IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 01-30894
(Summary Calendar)
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NORTH AMERICAN CAPACITY INSURANCE COMPANY,
Plaintiff-Appellant,
versus
BRISTER’S THUNDER KARTS, INC.
Defendant-Third Party Plaintiff-Appellee-Appellant,
versus
AMERICAN DYNASTY SURPLUS LINES INSURANCE COMPANY;
PALOMAR INSURANCE CORPORATION,
Third Party Defendants-Appellees.
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Appeals from the United States District Court
for the Eastern District of Louisiana
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April 11, 2002
Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.
PER CURIAM:
Plaintiff-Appellant North American Capacity Insurance Company
(North American) appeals the district court’s ruling that North
American waived its right to deny coverage to Brister’s Thunder
Karts, Inc. (Brister’s), thereby making North American solely
responsible for providing defense and coverage to Brister’s in the
underlying suit. The facts of this case, as set forth in the
district court’s Findings of Fact and Conclusions of Law, which we
append hereto, are undisputed, leaving us with only a question of
state law, to wit, whether Louisiana’s waiver doctrine precludes
North American’s denial of coverage to Brister’s.
We have thoroughly reviewed the facts and applicable law as
reflected in the appellate briefs of the parties, the record on
appeal, and the district court’s comprehensive opinion. Our review
satisfies us that the district court correctly decided this case.
Rather than waste judicial resources by writing a separate opinion,
which would be essentially duplicative of the work of the district
court, we express our full agreement with that court’s reason and
disposition of the case. We therefore adopt the district court’s
opinion in full, incorporate it herewith, append it hereto, and
affirm the judgment. Any remaining claims by Brister’s against
either American Dynasty Surplus Lines Insurance Company or Palomar
Insurance Corporation are dismissed as moot.1
AFFIRMED.
1
Palomar, the insurance brokerage firm that forwarded the
claim against Brister’s to North American, submitted a brief urging
affirmance of the district court’s judgment dismissing Palomar from
the suit. Brister’s did not appeal this issue in its opening brief
and thus we need not consider it. In any case, affirmance vel non
of the Fed. R. Civ. P. 12(b)(6) dismissal of Palomar vis-à-vis
Brister’s is mooted by our conclusion that North American waived
its right to deny coverage to Brister’s.
2
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NORTH AMERICAN CAPACITY INS. CO. * CIVIL ACTION
VERSUS * NO. 00-429
BRISTER’S THUNDER KARTS, INC. * SECTION “L”
FINDINGS OF FACT AND CONCLUSIONS OF LAW
I.
PROCEDURAL HISTORY
On February 10, 2000, North American Capacity Ins. Co. (“North
American”) filed suit seeking a declaratory judgment that they are
not liable to provide insurance coverage to Brister’s Thunder
Karts, Inc. (“Brister’s”). On September 5, 2000, Brister’s filed
a third-party complaint against Great American Ins. Co., doing
business as American Dynasty (“Great American”), and Palomar Ins.
Co. (“Palomar”). Brister’s seeks to hold Great American liable to
provide insurance coverage. Palomar was dismissed pursuant to Rule
12(b)(6) on June 8, 2001. This case came on for trial without a
jury on July 9, 2001.
The Court, having carefully considered the pleadings,
depositions, answers to interrogatories, and admissions, together
with affidavits, and pursuant to Rule 52(a) of the Federal Rules of
Civil Procedure, hereby enters the following findings of fact and
conclusions of law. To the extent that any findings of fact
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constitute a conclusion of law, the Court hereby adopts it as such,
and to the extent that any conclusions of law constitute a finding
of fact, the Court hereby adopts it as such.
II.
FINDINGS OF FACT
(1)
North American Capacity Insurance Company is a New Hampshire
corporation with its principal place of business in New Hampshire.
(2)
Brister's Thunder Karts, Inc. is a Louisiana corporation with
its principal place in Louisiana.
(3)
Great American Insurance Company, doing business as American
Dynasty Surplus Lines, Inc., is a foreign corporation with its
principal place of business outside Louisiana.
(4)
Palomar Insurance Company is an Alabama corporation doing
business in Louisiana.
(5)
Defendant Brister’s entered into an insurance contract
agreement with plaintiff North American to purchase a “claims-made”
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policy (the “North American Policy”).2 The North American Policy
covered Brister’s from October 12, 1995 to October 12, 1996.
Before it expired, the policy was cancelled by Brister’s effective
on July 29, 1996.
(6)
Upon cancellation, Brister’s entered into a new insurance
contract with Great American, to purchase a “claims-made” policy
(the “Great American Original Policy”). The effective coverage
period for the Great American Original Policy was between July 29,
1996 and July 29, 1997. Prior to the expiration of the Great
American Original Policy, Great American issued a renewal policy to
extend coverage from July 29, 1997 through July 29, 1998 (the
“Great American Renewal Policy”).
(7)
Brister’s sought performance of its insurance coverage after
being sued in state court by Rolland and Sue LeBlanc (the “LeBlanc
Lawsuit”) for facial injuries suffered by their daughter while she
was riding in a Brister’s go-cart. The alleged facial injury
occurred on May 17, 1996, and Brister’s was served with and
2
A claims-made policy is one “where coverage attaches only if the
negligent harm is discovered and reported within the policy period
in contrast with ‘an occurrence’ policy which merely requires the
commission of the negligent act during the policy’s effective
period regardless of the date of discovery and reporting.” Case v.
