United States Court of Appeals,
Fifth Circuit.
No. 96-31293
Summary Calendar.
ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff,
v.
FAIR GROUNDS CORPORATION, et al., Defendants,
Fair Grounds Corporation, Defendant-Appellee,
v.
United National Insurance Company, Defendant-Appellant.
United National Insurance Company, Plaintiff-Appellant,
v.
Fair Grounds Corporation, Defendant-Appellee.
Oct. 1, 1997.
Appeals from the United States District Court for the Eastern
District of Louisiana.
Before WIENER, BARKSDALE and EMILIO M. GARZA, Circuit Judges.
WIENER, Circuit Judge:
In this insurance coverage case, we must decide whether an
exclusion clause in a comprehensive general liability (CGL) policy
issued by Plaintiff-Appellant United National Insurance Company
(United) to Defendant-Appellee Fair Grounds Corporation (FGC)
applies to particular third-party property that was destroyed in a
fire on FGC's premises. Concluding that the third-party property
in question does not fall within the purview of the "care, custody,
or control" exclusion of the policy issued by United to FGC, we
1
affirm.
I.
FACTS AND PROCEEDINGS
In December 1993, a fire destroyed the Clubhouse, Grandstands,
and Jockey's Room at FGC's racetrack in New Orleans, Louisiana.
The fire damaged or destroyed the contents of the burned buildings,
including a significant amount of property owned by third-parties.
At the time of the fire, FGC had in effect a $2 million CGL
policy,1 issued by United, but that policy excluded from coverage,
inter alia, any damage to third party "personal property" in the
"care, custody, or control" of FGC. At issue here is the
applicability of that exclusion to (1) the computerized wagering
equipment, known as the Totalisator System, owned by Autotote
Systems, Inc. (Autotote), and (2) the racing equipment owned by
sixty-one jockeys.2
Autotote's own property insurer, St. Paul Mercury Insurance
Company (St. Paul), paid Autotote over $1 million for its losses
and filed suit in the district court against FGC asserting
1
At the time of the fire, FGC had a $5 million primary
property policy, a $5 million first-layer excess policy, and a $24
million excess policy, but was still woefully underinsured.
2
The district court determined whether the "care, custody, or
control" exclusion applied to other third-party property, including
a bugle on loan to FGC from the Louisiana State Museum, office
equipment owned by the Horsemen's Benevolent & Protection
Association (the HBPA), and a significant amount of food and
beverage vending equipment owned by various concessionaires. Those
determinations are not challenged on appeal by either party.
2
Autotote's subrogation rights.3 In turn, FGC tendered Autotote's
(and other third-party) claims to United, which denied coverage and
filed suit in the district court seeking a declaration of
non-coverage, based on the "care, custody, or control" exclusion,
for all third-party property damaged or destroyed in the fire. A
number of the third-parties also filed suit against FGC, which
eventually paid over $205,000 to settle most of those claims. The
district court consolidated United's declaratory judgment suit with
St. Paul's subrogation suit.
In August 1995, United moved for summary judgment in the
declaratory judgment suit. FGC filed a cross-motion for summary
judgment and sought reimbursement from United for the amounts paid
to third-parties in settlement of their claims.4 The district
court concluded, inter alia, that the property owned by Autotote
and the jockeys was not in the "care, custody, or control" of FGC
so that the exclusion did not apply to defeat United's coverage.
United filed a motion for new trial or, alternatively, to
amend a finding of fact, disputing the district court's finding
that FGC did not maintain or derive a monetary benefit from
Autotote's property—a finding which undergirded the district
3
FGC denied liability for Autotote's losses and asserted
third-party claims against several parties that it had already sued
in state court for their alleged fault in causing or contributing
to the fire. In March 1997, the state court jury awarded FGC
approximately $57 million in property damages and business
interruption losses, including $285,000 for all third-party
property damaged or destroyed in the fire. This amount did not
include an award for the property belonging to Autotote.
4
FGC moved for summary judgment in the St. Paul subrogation
suit also, but the district court denied that motion.
3
court's determination of coverage. Before ruling on United's
motion, however, the district judge transferred the case to a newly
appointed district judge who ultimately denied the motion. The St.
Paul litigation subsequently settled, but United specifically
reserved its right to appeal the district court's determination of
coverage.
United appealed, asserting that the district court erred in
determining that the property owned by Autotote and the jockeys was
not in the "care, custody, or control" of FGC and therefore is not
excluded from coverage under the policy issued to FGC. In short,
United urges us to hold that the subject property is excluded from
coverage.
