United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS August 21, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 02-60807
GENESIS INSURANCE COMPANY;PRESIDENT
RIVERBOAT CASINO-MISSISSIPPI, INC.,
Plaintiffs-Appellants,
v.
WAUSAU INSURANCE COMPANIES,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Mississippi
Before JONES and BENAVIDES, Circuit Judges, and KAZEN,* District
Judge.
BENAVIDES, Circuit Judge:
I. BACKGROUND
On April 25, 1996, Edith Baker, a guest at The President
Casino (“President”), in Biloxi, Mississippi, was struck by a
casino-owned shuttle bus driven by a casino employee as she
attempted to cross a drop-off area in front of the casino
entrance. Baker had emerged from a walkway to the driver’s left.
*
Chief District Judge of the Southern District of Texas,
sitting by designation.
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The driver, whose view of the walkway was partially blocked by a
six-foot chain link fence that was covered intermittently by
banners or flags, did not see Baker as she stepped onto the
drive. Baker was thrown 10 to 15 feet and suffered a variety of
injuries, including a fractured skull, broken ribs, damage to a
nerve that resulted in the permanent loss of smell and taste, and
temporomandibular joint disfunction associated with damage to her
jaw.
At the time of the accident, President was insured under a
business automobile policy from Wausau Insurance Companies
(“Wausau”). The casino immediately reported the accident to a
Wausau representative and shortly thereafter Wausau retained a
local independent adjuster to investigate. The adjuster
completed his investigation and closed the Baker file on
September 11, 1996. Baker had retained an attorney, but no
settlement offer was extended.
On April 22, 1999, Baker filed a complaint in the Circuit
Court of the Second Judicial District of Harrison County,
Mississippi, against President and its shuttle driver, alleging
negligence in the operation of President’s shuttle bus as the
proximate cause of her injuries. Pursuant to its policy, Wausau
hired an attorney to defend President. Mediation was
unsuccessful. On January 30, 2001, the trial court approved
Baker’s motion, unopposed by Wausau counsel, to amend her
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complaint to include an additional count for premises liability
based upon the placement of the fence, the walkway, and the
absence of warning signs and indicators in the vicinity of the
crosswalk. The following day, Wausau sent President a letter
reserving its right to deny coverage with respect to the premises
liability claim. President then notified its comprehensive
general liability (“CGL”) insurer, Genesis Insurance Company
(“Genesis”). Genesis promptly hired an attorney.
Trial was scheduled for March 5, 2001, and all motions for
continuance were denied. On February 28, 2001, Genesis filed
this action in the United States District Court for the Southern
District of Mississippi, seeking a declaration that the Wausau
policy covers the allegations in the state court Baker litigation
in their entirety, with the Genesis policy providing only excess
insurance over and above the $1,000,000 primary coverage afforded
by the Wausau policy.
Negotiations between the parties with respect to the Baker
litigation ensued. Defendants had concluded that they would
stipulate to liability, leaving only the issue of damages for the
jury. On March 2, 2001, a settlement of $400,000 was reached.1
$200,000 was paid by Wausau, and $200,000 by Genesis and
1
Genesis initially sought a declaratory judgment as to
coverage in the Baker litigation against President as well as
Wausau. Following the settlement of the Baker litigation,
Genesis amended its complaint and President was realigned as a
plaintiff in this action.
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President (the Genesis policy contained a self-insured retention
endorsement of $100,000). Genesis and President (“appellants”)
contend that their $200,000 payment was made with the specific
understanding that all parties reserved their right to seek
reimbursement from one another, as evidenced by a letter from
Genesis to Wausau and the e-mails of Wausau employees.
Genesis and President filed a joint Motion for Summary
Judgment, asserting that the unambiguous language of the Wausau
policy provides coverage for the entirety of the Baker claim.
