IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 10-30886

STEPHEN MARSHALL GABARICK, on behalf of himself and all others

similarly situated; Et Al, 

Plaintiffs

v.

LAURIN MARITIME (AMERICA) INCORPORATED; Et Al,

Defendants

________________________________________________________________________

INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, 

 Plaintiff - Intervenor - Appellant

HOUSTON CASUALTY INSURANCE COMPANY, 

 Intervenor - Appellant

v.

AMERICAN COMMERCIAL LINES, L.L.C.; AMERICAN COMMERCIAL

LINES, INCORPORATED, 

 Defendants - Appellees

Appeal from the United States District Court 

for the Eastern District of Louisiana

United States Court of Appeals

Fifth Circuit

F I L E D

August 9, 2011

Lyle W. Cayce

Clerk

Case: 10-30886 Document: 00511566112 Page: 1 Date Filed: 08/09/2011
No. 10-30886

Before HIGGINBOTHAM, OWEN, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Appellants Houston Casualty Company and Indemnity Insurance

Company of North America (collectively, the “Excess Insurers”), appeal the

district court’s decision requiring them to pay prejudgment interest on the funds

deposited into the court’s registry in an interpleader action. The Excess Insurers

argue that the district court erred by: (1) finding that coverage under the excess

policy was triggered by the primary insurer’s filing of an interpleader complaint;

(2) holding that a marine insurer that files an interpleader action and deposits

the policy limits with the court is obligated to pay legal interest in excess of the

policy limits; and (3) applying the incorrect interest rate and awarding interest

from the incorrect date. Because the Excess Insurers’ liability had not been

triggered at the time the Excess Insurers filed their interpleader complaint, we

conclude that the district court erred in finding that they unreasonably delayed

in depositing the policy limit into the court’s registry and in holding them liable

for prejudgment interest; therefore, we REVERSE and do not reach the Excess

Insurers’ remaining issues.

I. FACTS AND PROCEDURAL HISTORY

On July 23, 2008, the M/V TINTOMARA struck the DM-932, which was

in tow of the M/V MEL OLIVER, resulting in an oil spill in the Mississippi River. 

American Commercial Lines, LLC (“ACL”) owned the DM-932, but DRD Towing

Company, LLC (“DRD Towing”) operated the MEL OLIVER. After the accident,

several lawsuits were filed against ACL and DRD Towing.

DRD Towing had a protection and indemnity policy with Indemnity

Insurance Company of North America (the “Primary Insurer”) that provided 1

coverage of up to $1 million. DRD Towing also had an excess insurance policy

Indemnity Insurance Company of North America is also one of the Excess Insurers.

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with the Excess Insurers that provided coverage of up to $9 million. In the trial

court, ACL claimed that it was an additional insured under the excess policy.2

Due to the various claims filed against DRD Towing and ACL, the Primary

Insurer filed an interpleader complaint on August 11, 2008, seeking to deposit

$985,000 (the policy limit less the deductible) with the court and requesting that

the court determine the rights of the various claimants, including the Primary

Insurer, to the funds. The Primary Insurer did not disclaim its interest in the

funds, and it requested that the court declare that several coverage defenses

applied to the policy.3

On January 7, 2009, the district court granted ACL’s motion to dismiss

two of the coverage defenses, ruling that they were inapplicable; however, the

court declined to dismiss the entirety of the Primary Insurer’s requests for

declaratory relief, concluding that the policy might exclude coverage of certain

expenses under the punitive damages clause and the pollution exclusion clause.4

On March 24, 2010, the Excess Insurers filed an interpleader complaint

seeking release from further liability under the excess policy upon deposit of the

policy limit of $9 million into the court’s registry. ACL opposed the Excess

In a separate but related appeal, No. 09-30549, Stephen Gabarick v. Laurin Maritime

2

(America), Inc., ACL asserted that it was a tort claimant and not an additional insured under

the primary policy. Given our disposition of this appeal, we do not address the impact, if any,

of this assertion on the outcome of ACL’s claim.

Specifically, the Primary Insurer requested that the court declare that: (1) the

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DM-932 was not a covered vessel under the policy; (2) the losses caused as a result of a breach

of seaworthiness of the vessel were not covered; (3) claims for punitive or exemplary damages

were not covered; and (4) many of the claims were not covered as a result of a pollution

exclusion clause.

