UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
NATIONWIDE MUTUAL INSURANCE
COMPANY,
Plaintiff,
v.
LAFARGE CORPORATION; LAFARGE
CANADA INCORPORATED,
Defendants-Appellants,
and
NORTHEAST CEMENT COMPANY,
INCORPORATED; CENTRAL STATES
INDEMNITY COMPANY OF OMAHA;
INTEGRITY MUTUAL INSURANCE
COMPANY; MISSION INSURANCE
No. 96-1389
COMPANY; COLUMBIA CASUALTY
COMPANY; HIGHLANDS INSURANCE
COMPANY; UNITED STATES FIRE
INSURANCE COMPANY; HARTFORD
ACCIDENT AND INDEMNITY COMPANY;
THE NORTH RIVER INSURANCE
COMPANY; INSURANCE COMPANY OF
NORTH AMERICA; INTERNATIONAL
ATLANTINS INSURANCE COMPANY;
NORTHUMBERLAND GENERAL INSURANCE
COMPANY; SIMCOE AND ERIE GENERAL
INSURANCE COMPANY,
Defendants,
v.
HARTFORD CASUALTY INSURANCE
COMPANY,
Third Party Defendant-Appellee,
and
THE TRAVELERS INDEMNITY COMPANY;
PACIFIC EMPLOYERS INSURANCE
COMPANY; WALBROOK INSURANCE
COMPANY, LIMITED; BERMUDA FIRE &
MARINE INSURANCE COMPANY, LIMITED;
JOHN RICHARD YOUELL; CERTAIN
UNDERWRITING MEMBERS OF LLOYD'S,
LONDON, subscribing Policy No.
834/59498/85 and Policy No.
834/59499/85; ZURICH INTERNATIONAL
INSURANCE COMPANY, LIMITED; CNA
REINSURANCE COMPANY OF LONDON,
LIMITED; HEDDINGTON INSURANCE
COMPANY (U.K.), LIMITED; SOVEREIGN
MARINE AND GENERAL INSURANCE
COMPANY, LIMITED; TOKIO MARINE &
FIRE INSURANCE COMPANY (U.K.),
LIMITED; TAISHO MARINE AND FIRE
INSURANCE COMPANY (U.K.), LIMITED;
ALLIANZ INTERNATIONAL INSURANCE
COMPANY, LIMITED; STOREBRAND
INSURANCE COMPANY (U.K.), LIMITED;
TUREGUM INSURANCE COMPANY;
CENTURY INDEMNITY COMPANY;
GIBRALTAR CASUALTY COMPANY; TWIN
CITY FIRE INSURANCE COMPANY;
HARBOR INSURANCE COMPANY;
2
FIDELITY AND CASUALTY COMPANY OF
NEW YORK; NUTMEG INSURANCE
COMPANY; FIRST STATE INSURANCE
COMPANY; H. S. WEAVERS
UNDERWRITING AGENCY; STONEWALL
INSURANCE COMPANY; TEXAS PACIFIC
INDEMNITY COMPANY; EMPLOYERS
INSURANCE OF WAUSAU; AMERICAN
HOME ASSURANCE COMPANY; CHUBB
INSURANCE COMPANY OF CANADA;
ALLIANZ UNDERWRITERS INSURANCE
COMPANY; LONDON GUARANTEE AND
ACCIDENT COMPANY OF NEW YORK;
REPUBLIC INSURANCE COMPANY;
LANDMARK INSURANCE COMPANY;
AETNA CASUALTY & SURETY COMPANY;
CALIFORNIA UNION INSURANCE
COMPANY; CERTAIN UNDERWRITERS AT
LLOYD'S, LONDON; HALIFAX INSURANCE
COMPANY; SCOTTISH & YORK
INSURANCE COMPANY, LIMITED; THE
FEDERAL INSURANCE COMPANY; ST.
