Opinion
CIVIL ACTION NO. 3:02-CV-1700-G
June 23, 2003
MEMORANDUM ORDER
Before the court are the cross-motions for summary judgment of the defendant Lexington Insurance Company ("Lexington") and the plaintiff Mt. Hawley Insurance Company ("Mt. Hawley"). For the following reasons, Lexington's motion is granted, and Mt. Hawley's motion is denied.
I. BACKGROUND
This is an insurance coverage dispute. Mt. Hawley is a stock insurance company incorporated in Illinois with its principal place of business in Dallas County, Texas. Plaintiff's First Amended Complaint ("Complaint") ¶ 1. Lexington, a stock insurance company incorporated in Delaware with its principal place of business in Boston, Massachusetts, is a surplus insurance carrier licensed in Texas. Id. ¶ 2; Notice of Removal ¶ 7.
Brian Neal ("Neal") d/b/a Bryan Excavation was leasing, from National Equipment Services, Inc. ("NES") through NES's agent Elite Rentals, Inc. ("Elite"), a Model 325BL Caterpillar Excavator Number 25R02021 (the "excavator") with an option to purchase at the end of the lease term. Complaint ¶ 5. Elite owned the excavator. Lexington's Appendix in Support of its Motion for Summary Judgment ("Appendix"), Exhibit A, Stipulation of Facts By and Between Mt. Hawley Insurnce [sic] Company and Lexington Insurance Company ("Stipulations") ¶ 1. On February 21, 2000, the excavator was completely destroyed by fire. Complaint ¶ 5.
At the time of the fire, the excavator was insured by Mt. Hawley under an Inland Marine Commercial Policy of Insurance, policy number MIE0010009 (the "Mt. Hawley Policy"), with a policy period from November 15, 1999 through November 15, 2000. Id. ¶ 6; see also the Mt. Hawley Policy, attached as Exhibit A to the Complaint. Mt. Hawley provided the insurance coverage to Aerostaff Services, Inc. ("Aerostaff"). Complaint ¶ 6. Neal had contracted with Aerostaff for staff leasing services. Id. Neal was provided with insurance coverage while the excavator was utilized by Aerostaff employees leased by Neal. Id. On behalf of Bryan Excavation, Aerostaff filed a schedule of equipment covered by the Mt. Hawley Policy in which Aerostaff listed the excavator's stated value as $280,000. Stipulations ¶ 6. Under the terms of the rental/purchase agreement between Neal and Elite, Elite was the designated "loss payee" of the excavator under the Mt. Hawley Policy, but Elite was not a named insured under that policy. Complaint ¶ 6; Stipulations ¶¶ 6, 7. Elite did not pay premiums under the Mt. Hawley Policy. Stipulations ¶ 9.
Under the Mt. Hawley policy, the amount of coverage was based on "actual cash value." Complaint ¶ 6. "Actual cash value" is defined as "the appraisal value of the equipment at the time of the loss with proper deduction for depreciation." Id.
The Mt. Hawley Policy contained the following provision:
Other Insurance. This insurance does not cover any loss or damage which at the time of the happening of such loss or damage is insured by or would, but for the existence of this insurance be insured by an other Policy or Policies, except in respect of any excess beyond the amount which would have been payable under such other policy or policies had this insurance not been effected.
Mt. Hawley Policy ¶ 8.
The excavator was insured by an additional policy at the time of the fire. Complaint ¶ 7. This policy (the "Lexington Policy"), number 8523893, with a policy period of October 1, 1999 through October 1, 2000, was issued to NES by Lexington. Id.; see also the Lexington Policy, attached as Exhibit B to the Complaint. As a subsidiary of NES, Elite was an insured under the Lexington Policy. Stipulations ¶ 14. Bryan Excavation, however, was not named as an insured under the Lexington Policy. Id. ¶ 15. A section of the Lexington Policy entitled "Rental . Contractors Equipment Property Protection" covered property owned, sold, or rented, specifically including excavators. Complaint ¶ 7. The coverage under this policy was based on replacement cost, or the amount of the original purchase price of the property without deduction for depreciation. Id. The Lexington Policy contained the following paragraph:
Insurance under a separate policy may apply to your covered loss. If the separate policy more specifically insured the property, we will pay the amount of your covered loss left after the separate policy has been used up, less the deductible. But we will not pay more than the limit of coverage under this agreement. Excess coverage under this agreement will not apply to the deductible amount of more specific insurance.
