Court Opinion

ID: 27225
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:06:05+00
Date Added: 2024-06-11T14:56:58.168340
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT

                _______________________________

                           No. 01-30894
                        (Summary Calendar)
                _______________________________

NORTH AMERICAN CAPACITY INSURANCE COMPANY,

                                               Plaintiff-Appellant,

                                versus

BRISTER’S THUNDER KARTS, INC.

              Defendant-Third Party Plaintiff-Appellee-Appellant,

                                versus

AMERICAN DYNASTY SURPLUS LINES INSURANCE COMPANY;
PALOMAR INSURANCE CORPORATION,

                                  Third Party Defendants-Appellees.

      _________________________________________________

          Appeals from the United States District Court
              for the Eastern District of Louisiana
      _________________________________________________

                          April 11, 2002
Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.

PER CURIAM:

     Plaintiff-Appellant North American Capacity Insurance Company

(North American) appeals the district court’s ruling that North

American waived its right to deny coverage to Brister’s Thunder

Karts, Inc. (Brister’s), thereby making North American solely

responsible for providing defense and coverage to Brister’s in the

underlying suit.   The facts of this case, as set forth in the
district court’s Findings of Fact and Conclusions of Law, which we

append hereto, are undisputed, leaving us with only a question of

state law, to wit, whether Louisiana’s waiver doctrine precludes

North American’s denial of coverage to Brister’s.

     We have thoroughly reviewed the facts and applicable law as

reflected in the appellate briefs of the parties, the record on

appeal, and the district court’s comprehensive opinion. Our review

satisfies us that the district court correctly decided this case.

Rather than waste judicial resources by writing a separate opinion,

which would be essentially duplicative of the work of the district

court, we express our full agreement with that court’s reason and

disposition of the case.   We therefore adopt the district court’s

opinion in full, incorporate it herewith, append it hereto, and

affirm the judgment.   Any remaining claims by Brister’s against

either American Dynasty Surplus Lines Insurance Company or Palomar

Insurance Corporation are dismissed as moot.1

AFFIRMED.

     1
        Palomar, the insurance brokerage firm that forwarded the
claim against Brister’s to North American, submitted a brief urging
affirmance of the district court’s judgment dismissing Palomar from
the suit. Brister’s did not appeal this issue in its opening brief
and thus we need not consider it. In any case, affirmance vel non
of the Fed. R. Civ. P. 12(b)(6) dismissal of Palomar vis-à-vis
Brister’s is mooted by our conclusion that North American waived
its right to deny coverage to Brister’s.

                                 2
                     UNITED STATES DISTRICT COURT
                    EASTERN DISTRICT OF LOUISIANA

NORTH AMERICAN CAPACITY INS. CO.                * CIVIL ACTION

VERSUS                                          * NO. 00-429

BRISTER’S THUNDER KARTS, INC.                   * SECTION “L”

              FINDINGS OF FACT AND CONCLUSIONS OF LAW

                                 I.

                         PROCEDURAL HISTORY

     On February 10, 2000, North American Capacity Ins. Co. (“North

American”) filed suit seeking a declaratory judgment that they are

not liable to provide insurance coverage to Brister’s Thunder

Karts, Inc. (“Brister’s”).    On September 5, 2000, Brister’s filed

a third-party complaint against Great American Ins. Co., doing

business as American Dynasty (“Great American”), and Palomar Ins.

Co. (“Palomar”).    Brister’s seeks to hold Great American liable to

provide insurance coverage. Palomar was dismissed pursuant to Rule

12(b)(6) on June 8, 2001.    This case came on for trial without a

jury on July 9, 2001.

     The   Court,   having   carefully   considered   the   pleadings,

depositions, answers to interrogatories, and admissions, together

with affidavits, and pursuant to Rule 52(a) of the Federal Rules of

Civil Procedure, hereby enters the following findings of fact and

conclusions of law.      To the extent that any findings of fact

                                   1
constitute a conclusion of law, the Court hereby adopts it as such,

and to the extent that any conclusions of law constitute a finding

of fact, the Court hereby adopts it as such.

