Opinion ID: 2737139
Heading Depth: 1
Heading Rank: 5

Heading: Insurance Offsets

Text: We turn next to the question whether the district court should have offset against NCR’s contribution certain liability insurance proceeds that Glatfelter obtained. NCR objects to the district court’s ruling that its contribution liability should not be reduced by those amounts. Evaluation of its claim requires us to decide two related matters: whether the collateral source rule applies in CERCLA contribution actions, and if not, whether any amount of Glatfelter’s insurance settlement should have been offset against NCR’s required contribution. Nos. 13-2447 et al. 45 We agree with the district court that the collateral source rule does not apply in CERCLA § 113(f) contribution actions, and so in principle courts may take insurance payments into account when deciding contribution shares. As the Tenth Circuit explained in Friedland v. TIC-The Industrial Co., 566 F.3d 1203 (10th Cir. 2009), the collateral source rule is meant to prevent a defendant from receiving the benefit of insurance compensation paid to an (innocent) injured third party. Id. at 1206–07; see also RESTATEMENT (SECOND) OF TORTS § 920A(2) & cmt. d. Contribution actions under CERCLA § 107 are a mechanism for allocating costs among joint tortfeasors and are governed wholly by equity. Equity would not be served by requiring a district court to remain blind to alternate sources of recovery for one tortfeasor and the possibility of its recouping more than 100% of its share. Cf. K.C.1986 Ltd. P’ship v. Reade Mfg., 472 F.3d 1009, 1018 (8th Cir. 2007) (district court should have considered settlement credits when calculating amount of judgment); Boeing Co. v. Cascade Corp., 207 F.3d 1177, 1190 (9th Cir. 2000) (district court properly tried to eliminate double reimbursement for same expense). The question before us is thus narrow: whether the district court properly treated the insurance settlements in this case. We look for guidance to Friedland’s second holding, that when a party enters into a settlement with its insurer that does not break down the amount of the settlement that covers its costs in common with other PRPs and the amount that covers individual costs (such as defense costs), that party cannot later assert that the settlement is dedicated wholly to its individual costs and thereby avoid having it credited against a counterparty’s contribution share. 566 F.3d at 1210 46 Nos. 13-2447 et al. (citing Hess Oil V.I. Corp. v. UOP, Inc., 861 F.2d 1197, 1209 (10th Cir. 1988)). The district court rejected as inequitable a reading of Friedland that would require all proceeds from an undifferentiated insurance settlement to cover common liability costs. Even NCR’s expert agreed that at least some of Glatfelter’s settlement was for defense costs, which are not subject to recovery in contribution. Some differentiation, it held, is thus necessary. Noting that an after-the-fact attempt to earmark the settlement funds would be too speculative, the court looked back to Glatfelter’s original insurance contract with its carrier. This contract included coverage for both direct liability and defense costs, although only the liability portion was capped at a certain amount of money. For the purpose of evaluating the claim before it, the court then made the assumption—favorable to NCR—that as much of the settlement as could be attributed to common liability should be, in order to avoid any gamesmanship by Glatfelter. Thus, to calculate how much Glatfelter stood to recover, it started by taking the full amount of Glatfelter’s insurance settlement and subtracting that portion in excess of the contract’s liability maximum. Adding that figure to the contribution amount Glatfelter sought from NCR, it found that the combined amount of liability insurance and contribution would not cover Glatfelter’s full liability, so there was no danger that Glatfelter would recover more than 100% of its share. Accordingly, it held that Glatfelter’s insurance proceeds should not be offset against its contribution claim. We find the district court’s reasoning sound. Contribution actions are governed by equity, and the disposition of insurance settlements to a PRP is one aspect of that equitable Nos. 13-2447 et al. 47 determination. Friedland affirms that any level of double recovery is inequitable in CERCLA contribution actions, and that ignoring insurance settlements when it would lead to double recovery is inconsistent with the statute’s purpose. It does not otherwise establish a bright-line rule for how a court should treat insurance settlements. Under different circumstances, the treatment of Glatfelter’s insurance proceeds might have been inequitable: if, for instance, Glatfelter had negotiated an enormous insurance settlement, but had strategically allocated all of it to defense costs in the settlement agreement and put up a smokescreen of “bargaining away” its liability coverage. The governing rule is equity, and the way equity was achieved in Friedland may prove unsuitable to other cases. The district court’s determination here that it was not inequitable to leave the insurance proceeds with Glatfelter was not an abuse of discretion. One final question is whether the district court abused its discretion by treating Glatfelter’s liability for operable units 1 through 5 as an undivided cost, or if it was required to segregate the unit 1 costs and give NCR credit for the costs attributable to units 2 through 5. We are satisfied that because the amount of Glatfelter’s insurance settlement does not create a risk that it would be made more than whole if it receives its demanded contribution share, there was no harm in the district court’s decision to consider all of Glatfelter’s Fox River liability as a whole. We therefore affirm the district court’s decision not to credit Glatfelter’s insurance settlement against NCR’s contribution share.