Lexington Policy at 35.
The Lexington Policy' further specified that "[n]o third party having temporary possession of your property, such as a transportation company, can benefit directly and indirectly from it." Id. at 57.
On February 22, 2000, Bryan Excavation filed a claim under the Mt. Hawley Policy for loss of the excavator. Complaint ¶ 8; Stipulations ¶ 16. Elite never submitted a claim under the Mt. Hawley Policy for damage to the excavator. Stipulations ¶ 17.
On March 23, 2000, Mt. Hawley determined that the actual cash value of the excavator was $174,900 and offered to settle the claim, upon execution of a sworn proof of loss, for $174,900, less a $10,000 deductible. Complaint ¶ 8.
In a letter dated March 31, 2000, Elite informed Bryan Excavation, through counsel, that Elite did not agree that $174,900 represented the fair market value or the replacement value of the excavator. Stipulations, Exhibit 13, Letter dated March 31, 2000 from Ron O. Norwood, Esq. to Mary Ann Starks, Esq. The letter stated that the rental agreement between Bryan Excavation and Elite required Bryan Excavation to pay Elite $203,000 with respect to the use and purchase of the excavator. Id.
On April 3, 2000, NES filed a claim with Lexington under the Lexington Policy. Complaint ¶ 9; see also Stipulations, Exhibit 18, Property Loss Notice. NES sought to recover the replacement value of the excavator, or $203,000. Id.
On June 26, 2000, Neal submitted to Mt. Hawley a sworn proof of loss, in the amount of $279,000, in which Neal represented that no other policy would cover the loss of the excavator. Complaint ¶ 10; see also id., Exhibit C, Sworn Statement in Proof of Loss; Stipulations ¶ 22. Neal did note, however, "that Elite . . . had insurance coverage provided by Lexington for what is believed to be supplemental or secondary insurance coverage that may cover the difference, if any, between actual cash value and replacement cost." Complaint ¶ 10. Mt. Hawley never requested that Elite or Aerostaff file a sworn proof of loss under the Mt. Hawley Policy. Stipulations ¶¶ 19, 20.
On July 19, 2000, Mt. Hawley rejected the amount provided in the proof of loss and issued a check jointly payable to Aerostaff, Bryan Excavation, and Elite in the amount of $164,900, the actual cash value of the excavator. Complaint ¶¶ 11, 16; Stipulations ¶ 23; see also Stipulations, Exhibit 8, Letter dated July 19, 2000 from Shawn Garner to David Smith, Esq. and Check.
On July 26, 2000, Bryan Excavation, through counsel, asked Mt. Hawley to confirm that Mt. Hawley's payment under the Mt. Hawley Policy did not "constitute a waiver of any rights of any of the payees on the check including Bryan Excavation, is not final, and does not constitute a compromise and settlement or release." Stipulations, Exhibit 9, Letter dated July 26, 2000 from David M. Smith, Esq. to Shawn Garner (emphasis in original). On July 31, 2000, Mt. Hawley assured Bryan Excavation via facsimile that negotiation of the check would not be considered a waiver of the payees' rights under the Mt. Hawley Policy nor would it be considered a settlement or a release. Stipulations, Exhibit 10, Facsimile dated July 31, 2000 from Shawn Garner to David M. Smith, Esq.
Bryan Excavation agreed that the terms of the rental agreement with Elite required it to pay Elite more than the cash value of the excavator. Stipulations ¶ 29. Thus, Bryan Excavation endorsed the $164,900 check to Elite, and Elite deposited the check into its bank account. Id; see also Stipulations, Exhibit 14, Letter dated August 14, 2000 from David M. Smith, Esq. to Ron O. Norwood, Esq.
Bryan Excavation ultimately brought suit against Mt. Hawley and others in the 270th Judicial District Court of Harris County, Texas. Stipulations ¶ 26; see also id., Exhibit 11, Plaintiff's Second Amended Petition and Request for Disclosure. Elite was not named as a party in that suit. Stipulations ¶ 27. In that suit, Bryan Excavation sought the difference between the actual cash value paid by Mt. Hawley and the replacement cost of the excavator. Id. ¶ 26. Mt. Hawley and Bryan Excavation settled that suit. Id. ¶ 34.
