Court Opinion

ID: 5127015
Source: CourtListenerOpinion
Date Created: 2021-11-18 01:00:37.867648+00
Date Added: 2024-06-11T08:21:53.465316
License: Public Domain

Case: 20-11113      Document: 00516097974          Page: 1    Date Filed: 11/17/2021

            United States Court of Appeals
                 for the Fifth Circuit                               United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                    November 17, 2021
                                    No. 20-11113
                                                                       Lyle W. Cayce
                                                                            Clerk
   Great American Insurance Company,

                                                             Plaintiff—Appellant,

                                       versus

   Employers Mutual Casualty Company; Corona
   Management Ventures, L.L.C.,

                                                          Defendants—Appellees.

                   Appeal from the United States District Court
                       for the Northern District of Texas
                             USDC No. 3:18-CV-1819

   Before King, Smith, and Haynes, Circuit Judges.
   Haynes, Circuit Judge:
          Great American Insurance Company and Employers Mutual Casualty
   Company, two umbrella policy providers, dispute their respective obligations
   to contribute to a $7 million settlement of a wrongful death suit arising out of
   a motor-vehicle accident. Great American filed suit against Employers
   Mutual, seeking a declaratory judgment regarding priority of coverage and
   damages for breach of contract. Both parties moved for summary judgment.
   The district court assumed without deciding that the Employers Mutual
   policy (the “EMC Umbrella Policy”) was required to provide coverage
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                                    No. 20-11113

   before the Great American policy (the “Great American Umbrella Policy”).
   However, the district court granted summary judgment in favor of
   Employers Mutual, concluding that Great American failed to allocate
   damages between covered and non-covered claims.
          We conclude that the district court was correct in its assumption that
   the EMC Umbrella Policy had priority of coverage; however, the district
   court erred in granting summary judgment for Employers Mutual because
   Great American’s evidence created a factual dispute on allocation.
   Accordingly, we REVERSE the summary judgment and REMAND for
   proceedings consistent with this opinion.

                                     Background

          The underlying liability lawsuit arose from an automobile accident.
   Gerald Decker, an employee of Corona Management Ventures, LLC
   (“Corona”) was driving a tractor-trailer while performing tire collection
   services for Liberty Tire Recycling, LLC (“Liberty Tire”). Decker lost
   control of the tractor-trailer and collided with two vehicles driven by Tammy
   Hill and Leslie Stalder (the “Underlying Plaintiffs”). Ms. Hill died as a
   result of the accident, and Ms. Stalder sustained serious personal injuries.
   The Underlying Plaintiffs filed lawsuits against Liberty Tire, Corona, and
   Decker. These suits asserted that (1) Decker was negligent; (2) Liberty Tire
   was negligent; (3) Corona was vicariously liable for Decker’s negligence; and
   (4) Liberty Tire was vicariously liable for Decker and Corona’s negligence.
   After extensive litigation, the parties settled all claims via a $7 million
   Settlement Agreement (the “Settlement Agreement”). Great American and
   Employers Mutual reserved their respective rights with respect to liability for
   the settlement and agreed to resolve the coverage dispute via a declaratory
   judgment action.

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                                       No. 20-11113

          During the relevant timeframe, Liberty Tire and Corona were covered
   by several relevant insurance policies:

              • Employers Mutual insured Corona via a primary commercial
                auto policy with a $1 million policy limit (the “EMC Primary
                Policy”).

              • Employers Mutual insured Corona via a secondary commercial
                umbrella policy, the EMC Umbrella Policy, with a $1 million
                policy limit. The EMC Umbrella Policy covered all “insured,”
                defined in the policy as “[a]nyone liable for the conduct of an
                insured . . . , but only to the extent of that liability.”

              • Liberty Mutual Insurance Company (“Liberty Mutual”) in-
                sured Liberty Tire via a primary commercial auto policy with a
                $2 million policy limit (the “Liberty Mutual Primary Policy”).

              • Great American insured Liberty Tire via a commercial um-
                brella policy, the Great American Umbrella Policy, with a $30
                million policy limit.

