Certain London Mkt v. PA Nat Mtl Cslty Ins

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 14, 2004
• Docket: 03-60664
• Status: Unpublished

Opinion

United States Court of Appeals Fifth Circuit F I L E D UNITED STATES COURT OF APPEALS For the Fifth Circuit July 14, 2004

Charles R. Fulbruge III No. 03-60664 Clerk

CERTAIN LONDON MARKET INSURANCE COMPANIES; ET AL

Plaintiffs,

CERTAIN LONDON MARKET INSURANCE COMPANIES, ALLIANZ INSURANCE COMPANY and ZURICH AMERICAN INSURANCE COMPANY

Plaintiffs-Appellants,

VERSUS

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY; ET AL

Defendants,

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY

Defendant-Appellee

Appeal from the United States District Court For the Northern District of Mississippi, Eastern Division (01-CV-179)

Before HIGGINBOTHAM, DENNIS, and CLEMENT Circuit Judges. PER CURIAM:*

Certain London Market Insurance Companies, Allianz Insurance

Company and Zurich American Insurance Company (“Certain London”)

* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

1 appeal the district court’s judgment in favor of Pennsylvania

National Mutual Casualty Insurance Company (“Pennsylvania

National”) declaring that it was not required to defend or

indemnify Certain London under the insurance policy involved in

this case. We AFFIRM.

I. BACKGROUND

In March 1998, Performance Fiberglass & Linings

(“Performance”) purchased a Commercial General Liability policy

(the “Policy”) from Pennsylvania National. The following month,

Performance entered into a Master Work Agreement for Construction

and Field Services (“MWA”) with Kerr-McGee. Under the MWA,

Performance agreed to perform certain rubber lining and fiberglass

work for Kerr-McGee at Kerr-McGee’s electrolytic plant in Hamilton,

Mississippi. The MWA contained a provision that required

Performance to indemnify Kerr McGee “from and against any and all

losses, damages, bodily injuries. . .directly or indirectly arising

out of” Performance’s work under the MWA.

Two of Performance’s employees were seriously injured while

they were relining a tank at Kerr-McGee’s facility. These

employees sued Kerr-McGee alleging that Kerr-McGee was liable for

their injuries due to its negligence. Kerr-McGee demanded that

Performance and its insurer, Pennsylvania National, defend and

indemnify Kerr-McGee in these two lawsuits. When Performance and

2 Pennsylvania National refused, Kerr-McGee and its insurers, Certain

London, settled the two lawsuits brought by the injured employees.

After the settlements, Certain London filed this declaratory

judgment action against Performance and Pennsylvania National

seeking indemnity from Performance and coverage under the Policy

from Pennsylvania National for the costs associated with settling

the two employees’ lawsuits.2 Following a one-day bench trial, the

district court ruled in favor of Pennsylvania National, concluding

that because the indemnity provision in the MWA was invalid under

Mississippi law it could not be an “insured contract” under the

Policy. Certain London timely appealed.

II. ANALYSIS

“The standard of review for bench trials is well-established:

‘findings of fact are reviewed for clear error; legal issues de

novo.’” See Gebreyesus v. FC Schaffer & Assoc’s, Inc., 204 F.3d

639, 642 (5th Cir. 2000)(quoting F.D.I.C. v. McFarland, 33 F.3d

532, 536 (5th Cir. 1994)). Questions of contract interpretation

are legal issues and are reviewed de novo. See Am. Totalisator

Co., Inc. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir. 1993).

The parties agree that the MWA is a construction contract

governed by Mississippi law, and that certain indemnity agreements

2 Kerr-McGee was subsequently joined as a plaintiff, but both Kerr-McGee and Performance were dismissed as parties by the district court prior to trial and are not parties to this appeal.

3 in construction contracts are void under Mississippi law as against

public policy. See MISS. CODE ANN. §31-5-41 (2004). The parties

also agree that Kerr-McGee was not a named insured under the Policy

and that the Policy contains a contractual liability exclusion,

which excludes from coverage any agreement or contract under which

Performance “assumes liability,” for another party unless that

agreement is an “insured contract.” Thus, the parties agree that

Certain London is only entitled to coverage under the Policy if

Performance’s agreement to indemnify Kerr-McGee in the MWA is an

“insured contract” under the Policy and if that indemnity agreement

is valid under Mississippi law.

The Policy defines an “insured contract” in relevant part as:

“[t]hat part of any other contract or agreement pertaining to

[Performance’s] business. . .under which [Performance] assumes the

tort liability of another party.” Tort liability is defined as “a

liability that would be imposed by law in the absence of any

contract or agreement.” Therefore, any provision in the MWA

requiring Performance to indemnify Kerr-McGee is an “insured

contract” only if Performance is assuming Kerr-McGee’s tort

liability under that provision.

But Certain London has not proven that Performance assumed any

of Kerr-McGee’s tort liability. First, Certain London has not

established that Kerr-McGee would have any tort liability for

Performance’s negligence. In fact, Certain London admits in this

4 case that Kerr-McGee had no liability for Performance’s negligence

and that it only settled the employees’ lawsuits as a “business

decision.”3

Second, the only other tort liability besides its own

liability that Performance could have assumed under the indemnity

provision of the MWA that would also be an “insured contract” under

the Policy is tort liability arising from Kerr-McGee’s own

negligence. However, in a construction contract, “every covenant,

promise and/or agreement contained therein to indemnify or hold

harmless another person from that person’s own negligence is void

as against public policy” under Mississippi law. See MISS. CODE.

ANN. 31-5-41 (2004); Crosby v. Gen. Tire & Rubber Co., 543 F.2d

1128 (5th Cir. 1976). Therefore, there is no valid basis for

establishing tort liability necessary to constitute an “insured

contract” under the Policy. Accordingly, the district court’s

grant of summary judgment in favor of Pennsylvania National is

AFFIRMED.4

3 Moreover, Performance and its employees were designated by the MWA as “independent contractors.” Because there is no vicarious liability under Mississippi law for the acts of independent contractors, see Carr v. Crabtree, 55 So. 2d 408 (Miss. 1951), Kerr-McGee could not have any liability for Performance’s negligent acts. 4 In its reply brief, Certain London also argues that it is entitled to coverage under a second exception to the Policy’s contractual liability exclusion. That exception would permit coverage for Performance’s agreements to assume another’s tort liability “[t]hat the insured would have in the absence of the

5 AFFIRMED

contract or agreement.” However, this argument is waived because Certain London failed to raise it before the district court. See Forbush v. J.C. Penny Co., 98 F.3d 817, 822 (5th Cir. 1996).