II.
ANALYSIS
A. JURISDICTION
FGC contends that United's appeal is premature for want of a
certification for entry of a final judgment, pursuant to Federal
Rule of Civil Procedure 54(b), as the district court did not
dispose of all issues in this matter on summary judgment.5 Shortly
after FGC filed its appellate brief, however, United obtained a
Rule 54(b) certificate from the district court. We have previously
recognized that a premature notice of appeal is effective if Rule
5
FGC asserts that the district court did not determine FGC's
entitlement to (1) penalties and attorneys' fees for United's
alleged bad faith in denying coverage or (2) reimbursement from
United for amounts paid to third-parties in settlement of their
claims.
4
54(b) certification is subsequently granted.6 In addition, a
declaratory judgment is reviewable as a final judgment,7 and
further necessary or proper relief based on that declaratory
judgment may be granted subsequently.8 We therefore conclude that
we have appellate jurisdiction to hear the instant case.9
B. STANDARDS OF REVIEW
We review de novo the district court's grant or denial of a
motion for summary judgment, viewing the facts and all reasonable
inferences therefrom in the light most favorable to the non-moving
party.10 Summary judgment is proper if the "pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment
as a matter of law."11
6
Warfield v. Fidelity & Deposit Co., 904 F.2d 322, 324 n. 2
(5th Cir.1990) (citing Crowley Maritime Corp. v. Panama Canal
Comm'n, 849 F.2d 951, 953-54 (5th Cir.1988)). See also Alcorn
County, Miss. v. U.S. Interstate Supplies, Inc., 731 F.2d 1160 (5th
Cir.1984) (citing Jetco Electronic Indus., Inc. v. Gardiner, 473
F.2d 1228 (5th Cir.1973)).
7
See 28 U.S.C. § 2201(a) (1994).
8
See 28 U.S.C. § 2202 (1994).
9
The district court issued the Rule 54(b) certificate based on
four express, legitimate reasons: (1) there was no just cause for
the delay, (2) St. Paul's consolidated subrogation suit had been
settled, (3) FGC's claims for penalties, attorneys' fees, and
indemnity were fully contingent on the determination of coverage,
and (4) the appellate briefs on the coverage issue had already been
filed.
10
Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 266
(5th Cir.1995).
11
Id. (quoting Fed.R.Civ.P. 56(c)).
5
In addition, United appeals the district court's denial of
its motion for new trial or, alternatively, to amend a finding of
fact. United's motion is a peculiar one to say the least. As no
trial was held in the district court, it cannot logically be called
a motion for new trial. Alternatively, United asked the district
court to amend a finding of fact, pursuant to Federal Rule of Civil
Procedure 52(b), but that rule likewise contemplates an underlying
trial. Based on the content of United's motion, however, we
conclude that it is more properly construed as a request for
reconsideration of the district court's entry of summary judgment.12
Moreover, as the Federal Rules of Civil Procedure do not recognize
a general motion for reconsideration, we shall treat United's
motion as a Rule 59(e) motion to alter or amend a judgment. We
review the district court's denial of a Rule 59(e) motion for an
abuse of discretion.13 Under that standard, the district court's
decision need only be reasonable.14 We turn now to the merits of
the appeal.
C. AUTOTOTE'S PROPERTY
1. The Totalisator Service Agreement
Autotote's property consisted of certain computerized wagering
12
United's memorandum in support of its motion states, "[t]he
instant Motion seeks partial relief from a summary judgment entered
July 31, 1996."
13
Martinez v. Johnson, 104 F.3d 769, 771 (5th Cir.1997);
Edward H. Bohlin Co., Inc. v. The Banning Co., Inc., 6 F.3d 350,
353 (5th Cir.1993); Batterton v. Texas General Land Office, 783
F.2d 1220, 1225 (5th Cir.), cert. denied, 479 U.S. 914, 107 S.Ct.
316, 93 L.Ed.2d 289 (1986).
14
Bohlin, 6 F.3d at 353.