During oral argument, counsel for the Excess Insurers stated that the pollution 4

exclusion clause was not a part of the primary policy; however, the record indicates that the

Primary Insurer did, in fact, raise the pollution exclusion defense, and the district court

refused to dismiss the request for declaratory relief with respect to the pollution exclusion

clause. Thus, according to the record, the pollution exclusion issue remained pending in the

district court after the January 7, 2009 ruling.

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Insurers’ motion for leave to deposit the policy limit with the court, arguing that

the Excess Insurers should have to pay prejudgment interest on the interpleaded

funds in order to be released from liability. ACL argued that interest should be

awarded because the Excess Insurers unreasonably delayed in depositing the

funds with the court. ACL stated that “[h]ad the Excess Insurers deposited the

$9 million policy limit in a timely manner, the interest would have been accrued

for well over twelve months to the benefit of the claimants, rather than to the

benefit of the Excess Insurers.”

After hearing arguments on this issue, the district court concluded that

the Excess Insurers should be required to pay prejudgment interest from

January 7, 2009. The court held that the rate to be applied was 3.5% and

ordered the Excess Insurers to pay $495,369.86 in prejudgment interest. The

Excess Insurers timely filed an interlocutory appeal of this order under 28

U.S.C. § 1292(a)(3).

II. STANDARD OF REVIEW AND JURISDICTION

We have jurisdiction to hear this interlocutory appeal pursuant to 28

U.S.C. § 1292(a)(3) which gives this court jurisdiction to review “[i]nterlocutory

decrees of such district courts or the judges thereof determining the rights and

liabilities of the parties to admiralty cases in which appeals from final decrees

are allowed.” 28 U.S.C. § 1292(a)(3). Here, the district court’s order requires the

Excess Insurers to pay almost $500,000 more than they contend they are liable

to pay as compensation to the injured parties for the delay in depositing the

funds with the court. The district court’s order affected a “liability”; therefore,

we have jurisdiction.

Generally, the decision to award prejudgment interest is reviewed under

an abuse of discretion standard. Jauch v. Nautical Servs. Inc., 470 F.3d 207, 214

(5th Cir. 2006) (per curiam). ACL argues that this standard applies; however,

this issue requires the court to interpret the insurance contract to determine

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whether the Excess Insurers’ obligations under the contract have been triggered. 

Such a question of law is subject to de novo review. Theriot v. United States, 245

F.3d 388, 394 (5th Cir. 1998) (per curiam) (“Contract interpretation is a question

of law, subject to de novo review.”).

III. DISCUSSION

The Excess Insurers argue that their liability was not triggered on

January 7, 2009 because the primary policy was not exhausted at that time (or

any time before they filed their interpleader action). Therefore, the Excess

Insurers allege that the district court erred in holding them liable for

prejudgment interest.

Because this is a case brought under maritime law, it is first necessary to

determine whether state law or federal maritime law should be used to analyze

whether the primary policy has been exhausted. Generally, “[s]tate law . . .

governs the interpretation of marine insurance policies unless an available

federal maritime rule controls the disputed issue.” Albany Ins. Co. v. Kieu, 927

F.2d 882, 886 (5th Cir. 1991). Although this case was brought under federal

admiralty jurisdiction,“[w]here . . . no federal law, legislative or judicial, relating

to the question exists, the law of the state where the marine insurance contract

was issued and delivered is the governing law.” Elevating Boats, Inc. v. Gulf

Coast Marine, Inc., 766 F.2d 195, 198 (5th Cir. 1985). The parties have not cited

and we have not located any federal maritime rule that addresses the issue of

exhaustion of a primary insurance policy ; therefore, we conclude that Louisiana 5

Federal maritime law does provide that “prejudgment interest should be awarded in 5

maritime collision cases, subject to a limited exception for ‘peculiar’ or ‘exceptional’

circumstances.” City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 195

(1995). This general principle is inapplicable to these facts, however, because this case does

not concern whether to award prejudgment interest to the injured party, but rather whether

the insurer should have to pay prejudgment interest for its alleged failure to timely deposit

the funds with the court.

