Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-08-04521/USCOURTS-ca3-08-04521-0/pdf.json

Parties Involved:
Federal Insurance Company
Appellant
Great Northern Insurance
Appellant
Greenwich Insurance Co
Appellee

Document Text:

Honorable Paul S. Diamond, United States District Judge for the Eastern District *

of Pennsylvania, sitting by designation.

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 08-4521

____________

GREAT NORTHERN INSURANCE COMPANY;

FEDERAL INSURANCE COMPANY,

 Appellants

v.

GREENWICH INSURANCE COMPANY

____________

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 05-cv-00635)

District Judge: Honorable Joy Flowers Conti

____________

Submitted Pursuant to Third Circuit LAR 34.1(a)

January 28, 2010

Before: FUENTES and FISHER, Circuit Judges, and DIAMOND, District Judge.

*

(Filed: March 24, 2010)

____________

OPINION OF THE COURT

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Case: 08-4521 Document: 003110072316 Page: 1 Date Filed: 03/24/2010
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FISHER, Circuit Judge.

We are asked in this appeal to determine whether the District Court erred in

holding that, under Pennsylvania law, an insurer cannot seek equitable contribution from

another insurer of a mutual insured when it failed to present evidence demonstrating it

made payments on behalf of the mutual insured. For the reasons stated herein, we will

affirm.

I.

We write exclusively for the parties, who are familiar with the factual context and

legal history of this case. Therefore, we will set forth only those facts necessary to our

analysis.

Atlas America, Inc. (“America”) is in the business of owning and developing

various natural gas production wells. Its wholly-owned subsidiary Atlas Resources

(“Resources”) was the operator of certain America wells, including the well at issue in

this case (the “Ronco well”). America entered into a master work agreement with Gene

D. Yost & Sons, Inc. (“Yost”) for the purpose of engaging Yost to drill natural gas

development wells, including the Ronco well. Resources entered into a drilling contract

with Yost specifically for the Ronco well. The drilling contract, to which only Yost and

Resources are parties, contains an assumption of liability clause that states that Resources

will indemnify Yost for claims arising out of Yost’s conduct under the drilling contract.

Case: 08-4521 Document: 003110072316 Page: 2 Date Filed: 03/24/2010
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The parties in interest in this case are the insurance companies of America,

Resources and Yost. Plaintiff-appellants Great Northern Insurance Company (“Great

Northern”) and Federal Insurance Company (“Federal”) are both members of the Chubb

Group of Insurance Companies (collectively “Chubb”). Great Northern issued a primary

policy on which America was the first named insured and Resources was an additional

named insured. Federal issued an umbrella policy on which both America and Resources

were named insureds. Defendant-appellee Greenwich Insurance Company (“Greenwich”)

issued a policy on which Yost was a named insured and Resources was an additional

insured.

On February 2, 2004, a blow-out occurred at the Ronco well. The resulting fire

and by-products caused property damage to homes, automobiles, and personal property of

third parties in nearby towns. As a result of cleanup expenses and damage incurred by

third parties, Chubb paid out the Great Northern policy limit of $1,000,000 and an

additional $605,366.83 under the Federal umbrella policy.

Chubb seeks equitable contribution from Greenwich on the grounds that some

portion of its payments was in discharge of Greenwich’s obligation to pay on behalf of

Resources as an additional named insured on Yost’s Greenwich policy. The District

Court granted judgment in favor of Greenwich. This timely appeal followed.

Case: 08-4521 Document: 003110072316 Page: 3 Date Filed: 03/24/2010
4

II.

The District Court exercised jurisdiction under 28 U.S.C. § 1332(a)(1) and applied

the choice of law rules applicable in the Commonwealth of Pennsylvania. We have

appellate jurisdiction pursuant to 28 U.S.C. § 1291. We review the denial of a request for

an equitable remedy for abuse of discretion. Holmes v. Pension Plan of Bethlehem Steel

Corp., 213 F.3d 124, 134 (3d Cir. 2000).

III.

To recover on a claim of equitable contribution under Pennsylvania law, an insurer

must show by a preponderance of the evidence that (1) it is one of several parties liable

for a common debt or obligation; and (2) it discharged the debt for the benefit of the other

parties. See In re Mellon’s Estate, 32 A.2d 749, 757 (Pa. 1943).