The motion also alleged that Wausau was estopped from denying
coverage because it undertook the claim and handled it
exclusively from April 1996, until the end of January 2001,
without issuing a non-waiver notice or a reservation of rights
letter. Alleging “bad faith” on the part of Wausau, President
and Genesis seek contractual and punitive damages. Wausau filed
its own Motion for Summary Judgment on the grounds that President
and Genesis voluntarily proferred payment for the Baker
settlement, and are therefore barred from seeking reimbursement
under the voluntary payment doctrine.
The district court granted summary judgment in favor of
Wausau. In a Memorandum Opinion dated June 18, 2001, it
concluded that under the voluntary payment doctrine, President
and Genesis gave up their claims against Wausau when they
voluntarily settled the Baker litigation. The court dismissed
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President and Genesis’s summary judgment motion as moot.
President and Genesis appealed to this court.
II. STANDARD OF REVIEW
A district court’s grant of summary judgment is reviewed de
novo. Rivers v. Central and S. W. Corporation, 186 F.3d 681, 682
(5th Cir. 1999). Summary judgment is appropriate, when, viewing
the evidence in the light most favorable to the nonmoving party,
the record reflects that no genuine issue of any material fact
exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-324 (1986).
See also Transitional Learning Comty. at Galveston, Inc. v. U.S.
Office of Pers. Mgmt., 220 F.3d 427, 429 (5th Cir. 2000). A
material fact is one that “might affect the outcome of the suit
under the governing law,” and a “dispute about a material fact is
‘genuine’...if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Sulzer Carbomedics,
Inc. v. Oregon Cardio-Devices, Inc., 257 F.3d 449, 456 (5th Cir.
2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). The record before the court must be considered in the
light most favorable to the nonmovants, President & Genesis.
Sulzer Carbomedics, Inc., 257 F.3d at 456.
In a diversity action such as this one, federal courts are
bound to apply the choice of law rules of the forum state in
which the court sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313
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U.S. 487, 496 (1941). The outcome of diversity litigation in a
district court should be the same as if the case had been tried
in the forum state's court. Siciliano v. Hudson, 1996 WL 407562,
*2 (N.D. Miss. 1996). See also Guaranty Trust Co. v. York, 326
U.S. 99, 109-110 (1945). The parties agree, and Mississippi
choice of law dictates that the laws of the state of Mississippi
apply. See Boardman v. United Services Auto Ass’n, 470 So. 2d
1024, 1032 (Miss. 1985); Guaranty Nat. Ins. Co. v. Azrock
Industries Inc., 211 F.3d 239, 243 (5th Cir. 2000). We therefore
attempt to ascertain what Mississippi’s highest court would
decide if faced with the issues presented in this case. See
United Nat’l Ins. Co. v. SST Fitness Corp., 309 F.3d 914, 917
(6th Cir. 2002).
III. DISCUSSION
A. The Volunteer Doctrine
Genesis and President ask us to determine (1) whether the
volunteer doctrine bars them from recovering the monies they
contributed to the Baker settlement, (2) whether Wausau breached
its contract of insurance with President by denying coverage for
the premises liability claim, and (3) whether Wausau breached the
contract in bad faith.
The district court held that Genesis and President had
waived their right to recover the payments they made in the Baker
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settlement on the basis of the volunteer doctrine, a common-law
construct that has been consistently followed in Mississippi.
The rule establishes that:
[A] voluntary payment can not be recovered back, and a
voluntary payment within the meaning of this rule is a
payment made without compulsion, fraud, mistake of
fact, or agreement to repay a demand which the payor
does not owe, and which is not enforceable against him,
instead of invoking the remedy or defense which the law
affords against such demand.
McDaniel Bros. Constr. Co., Inc. v. Burk-Hallman Co., 175 So.2d
603, 605 (Miss. 1965). Accord Presley v. American Guarantee &
Liability Ins. Co., 116 So.2d 410, 416 (Miss. 1959); McLean v.
Love, 157 So. 361, 362 (Miss. 1934). Finding that President and
Genesis were not compelled to contribute to the Baker litigation,
laboring under a mistake of fact, or had entered into an
agreement with Wausau to reserve their rights to dispute
coverage, the district court concluded that President and Genesis
were barred from seeking reimbursement by the volunteer doctrine.
