RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0139p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
-
ONEBEACON AMERICA INSURANCE
Plaintiff-Appellant, --
COMPANY,
-
No. 10-4530
,
>
-
v.
-
-
AMERICAN MOTORISTS INSURANCE
-
COMPANY,
Defendant-Appellee. N
Appeal from the United States District Court
for the Northern District of Ohio at Akron.
No. 09-02979—John R. Adams, District Judge.
Argued: February 29, 2012
Decided and Filed: May 17, 2012
Before: COLE, GILMAN, and WHITE, Circuit Judges.
_________________
COUNSEL
ARGUED: Patrick T. Walsh, HINKHOUSE WILLIAMS WALSH LLP, Chicago,
Illinois, for Appellant. David L. Lester, ULMER & BERNE LLP, Cleveland, Ohio, for
Appellee. ON BRIEF: Patrick T. Walsh, Sarah H. Dearing, HINKHOUSE WILLIAMS
WALSH LLP, Chicago, Illinois, for Appellant. David L. Lester, ULMER & BERNE
LLP, Cleveland, Ohio, for Appellee.
_________________
OPINION
_________________
COLE, Circuit Judge. OneBeacon American Insurance Company
(“OneBeacon”) and American Motorists Insurance Company (“AMICO”) were insurers
of the B.F. Goodrich Corporation (“Goodrich”) and, among others, were liable for
environmental cleanup at the Goodrich plant in Calvert City, Kentucky. AMICO settled
1
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 2
with Goodrich, but OneBeacon’s predecessor, Commercial Union Insurance Company
(hereinafter “OneBeacon”), refused to settle and went to trial. A state court jury found
for Goodrich, and OneBeacon was ordered to pay $42 million in compensatory damages
and $12 million in attorney fees. The state court also denied OneBeacon’s request for
settlement credits to reflect amounts paid by other insurers, such as AMICO, through
settlements with Goodrich. OneBeacon then brought this action for equitable
contribution in state court, which AMICO removed to federal court. The district court
adopted the rationale reflected in the state court’s settlement-credit decision and granted
AMICO’s motion for summary judgment. For the following reasons, we AFFIRM the
judgment of the district court.
I. BACKGROUND
None of the underlying facts are in dispute. In 1999, Goodrich filed a complaint
against several insurers, including OneBeacon, in the Summit County, Ohio, Court of
Common Pleas, contending that the insurers were contractually obligated to indemnify
Goodrich against claims by the federal government for soil and groundwater
contamination at Goodrich’s Calvert City, Kentucky, plant. During the litigation,
Goodrich settled with a number of insurers. Prior to the litigation, in 1995, Goodrich
settled with AMICO, a primary insurer with which it had a $55 million policy.
OneBeacon, an excess carrier that did not settle with Goodrich, had a policy that
attached once AMICO’s liability exceeded $20 million.
A jury verdict was returned against OneBeacon and its co-defendant, Certain
London Market Insurance Companies (“Lloyd’s”), in the amount of $42 million in
compensatory damages, with a finding that Goodrich is entitled to attorneys’ fees. The
court also awarded prejudgment interest of $19.6 million on the compensatory damages,
$12 million in attorney fees, and $3.2 million in past interest on the attorneys’ fees.
OneBeacon received a “set-off” of $20 million to reflect its position as an excess insurer.
OneBeacon and Lloyd’s were jointly and severally liable for the compensatory damages
and 88% of the attorney fees. For the remaining 12%, OneBeacon was held solely liable
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 3
because the court concluded that it had engaged in bad faith in processing, investigating,
or denying Goodrich’s claim.
Following the jury verdict, OneBeacon sought settlement credits to reflect the
coverage amounts that Goodrich had already received from the settling insurers. The
trial court went out of its way to make clear that it was not considering OneBeacon’s
decision not to settle, since “[n]o party should be judicially punished for proceeding to
trial.” But the trial court went on to note that “well-established law does favor
settlement” and that “[t]he basis for settlement credits is the foundational principle that
an injured party should only receive compensation for the damages incurred. . . .”
