Filed: May 30, 2007
Latest Update: Feb. 21, 2020
Summary: United States Court of Appeals Fifth Circuit IN THE UNITED STATES COURT OF APPEALS FILED FOR THE FIFTH CIRCUIT May 30, 2007 _ Charles R. Fulbruge III No. 06-60446 _ Clerk LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff-Appellee v. FIREMAN’S FUND INSURANCE COMPANY, Intervenor Defendant-Appellant - Appeal from the United States District Court for the Southern District of Mississippi (3:01-CV-860) - Before HIGGINBOTHAM, WIENER, and CLEMENT, Circuit Judges. WIENER, Circuit Judge*: During the penden
Summary: United States Court of Appeals Fifth Circuit IN THE UNITED STATES COURT OF APPEALS FILED FOR THE FIFTH CIRCUIT May 30, 2007 _ Charles R. Fulbruge III No. 06-60446 _ Clerk LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff-Appellee v. FIREMAN’S FUND INSURANCE COMPANY, Intervenor Defendant-Appellant - Appeal from the United States District Court for the Southern District of Mississippi (3:01-CV-860) - Before HIGGINBOTHAM, WIENER, and CLEMENT, Circuit Judges. WIENER, Circuit Judge*: During the pendenc..
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United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALS FILED
FOR THE FIFTH CIRCUIT May 30, 2007
_____________________
Charles R. Fulbruge III
No. 06-60446
_____________________ Clerk
LIBERTY MUTUAL FIRE INSURANCE COMPANY,
Plaintiff-Appellee
v.
FIREMAN’S FUND INSURANCE COMPANY,
Intervenor Defendant-Appellant
----------------------
Appeal from the United States District Court
for the Southern District of Mississippi
(3:01-CV-860)
----------------------
Before HIGGINBOTHAM, WIENER, and CLEMENT, Circuit Judges.
WIENER, Circuit Judge*:
During the pendency of an underlying state court lawsuit,
Defendant-Appellant Fireman’s Fund Insurance Company (“Fireman’s
Fund”), an excess insurer, settled the lawsuit on behalf of its
insured. Thereafter, Fireman’s Fund sought to recover partial
reimbursement from Plaintiff-Appellant Liberty Mutual Fire
Insurance Company (“Liberty Mutual”), a primary insurer, in a
separate federal declaratory judgment action. The district court
dismissed Fireman’s Fund’s reimbursement claim, concluding that
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
it was barred by Mississippi’s voluntary payment doctrine.
Perceiving no reversible error, we affirm.
I. FACTS AND PROCEEDINGS
In a 2001 Mississippi state court lawsuit (“the Doe
lawsuit”), Tina Doe alleged that, while she was a tenant in the
Signature Square Apartment Complex (“the Complex”), she was
assaulted and raped by an employee of the Complex. Just days
before the alleged incident, Virtu Signature Square Associates,
L.L.C. (“Virtu”) had purchased the Complex.
In her complaint, Doe asserted claims against two categories
of defendants: (1) Virtu, as owner of the Complex at the time of
the incident, and Linda Denham, as Virtu’s office manager at the
time of the incident, and (2) the immediately preceding owner of
the Complex, its allegedly related entities, and one of its
employees —— Jorad-Jackson I Limited Partnership d/b/a Signature
Square Apartments, Del Development Corporation, SGI Nevada, Inc.
and Pete Brown (collectively, “the Del Defendants”).
At the time of the incident, Virtu was a named insured under
a primary commercial general liability policy issued by Liberty
Mutual Insurance to Property Owners Purchasing Group (“the
Liberty Mutual Policy”). The policy limit of the Liberty Mutual
Policy was $1 million.
Pursuant to the terms of that policy, Liberty Mutual agreed
2
to defend Virtu and Denham against the claims asserted in the Doe
lawsuit, subject to a reservation of rights, and thus retained
and paid for defense counsel. Liberty Mutual also filed the
present action in the district court, seeking a judicial
declaration that the Liberty Mutual Policy did not provide
coverage for the claims asserted against Virtu and Denham in the
Doe lawsuit.
In December 2002, Doe amended her state court lawsuit,
adding additional defendants. These additional defendants
included Greystar Management Services, L.P. (“Greystar”), which
was the management company for the Complex at the time of the
incident, and two other allegedly related entities.
