Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-15-01623/USCOURTS-ca8-15-01623-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 15-1547

___________________________

Continental Casualty Company

lllllllllllllllllllllPlaintiff - Appellee

v.

National Union Fire Insurance Company of Pittsburgh, PA

lllllllllllllllllllllDefendant

The Valspar Corporation

lllllllllllllllllllllIntervenor Defendant - Appellant

___________________________

No. 15-1623

___________________________

Continental Casualty Company

lllllllllllllllllllllPlaintiff - Appellee

v.

National Union Fire Insurance Company of Pittsburgh, PA

lllllllllllllllllllllDefendant - Appellant

The Valspar Corporation

lllllllllllllllllllllIntervenor Defendant

Appellate Case: 15-1623 Page: 1 Date Filed: 02/09/2016 Entry ID: 4364895 
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Appeals from United States District Court 

for the District of Minnesota - Minneapolis

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Submitted: October 19, 2015

Filed: February 9, 2016

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Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges.

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RILEY, Chief Judge.

This is a diversity case involving a maker of paints and other coatings—The

Valspar Corporation, a Delaware and Minnesota citizen—and two of its

insurers—Continental CasualtyCompany, an Illinois citizen, and National Union Fire

Insurance Company of Pittsburgh, PA, a Pennsylvania and New York citizen. See

28 U.S.C. § 1332(a)(1), (c)(1). The district court ordered National Union to pay part 1

of the costs Continental incurred to defend Valspar against several lawsuits. Valspar

intervened and now appeals because it has agreements with National Union under

which Valspar might be required to reimburse anything National Union pays

Continental. We affirm.

I. BACKGROUND

Valspar bought primary general liability insurance from various companies

over the years. In 2005 and 2006, Valspar faced lawsuits claiming damages from

benzene in its products, triggering policies it bought from Continental and National

The Honorable John R. Tunheim became Chief Judge of the United States 1

District Court for the District of Minnesota on July 1, 2015.

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Union, along with five other primary insurers. Continental agreed to defend Valspar,

reserving its rights to have the other insurers contribute to paying the costs.

National Union refused to contribute, explaining it had a “fronting

arrangement” with Valspar, whichmeant Valspar wasresponsible for its own defense

costs and National Union was not obliged to defend it. Continental sued for

declarations that National Union had a duty to defend Valspar and owed Continental

National Union’s share of the defense costs. Valspar intervened, arguing that in light

of National Union’s asserted right to pass its costs to Valspar, a nominal right of

Continental to contribution from National Union would really be a right to

contribution from Valspar, to which Continental was not entitled. National Union

then cross-claimed for a declaration Valspar must indemnify National Union against

any contribution Continental wins, as well as damages against Valspar for

anticipatorily breaching its indemnity obligations.

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On cross-motionsfor summary judgment,the district court held National Union

had a duty to defend Valspar and to contribute to the defense costs and Valspar did

not have a duty to contribute to the defense costs directly (as opposed to potentially

having to reimburse National Union). The district court therefore ordered National

Union to pay a seventh of Continental’s defense costs. Valspar appeals. The district

3

court granted Valspar’s motion to enter partial final judgment, see Fed. R. Civ. P.

54(b), so we have jurisdiction under 28 U.S.C. § 1291.

Nothing has happened on the cross-claims, and they are stayed pending this 2

appeal.

National Union also appeals but does not challenge the merits of the district

3

court’s decision. National Union just wants to be in position to have the judgment

against it reversed if we agree with Valspar and hold Continental is not entitled to

contribution.

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II. DISCUSSION

Contract interpretation and the propriety ofsummary judgment are legal issues

we review de novo. See, e.g., Hot Stuff Foods, LLC v. Hous. Cas. Co., 771 F.3d

1071, 1074 (8th Cir. 2014). No one disputes Minnesota law governs, so it does. See

BBSerCo, Inc. v. Metrix Co., 324 F.3d 955, 960 n.3 (8th Cir. 2003) (noting the law

of the forum state applies by default if the parties do not raise the issue).

