*1 preparation areas of tax or accounting
but
operated
that he had
a
prepara-
tax
STONEHENGE ENGINEERING COR
tion
business as
sideline
several
PORATION;
National
years.
special
While a
skill “usually re-
Corporation, Plaintiffs-Appellees,
quir[es]
education,
substantial
training or
v.
§
licensing,”
U.S.S.G.
appl.
3B1.3
note
training
“substantial
is
mandatory
not a
EMPLOYERS INSURANCE OF
prerequisite
special
making
skills ad-
WAUSAU, Defendant-
Hummer,
justment.”
ing,” nor are they on par with the special possessed by
skills “pilots, lawyers, doc-
tors, accountants, chemists, and demolition
experts.” § U.S.S.G. appl. 3B1.3 note 2.
The district court inappropriately con-
sidered the possessed skills by Gormley’s
coconspirators. It also erred in its inter-
pretation of guidelines by concluding
that tax preparation practiced by Gorm-
ley special is a skill. We reverse this
aspect of the Gormley case. did not pos- a special
sess skill within the meaning of §
U.S.S.G. 3B1.3.
V
We vacate Gormley’s sentence and re-
mand for resentencing by eliminating the
enhancement for the special use of a skill.
VACATEDAND REMANDED *2 Robbins, L.L.C.,
Bruner, & Colum- Powell Carolina, bia, Appellees. for ON South Mack, Elizabeth Francis M. S. BRIEF: Plowden, Brosnan, Richardson, Carpenter Robinson, PA., Columbia, South Car- & olina, Appellant. for TRAXLER, Judge, Circuit Before HAMILTON, and Judge, Senior Circuit GOODWIN, United States Joseph R. District of Judge for the Southern District sitting by designation. Virginia, West and part, in part, Affirmed vacated Senior published opinion. remanded opinion, HAMILTON wrote Judge joined. Judge Judge which GOODWIN separate opinion TRAXLER wrote dissenting part. concurring part OPINION HAMILTON, Judge: Senior Circuit contrac- general corporately Two related tors, Corporation Stonehenge Engineering (col- Stonehenge Corporation and National this diversi- Stonehenge) brought lectively Insurance against Employers ty action indemnification, (Wausau) seeking commer- three successive standard under issued liability policies general cial amount Sto- Stonehenge, for settle a lawsuit nehenge construction defective alleging Sto- complaint, condominium units. its claims bad faith alleged two also nehenge faith Wausau, asserting bad one defend, the other indemnify and refusal to faith refusal to settle. bad alleging Stonehenge’s granted The district on its summary judgment motion for claim, i.e., its indemnifi- of contract breach claim, motion granted Wausau’s cation Stonehenge’s judgment on summary for appeal, On faith claims. two bad of Sto- grant the district court’s challenges summary for motion nehenge’s Carpenter, Elford ARGUED: Charles claim. of contract breach Richardson, Plowden, & on the Carpenter Jr., court’s district Carolina, appeals the cross Columbia, Robinson, P.A., South summary Bruner, Wausau’s motion grant Livingston James Appellant. judgment on the two bad faith claims. which in turn copy sent a to Stonehenge on assigns also error to the dis- September 1990. Stonehenge investi- trict court’s refusal to award it interest for gated alleged defects identified in the the period of time between the settlement Moore Report responded in writing to of the underlying lawsuit and the date of report on November 1990. In its *3 entry on its breach of response, Stonehenge completely denied contract claim. responsibility for alleged defects on the basis that it constructed III in Phase
We affirm the district court all re- accordance with the building code in effect spects, except por- we vacate the damage Lexington County at the time of con- tion of the favor of Stone- struction, and on the basis that the dam- henge and remand for of judgment age identified in the Report in a Moore specified lesser amount. result-
ed from lack of owner maintenance owner alteration of certain portions and/or I. of Phase III buildings. Stonehenge admit- During mid-1980s, early ted the existence aof “riser” code violation henge constructed Phase III of a condo- on the front of particular Phase III minium project known as “Yacht Cove” in building, but attributed its existence to Lexington County, South Carolina on the settlement of the right adja- corner of the Murray. shores Lake Phase III con- cent sidewalk. sisted of buildings, nineteen totaling 130 residential units. Thirty-two of the units 16, 1992, April On the Owners Associa- units, were known as “villa” while the re- tion Stonehenge by notified letter that if a maining ninety-eight units were known as representative of Stonehenge did not con- “townhouse” units. Stonehenge completed tact its attorney days, within ten it would construction of Phase III in March 1987. assume that Stonehenge did not intend to 1989, voluntarily
In approximately address the defects the owners of identified residential units the Moore Report, constructed in thus requiring Phase III began experiencing problems take legal with action Stonehenge. Phase The III buildings. example, For the owners record does not disclose whether Stone- siding, noticed buckled cracks in letter, founda- responded to this but shortly tions, sagging result, and balconies. As a it, receiving after Stonehenge notified Ma- (the the Yacht Cove Owners Association ryland (Ma- Casualty Insurance Company Association) Owners hired G. Allen Moore ryland Casualty) of the Owners Associa- (Moore), a private building inspector, to tion’s Maryland claims. Casualty insured inspect the buildings at issue and prepare Stonehenge under a general commercial report. 19, 1990, On March Moore sub- liability 1,1986 policy July from to Novem- (the mitted report his Report) Moore 1, ber 1987. Of relevance appeal, to this the Owners Association. The Moore Re- several other general liability insurance port balconies, identified defects in the successively carriers insured Stonehenge roofs, foundations, walls, basement porch- under commercial general liability policies es, decks, handrails, stairs, pickets, siding, 1, 1, from November 1987 until November flashing of Phase III buildings. 1995. Casualty Aetna Surety Compa- 1996, the fall of Moore also identified de- (Aetna) ny insured from No- fects in subflooring of Phase III build- 1, 1, vember 1987 to November 1991. ings. (Home) Home Insurance Company insured 1,1991