Greystar was an additional insured under the Liberty Mutual
Policy. As such, Liberty Mutual agreed to defend Greystar
against the claims in the Doe lawsuit and thus retained and paid
for defense counsel. Liberty Mutual did not deny coverage or
seek a judicial determination that the Liberty Mutual Policy did
not provide coverage to Greystar for the claims asserted in the
Doe lawsuit, and thus did not proceed under a reservation of
rights.
Liberty Mutual assigned two claims professionals to work the
Doe lawsuit. Jamie Moray handled and monitored the defense of
Virtu, Denham, and Greystar in the Doe lawsuit; Antonio Glenn
3
handled all issues of coverage under the Liberty Mutual Policy.
At the time of the incident, Greystar was also insured under
an excess/umbrella policy issued by Fireman’s Fund (“the
Fireman’s Fund Policy”). The policy limit of the Fireman’s Fund
Policy was $25 million.
In July 2003, after the conclusion of an unsuccessful
mediation, Fireman’s Fund was notified of the Doe lawsuit, which
was set to be tried approximately three to four weeks later. On
receiving notice, Fireman’s Fund assigned James Shaw to handle
the claims asserted against Greystar in the Doe lawsuit.
Shaw believed that Greystar’s potential exposure in the Doe
lawsuit exceeded the $1 million policy limit of the Liberty
Mutual Policy. Moray believed that the facts and circumstances
did not demonstrate a significant potential liability on the part
of Virtu, Denham, or Greystar.
After numerous communications between Moray and Shaw, Moray
advised Shaw that $200,000.00 was the maximum amount that Liberty
Mutual would pay to settle the claims against Greystar. Moray
also advised Shaw that he was not the adjuster responsible for or
involved in the handling of any coverage issues under the Liberty
Mutual Policy and that these issues were being handled by Glenn.
During one telephone conversation, Shaw advised Moray that
Fireman’s Fund might, after settling the Doe lawsuit, file suit
4
against Liberty Mutual.
Following these discussions, Shaw sent Moray an email which
stated, in part:
[Fireman’s Fund] is not convinced that [the Liberty
Mutual Policy] does not apply. As such, we are forced
to negotiate settlement in [the Doe lawsuit] with
minimal contribution from [Liberty Mutual]. Please be
advised that we are doing so under a full reservation
of rights under the policies, and that we specifically
reserve the right to resolve the coverage issues after
the fact.
After sending this email, Shaw, together with his Fireman’s Fund
counterparts handling the Doe lawsuit under the policy issued to
the Del Defendants, assumed complete control of the settlement
negotiations in the Doe lawsuit. Shaw and his counterparts
agreed to pay Doe $3 million to settle all claims she asserted in
the Doe lawsuit and agreed among themselves to allocate this
settlement equally between the Del Defendants and Greystar ——
actually between their respective insurers —— each paying $1.5
million.
Of Greystar’s allocated $1.5 million, Liberty Mutual paid
$200,000.00, which was consistent with its prior representations
to Fireman’s Fund. Fireman’s Fund paid $1.3 million, the balance
of the settlement.
In February 2005, Fireman’s Fund, which had previously
intervened in Liberty Mutual’s federal declaratory judgment
5
action, filed a motion for summary judgment, contending that the
Liberty Mutual Policy provided coverage to Greystar and, as such,
Fireman’s Fund was entitled to recover $800,000.00 (the $1
million Liberty Mutual Policy limit minus the $200,000.00 already
paid by Liberty Mutual) of the $1.3 million that Fireman’s Fund
had paid in settling the claims against Greystar. On the same
day, Liberty Mutual filed its own cross-motion for summary
judgment, contending that Mississippi’s voluntary payment
doctrine precluded any recovery from Liberty Mutual by Fireman’s
Fund.
In February 2006, the district court granted, without
reasons, Liberty Mutual’s summary judgment motion and entered
final judgment in Liberty Mutual’s favor. Fireman’s Fund timely
filed a notice of appeal.
II. ANALYSIS
A. Standard of Review
We review grants of summary judgment de novo, applying the
same standard as the district court.1 Summary judgment is
appropriate when there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law.2
1
Abarca v. Metro. Transit Auth., 404 F.3d 938, 940 (5th Cir.
2005).
2
Dallas Fire Fighters Ass’n v. City of Dallas, 150 F.3d 438,
440 (5th Cir. 1998).