The parties agree the general rule under Minnesota law comes from Cargill,

Inc. v. Ace American Insurance Co.: “a primary insurer that has a duty to defend, and

whose policy is triggered for defense purposes, has an equitable right to seek

contribution for defense costs from any other insurer who also has a duty to defend

the insured, and whose policy has been triggered for defense purposes.” Cargill, Inc.

v. Ace Am. Ins. Co., 784 N.W.2d 341, 354 (Minn. 2010). Valspar advances four

main reasons why that rule does not apply between Continental and National Union

in this case: (1) National Union did not have a duty to defend Valspar within the

meaning of Cargill; (2) Valspar might ultimately need to pay National Union’s

contribution; (3) Continental agreed not to try to recover its defense costs from

Valspar; and (4) Continental failed timely to pay some of the defense costs. In the

alternative, Valspar argues the amount National Union is required to contribute

should account for amounts Valspar spent on its own defense. We address each point

in turn.

A. Continental’s Right to Contribution from National Union

1. National Union’s Duty To Defend Valspar

After a thorough analysis of various documents relating to Valspar’s policies

with National Union, the district court held National Union assumed and retained a

duty to defend Valspar. The bottomline wasthat the policiessaid “[National Union]

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Continental suggests the district court’s analysis went further than necessary. 

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According to Continental, the district court should not have considered documents

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Appellate Case: 15-1623 Page: 4 Date Filed: 02/09/2016 Entry ID: 4364895 
will have the right and duty to defend” Valspar against civil proceedingsfor damages,

and National Union nowhere explicitly or implicitly disclaimed that duty. See, e.g.,

Eng’g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 704 (Minn.

2013) (“Where the language of an insurance policy ‘is clear and unambiguous,’ we

effectuate the intent of the parties by ‘interpret[ing] the policy according to plain,

ordinary sense.’” (alteration in original) (quoting Carlson v. Allstate Ins. Co., 749

N.W.2d 41, 45 (Minn. 2008))). Provisions in several agreements did oblige Valspar

to pay or reimburse National Union (or its claims adjuster) for some defense costs,

but those obligations did not relieve National Union from its duty to defend, the

district court explained, because the duty to defend is not only the “mere obligation

to pay for defense costs.”

Valspar challenges that last point—the district court’s recognition of a duty to

defend which is broader than the responsibility for paying defense costs. Valspar

faults the district court for basing its understanding of the duty to defend on excesscarrier cases distinguishing that duty from insurers’ duty to reimburse defense costs,

because “[a]n excess insurer’s duty to reimburse an insured . . . is, of course, very

different from the broad duty to defend.” Yet that was the district court’s point:

otherthan the National Union policiesthemselves and express endorsements, because

by their terms the policies “c[ould] be amended or waived only by endorsement

issued by [National Union] and made a part of th[e] policy.” And the district court

could have stopped after finding a duty to defend triggered in a single policy, because

under Minnesota law that would have been enough to justify National Union sharing

equally in the defense costs. See Cargill, 784 N.W.2d at 354. Valspar protests that

Continental cannot raise those points here because it did not cross-appeal. Valspar

is mistaken. See, e.g., United States v. Am. Ry. Express Co., 265 U.S. 425, 435

(1924) (“[An] appellee may, without taking a cross-appeal, urge in support of a

decree any matter appearing in the record, although his argument may involve an

attack upon the reasoning of the lower court or an insistence upon matter overlooked

or ignored by it.”). Even so, we need not consider which agreementsthe district court

should have reviewed because the district court’s interpretation of the documents, as

such, is not at issue on appeal.

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Appellate Case: 15-1623 Page: 5 Date Filed: 02/09/2016 Entry ID: 4364895 
Valspar taking responsibility for paying its own defense while leaving other aspects

of its insurance arrangement with National Union in place was much like an insurer

agreeing to reimburse its insured’s defense costs but not actually to conduct the

defense. So the district court cited cases explaining how the duty to defend includes

more than paying for the defense to demonstrate that Valspar’s responsibility for

defense costs did not negate National Union’s duty to defend. See, e.g., Liberty Mut.