          The EMC Primary Policy and the Liberty Mutual Primary Policy
   covered the first $2,668,537.90 of the Settlement Agreement without debate.
   However, Great American and Employers Mutual disputed their respective
   liability for the remaining $4,331,462.10. In order to end the Underlying
   Lawsuit, Great American paid the remaining balance and filed suit against
   Employers Mutual, seeking (1) a declaratory judgment regarding the priority
   of coverage between the umbrella policies and (2) damages 1 for Employers

          1
           Great American requested the $1 million policy limit for the coverage provided
   under EMC’s Umbrella Policy.

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   Mutual’s breach of its umbrella policy for refusing to fund the underlying
   settlement.
           Both parties moved for summary judgment.                       The district court
   granted Employers Mutual’s motion, denied Great American’s motion, and
   dismissed Great American’s remaining claims. Great American timely
   appealed.

                               Jurisdiction & Standard of Review

           The district court had jurisdiction pursuant to 28 U.S.C. § 1332. We
   have appellate jurisdiction to review the district court’s final judgment under
   28 U.S.C. § 1291.
           We review the district court’s grant of summary judgment de novo,
   viewing all admissible evidence “in the light most favorable to the nonmoving
   party and drawing all reasonable inferences in that party’s favor.” Kariuki v.
   Tarango, 709 F.3d 495, 501 (5th Cir. 2013) (quotation omitted). A district
   court must grant summary judgment “if the movant shows that there is no
   genuine dispute as to any material fact and the movant is entitled to judgment
   as a matter of law.” FED. R. CIV. P. 56(a).

                                              Discussion

                 Priority of Coverage

           Using Texas law, 2 we first consider which umbrella policy had priority
   of coverage. The district court did not decide the issue but assumed that the
   coverage provided by the EMC Umbrella Policy applied before the coverage
   provided by the Great American Umbrella Policy. Because the Great

           2
               Neither party disputes that Texas law applies to the interpretation of the relevant
   policies.

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   American Umbrella Policy was excess to the EMC Umbrella Policy, we now
   conclude the same.
          Under Texas law, insurance policies are construed in accordance with
   the general rules of interpretation and construction that apply to contracts
   generally. Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI Indus., Inc., 907
   S.W.2d 517, 520 (Tex. 1995) (per curiam). The primary goal in policy
   interpretation is to give effect to the written expression of the parties’ intent.
   Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998).
   Accordingly, a court should interpret an insurance policy in a way which
   (1) “confers meaning to all its terms”; (2) “harmonize[s] and give[s] effect
   to all of the provisions”; and (3) avoids rendering parts of the policy
   inoperative or “meaningless.” Tittle v. Enron Corp., 463 F.3d 410, 419 (5th
   Cir. 2006) (quotation omitted); see also Citigroup Inc. v. Fed. Ins. Co., 649 F.3d
   367, 372 (5th Cir. 2011); Balandran, 927 S.W.2d 738, 740–41 (Tex. 1998). No
   singular provision is “given controlling effect”; instead, all provisions are
   “considered with reference to the whole instrument.” Tittle, 463 F.3d at 419
   (quotation omitted).
          The parties dispute whether the Great American Umbrella Policy was
   excess to the EMC Umbrella Policy. An “excess insurance” policy is “an
   agreement to indemnify against any loss that exceeds the amount of primary
   or other coverage.” Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410 S.W.3d 843,
   848 (Tex. 2012). An excess insurance company’s obligation to provide
   coverage generally does not arise until the underlying insurance limits are
   exhausted. Nat’l Union Fire Ins. Co. of Pittsburgh v. Ins. Co. of N. Am., 955
   S.W.2d 120, 137 (Tex. App.—Houston [14th Dist.] 1997, pet. granted), aff’d
   sub nom. Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburgh, 20
   S.W.3d 692 (Tex. 2000).