In a letter dated March 15, 2001, Maxson Young Associates, Inc., Lexington's claims adjuster, advised Elite's counsel the following:
It is understood the insurance carrier for Bryan Excavation, Mount Hawley Insurance Company, has paid a net cash value claim in the amount of $164,900.00 for damage to the excavator. It is further understood the attorney representing Bryan Excavation is pursuing the remainder of the claim including the difference between the actual cash value and the replacement cost of the Caterpillar Excavator directly with Mount Hawley Insurance Company.
Lexington Insurance Company has been advised this matter is being pursued directly against the Lessee's insurance carrier, Mount Hawley Insurance Company, and they have made the decision to close their claim file pending the outcome of the negotiations with Mount Hawley Insurance Company. If an impass [sic] is reached with Mount Hawley Insurance Company, please notify [us] and the Lexington Insurance Company file will be reopened immediately.Id., Exhibit 18, Letter dated March 15, 2001 from Bill Adams to Ron O. Norwood, Esq. Elite has not since requested that Lexington reopen the file nor has Elite filed a new claim regarding the loss of the excavator. Id. ¶ 39.
On July 24, 2002, Mt. Hawley filed this suit in the 162nd Judicial District Court of Dallas County, Texas. Notice of Removal ¶ 1. In its pleading, Mt. Hawley sought damages, equitable contribution, and equitable subrogation in conjunction with damage to an excavator. Complaint ¶¶ 16-20. Mt. Hawley maintains that both the Lexington Policy and the Mt. Hawley Policy contain "excess other insurance" clauses which preclude the coverage of the other. Id. ¶ 15. As a result, Mt. Hawley asserts, Lexington and Mt. Hawley — as primary insurers — are equally responsible to share in the coverage for the loss of the excavator up to the actual cash value of the loss. Id. Mt. Hawley thus seeks equitable contribution from Lexington in an amount equal to half of the amount of the excavator's cash value, or $87,450, that Mt. Hawley paid to NES. Id. ¶¶ 16, 18. On August 9, 2002, Lexington removed the case to this court on the basis of diversity jurisdiction.
II. ANALYSIS A. Evidentiary Burdens on Motion for Summary Judgment
Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
A movant for summary judgment makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues to support the nonmovant's case. Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). The pleadings, depositions, admissions, and affidavits, if any, must demonstrate that no genuine issue of material fact exists. FED. R. CIV. P, 56(c).
Once the movant make this showing, the nonmovant may not rest on the allegations in its pleadings. Celotex, 477 U.S. at 324; FED. R. CIV. P. 56(e). Rather, it must direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. Celotex, 477 U.S. at 324. To carry this burden, the "opponent must do more than simply show . . . some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). Instead, the nonmovant must present evidence sufficient to support a resolution of the factual issue in its favor. Anderson, 477 U.S. at 257.
While all of the evidence must be viewed in a light most favorable to the motion's opponent, id. at 255 (citing Adickes v. S.H. Kress Company, 398 U.S. 144, 158-59 (1970)), neither conclusory allegations nor unsubstantiated assertions will satisfy the opponent's summary judgment burden. Little v. Liquid Air Corporation, 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825 (1992). Summary judgment is proper if, after adequate time for discovery, the opposing party fails to establish the existence of an element essential to its case and as to which it will bear the burden of proof at trial. Celotex, 477 U.S. at 322-23.
B. Insurance Policy Interpretation Under Texas Law
In National Union Fire Insurance Company of Pittsburgh, Pennsylvania v. CBI Industries, Inc., 907 S.W.2d 517 (Tex. 1995), the Texas Supreme Court summarized the approach courts must take when interpreting insurance contracts. "Insurance policies are controlled by rules of interpretation and construction which are applicable to contracts generally." Id. at 520; see also Potomac Insurance Company of Illinois v. Jayhawk Medical Acceptance Corporation, 198 F.3d 548, 550 (5th Cir. 2000); Nutmeg Insurance Company v. Pro-Line Corporation, 836 F. Supp. 385, 388 (N.D. Tex. 1993) (citing National Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991)); Texas Fanners Insurance Company v. Murphy, 996 S.W.2d 873, 879 (Tex. 1999). "The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument." CBI Industries, 907 S.W.2d at 520 (citation omitted). In determining the intent of the parties, the court construes the policy to give effect to each of its terms and to avoid rendering any term meaningless. Ideal Mutual Insurance Co. v. Last Days Evangelical Association, Inc., 783 F.2d 1234, 1238 (5th Cir. 1986) (citation omitted).