PAUL SURPLUS LINES INSURANCE
COMPANY; LEXINGTON INSURANCE
COMPANY; LAURENTIENNE GENERALE
COMPAGNIE D'ASSURANCE; KANSA
GENERAL INSURANCE COMPANY,
LIMITED; AETNA CASUALTY OF CANADA;
GUARDIAN INSURANCE COMPANY OF
CANADA; LA COMPAGNIE D'ASSURANCE
CONTINENTAL DU CANADA;
INTERNATIONAL INSURANCE COMPANY;
ZURICH INSURANCE COMPANY;
3
RELIANCE INSURANCE COMPANY,
INCORPORATED; ROYAL INDEMNITY
COMPANY; BOREAL PROPERTY AND
CASUALTY INSURANCE, INCORPORATED,
formerly known as Aetna Casualty of
Canada; BOREAL ASSURANCES,
INCORPORATED, formerly known as
Laurentienne Generale Compagnie
D'Assurance,
Third Party Defendants,
CIGNA INSURANCE COMPANY OF CANADA,
Party in Interest.
NATIONWIDE MUTUAL INSURANCE
COMPANY,
Plaintiff,
v.
LAFARGE CORPORATION; LAFARGE
CANADA INCORPORATED,
Defendants-Appellees,
No. 96-1453
and
NORTHEAST CEMENT COMPANY,
INCORPORATED; CENTRAL STATES
INDEMNITY COMPANY OF OMAHA;
INTEGRITY MUTUAL INSURANCE
COMPANY; MISSION INSURANCE
COMPANY; COLUMBIA CASUALTY
COMPANY; HIGHLANDS INSURANCE
4
COMPANY; UNITED STATES FIRE
INSURANCE COMPANY; HARTFORD
ACCIDENT AND INDEMNITY COMPANY;
THE NORTH RIVER INSURANCE
COMPANY; INSURANCE COMPANY OF
NORTH AMERICA; INTERNATIONAL
ATLANTINS INSURANCE COMPANY;
NORTHUMBERLAND GENERAL INSURANCE
COMPANY; SIMCOE AND ERIE GENERAL
INSURANCE COMPANY,
Defendants,
v.
HARTFORD CASUALTY INSURANCE
COMPANY,
Third Party Defendant-Appellant,
and
THE TRAVELERS INDEMNITY COMPANY;
PACIFIC EMPLOYERS INSURANCE
COMPANY; WALBROOK INSURANCE
COMPANY, LIMITED; BERMUDA FIRE &
MARINE INSURANCE COMPANY, LIMITED;
JOHN RICHARD YOUELL; CERTAIN
UNDERWRITING MEMBERS OF LLOYD'S,
LONDON, subscribing Policy No.
834/59498/85 and Policy No.
834/59499/85; ZURICH INTERNATIONAL
INSURANCE COMPANY, LIMITED; CNA
REINSURANCE COMPANY OF LONDON,
LIMITED; HEDDINGTON INSURANCE
5
COMPANY (U.K.), LIMITED; SOVEREIGN
MARINE AND GENERAL INSURANCE
COMPANY, LIMITED; TOKIO MARINE &
FIRE INSURANCE COMPANY (U.K.),
LIMITED; TAISHO MARINE AND FIRE
INSURANCE COMPANY (U.K.), LIMITED;
ALLIANZ INTERNATIONAL INSURANCE
COMPANY, LIMITED; STOREBRAND
INSURANCE COMPANY (U.K.), LIMITED;
TUREGUM INSURANCE COMPANY;
CENTURY INDEMNITY COMPANY;
GIBRALTAR CASUALTY COMPANY; TWIN
CITY FIRE INSURANCE COMPANY;
HARBOR INSURANCE COMPANY; FIDELITY
AND CASUALTY COMPANY OF NEW
YORK; NUTMEG INSURANCE COMPANY;
FIRST STATE INSURANCE COMPANY; H.
