F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
FEB 12 2004
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
NATIONAL AMERICAN
INSURANCE COMPANY, an
Oklahoma Corporation,
Plaintiff - Appellant, No. 03-6088
v.
AMERICAN RE-INSURANCE
COMPANY,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D. Ct. No. 02-CV-232-H)
Joseph K. Goerke, Driskill & Jones, Oklahoma City, Oklahoma (Alison A. Cave,
Driskill & Jones, Oklahoma City, Oklahoma, and R. Patrick Gilmore, Chandler,
Oklahoma, with him on the briefs), appearing for Appellant.
Robert D. Allen, Baker & McKenzie, Dallas, Texas (William W. Speed, Law
Offices of William W. Speed, Ada, Oklahoma, with him on the brief), appearing
for Appellee.
Before TACHA, Chief Circuit Judge, McKAY, and TYMKOVICH, Circuit
Judges.
TACHA, Chief Circuit Judge.
Plaintiff-Appellant National American Insurance Company (“NAICO”)
brought breach of contract claims against Defendant-Appellee American Re-
Insurance Company (“Am-Re”). Upon motion for summary judgment by Am-Re,
the district court held the relevant reinsurance policy language ambiguous,
admitted Am-Re’s uncontroverted parol evidence supporting its interpretation of
the policy, and granted Am-Re summary judgment. This appeal followed. We
take jurisdiction under 28 U.S.C. § 1291 and AFFIRM.
I. Background
This case arises out of a dispute concerning the type of reinsurance
purchased by a primary insurer. As a foundation for this analysis, we note that
insurance companies often cover their potential liabilities in layers. For example,
if a policy offers the insured $3 million in coverage, the primary insurer might
provide the first $100,000 in coverage, a secondary reinsurer might provide
coverage for liabilities from $100,000 to $1,000,000, and a tertiary entity—often
Lloyd’s of London or a similar institution—would provide coverage for any
excess liability. In addition to this layering of liability, insurance companies may
purchase differing types of insurance or reinsurance at each level.
This case concerns three types of insurance. “Occurrence-based” insurance
requires the insurer to cover any liability that results from an event that occurred
during the policy period—even if the injury is discovered and the claim is made
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after the expiration of the coverage period. This type of insurance contrasts with
the second relevant type of insurance—“claims-made.” Under this scheme, the
date of the discovery of the injury and the claim-filing date must fall within the
policy period. Generally, a claims-made policy includes a retroactive date that
precludes coverage for liability-producing events occurring prior to that date. See
generally In re Silicone Implant Ins. Coverage Litig., 667 N.W.2d 405, 409-10
(Minn. 2003) (discussing differences between occurrence-based and claims-made
policies). The third type of coverage at issue here is “tail coverage,” which one
commentator describes as “‘occurrence’ coverage for occurrences within the
policy period producing claims within the specified extended reporting period.”
Bob Works, Excusing Nonoccurrence of Insurance Policy Conditions in Order to
Avoid Disproportionate Forfeiture: Claims-Made Formats as a Test Case ,5
C ONN . I NS . L.J. 505, 528 n.36 (1999). We turn now to the facts before us.
The Association of County Commissioners of Oklahoma Self-Insured
Group (“ACCO-SIG”) provides Oklahoma counties with liability insurance for a
wide range of activities—from auto coverage to pollution liability. ACCO-SIG
offers occurrence-based coverage to its member counties, while limiting its
coverage to the first $50,000 of liability for any claim. Thus, ACCO-SIG
purchases reinsurance to cover any liability above $50,000 per claim.
From July, 1, 1995, until July 1, 1997, ACCO-SIG purchased claims-made
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reinsurance from NAICO. NAICO’s reinsurance policy had an “other-insurance
clause,” which required ACCO-SIG to seek coverage under any other insurance
policy that it held prior to seeking coverage from NAICO. 1
Immediately prior to
July 1, 1997, several ACCO-SIG member counties submitted 33 claims to ACCO-
SIG totaling approximately $1.5 million in liability. NAICO and Am-Re dispute
liability for these claims.
On July 1, 1997, ACCO-SIG switched its reinsurance coverage for the next
two years to Am-Re. Unlike the NAICO one, the Am-Re policy 2
does not contain
an other-insurance clause. Am-Re also provided ACCO-SIG with retroactive
reinsurance for the period July 1, 1992, to July 1, 1997. Whether this retroactive
policy is properly construed as occurrence-based or tail coverage forms the crux
of this appeal.
ACCO-SIG sought reimbursement from NAICO for the $1.5 million in
claims filed by the member counties immediately prior to July 1, 1997. NAICO
refused to pay, and, in 1999, ACCO-SIG sued NAICO in Oklahoma state court.
