'l Union Fire Pit v. Travelers Indem Co ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-2848
R OCKWELL A UTOMATION, INC.,
Plaintiff,
v.
N ATIONAL U NION F IRE INSURANCE
C OMPANY OF P ITTSBURGH, PA,
Defendant, Cross Plaintiff-Appellant,
v.
T RAVELERS INDEMNITY C OMPANY,
as successor in interest to Gulf Insurance
Company, and F EDERAL INSURANCE C OMPANY,
Defendants, Cross Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 06 C 904—Lynn Adelman, Judge.
A RGUED M AY 8, 2008—D ECIDED S EPTEMBER 12, 2008
2 No. 07-2848
Before M ANION, E VANS, and W ILLIAMS, Circuit Judges.
M ANION, Circuit Judge. Following a state court trial in
Missouri, a jury found Rockwell Automation, Inc.
(“Rockwell”) liable for damages exceeding $97 million. The
court also awarded post-judgment interest which eventu-
ally accrued to over $18 million. Rockwell’s excess
insurers, National Union Fire Insurance Company of
Pittsburgh (“National Union”), Federal Insurance Com-
pany (“Federal”), and Gulf Insurance Company (“Gulf”)
refused to pay the post-judgment interest, and Rockwell
filed suit in Wisconsin state court seeking indemnifica-
tion. The insurers removed the action to federal court.
National Union settled with Rockwell, paid the post-
judgment interest, and then filed cross-claims against
the other excess insurers seeking to recoup the $18 million.
The district court granted motions to dismiss and for
summary judgment filed by Federal and Travelers Indem-
nity Company (“Travelers”), Gulf’s successor in interest.
The motions were granted based on the district court’s
conclusion that the general coverage sections of Federal
and Gulf did not make them responsible for payment of
post-judgment interest, and that National Union’s assump-
tion of Rockwell’s defense obligated it to pay the post-
judgment interest under its policy. National Union
appeals the entry of judgment against it on these bases, as
well the district court’s determination that National
Union’s policy should be construed under Wisconsin law
thus making it responsible for all of the post-judgment
interest that accrued on the judgment against Rockwell.
We affirm.
No. 07-2848 3
I.
This case arises out of a negligence and products liability
lawsuit filed in 2001 in Jackson County, Missouri. Kansas
City Power and Light (“KCPL”) sued those it believed
responsible for a natural gas explosion which occurred on
February 17, 1999, and caused hundreds of millions of
dollars in damage. Among the defendants was Rockwell,
whose excess insurers are the parties in this appeal. The
case proceeded to trial, and on March 4, 2004, the jury
returned a verdict assessing KCPL’s damages at $452
million, and finding Rockwell 30% at fault. After it
applied credits for settlements between KCPL and other
defendants, the trial court determined that Rockwell’s
portion of the jury verdict was $97,622,191.16. The trial
court also determined, however, that based on limiting
language in the contract between Rockwell and KCPL,
Rockwell’s liability should be reduced to $190,867. KCPL
appealed, and the Missouri Court of Appeals reversed the
trial court’s decision to reduce the judgment. The lower
court was directed not only to reinstate its original judg-
ment, but to award post-judgment interest from August 12,
2004, the date the judgment was originally entered.
Rockwell had several layers of insurance coverage
relevant to the liability it incurred in the Missouri suit.
First, it was self-insured for $2 million per occurrence,
and held a policy with Travelers providing $1 million in
excess general liability coverage. Next, National Union
issued an excess general liability policy with coverage
up to $50 million over the $3 million in underlying cover-
age. Federal issued an additional $50 million excess policy
4 No. 07-2848
to Rockwell, and a third $50 million excess policy was
issued by Gulf.1 The questions before us on appeal relate
to coverage under the three $50 million excess policies.2
The National Union policy begins with a general cover-
age section entitled “Coverage.” In that section, National
Union states that it
will pay on behalf of the Insured those sums in excess
of the Retained Limit that the Insured becomes legally
obligated to pay by reason of liability imposed by law
or assumed by the Insured under an Insured Contract
because of Bodily Injury, Property Damage, Personal
Injury or Advertising Injury that takes place during the
Policy Period and is caused by an Occurrence happen-
ing anywhere in the world.
