Estate of Bradley v. Royal Surplus Lines Insurance
2011 U.S. App. LEXIS 14737
| 5th Cir. | 2011Background
- Estate sued Indianola Health and Rehabilitation Center and others in Mississippi state court for negligence, mistreatment, and related claims arising during Bradley's nursing home residency (Feb 2000–May 2002).
- Jury awarded $1.5 million in compensatory damages and $10.5 million in punitive damages; final judgment entered; no appeal from that judgment.
- Mariner's excess insurers Lexington (first layer) and Royal and Lumbermens (second and third layers) were involved; Royal and Lumbermens declined to participate in defense or appellate bonding.
- Settlement extinguished all Bradley claims with Estate for $10.5 million; Lexington and Mariner paid $2.3 million; Royal and Lumbermens paid nothing; Mariner assigned its claims against Royal/Lumbermens to Estate.
- Estate filed a federal diversity action against Royal and Lumbermens (claims of bad-faith failure to defend/indemnify) seeking coverage for the underlying state action and settlement; district court granted summary judgment for insurers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Royal have a duty to defend in the underlying state action? | Estate argues Royal followed Lexington and had a defense duty. | Royal contends its duty to defend did not arise because underlying limits were not exhausted. | No defense duty; Royal's duty to defend never materialized. |
| Did Royal and Lumbermens have a duty to indemnify for the underlying judgment/settlement? | Estate argues both policies should indemnify for the damages within their periods. | Royal/Lumbermens contend indemnity is limited to damages within their policy periods and only after underlying limits are exhausted. | No indemnity duty; damages occurred outside Royal's and Lumbermens' policy periods. |
| Does Lexington’s medical professional liability endorsement define a single medical incident across Bradley's stay, affecting coverage periods? | Estate contends Bradley's injuries constitute a single incident spanning multiple policies. | Insurers argue injuries relevant to the verdict occurred within specific policy periods and not a single incident. | Lexington's endorsement limits indemnity to damages from incidents occurring during the policy period; Royal/Lumbermens could not indemnify for injuries outside their periods. |
Key Cases Cited
- Noxubee Cnty. Sch. Dist. v. United Nat'l Ins. Co., 883 So.2d 1159 (Miss. 2004) (policy-interpretation; duties to defend/indemnify distinct)
- Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So.2d 400 (Miss. 1997) (duty to defend based on complaint vs. policy coverage)
- Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d 714 (Miss. 2004) (duty to defend; coverage scope controls actions)
- Insituform Techs., Inc. v. Am. Home Assur. Co., 566 F.3d 274 (1st Cir. 2009) (follow-form concept; limitations and scope)
- United States Fid. & Guar. Co. v. Omnibank, 812 So.2d 196 (Miss. 2002) (defense obligation determined by policy and pleadings)
- A & S Trucking Co. v. First General Ins. Co., 578 So.2d 1212 (Miss. 1991) (indemnity not established where no coverage)
- Garcia v. Am. Physicians Ins. Exch., 876 S.W.2d 842 (Tex. 1994) (election of single incident in multiple policies)
- Ins. Co. of N. Am. v. Canal Indem. Co., 352 F.3d 254 (5th Cir. 2003) (Erie: use final decisions of state supreme court; follow-form discussions)