                                 II.

                         FINDINGS OF FACT
                                 (1)
     North American Capacity Insurance Company is a New Hampshire

corporation with its principal place of business in New Hampshire.

                                 (2)

     Brister's Thunder Karts, Inc. is a Louisiana corporation with

its principal place in Louisiana.

                                 (3)

     Great American Insurance Company, doing business as American

Dynasty Surplus Lines, Inc., is a foreign corporation with its

principal place of business outside Louisiana.

                                 (4)

     Palomar Insurance Company is an Alabama corporation doing

business in Louisiana.

                                 (5)
     Defendant   Brister’s   entered   into   an   insurance   contract

agreement with plaintiff North American to purchase a “claims-made”

                                  2
policy (the “North American Policy”).2   The North American Policy

covered Brister’s from October 12, 1995 to October 12, 1996.

Before it expired, the policy was cancelled by Brister’s effective

on July 29, 1996.

                               (6)
     Upon cancellation, Brister’s entered into a new insurance

contract with Great American, to purchase a “claims-made” policy

(the “Great American Original Policy”).     The effective coverage

period for the Great American Original Policy was between July 29,

1996 and July 29, 1997.    Prior to the expiration of the Great

American Original Policy, Great American issued a renewal policy to

extend coverage from July 29, 1997 through July 29, 1998 (the

“Great American Renewal Policy”).

                               (7)
     Brister’s sought performance of its insurance coverage after

being sued in state court by Rolland and Sue LeBlanc (the “LeBlanc

Lawsuit”) for facial injuries suffered by their daughter while she

was riding in a Brister’s go-cart.       The alleged facial injury

occurred on May 17, 1996, and Brister’s was served with and

2
  A claims-made policy is one “where coverage attaches only if the
negligent harm is discovered and reported within the policy period
in contrast with ‘an occurrence’ policy which merely requires the
commission of the negligent act during the policy’s effective
period regardless of the date of discovery and reporting.” Case v.
Louisiana Medical Mutual Insurance Co., 624 So. 2d 1285, 1289
(La.App. 3 Cir. 1993) (emphasis in original).

                                3
received notice of the LeBlanc Lawsuit complaint on August 19,

1997.

                                     (8)
     On   August   20,   1997,   Brister’s    sent    the    petition   to   its

insurance   broker,      Palomar.      On    August    21,     1997,    Palomar

acknowledged receipt of the claim by facsimile.                 Palomar also

attached a copy of the loss notice that it had sent to North

American on August 20, 1997.

                                     (9)
     Upon receiving the loss notice from Palomar, North American

proceeded to appoint counsel to defend Brister’s in the LeBlanc

Lawsuit on August 25, 1997.3        In addition, Brister’s paid $25,000

in attorney’s fees as required by the deductible of the North

American Policy.

                                    (10)
     North American seeks a declaratory judgment declaring that

they are not liable to provide Brister’s with insurance coverage.

                                    III.

                            CONCLUSIONS OF LAW
                                     (1)
     This Court has jurisdiction pursuant to 28 U.S.C. § 1332.

3
  Mary Hamilton, Esquire of the Law Firm of Voorhies & Labbe, was
chosen to represent Brister’s whom she has vigorously defended in
the LeBlanc Lawsuit until the present time.

                                      4
                                   (2)
      Venue is appropriate for this district pursuant to 28 U.S.C.

§ 1391.

                                   (3)
      North American asserts that it did not waive its right to a

coverage defense by appointing counsel to defend Brister’s claim

asserted after the coverage period had expired.        In support of its

position, North American cites Tate v. Charles Aguillard Ins. &

Real Estates, Inc., 508 So. 2d 1371, 1374 (La. 1987), for the

proposition that an insurer does not waive the coverage conditions

of the insurance policy by its conduct or actions.         Moreover, North

American explains that waiver cannot be used to extend insurance

coverage to a risk not properly within the limits of the policy as

written.   See Tate, 508 So. 2d at 1374.