A section entitled “Defense” follows and states, in perti-
nent part, that whenever National Union assumes
the defense of any claim or suit, it will pay
...
d. pre-judgment interest awarded against the Insured
on that part of the judgment we pay. If we make an
offer to pay the applicable Limit of Insurance, we will
1
Travelers and Gulf merged after this policy was issued, and
Travelers became Gulf’s successor in interest. Accordingly,
while the policy it issued is discussed below, Gulf is no longer
a party to these proceedings.
2
We will use the term “excess insurers” to refer collectively to
the issuers of the $50 million excess policies, namely National
Union, Federal, and Travelers as Gulf’s successor in interest.
No. 07-2848 5
not pay any pre-judgment interest based on that period
of time after the offer;
e. all interest that accrues after entry of judgment and
before we have paid, offered to pay or deposited in
court the part of the judgment that is within our
applicable Limits of Insurance.
The Federal policy lists the National Union policy as
underlying insurance, and states in its coverage section
that Federal “will pay that part of loss, covered by this
insurance, in excess of the limits of Underlying Insurance.”
The Federal policy does not expressly mention payment of
post-judgment interest. The Gulf policy also lists the
National Union policy as underlying insurance, and its
coverage section provides that Gulf will “indemnify the
Insured that amount of loss which exceeds the amount
of loss payable by the underlying policies described in
the Declarations . . . .” Like the Federal policy, the Gulf
policy makes no express mention of payment of post-
judgment interest.
While not expressly mentioning post-judgment
interest, both policies contain language indicating that
they follow form with the National Union policy. The
Federal policy provides that “[t]he terms and conditions
of Underlying Insurance are made a part of this policy,
except with respect to any contrary provision contained
in this policy.” The Gulf policy likewise provides that,
subject to certain exceptions irrelevant here, “this policy
shall apply in like manner as the underlying insurance.”
Therefore, the terms of the National Union “Defense”
section, and specifically those covering payment of post-
6 No. 07-2848
judgment interest, are subject to our review in determining
the obligation of Federal and Travelers to pay post-judg-
ment interest. See Sphere Drake Ins. Ltd. v. All Am. Ins. Co.,
256 F.3d 587, 589 (7th Cir. 2001) (noting that it is the
essence of a follow-form policy to follow the underlying
policy in every respect except where specifically men-
tioned); see also Houbigant, Inc. v. Fed. Ins. Co., 374 F.3d 192,
203 (3rd Cir. 2004) (noting that under a follow-form
policy “coverage issues presented turn solely on the
interpretation of the underlying polic[y]”).
Because Rockwell was self-insured for the initial
$2 million of its coverage, it retained and paid for its
own trial counsel, Steven P. Sanders. The record shows
that National Union, Federal, and Travelers were, at the
very least, being kept abreast of developments in the case
by Sanders. National Union also retained and paid for
attorney Melinda Kollross with the intention that she
would, at a minimum, assist at trial by identifying and
preserving appellate issues. To that end, Kollross worked
on a proposed verdict form and the post-trial motions,
and prepared a memorandum identifying appellate
issues which she forwarded to Sanders. Towards the
end of the trial, KCPL asserted the existence of a
conflict with Kollross’s firm, and it was decided that
counsel other than Kollross would be sought to assist on
post-trial motions and the appeal. Attorney Susan Ford
Robertson was retained by National Union for that pur-
pose. National Union admits that it paid Robertson’s fees,
but the parties dispute whether National Union alone
selected Robertson, and whether primary responsibility
for Rockwell’s defense ever transferred from Sanders to
Robertson.