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             Great American contends that the Great American Umbrella Policy’s
   “retained limit” language indicated that it was excess to all other insurance;
   therefore, Great American was not obligated to provide coverage until the
   EMC Umbrella Policy was exhausted. Employers Mutual disagrees, arguing
   instead that the umbrella policies were both excess policies. Employers
   Mutual contends that the policies contained conflicting “other insurance”
   clauses, 3 which made the clauses mutually repugnant and thus required the
   insurers to contribute on a pro rata basis according to their limits of liability.
   See Colony Nat’l Ins. Co. v. United Fire & Cas. Co., 677 F. App’x 941, 947 (5th
   Cir. 2017).
             Construing the policies in accordance with Texas law, we agree that
   the Great American Umbrella Policy was excess to the EMC Umbrella
   Policy.       Both policies provided coverage for liability “in excess” of a
   “retained limit.” However, importantly, the policies differed in how they
   defined “retained limit.” The EMC Umbrella Policy stated the following:
   “We will pay on behalf of the insured the ‘ultimate net loss’ in excess of the
   ‘retained limit’ because of ‘bodily injury’ . . . to which this insurance
   applies.” The EMC Umbrella Policy defined “retained limit” as “the
   available limits of all ‘underlying insurance.’” “Underlying insurance,” in
   turn, was limited to (1) any policies listed under the schedule of underlying
   insurance and (2) any other insurance available to the insured, but only when
   such other insurance “provides the same type of coverage” provided in the
   policies listed in the schedule of “underlying insurance.” The only policy
   (relevant to this dispute) in the schedule of underlying insurance was the

             3
             “[O]ther insurance clauses” are provisions designed to “limit liability if the
   insured event is also covered by another insurance policy.” David P. Van Knapp, Resolution
   of Conflicts, in Non–Automobile Liability Insurance Policies, Between Excess or Pro–Rata
   “Other Insurance” Clauses, 12 A.L.R. 4th 993, 995 (1982).

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   Employers Mutual Primary Policy. 4 Reading these provisions together, the
   EMC Umbrella Policy provided coverage after the limits of the underlying
   insurance (i.e., the primary policies) paid out. In other words, the EMC
   Umbrella Policy provided coverage after all primary coverage was exhausted.
           In contrast, the Great American Umbrella Policy stated that Great
   American would pay the sums “in excess of the ‘Retained Limit’ that the
   ‘Insured’ becomes legally obligated to pay.” “Retained Limit” included
   “the applicable limits of any other insurance providing coverage to the ‘Insured’
   during the Policy Period.” Reading these provisions together, it follows that
   the Great American Umbrella Policy provided coverage only after all other
   insurance was exhausted, whether primary or excess.
           Based on the plain terms of these policies, the Great American
   Umbrella Policy was the true excess policy after all other policies. The EMC
   Umbrella Policy’s “other insurance” provision contained clear limiting
   language, dictating that it would pay out after exhaustion of the primary
   policies. The Great American Umbrella Policy was not a primary policy—
   therefore, it did not fall within the scope of Employers Mutual’s “other
   insurance” provision. Conversely, the Great American Umbrella Policy’s
   broad “other insurance” clause did not include these same limitations—
   rather, it was required to pay out after all other insurance was exhausted.
   Accordingly, we conclude that the Great American Umbrella Policy was the
   true excess policy, the EMC Umbrella Policy had priority of coverage, and

           4
               The EMC Primary Policy provided liability coverage for “all sums an ‘insured’
   legally must pay as damages because of ‘bodily injury’ . . . caused by an ‘accident’
   and . . . [due to the] use of a covered ‘auto.’”

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   Great American was not obligated to pay into the settlement until the EMC
   Umbrella Policy had been exhausted. 5