6
equipment, known as the Totalisator System, which had been
installed at the racetrack. Autotote and FGC had entered into a
"Totalisator Service Agreement" (the Agreement), pursuant to which
Autotote agreed to provide to FGC "totalisator services utilizing
[Autotote's] computer programs and equipment for all wagering held
at the RACETRACK." As compensation for Autotote's services, FGC
agreed to pay Autotote, inter alia, 45% of the gross monies wagered
through the Totalisator System. The Agreement explicitly provided
that the Totalisator System would at all times be and remain the
property of and under the exclusive control of Autotote.15
United asserts that the Totalisator System was nevertheless in
the "care, custody, or control" of FGC such that the exclusion
applies to defeat coverage of that property. Specifically, United
relies on the provisions of the Agreement that (1) obligate FGC
adequately to safeguard Autotote's property and (2) prohibit
Autotote from removing the equipment during the term of the
Agreement or using it for any other purpose when wagering was
scheduled.
2. Was Autotote's property in the "care, custody, or control" of
FGC?
According to Louisiana law, a provision that attempts to
narrow the insurer's obligation, such as an exclusion clause, is
15
According to the Agreement, however, the junction boxes,
wiring, and cabling provided by Autotote and made a part of the
fixed installation became the property of FGC upon FGC's payment
for the same.
7
strictly construed against the insurer.16 The Louisiana Supreme
Court recently defined "care, custody, or control" for purposes of
an exclusion clause in the context of a CGL policy and announced
two distinct circumstances in which the insured is deemed to have
"care, custody, or control" of property such that the exclusion
applies to defeat coverage:
The first, and most common, circumstance usually occurs where
the insured is either a contractor or subcontractor who has
been sued by the owner of the property upon which work was
being performed, or is a party with whom property has been
placed for use or repair.
...
The second circumstance under which the insured will be held
to have "care, custody, or control" of the property occurs
where the insured has a proprietary interest in or derives
monetary benefit from the property.17
United does not argue that Autotote's property was in the "care,
custody, or control" of FGC as contemplated by first circumstance,
i.e., contractor or subcontractor relationship. That leaves for us
to determine only whether FGC had a proprietary interest in or
derived a monetary benefit from Autotote's property. And, as
United concedes that FGC had no proprietary interest in Autotote's
property, the issue stated most narrowly is whether FGC derived a
monetary benefit from Autotote's property. We conclude, as did the
district court, that it did not.
There is no question but that FGC could not operate its
racetrack business profitably or effectively without the services
16
Reynolds v. Select Properties, Ltd., 634 So.2d 1180, 1183
(La.1994).
17
Id. at 1184 (citations omitted).
8
provided by Autotote and, concomitantly, that Autotote could not
fulfill its contractual obligation to provide FGC with computerized
wagering services without using its Totalisator System—including
its tangible movable (personal) property—on FGC's premises. But
FGC did not derive a monetary benefit from Autotote's property
itself. Rather, the financial benefit that FGC derived from
Autotote's property was nothing more than the indirect business
symbiosis of its Agreement with Autotote: FGC benefitted from the
racetrack's profits which turned, in part, on the efficient
services provided by Autotote's effective use of its own equipment.
This attenuated, indirect benefit is too remote to come within the
kind of monetary benefit required to bring Autotote's property
under the "care, custody, or control" exception. In fact, when we
examine the relationship between FGC and Autotote from a proper
business perspective, we reach precisely the opposite conclusion—it
was Autotote and not FGC, United's insured, that was deriving a
monetary benefit from the subject property, as it was Autotote that
was contractually entitled to a fixed percentage of gross monies
wagered through that service and equipment.
Like the district court before us, we conclude that Autotote's
property was not in the "care, custody, or control" of FGC. It
follows that the subject exclusion does not apply to defeat
United's coverage of Autotote's property.
D. THE JOCKEYS' PROPERTY
The jockeys' property consisted of racing equipment owned,
used, and maintained exclusively by the jockeys and stored in the
9
Jockey's Room on FGC's premises. Under Louisiana law property
belonging solely and unconditionally to a third-party and entrusted
to the insured for safekeeping is not considered to be in the
"care, custody, or control" of the insured for purposes of that
exclusion.18 The jockeys' property falls squarely into this
exception and thus does not trigger application of the "care,
custody, or control" exclusion.
III.
CONCLUSION
We hold that Autotote's property was not in the "care,
custody, or control" of FGC and that the exclusion does not apply
to defeat United's coverage of that property. Likewise, the
jockeys' property was not in the "care, custody, or control" of FGC
for purposes of applying that exclusion to deny coverage. For the
foregoing reasons, the district court's grant of summary judgment
as it relates to the property owned by Autotote and the jockeys is
AFFIRMED.
18
Gulf-Wandes Corp., Inc. v. Vinson Guard Service, 459 So.2d
14, 19 (La.App. 1st Cir.1984), writ denied, 464 So.2d 312
(La.1985).
10