No. 07-2848 7
Following the decision of the Missouri Court of Appeals,
National Union and Federal contributed the amounts
within their respective policy limits to satisfy the damages
portion of the judgment. However, the three excess insur-
ers refused to pay the post-judgment interest ordered
by the appellate court prompting Rockwell to initiate this
action in the Milwaukee County Circuit Court seeking
indemnification. Rockwell alleged that National Union
was responsible for the post-judgment interest because
it had assumed Rockwell’s defense after the jury verdict. It
also alleged in the alternative that each of the excess
insurers was responsible for payment of the post-
judgment interest under the general coverage sections of
their policies. The excess insurers removed the action to
federal court citing 28 U.S.C. § 1332 as the basis for
federal jurisdiction. National Union and Rockwell entered
into a settlement where Rockwell assigned to National
Union its claims against Federal and Travelers. In
return, National Union payed the post-judgment interest
at issue, which by that point had accrued to an amount
exceeding $18 million.
National Union filed amended cross-claims against
Federal and Travelers denying that it had assumed
Rockwell’s defense and alleging that it, Federal, and
Travelers had each merely participated in defending
Rockwell. National Union sought from Federal and
Travelers damages to compensate it for paying the
$18 million in post-judgment interest. Federal and Travel-
ers both moved to dismiss National Union’s cross-claims
arguing that the general coverage sections of their
policies did not obligate them to pay Rockwell’s post-
8 No. 07-2848
judgment interest. Federal moved alternatively for sum-
mary judgment arguing that National Union assumed
Rockwell’s defense, and that it was therefore solely re-
sponsible for payment of post-judgment interest.
The district court granted Federal and Travelers’ motions
to dismiss concluding that their policies did not require
them to pay post-judgment interest on the judgment
against Rockwell. Specifically, the court found that the
language in National Union’s policy, with which
Federal and Gulf’s policies follow form, requiring it to pay
post-judgment interest when it assumed Rockwell’s
defense would be rendered superfluous if post-judgment
interest were included in the terms “sums” and “loss” used
in the general coverage section of the excess policies. The
court therefore concluded that the excess insurers were
only required to pay post-judgment interest when they
assumed the defense, and that since National Union did
not allege that Federal and Travelers had done so, it had
not stated a claim upon which relief could be granted. The
district court also concluded, as an alternative basis for
its finding, that Federal and Travelers were entitled to
summary judgment because even if post-judgment inter-
est was covered by the “sums” and “loss” language,
National Union assumed Rockwell’s defense and therefore
became solely liable for the post-judgment interest.
Finally, the district court determined that Wisconsin law
applied when construing the policies, and that National
Union was therefore responsible for all of the post-judg-
ment interest on the judgment against Rockwell, and not
just the portion falling with National Union’s coverage
limits.
No. 07-2848 9
On appeal, National Union argues that there was at least
a question of fact about whether it assumed Rockwell’s
defense during the Missouri trial, and that the district
court therefore erred in entering summary judgment
for Federal and Travelers. National Union also asserts
that the district court erred in determining that its policy
should be construed under Wisconsin law. It argues that
facts exist in the record raising the possibility that its
policy should be construed under California law, which
is more favorable to National Union, and that the parties
should have been allowed to develop the factual record
more fully before the determination was made. Finally,
National Union argues that the district court incorrectly
interpreted the policies when it concluded that post-
judgment interest was not included in the “sums” and
“loss” for which the excess insurers covered Rockwell.
II.
When the district court grants motions to dismiss
made pursuant to Federal Rule of Civil Procedure 12(b)(6)
or for summary judgment, our review is de novo and
we draw all reasonable inferences in favor of the non-
movant. Williams v. Seniff, 342 F.3d 774, 781 (7th Cir. 2003).