The Owners Association from November subsequently to No- 1, sent a copy of the Report Finally, Moore vember Wausau insured developer Cove, of Yacht Equitable Real Stonehenge under three annual standard Inc., Estate Investment Management, general commercial liability policies for the ful, and workmanlike manner. diligent, Novem- 1992 to November period time Policies).1 mil- sought 1.27 (the Association Owners Three Wausau ber damages, with the lion bulk dollars As- receiving notice Owners After constituting the amount figure Stonehenge, Ma- claims sociation’s would be nec- Association believed Owners III investigated Phase ryland every the exterior of essary to reside rights under a reservation buildings replace light- in Phase III and building from Sto- information additional requested unit. every villa weight concrete floors Casualty conducted Maryland nehenge. revealed, inter investigation that By March Owners Association an on-site alia, lightweight fees problems ongoing some could ill afford units, primarily villa taken attorneys, floors in two who by its had generated concrete vinyl basis, underneath kitchen area rather hourly-rate the case on *4 29, 1992, Stone- September On a basis. As flooring.2 contingency-fee than on a written re- an extensive henge result, submitted to Association the Owners offered Maryland $400,- request to a sponse against settle its suit response, In its information. accept for more to the “drop dead” date 000 with notice of that its Stonehenge stated first 11, Stonehenge re- by April 1996. offer buildings was Phase III with any problems offer. fused the settlement in Report Septem- the Moore receipt its the notice of did not receive ber 1990. against Stone- suit Owners Association’s of the Own- notified Aetna until late March claims henge presuit or its 21, claims on October ers Association’s just after received in- Casualty, Aetna Maryland 1992. Like of a to By copy offer.3 letter a reservation the claims under vestigated 12, 1996, the claims ad- July Aetna dated rights. handling Stonehenge’s juster at Wausau claim, Gause, Stone- informed Charles 6,1993, the Owners Association April On to position not in a that Wausau was the Court Stonehenge in against filed suit any to settlement without contribute County, Lexington Pleas of Common Damage’ ‘Property “Evidence of following: that alleged The suit South Carolina. place which took by an ‘Occurrence’ caused buildings, III constructing Phase case law period or during policy im- our its negligent and breached henge was re- way which some in a care- South Carolina warranty perform to work plied exists, provides fer indemnification which Wausau Policies of the Three 1.Each discretion, and, investigate right to in its [Sto- those that "will sums that Wausau or suit and settle claim any occurrence obligated pay as nehenge] legally becomes may that result. damage’ to 'property ... damages because of 365, 422, (J.A. applies.” this insurance which lightweight concrete floor installed 2. The 490). property applies to that it Each states system part flooring unit was every villa property is caused damage only if the twenty-four spaced trusses floor that included place takes “occurrence” ply- five-eighth center inch inches on poli- coverage territory and occurs one- A one and spanning the trusses. wood cy period. was lightweight layer of concrete half inch by the then top plywood is defined and poured term "occurrence” on then accident, parquet carpet, vinyl, in- wood as or padding Policies "an and Three depending exposure top repeated flooring placed cluding or was continuous lightweight concrete type room. The general condi- substantially the same harmful acting as a 375, 432, 501). than no function other (J.A. floor had defines Each tions.” "Physical sound barrier. damage” In- "property the term including tangible property, all result- jury to (J.A. attempt Stonehenge makes some property.” Although ing 3. of use of loss 433, 502). that it notified provides that Wau- to assert Finally, each in its brief earlier, contains evidence duty record right to defend and have the sau would support assertion. seeking its any suit quires us to contribute to a settlement.”4 The state trial reviewed the Set- (J.A. 318). Agreement tlement and found that under facts the Settlement later, yearA with a trial set for March Agreement a “fair equitable reso- 17, 1997 rapidly approaching, Wausau was (J.A. 29). lution of the matter.” Thereaf- again participate asked in settlement ter, the state trial judge approved the discussions, but Wausau refused for the Agreement Settlement adopted it as given prior same reason before. Just his order. trial and after trial preparation, extensive willing Owners Association was to ac- 28, 1997, May On Stonehenge filed the cept to settle its million suit. $1.27 present diversity Wausau, action Maryland Casualty agreed to contribute alleging three counts in connection with $100,000, $300,- agreed Aetna to contribute the Three Wausau Policies. Count I al- $75,- and Home to contribute leged contract, breach of II alleged Count figures represented These indemnify defend, bad faith refusal to amount each carrier believed constituted and Count III alleged bad faith refusal to pro-rata its share of proposed settle- settle. Stonehenge sought figure. ment damages, interest, pre-judgment punitive 17, 1997, On March Stonehenge entered fees, damages, attorney’s and costs. Wau- *5 (the into a agreement settlement Settle- answered, sau denying complaint’s ma- Agreement) ment with the Owners Associ- allegations. terial ation. In accordance with the Settlement parties The filed cross motions