Ultimately, the trial court determined that the settlement agreements between Goodrich
and the settling insurers, like AMICO, “include[d] and discharge[d] liabilities other than
solely past costs incurred by B.F. Goodrich. They are resolving claims for future costs,
terminating rights and defenses of both parties, concluding the litigation and risks
associated with it, including future appeals, and importantly, providing finality and fiscal
certainty.”
The trial court thus decided that the universe of claims that AMICO and other
insurers settled via their agreements with Goodrich was not coextensive with the claims
for which OneBeacon was found liable. The trial court alternatively held that because
the jury found OneBeacon to have acted in bad faith, such bad faith precluded the court
from engaging in the equitable practice of granting settlement credits. The trial court
noted that if OneBeacon “thinks it is entitled to contribution from other insurers, let it
proceed against them.”1 (emphasis added).
OneBeacon did just that. After the Ohio Court of Appeals upheld the jury verdict
and the trial court’s denial of settlement credits, OneBeacon sought declaratory relief for
equitable contribution from AMICO in the Summit County Court of Common Pleas.
AMICO then removed the case to federal court on diversity grounds. The district court
did not frame the issue in the same terms as the trial court, but contended that “[t]he
1
Goodrich “targeted” OneBeacon for the entire amount awarded. Any claim that OneBeacon may
have against Lloyd’s is not at issue in this appeal.
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 4
underlying rationale for receipt of those [settlement] credits is identical to a claim of
contribution—OneBeacon sought a determination that failure to apply settlement credits
would result in an unequal distribution of the common liability of the insurers.” The
district went on to state that the instant complaint “serves as nothing more than an effort
to evade the original trial court’s determination that settlement credits were
inappropriate,” even though the trial court had effectively instructed OneBeacon to file
an action for equitable contribution.
Ultimately, the district court held that the instant action was “a second bite at the
apple” for OneBeacon and adopted the trial court’s logic that the jury award and
AMICO’s coverage were not “one in the same.” It also adopted the trial court’s
alternative holding that precluded OneBeacon from seeking equitable relief because it
had acted in bad faith towards Goodrich, as determined by the jury in the state trial.
Finally, the district court determined that Ohio law was not clear as to whether a non-
settling insurer could seek contribution from a settling insurer, so it concluded that
OneBeacon failed to uphold its burden of persuasion. The district court granted
AMICO’s motion for summary judgment, and this appeal followed.
II. ANALYSIS
OneBeacon argues that the district court erred in holding that, under Ohio law,
a targeted non-settling insurer has no right to seek contribution from a settling insurer.
In response, AMICO argues that Ohio’s expressed policy of favoring settlements
requires an affirmance of the district court’s judgment. And, that even if this were not
the case, Ohio law forbids contribution actions between excess insurers and primary
insurers. Finally, AMICO argues, even if Ohio law spoke in OneBeacon’s favor on
these issues, OneBeacon is still estopped from seeking equitable relief because it acted
in bad faith, as determined by the state trial court. Because Ohio’s policy favoring
settlements provides us with sufficient guidance to conclude that a settled policy is
exhausted for purposes of equitable contribution, we need not answer whether Ohio law
permits interclass contribution actions or whether a jury’s finding of bad faith bars
equitable relief entirely.
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 5
A. Standard of Review
We review the district court’s grant of summary judgment de novo. Blackmore
v. Kalamazoo Cnty., 390 F.3d 890, 894 (6th Cir. 2004). Summary judgment is proper
when there is no genuine dispute of material fact and the moving party, AMICO, is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). AMICO bears the initial
burden of demonstrating the absence of genuine disputes of material fact. Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986). If AMICO satisfies its burden, OneBeacon must
then set forth the specific facts showing that there is a genuine dispute for trial.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).