Ins. v. Pella Corp., 650 F.3d 1161, 1172 (8th Cir. 2011) (explaining the duty to

defend “also requires the insurer to conduct and take control of the whole defense”). 

We see no problem with the district court’s logic, and Valspar points to nothing

suggesting the district court’s analogywasinapt—such as any agreement under which

Valspar’s defense responsibilities extended beyond just paying costs.

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But even if National Union retained some part of its duty to defend, Valspar

maintains, that “vestige” was not enough to justify contribution because it did not

include a duty to pay defense costs. Under Cargill, an insurer has a right to equitable

contribution when “more than one primary insurer coversthe same risk and an insurer

discharges a common obligation also belonging to another insurer.” Cargill, 784

N.W.2d at 353 (emphasis added). According to Valspar, National Union did not

share any “common obligation” discharged by Continental, “because an insurer with

NO duty to pay defense costs clearly has no burden in common with insurers having

a duty to pay them in full.”

Of course, as the district court noted, parties can and do agree to modify 5

insurance policiesto relieve insurers of the duty to defend. See, e.g., GenesisIns. Co.

v. BRE Props., 916 F. Supp. 2d 1058, 1073 (N.D. Cal. 2013) (describing an

endorsement that provided “We [the insurer] have no duty to defend any claim or

‘suit’” (emphasis omitted)); State Nat’l Ins. Co. v. County of Camden, Civ. No. 08-

5128, 2012 WL 6652819, at *1 (D.N.J. Dec. 19, 2012) (“The [insured] shall be

obligated to . . . provide an adequate defense . . . of any action for or notice of any

actual, potential or alleged damages.”). Valspar and National Union did not.

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It is not quite right to say National Union did not need to pay defense costs. 

As the district court carefully reasoned—and Valspar does not dispute—although

Valspar was ultimately financially responsible for certain defense costs under its

agreements with National Union, it did not have to pay for its defense in the first

instance. Rather,in different ways, various agreements obliged Valspar to indemnify,

reimburse, or advance money to National Union (or the claims adjuster), which, by

implication, actually paid for the defense. By the terms of the agreements, the basic

arrangement wasthat National Union would pay the expenses and Valspar would pay

National Union. Far from being free from any obligation to pay for Valspar’s 6

defense, as Valspar asserts, National Union was on the hook unless and until Valspar

performed or National Union exercised its rights.

Further, we reject Valspar’s assumption that the phrase “common obligation”

in Cargill means only an obligation to pay for the defense. The obligation of an

insurer with a duty to defend—that is, the obligation shared with other insurers and

discharged when one accepts the defense—is to “provide a defense,” not just to pay

for it. See Murray v. Greenwich Ins. Co., 533 F.3d 644, 648 (8th Cir. 2008). Thus,

whenever the Minnesota Supreme Court identified the shared obligation justifying

a right to contribution, it consistently referred to the “obligation to defend.” See

Cargill, 784 N.W.2d at 348, 351-52 (emphasis added); see also id. at 354 (“[W]e . . .

hold that a primary insurer that has a duty to defend . . . has an equitable right to seek

contribution for defense costs from any other insurer who also has a duty to defend

the insured.”).

Whether the arrangement operated this way in practice is immaterial. We are 6

concerned with National Union’s legal obligations to Valspar, and in Minnesota, as

elsewhere, courts “look to [a contract’s]language to determine the parties’ intent” and

“assign unambiguous contract language its plain meaning,” Savela v. City of Duluth,

806 N.W.2d 793, 796-97 (Minn. 2011).

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Appellate Case: 15-1623 Page: 7 Date Filed: 02/09/2016 Entry ID: 4364895 
2. Valspar’s Potential Liability to National Union

Valspar next argues “requiring Valspar to pay defense costs indirectly, through

National Union,” is the same as requiring Valspar to contribute to the defense, so it

contradicts the district court’s ruling that Continental has no right to contribution

from Valspar. We disagree. The party Continental is suing matters.