S. WEAVERS UNDERWRITING AGENCY;
STONEWALL INSURANCE COMPANY;
TEXAS PACIFIC INDEMNITY COMPANY;
EMPLOYERS INSURANCE OF WAUSAU;
AMERICAN HOME ASSURANCE COMPANY;
CHUBB INSURANCE COMPANY OF
CANADA; ALLIANZ UNDERWRITERS
INSURANCE COMPANY; LONDON
GUARANTEE AND ACCIDENT COMPANY OF
NEW YORK; REPUBLIC INSURANCE
COMPANY; LANDMARK INSURANCE
COMPANY; AETNA CASUALTY & SURETY
COMPANY; CALIFORNIA UNION
6
INSURANCE COMPANY; CERTAIN
UNDERWRITERS AT LLOYD'S, LONDON;
HALIFAX INSURANCE COMPANY;
SCOTTISH & YORK INSURANCE
COMPANY, LIMITED; THE FEDERAL
INSURANCE COMPANY; ST. PAUL
SURPLUS LINES INSURANCE COMPANY;
LEXINGTON INSURANCE COMPANY;
LAURENTIENNE GENERALE COMPAGNIE
D'ASSURANCE; KANSA GENERAL
INSURANCE COMPANY, LIMITED; AETNA
CASUALTY OF CANADA; GUARDIAN
INSURANCE COMPANY OF CANADA; LA
COMPAGNIE D'ASSURANCE CONTINENTAL
DU CANADA; INTERNATIONAL INSURANCE
COMPANY; ZURICH INSURANCE COMPANY;
RELIANCE INSURANCE COMPANY,
INCORPORATED; ROYAL INDEMNITY
COMPANY; BOREAL PROPERTY AND
CASUALTY INSURANCE, INCORPORATED,
formerly known as Aetna Casualty of
Canada; BOREAL ASSURANCES,
INCORPORATED, formerly known as
Laurentienne Generale Compagnie
D'Assurance,
Third Party Defendants,
CIGNA INSURANCE COMPANY OF CANADA,
Party in Interest.
7
LAFARGE CORPORATION; LAFARGE
CANADA INCORPORATED,
Plaintiffs-Appellants,
No. 96-2356
v.
NATIONAL UNION FIRE INSURANCE
COMPANY, of Pittsburgh, Pennsylvania,
Defendant-Appellee.
LAFARGE CORPORATION; LAFARGE
CANADA INCORPORATED,
Plaintiffs-Appellees,
No. 96-2559
v.
NATIONAL UNION FIRE INSURANCE
COMPANY, of Pittsburgh, Pennsylvania,
Defendant-Appellant.
Appeals from the United States District Court
for the District of Maryland, at Baltimore.
Alexander Harvey II, Senior District Judge.
(CA-90-2390-H, CA-93-4173-H, CA-95-2795-H)
Argued: May 5, 1997
Decided: August 28, 1997
Before HALL, LUTTIG, and MICHAEL, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
8
COUNSEL
ARGUED: R. Nicholas Gimbel, HOYLE, MORRIS & KERR, Phila-
delphia, Pennsylvania, for Appellants. Allan D. Windt, Bryn Mawr,
Pennsylvania; Paul S. Schleifman, LANE & MITTENDORF, L.L.P.,
Washington, D.C., for Appellees. ON BRIEF: Jill A. Douthett, Eliza-
beth W. Fox, HOYLE, MORRIS & KERR, Philadelphia, Pennsylva-
nia, for Appellants. M. Bradley Hallwig, Gregory L. Van Gieson,
ANDERSON, COE & KING, Baltimore, Maryland; Frank P. Sapo-
naro, Jr., LANE & MITTENDORF, L.L.P., Washington, D.C., for
Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
In this opinion we decide two related cases. They involve questions
about the obligation of insurance companies to pay defense expenses
and settlement costs incurred in a product liability action brought by
Lone Star Industries against Lafarge Corporation (Lafarge US) and
Lafarge Canada, Inc. (Lafarge Canada). We addressed the underlying
litigation in In re: Lone Star Industries, Inc. , 19 F.3d 1429, 1994 WL
118475 (4th Cir. 1994) (unpublished).