               Allocation

           We next consider whether Great American submitted sufficient
   evidence to create a factual dispute on allocation.                The district court
   concluded that it did not, but we disagree. Because Great American’s
   affidavits provided a reasonable basis for allocating damages, the district
   court erred in granting summary judgment to Employers Mutual.
           In Texas, a party seeking coverage under an insurance policy must
   prove that its damages are covered by the relevant policy before it can
   recover. Seger v. Yorkshire Ins. Co., 503 S.W.3d 388, 400–01 (Tex. 2016).
   This process of segregating out covered and non-covered damages is known
   as “allocation.” See Satterfield & Pontikes Constr., Inc. v. U.S. Fire Ins. Co.,
   898 F.3d 574, 581 (5th Cir. 2018). The coverage-seeking party carries the
   allocation burden, and a failure to allocate covered and non-covered damages
   is fatal to recovery. See Travelers Indem. Co. v. McKillip, 469 S.W.2d 160, 163
   (Tex. 1971).
           Thus, to satisfy its allocation burden at summary judgment, Great
   American was required to present evidence upon which a fact finder could
   segregate covered damages. See Satterfield, 898 F.3d at 581. This evidence
   could consist of “any facts that could have been considered in the
   [underlying]       lawsuit      itself,”    including       “internal      memoranda,
   correspondence between the insurer and insured, communications with the

           5
             We disagree with Employers Mutual’s “other insurance” clauses argument.
   These clauses do not mirror each other—rather, based on a plain reading of the policy
   language, both policies’ “other insurance” clauses could apply harmoniously. Therefore,
   they were not mutually repugnant, and we decline to order contribution on a pro rata basis.

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                                     No. 20-11113

   injured party, [and] investigative reports.” Am. Int’l Specialty Lines Ins. Co.
   v. Res-Care Inc., 529 F.3d 649, 656–57 (5th Cir. 2008) (quotation omitted).
   Though Great American was not required to submit evidence establishing
   damages with “mathematical precision,” it did need to provide evidence
   creating “some reasonable basis” for allocation. Fiess v. State Farm Lloyds,
   392 F.3d 802, 808 n.24 (5th Cir. 2004). Additionally, it was not necessary to
   have the actual settlement agreement in the Underlying Lawsuit provide the
   allocation. See, e.g., Cooper Indus. LLC v. Am. Intern. Specialty Lines Ins. Co.,
   350 F. App’x 876, 877–79 (5th Cir. 2009) (per curiam) (holding that the
   district court did not err in apportioning settlement even though “the
   settlement agreement did not allocate responsibility between” insurer and
   insured); LGS Techs., LP v. U.S. Fire Ins. Co., No. 2:07-CV-399, 2015 WL
   5934689, at *6 (E.D. Tex. 2015) (allocating settlement proceedings post-
   settlement agreement); RLI Ins. Co. v. Phila. Indem. Ins. Co., 421 F. Supp. 2d
   956, 958 (N.D. Tex. 2006) (same).
          Employers Mutual argues that Great American failed to prove exactly
   what portion of the $7 million Settlement Agreement was allocated for
   settling claims that Employers Mutual was liable for. The parties agree that
   this means all claims other than Liberty Tire’s direct (not vicarious) liability.
   Great American responds that exact apportionment was unnecessary—
   rather, the evidence established that the covered claims were worth at least
   $7 million. Therefore, according to Great American, there was a reasonable
   basis for allocation.
          Great American’s theory is premised on the following: the Underlying
   Plaintiffs had strong claims against Corona and Decker for their direct
   negligence and against Liberty Tire for its vicarious liability for Corona and
   Decker’s negligence. These claims were undoubtedly covered by the EMC
   Umbrella Policy, so Employers Mutual was liable for the associated

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   damages. 6 Great American contends that the value of these claims alone
   exceeded $7 million; thus, Great American paid at least $1 million to settle
   claims that Employers Mutual was liable for. Because the Employers Mutual
   Umbrella Policy maxed out at $1 million, Great American reasons that there
   was no allocation issue, and it did not need to submit evidence detailing how
   much of the settlement went toward each claim and against each defendant.
           At bottom, the allocation issue depends upon the sufficiency of Great
   American’s summary judgment evidence. To support its allocation theory
   and establish that the covered claims were worth at least $7 million, Great
   American submitted the affidavits of (1) Brent Anderson, Liberty Tire’s
   attorney in the Underlying Litigation, and (2) Carol Euwema, Great
   American’s lead adjuster for the relevant claims.
           The Anderson affidavit concluded that the “evidence in the
   [underlying lawsuit] did not overwhelmingly support Plaintiffs’ independent
   negligence claims against Liberty Tire.” Rather, the “reasonable settlement
   value” for the claims against Decker, Corona, and Liberty Tire for vicarious
   liability exceeded $7 million.           Anderson based this conclusion on the
   “discovery in the [underlying lawsuit], the Plaintiffs’ alleged damages, the
   Plaintiffs’ claims and theories of recovery, the venue of the [underlying
   lawsuit], Texas and federal law concerning Liberty Tire’s vicarious liability,