for sum- Agreement, each Stonehenge entity con- mary judgment on the breach of contract $750,000 judgment fessed for in favor of 20, claim. February On the district the Owners April Association on 1997. granted court Stonehenge’s motion for In accordance with the amounts each car- summary judgment on the breach of con- agreed $625,- rier to contribute toward the tract claim and denied Wausau’s cross mo- figure, Maryland settlement tion for summary judgment on the same $100,000 a made payment, cash Aetna claim. subsequently Wausau filed a mo- $300,000 made a payment, cash and Home tion summary judgment on Stone- made a payment. cash This left a (bad henge’s remaining two claims faith balance of still owed to the Own- refusal to indemnify and defend and bad pursuant ers Association to the Settlement settle), faith refusal to which the district Agreement. Although Wausau had suffi- 5,1998. granted court on June cient notice and opportunity to participate in the discussions that led to the Settle- parties The stipulated that the amount ment Agreement, Wausau par- refused to of Wausau’s allocated contribution towards ticipate. settlement reached with Agreement Settlement provid- also the Owners Association was a matter for ed that the Owners Association could not the district court to decide. After the par- execute the confession of judgment issue, ties submitted memoranda on the against National Stonehenge Corporation. the district court allocated damages Furthermore, Stonehenge Engineering $190,500, Wausau in the amount of Corporation would any be liable for $750,000. bal- representing 25.4% of In mak- ance due on the confession of it ing amount, its determination as to this signed after it had fully exhausted or pur- district court trigger found that the period sued rights its indemnification under the Three Wausau Poli- Wausau. 17, 1997, cies ended on March the date Notably, appear Wausau dispute does not sau Stonehenge’s faulty Policies as a result of buildings Phase III suffered buildings early construction of those in the policy periods of the Three Wau- mid-1980s. in its favor on its breach Association the Owners Stonehenge and 14,1998). (August claim Fur- contract Agreement. the Settlement executed ther, stated: the district II. mil- more than alleged $1.3 Yacht Cove and continues to argued below from construc- resulting lion obligated it is not argue appeal suit, but underlying tion defects of the Three Wausau under the terms its claim for to settle instead indemnify Policies future $750,000, all thereby capping judgment be- of the confessions of portion con- alleged damages arising out uncontradicted contains cause the record The court finds that defects. struction Stonehenge had no- showing that evidence on actual although not based figure, pre-suit Association’s tice of the Owners collusive- entered into damages, was not respective effective prior claims a fraudulently and is ly Policies and the Three Wausau dates of allo- to calculate the upon which amount prior lawsuit resulting had notice case. settle- in the instant This cation and third dates of the second the effective ac- necessarily took into ment amount argu- support of its Policies. litigation and uncertainty of count ment, upon the known loss relies the case to a expense prosecuting doctrine, affirma- law which is common Moreover, approxi- roughly verdict. of policy claim insured’s tive defense negotiations. settlement mated earlier See, Liab. e.g., United States coverage. addition, under- trial Selman, 70 F.3d 690-91 Ins. Co. case reviewed lying Cir.1995) (1st law (applying Massachusetts it to be specifically found agreement and majority of courts recognizing that Finally, resolution. equitable a fair and affir- as an known loss doctrine treat negotiated agree- court’s use of *6 coverage); 7 to a claim of mative defense promotes underlying suit ment Segalla, Thomas F. Couch Lee R. Russ & of settle- public policy encouraging (3d & § ed. 1996 102:8 on Insurance ment. basis, seeks Supp.1998). On entry of omitted). district court’s (J.A. 191) (footnote reversal of the The district Stonehenge on Stone- in favor of judgment of judgment favor entered final court contract claim. henge’s breach of claim of contract Stonehenge on its breach 14,1998. August on when is Summary judgment appropriate fact, material issue of genuine there is no alter or a motion to Stonehenge filed judg moving party entitled filed a mo- and Wausau judgment amend law. Fed.R.Civ.P. a matter of See ment as The district for reconsideration. tion Catrett, 56(c); 477 U.S. Corp. v. Celotex parties Both motions. court denied both 2548, 265 317, 322, 91 L.Ed.2d 106 S.Ct. appeals the timely noted appeals. (1986). the district review de We novo in favor of district court’s motion Stonehenge’s of grant court’s breach of contract Stonehenge on the of of Wau in the face summary judgment the district Stonehenge appeals claim. doctrine loss of known sau’s assertion of Wau- favor entry of court’s defense, evi viewing the as an affirmative faith claims. Further- sau on the two bad to Wau most light favorable dence in more, the district Stonehenge contends Inc., Liberty Lobby, See Anderson sau. it interest refusing to award erred 2505, 242, 255, 91 106 S.Ct. 477 U.S. statutory rate at the South Carolina Finkle, (1986); Myers v. 950 L.Ed.2d 2Ó2 annum, S.C. per of 14% see judgments (4th Cir.1991). 165, 167 F.2d (Law. 1987), Co-op. §Ann. 34-31-20 Code stated, loss the known often As most judg- of the confessions the date from juris- law insurance 1997) in common 21, doctrine until the date (April ment 302
prudence
excludes
of a loss to the
parties
agreement
Because the
are
insured of which the insured had actual
that South Carolina’s substantive law con
issue,
knowledge prior
policy’s
effective
trols our resolution of this
we as
Furthermore,
substantially
arguendo.
date or knew was
certain to
sume the same
United,
See,
ap
because no
Carolina
e.g.,
occur.