In the first case before us today (Lafarge I) , No. 96-1389(L),
Appellants-Cross Appellees Lafarge US and Lafarge Canada (some-
times collectively Lafarge) appeal from a trial and judgment awarding
them $19 million for their expenses in defending the product liability
lawsuit mentioned above. That underlying suit was triggered by prob-
lems with cement Lafarge had manufactured and sold over a seven-
year period. Lafarge US and Lafarge Canada appeal because they
claim that their recoverable expenses and damages are much higher
than $19 million and that, among other things, they are entitled to a
9
new trial. The district court equitably apportioned the $19 million
judgment among several of Lafarge's insurance companies according
to each insurer's "time on the risk", that is, the amount of time each
company insured Lafarge. Appellee-Cross Appellant Hartford Casu-
alty Insurance Company (Hartford) is one of those insurers, and its
share was determined to be about $2 million. Hartford cross-appeals
the judgment against it. We affirm the judgment in Lafarge I.
In the second case (Lafarge II), No. 96-2356(L), Lafarge appeals
from an order of the district court apportioning to Appellee-Cross
Appellant National Union Fire Insurance Company (National Union)
an equitable share of the $11.2 million settlement paid by Lafarge to
Lone Star to settle the underlying case after a retrial. National Union
refused to contribute to the settlement. In Lafarge II the district court
ordered National Union to pay about $1.9 million of the settlement
figure. Lafarge argues that National Union should pay more, and
National Union (in its cross-appeal) argues that it should pay much
less. We also affirm the judgment in Lafarge II .
I.
Lafarge US and its wholly owned subsidiary, Lafarge Canada, sold
cement to Lone Star Industries over a seven-year period from 1983
to 1989. The cement failed to hold up as promised. As a result, con-
crete railroad ties that Lone Star made with Lafarge's cement deterio-
rated. Lone Star initiated a lawsuit against Lafarge and obtained a
$1.2 million jury verdict. Lone Star appealed to us, and we reversed
and remanded for a new trial. On retrial, the jury awarded Lone Star
about $8 million. While the case was on appeal from the judgment on
the second verdict, Lafarge agreed to pay Lone Star $11.2 million in
settlement. National Union did not participate in the settlement,
though Lafarge's other insurers did.
Lafarge US and Lafarge Canada jointly spent $27 million to defend
the suit by Lone Star, and they sued their insurance companies for
reimbursement. Lafarge had sold cement to Lone Star for seven years.
The district court, applying a pro rata time-on-the-risk analysis,
divided the liability into twelve segments: one for each Lafarge com-
pany (Lafarge US and Lafarge Canada) for each of the seven years.
Instead of fourteen segments, seven for Lafarge US for each of seven
10
years and seven for Lafarge Canada for each of seven years, there
were only twelve because two segments would have been attributed
to an insurance company that became insolvent. If an insurer insured
Lafarge US for two years, for example, it got two segments and two-
twelfths of the liability. Hartford insured Lafarge US, but not Lafarge
Canada, for one of those seven years. Hartford was responsible for
just one of the twelve segments and thus one-twelfth of the defense
costs.
Lafarge I went to trial on the issue of how much of the defense
costs was reasonable and necessary, and the jury returned a verdict
setting the figure at $19 million. Hartford's one-twelfth share, plus
interest and less a one-twelfth share of its deductible, comes out to
about $2 million.