The reason Continental cannot sue Valspar for contribution directly is that

between the two of them, Continental was contractually required to defend the whole

suit, so it has no right to ask Valspar to pay for part. See Wooddale Builders, Inc. v.

Md. Cas. Co., 722 N.W.2d 283, 302 (Minn. 2006). Continental can sue National

Union, on the other hand, because the Minnesota Supreme Court has decided insurers

with overlapping duties to defend should share the cost of the defense, for the sake

of fairness and to avoid incentivizing wasteful fights over who will defend. See

Cargill, 784 N.W.2d at 352-53. The possibility that National Union might in turn

recoup its expenses from Valspar does nothing to change the basis for that right as

between Continental and National Union.

Aerojet-General Corp. v. Transport Indemnity Co., from which Valspar draws

the proposition that “[a]n insured is not required to make such a contribution together

with insurers,” is not to the contrary. Aerojet-Gen. Corp. v. Transp. Indem. Co., 948

P.2d 909, 930 (Cal. 1998) (applying California law). First, as suggested by the

quoted passage, Aerojet concerned insurerstrying to recover defense costs from their

insured, not another insurer. Id. at 929-30. And under the “fronting” policy at issue

in Aerojet, as interpreted by the California Supreme Court, the insured “agree[d] to

. . . defend itself” and the insurer “had no duty to defend whatsoever.” Id. at 928-29. 

In light of those key differences, Aerojet simply does not speak to the situation

presented in this case, where an insurer seeks contribution from another insurer that

did have a duty to defend.

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Appellate Case: 15-1623 Page: 8 Date Filed: 02/09/2016 Entry ID: 4364895 
3. Continental’s Agreement Not To Sue Valspar for Its Costs

Valspar also argues that by seeking contribution from National Union,

Continental is violating an agreement with Valspar “not to seek recovery from

Valspar for defense costs advanced by Continental in connection with the [claims

underlying this case]” and “to waive any right of recovery from Valspar for such

costs.” That argument fails for the same simple reason as the last: Continental is

suing National Union, not Valspar. Continental is not currently seeking recovery 7

from Valspar, nor isit exercising any right against Valspar. Just as a suit for damages

against an insured is different from a direct suit against its insurer, cf. Camacho v.

Todd & Leiser Homes, 706 N.W.2d 49, 56 (Minn. 2005), so a suit against National

Union is different from a suit against Valspar, notwithstanding Valspar’s potential

obligation to indemnify National Union. And we find no support for Valspar’s

suggestion that a waiver of rights against one party also acts as a waiver of different

rights against another, unrelated party.

4. Continental’s Fulfillment of Its Duty To Defend

Last, Valspar argues equitable contribution is inappropriate because

Continental has dirty hands. See Cargill, 784 N.W.2d at 354 (“[B]reach of a duty to

defend precludes application of an equitable right to contribution.”). According to

Valspar, Continental breached its duty to defend by not reimbursing roughly $15,800

Valspar paid in attorney fees and allegedly delaying other payments. The district

court held that even if Continental should have paid the $15,800—less than 3% of the

over $560,000 Continental paid for the defense—and the delay was unreasonable,

Continental’s conduct did not rise to the level of a breach precluding equitable

contribution, because “Continental did not fail to provide Valspar with a defense.” 

Because we conclude Valspar’s reliance on Continental’s agreement is 7

misplaced, we need not consider whether the agreement is unenforceable, as the

district court concluded.

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Valspar takes issue with what it sees as the district court’s suggestion “only a

complete failure to meet the duty to defend” would count as a breach, arguing

“Minnesota authority” forecloses that approach. In Cargill, Valspar says, the

Minnesota Supreme Court raised the possibility an insurer could have breached its

duty to defend despite “timely offer[ing] to pay defense costs.” Valspar misreads

Cargill. The insurer in that case did offer to pay the full defense costs, but only if its

insured signed a loan receipt agreement meant to give the insurer standing to sue the

insured’s other insurers for their shares (which it needed because Minnesota law did

not yet recognize a right to equitable contribution). Id. at 344-45 & n.5. We

understand that withholding and conditioning ofthe defense to be what the Minnesota

Supreme Court thought might constitute a breach.