Because we are convinced that an issue of fact remains as to
whether there was an agreement between the parties to
subsequently litigate the coverage issue, we reverse the district
court’s grant of summary judgment.
1. Was there an agreement to litigate coverage following
settlement?
A mutual agreement between President, Wausau, and Genesis to
litigate their respective liabilities among themselves after
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settling the Baker litigation would preclude the application of
the volunteer doctrine. See McLean, 157 So. At 362. Accord
McDaniel Bros. Constr. Co., 175 So.2d at 605; Presley, 116 So.2d
at 416. Genesis contends that its reservation of rights letter,
combined with Wausau’s internal e-mails, indicate the presence of
an agreement.
The district court concluded that the settlement with Baker
took place “in lieu” of a legal determination of the parties’
respective obligations under their policies. The court premised
its decision upon the legal rule that a payment under “protest”
or accompanied by a unilateral reservation of rights will not
escape the application of the volunteer doctrine. See Rowe v.
Union Central Life Ins. Co., 12 So. 2d 431, 433 (Miss. 1943);
Horne v. Time Warner Operations, Inc., 119 F. Supp. 2d 624, 629
(S.D. Miss. 1999).
A review of the record, however, reveals that the appellants
have raised a fact issue as to whether Genesis’s reservation of
rights was indeed unilateral or whether Wausau had agreed with
President and Genesis to preserve the coverage issue for
resolution at a later date. On March 5, 2001, before money
changed hands in the Baker settlement, Genesis’s attorney sent
counsel for Wausau a letter which states:
In furtherance of our telephone conversation last week,
all parties to the discussions on settlement (Bob
Sheriff on behalf of Wausau, Maria Johnson on behalf of
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the President, and me on behalf of Genesis) agreed that
amounts contributed toward settlement of the Edith
Baker suit against the President and its driver would
be contributed without prejudice to the rights of any
party to deny coverage and obligation to pay, and to
seek recovery from other contributing parties. Our
Complaint for Declaratory Judgment filed in federal
court is consistent with this agreement.
As you know, an agreement of settlement has now been
reached at $400,000.... As noted above, all payments
are without prejudice to the rights, claims and
defenses of the respective payors.
Wausau did not respond to the letter. Thus the letter itself
does not constitute conclusory evidence of an agreement between
the parties. See Sweet Home Water & Sewer Assoc. v. Lexington
Estates, Ltd., 613 So.2d 864, 871 (Miss. 1993)(holding that a
valid contract requires acceptance by the offeree); Palmer v.
Security Life Ins. Co. of Am., 189 F. Supp. 2d 584, 589 (S.D.
Miss. 1999)(listing the six requirements of a valid contract,
including mutual assent). The letter does, however, relate the
existence of an oral agreement. Oral agreements are recognized
and enforceable in Mississippi. Murphree v. W.W. Transportation,
797 So.2d 268, 273 (Miss. Ct. App. 2001).
President and Genesis supplied additional evidence of an
oral agreement in the form of an email exchange on March 2, 2001,
between Robert Sheriff (referred to in the letter from Genesis as
Bob Sheriff), and fellow Wausau colleague, William Carroll.
Carroll: If they [Genesis] make an agreement to settle, are
they not stuck with a voluntary agreement? What gives them
the right to come back after the fact, wouldn’t they have to
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do it up front unless we agreed to some kind of funding
agreement?
Sheriff: We have Reserved our Rights as to coverage and
Genesis has Reserved their Rights as to coverage.
Sheriff’s response to Carroll indicates that an agreement
with Genesis that each party would reserve their rights to
subsequently litigate the coverage question had occurred or was a
fait accompli. The email exchange and letter from Genesis to
Wausau constitute probative evidence in support of the contention
that the parties were of one mind regarding the preservation of
the coverage issue in the face of the Baker settlement. See In
re Estate of Davis, 832 So.2d 534, 537 (Miss. Ct. App.