Lafarge appeals several issues in Lafarge I and asks for a new trial
on the reasonableness of defense costs. It argues that (1) the district
court erred in its jury instructions, (2) Hartford is equitably estopped
from contesting the reasonableness of the defense costs, (3) certain
documents pertaining to the reasonableness of the costs should have
been admitted into evidence, (4) it should have been allowed to call
a fee expert in rebuttal, and (5) it should be allowed to recover attor-
ney's fees for this litigation. Hartford cross-appeals several issues,
arguing that (1) it is not liable because the cement was manufactured
by Lafarge Canada (not by Hartford's insured, Lafarge US), (2) even
if it is liable, it is entitled to indemnification, (3) the policy's
$250,000 deductible applies to each lot of cement delivered to Lone
Star, (4) its duty to pay defense costs was excused by Lafarge's fail-
ure to cooperate, (5) the district court's equitable apportionment fails
to take into account a share paid by a settling party, (6) the district
court erred by only applying one-twelfth of the $250,000 deductible
to Hartford's one-twelfth share of the judgment, and (7) the district
court should not have awarded prejudgment interest to Lafarge.1
_________________________________________________________________
1 As a preliminary matter, we note that Lafarge initially appealed the
district court's rulings on its common law and statutory bad faith claims.
In a motion granted by this court, Lafarge voluntarily dismissed its
appeal on the bad faith issues. Several of Lafarge's arguments challeng-
ing evidentiary rulings pertaining to the bad faith claims have also been
dropped by Lafarge.
11
In Lafarge II, Lafarge appeals the apportionment of liability to
National Union and the denial of attorney's fees. National Union
cross-appeals the apportionment.
II.
Lafarge I
We turn first to Lafarge's appeal from the litigation with Hartford
over the reasonableness of defense costs in the Lone Star case. First,
Lafarge appeals the district court's decision not to instruct the jury
that usual and customary attorney's fees are presumed reasonable
under Texas law. We agree with the district court that the jury was
entitled to consider the reasonableness of these costs without regard
to any presumption. Accordingly, we affirm the district court on this
issue. Lafarge also argues that Hartford is equitably estopped from
contesting the reasonableness of the expenses. Lafarge points to a let-
ter from Hartford's counsel which said Hartford would pay its share
of defense costs, subject to some "potential coverage defenses."
Lafarge argues that Hartford did not specify that it meant "reason-
able" defense costs. Nothing in the letter, however, amounts to a
waiver of the reasonableness standard. We agree with the district
court that equitable estoppel did not apply and that the reasonableness
of defense costs remained an issue of fact to be decided by the jury.
Accordingly, we affirm the district court on this issue.
Lafarge next contests two evidentiary rulings. The first concerns
whether certain documentary evidence might have confused the jury.
At trial Lafarge sought to introduce certain documents demonstrating
that a bankruptcy court had approved as reasonable Lone Star's peti-
tions to pay its steep legal fees in pursuing Lafarge in the underlying
litigation. The district court allowed Lafarge to tell the jury the total
amount of the fees incurred by Lone Star, but it did not admit the
bankruptcy court documents. Lafarge also wanted to introduce a doc-
ument comparing the fees of Lone Star and Lafarge during one time
period. The work being performed by the two law firms during the
period was different, however, and this fact was not apparent from the
face of the document. It was well within the district court's discretion
to exclude these documents on the ground that they might have con-
fused the jury. See Fed. R. Evid. 403 ("Although relevant, evidence
12
may be excluded if its probative value is substantially outweighed by
the danger of unfair prejudice, confusion of the issues, or misleading
the jury, or by considerations of undue delay, waste of time, or need-
less presentation of cumulative evidence.") (emphasis added). See
also United States v. Aramony, 88 F.3d 1369, 1377 (4th Cir. 1996)
(reviewing Rule 403 evidentiary ruling under abuse of discretion stan-
dard), cert. denied, 117 S. Ct. 1842 (1997).