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law applies, as the insurance policy in this case was issued in Louisiana to DRD

Towing, a Louisiana company. See id. at 198; see also Kieu, 927 F.2d at 886.

Under Louisiana law, “excess insurance . . . provide[s] supplemental

coverage that picks up where [the insured’s] primary coverage ends and thus

provide[s] protection against catastrophic losses.” La.Safety Ass’n ofTimbermen

Self-Insurers Fund v. La. Ins. Guar. Ass’n, 17 So. 3d 350, 359 (La. 2009)

(emphasis omitted); see also JOHN A. APPLEMAN & JEAN APPLEMAN, INSURANCE

LAW AND PRACTICE § 2.16 (2d ed. 2003) (“The insured may obtain additional

coverage in the form of an excess policy which by its terms will only come into

play once the limits of the primary policy have been exhausted.”). Thus, “[t]he

very nature of excess insurance coverage is such that a predetermined amount

of underlying primary coverage must be paid before the excess coverage is

activated.” Samuels v. State Farm Mut. Auto. Ins. Co., 939 So. 2d 1235, 1239

(La. 2006) (quoting La. Ins. Guar. Ass’n v. Interstate Fire & Cas. Co., 630 So. 2d

759, 767 (La. 1994)). Because coverage is only triggered after the primary

insurance limit has been exhausted, excess insurance “is generally available at

a lesser cost than the primary policy since the risk of loss is less than for the

primary insurer . . . .” APPLEMAN, supra, § 2.16.

At oral argument, ACL conceded that the primary policy was not

exhausted by payment of judgments and settlements at the time the Excess

Insurers filed their interpleader action. It argued instead that, once the Excess

Insurers filed an interpleader, they “took the case out of the policy,” making

“irrelevant” the language of the excess policy requiring primary policy

exhaustion to trigger the Excess Insurers’ liability. This somewhat circular

argument then continues with the notion that if the Excess Insurers were going

to file an interpleader, they had to do so no later than the January 2009 district

court ruling. Therefore, ACL concludes, the Excess Insurers unreasonably

delayed in depositing their funds with the court by waiting over a year to file

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their interpleader action and were unjustly enriched by reaping the time value

of that money in the interim.

ACL relies on Aetna Casualty & Surety Co. v. Hood, No. 95-60152, 1995

WL 581567 (5th Cir. Aug. 24, 1995) (per curiam) (unpublished), to support its

position. Aetna Casualty & Surety Co. mentions that, in evaluating whether

interest should be awarded in an interpleader action, the court considers “(1)

whether the stakeholder unreasonably delayed in instituting the action or

depositing the fund with the court, (2) whether the stakeholder used the fund for

his benefit and would be unjustly enriched at the expense of the claimants who

have claim to the fund, and (3) whether the stakeholder eventually deposited the

fund into the court’s registry.” 1995 WL 581567, at *2 (citing Gelfgren v.

Republic Nat. Life Ins. Co., 680 F.2d 79 (9th Cir. 1982)). However, the court in

Aetna Casualty & Surety Co. did not explicitly adopt this three-factor test.

Even assuming that the three-factor test should be used, we note that the

question of “unreasonable” delay and “unjust” enrichment cannot be divorced

from the source of the Excess Insurers’ obligations which, in turn, comes from

the language of their excess policy. ACL is not entitled to rewrite the policy to

place a burden on the Excess Insurers that they did not bargain for in their

contract. As noted above, excess insurance policies are less expensive than

primary policies precisely because the excess insurer carries less of a risk than

a primary insurer. Samuels, 939 So. 2d at 1239; see also APPLEMAN, supra,

§ 2.16. Because the primary policy had not been exhausted as of the time the

interpleader was filed, the Excess Insurers neither “unreasonably” delayed nor

were “unjustly” enriched by not filing the interpleader earlier. We thus conclude

that the district court erred in holding them liable for prejudgment interest on

the interpleaded funds.

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IV. CONCLUSION

For the foregoing reasons, we REVERSE the district court’s order directing

the Excess Insurers to pay prejudgment interest on the funds deposited with the

court and REMAND for proceedings consistent with this opinion.

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