In evaluating the evidence, we draw all reasonable inferences in favor of
OneBeacon. Blackmore, 390 F.3d at 895 (citing Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). But a mere scintilla of evidence in support of
OneBeacon’s position will be insufficient for its claim to survive summary judgment.
Rather, there must be enough evidence that the jury could reasonably find for the non-
moving party. Anderson, 477 U.S. at 251.
B. Equitable Contribution under Ohio Law
OneBeacon contends that Ohio law permits targeted insurers to seek equitable
contribution from non-targeted insurers in order to ensure that no one insurer is
responsible for more than its fair share of the loss. In support of this contention,
OneBeacon cites to two Ohio cases holding that targeted insurers, like OneBeacon, may
seek contribution from “responsible” non-targeted insurers with “applicable” policies:
Goodyear Tire & Rubber Co. v. Aetna Casualty & Surety Co., 769 N.E.2d 835 (Ohio
2002), and Pennsylvania General Insurance Company v. Park-Ohio Industries, Inc., 902
N.E.2d 53 (Ohio Ct. App. 2008) (Penn General I). These cases, OneBeacon argues,
make clear that Ohio law permits contribution actions between insurers, and that the
Ohio Supreme Court could have easily excepted settling insurers if it desired to do so.
Unsurprisingly, AMICO disagrees and directs our attention to the words
“responsible” and “applicable” which the Ohio Supreme Court used to modify the types
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 6
of insurers from whom OneBeacon would be able to seek equitable contribution.
AMICO argues that, under Ohio law, when an insurer settles with a policyholder, even
if the settlement is for less than the policy limit, the underlying policy is exhausted. See
Triplett v. Rosen, Nos. 92AP-816, 92AP-817, 1992 WL 394867, at *7 (Ohio Ct. App.
Dec. 29, 1992) (finding that public policy considerations that generally favor settlements
allowed a $300,000 policy to be “exhausted” even though the parties settled for only
$200,000). AMICO is unable, however, to point to any Ohio case law indicating that
an “exhausted” policy is not an “applicable” or “responsible” policy for equitable-
contribution purposes or otherwise. Rather, AMICO points to the theoretical
underpinnings of what “exhaustion” actually means, reiterating the established rule that
a settled insurer with an exhausted policy is no longer liable to the policyholder. The
natural extension of this rule, AMICO argues, is that it would be incongruous for a
settled insurer’s policy to be worthless to a policyholder, yet still a basis for equitable
contribution by a non-settling insurer.
Whether Ohio law permits non-settling insurers to target settling insurers for
equitable contribution has not been answered definitively by Ohio courts, but it has been
answered by district courts within this circuit and by other circuit courts. “In diversity
cases such as this, we apply state law in accordance with the controlling decisions of the
state supreme court.” Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450,
454 (6th Cir. 2001). “If the state supreme court has not yet addressed the issue
presented, we must predict how the court would rule by looking to all the available
data.” Id.
1. Ohio state-court cases
In Goodyear, the plaintiff sued a number of insurers seeking a declaratory
judgment on claims for pollution-cleanup costs. 769 N.E.2d at 839. The Ohio Supreme
Court considered two methods for allocating insurance coverage among the insurers.
Id. at 840. The first approach, favored by the plaintiff, was an “all sums” approach in
which the plaintiff may target one insurer, up to the limits of that insurer’s policy, for
full coverage of the loss. The targeted insurer may then seek contribution from the other
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 7
insurers for any amounts for which they are potentially responsible. This method places
the onus on the targeted insurer, rather than on the policyholder. Under the second
approach, the “pro rata” method, each insurer must pay only the portion of the claim for
which it is deemed responsible. This places the burden on the policyholder to join all
relevant parties in the lawsuit.