Here, by contrast, Continental agreed to provide a defense and reimbursed the

vast majority of Valspar’s defense costs. We agree with the district court that equity 8

does not require Continental to bear the entire cost of Valspar’s defense. 

Continental’s duty was to defend Valspar. It did so. Because a relatively minor fee

dispute arising out of that defense could not change that, even if Continental turned

out to be wrong, we reject Valspar’s contention that the district court should have

answered the underlying factual questions of whether the unpaid fees and

Continental’s delay were reasonable.

B. Amount of National Union’s Contribution

Having concluded Continental is entitled to equitable contribution from

National Union, we reach Valspar’s alternative argument that the calculation of

National Union’s contribution should take into account defense costs Valspar paid

Continental even appears to have gone through an appeal and review process

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with Valspar, after which Continental paid some amounts it initially refused to cover.

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Appellate Case: 15-1623 Page: 10 Date Filed: 02/09/2016 Entry ID: 4364895 
out of pocket and for which it has not been reimbursed. Valspar’s position reflects

9

a misunderstanding of the nature of equitable contribution among insurers. The point

of contribution is to make sure all insurers with a duty to defend share equitably in

defense costs paid by any of them. See Cargill, 784 N.W.2d at 353-54. Contribution

is a mechanism for fairly allocating the costs incurred by insurersin discharging their

overlapping obligations. As such, it is unaffected by amounts paid by the insured (or

anyone else) unless an insurer reimburses or becomes liable for them. If the costs

10

Valspar paid were covered by its policies with Continental or other insurers,

Valspar’s remedy isto exercise its contractual rights to reimbursement (at which point

the insurer that paid could potentially seek contribution from the others). If not, there

is no reason to include the costs in the amount to be spread among the insurers.

The essence of Valspar’s argument is, practically speaking, “Valspar is the

party that will be contributing to Continental’s defense costs,” so it is only fair to give

Valspar credit for the costs it already paid. We first note there has not been any

determination that the insurers were actually responsible for the costs Valspar paid,

either by a court or an insurer agreeing to reimburse them. Further, whatever the

merits of overlooking technicalities for the sake of equity and efficiency, if this case

11

Valspar wants the amount it paid—roughly $68,000—included in the total cost 9

of the defense and then credited against National Union’s one-seventh share, which

would have the end result of reducing the judgment against National Union by sixsevenths of what Valspar paid, or about $58,000.

Because Valspar agrees its payment of the amounts in question “had nothing

10

to do with the National Union program,” we need not address the district court’s

suggestion that the analysis might be different if the payments were “attributable to

National Union’s duty to defend.”

Valspar’s preferred approach would reach the same bottom line as if Valspar

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paid all of what National Union owes, Valspar sought reimbursement for the $68,000

it paid, Continental or another insurer reimbursed it, that insurer got the others,

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Appellate Case: 15-1623 Page: 11 Date Filed: 02/09/2016 Entry ID: 4364895 
were about an award against Valspar, the judgment is against National

Union—indeed, the question of whether Valspar needs to indemnify National Union

is still pending. We see no equitable reason to treat National Union as if it already

paid anything toward Valspar’s defense.

III. CONCLUSION

National Union had a duty to defend Valspar and therefore has an equitable

obligation to contribute to paying the costs of the defense. Neither Valspar’s

agreement to pay National Union’s costs, Continental’s agreement not to recover

defense costs from Valspar, nor Continental’s alleged failure to pay a small fraction

of the costs defeats Continental’s right to contribution from National Union. These

are distinct obligations. And National Union’s share of the defense costs paid by the

insurers is unaffected by amounts paid by Valspar. We affirm and remand for further

proceedings.

______________________________

including National Union, to contribute to that payment, and Valspar indemnified

National Union’s share.

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