States Liab. Ins.
South
case exists
Co.,
plying
addressing
or
the known
(applying
henge actually floors, in concrete lightweight As for the by claimed damage property liable for the 1992, thirty-two lightweight four of time one or Association at the the Owners in late 1985 concrete floors constructed Policies took of the Three Wausau more had failed early the villa units liability was sub- or knew that such effect Specifically, light- replaced. and were certain to occur. stantially up high traf- weight concrete broke Moreover, As fact that the Owners slightly up the other fic areas broke filed suit sociation that Stone- areas. The record establishes 1993, the effective dates of prior to April problems of the with knowledge had Policies, and third does the second lightweight con-concrete regard known loss application of the trigger not late Au- in these four villa units floors In at trial prevail order to doctrine. early September 1992 and further gust or construction negligent its claim of potential problems knew of the obvious would the Owners Association Stonehenge, remaining twenty-eight villa units. following by preponder have to show part on the of Stone- knowledge Such (1) duty of care of the evidence: ance however, henge, equate does not knowl- Stonehenge to the Owners Associ owed prior to the effective dates of the edge (2) ation; by a duty a breach of that imposition Policies that Three Wausau (3) omission; act or negligent of the liability upon for construction from the breach. resulting proximately in all of the lightweight concrete floors Ins. Co. v. James C. See South Carolina oc- substantially certain to villa units was 171, Co., 348 S.E.2d & 290 S.C. Greene First, Association’s ex- cur. the Owners (1986). prevail at trial order inspect the build- did not even pert witness implied claim breach of warran upon its spring of Phase III until ings careful, diligent, in a ty perform work of the after the effective dates which is manner, the Owners As and workmanlike Second, prior to Policies. Three Wausau prove would have to that Stone sociation witnesses in expert depositions III construct Phase build henge did not begin not until mid- which did careful, diligent, in a and workmanlike ings light-weight possibility Lum Kennedy v. Columbia manner. See was product was a defective concrete itself Co., 335, 384 Mfg. 299 S.C. S.E.2d ber & as the sole cause not ruled out (1989). 730, 736 If concrete itself cracking. lightweight the Moore Stonehenge’s response and thus caused product, a defective *8 the defects Report, Stonehenge attributed the Association’s cracking, the Owners owner mainte- inadequate identified warranty implied of negligence and breach of the third-party alteration nance and prevail. could not claims exception of With the original structures. sum, carry its bur- In Wausau failed lightweight the con- the deterioration of evidence to es- proffering sufficient units, den of inadequate in the villa crete floors defense of the affirmative tablish third-party altera- owner maintenance and against Stonehenge’s loss doctrine known original structures constituted tion of claim.6 of contract prior to the breach sufficiently viable defenses the affirma- opportunity to assert opposing waived its Wausau’s assertion In addition to failing merits, district court tive defense before the loss doctrine on of the known answer. Because the defense in its alternatively argues to assert that 304 Harden, (stating according
III.
808
that
to Joe
liability
gen-
under
standard commercial
alternatively seeks reversal of
liability
inju-
policy
triggered
eral
is
when
in
the district court’s
ry
property
itself occurs and “can
Stonehenge’s
favor of
policy
continue over several
thus
periods,
breach of contract claim on
basis
than one
triggering
policy”).
more
Ac-
“occurrence,”
as that term is defined in
cording
Supreme
to the South Carolina
general liability poli
commercial
standard
Court,
theory
will
coverage
“this
allow
cies such as the Three Wausau Policies at
among
the allocation of risk
when
insurers
here,
place during
issue
did not take
than
in
policy
more
one insurance
effect
time
of the Three
Policies
progressive damage.”
Joe
Therefore,
in
were
force.
