Opinion ID: 174629
Heading Depth: 3
Heading Rank: 2

Heading: Waiver of Arguments on Appeal

Text: At the district court level, Travelers claimed that it was entitled to priority of recovery against National Union's share of the subrogation proceeds based on the terms of the primary and excess policies, equitable principles, and industry standards. National Union argues that Travelers waived the latter two issues (equitable principles and industry standards) because, according to National Union, the issues do not appear in Travelers's opening appellate brief. We disagree and find Travelers more than adequately raised the issue of industry standards in its opening brief. We also find that, in the circumstances presented, the arguments based on industry standards are intertwined with and are not separable from equitable concepts. Travelers argues throughout its opening brief that it is entitled to a priority of recovery. It asserts that National Union acted without regard to Travelers's rights when National Union took and retained subrogation proceeds. Travelers presents ample authority from courts and scholars discussing the fundamental nature of excess and primary insurance, the relative duties of excess and primary insurers in the payment of claims, and the relative rights of excess and primary insurers in the context of subrogation. See, e.g., Century Indemn. Co. v. London Underwriters, 12 Cal.App.4th 1701, 1709-10, 16 Cal. Rptr.2d 393 (Cal.Ct.App.1993) (holding that where an insured enters into an excess policy granting the excess insurer priority in subrogation proceeds, the primary insurer must honor the insured's contract obligation as expressed in the excess policy); Vesta Ins. Co. v. Amoco Prod. Co., 986 F.2d 981, 988 (5th Cir.1993) (Where the insurers' coverage is in the nature of layers, the excess carrier should recover under subrogation before primary insurers can be reimbursed.) (quoting 16 Lee R. Russ, Couch on Insurance § 61.48 at 133 (2d ed.1983)); Fluor Austl. Pty. Ltd. v. Allianz Global Risks U.S. Ins. Co., 234 Fed.Appx. 579, 580 (9th Cir.2007) ([S]ubrogation proceeds should be allocated to insurers in the order opposite to that in which they contributed to a settlement payout.... [T]raditional insurance principles and considerations of equity ... dictate top-down allocation in accordance with the levels of risk exposure for which the various insurers bargained.) (internal citation omitted). Through Travelers's own statements, its references to authority, and its discussion of that authority, the issue of industry standards permeates the portion of Travelers's opening brief directed towards the relative priority of Travelers and National Union. National Union's arguments to the contrary focus largely on the labels employed in Travelers's brief rather than the content of the arguments. Travelers plainly did not waive any issues or arguments surrounding industry standards or the nature of excess and primary coverage. Regarding a possible waiver of equitable principles, our decision today does not rest on any such principles standing alone; the subrogation rights in this case are contractual in nature and Travelers's claim that National Union must disgorge funds is inextricably linked to Travelers's arguments regarding industry standards and practices and the basic nature of excess and primary insurance. As such, in this case, we need not determine whether Travelers waived any specific or wholly separate issues or arguments based on equitable principles. That having been said, the origins of subrogation, in general, are equitable in nature. Given this fact we view with skepticism arguments that a party asserting any subrogation-based claim could at the same time entirely waive equitable principles. This is true even where the asserted subrogation-rights are contractual in nature (unless, of course, the contract rights at issue are unusual and contrary to established equitable principles). See, e.g., Universal Title Ins. Co. v. United States, 942 F.2d 1311, 1314 (8th Cir.1991) (noting that where the government in the district court essentially addressed the issue of whether the equities supported [the plaintiff's subrogation claim] the district court arguments were broad enough to encompass all of the government's subrogation-related arguments on appeal); id. (The real question should be whether the new argument is such as to raise a new issue.... [I]t would be in disharmony with one of the primary purposes of appellate review were we to refuse to consider each nuance or shift in approach urged by a party....) (quoting In re Osweiler, 52 C.C.P.A. 1427, 346 F.2d 617, 621 (1965)); Anison v. Rice, 282 S.W.2d 497, 503-04 (Mo.1955) (noting that common-law or equitable subrogation rights may not supercede contractual rights where it would be inconsistent with the terms of the contract). Turning to the substance of Travelers's claims, we first address the claims against KCPL.