The second evidentiary issue concerns a rebuttal witness. The dis-
trict court ruled that Lafarge could not call a new fee expert to rebut
the testimony of Hartford's fee expert, who according to Lafarge,
went (unfairly) beyond the opinions expressed in his deposition testi-
mony. The district court determined that Lafarge, through the testi-
mony of its initial expert and through its opportunity to cross-examine
Hartford's expert about the discrepancies in his testimony, had a fair
opportunity to present its case on the reasonableness of its defense
costs. The testimony of the rebuttal expert was likely to be cumulative
to some extent, and it may have lengthened the trial unnecessarily.
Therefore, the district court's decision not to allow Lafarge to call the
rebuttal expert was not an abuse of discretion. See Fed. R. Evid. 403.
We therefore affirm the district court on these evidentiary issues.
Lafarge's next issue concerns attorney's fees in the present litiga-
tion, Lafarge I. Because Lafarge was awarded a judgment in this case
(based on its insurance contract) for its defense costs in the Lone Star
litigation, Lafarge says it is entitled to attorney's fees for prosecuting
this case. The district court held that Texas law did not allow Lafarge
to recover such fees. The district court noted that under Texas law
attorney's fees may be recovered on a breach of contract claim, but
not if the contract is a "contract issued by an insurer that is subject
to the provisions of . . . Article 21.21" of the Texas Insurance Code.
See Tex. Civ. Prac. & Rem. § 38.006(4). Because Hartford is an "in-
surer that is subject to" Article 21.21, the district court held it was
exempt from the payment of attorney's fees.
Lafarge reads the statute differently to avoid the statutory excep-
tion for insurers subject to Article 21.21. Lafarge argues that the "sub-
ject to" language refers to "contract" rather than "insurer." Lafarge
then argues that the insurance contract here is not a contract "subject
to" Article 21.21. Lafarge concludes, therefore, that its insurance con-
13
tract claim is a regular breach of contract claim for which it may
recover attorney's fees.
Lafarge's interpretation of the statute might be correct if the clause
"issued by an insurer" was set off by commas ("contract, issued by an
insurer, that is subject to [Article 21.21]") or if the clause was other-
wise set apart ("contract subject to Article 21.21 that is issued by an
insurer"). It is not, and the "subject to" language more easily applies
to the noun just before it, "insurer."2 We recognize that Lafarge can
find some limited authority to support its argument. See, e.g., Barnett
v. Aetna Life Ins. Co., 723 S.W.2d 663 (Tex. 1987) (affirming award
of attorney's fees without explanation). The Texas Supreme Court,
however, has interpreted the section to mean that some insurers (not
some contracts) are within the scope of this provision and some insur-
ers are not. See Dairyland County Mut. Ins. Co. v. Childress, 650
S.W.2d 770, 775 (Tex. 1983) ("Dairyland is a county mutual insur-
ance company and as such is not one of the insurors[sic] exempt
from the provision[.]"); see also Bituminous Cas. Corp. v. Vacuum
Tanks, Inc., 975 F.2d 1130, 1133 (5th Cir. 1992) ("This language [in
Dairyland] implies that an insurer who falls within the provisions of
section 38.006 is exempt from the payment of attorney's fees[.]") We
believe that the "subject to" language refers to "insurer," not "con-
tract." We therefore conclude that the district court read the statute
and relevant case law correctly, and we affirm the district court on
this issue.
Hartford also appeals several issues. Because Hartford only insured
Lafarge US, not Lafarge Canada, Hartford says that it is not responsi-
ble for defense costs. Hartford argues that Lafarge US (the distribu-
tor) was simply a conduit for any misrepresentations made by Lafarge
Canada (the manufacturer) and that Lafarge Canada is ultimately
responsible through indemnity/subrogation principles. The district
court noted that the facts in the underlying trial established a breach
of express warranty, and the jury verdict did not distinguish between
Lafarge US and Lafarge Canada. The court concluded as a matter of
law that Lafarge US participated in the breach of express warranty
_________________________________________________________________
2 This construction ("subject to" refers to "insurer"), which was adopted
by the district court, follows the statutory construction rule of the last
antecedent (a phrase should be read to modify its immediate antecedent).