                                   (4)

      North American’s reliance on Tate is ill founded.          In Tate,

the Louisiana Supreme Court concluded that “there is no fundamental

difference between conditions which have been classified as going

to   coverage   and   those   classed    as   furnishing   a   ground   for

forfeiture.”    Id.   The Louisiana Supreme Court held “that waiver

may apply to any provision of an insurance contract under which the

insurer knowingly and voluntarily elects to relinquish his right,

power or privilege to avoid liability, even though the effect may

                                    5
bring within coverage risks originally excluded or not covered.”

Id. at 1375 (emphasis added).

                                 (5)

     The Louisiana Supreme Court in Steptore v. Masco Construction

Co., Inc., 643 So. 2d 1213 (La. 1994), reaffirmed the Tate principle

in a suit almost factually identical to the present case.          In

Steptore, the court considered        whether a liability insurer who

knew of facts indicating that it had the right to deny coverage

waived its coverage defense by undertaking the insured’s defense

without obtaining a nonwaiver agreement to reserve its rights. See

Steptore, 643 So. 2d at 1213.    At the time of the event giving rise

to the claim, the facts of the case clearly indicated that insurer

had knowledge that insured was in breach which was sufficient for

insurer to deny coverage.   See id. at 1215-1217.

                                 (6)

     Like the insurer in Steptore, North American knew that it had

received notice of Brister’s claim more than a year after the

coverage had lapsed.      In Steptore, the insurer did not deny

coverage or enter into an agreement reserving the right to deny

coverage until six months after it appointed counsel to undertake

insured’s defense.   See id. at 1215.    North American did not obtain

a nonwaiver agreement reserving its right to deny coverage, and

                                  6
unlike the Steptore insurer, it waited three years to deny coverage

for the first time.     Because North American assumed Brister’s

defense without reserving its rights or otherwise protecting its

interests, it waived any coverage defense it may have had under its

policy with Brister’s. See id. at 1217.

                                (7)

      North American assumed and continued the defense of the

insured in the face of facts indicating that it had a right to deny

coverage.   See id. at 1216 (stating that an insurer is charged with

knowledge of the contents of its own policy).    Furthermore, North

American did not obtain a nonwaiver agreement to reserve its right

to deny coverage.   See Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1175

(5th Cir. 1992) (stating that an insurer must obtain a nonwaiver

agreement to reserve its rights when a conflict of interests arises

and the insurer has knowledge of facts indicating noncoverage). As

a result, the Court finds that North American waived any coverage

defense it may have had under the policy.

                                (8)

      North American shoulders all liability in this case because

the   escape clause of the Great American Policy and the pro rata

clause of the North American Policy are both given effect and

control.    See Citgo Petroleum Corp, v. Yeargin, Inc., 690 So. 2d
7
154, 167 (La.App. 3 Cir. 1997) (stating that conflicting “escape”

and “pro rata” clauses are not mutually repugnant and thus are

given effect).   Great American concedes that at the time the claim

was made to Brister’s its policy was in force and effect.   However,

the Great American Policy contains an “escape clause” which denies

coverage to an insured who is covered by the terms of another

insurance policy.     In this case, the “other insurance policy

available to the insured” referenced in Great American’s escape

clause is the North American Policy because North American insured

Brister’s and waived its coverage defense.      The North American

Policy also contains a “pro rata clause” that allocates the share

of the liability equally or according to the terms of the policies.

Therefore, Great American escapes coverage by operation of its

escape clause and pro rata clause because Brister’s is covered by

the North American Policy.

                                IV.

                             CONCLUSION

     On the basis of the foregoing findings of fact and conclusions

of law, the Court finds that plaintiff North American waived its

coverage defense.     Consequently, North American is liable to

provide insurance coverage to Brister’s.

     This is the judgment of the Court.

                                 8
New Orleans, Louisiana

                         S/   ELDON E. FALLON
                          UNITED STATES DISTRICT JUDGE

                               9