The Ohio Supreme Court adopted the “all sums” approach, noting that such a
rule “promotes economy for the insured while still permitting insurers to seek
contribution from other responsible parties when possible.” Id. at 841. That Court
further noted that “the insurers bear the burden of obtaining contribution from other
applicable primary insurance policies as they deem necessary.” Id.
In Penn General I, Park-Ohio, a coil manufacturer, sought coverage from its
insurer, Pennsylvania General, for costs and claims arising out of asbestos exposure at
various work sites. 902 N.E.2d at 55. Pennsylvania General sought equitable
contribution from three non-targeted insurers (which had not settled), but the trial court
denied that request because Park-Ohio and Pennsylvania General had failed to properly
notify the other insurers of the claim. Id. at 57. The Ohio Court of Appeals reversed,
finding that the Goodyear decision permitting equitable contribution under the all sums
approach controlled, and that a decision leaving the whole of the claim obligation on
Pennsylvania General would be inequitable. Id. at 58. That court further stated that
“[s]ince the doctrine of contribution has its basis in the broad principles of equity, it
should be liberally applied.” Id. at 59. The Ohio Supreme Court affirmed, finding that
the notification failure did not “result in prejudice to the nontargeted insurers.” Penn.
Gen. Ins. Co. v. Park-Ohio Inds., 930 N.E.2d 800, 808 (Ohio 2010) (Penn General II).
AMICO asserts that neither case reveals a willingness to allow non-settling
insurers to seek contribution from settling insurers and that such a reading is strained at
best. In Goodyear, AMICO notes that the Ohio Supreme Court used the words
“applicable” and “responsible” to describe the types of insurers from whom non-settling
insurers can seek contribution, and it argues that we ought to give meaning to those
words.
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 8
2. Northern District of Ohio cases
Although we have not addressed this issue, two decisions from district courts
within the circuit have had the opportunity to do so. In GenCorp, Inc. v. AIU Insurance
Co., GenCorp, a polymer manufacturer, sought payment on claims arising from an
environmental cleanup. 297 F. Supp. 2d 995, 997 (N.D. Ohio 2003), aff’d 138 F. App’x
732 (6th Cir. 2005). The action was against excess insurers because GenCorp had
already settled with its primary insurers and some of its excess insurers. Id. at 998-99.
The remaining excess insurers argued that because the combined limits of the settled
insurers’ policies exceeded GenCorp’s claim liability, their excess policies should not
be triggered. Id. at 1000. Alternatively, the excess insurers argued that if they were
liable, they ought to receive settlement credits for the full amount of all policy coverage
available under the settlements, rather than the actual amounts of the settlements. Id.
The district court rejected these arguments, holding that “[t]he settlements
extinguished all claims . . . against the primary insurers. The excess insurers, therefore,
cannot seek contribution from GenCorp’s primary insurers because those insurers have
no remaining liability to GenCorp.” Id. at 1007. OneBeacon seeks to distinguish
GenCorp by pointing to statements from that decision that allude to the inequity that
results from requiring a carrier to pay for more than its bargained-for share of liability.
But no court is asking OneBeacon to pay more than its contracted-for share of liability;
any amount that OneBeacon would pay, settlement credits or not, would be less than or
equal to its policy limit.
Another court in the Northern District of Ohio adopted a similar view in Bondex
International, Inc. v. Hartford Accident & Indemnity Co., a case in which the
policyholder sought payment on claims arising from asbestos-related injuries. No. 1:03-
CV-01322, 2007 WL 405938, at *1 (N.D. Ohio Feb. 1, 2007). The insurers refused to
pay because the named insured parties were the successors to the tortfeasors, and not the
tortfeasors themselves. Id. Colony, a primary insurer, settled with the policyholder. Id.
at *1-2. A group of non-settling insurers then sought contribution from Colony. Id. The
district court found for Colony, basing its decision on Ohio’s policy “supporting the
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 9
finality and encouragement of settlements, even if upholding such a settlement creates
a detriment to non-settling parties.” Id. at *4 (citing Krischbaum v. Dillon, 567 N.E.2d
1291, 1301-02 (Ohio 1991)). Allowing such contribution, the district court found, would
undermine the finality of settlements. Id. The court further found that non-settling
insurers may still seek settlement credits to reflect amounts paid out by settling insurers,
such that the policyholder does not receive a windfall and the non-settling insurer is not
liable for more than its contracted-for share of liability. Id. This Court affirmed on other
grounds. Bondex Int’l, Inc. v. Hartford Acc. & Indem. Co., 667 F.3d 669 (6th Cir. 2011).