We turn first to the question of whether National Union
assumed Rockwell’s defense during the Missouri state
proceedings. This question was considered below on a
motion for summary judgment, and we may therefore
consider the evidence filed by the parties. Fed. R. Civ. P.
56(c). We have previously noted that selection, supervision,
and payment of counsel by an insurer are signs that the
10 No. 07-2848
insurer has assumed an insured’s defense. Taco Bell Corp.
v. Cont’l Cas. Co., 388 F.3d 1069, 1076 (7th Cir. 2004).
National Union argues that our statement was dicta, and
does not provide a controlling test for when an insurer
has assumed the defense of its insured. It is true that our
concern in Taco Bell was an insurer’s complaint that its
insured had incurred unreasonable expenses in
defending itself for which the insurer did not want to be
held responsible. However, our discussion took for
granted that selection, supervision, and payment of
counsel are accepted indications that an insurer has
assumed an insured’s defense. See id. (noting that if the
insurer did not trust the insured, “it could . . . have as-
sumed the defense and selected and supervised and paid
for the lawyers defending” the insured); see also Pendleton
v. Pan Am. Fire & Cas. Co., 317 F.2d 96, 100 (10th Cir. 1963)
(noting that while an insurer did not have a duty to
defend the insured, it assumed the defense by retaining
two lawyers and controlling the litigation); but see
Arkwright-Boston Mfrs. Mut. Ins. Co. v. Aries Marine Corp.,
932 F.2d 442, 445-46 (5th Cir. 1991) (concluding that mere
presence at and participation in settlement discussions
did not constitute an assumption of the defense).
National Union argues that even if these factors are
accepted as showing that an insurer assumed the defense,
there exist genuine issues of material fact in determining
whether it alone selected Robertson, and whether Robert-
son was in control of the Missouri state litigation on
appeal. In support, National Union points to emails
exchanged before Robertson’s selection in which Na-
tional Union’s claims handler, Doug Brosky, solicited
No. 07-2848 11
and received input from Rockwell and its insurers on
identifying appellate counsel. However, although input
was being sought from Rockwell and its insurers, National
Union was taking the lead, at least implying that the
decision regarding selection of appellate counsel was
National Union’s to make.
We need not rely solely on any inference arising from
the fact that National Union was seeking input from the
other concerned parties. In an email sent to Rockwell’s
general counsel on May 17, 2004, Brosky stated that his
inclination was “to retain [Robertson] regardless of what
[Federal] says.” Brosky continued that he “would like to
have [Federal’s] support, but their position should not
and will not affect the selection process.” Additionally, a
representative from Federal sent Brosky an email the
following day asking if he had “decided on an appellate
counsel,” to which Brosky responded that he was
working on it and hoped to have the matter decided by
the end of the month. While National Union argues that
its solicitation of input creates a question of material fact
to determine who selected Robertson, it should be re-
membered that “we are not required to draw every con-
ceivable inference from the record, and mere speculation
or conjecture will not defeat a summary judgment mo-
tion.” McCoy v. Harrison, 341 F.3d 600, 604 (7th Cir. 2003)
(quotations omitted). The fact that National Union was
the one seeking input, when combined with Bosky’s later
statements that he was going to make the decision regard-
less of what input he received from Federal, shows that
National Union was in charge of selecting appellate
counsel.
12 No. 07-2848
National Union admits that it paid Robertson’s fees, but
it says it only did so after suggesting that all of the excess
insurers pay part, and they declined to do so. Its pur-
pose in making this argument is to point out that it paid
Robertson voluntarily, and not because of any contractual
obligation to do so. National Union’s motivation for
retaining and paying for Robertson is clear—it was going
to be the first excess insurer impacted if the Missouri trial
court’s decision was overturned on appeal. While clear,
however, the motivation is not the deciding factor here.