Wausau con
Harden,
305 Thus, id. at 807. duty damage. indemni- See discov- to Federated’s versed as case ery remanded the the contamination coincided with the id. at 813. We of fy. See when the damage. court to determine of the completion to the district adjoining prop- reached the contamination Spartan lay To read Petroleum as thus, an “oc- whether there was erty, and ing discovery down a blanket rule that of policy period. See during currence” damage trigger period of cover ends the id. at in a age progressive property ease would remand, aid the court on we To district completely undercut the thrust of the allocating method of set out in Supreme opinion South Carolina Court’s policy applied: in the event Obviously, Joe Harden. under some cir liability propor- be a Federated’s “would cumstances, in a defective especially equal the ... to the tion of case, of construction deterioration or dam policy policies the Federated or cov- period age property at issue can continue ered, period of dam- divided the total despite discovery existing to occur de explained further ages.” Id. at 813. We damage. Critically, present fects or damages “runs period that the total appear dispute Wausau does not time the con- injury-in-fact from the —the buildings that III to dete Phase continued [adjacent] migrated tamination onto of the riorate the effective dates damage com- property [was] —‘until Three Policies as a result of Wausau Sto Harden, 486 plete.’” (quoting Id. Joe nehenge’s practices. defective construction 91). at then stated that “[w]e S.E.2d We Therefore, law, under South Carolina case ‘complete’ take the time the was place pur has taken “occurrence” discovered, which in be the time it was We, the Three Policies. poses of Wausau case is 1990.” Id. therefore, liability portion affirm quoted this last upon Wausau seizes judgment upon court’s district Spartan statement Petroleum divin- Stonehenge’s summary judg motion for interpreted Joe Harden ing that we have ment on its breach of contract claim. period of cover- provide trigger that the property damage in a case age progressive IV. always injury-in-fact ends when is discov- Thus, contends, trigger ered. uphold that if we its Wausau contends case coverage present period Stonehenge’s breach of contract liability on “when the ended at the latest claim, court’s we must vacate the district discovered, Yacht was not damage at Cove judgment and remand for recalculation (Wausau Br. at the date of settlement.” in indemni- the amount owes 21). first regard, In this ar- fication. court’s use of the gues our de- the district completely misconstrues respect judgment figure confessions of Spartan cision in Petroleum share, pro-rata instead of period calculating its trigger to when termination of the $475,000 figure actually paid by using the progres- in a Carolina South carriers, holding in violated our occurs. After the other property damage sive case (4th Cir.1984), Cox, F.2d 421 Pe- Hitt v. Spartan the entire decision reading therefore, troleum, amounted to an abuse with the clear under- one is left Alternatively, court’s discretion. our reference to “the time district standing ex- argues that sufficient evidence discovered” was Wausau damage] [when Petroleum, figure ists to establish Spartan specific. case collusion, and of fraud and immediately product af- Apparently, at 813. F.3d therefore, the basis for cannot serve as the contamination was discovered ter amount of indemnification establishing the adjacent property, the contamination Stonehenge. it owes stopping any further up, was cleaned thus *10 Although respect we find no evidence to National Cor- collusion, or suggestive the record of fraud poration. despite We reach this conclusion agree we with Wausau that the district finding the district court’s that the Settle- $750,000 confessions of court’s use of the Agreement ment between Owners As- $475,000 judgment figure instead sociation and was not actually paid by the other carriers figure product of fraud or Hitt collusion. does Hitt, holding conflicts with our in Hitt. In appear require presence not to we held that a conditional settlement fraud or collusion between the insured and whereby the party agreed insured to injured party prevent order to full $150,000 injured party an additional in indemnification on a conditional settlement liability if the carrier was held expected when the insured never to pay obligated indemnify to was unreason the conditional amount out of its own re- able, therefore, invalid because “the sources. negotiating parties longer adverse ha[d] presump interests and their settlement is Stonehenge Corpora- Unlike National tively unreasonable.” Id. at 426. The ra tion, the Agreement pro- Settlement did our holding tionale for Hitt is that an vide that the Owners Association could insured should not be allowed to in seek execute on judgment the confession of demnity liability from a carrier signed by Stonehenge Engineering Corpo- expect “amounts that the insured does not ration if Stonehenge Engineering was not out its own resources.” Id. obtaining successful indemnification added). (emphasis recovery To allow full support argument from Wausau. of its liability carrier “would set a Stonehenge Engineering Corporation precedent allowing any insured left to de pay any knew that it would never portion only fend himself not to settle at a reason judgment balance of its confessed amount, away able but to give an addition out of its own resources when it entered al amount up liability limit of the Agreement, into the Settlement policy conditional on a successful indemni directs this court to a letter April dated ty company.” suit the insurance 1996, approximately year before the exe- Id. cution of the Agreement. Settlement The present all of evidence letter, corporate attorney from the for Sto- points to the conclusion that Stonehenge nehenge Engineering Corporation Engineering Corporation and National adjuster, states: Stonehenge Corporation never intended to [Pjlease be advised that En- pay the any Owners Association excess gineering Corporation is financially not respective their judgment confessions of able to contribute to a settlement of this respect not covered With Wausau. Corporation case. This has been a shell Stonehenge, National under express terms corporation years for over five for rea- of the Settlement Agreement, completely totally sons that are unrelated this or dissent, overlooked the Owners As- litigation. other Asso- [Owners sociation not to file or execute finally to have gotten ciation] seem[s] judgment confession of signed by Na- message judgment the idea of a tional Stonehenge Corporation. Clearly, against Stonehenge Engineering Corpo- circumstance, in this nearly scary ration is not so as the Corporation not expect pay any did be; therefore, plaintiffs would like it to amount of the balance due on its confes- plaintiffs altered their settlement de- sion of out of its own resources Nonetheless, accordingly. mands direct contravention our holding Therefore, Hitt, Hitt. want to reiterate that Stonehenge under the district is not court abused its in a by using position funding discretion to contribute to the figure confession of settlement.... *11 810). (J.A. entry judgment the dis- of their favor in the This letter before $120,650, representing also directs this amount of of trict court below. Wausau 25.4% $475,000.7 in a foot- following court to the statement denying in the district court’s order note to alter or amend Stonehenge’s motion V.