OneBeacon argues that Bondex is distinguishable because the parties there were
permitted to seek settlement credits, whereas the state trial court’s decision here
precluded settlement credits. OneBeacon does not, however, explain why the legal
analysis in Bondex should change based on whether the targeted insurer was previously
granted settlement credits. The district court in Bondex did state, in dicta, that the
Colony settlement “should reduce whatever award is made against [the non-settling
insurers],” 2007 WL 405938, at *4, but the question presented in this case is not whether
OneBeacon ought to be able to receive a credit to reflect AMICO’s settlement, but
whether OneBeacon ought to receive actual financial contributions from AMICO. The
district court’s dicta in Bondex is not applicable to the instant proceeding.
3. Other federal cases
AMICO, like the district courts in Bondex and in this case, cites to a Third
Circuit case, Koppers Co., Inc. v. Aetna Casualty & Surety Co., in support of its position.
98 F.3d 1440 (3d Cir. 1996). In Koppers, the plaintiff entered into settlement
agreements with several of its primary insurers, leaving only excess insurers as litigating
defendants. Id. at 1443. The district court eventually found for the plaintiff, holding the
excess insurers liable for the full amount of the claim and, as here, did not reduce the
verdict to account for the prior settlements. Id. On appeal, the Third Circuit agreed with
the defendant-insurers that the district court erred when it did not grant the defendants
settlement credits. Id. at 1449.
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 10
The Third Circuit noted that in order to preclude a double recovery by the
plaintiff, and to ensure that no one insurer pays more than its fair share, the court “must
either (1) reduce the judgment to account for the settling insurers’ apportioned shares of
liability, or (2) permit the non-settling insurers to seek contribution from the settling
insurers and, in turn, permit the settling insurers to seek reimbursement from [the
plaintiff].” Id. at 1452. The Third Circuit predicted that the Pennsylvania Supreme
Court would choose the former rule, commonly referred to as the “apportioned share set-
off rule,” or settlement credits. Id. In doing so, that court effectively barred non-settling
insurers, like OneBeacon, from seeking equitable contribution from settling insurers, like
AMICO. Such contribution, that court reasoned, “would defeat the finality of the
settlement” between the settling insurer and the policyholder. Id. at 1453. The Third
Circuit also held, which AMICO urges us to do as well, that a settlement with a primary
insurer “exhausts” the coverage and triggers the excess policy. Id. at 1454. This rule
“encourages settlement and allows the insured to obtain the benefit of its bargain with
the excess insurer, while at the same time preventing the insured from obtaining a double
recovery.” Id. Under this rule it is the insured, rather than the excess insurer, that must
make up the loss between the settlement amount and the underlying policy limit. Id.
OneBeacon notes that the Second Circuit rejected this position in Maryland
Casualty Co. v. W.R. Grace & Co., 218 F.3d 204, 208-12 (2d Cir. 2000). But
OneBeacon fails to acknowledge that all of the litigating parties in W.R. Grace—the
ones seeking contribution and those from whom contribution was sought—had already
settled with the insured and that the appellants’ contribution claim ultimately failed. Id.
at 208. The Second Circuit did note, however, that “[t]he notion that any settlement by
which an insurer obtains a release from its insured, regardless of its terms, insulates that
insurer from all contribution claims, is untenable.” Id. at 210. That court went on to
conduct an analysis of the equities, attempting to answer “whether one party [was]
unjustly enriched at the expense of another . . . .” Id. at 212.