National Union’s policy binds it to pay post-judgment
interest not included in any underlying policy or other
insurance when it assumes the defense of any claim or
suit against its insured. There is no concern expressed in
the policy for what may have caused National Union to
assume the defense, or attention given to the effect of any
particular motivation. Therefore, National Union is not
relieved of its obligation to pay post-judgment interest if
it assumed Rockwell’s defense voluntarily rather than
because it was contractually obligated to do so.
National Union’s final argument on this point is that
Robertson was not in control of the case on appeal, and
therefore National Union cannot be said to have assumed
Rockwell’s defense. If true, this would be important
because mere participation in Rockwell’s defense would
not obligate National Union to pay post-judgment
interest under the “Defense” section of its policy. In
support of its argument, National Union again highlights
an email in which Brosky responds to Robertson’s sub-
mission of post-trial motion drafts saying he would defer
to Sanders on their final approval. National Union also
No. 07-2848 13
relies on communications indicating that Robertson was
receiving advice from Sanders and others on appellate
strategy, and that Robertson kept Rockwell, Sanders, and
the excess insurers apprised of the status of the appeal. The
conclusion National Union draws from this evidence is
that it “did not assume exclusive control over Rockwell’s
defense at the post-trial stage.” However, the fact that
various parties were participating in Rockwell’s defense
during the appeal says nothing of who was in charge of the
defense. National Union concedes that it participated in
Rockwell’s defense at trial, yet it argues, and the record
confirms, that Rockwell was in charge of its own defense
at that stage. Likewise, the fact that multiple parties were
participating in Rockwell’s defense on appeal does not
undercut the fact that one party was in charge.
Even the evidence cited by National Union establishes
that Robertson was in charge of Rockwell’s defense on
appeal. Robertson was the one seeking input and keeping
others apprised. Additionally, to the communications
cited by National Union can be added numerous emails
in which parties expressed deference to Robertson’s
judgment and indicated that they were only making
“suggestions.” In fact, Sanders expressly told Robertson
when discussing the issue of whether to file a reply brief,
“you are the appellate expert so I defer to you.” Not only
was Robertson the hub of communication to whom
others deferred, but the record reveals no other attorney
who could have been considered in charge if Robertson
was not.
In sum, selection and payment by an insurer of the
attorney who controls an insured’s defense indicates that
14 No. 07-2848
the insurer has assumed the defense. Taco Bell, 388 F.3d at
1076. The record establishes that National Union selected
and paid for Robertson to represent Rockwell on appeal,
and that Robertson was in charge of Rockwell’s defense
by the time the case reached the appellate level. There is
no evidence in the record sufficient to raise an inference
otherwise. We conclude, therefore, that National Union
assumed Rockwell’s defense during the proceedings in
the Missouri state court.
Our determination that National Union assumed
Rockwell’s defense makes necessary a review of the
district court’s determination that National Union’s policy
should be construed under Wisconsin law. National
Union argued below that Rockwell exhibited California
ties that warranted allowing the parties to develop the
factual record before a choice of law determination was
made. The district court, however, found that the National
Union policy’s most significant ties were with Pennsylva-
nia, and then applied Wisconsin law noting that there
was no outcome-determinative difference between the
relevant law in the two states. National Union argues that
the choice of law question is relevant because if its policy
is construed under California law, then its responsibility
for paying “all interest that accrues after entry of judg-
ment” when it assumes the defense means it is respon-
sible only for “all interest on that part of the judgment for
which the company was liable, and not all interest on the
entire judgment.” Standard Accident Ins. Co. of Detroit v.
Winget, 197 F.2d 97, 106 (9th Cir. 1952) (quoting Sampson v.
No. 07-2848 15
Century Indem. Co., 66 P.2d 434, 436 (Cal. 1937)).3 If, on the
other hand, Wisconsin law governs, then “all interest”
means “all interest on the judgment, whatever its amount
in relation to the policy limits.” Weimer v. Country Mut. Ins.
Co., 575 N.W.2d 466, 473 (Wis. 1998). We review a district
court’s choice of law determination de novo. Tanner v.