2001)(holding that meeting of the minds and consideration between
competent parties are the requisite ingredients of a valid and
binding agreement). Sheriff’s denial of such an agreement in his
deposition is insufficient to justify the district court’s
conclusion on summary judgment that one did not exist.
The presence or absence of an agreement is a question of
fact to be resolved by the fact-finder. Ham Marine, Inc. V.
Dresser Indus., Inc., 72 F.3d 454, 458 (5th Cir. 1995); Hunt v.
Coker, 741 So.2d 1011, 1015 (Miss. Ct. App. 1999). Thus, we
decline to determine on appeal whether the parties had an oral
agreement to litigate the coverage issue following settlement and
remand the issue to the district court for trial. But see Nat’l
Surety Corp. v. Western Fire & Indemnity Co., 318 F.2d 379, 385-
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86 (5th Cir. 1963)(applying Texas law, but citing no cases, and
holding that where two insurance companies, in their mutual best
interest, split the cost of settling a case, they had implicitly
agreed to subsequently determine their respective obligations,
thus barring the application of the volunteer doctrine).
2. Were President and Genesis’s Payments Voluntary or
Compelled?
An involuntary payment is one “not proceeding from choice.”
66 Am. Jur. § 112 (2001). Payments that are made by virtue of
legal obligation or by accident or mistake are inherently
involuntary.2 Id. Payments made under compulsion are also not
2
Genesis contends that it (and thereby President, through
the self-insured retention addendum) was legally obligated to
contribute to the settlement, citing Keys v. Rehabilitation
Cntr., Inc., 574 So.2d 579 (Miss. 1990). The argument is
untenable. At a minimum, the fact that the appellants beseach
this court, in the same petition, to make a legal determination
that Genesis’s policy did not obligate them to contribute to the
settlement certainly puts their claim to the contrary with
respect to the volunteer doctrine in doubt. At the time of the
settlement, no determination had been made regarding the legal
liability of Genesis in the Baker litigation. All that had been
voluntarily stipulated to was the liability of Wausau and/or
Genesis. Genesis filed this declaratory judgment action
expressly for the purpose of determining its uncertain legal
liability. Genesis was accordingly no more legally obligated to
contribute to a settlement than the parties in Armco v. Southern
Rock, Inc. and Rowe v. Union Cent. Life Ins. Co., which were
found to have made their payments voluntarily. See Armco, 696
F.2d 410 (5th Cir. 1983); Rowe, 12 So.2d 431 (Miss. 1942).
Genesis and President do not contend that were laboring
under a mistake of fact when they made their settlement payments,
nor do they claim to have been fraudulently induced to do so.
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considered voluntary, and are thus not barred from recovery by
the volunteer doctrine. McDaniel Bros. Const. Co., Inc. v. Burk-
Hallman Co., 175 So.2d 603 (Miss. 1965); McLean v. Love, 157 So.
361, 362 (1934).
President and Genesis contend that their contributions to
the Baker settlement were the product of compelling circumstances
created by Wausau, and thus were not voluntary. Specifically,
the appellants argue that Wausau, in notifying President of its
intention to deny coverage with respect to a premises liability
claim less than a month and a half before trial deprived it and
Genesis of the ability to mount an adequate defense, thus forcing
them to participate in a settlement.3 The district court
disagreed, holding that, as a matter of law, a “lack of timely
notice” does not sufficiently compel to enable an otherwise
voluntary payment to achieve immunity from the voluntary payment
doctrine. While Wausau’s handling of the Baker claim appears to
have been less than admirable, we agree that its conduct did not
compel President and Genesis to throw their hats into the
settlement ring.
The meaning of compulsion with respect to the voluntary
3
President and Genesis also contend that they were compelled
to contribute to the Baker settlement by Wausau’s refusal to
settle the litigation in the absence of their contribution. The
evidence presented, however, is indicative merely of “hard
bargaining,” not compulsion. See 66 Am. Jur. 2d § 123.