Louisiana Medical Mutual Insurance Co., 624 So.2d 1285, 1289
(La.App. 3 Cir. 1993) (emphasis in original).
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received notice of the LeBlanc Lawsuit complaint on August 19,
1997.
(8)
On August 20, 1997, Brister’s sent the petition to its
insurance broker, Palomar. On August 21, 1997, Palomar
acknowledged receipt of the claim by facsimile. Palomar also
attached a copy of the loss notice that it had sent to North
American on August 20, 1997.
(9)
Upon receiving the loss notice from Palomar, North American
proceeded to appoint counsel to defend Brister’s in the LeBlanc
Lawsuit on August 25, 1997.3 In addition, Brister’s paid $25,000
in attorney’s fees as required by the deductible of the North
American Policy.
(10)
North American seeks a declaratory judgment declaring that
they are not liable to provide Brister’s with insurance coverage.
III.
CONCLUSIONS OF LAW
(1)
This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
3
Mary Hamilton, Esquire of the Law Firm of Voorhies & Labbe, was
chosen to represent Brister’s whom she has vigorously defended in
the LeBlanc Lawsuit until the present time.
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(2)
Venue is appropriate for this district pursuant to 28 U.S.C.
§ 1391.
(3)
North American asserts that it did not waive its right to a
coverage defense by appointing counsel to defend Brister’s claim
asserted after the coverage period had expired. In support of its
position, North American cites Tate v. Charles Aguillard Ins. &
Real Estates, Inc., 508 So.2d 1371, 1374 (La. 1987), for the
proposition that an insurer does not waive the coverage conditions
of the insurance policy by its conduct or actions. Moreover, North
American explains that waiver cannot be used to extend insurance
coverage to a risk not properly within the limits of the policy as
written. See Tate, 508 So.2d at 1374.
(4)
North American’s reliance on Tate is ill founded. In Tate,
the Louisiana Supreme Court concluded that “there is no fundamental
difference between conditions which have been classified as going
to coverage and those classed as furnishing a ground for
forfeiture.” Id. The Louisiana Supreme Court held “that waiver
may apply to any provision of an insurance contract under which the
insurer knowingly and voluntarily elects to relinquish his right,
power or privilege to avoid liability, even though the effect may
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bring within coverage risks originally excluded or not covered.”
Id. at 1375 (emphasis added).
(5)
The Louisiana Supreme Court in Steptore v. Masco Construction
Co., Inc., 643 So.2d 1213 (La. 1994), reaffirmed the Tate principle
in a suit almost factually identical to the present case. In
Steptore, the court considered whether a liability insurer who
knew of facts indicating that it had the right to deny coverage
waived its coverage defense by undertaking the insured’s defense
without obtaining a nonwaiver agreement to reserve its rights. See
Steptore, 643 So.2d at 1213. At the time of the event giving rise
to the claim, the facts of the case clearly indicated that insurer
had knowledge that insured was in breach which was sufficient for
insurer to deny coverage. See id. at 1215-1217.
(6)
Like the insurer in Steptore, North American knew that it had
received notice of Brister’s claim more than a year after the
coverage had lapsed. In Steptore, the insurer did not deny
coverage or enter into an agreement reserving the right to deny
coverage until six months after it appointed counsel to undertake
insured’s defense. See id. at 1215. North American did not obtain
a nonwaiver agreement reserving its right to deny coverage, and
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unlike the Steptore insurer, it waited three years to deny coverage
for the first time. Because North American assumed Brister’s
defense without reserving its rights or otherwise protecting its
interests, it waived any coverage defense it may have had under its
policy with Brister’s. See id. at 1217.
(7)
North American assumed and continued the defense of the
insured in the face of facts indicating that it had a right to deny
coverage. See id. at 1216 (stating that an insurer is charged with
knowledge of the contents of its own policy). Furthermore, North
American did not obtain a nonwaiver agreement to reserve its right
to deny coverage. See Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1175
(5th Cir. 1992) (stating that an insurer must obtain a nonwaiver
agreement to reserve its rights when a conflict of interests arises
and the insurer has knowledge of facts indicating noncoverage). As
a result, the Court finds that North American waived any coverage
defense it may have had under the policy.
(8)
North American shoulders all liability in this case because
the escape clause of the Great American Policy and the pro rata
clause of the North American Policy are both given effect and
control. See Citgo Petroleum Corp, v. Yeargin, Inc., 690 So.2d
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154, 167 (La.App. 3 Cir. 1997) (stating that conflicting “escape”
and “pro rata” clauses are not mutually repugnant and thus are
given effect). Great American concedes that at the time the claim
was made to Brister’s its policy was in force and effect. However,
the Great American Policy contains an “escape clause” which denies
coverage to an insured who is covered by the terms of another
insurance policy. In this case, the “other insurance policy
available to the insured” referenced in Great American’s escape
clause is the North American Policy because North American insured
Brister’s and waived its coverage defense. The North American
Policy also contains a “pro rata clause” that allocates the share
of the liability equally or according to the terms of the policies.
Therefore, Great American escapes coverage by operation of its
escape clause and pro rata clause because Brister’s is covered by
the North American Policy.
IV.
CONCLUSION
On the basis of the foregoing findings of fact and conclusions
of law, the Court finds that plaintiff North American waived its
coverage defense. Consequently, North American is liable to
provide insurance coverage to Brister’s.
This is the judgment of the Court.
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New Orleans, Louisiana
S/ ELDON E. FALLON
UNITED STATES DISTRICT JUDGE
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