Jupiter Realty Corp., 433 F.3d 913, 915 (7th Cir. 2006).
In a suit, like this one, where subject matter jurisdiction
is based on diversity, the forum state’s choice of law
rules determine the applicable substantive law. Sound of
Music Co. v. Minn. Min. & Mfg. Co., 477 F.3d 910, 915
(7th Cir. 2007). “In contract cases, Wisconsin courts
apply the law of the state with which the contract has
the most significant relationship.” Hystro Prods., Inc. v.
MNP Corp., 18 F.3d 1384, 1387 (7th Cir. 1994). Contacts
considered relevant are (1) the place of contracting; (2) the
place of negotiation of the contract; (3) the place of perfor-
mance; (4) the location of the subject matter of the con-
tract; and (5) the respective domiciles, places of incorpora-
tion and places of business of the parties. Id. It is important
“not to count contacts but instead, to consider which
contacts are most significant and to determine where
those contacts are found.” Id.
Taking the last factor first, we note that National Union
is a Pennsylvania company and the Declarations page of
3
National Union also attempts to argue on appeal that New
York law governs its contract. However, it never asserted this
argument to the district court, nor did it raise any New York
contacts below. Accordingly, the argument is waived. Hicks
v. Midwest Transit, Inc., 500 F.3d 647, 652 (7th Cir. 2007).
16 No. 07-2848
the policy it issued to Rockwell lists its home office at a
Pennsylvania address. Rockwell was issued the policy
under its prior name, Rockwell International Corporation.
The Declarations page provides a Pennsylvania address
for Rockwell International Corporation, but a revised
Declarations page list an address in California. Rockwell,
however, is incorporated in the state of Delaware with its
principal place of business in Wisconsin. Regarding the
place of performance and the location of the policy’s
subject matter, we note that National Union agreed to
insure Rockwell for an occurrence “happening anywhere
in the world.” This does not help our analysis much, but
it is helpful to note that the specific subject matter at issue
here was an explosion resulting in property damage to
KCPL in Missouri. The resulting law suit was filed in
Missouri, and it was a Missouri court that issued the
judgment under which Rockwell became liable, thus
triggering its coverage under the National Union policy.
These facts are sufficient to indicate that the policy’s
most significant contacts are with Pennsylvania or Mis-
souri. The district court determined that the strongest
connection was with Pennsylvania, but in reliance on
Wood v. Mid-Valley, Inc., 942 F.2d 425, 426 (7th Cir. 1991),
it applied the law of Wisconsin because it was the
forum state and “there is no outcome-determinative
difference between the law of Pennsylvania and that of
Wisconsin with respect to the issue in question.” In Wood,
however, we held that “when neither party raises a
conflict of law issue in a diversity case, the federal court
simply applies the law of the state in which the federal
court sits.” Id. Here, National Union did raise the choice
of law issue, and Wood is therefore inapposite.
No. 07-2848 17
For the specific question under consideration, however,
we need not resolve the choice of law issue because, like
Wisconsin, courts in Pennsylvania and Missouri construe
the “all interest” language as rendering an insurer respon-
sible for the entirety of the interest on a judgment, not
just that portion of the judgment falling within the in-
surer’s coverage. See Levin v. State Farm Mut. Automobile
Ins. Co., 510 S.W.2d 455, 458 (Mo. 1974) (noting that an
“agreement to pay court costs and interest is not part of,
but is a separate obligation beyond the limit of the [in-
surer’s] liability”); Underwood v. Buzby, 136 F. Supp. 957,
959 (E.D. Pa. 1955) (concluding that the requirement
under Pennsylvania law that vague provisions be re-
solved in favor of the insured required that the “all inter-
est” language render an insurer liable for all of the inter-
est on a judgment regardless of policy limits).