NAICO defended, in part, on the theory that Am-Re’s retroactive reinsurance
1
In relevant part this clause states “If the Insured has other insurance
insuring against a Loss covered by this policy, the insurance provided by this
policy shall apply in excess of the other insurance.”
2
There were two reinsurance contracts between ACCO-SIG and Am-Re, one
providing specific excess of loss coverage and the other supplying aggregate
excess of loss reinsurance. Both contracts contain the same relevant language.
We refer to them as one reinsurance policy for convenience.
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triggered the other-insurance clause of NAICO’s policy. Thus, in NAICO’s view,
ACCO-SIG should have looked to Am-Re for coverage. ACCO-SIG and NAICO
eventually settled with NAICO paying ACCO-SIG $1.25 million in exchange for
ending the litigation and the assignment of ACCO-SIG’s rights against Am-Re.
NAICO then launched a diversity suit, pursuant to 28 U.S.C. § 1332,
against Am-Re, asserting breach of contract, tortious breach of contract, unjust
enrichment, and subrogation claims under Oklahoma law. NAICO seeks to
recover the $1.25 million it paid to ACCO-SIG, arguing that the retroactive
portion of the Am-Re reinsurance policy places liability for the pre-July 1, 1997,
events on Am-Re. NAICO moved for partial summary judgment on these
grounds. Am-Re responded by filing a summary judgment motion of its own.
The district court granted Am-Re’s motion in an alternative holding. First,
the district court held that the Am-Re reinsurance contract was ambiguous. Then,
it considered parol evidence of Am-Re and ACCO-SIG’s intent to form a
retroactive tail coverage policy, finding this evidence uncontroverted by NAICO.
In the alternative, the district court held that the parol evidence also supported a
finding of mutual mistake as to the Am-Re reinsurance policy. Accordingly, it
granted summary judgment for Am-Re. NAICO filed a timely notice of appeal.
II. Standard of Review
We review the district court’s “grant of summary judgment de novo,
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applying the same standards used by the district court.” Byers v. City of
Albuquerque, 150 F.3d 1271, 1274 (10th Cir. 1998). Summary judgment is
appropriate “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c). We view the evidence, and
draw reasonable inferences therefrom, in the light most favorable to the
nonmoving party. Byers, 150 F.3d at 1274.
Although the movant must show the absence of a genuine issue of material
fact, it “need not negate the nonmovant’s claim.” See Jenkins v. Wood, 81 F.3d
988, 990 (10th Cir. 1996). Once the movant carries this burden, the nonmovant
cannot rest upon its pleadings, but “must bring forward specific facts showing a
genuine issue for trial as to those dispositive matters for which [it] carries the
burden of proof.” Id. “The mere existence of a scintilla of evidence in support of
the nonmovant’s position is insufficient to create a dispute of fact that is
‘genuine’; an issue of material fact is genuine only if the nonmovant presents
facts such that a reasonable jury could find in favor of the nonmovant.”
Lawmaster v. Ward, 125 F.3d 1341, 1347 (10th Cir. 1997).
III. Discussion
On appeal, NAICO makes three arguments. First, NAICO contests the
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district court’s conclusion that the Am-Re policy is ambiguous. We address this
argument below. Second, NAICO argues that, because the district court issued an
opinion in the alternative, employing conditional language, it failed to make
specific findings of contractual ambiguity. This argument is meritless; thus we
reject it summarily. A district court is entitled to offer alternative grounds for its
holding. Third, NAICO argues that the equitable doctrine of mutual mistake does
not apply here. Because we affirm on ambiguity grounds, we need not address the
mutual mistake issue.
A. Oklahoma Contract Law
The parties do not contest that Oklahoma law governs this case. On issues
of contractual ambiguity and the use of parol evidence, the law is well settled.
In Oklahoma, unambiguous insurance contracts are construed, as are
other contracts, according to their terms. The interpretation of an
insurance contract and whether it is ambiguous is determined by the
court as a matter of law. Insurance contracts are ambiguous only if
they are susceptible to two constructions. In interpreting an
insurance contract, this Court will not make a better contract by
altering a term for a party’s benefit. Max True Plastering Co. v. U.S.
Fidelity & Guar. Co., 912 P.2d 861, 869 (Okla. 1996) (footnotes
omitted).
In interpreting contracts, courts must view the document as a whole so as to
give effect to every part of the contract and enable each clause to help interpret
the others. Okla. Stat. Ann. tit. 15, § 157. If a contract is ambiguous, the trial
court may admit parol evidence to aid in interpretation. Fowler v. Lincoln County
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Conservation Dist., 15 P.3d 502, 507 (Okla. 2000). Generally, the issue to which
parol evidence has been admitted becomes “a mixed question of law and fact to
be determined by the trier thereof, whether court or jury.” Harjo v. Harjo , 247
P.2d 522, 526 (Okla. 1952). Nonetheless, a trial court may consider parol
evidence in making its summary judgment ruling if the movant properly submits
the evidence along with his motion. Prudential Ins. Co. of Am. v. Glass , 959 P.2d
586, 595 (Okla. 1998).