judgment: appeal, Stonehenge its cross contends not to Association] Owners [The in refusing the district court erred execute Confession award it interest at the South Carolina Although execution is al- Stonehenge. statutory judgments rate for of per 14% Engineering, against Stonehenge lowed annum, see S.C.Code § Ann. 34-31-20 entity probably judgment proof, is that (Law. 1987), from the of the Co-op. date by certainly understood consideration 1997) of judgment (April confessions counsel, Engineering’s] [Stonehenge entry judgment until the date of the on Owners Associa- represented [the who (August its breach of contract claim suit and was underlying tion] 1998). Stonehenge requested such inter- to this information. privy post judgment est its motion to alter or (J.A. 1). 198 n. judgment. denying amend its order agree with Wausau district We or amend Stonehenge’s motion to alter using its court abused discretion judgment, the district court stated: $750,000 figure apportioning as basis The record is devoid of evidence pro-rata Wausau’s share plaintiffs that either of the can be held by Stonehenge Engineering Corpo- caused ,post-[confessions judgment liable for of] First, ration. the letter to the Wausau underlying interest virtue of the [con- adjuster compelling evidence judgment. contrary, To the of] fessions Corporation never ex- henge Engineering Agreement [the Settlement between pected pay a dime of the balance of its plaintiffs and the Association] Owners from its own re- confessed clearly provides that Owners Asso- [the Second, sources. the record is void of attempt can to collect ciation] contradictory on In- evidence the issue. Stonehenge Engineering only the defi- deed, the district court itself all but ex- ciency remaining under the Confession pressly recognized Stonehenge Engi- Agree- Judgment. Settlement pay a dime of neering expected never provision ment makes no for the recov- judgment out the balance of its confessed ery of interest. of its own resources. (J.A. 198). Because neither National fully agree with the district court’s We nor Corporation Engineering reasoning refusing to award Corporation expected ever the bal- of the confessed interest from the date respective ance due their confessions Hitt counsels that we vacate judgments to the date judgment, Stonehenge’s judgment against Wausau damage portion of the district court’s We, therefore, claim. companies in favor of these two breach of contract point.8 court on this remand this case to the district court affirm the district equitable figure has Contrary position taken the dis- is fair sent, bearing absolutely the fact that the district court and on the issue of whether state trial both found the set- own intended to out of its equitable figure a fair and tlement to be excess of the resources the confessions litigation amount to settle the between the judgment. Stonehenge is com- Owners Association and grant of us, 8. We also affirm the district court's pletely question irrelevant to the before summary judgment on motion for Wausau’s i.e., indemnification is due Stone- how much claims, Stonehenge's two bad faith the other henge under the Three Wausau Policies. cross-appeal. subjects Stonehenge's Our specifically, the fact that the More In- Maryland Casualty VI. 7/1/86'—11/1/87 Company surance conclusion, liability por- *12 we affirm the Casualty Aetna and 11/1/87-—-11/1/91 against Wausau with judgment tion of the Surety Company of contract Stonehenge’s breach respect to Home Insurance Com- however, vacate, damage the 11/1/91—11/1/92 claim. We pany judgment and remand portion of that Stonehenge in favor of entry of of Employers Insurance 11/1/92—11/1/95 $120,650. affirm the
in
amount of
We
the
refusal
to award Stone-
district court’s
companies
These insurance
were notified
the date of the con-
henge interest from
lawsuit,
except
par-
and all
of the
entry
the
the
judgments to
date of
fessed
Stonehenge.
of
ticipated
defense
on
judgment against Wausau
Stone-
of
repeated requests, Wausau re-
Despite
Finally,
of contract claim.
henge’s breach
in-
Stonehenge
to defend
or to be
fused
judg-
court’s
of
we affirm the district
in
negotiations.
volved
Stonehenge’s
on
ment
favor of Wausau
trial,
day
and the
On
two
faith claims.
bad
Association reached a settlement
Owners
PART,
IN
IN
AFFIRMED
VACATED
companies,
which all
insurance
PART, AND REMANDED
Wausau,
general
The
except
participated.
open
were
on the record in
placed
terms
TRAXLER,
Judge, concurring
Circuit
part
and in relevant
were as follows:
part
dissenting
part:
Stonehenge Engineering Corporation and
II,
I,
III,
I
and V of
agree with Parts
agreed
Stonehenge Corporation
majority
respectfully have
opinion,
but
Associ-
to confess
Owners
opinion
a
as to the amount
difference
$750,000.
ation
the amount
With
Wausau owes as discussed in Part
IV.
payments,
attorney
to the
regard
pre-
Cox,
believe Hitt
majority,
Unlike the
senting the settlement told the court:
(4th Cir.1984),
inapplicable
737 F.2d
position
also
of one
We
believe
therefore,
I dissent.
carrier[,] Employer’s Mutual of Wau-
sau[,]
coverage
and their
denial of
I.
Stonehenge in a
placed
defendants has
precarious position. Three
Stone-
defects in
experiencing
After
substantial
henge’s liability insurance carriers have
the construction of the “Yacht Cove” con-
pay
the sum of
plaintiff
Yacht
project,
dominium
Cove Owners
as follows: The Aetna
(“Owners Association”) sued
Association
$300,000;
Company
pay
Insurance
will
contractors,
general
National Stone-
Maryland
Company
Insurance
will
henge Corporation
Stonehenge Engi-
$100,000;
and the Home Insurance
neering Corporation (collectively “Stone-
$75,000.