Additionally, even under California law, courts have a
“duty to construe the policy in its entirety, and taking the
instrument by its four corners . . . to ascertain the mutual
intention of the parties as it existed at the time of the
execution of the instrument.” Sampson v. Century Indem.
Co., 66 P.2d 434, 436 (Cal. 1937). As the court noted in
Underwood when considering the “all interest” language,
“very little restrictive language would have been
required to limit the liability of the insurer to interest
only upon that portion of the judgment covered by its
policy if that were the intention of the insurer.” Underwood,
136 F. Supp. at 959. National Union’s policy, in fact,
contains such language, but it applies only to pre-judgment
18 No. 07-2848
interest.4 The fact that National Union’s policy requires it
to pay pre-judgment interest only on that part of the
judgment falling within its policy limit, but is missing a
similar limitation on post-judgment interest would have
made National Union’s position tenuous even under
California law. See Maxconn, Inc. v. Truck Ins. Exch., 88 Cal.
Rptr. 2d 750, 758 (Cal. Ct. App. 1999) (“The absence of an
expression or word in a policy is clearly an appropriate
consideration in the interpretation of contracts.”). We
conclude, therefore, that under the law of any of the
states put forth, National Union’s policy requires it to pay
all of the post-judgment interest for which Rockwell
became liable when it has assumed Rockwell’s defense.
National Union attempts to circumvent the language
in its policy requiring it to pay “all interest” after assuming
Rockwell’s defense by arguing that post-judgment
interest is included in the general coverage sections of the
three excess policies. As noted above, the “Coverage”
section in National Union’s policy makes it responsible for
paying “those sums . . . that the Insured becomes legally
obligated to pay by reason of liability imposed by law . . . .”
Federal’s policy obligates it to pay “that part of loss . . . in
excess of the limits of Underlying Insurance,” and Gulf’s
requires it to “indemnify the Insured that amount of loss
which exceeds the amount of loss payable by the underly-
ing policies.” The district court determined that the
words “sums” and “loss” in the coverage sections do not
4
“When we assume the defense of any claim or suit . . . [w]e
will pay . . . pre-judgment interest awarded against the
Insured on that part of the judgment we pay.”
No. 07-2848 19
include post-judgment interest, and we review that
construction de novo. BASF AG v. Great Am. Assurance Co.,
522 F.3d 813, 819 (7th Cir. 2008). When construing an
insurance policy, the objective should be to discern and
give effect to the parties’ intentions. State Farm Mut. Auto.
Ins. Co. v. Bailey, 734 N.W.2d 386, 391 (Wis. 2007). This
occurs primarily by giving “the common, ordinary mean-
ing to the policy language (i.e., what the reasonable
person in the insured’s position would understand it to
mean).” Id. While ambiguities are construed in favor of
the insured, ambiguities only exist when “the language of
the policy is susceptible to more than one reasonable
construction.” Id. (quotation omitted).5
National Union’s argument that post-judgment interest
is included in the general coverage sections of the three
excess policies hinges on the general definitions of the
terms “sums” and “loss.” Additionally, National Union
argues that the coverage sections of the policies set forth
what the excess insurers are required to pay within the
their policy limits, while the “Defense” section of
National Union’s policy spells out what they must pay in
addition to their policy limits. Neither of these argu-
ments is supported by a reasonable reading of National
Union’s policy. First, as noted by the district court, the
5
Our conclusion above that we need not resolve the choice of
law issue is not changed by citation to these general construc-
tion principles because they are in effect in both Missouri
and Pennsylvania. See Wall Rose Mut. Ins. Co. v. Manross, 939
A.2d 958, 962 (Pa. Super. Ct. 2007); Farmland Indus., Inc. v.
Republic Ins. Co., 941 S.W.2d 505, 508 (Mo. 1997).
