[CORRECTED] [PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_________________ FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 01-13734 OCT 28, 2002
Non-Argument Calendar THOMAS K. KAHN
CLERK
__________________
D.C. Docket No. 99-03449-CV-C-NE
FEDERAL INSURANCE COMPANY,
individually,
PEARCE CONSTRUCTION COMPANY, INC.,
through assignee Federal Insurance Company,
Plaintiffs-Appellants,
versus
TRAVELER’S CASUALTY AND SURETY COMPANY,
TRAVELER’S PROPERTY CASUALTY CORP,
AETNA CASUALTY & SURETY COMPANY,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(October 28, 2002)
Before BLACK, MARCUS and GODBOLD, Circuit Judges.
PER CURIAM:
A substantial judgment was entered against an insured in a case arising from
the death of a worker on the insured’s job site. The insured maintained primary
liability coverage with Aetna (now Travelers), and excess coverage from Federal
Insurance Company. The decendent’s personal representative sued the employer
but settlement negotiations were unsuccessful. A jury then returned a substantial
verdict in favor of the personal representative. Thereafter the parties settled and
Travelers paid the limits of its primary coverage, $1,000,000, and Federal paid the
balance of $3,600,000.
Federal then sued Travelers alleging that it had breached the duty of good
faith in several respects: in failure to settle, in deciding whether to settle, and in
failure to keep Federal informed of settlement negotiations and of developments
adverse to the two insurers. Alternatively Federal alleged that as an excess insurer
it was equitably subrogated to rights of the insured arising out of the foregoing
duties of Travelers as primary carrier. The district court entered summary
judgment for Travelers.
On appeal this court found that there were no clear controlling precedents in
decisions of the Alabama Supreme Court, therefore it certified to that court the
following two questions (as slightly rephrased by that court): Fed. Ins. Co. v.
Traveler’s Cas. & Sur. Co., 280 F.3d 1356 (11th Cir. 2002).
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(1) Whether, absent any specific contractual duty, a primary
insurance carrier owes a duty of good faith in each, or all, of the
following duties to an excess carrier in its conduct of the
defense of an insured who is insured by both: duty of good faith
to settle; duty of good faith in deciding whether to settle; and
duty of good faith to keep the excess carrier informed of
settlement negotiations and adverse developments.
(2) Whether an excess carrier, whose insured was “never subject to
a final judgment ordering the payment of money that [the
insured] personally – and not his insurer – would have to pay,”
can be equitably subrogated to the rights of the insured arising
out of any of the foregoing duties against the primary carrier in
the conduct of its defense of the mutual insured.
The Alabama Supreme Court answered each question in the negative. Federal Ins.
Co. v. Travelers Cas. & Sur. Co., 2002 WL 1998282 Ala. (Aug. 30, 2002).
The Supreme Court’s answers have set out the applicable Alabama law, we
apply that law, as we must, and hold that the district court correctly entered
judgment for Travelers. The judgment is AFFIRMED.
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