### IN THE UNI TED STAT ES COURT OFAPPEALS FOR THE FIF TH CIRCU IT

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 U n i te d S ta te s C o u rt o f A p p ea l s F i ft h C i rc u i t 

### F I L E D August 9, 2 011 Lyle W . Cayce Clerk Case: 10-30886 Document: 00511566112 Page: 1 Date Filed: 08/09/2011No. 10-30886

Before HIGGINBOTHAM, OWEN, and HAYNES, Circuit Judges. HAYNES, Circuit Judge: App e l l ants 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 interpleade r 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 h a d 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 p olicy 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

Indem nity Insur ance Com pany of Nor th Ame ric a is als o one of the Exces s Insur ers . 1 2 Case: 10-30886 Document: 00511566112 Page: 2 Date Filed: 08/09/2011No. 10-30886

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 moti o n t o di s miss two of the coverage defenses, ruling that they were inapplicabl e ; however, the court declined to dismiss the enti rety 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 se par ate but rela ted app eal, No. 09-3 0549, Stephe n Ga bar ic k v. Laur in Ma ri tim e 2 (A me ri ca

), Inc. , ACL ass ert ed that it wa s a tort clai man t and not an add itio nal ins ured unde r the pr im ary pol icy. Given our dis pos itio n of this app eal, we do not add res s the im pac t, if any, of this as se rti on on the outc om e o f ACL’s clai m.

S pec ifi cally, the Prim ary Insur er requ es ted that the cour t dec lare that : ( 1 ) t h e 3 DM -932 wa s not a cover ed vess el unde r the pol icy; (2) the los se s caus ed as a res ult of a brea ch of se aw ort hines s of the vess el we re not cover ed; (3) clai ms for puni tive or exem plar y dam ages we re not cover ed; a n d ( 4) man y of the clai ms we re not cover ed as a res ult of a pol luti on exclus ion claus e.

Du ring oral argum ent, couns el for the Exces s Insur ers st ated th a t the pol luti on 4 exclus ion claus e w as not a partof the pr ima ry poli cy; how ever, the rec ordindic ates that the Pr i m a r y Insur er did , in fac t, rais e the pol luti on exclus ion def ens e, and the dis tri ct cour t ref use d to dis mi ss the requ es t for dec larat ory reli ef wi th res pec t t o the pol luti on exclus ion claus e. Thus, accor ding tothe rec ord , the pollut ion exclus ion iss ue rem ainedpending in the dis tri ct cour t aft er the January 7, 200 9 r uling. 3 Case: 10-30886 Document: 00511566112 Page: 3 Date Filed: 08/09/2011No. 10-30886

Insurers’ motion for leave to deposit the policy limit with the court, arguing that the Excess Insurer s sho ul d h ave 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 i n d e p ositing 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 ben e f i t o f the claimants, rather than to the benefit of the Excess Insurers.” After hearing arguments on this issue, the district court conclude d t h a t the Excess Ins u rers should be required to pay prejudgment interest from January 7, 2009. The court held that the rate to b e 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 t o p ay as compensation to the injured parties for the delay in depositing th e 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, t h i s i s s u e requires the court to interpret the insurance contract to determine

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whether the Excess Insurers’ obligations under th e c o ntr act h ave 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). Therefor e, the Excess I n s urers allege that the district court erred in holding them liabl e f o r 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 b e en exhausted. Generally, “[s]tate law

. . . governs the interp r etation 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 w a s brought under federal admiralty jurisdiction, “[w] h er e . . . 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.” Elevati ng Bo a t s, 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

Fede ral mar itim e law doe s pr ovide that “p rejud gmen t inte res t sho uld be aw ard ed in 5
mar itim e coll isi on cas es , subject to a lim ite d excep tio n for ‘pe culia r’ or ‘ e x c e p t ional’ cir cum st ance s. ” City of Mi lw auke e v. Cem ent Di v. , Na t’l Gy ps um Co . , 5 1 5 U. S. 189, 195 (199 5). This general pr incip le is inap pli cableto thes e fac ts , how ever, becaus e this casedoes not conc ern wh ethe r to aw ard pr ejudgm ent intere st to the injure d par ty, but rat her wh ethe r the ins urer sho uld have to pay pr ejudgm ent inte res t for its allege d fai lure to tim ely d e pos it the fund s wi th the cour t. 5 Case: 10-30886 Document: 00511566112 Page: 5 Date Filed: 08/09/2011No. 10-30886

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 Louisian a l a w , “excess insurance

. . . provide[s] supplemental coverage that picks up where [the i n s u r e d ’s] primary coverage ends and thus provide[s] protection against catastrophic losses.” La . Sa f e t y Ass ’ n of T i m b e r men Self-Insurers Fund v. La. Ins. Gua r . As s ’ n , 17 So. 3d 350, 359 (La. 2009) (emphasis omitted); see also J O H N A. AP P L E M A N & J E A N AP P L E M A N , I N S U RA N C E LAW A N D P RA C T I C E § 2.16 (2d ed. 2003) (“The insured may ob t a in additional coverage in the form of an excess po l i c y w hich 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 coverag e m u s t b e paid before the excess coverage is activated.” Samuels v. State Farm M u t

. A u t o . I

ns. 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 l o s s i s l e ss than for the primary insurer . . . .” AP P L E M A N , supra , § 2.16. At oral argument, ACL conceded that the prima ry policy was not exhausted by payment of judgments and settlem e n ts at the time the Excess Insurers filed their interpleader action. It argued instead that, once the Excess Insurers filed an i n t e r p l eader, they “took the case out of the policy,” making “irrelevant” the language of the excess policy requirin g p r imary 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. T h e r e f

o re, ACL concludes, the Excess Insurers unreasonably dela y e d i n d e positing 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- 6 0152, 1995 WL 581567 (5th Cir. Aug. 24, 1995) (per curiam) (unpublished) , t o s u p port its
po s i t i on. Aetna Casualty & Surety Co. mentions that, in evaluating whether interest should be awarded in an interpleader action, the court considers “(1) whether t h e s takeholder 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 f u n d 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 div o r c ed 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, e x c e s s insurance policies are less expensive than primary policies precisely because the excess insurer carries less of a risk than

a primary insurer. Samu e ls , 9 39 So. 2d at 1239; see also AP P L E M A N , supra , § 2.16. B e c a u s e t h e 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.

7 Case: 10-30886 Document: 00511566112 Page: 7 Date Filed: 08/09/2011No. 10-30886 IV. CONCLUSION For the foregoing reasons, we REVERSE th e di s trict c o urt’ s or d e r dir e cting 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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