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payment doctrine is not well-defined in Mississippi. There are
only a handful of Mississippi state cases that discuss the
voluntary payment doctrine at any length, and neither the parties
nor or independent research have revealed any that have been
decided within the past twenty years.4 There has been a trend
toward expanding the range of situations that are considered
compelling, 66 Am. Jur. 2d § 109; Halstead Terrace Nursing Cntr.,
Inc. V. Scottsdale Ins. Co., 1997 WL 124263 *3 (N.D. Ill. 1997),
that Mississippi has not yet had the opportunity to pass upon.
As in many other areas of the law, whether a payment was
compelled or made voluntarily is a highly factual determination,
Glantz Contracting Co. v. General Electric Co., 379 So.2d 912,
917-18 (Miss. 1980), and none of the Mississippi cases address
the issue of compulsion issue apart from its particular factual
context. Accordingly, we enlist the assistance of cases from
other jurisdictions and the legal literature in an attempt to
surmise whether the Mississippi Supreme Court, as a matter of
law, would apply the voluntary payment doctrine in the undisputed
factual circumstances surrounding the settlement. See, e.g.,
4
See, e.g., Town of Wesson v. Collins, 18 So. 360 (Miss.
1895); Schmittler v. Sunflower County, 125 So. 534 (Miss. 1930);
McLean v. Love, 157 So. 361 (Miss. 1934); Rowe v. Union Central
Life Ins. Co., 12 So.2d 431 (Miss. 1943); Presley v. Am.
Guarantee & Liability Ins. Co., 116 So.2d 410 (Miss. 1959);
McDaniel Bros. Const. Co. v. Burk-Hallman Co., 175 So.2d 603
(Miss. 1965); State Farm Mutual Automobile Ins. Co. V. Allstate
Ins. Co., 255 So.2d 667 (Miss. 1971); Glantz Contracting Co. V.
General Electric Co., 379 So.2d 912 (Miss. 1980).
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American Indemnity Lloyds v. Travelers Property & Casualty Ins.
Co., 2003 WL 21437012 (5th Cir. 2003); 66 Am. Jur. 2d §§ 108-09
(2001).
Not all pressure for payment amounts to compulsion. 16 Lee
R. Russ, Couch on Insurance § 223.28 (3d. ed. 2003). The general
rule guiding the determination of whether a payment was made
voluntarily or not can be stated as follows:
where a person pays an illegal demand, with full
knowledge of all the facts which render the demand
illegal, without an immediate and urgent necessity to
pay, unless it is to release his or her person or
property from detention or to prevent an immediate
seizure of his or her person or property, the payment
is voluntary. It is only when, in an emergency for
which a person is not responsible, the person is
compelled to meet an illegal exaction to protect his or
her business interest that he or she may recover the
payment, but if, with knowledge of the facts, that
person voluntarily takes the risk of encountering the
emergency, the payment is voluntary and may not be
recovered.
66 Am. Jur. 2d § 109 (emphasis added). President and Genesis’s
claim of compulsion falls short in two respects.
President and Genesis were faced with one of two options:
(1) contributing $200,000 immediately to a settlement; or (2)
allowing the Baker case to go to trial, and waiting for a ruling
in the declaratory judgment action, at which point they would be
held responsible for a certain percentage (estimated from 0%-50%)
of the damages (that Genesis feared could reach $1 million) as
determined by a jury for whom they had little time to prepare.
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First, this dilemma lacks the sense of immediacy often
accompanied by compelled payments. See, e.g., Glantz, 379 So.2d
at 917-18 (finding that appellee who could either make payments
or face an immediate work stoppage threatening an important
contract was compelled to make payments); Mobile Telecomm. Tech.
Corp. V. Aetna Casualty & Surety Co., 962 F. Supp. 952, 955 (S.D.
Miss. 1997)(“It is well-established that it is not duress to
institute or threaten to institute civil suits...”). Litigation,
particularly where two separate cases, in two separate courts,
are involved, often takes years to resolve.