6
The parties agree that Mississippi law applies in this diversity
action.3
B. Applicable Law
The voluntary payment doctrine is a common law construct
that has been consistently followed in Mississippi.4 Under this
maxim,
“[A] voluntary payment can not be recovered back, and a
voluntary payment within the meaning of this rule is a
payment made without compulsion, fraud, mistake of
fact, or agreement to repay a demand which the payor
does not owe, and which is not enforceable against him,
instead of invoking the remedy or defense which the law
affords against such demand.”5
In contrast, an “involuntary payment” is one “‘not proceeding
from choice.’”6 Thus, payments made by virtue of a legal
obligation, by accident, by mistake, or under compulsion are not
considered voluntary and thus are not barred from recovery under
the voluntary payment doctrine.7 In addition, a mutual agreement
between insurance companies to litigate their respective
liabilities between themselves after settling an underlying
3
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
4
Genesis Ins. Co. v. Wausau Ins. Co., 343 F.3d 733, 736 (5th
Cir. 2003).
5
Id. (quoting McDaniel Bros. Constr. Co. v. Burk-Hallman Co.,
175 So. 2d 603, 605 (Miss. 1965)).
6
Id. at 738.
7
Id.
7
lawsuit will preclude application of the voluntary payment
doctrine.8
C. Merits
1. Voluntary Payment
The first issue on appeal is Fireman’s Fund contention that
its settlement payment was not voluntary, because it had a legal
obligation to settle the Doe lawsuit on behalf of Greystar. In
support of its position, Fireman’s Fund relies on State Farm
Mutual Automobile Insurance Co. v. Allstate Insurance Co.9
Fireman’s Fund’s reliance on State Farm is misplaced, however.
State Farm stands for the legal proposition that a primary
insurer is under a legal obligation to defend and settle a
lawsuit in the best interests of its insured; and thus, if a co-
primary insurer fails to participate in a successful settlement
negotiation, the voluntary payment doctrine does not preclude an
action for contribution. Under the Fireman’s Fund Policy,
though, Fireman’s Fund is not a primary insurer charged with the
duty to defend. Rather, Fireman’s Fund is an excess/umbrella
insurer under no obligation to defend or settle any lawsuit
against Greystar. Fireman’s Fund’s sole obligation was to pay
any amount, up to the limit of its policy, that exceeded the
8
Id. at 736.
9
255 So. 2d 667, 669 (Miss. 1971).
8
limits of any primary insurance policy. Thus, Fireman’s Fund has
inappropriately attempted to agglomerate to itself as an
excess/umbrella insurer the primary insurer’s duty to defend and
thereby avoid the consequences of the voluntary payment doctrine.
In addition, Fireman’s Fund relies on Canal Insurance Co. v.
First General Insurance Co.10 as imposing on it another legal
obligation to settle the claims against Greystar. This reliance
is also misplaced.
In First General, Canal, an insurer, had no duty to defend
the claims against its insured in an underlying lawsuit, but
nonetheless provided a defense, under a reservation of rights,
after First General, another insurer, wrongfully refused to
provide one.11 After providing the defense, Canal sought to
recover its defense costs from First General, which argued in
opposition that Canal’s defense payments were voluntary and thus
unrecoverable.12
In reversing the district court’s ruling in favor of Canal,
we determined that Canal was not a volunteer.13 After
acknowledging that Canal had no policy obligation to provide a
10
889 F.2d 604 (5th Cir. 1989).
11
Id. at 611-12.
12
Id.
13
Id.
9
defense to its insured, which seemingly would have rendered Canal
a volunteer, we nevertheless held that, because of a mandatory
state-law insurance endorsement that effectively made Canal its
insured’s surety as to any judgments rendered against the
insured, Canal (1) reasonably could have feared that a court
might construe this endorsement as requiring Canal to provide its
insured a defense, and (2) had a manifest interest in controlling
the underlying litigation to minimize the size of any judgments
after First General had denied coverage and refused to provide a
defense.14 Based solely on these two circumstances, both of
which arose from an endorsement mandated by state-law, we
concluded that Canal could not be characterized as a volunteer.15
Here, there exists nothing akin to the mandatory state-law
endorsement in First General that (1) might have reasonably
caused Fireman’s Fund to fear that a court could conclude that it
had a duty to defend, or (2) imbued Fireman’s Fund with a
manifest interest in controlling the litigation. Furthermore,
even if there had been a similar endorsement, Liberty Mutual
never denied coverage as to Greystar and had agreed from the
outset to provide Greystar with a defense, thereby nullifying any
interest that Fireman’s Fund might have had in controlling the
14
Id.
15
Id.
10
litigation. We are satisfied that Fireman’s Fund had no legal
obligation to make a settlement payment on Greystar’s behalf and
thus cannot avoid the application of the voluntary payment
doctrine by means of an “involuntary” payment defense.