At trial, Chubb successfully showed that it and Greenwich were liable under their

respective insurance policies for a common obligation to Resources, thus satisfying the

first element of an equitable contribution claim. However, because the District Court

could not determine whether any of the third-party damage claims were paid on behalf of

Resources, the District Court held that Chubb’s failure to allocate liability between the

insureds caused its claim for equitable contribution to fail. (See App. at A114 (“I have

serious questions about how I will do this allocation when nothing has been presented to

me. It could be a hundred percent, it could be zero percent.”).)

Case: 08-4521 Document: 003110072316 Page: 4 Date Filed: 03/24/2010
We note that the District Court was persuaded, as are we, by the California 1

appellate court’s opinion in Crusader v. USF & G Insurance Co., 2007 WL 1140417

(Cal. Ct. App. Apr. 18, 2007), addressing a similar situation. In Crusader, two insurers

contributed unequally to a lump settlement of lawsuits against their mutual insured. In

the subsequent equitable contribution suit, the court held that the plaintiff had failed to

produce evidence of how the settlements were apportioned and that the court was

therefore unable to fashion an equitable remedy between the parties.

5

We agree with the District Court that Chubb offered insufficient evidence at trial

to guide the Court in apportioning the claim payments between America and Resources. 

Chubb’s claims adjuster offered contradictory testimony regarding the basis for having

made the claim payments, indicating in deposition that all payments had been made on

behalf of America and then indicating at trial that payments had been made on behalf of

Resources as the operator of the well. Pre-suit correspondence from Chubb consistently

maintained that payments had been made on behalf of America exclusively. While we

recognize, as did the District Court, that it is industry practice to refer to a policy by the

first named insured, this does not excuse the absence of evidence of specific

apportionment when an insurer turns to a court seeking equitable contribution.1

Additionally, Chubb failed to introduce evidence of negligence or other legal

liability on behalf of Resources for the blowout. The Chubb claims adjuster indicated

that there could have been liability as a result of actions by an insured, but never

attempted to apportion specific liability to America or Resources. Absent an indication of

how to allocate legal liability, the District Court was left to speculate as to whether Chubb

made any payments whatsoever on behalf of Atlas Resources.

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On appeal, Chubb primarily contends that the District Court erred when it failed to

recognize the indemnity clause contained in the drilling contract between Yost and

Resources. We find this argument irrelevant. The dispositive question is allocation of

payments between America and Resources – e.g., what portion of Chubb’s payment

covered Resources’ liability and therefore potentially implicates Greenwich’s policy. 

Assuming arguendo that Resources was required to contractually indemnify Yost, we

would merely have one more unquantifiable basis for Resource’s liability. Because, on

the facts before us, it remains possible that Chubb paid nothing on behalf of Resources,

this contractual indemnification argument gets us no further into the second element of an

equitable contribution claim.

Finally, Chubb contends that the practical effect of the District Court’s

determination is that insurance claims adjusters will be forced to apportion liability and

thereby have the power to “make legally binding liability determinations” which would

effectively “usurp the judicial system and produce subjective results.” (Chubb Br. at 25.) 

We disagree. A claims adjuster’s determination of respective liability, while certainly

helpful, would not have been the only evidence that might have aided the District Court in

its equitable apportionment. Evidence of comparative negligence on the part of the

insureds, acknowledgment of shared liability or payment on behalf of a mutual insured, or

even a concerted effort by the litigants to reduce general allegations to specific numbers

might guide the court’s analysis. At bottom, a claim for equitable contribution calls upon

Case: 08-4521 Document: 003110072316 Page: 6 Date Filed: 03/24/2010
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the power of the court to design a remedy that is fair. Fairness cannot be fashioned from

speculation.

Because Chubb failed to prove by a preponderance of the evidence that it

discharged debt for the benefit of Resources, the District Court did not abuse its

discretion in finding that Chubb failed to satisfy the second element of its claim for

equitable contribution.

IV.

For the foregoing reasons, we will affirm the order of the District Court.

Case: 08-4521 Document: 003110072316 Page: 7 Date Filed: 03/24/2010