FEDERAL-MOGUL U.S. ASBESTOS PERSONAL INJURY TRUST, Plаintiff-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant, Continental Insurance Company, Defendant-Appellee.
No. 10-1290
United States Court of Appeals, Sixth Circuit
Argued: June 10, 2011. Decided and Filed: July 8, 2011.
645 F.3d 386
As Manderson points out, there is a strong presumption under
It is unclear whether Manderson has been awarded any costs. Although the final judgment stated CMC was “liable to [Manderson] for attorney‘s fees and costs incurred in the prosecution of his claim for maintenance and cure” (emphasis added), Manderson‘s application in that regard included only аttorney‘s fees. Any costs awarded in that instance, however, would relate only to Manderson‘s maintenance-and-cure claims, whereas an award under
Nevertheless, the court‘s explanation that Manderson did “not prevail on any of his other claims“, combined with the court‘s willingness to assume in the same order, arguendo, that CMC was the prevailing party, provides sufficient justification for its costs denial. Third Opinion, at 1. See In re Corrugated Container Antitrust Litigation, 756 F.2d 411, 418 (5th Cir.1985) (“The jury found for the plaintiffs in part and for the defendants in part. The trial court acted within its discretion” in denying costs to defendants.). This is even more so, in the light of our vacating or modifying a substantial part of the relief granted by the district court. Accordingly, there was no abuse of discretion.
III.
For the foregoing reasons, the judgment is AFFIRMED in part; MODIFIED in part; and VACATED in part; and this matter is REMANDED for entry of judgment consistent with this opinion.
Before: COLE, McKEAGUE, and GRIFFIN, Circuit Judges.
OPINION
COLE, Circuit Judge.
This is an insurance duty-to-defend case. Plaintiff-Appellant Federal-Mogul U.S. Asbestos Personal Injury Trust filed a complaint in the district court seeking declaratory relief. The Trust holds an umbrella insurance policy issued by Defendant-Appellee Continental Insurance Company and сlaims that pursuant to that policy, Continental is now required to defend the Trust against certain claims. Continental, contending it is under no duty to defend, moved to dismiss the complaint for failure to state a claim. The district court agreed and dismissed the complaint. Because the declaratory relief sought by the Trust is precluded by the facts alleged, we AFFIRM the judgment of the district court.
I. BACKGROUND
Federal-Mogul U.S. Asbestos Personal Injury Trust (“Trust“) is a trust created by the Chapter 11 bankruptcy plan of the Federal-Mogul Corporation. From 1965 to 1981, a division of the Federal-Mogul Corporation, the Vellumoid Company, manufactured and sold automotive products containing asbestos. Subsequently, numerous lawsuits were filed agаinst the Federal-Mogul Corporation for asbestos-related injuries arising from Vellumoid‘s products (“Vellumoid claims“). Federal-
The Trust holds three primary-level general insurance policies that cover it for both liability and defense costs arising out of the Vellumoid claims, one each from Travelers Indemnity Company, Globe Indemnity Company, and Liberty Mutual Insurance Company. The Trust alleged that the limits of the Travelers Policy have been exhausted, but the other two primary policies are currently defending the Trust against the Vellumoid claims. The policy held by the Trust at issue here is Continental‘s umbrella policy SRU 3196774 (“Policy“). The only primary policy covering the Vellumoid claims that is listed in the umbrella Policy‘s Underlying Insurance Schedule is the Travelers Policy.
