State Farm Fire & Casualty Company and Monroe Guaranty Insurance Company v. Zurich Insurance Company
Docket: 96-5415
Court: Court of Appeals for the Sixth Circuit; April 15, 1997; Federal Appellate Court
Plaintiffs State Farm Fire, Casualty Company and Monroe Guaranty Insurance Company appeal a District Court decision favoring defendant Zurich Insurance Company regarding the recovery of funds from a personal injury settlement. The Court of Appeals affirms the District Court's summary judgment.
Evans/Griffin Incorporated leased commercial space from Clifton Oxford Investment Company, which required Evans/Griffin to maintain specific liability insurance and indemnify the lessor against claims. Although Evans/Griffin obtained liability insurance from State Farm and Monroe, the policies did not list Clifton Oxford as an insured party.
In July 1990, a child, Mindy Evans, was injured in a common area of the building, leading to a lawsuit against Clifton Oxford, which subsequently filed a third-party complaint against Evans/Griffin for indemnification based on the lease. This third-party complaint was dismissed after a settlement agreement where State Farm and Monroe agreed to defend and indemnify Clifton Oxford as if it were a named insured. In return, Clifton Oxford agreed to dismiss its claims and cooperate fully with Evans/Griffin's defense, thereby ensuring that it would be treated as an additional insured under the plaintiffs' policies.
State Farm entered an agreement with Monroe and Evans/Griffin based on two primary reasons: Firstly, they determined that Evans/Griffin's lease, which included an indemnity clause, constituted an 'insured contract' under their policies, suggesting that any liability incurred by Clifton Oxford from Mindy Evans' accident could fall under this indemnity clause and thus be covered. Secondly, Evans/Griffin claimed they had requested that Clifton Oxford be named as an insured before the incident occurred. Following the defense of Clifton Oxford, State Farm and Monroe settled a personal injury claim exceeding $300,000. Subsequently, they filed a suit against Zurich Insurance Company to recover some or all of the settlement costs. This case was moved to the United States District Court for the Western District of Kentucky.
On June 2, 1995, the plaintiffs sought a declaratory judgment to establish that Zurich and Monroe were each responsible for half of the settlement costs, while asserting that State Farm had no liability as its coverage was considered excess. Zurich countered with a motion for summary judgment. On December 11, 1995, the District Court denied the plaintiffs’ motion and granted Zurich's motion, primarily reasoning that the insurance policies covered different insureds and interests, thus the 'other insurance' provisions did not apply. The court also denied a subsequent motion to alter or vacate this order. The plaintiffs then filed a timely appeal.
The reviewing court applies a de novo standard to summary judgment, affirming that evidence must be viewed favorably towards the nonmoving party to identify any genuine material fact issues. Contribution among insurance companies is permissible when all insurers share liability for a common obligation, but this only holds when policies cover the same property, interest, and risks, and are payable to the same parties. In cases where policies insure different parties, no contribution right exists, as established in Reliance Insurance Co. v. Liberty Mutual Fire Ins. Co.
In Reliance, the Jewish Federation Apartments (JFA) entered a construction contract requiring a 'builder's risk' insurance policy, which JFA obtained from Reliance Insurance Company. The building company involved also secured a builder's risk policy from Liberty Mutual Fire Insurance Company. However, neither policy named the other party as an additional insured or loss payee. Following a fire that partially damaged the construction project, JFA's claim was paid by Reliance, while the building company did not file a claim with Liberty Mutual. Reliance subsequently sued Liberty Mutual for indemnification and/or contribution, but the claim was rejected because the two insurance policies did not cover the same interests, as each covered different insured parties.
The District Court determined that Clifton Oxford was not an insured under State Farm or Monroe’s policies, despite a related agreement. It was unnecessary to assess the agreement's sufficiency for retroactive coverage because State Farm and Monroe's policies insured additional interests, including Evans/Griffin’s liability to Clifton Oxford. As a result, Zurich's policy did not include the same insured parties or cover the same interests, leading to the affirmation of the District Court's judgment. The lease explicitly indicated that 'Lessees' was the correct term, and it was noted that Monroe provided primary coverage while State Farm provided excess coverage. The District Court also found that State Farm had an obligation to indemnify Clifton Oxford under its contract with Evans/Griffin.