14
and was not a mere conduit for the misrepresentations by Lafarge
Canada. The court then held that Lafarge US's insurers (including
Hartford) were therefore liable along with Lafarge Canada's insurers.
On this issue, we affirm on the reasoning of the district court.
Hartford also argues that the sole cause of Lone Star's damages
was a manufacturing defect. Hartford contends that because the man-
ufacturing was performed by Lafarge Canada, not Lafarge US, Hart-
ford is entitled to recover from Lafarge Canada any defense costs it
might pay on behalf of Lafarge US. This argument also fails, how-
ever, in light of the jury verdict. As we noted above, we agree with
the district court that the liability rested on the jury's finding of a
breach of express warranty, not a manufacturing defect. Both Lafarge
US and Lafarge Canada participated in the breach of express war-
ranty. Therefore, we agree with the district court that Hartford has no
right to recover from Lafarge Canada through indemnity/subrogation.
Hartford argues that a $250,000 deductible applies to each lot of
defective cement that Lafarge US delivered to Lone Star. The policy
states:
Amount and Application of Deductible
250,000 Each Occurrence and/or
Accident and/or Each Claim
After reviewing the district court's extensive opinion from the bench
on this issue, we agree with the court's interpretation of "each occur-
rence," its conclusion that the "occurrence" and underlying cause of
the liability was the "continuous, large-scale manufacture and sale" of
defective cement, and its holding that there was only one "occur-
rence" for deductible purposes. Here, we affirm on the reasoning of
the district court.
Hartford argues that its duty to pay defense costs was excused
because Lafarge US breached a duty to cooperate when it failed to
provide certain information to Hartford. The clause in the policy cov-
ering the duty to cooperate, however, was designed to help Hartford
pursue or defend claims on Lafarge's behalf. Hartford was not
defending the suit against Lone Star at the time Hartford says Lafarge
should have provided additional documentation. Indeed, Hartford was
15
refusing to help. We believe the duty to cooperate clause was not
intended to extend to a situation where the information was requested
after parties are adversaries in litigation and the insurer has refused
to act on the insured's behalf. We therefore agree with the district
court that Lafarge did not breach a duty to cooperate, and we affirm
on this issue.
Finally, we turn to the heart of this controversy-- the district
court's apportionment of the defense costs among the various insur-
ance companies. The jury found that $19 million of the costs were
reasonable and necessary and therefore recoverable by Lafarge US
and Lafarge Canada under the governing insurance policies. The dis-
trict court took the amount of this jury verdict ($19 million), less pre-
tender expenses, and divided by 12, which amounted to $1,590,000.
The district court applied 1/12th of a $250,000 deductible to the
1/12th share Hartford bore, and it added $550,000 in prejudgment
interest. The end result was a judgment against Hartford of about
$2,150,000.
Lafarge US and Lafarge Canada were both at fault for breaching
express warranties that they made to Lone Star, so the insurers of both
Lafarge US and Lafarge Canada were responsible for defense costs.
Because the insurers of both companies are jointly and severally lia-
ble, each one, including Hartford, was potentially responsible for the
whole $19 million jury verdict, plus interest. To avoid, among other
things, later lawsuits among insurance companies to litigate contribu-
tion questions, the district court decided that"fairness requires an
apportionment of defense costs in this case."
The first apportionment issue stems from a settlement between
Lafarge and Nationwide, another Lafarge insurer, for about $5 mil-
lion. Hartford complains that it is paying more than its fair share
under joint and several liability principles because Nationwide settled
for more than the share it ultimately would have owed had it also
gone to trial. Therefore, Hartford argues, the district court should
have reduced the jury verdict by the $5 million first, and then appor-
tioned the remainder among the remaining insurers. This would have
provided a windfall to Hartford, however. Its judgment would be
reduced only because another insurer decided to settle rather than liti-
16
gate in court.3 Equitable apportionment is, as the name suggests, a
doctrine of equity, and the district court's decision to have Hartford
pay its fair share and deny it the windfall was not an abuse of discre-
tion.