B. The Parties’ Interpretations Of The Am-Re Reinsurance Policy
The provisions of the Am-Re reinsurance policy under dispute follow (with
the pivotal language placed in bold by this Court):
ARTICLE I
BUSINESS COVERED
(a) [Am-Re] agrees to reimburse [ACCO-SIG], on an excess
loss basis for the amounts of ultimate net loss which [ACCO-SIG]
may pay for the coverages set forth below . . . .
COVERAGES
General Liability, Automobile Liability, Law Enforcement Liability
and Public Official Liability, Pollution Liability and Criminal
Defense Liability Reimbursement Coverage as provided in the
[ACCO-SIG] Liability Protection Plan document for covered
[ACCO-SIG] entities . . . as respects losses occurring or claims
made as applicable, commencing on and after 12:01 A.M., July
1, 1997, with a retroactive date no earlier than 12:01 a.m., July
1, 1992. . . .
ARTICLE VI
(a) The term “occurrence” as used herein means the
definition as stated or in the ACCO-SIG Liability Protection Plan
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Document. 3 When claims made policies are involved individually or
in the same “Event” with occurrence policies and/or other claims
made policies, the date of the loss for the “Event” shall be
determined as follows:
1. If an occurrence policy is identified as being involved,
then the date of loss shall be the date as determined
under the occurrence policy; or
2. If no occurrence policy is identified as being involved,
then the date of loss will be the date the first claim is
made under a claims made policy.
(b) The term “Claims made,” as used in the Agreement,
shall mean those claims first made against the insured during the
policy period and occurring on or after the retroactive date, if any.
NAICO argues that the plain language of the Am-Re policy states that Am-
Re provided ACCO-SIG with an occurrence-based reinsurance policy for the
period running from July 1, 1997, to July 1, 1999, and that it provided ACCO-SIG
with a retroactive occurrence-based policy stretching back to July 1, 1992. In
essence, NAICO interprets the bolded language above to mean: “Am-Re agrees to
reimburse ACCO-SIG for General Liability, et al., as respects losses occurring
after 12:01 a.m., July 1, 1992.” NAICO’s conclusion derives from its argument
that the Am-Re reinsurance policy “follows the form” of the ACCO-SIG policy
with its member counties. In other words, NAICO argues that, because ACCO-
3
The ACCO-SIG Liability Protection Plan defines “occurrence” as “an
accident . . . commencing during the policy period . . . or any intentional act by . .
. a plan member, commencing during the policy period, which results in [injury or
damage.]”
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SIG offers occurrence-based coverage to its member counties, Am-Re offers
retroactive occurrence-based coverage to ACCO-SIG.
In support of this “follows the form” interpretation, NAICO relies on the
“Business Covered” section of Article I(a) (as quoted above), and the definition
of “occurrence” in Article VI(a). We agree that these provisions support
NAICO’s conclusion that the retroactive portions of the Am-Re policy provide
occurrence-based coverage.
Nonetheless, we agree with the district court and find NAICO’s
interpretation strained. NAICO ignores the “commencing on and after 12:01
A.M., July 1, 1997,” language of the “Coverage” section of Article I(a) and
renders the “claims made as applicable on and after 12:01 A.M., July 1, 1997”
language of that article surplusage. We must give this contractual language some
meaning. See Okla. Stat. Ann. tit. 15, § 157. Moreover, “this Court will not
make a better contract by altering a term for a party’s benefit.” Max True
Plastering Co., 912 P.2d at 869.
Am-Re offers a similarly strained interpretation of the policy. Am-Re
argues that the plain language of the bolded section above states that Am-Re
provides occurrence-based reinsurance for the policy period and retroactive tail
coverage reinsurance from July 1, 1992, until July 1, 1997. Thus, Am-Re
interprets the above clause to mean:
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Am-Re agrees to reimburse ACCO-SIG for General Liability, et al.,
as respects losses occurring on and after 12:01 A.M., July 1, 1997.
And Am-Re agrees to reimburse ACCO-SIG for claims made on and
after 12:01 A.M., July 1, 1997, with a retroactive date no earlier than
12:01 a.m., July 1, 1992.
In suggesting this reading, Am-Re relies on: the definition of “claims made” in
Article VI(b), the “commencing on and after 12:01 A.M., July 1, 1997,” language
of the “Coverage” section of Article I(a), and the “claims made as applicable on
and after 12:01 A.M., July 1, 1997” language of Article I(a). As with NAICO, we
agree that the provisions of the policy cited by Am-Re support its interpretation.