           6
             The EMC Umbrella Policy provided coverage for claims against Corona, as
   Corona is the directly insured party. However, the EMC Umbrella Policy extended the
   definition of “insured” to “[a]nyone liable for the conduct of an insured . . . , but only to
   the extent of that liability.” Therefore, based on the plain language of the EMC Umbrella
   Policy, Employers Mutual was liable for claims against Liberty Tire, but only for Liberty
   Tire’s vicarious liability for Corona. Accordingly, to satisfy its allocation burden, Great
   American was required to submit evidence demonstrating that it expended settlement
   funds to resolve the vicarious liability claims against Liberty Tire.

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   the capabilities of the Plaintiffs’ trial counsel, and [his] personal experience
   as defense counsel.”
           Similarly, the Euwema affidavit concluded that the evidence did not
   overwhelmingly support the Underlying Plaintiffs’ negligence claims against
   Liberty Tire.       Euwema also stated that “Great American’s settlement
   payment was based primarily on concerns regarding . . . Corona and Liberty
   Tire’s related vicarious liability.” Euwema based her evaluation on the
   “discovery in the [underlying lawsuit], the Plaintiffs’ alleged damages, the
   Plaintiffs’ claims and theories of recovery, the venue of the [underlying
   lawsuit], applicable legal principles, the capabilities of the Plaintiffs’ trial
   counsel, and [her] personal experience as an adjuster for claims against truck
   drivers.”
           The district court declined to consider these affidavits, holding that
   they were too conclusory to constitute proper summary judgment evidence.
   We disagree with that conclusion. The Federal Rules permit parties to rely
   on affidavits to oppose a motion for summary judgment if the affidavits are
   “made on personal knowledge, set out facts that would be admissible in
   evidence, and show that the affiant or declarant is competent to testify on the
   matters stated.” FED. R. CIV. P. 56(c)(4). 7 An affidavit cannot sink below
   a level of “conclusoriness” if it is to provide the basis for a genuine issue of
   material fact, but the Anderson and Euwema affidavits do not fall below that
   threshold. The affidavits set forth the declarants’ credentials, familiarity
   with the case, and underlying knowledge of the relevant law. The affidavits

           7
              This is true even if the affidavit is self-serving and uncorroborated. United States
   v. Stein, 881 F.3d 853, 858–59 (11th Cir. 2018) (en banc); McClendon v. United States, 892
   F.3d 775, 785 (5th Cir. 2018) (agreeing with Stein’s reasoning in a tax case); see also C.R.
   Pittman Const. Co. v. Nat’l Fire Ins. Co. of Hartford, 453 F. App’x 439, 443 (5th Cir. 2011)
   (per curiam) (“[A]n affidavit based on personal knowledge and containing factual
   assertions suffices to create a fact issue, even if the affidavit is arguably self-serving.”).

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   also list the numerous factors that Anderson and Euwema considered in their
   analysis.   Because each affidavit described the facts supporting the
   declarant’s ultimate conclusions, they were not conclusory and therefore
   were competent summary judgment evidence.
          Drawing all inferences in favor of Great American, we hold that Great
   American submitted sufficient evidence to create a factual dispute on
   allocation. If true, these affidavits established that the covered claims Great
   American paid on behalf of Employers Mutual were worth at least $7
   million—thereby triggering and exhausting the EMC Umbrella Policy.
   Because a fact finder could reasonably allocate damages, we hold that the
   district court erred in granting summary judgment.

                                       Conclusion

          For the foregoing reasons, we REVERSE summary judgment in
   favor of Employers Mutual and REMAND to the district court for
   proceedings consistent with this opinion. 8

          8
             Because we conclude that Great American raised a fact issue that must be
   resolved, we do not reach its other arguments.

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