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 11
W.R. Grace does not discuss whether the underlying state law, New York’s,
favored policies that encouraged settlement.2 And, the Second Circuit declined to adopt
OneBeacon’s main argument when it reviewed the district court’s decision in that case.
The district court, in citing to a state-court decision, noted that the state-court case
“establish[ed] nothing beyond the undisputed principle that a paying insurer can recover
from a non-paying insurer.” Id. at 209 (citation omitted). Here, OneBeacon argues that
this “undisputed principle” also stands for the proposition that a non-settling insurer may
seek contribution from a settling insurer. The Second Circuit, presented with this
principle, could have based its decision on this alternative rationale, but chose not to do
so.
***
Based on decisions by the Ohio courts and the logic expressed in GenCorp,
Bondex, and Koppers, we agree that settlement can exhaust a settling insurer’s policy,
and that such exhaustion precludes a non-settling insurer from seeking equitable
contribution from the settling insurers. Such a position best comports with the Ohio
Supreme Court’s proposition that
[t]he law favors prevention of litigation by compromise and settlement.
Given the explosion of litigation so characteristic of the modern era, it is
essential that the settlement of litigation be facilitated, not impeded. So
long as there is no evidence of collusion, in bad faith, to the detriment of
other, non-settling parties, the settlement of litigation will be encouraged
and upheld.
Krischbaum, 567 N.E.2d at 1302 (internal citations and quotation marks omitted). Our
conclusion also receives support elsewhere in Ohio law. See Ohio Rev. Code
§ 2307.28(B) (“The release or covenant discharges the person to whom it is given from
all liability for contribution to any other tortfeasor.”). A decision allowing OneBeacon
to pursue equitable contribution from AMICO would not only fail to encourage
2
Additionally, “New York has not adopted a rule of common law that imposes either” the all
sums or pro-rata approach. Viking Pump, Inc. v. Century Indem. Co., No. 1465-VCS, 2009 WL 3297559,
at *20 (Del. Ch. 2009). But cf. Consol. Edison Co. of NY v. Allstate Ins. Co., 774 N.E.2d 687 (N.Y. 2002)
(applying a pro rata approach to the facts of that case).
No. 10-4530 OneBeacon Am. Ins. Co. v. Am. Motorists Ins. Co. Page 12
settlements, it would actively discourage such settlements. An insurer would have no
incentive to settle with a policyholder if it knew that it would be liable to another insurer
down the road. And an insurer considering going to trial would be economically rational
in doing so if the expected value of prevailing at all exceeds the expected cost of
defending the lawsuit.
Normally, as in Koppers, the reviewing court may reduce the amount of the
underlying verdict to reflect settlement credits because both the decision against the
excess insurer and the action for contribution emanate from the same litigation. Here,
Ohio state courts made and affirmed the decision to preclude OneBeacon from receiving
settlement credits, and those decisions are not before this Court for review. To grant
OneBeacon’s request for equitable contribution would require AMICO to pay more than
its fair share, because it will be liable to both Goodrich (per the settlement agreement)
and OneBeacon. A consequence of such a decision would be to reduce drastically the
incentives currently in place encouraging parties to settle. The stability of existing
settlement agreements between insurers and policyholders would be called into question,
spawning a never-ending series of contribution and indemnification disputes. Given the
Ohio Supreme Court’s above-quoted rule, a reversal of the district court’s judgment
would run against what the Ohio Supreme Court would likely do if faced with this
question.
Simply put, adopting OneBeacon’s position would fundamentally undermine
current settlements and discourage future settlements. Because a settled policy is
exhausted for purposes of equitable contribution under Ohio law, we need not address
AMICO’s other bases for affirmance.
III. CONCLUSION
For the foregoing reasons, the judgment of the district court is AFFIRMED.