The Trust filed this action seeking declаratory relief in the district court, claiming that the Policy requires Continental to defend the Trust against the Vellumoid claims. Continental moved to dismiss the complaint under
II. ANALYSIS
A. Standard of Review
We review the grant of a motion to dismiss under
B. Legal Framework
Bеcause this is a diversity case, we apply substantive state law. See Anton v. Nat‘l Union Fire Ins. Co., 634 F.3d 364, 367 (6th Cir.2011). The parties agree that Michigan law applies. An insurer‘s duty to defend is “defined by policy language,” Frankenmuth Mut. Ins. Co. v. Cont‘l Ins. Co., 450 Mich. 429, 537 N.W.2d 879, 880 (1995), and “the policy language is most important in our analysis,” Bosco v. Bauermeister, 456 Mich. 279, 571 N.W.2d 509, 513 (1997). Interpretation of the policy is a question of law, see Minges Creek, L.L.C. v. Royal Ins. Co. of Am., 442 F.3d 953, 956 (6th Cir.2006) (citing Schmalfeldt v. N. Pointe Ins. Co., 469 Mich. 422, 670 N.W.2d 651, 653 (2003)), and Michigan courts “look to the language of the insurance policy and interpret the terms therein in accordance with Michigan‘s well-established principles of contract construction,” Citizens Ins. Co. v. Pro-Seal Serv. Group, Inc., 477 Mich. 75, 730 N.W.2d 682, 685 (2007) (quoting Henderson v. State Farm Fire & Cas. Co., 460 Mich. 348, 596 N.W.2d 190, 193-94 (1999)). These principles include:
First, an insurance contract must be enforced in accordance with its terms. A court must not hold an insurance company liable for a risk that it did not assume. Second, a court should not create ambiguity in an insurance policy
C. Interpretation of the Policy
Both parties agree that the Policy is an umbrella policy. An umbrella policy serves two functions: “1) to provide for a higher limit of liability for those losses typically covered by liability insurance-general liability ...; [and] 2) to provide for some coverage of those less common losses not typically covered by liability insurance....” Am. Special Risk Ins. Co. v. A-Best Prods., Inc., 975 F.Supp. 1019, 1022 (N.D.Ohio) (quoting Garmany v. Mission Ins. Co., 785 F.2d 941, 948 (11th Cir.1986)), aff‘d, 166 F.3d 1213 (6th Cir. 1998). The first scenario is typicаlly referred to as vertical coverage and the latter as horizontal. Id.; see also Yaffe Cos. v. Great Am. Ins. Co., 499 F.3d 1182, 1188 (10th Cir.2007) (“Umbrella policies differ from standard excess policies in that they are designed to fill gaps in coverage both vertically (by providing excess coverage) and horizontally (by providing primary coverage).” (quoting Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1053 (1st Cir.1993))).
The Policy‘s Insuring Agreement states that Continental must “pay on behalf of the insured the ultimate net loss, in excess of the applicable underlying or retained limit, which the insured shall become obligated to pay....” (Policy, Dist. Ct. Docket No. 24, at 12.) “Ultimate net loss” is defined to exclude “all loss expenses and legal expenses (including attorney‘s fees ...),” and provides that “[e]xcept as set forth in thе Defense, Settlement, Supplementary Payments Insuring Agreement, this policy shall not apply to defense, investigation, or legal expenses covered by underlying insurance.” (Id.) The Defense, Settlement, Supplementary Payments Insuring Agreement (“DSSP“) provides:
When underlying insurance exists, the company shall have the right but not the obligation to participate at any time in the defense of any suit against the insured.
When an occurrence is not covered by the underlying insurance listed in the underlying insurance schedule or any other underlying insurance collectible by the insured, but covered by the terms of this policy, without regard to the retained limit contained herein, the company in addition to the applicable limits of liability shall: (a) defend any suit against the insured....
(Id.) The Travelers Policy is the only primary insurance policy covering the Vellumoid claims that is listed in the Policy‘s Underlying Insurance Schedule, (see Policy, Dist. Ct. Docket No. 24, at 9); the other two primary policies covering the Vellumoid claims, issued by Liberty Mutual and Globe Indemnity, are not listed in the schedulе.
The Trust argues that exhaustion of the Travelers Policy triggers Continental‘s duty to defend under the DSSP and another provision of the Policy, Condition 3. Each of these is discussed in turn.
Under the Policy‘s DSSP provision, Continental must defend any suit against the Trust “[w]hen an occurrence is not covered by the underlying insurance
In its complaint, the Trust alleged that the Vellumoid claims “fall within the scope of coverage,” (First Am. Compl., Dist. Ct. Docket No. 23, at 3), of not only the Travelers Policy, but also the other two primary insurance policies held by the Trust. The complaint further alleged that “[t]hose primary insurers are defending the Trust with respect to Vellumoid asbestos-related bodily injury claims.” (Id. at 3-4 (emphasis added).) These allegations are dispositive of the issue before us, for the plain language of the DSSP provides that Continental must defend only where an occurrence is not covered by the underlying insurance listed in the schedule (the Travelers Policy), “or any other underlying insurance collectible by the insured.” (Policy, Dist. Ct. Docket No. 24, at 12 (emphasis added).) The Trust‘s claim that exhaustion of only the Travelers Policy triggers Continental‘s duty to defend under the DSSP is untenable because it ignores the words “or any other underlying insurance collectible by the insured.”