Company
will
in state court and asserted actual
henge”),
payment
in excess of
million as well as When the
is made to
$1.3
right
punitive damages.
plaintiff,
that will be credited
Judgment
leaving a
began
April
to the condominiums
the Confession of
Judgment
1985 and continued until March
balance on
Confession
(and
$275,000.
proved)
give
later
will
contended
existed for a substantial
three insurance carriers who are con-
insurance
portion
damage period.
tributing
The break-
to the resolution of the case
coverage
upon
down of
was as follows:
release from the Yacht Cove claim
upon by
review of the evidence relied
are without merit.
they
support
of these claims reveals
pay-
summary judgment
and the
as to
receiving
payments,
Stonehenge’s
these
claim,
agreed to made to
ments have been
be
breach of contract
the district court
days
today:
within 30
from
plaintiff
granted
partial
summary
Wausau,
March 17th.
judgment against
finding that
parties
stip-
did exist. The
then
presenta-
24. At the conclusion of the
J.A.
appropriate
ulated that it was
for the dis-
tion,
specific
trial
made a
the state
trict court to allocate the amount of dam-
based
his review of the file
finding,
ages
doing,
owed Wausau.
In so
supplied by the
and the documentation
specific finding
district court made a
that the settlement was “a fair and
parties,
*13
$750,000
settlement “was not entered
equitable resolution of the matter.”
J.A.
collusively
into
and fraudulently and [was]
29.
amount
proper
upon which to calculate
The formal settlement documents were
the allocation.” J.A. 185.
signed memorializing
presen-
the oral
later
open
tation made in
court.
addition to
grant
summary
We review the
judg
above, the
the terms related
Owners Asso-
novo,
ment to
de
viewing
signed a covenant not to file or
ciation
light
evidence in the
most favorable to
Judgment
execute on the Confession of
Higgins
E.I.
Wausau. See
v.
DuPont de
Stonehenge Corporation
against
(4th
Co.,
1162,
Nemours &
863 F.2d
1167
unless,
subsequent
litigation,
“Wausau Cir.1988).
regard to the
With
allocation
successfully prove[d]
a[e]ourt
com-
court,we
by the
district
review
jurisdiction
that either
petent
determine^]
legal
the district court’s
determinations de
[Stonehenge
or
Engineering]
[National novo, Neathery
see
v.
Overseas Mari
M/V
Stonehenge] were not named insureds or
(4th
Cir.1983),
2
lyn, 700 F.2d
143 n.
additional named insureds under
error,
clear
findings
and its factual
for
see
policies
from
[three]
[issued
of insurance
Lange,
v.
717 F.2d
Bonds Mortensen &
recovery
or and
11/1/95]
[sic]
11/1/92
(4th Cir.1983).
123, 125
(em-
is made
Wausau.” J.A. 342
phasis
original).
III.
gave
The Owners Association
no such
Stonehenge Engineering,
covenant to
but
A.
agree
judgment
did
not to execute on the
impracticality
Because of the
of deter-
against Stonehenge Engineering until'all
mining
the actual amount of
payment
efforts to secure
from Wausau
during
period,
occurred
each insurance
completed
only
had been
and then
to the
parties proposed various methods of allo-
unpaid
extent the
was left
after
might
expected,
cation. As
be
the action
In order to
Wausau.
judge
proposal
submitted a
to the district
protect Stonehenge Engineering,
Own-
$33,125,
as little as
which would
agreed not to
ers Association
settle
theory
while
submitted a
Wausau for an amount less than what Sto-
$259,575.
justify
Only
much as
two
under the
nehenge Engineering would owe
judge
cases were cited to
district
—Joe
ap-
Judgment,
prior
Confession of
without
Builders,
Inc. v. Aetna
Harden
Stonehenge Engineering.
from
proval
Co.,
Surety
&
326
judge had also settlement, the would never be ter insured Third, $750,- equitable. fair the to be and another dollar from obligated to contribute which figure approximated amounts Thus, underlying the pocket. its own ne- prior been discussed settlement had of Hitt was that the insured had premise Association gotiations between the Owners fully extinguished personal exposure its lastly, the district Stonehenge. and And $350,000 and, through the settlement for out that the use of the set- judge pointed therefore, by guaran- nothing had lose tlement amount would result Wausau money teeing injured party the more so roughly in making payment a money only long as the additional would be payments previously proportion against if suit the paid the indemnification by upon carriers the made the other based company produced insurance it. years each had insured Stone- number obvious difference the case be- each these reasons henge. Because one of Stonehenge and fore us is that National sound, I the district uphold is would the Stonehenge Engineering from outset finding court’s as the liability for personal of the settlement had appropriate the damages basis for The Con- the entire settlement amount. point process. in the allocation starting Judgment was a valid fession Stonehenge B. against both Stonehenge Engineering. National Stone- the district court’s rationale Rejecting judg- obligated would be allocating damages based set- contingencies if de- personally ment 750,000, majority tlement amount of agreement in the settlement came scribed position that the basis instead takes pass. $475,000, for allocation of is already paid by represents which the total Stonehenge Engineering, Con- For companies. the other three insurance very as a real Judgment fession of stands disagree for several reasons. liability Stonehenge Engineering as well. judg- First, from execution of the rejection majority is not immune by against if the action Wausau fails or amount is based ment Judgment Confession of (4th Cir.1984). Cox, which to on Hitt v. providing short of funds with 737 F.2d falls Lia- case, however, satisfy Judgment. cited to the Confession This was never bility paid nothing settling for the amount not three to lose the case for $275,000, any continues In companies, making argument, insurance amount. Stonehenge Engineering. equate Wausau seeks to the insured in Hitt with Stonehenge Engineering by nevertheless strains to invoke claiming any that neither had incentive to