The court must decide the question of ambiguity of an insurance policy by "looking at the contract as a whole. . . ." CBI Industries, 907 S.W.2d at 520. Once a court determines that a contract term is not ambiguous, it must then determine that contract's "plain meaning." Puckett v. U.S. Fire Insurance Co., 678 S.W.2d 936, 938 (Tex. 1984) (citation omitted). In this case, the court has separately reviewed the Mt. Hawley Policy and the Lexington Policy. On the basis of that review, the court concludes that the language in each policy can be given a "definite [and] certain legal meaning" and is therefore not ambiguous. CBI Industries, 907 S.W.2d at 520; see also Certain Underwriters at Lloyd's London v. C.A. Turner Construction Company, Inc., 941 F. Supp. 623, 628 (S.D. Tex. 1996), aff'd, 112 F.3d 184 (5th Cir. 1997).
C. Equitable Subrogation
"[T]he doctrine of subrogation is given a liberal application and is broad enough to include every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which in equity and good conscience should have been discharged by the latter." Argonaut Insurance Company v. Allstate Insurance Company, 869 S.W.2d 537, 541-42 (Tex.App.-Corpus Christi 1993, writ denied). Under Texas law, an insurance carrier may bring suit against another insurance carrier under the doctrine of equitable subrogation. General Star Indemnity Company v. Vesta Fire Insurance Corporation, 173 F.3d 946, 949 (5th Cir. 1999). Equitable subrogation is:
[T]he legal fiction through which a person or entity, the subrogee, is substituted, or subrogated, to the rights and remedies of another by virtue of having fulfilled an obligation for which the other was responsible. According to this doctrine, an excess insurer, paying a loss under a policy, "stands in the shoes" of its insured with regard to any cause of action its insured may have against a primary insurer responsible for the loss. It is elementary that, before an excess insurer can recover from a primary insurer under the doctrine of equitable subrogation, the excess insurer must first prove that the primary insurer failed to fulfill a duty owed to the insured.Id.
Mt. Hawley asserts that it is equitably subrogated to the right to recover from Lexington the amount it paid under the Mt. Hawley Policy. Complaint ¶¶ 19-20. The parties have stipulated that Bryan Excavation is the party insured under the Mt. Hawley Policy. Stipulations ¶¶ 4, 5. Bryan Excavation is not insured under the Lexington Policy. Thus, Mt. Hawley has failed to establish that Bryan Excavation would have any cause of action against Lexington. Moreover, Mt. Hawley has not shown that Lexington failed to fulfill a duty owed to Bryan Excavation.
D. Equitable Contribution
The doctrine of equitable contribution ensures that an insured does not benefit from a double recovery. Union Indemnity Insurance Company of New York v. Certain Underwriters at Lloyd's, 614 F. Supp. 1015, 1017 (S.D. Tex. 1985). Mt. Hawley seeks an equitable contribution from Lexington in an amount equal to half of the amount of the excavator's cash value, or $87,450, that Mt. Hawley paid to NES. Complaint ¶¶ 16, 18. For Mt. Hawley be entitled to equitable contribution from Lexington, the Mt. Hawley Policy and the Lexington Policy must insure the same party, interest, and risk. See Union Indemnity Insurance, 614 F. Supp. at 1016; see also COUCH ON INSURANCE 3d ed. § 218:3 n. 10 (2003) (citing cases). Here, the policies provided coverage for different insureds and different interests ( i.e., lessor/owner and lessee). As a result, Mt. Hawley is not entitled to equitable contribution from Lexington.III. CONCLUSION
For the reasons stated, Lexington's motion is GRANTED, and Mt. Hawley's motion is DENIED. Judgment will be entered that Mt. Hawley take nothing on its claims against Lexington.
SO ORDERED.
JUDGMENT
This judgment is entered pursuant to F.R. CIV. P. 58 and the memorandum order of this date. For the reasons stated in that memorandum order, it is ORDERED that the plaintiff take nothing from the defendant on its claims in this case and that the defendant recover its costs of court.