Nevertheless, Am-Re’s interpretation ignores the definition of “occurrence”
as provided in Article VI(a) and those portions of Article I(a) relied on by
NAICO. As stated before, Oklahoma law does not allow us simply to ignore
contractual language to form a more attractive contract for one party. See Okla.
Stat. Ann. tit. 15, § 157; Max True Plastering Co., 912 P.2d at 869.
We are also unable to construct a third reading of the Am-Re reinsurance
policy that comports with the canons of contractal interpretation under Oklahoma
law. See Okla. Stat. Ann. tit. 15, § 157. Thus, we find that the Am-Re
reinsurance policy is susceptible to two interpretations (viz., the one offered by
NAICO and the one offered by Am-Re), and we hold that the Am-Re reinsurance
policy is ambiguous as to the type of retroactive reinsurance provided by Am-Re.
Max True Plastering Co., 912 P.2d at 869.
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C. Am-Re’s Parol Evidence
The district court, after it found the Am-Re reinsurance policy ambiguous,
turned to parol evidence to discern the intent of the contracting parties. Fowler,
15 P.3d at 507 (courts may admit parol evidence after finding an ambiguity);
Glass , 959 P.2d at 594-95 (court may consider parol evidence on motion for
summary judgment). The district court held that Am-Re “ha[d] submitted
uncontroverted evidence that the parties’ intent in negotiating and executing the
reinsurance agreements was for AM-RE to provide limited prior acts reinsurance
on a claims made basis for losses reported/made to ACCO-SIG . . . [during] the
term of the agreements.” We find no error in the district court’s analysis.
The record is replete with evidence such as the following August 24, 1999,
affidavit of Dusty Birdsong, ACCO-SIG’s current litigation coordinator and the
former Senior Claims Adjustor for ACCO-SIG’s plan administrator. Mr.
Birdsong averred:
It was the intent of ACCO-SIG . . . that the retroactive coverage
provided under the ACCO-SIG Liability Protection Plan and Am Re
specific policy requires that although a loss might have occurred
prior to July 1, 1997 (but no sooner than July 1, 1993), coverage
would be provided for that loss as long as the claim is first made
against . . . ACCO-SIG after July 1, 1997. . . . [A]pplying NAICO’s
logic and reasoning, member counties would be paying a one-year
premium for a policy period that extended from July 1, 1993, to July
1, 1998. Needless to say, the premium for such coverage would be
astronomical and cost prohibitive. Obviously, this was never the
intent of ACCO-SIG or Am Re[.]
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Am-Re also presented evidence to the district court that it had a similar
intent upon entering into the policy agreement. For example, Gary E. Eberling, an
assistant vice president for Am-Re, in an October 13, 1998, letter to an ACCO-
SIG representative wrote, “[T]he intent of our coverage was to provide
occurrence based coverage, as well as, tail coverage for the claims made coverage
provided by NAICO.”
The district court held, and we agree, that NAICO did not present any
contradictory evidence. In its briefing on appeal, NAICO does not point to
specific facts in the record contradicting Am-Re’s evidence. Although we are not
obligated to comb through the record to locate material not referenced by parties,
see Adler v. Wal-Mart Stores, Inc. , 144 F.3d 664, 672 (10th Cir. 1998), we
conducted an independent review and failed to uncover any evidence
contradicting that provided by Am-Re.
Instead of presenting contradictory evidence, NAICO attempted to cast
doubt upon the credibility of some of Am-Re’s evidence. Standing alone, attacks
on the credibility of evidence offered by a summary judgment movant do not
warrant denial of a summary judgment motion. Jenkins, 81 F.3d at 990 (requiring
the nonmoving party to present specific facts demonstrating the existence of a
material fact to be tried). Moreover, on “a motion for summary judgment we
cannot evaluate credibility nor can we weigh evidence.” Cone v. Longmont
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United Hosp. Ass’n , 14 F.3d 526, 533 (10th Cir. 1994). The district court,
therefore, when evaluating a motion for summary judgment, should not determine
whether it believes the movant’s evidence; rather, it must determine whether the
nonmovant offered any specific facts that demonstrate the existence of a material
fact to be tried. NAICO failed to provide any evidence on this score. Thus, we,
like the district court, find the parol evidence uncontested that ACCO-SIG and
Am-Re sought to contract for occurrence-based coverage from July 1, 1997, to
July 1, 1999, with retroactive tail coverage.
IV. Conclusion
Because we find the Am-Re insurance policy ambiguous and the parol
evidence of the contracting parties’ intent uncontested, we AFFIRM.
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