REVISED DECEMBER 5, 2007
United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALSE D
FIL
FOR THE FIFTH CIRCUIT November 14, 2007
Charles R. Fulbruge III
Clerk
No. 03-10705
LIBERTY MUTUAL INSURANCE COMPANY
Plaintiff-Counter-Defendant,
Appellee-Cross-Appellant
v.
MID-CONTINENT INSURANCE COMPANY
Defendant-Counter-Claimant,
Appellant-Cross-Appellee
Appeals from the United States District Court
for the Northern District of Texas
Before GARWOOD, JOLLY, and BARKSDALE, Circuit Judges.
PER CURIAM:
In this suit between two liability insurers Liberty Mutual Insurance
Company (Liberty Mutual) seeks to recover from Mid-Continent Insurance
Company (Mid-Continent) a portion of the sums Liberty Mutual paid to settle
a third party claim against Kinsel Industries (Kinsel), a covered insured under
each of their respective $1 million comprehensive general liability (CGL) policies.
Each insurer assumed defense of Kinsel, and the case ultimately settled for $1.5
million, but Mid-Continent would pay only $150,000, so Liberty Mutual (which
No. 03-10705
also had a $10 million excess policy covering Kinsel) paid the remaining
$1,350,000 and then brought this suit against Mid-Continent for $600,000,
which it contended Mid-Continent was obligated for as its remaining
proportionate part of the $1.5 million settlement. Following a bench trial, the
district court awarded Liberty Mutual $550,000. Liberty Mut. Ins. Co. v. Mid-
Continent Ins. Co., 266 F. Supp. 2d 533 (N.D. Tex. 2003). Mid-Continent has
appealed that judgment.1 We certified the following questions to the Supreme
Court of Texas, viz:
1. Two insurers, providing the same insured applicable primary
insurance liability coverage under policies with $1 million limits and
standard provisions (one insurer also providing the insured coverage
under a $10 million excess policy), cooperatively assume defense of
the suit against their common insured, admitting coverage. The
insurer also issuing the excess policy procures an offer to settle for
the reasonable amount of $1.5 million and demands that the other
insurer contribute its proportionate part of that settlement, but the
other insurer, unreasonably valuing the case at no more than
$300,000, contributes only $150,000, although it could contribute as
much as $700,000 without exceeding its remaining available policy
limits. As a result, the case settles (without an actual trial) for $1.5
million funded $1.35 million by the insurer which also issued the
excess policy and $150,000 by the other insurer.
In that situation is any actionable duty owed (directly or by
subrogation to the insured’s rights) to the insurer paying the $1.35
million by the underpaying insurer to reimburse the former
respecting its payment of more than its proportionate part of the
settlement?
2. If there is potentially such a duty, does it depend on the
underpaying insurer having been negligent in its ultimate
evaluation of the case as worth no more than $300,000, or does the
duty depend on the underpaying insured’s evaluation having been
sufficiently wrongful to justify an action for breach of the duty of
1
Liberty Mutual has cross-appealed only the district court’s failure to award it
prejudgment and postjudgment interest.
2
No. 03-10705
good faith and fair dealing for denial of a first party claim, or is the
existence of the duty measured by some other standard?
3. If there is potentially such a duty, is it limited to a duty
owed the overpaying insurer respecting the $350,000 it paid on the
settlement under its excess policy?
Liberty Mut. Ins. Co. v. Mid-Continent Ins. Co., 405 F.3d 296, 310
(5th Cir. 2005).2
The Texas Supreme Court, by its October 12, 2007 opinion, Mid-Continent
Insurance Company v. Liberty Mutual Insurance Company, ___ S.W.3d ___, 2007
WL 2965401 (No. 05-0261, Oct. 12, 2007), answered “the first question in the
negative” and therefore did “not reach the second and third questions.”
In light of the opinion of the Texas Supreme Court, the judgment of the
district court is reversed and the case is remanded to the district court with
instructions to enter judgment that Liberty Mutual take nothing by its suit
against Mid-Continent and for any further appropriate proceedings not
inconsistent with our opinions herein and the opinion of the Texas Supreme
Court.
REVERSED and REMANDED with instructions.3
2
Modified in presently immaterial respects, 407 S.W.3d 683 (5th Cir. 2005).
3
Liberty Mutual’s cross-appeal is accordingly dismissed as moot.
3