2. Mutual Agreement to Litigate Post-Payment
The second issue on appeal is Fireman’s Fund’s contention
that summary judgment was improperly granted, as —— it asserts ——
there exists a genuine fact issue whether a mutual, pre-
settlement agreement to litigate coverage issues post-settlement
existed between it and Liberty Mutual. According to Fireman’s
Fund, sufficient evidence of such a mutual agreement exists to
create a genuine issue of material fact and thus make the
district court’s grant of summary judgment erroneous.
Specifically, Fireman’s Fund points to (1) Shaw’s deposition
testimony, (2) the August 2001 email from Shaw to Moray, (3)
Moray’s file notes, and (4) a September 2001 letter from Liberty
Mutual to Wausau, as support for its contention that a factual
conflict exists whether the parties agreed to litigate the
coverage issue subsequently.
a. Deposition Testimony
Initially, Fireman’s Fund contends that Shaw’s deposition
testimony evidences that the two insurers did mutually agree to
litigate their respective liabilities subsequently. In his
11
August 17, 2004 deposition, Shaw testified, in part:
Q: Anything else you can recall about your
conversations with Mr. Moray?
A: Yes.
Q: What else?
A: When we came to settling the case, Liberty
Mutual’s contribution was $200,000. I did not
believe that that represented Liberty’s exposure,
and I told him directly that we were going to sue
them for it and that I was going to send him a
reservation of rights letter, and he said, “You do
what you have to do.”
And I told him that I felt Liberty was trying to
manipulate this from a position of noncoverage and
I was offended that they could take that position
and I was further offended, after we had had those
discussions, that there could now be raised the
element that we might have made a volunteer
payment there, which was at no time discussed
because the disagreements on coverage were pretty
stark.
Q: But you and Mr. Moray discussed a voluntary
payment issue?
A: No, that was never brought up.
Q: Never came up?
A: Well, I took his contribution to the settlement as
a ratification, that it was reasonable and that
what was being agreed to —— the settlement was
acceptable and not outside the bounds of what
should be paid in settlement for such a loss.
Q: At no time did you —— did Mr. Moray ever raise
with you voluntary payment?
A: Not at all.
12
Q: Never used that term with you?
A: Not at all.
. . .
Q: So when you left off with Mr. Moray, it was,
“We’re going to get this case settled and then
we’re going to sue you”?
A: “We will do what we have to to seek recovery.”
Q: Well, did you tell him that you were going to sue
him or did you tell him that you were going to do
what you had to do to seek recovery?
A: I mentioned the word “sue.” I mentioned
“recovery.” I probably told him ten times what we
were going to do.
Q: Was there ever a verbal agreement between you and
Mr. Moray to the effect that Liberty Mutual would
contribute $200,000; Fireman’s Fund would
contribute the balance; and that both parties
would agree to resolve any coverage issues in a
subsequent proceeding?
A: Do you mean did I have his permission ——
Q: Yes.
A: —— to settle the claim or to sue Liberty Mutual?
Q: To sue Liberty Mutual.
A: I had his acknowledgment that we would do that if
we had to. He acknowledged that that would be
appropriate.
Q: He understood that that’s what you were going to
do?
A: That was —— yeah, one of the potential —— either
arbitration or litigation or even negotiation
later outside the realm of an arbitration, but
13
that this would be brought to resolution at some
point.
Q: I mean, you made that clear to him that you were
going to do that?
A: Yes. And there was never any disagreement from
him on that part.
Q: Did he expressly agree that that would be fine?
A: Yes.
. . .
Q: And is that the reservation of rights letter ——
the reservation of rights you’re referring to?
A: That is, yes.
Q: And there’s nothing in this e-mail about Liberty
Mutual agreeing to resolve the coverage issues
after the fact?
A: The discussion had been that we will, and I didn’t
see the need to point out that, “You have agreed
that we” —— I didn’t believe there was any need to
gain Liberty Mutual’s agreement for us to sue them
later since they had disclaimed coverage and we
felt that they were not stepping up to the plate
fully in a defense obligation; that for us to have
the onus or the burden of obtaining their
agreement would be ludicrous. That ——
Q: That just wasn’t necessary in your mind?
A: —— wasn’t necessary, no.
Q: In your mind, you were doing everything you could
to preserve Fireman’s Fund’s right to litigate
later or arbitrate later against Liberty Mutual?
A: We were reserving our rights. We had told them
that we would do so.
14
Q: And you’re telling them again?
A: And I’m telling them again, and now we’re sitting
here talking about it.