Hitt on the theory that neither National limit the amount of the settlement. From Stonehenge Engineering Stonehenge nor argues this Wausau that the agreement to matter, practical expected, ever as than pay more was a sham and judgment. doing, In so Wausau neces- Hitt dictates the excess be dis- sarily first tries to focus our attention on In regarded. my opinion, this extends which after the settle- developed events Hitt far beyond its intended effect. wants us to Specifically, ment. having view National had Hitt does not insolvency deal time of be- exposure at the Rather, Hitt’s party ato settlement. now it has been established that cause payment reference to from an insured’s both National was, view, personal in my resources mere- Engineering were insureds under ly to that payment payment contrast from policies and the district has legally only which would be due after suc- recovery against determined there will be cessful indemnification in- actions light findings, Wausau. these Na- Hitt is surance companies. Nowhere tional now cleared of payment by there a reason to condition an liability. company insurance of a settlement amount personal on the Hitt, resources of insured. us, unlike the case before *15 to read Hitt Yet Wausau wants as authori- to did exist responsibility pay insured’s not ty ignore validity for it to of a settlement, settle- in- upon only but arose after solely ment amount its insured because litigation pursued demnification may pay unable to at the time. have been company the insurance and then agree. Accepting argument, I cannot if to a only pursued successful conclusion. these, However, my opinion, changing is tantamount to in circumstances like very contract at exposure party financial of a to a settle- the terms of the insurance agreed pay issue. Wausau to on behalf of ment must be determined as of the date (and Stonehenge Engineering National light settlement and not of how legitimate Stonehenge) uncertainties later resolve them- “those sums that the insured legally obligated pay to as dam- selves. When National settled becomes Association, ages ‘property damage’ with the Na- of ... to the case Owners because applies.” tional was liable for the bal- which this insurance J.A. 365. only filing solvency ance due with of the Nowhere in the contract is the payment, and execution thereon withheld a condition of nor is pending the insured contingencies any resolution of the in a subse- there such limitation on indemnifica- And, tion for a been quent separate proceeding. and court The settlement. has previously, legal fact that National was ulti- shown the insureds had mately responsibility obligation pay Judg- relieved of does not to the Confession of change the fact that when it settled the ment. Stonehenge had committed National course, company an insurance is not Of liability. Consequently, I find no itself to long It has been es- protection. without
basis Hitt to
disregard
the settlement
“[wjhen the
in a
tablished that
insured
Stonehenge.
agreed
amount
to
liability policy
litigation
settles a claim
trial,
questions
him without
also
to invalidate Stone-
seeks
in a
henge Engineering’s liability
open
for the set- which are
for consideration
suit
En-
include those
by alleging
policy
tlement
that
the insured
coverage, liability
was insolvent and hence had
relate to
and
gineering
which
occurred,
damage
which the
Mut. Liab.
Employers
thereof.”
extent
Hendrix,
that
insurance cov-
199 F.2d
found
Wausau’s
Ins. Co. Wisconsin
Cir.1952).
(4th
Thus,
reason
November
1992 and No-
erage
between
percent
“is a
sub
1995 accounted for 25.4
ableness of a settlement
vember
Hitt,
60;
Then, utilizing
ject
inquiry.”
damage period.
Id. at
see also
total
us,
$750,000,
But in the case before
damage figure
These show judge trial reached that the resolution the IV. eminently fair reasonable. The A com- chart below reflects his decision. I previously, agree As stated with the actually parison paid of the amounts judge damage correct district ba- this, companies the other insurance to the allo- $750,000. deciding sis is After inde- cations the district used his judge proceeded compute district to pendent determination reflects fairness proportion Wausau should bear. of his decision. Specifically, determining period after EQUITABLE ALLOCATION OF DAMAGES OCCURRING TO
FROM 11/1/85 3/17/97
Percentage Proportion of Time Damages Number of There Was Coverage Actually Dates of Years of Due Per Coverage Coverage Court District Carrier Paid 79,500 Initial Carrier 1.25 .106 4/1/85 Stonehenge1 or 7/1/86 Maryland 1.3 .113 100,000 7/1/86 84.750 11/1/87 254,250 300,000 Aetna to 4 .339 11/1/87 11/1/91 75,000 Home .085 11/1/91 63.750 Insurance 11/1/92 190,500 [120,650]2 .254 11/1/92 11/1/95
Final Carrier 1.21 .103 11/1/95 90.750 or 3/17/97 According 1. to the district court: identify during record not the initial final The does insurance carriers carriers, trigger period. identity any coverage The of these or whether even periods, purpose establishing existed those is immaterial for the Wausau’s equitable proportioning damages calculation share. Court’s is based throughout trigger period. plaintiffs the duration of the entire If the did not have they periods, responsible first and last then would be apportioned periods. that are to those J.A. per majority opinion. 2. This amount reflects Wausau’s share Therefore, Although companies respectfully the other insurance from Wausau. paid more than would have majority’s from Part IV of the dissent judge’s been called for under the district opinion. calculations, are, my the differences
opinion, anything, minimal. If obviously financially
would benefit from respon-
the fact that the assessment of its
sibility was made with the cool reflection of than in
a district rather the heat of of a prospect
state court battle damage verdict
large punitive actual and
staring it the face.
V. conclusion, the sum of accept would as a basis for the alloca- damages,
tion of Wausau’s share of the
and I would affirm the district court’s computing specific
method of sum due