Tim Sosebee v. Steadfast Insurance Company
701 F.3d 1012
5th Cir.2012Background
- Steadfast appeals district court’s denial of its summary judgment and asks for judgment in its favor on coverage defense.
- Sosebee passengers sued Harvest-related parties for substantial injuries; Harvest insured by Steadfast and also by Zurich; Harvest later filed for Chapter 11 bankruptcy.
- A February 23, 2009 reservation-of-rights letter on Zurich letterhead (signed by Zurich) referenced Steadfast and cited the watercraft exclusion, stating Zurich would proceed with investigation subject to rights; letter described policy details and was meant to preserve Steadfast’s rights.
- Steadfast later learned, during discovery, that its own policy excluded coverage; Steadfast amended its answer to assert the watercraft exclusion in 2011.
- District court stayed related matters due to Harvest’s bankruptcy; Sosebee sought waiver of Steadfast’s noncoverage defense under Louisiana law; Steadfast argued no waiver occurred.
- Court must decide whether Steadfast’s reservation was valid and whether its conduct waived the noncoverage defense given the bankruptcy context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Steadfast’s reservation of rights effective? | Sosebee contends letter did not validly reserve Steadfast’s rights. | Steadfast argues the letter unambiguously reserved rights under the watercraft exclusion. | Yes; reservation of rights valid. |
| Did Steadfast waive its noncoverage defense by conduct? | Sosebee argues Steadfast’s conduct implied relinquishment of the exclusion. | Steadfast contends no intentional relinquishment and conduct not sufficiently inconsistent to cause reasonable belief of waiver. | No waiver; Steadfast did not relinquish its right. |
| Did Harvest’s bankruptcy and the automatic stay affect waiver analysis or enforcement? | Sosebee asserts stay and bankruptcy dynamics might impact waiver and direct action rights. | Steadfast argues stay for insurance proceeds not property of the estate and waiver analysis unaffected by stay. | Automatic stay not controlling for waiver; direct action rights proceed separate from stay. |
Key Cases Cited
- Steptore v. Masco Corp., 643 So. 2d 1213 (La. 1994) (waiver requires intent or conduct so inconsistent as to induce belief of relinquishment)
- Emery v. Progressive Cas. Ins. Co., 49 So. 3d 17 (La. App. Ct. 2010) (insurer's conduct and prejudice considerations in waiver)
- Duffy, FDIC v., 47 F.3d 146 (5th Cir. 1995) (insurer may waive defenses through conduct; reservation timing matters)
- Arceneaux v. Amstar Corp., 969 So. 2d 438 (La. 2007) (direct-action statute and prejudice/waiver framework; insuror’s conduct must prejudice insured)
- Steptore v. Masco Co., quoted and relied upon, 643 So. 2d 1213 (La. 1994) (waiver standard and protective application in conflict-of-interest contexts)