As can be seen from this deposition testimony, Shaw was
attempting to get Liberty Mutual to raise its settlement
contribution and, in this effort, he threatened the possibility
of a lawsuit. Moray responded, in essence, that, regardless of a
potential lawsuit, Liberty Mutual was not going to raise its
contribution and Fireman’s Fund could go do whatever it wanted.
Although there was some mutual assent, it was not directed
towards a subsequent coverage lawsuit between the two insurers.
Instead, both parties acknowledged that Liberty Mutual would not
raise its settlement contribution over $200,000.00 and Fireman’s
Fund could do whatever it wanted in response. This is not
sufficient to constitute mutual assent to subsequent coverage
litigation.
b. Email
In the August 2001 email from Shaw to Moray, Shaw wrote, in
part:
We are not convinced that Liberty International
Underwriters’ Policy RG2-W31-004265-010 does not apply.
As such, we are forced to negotiate settlement in this
matter with minimal contribution from Liberty
International Underwriters. Please be advised that we
are doing so under a full reservation of rights under
the policies, and that we specifically reserve the
right to resolve the coverage issues after the fact.
15
Fireman’s Fund contends that this email constitutes a pre-
settlement, mutual agreement to reserve the right to litigate the
parties’ coverage issues subsequently. We disagree.
In his email, Shaw purports unilaterally to reserve
Fireman’s Fund’s right to litigate. This is not sufficient to
preclude application of the voluntary payment doctrine, which
requires that all interested parties mutually agree to litigate
subsequently.
c. File Notes
In his file notes relating to the Doe lawsuit, Moray
observed, in part: “Jim Morey —— 6/3/04 —— A review of the file
reveals that on 8/11/03, the case settled for $3,000,000.00 with
Liberty’s contribution being $200,000. Thereafter, the matter is
subject to coverage litigation. This part of the file is being
handled by Tony Glenn.” Fireman’s Fund asserts that this
notation also supports its position that the parties did reserve
their rights to litigate subsequently.
Fireman’s Fund’s position is unpersuasive. This file note
does not reference Shaw, Fireman’s Fund, or any agreement between
Liberty Mutual and Fireman’s Fund with respect to the Doe
lawsuit. In addition, this note was written approximately ten
months after the Doe lawsuit was settled and several months after
Fireman’s Fund filed its intervention complaint with the district
16
court. These notes are simply file documentation from a periodic
file review, not evidence of a ten-month-old mutual agreement to
litigate.
d. Letter
The last item of evidence offered by Fireman’s Fund is a
September 2001 letter from Liberty Mutual to Fireman’s Fund. The
letter states, in part:
I have enclosed in connection with the reference
matter Liberty Mutual Fire Insurance Company Check No.
8018688 in the amount of $200,000 made payable to [Ms.
Doe and her attorneys].
Tender of this check by Liberty Mutual Fire
Insurance Company is not intended as nor should it be
construed as an admission by Liberty Mutual Fire
Insurance Company or any related companies of any
liability under Policy No. RG2-W31-004265-010 in
connection with the matters at issue. Said tender is
made subject to Liberty Mutual Fire Insurance Company’s
full and complete reservation of rights under the
above-reference policy and without prejudice to any of
the claims and/or defenses currently asserted or which
may be asserted by Liberty Mutual Fire Insurance
Company in the lawsuit styled and numbered Liberty
Mutual Fire Insurance Company v. Virtu Signature Square
Associates, LLC, et al., in the United States District
Court for the Southern District of Mississippi, Jackson
Division, Civil Action No. 3:01CV860WS.
Like the other items, this letter too fails to prove a
mutual agreement between Fireman’s Fund and Liberty Mutual. It
does not mention Fireman’s Fund or any mutual agreement between
Fireman’s Fund and Liberty Mutual. Neither does it purport to
reserve any of Liberty Mutual’s rights with respect to Fireman’s
17
Fund. Instead, it unilaterally confirms Liberty Mutual’s
reservation of rights under the Liberty Mutual Policy with
respect to its insureds and reserves all existing claims and
defenses with respect to the pending lawsuit between Liberty
Mutual and Virtu and Denham. It is therefore insufficient to
constitute evidence of a mutual agreement to litigate
subsequently.
III. CONCLUSION
Based on the applicable law and our extensive review of the
parties’ briefs and the record on appeal, we hold that the
district court did not err in ruling that Fireman’s Fund’s claims
were barred by the application of Mississippi’s voluntary payment
doctrine.
AFFIRMED.
18