Hartford argues next that the district court erred when making its
apportionment calculation by giving it credit for only one-twelfth of
the $250,000 deductible. As explained above, the district court took
Hartford's one-twelfth share and subtracted one-twelfth of the deduct-
ible. This is consistent with the decision that the $19 million in
defense costs was caused by one occurrence: (1) the"occurrence" cre-
ated $19 million in defense costs, (2) the $250,000 deductible applies
against that one occurrence, and (3) the total of $19 million less
$250,000 is apportioned equitably into 12 shares. The application of
the one-twelfth deductible is simply an adjustment to properly reflect
the fact that Hartford is paying one-twelfth of the defense costs that
are due. Accordingly, we affirm on the apportionment issues.
Lastly, Hartford challenges the award of prejudgment interest. We
have reviewed the district court's opinion on this issue and its conclu-
sion that the prejudgment interest is appropriately considered part of
the joint defense costs to be equitably apportioned. We affirm on the
reasoning of the district court.4
_________________________________________________________________
3 To illustrate the point, suppose Nationwide had settled for less than
the share it would have owed based on the ultimate (total) jury verdict.
We would be surprised if Hartford would then argue that its (Hartford's)
share should be increased to account for the shortfall. The district court's
apportionment appropriately placed the risk of the settlement being too
small or too large (as compared to the ultimate verdict) on the two set-
tling parties (Lafarge and Nationwide). This left the other insurers unaf-
fected. This is consistent with the equitable apportionment scheme as a
whole, which is based on the principle that each insurer should pay a
share based on its time on the risk.
4 Both Lafarge and Hartford raise other issues in their briefs. We have
considered those issues and conclude that they are also without merit.
17
III.
Lafarge II
We now turn to Lafarge II. In that case both Lafarge and National
Union challenge the district court's equitable apportionment scheme
that allocated the cost of settlement among Lafarge's insurers. The
district court determined that certain policy periods for Lafarge Can-
ada were not covered. National Union covered Lafarge Canada (as
well as Lafarge US) in 1989-90, the last relevant policy period. The
district court found that there were six covered policy periods (5 for
Lafarge US and one for Lafarge Canada). Again applying joint and
several liability principles, the court apportioned the liability into six
segments according to each company's time on the risk. Because
National Union was responsible for two segments (1989-90 Lafarge
US and 1989-90 Lafarge Canada), it was responsible for one-third
(two-sixths) of the liability.
Lafarge argues that the liability should have been first divided 50-
50 between Lafarge Canada and Lafarge US, then divided by year. If
liability had been allocated in this manner, National Union would be
responsible for all of the liability attributable to Lafarge Canada, as
it was the only insurer of that company during the relevant periods.
Added to its one-fifth share of Lafarge US's liability, National Union
would be responsible for more than half the total.
National Union argues that the liability should have been divided
by five to reflect the five relevant years. It only insured Lafarge US
and Lafarge Canada in 1989-90, and so it would pay only one-fifth
of the total.
We have reviewed the district court's opinion, and we believe the
court properly applied the same equitable apportionment principles
mentioned in Lafarge I. Accordingly, we affirm on the reasoning of
the district court.
Lafarge also argues that under Texas law it should receive attor-
ney's fees for prosecuting this case (Lafarge II ), reiterating the same
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arguments made in Lafarge I. For the reasons stated above in part II
of this opinion, we affirm the district court on this issue as well.5
IV.
The judgments of the district court in both Lafarge I and Lafarge
II are therefore affirmed.
No. 96-1389(L) is AFFIRMED.
No. 96-2356(L) is AFFIRMED.
_________________________________________________________________
5 The parties raise other issues in Lafarge II. We also conclude that
those issues are without merit.
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