Second, the stakes, in the event that President and Genesis
refused to participate in the settlement, were of an
insufficiently dire magnitude to justify finding that their
settlement contributions were compelled. “[A] payment is
considered coerced only where it is made to avoid the loss of a
necessity, or to prevent an injury to a person, business or
property which is different and disproportionately greater than
the unlawful demand. Dreyfus v. Ameritech Mobile Comm., Inc.,
700 N.E.2d 162, 165-66 (1998). See, e.g., Mobile Telecomm., 962
F. Supp. 952 (finding no compulsion when insurer had choice
between making payments on its insured’s $2 million legal bill or
awaiting coverage determination and possibly paying additional
amount for insured’s interim financing); Alcoa Steamship Co. V.
Velez, 285 F. Supp. 123, 125 (D. P. R., 1968) (holding that
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employer’s payment of workmen’s compensation insurance premium,
when faced with alternative of losing all coverage, was
compelled).
Surely, the prospect of paying a maximum, as estimated by
President and Genesis, of $1,000,000 between them after the jury
returned its verdict, and all appeals (of both the state case and
this action) had been exhausted, did not threaten to have such “a
disastrous effect to business” that President and Genesis, two
national corporations, one of whose business was to insure
against precisely these kinds of judgments, felt compelled to
contribute to the Baker settlement. Randazzo v. Harris Bank
Palatine, N.A., 262 F.3d 663, 669 n.1 (7th Cir. 2001). This is
particularly true when we take appellants’ contention (which is
well supported) that the Genesis policy did not cover the Baker
accident (meaning that they would ultimately not be required to
pay any portion of a jury verdict) at face value. Compare
Halstead Terrace Nursing Cntr., Inc. v. Scottsdale Ins. Co., 1997
WL 124263 (finding that where insured nursing home was faced with
“‘enormous potential liability’ in excess of the policy limits,”
treble damages, and disruption to personnel by continued
litigation of a wrongful death suit against it, $175,000 payment
in order to enable settlement was compelled).
While Wausau’s questionable conduct placed Genesis in an
unenviable position, the law does not permit us to grant Genesis
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and President immunity from the volunteer doctrine on the grounds
that their settlement payments were compelled. Wausau,
President, and Genesis recognized that there was little chance
that a jury would not find in favor of Baker after viewing a
videotape that showed President’s shuttle bus hitting Baker as
she walked onto the crosswalk. The liability stipulation, and
subsequent settlement, were borne not so much of Wausau’s
compulsion, but of strategy (albeit influenced by Wausau’s
actions).
3. Justice Denied?
President and Genesis, claiming that Wausau’s demand for
payment was unjust, urge us to create a new exception to the
Mississippi volunteer doctrine premised upon the inadequacy of
the legal remedy that they sought (a declaratory judgment) and
the societal interest in encouraging settlements over protracted
litigation. The heart of their argument is that policy
considerations require such an exception.
It is not policy, however, but law that guides our
determinations. Particularly when our jurisdiction exists
through diversity, we feel compelled to tread lightly and allow
the state court to take the first step in developing new
doctrines. We therefore decline to make a predictive statement
on Mississippi’s behalf approving of and applying an exception
for those who pursue their available legal remedies and yet in
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good faith make what is alleged to be an unjustly demanded
payment in their best interest.
B. Breach of Contract & Bad Faith
The district court dismissed President’s breach of contract
and bad faith claims summarily as derivative of the reimbursement
issue. There were therefore no findings or conclusions of law
regarding these claims. Naturally, the district court will
revisit its ruling following its determination on remand as to
whether Wausau, President, and Genesis agreed to litigate the
coverage issue following settlement. It would be premature for
us to rule on them at this time, as well as an unjustifiable
extension of our appellate function.
IV. Conclusion
President and Genesis have created an issue of fact as to
whether they agreed with Wausau to litigate the coverage issue
following settlement. We thus VACATE and REMAND the district
court’s grant of summary judgment on the ground that the
volunteer doctrine bars the appellants from recovering their
payments.
VACATED and REMANDED.
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