A materially similar provision was construed in the same way by one of our sister circuits. In Castronovo v. National Union Fire Insurance Co., 571 F.3d 667, 671 (7th Cir.2009), the insured was covered by two underlying insurers, Travelers and Owners. The insured also held an umbrella policy, which listed only the Travelers Policy in the schedule of underlying insurance. Id. at 669. The insured brought an action against the umbrella insurer and made the same argument that the Trust makes here, that the exhaustion of the Travelers Policy triggered the umbrella insurer‘s duty to defend. Id. The Seventh Circuit rejected this argument because, just as here, the other underlying insurer was providing defense.2 Id. at 671-72.
Additionally, as noted by Continental, the Trust‘s interpretation would essentially read another provision, Condition 5, out of the policy. Condition 5 provides that “[i]f underlying insurance is exhausted by any accident or occurrence,” Continental must assume settlement or defense duties for “any proceeding аgainst the insured resulting from the same accident or occurrence.” (Policy, Dist. Ct. Docket No. 24,
The language of the DSSP is not ambiguous. For Continental‘s duty to defend to arise, the Vellumoid claims must not be covered by either Travelers or any other underlying insurance collectible by the Trust. The Trust alleged that the defense of those claims is currently covered by both Liberty Mutual and Globe Indemnity; therefore, Continental‘s duty to defend under the DSSP has not yet been triggered. For this reason, we need not reach the disputed issue оf whether the term “not covered” only refers to the scope of the underlying policy (Continental‘s position), or the collectability of the underlying policy (the Trust‘s position). Under either definition of the term, the requirements necessary to trigger Continental‘s duty to defend under the DSSP are not yet met.
The Trust also contends that because the Travelers Policy has been exhausted, Continental is required to “continue as underlying insurance” pursuant to Condition 3, and that such duty includes defending against the Vellumoid claims. Continental argues that Condition 3 concerns only its duty to indemnify and does not provide a duty to defend. The parties’ arguments thus primarily concern whether “continue as underlying insurance” includes defense duties or only speaks to coverage for settlements and judgments. But even assuming arguendo that the Trust is correct, and “continue as underlying insurance” requires Continental to defend as underlying insurance, the Trust‘s argument suffers from the same infirmity it did with respect to the DSSP provision: Condition 3‘s unambiguous language requires exhaustion of all underlying policies as a prerequisite to Continental‘s duty to “continue as underlying insurance.”
Condition 3 states, in relevant part, that “[w]here the aggregate limits of liability under said underlying policies of insurance are ... exhausted by reason of losses paid thereunder, this policy shall ... continue as underlying insurance.” (Policy, Dist. Ct. Docket No. 24, at 14.) Taken out of context, the words “said underlying policies” could be ambiguous. But undefined terms should be interpreted “in accordance with their commonly used meanings.” Henderson, 596 N.W.2d at 194. The word “said” is commonly understood to mean “named or mentioned before.” Oxford English Dictionary (online ver. May 2011). Considering Condition 3 as a whole crystallizes what “said underlying policies” refers to. Prior language in Condition 3 states that Continental‘s liability “shall оnly be for the ultimate net loss in excess of ... the underlying limits of liability of the underlying insurance policies as stated and described in the declarations and those of any underlying insurance collect-
The Trust‘s
Lastly, we find the Trust‘s argument that it is entitled to discovery on the parties’ intent unavailing. “Michigan permits the use of extrinsic evidence to dispose of a potential ambiguity, to prove the existence of a potential ambiguity, or to indicate the actual intent of the parties where an actual ambiguity exists.” Wonderland Shopping Ctr. Venture Ltd. P‘ship v. CDC Mortg. Capital Inc., 274 F.3d 1085, 1095 (6th Cir.2001). But courts cannot “look to extrinsic testimony to determine [parties‘] intent when the words used by them are clear and unambiguous and have a definite meaning.” Id. at 1095-96. The provisions relied upon by the Trust are unambiguous for the reasons explained above. Accordingly, extrinsic evidence is inadmissible and remand unnecessary.
III. CONCLUSION
Because the Trust has failed to state a claim upon which relief may be granted, we AFFIRM the district court‘s dismissal.
COLE
Circuit Judge