20 No. 07-2848
terms “sums” and “loss” can arguably be read in isola-
tion to include post-judgment interest. However, when
considered in the context of the policy as a whole, it is
unreasonable to read those terms as including post-judg-
ment interest because there is a section specifically articu-
lating when the insurer will pay post-judgment interest,
i.e., when it assumes Rockwell’s defense. See 1325 North
Van Buren, LLC v. T-3 Group, Ltd., 716 N.W.2d 822, 838 (Wis.
2006) (noting that “a contract is to be construed so as to
give a reasonable meaning to each provision of the con-
tract, and that courts must avoid a construction which
renders portions of a contract meaningless, inexplicable
or mere surplusage”); accord TAP Pharm. Prods. Inc. v. State
Bd. of Pharm., 238 S.W.3d 140, 143 (Mo. 2007); Guy M.
Cooper, Inc. v. East Penn Sch. Dist., 903 A.2d 608, 616 (Pa.
Super. Ct. 2006). The provision stating that National
Union will pay post-judgment interest when it assumes
the defense would be rendered superfluous if in the
preceding section it promised to pay post-judgment
interest as part of a “sum” for which Rockwell became
liable, whether it assumed Rockwell’s defense or not.
Inclusion of post-judgment interest in the term “loss” as
used in the follow-form policies of Federal and Gulf
would likewise render superfluous the National Union
“Defense” section.
National Union attempts to overcome this conclusion by
arguing that the “Coverage” section sets forth National
Union’s obligations within its policy limits, and that
the “Defense” section provides for its obligations in
addition to the policy limits. It is true that the “Defense”
section sets forth amounts National Union will pay above
its policy limit. Indeed, the final line of the section
No. 07-2848 21
states, “All expenses we incur in the defense of any suit
or claim are in addition to our Limits of Insurance.”
However, it is unreasonable to read a section entitled
“Defense” as if its purpose is to set forth the amounts
National Union will pay outside of its policy limits. A
more reasonable reading of the section is that its purpose
is to describe when National Union can and must
defend Rockwell, and then what amounts will be paid
when National Union assumes the defense that are not
already provided for in the “Coverage” section. If post-
judgment interest were already included in the coverage
section, there would be no need to list it separately as an
amount to be covered in the event National Union
assumed Rockwell’s defense. Furthermore, if the purpose
of the “Defense” section was to articulate the amounts
that would be paid outside of the policy limits, it would
have been very simple to state as much. As the policy is
written, however, it contains no such language.6 Accord-
ingly, the district court did not err in concluding that post-
6
Contrary to National Union’s argument, the final line of the
“Defense” section referenced above does not show that the
section’s purpose is to set forth the amounts National Union
will pay in addition to the policy limit. There are payments
discussed in the “Defense” section that are not expenses that
would be incurred by National Union in Rockwell’s
defense—post-judgment interest is an example of one. The
language plainly means that the expenses National Union
incurs while defending Rockwell (such as Robertson’s fees)
will not reduce the amount for which National Union has
agreed to cover Rockwell. It is unreasonable to attempt to read
this line as a sort of policy statement giving meaning to the
entire section.
22 No. 07-2848
judgment interest is not included in the general coverage
sections of the National Union, Federal, and Gulf policies.
III.
The record establishes that National Union selected
and paid for the attorney who controlled Rockwell’s
defense on appeal, which in turn establishes that National
Union assumed Rockwell’s defense during the Missouri
state proceedings. Additionally, the law of the states
shown in the record to have the most significant
contacts with National Union’s policy require an insurer
who agrees to pay “all interest” accruing after entry of
judgment to pay the interest accrued on the entire judg-
ment. The district court therefore did not err in deter-
mining that National Union is responsible for the full
amount of post-judgment interest that accrued on the
judgment against Rockwell. Finally, the district court did
not err in its determination that post-judgment interest
was not included in the general coverage sections of the
policies issued by National Union, Federal, and Gulf.
Accordingly, we A FFIRM the district court’s dismissal of
National Union’s claims and entry of judgment for
Federal and Travelers.
9-12-08