Opinion ID: 714797
Heading Depth: 2
Heading Rank: 3

Heading: The USF & G Issue

Text: 66 USF & G, claiming to be a trust beneficiary because Western MacArthur has asserted insurance claims against it and because the notice of the settlement of the litigation stated that the Settlement would govern the benefits of [a]ll persons or entities who now have, or in the future may have, a claim for ... indemnification ... arising from any obligation of the Trust for the payment of a death or personal injury claim (USF & G brief on appeal at 22 (emphasis in brief)), contends principally that the Trial Courts should have disapproved or restructured the Settlement on the grounds that (1) the creation of the MacArthur Fund was a misallocation of Trust assets that should be used to satisfy claims of health claimants rather than to provide a war chest for Western MacArthur's insurance claims against USF & G, (2) USF & G was not adequately represented by the MacArthur Subclass in the Settlement negotiations, and (3) the refusal to treat USF & G as a claimant creates the risk of future disruption of the Trust's administration, for USF & G will not be barred from asserting its claims against the Trust in the future. We reject all of these arguments, and we dismiss USF & G's appeal for lack of standing. 67 An intervenor in an action has standing to appeal only if it has suffered an injury in fact that is fairly traceable to the challenged action and that is likely to be redressed by the relief requested. Schulz v. Williams, 44 F.3d 48, 52 (2d Cir.1994). To suffer an injury in fact, an intervenor must have more than an abstract concern or a mere interest in the problem. Diamond v. Charles, 476 U.S. 54, 67, 106 S.Ct. 1697, 1706, 90 L.Ed.2d 48 (1986) (internal quotation marks omitted). Rather, it must have experienced an invasion of a legally-protected interest which is (a) concrete and particularized ... and (b) actual or imminent, not conjectural or hypothetical. Lujan v. Defenders of Wildlife, 504 U.S. 555, 559, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992) (internal quotation marks omitted). The party seeking to appeal must have a direct stake in the outcome of a litigation, Schulz v. Williams, 44 F.3d at 52 (internal quotation marks omitted), such that it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision, Lujan v. Defenders of Wildlife, 504 U.S. at 559, 112 S.Ct. at 2136 (internal quotation marks omitted). 68 Two sets of principles form the basis of our conclusion that USF & G has no such interest in the present matter. First, [a]n insurer who has not paid its insured's claim has no right in claims which the insured has against third parties. Bunge Corp. v. London & Overseas Insurance Co., 394 F.2d 496, 497 (2d Cir.), cert. denied, 393 U.S. 952, 89 S.Ct. 376, 21 L.Ed.2d 363 (1968). While the insurer may have a future interest in the rights that its insured has against a third party, the insurer's right of subrogation comes into existence only when the insurer pays the claim of the insured. See Ingersoll Milling Machine Co. v. M/V Bodena, 829 F.2d 293, 309 (2d Cir.1987), cert. denied, 484 U.S. 1042, 108 S.Ct. 774, 98 L.Ed.2d 860 (1988); Bunge Corp. v. London & Overseas Insurance Co., 394 F.2d at 497. Second, when an insurer has denied coverage, the person claiming coverage may enter into a settlement with a third party without first litigating its coverage dispute with the insurer and without prejudice to its right to pursue the coverage claim against the insurer; and the insurance claimant's execution of a release in favor of the third party, which extinguishes any present or future rights it might have against the third party, thereby also eliminates any subrogation right of the insurer to recover against the third party. See, e.g., Bunge Corp. v. London & Overseas Insurance Co., 394 F.2d at 497 (even if [the insurer] were now to pay [the insured] in full, it would succeed to no rights against [the third party]). 69 In the present case, it is clear that USF & G has no present concrete interest of its own in the outcome of this litigation. It is neither a health claimant nor a purveyor of asbestos products; any interest it may have in the Settlement derives only from its potential obligation to insure Western MacArthur, a party-defendant to the class action. But USF & G has not paid Western MacArthur's insurance claims, and, under the above principles, USF & G therefore has no present interest in any claims that Western MacArthur might have against the Trust. Further, since USF & G has denied that it has any obligation to pay asbestos-related claims of any member of the MacArthur Subclass, Western MacArthur had the right to release its claims against the Trust. Western MacArthur exercised that right, and thus, whatever the outcome of the coverage dispute between USF & G and Western MacArthur, USF & G will have no right of indemnification against the Trust in the future. 70 USF & G's reliance on cases such as Ingersoll Milling Machine Co. v. M/V Bodena and St. Paul Fire & Marine Insurance Co. v. United States Lines Co., 258 F.2d 374 (2d Cir.1958), cert. denied, 359 U.S. 910, 79 S.Ct. 587, 3 L.Ed.2d 574 (1959), for the proposition that if it is obligated to provide coverage it will retain the right to indemnification from the Trust after it unsuccessfully litigates those coverage questions, is misplaced, for it ignores the distinction between the cited cases and this one. In those cases, unlike this one, the insured had not given a release to the party from whom the insurer would seek indemnification. 71 We conclude that since USF & G has denied any insurance obligation to Western MacArthur, USF & G has no cognizable present interest in the litigation, and that since Western MacArthur has permissibly given a release to the Trust, USF & G has no cognizable future interest in indemnification from the Trust in the event that Western MacArthur's claim of coverage is upheld. Accordingly, we dismiss USF & G's appeal for lack of standing to challenge the Settlement.