United States v. CNA Financial Corp.

113 F. App'x 205

Opinions

MEMORANDUM

*

A.

The United States appeals the district court’s granting of summary judgment to Continental Casualty Company (“Continental”) on the question of Continental’s liability to the United States on an insurance policy taken out by Bristol Bay Area Health Corporation (“Bristol Bay”), pursuant to the Indian Self-Determination and Education Assistance Act of 1975 (“ISDEAA”), 25 U.S.C. § 450 et seq. We partially reverse the district court on the ground that the United States is properly characterized as an implied beneficiary of Bristol Bay’s insurance policy, and is therefore entitled to pursue its claim against Continental.

The United States argues that it must be considered an “implied insured beneficiary” of Bristol’s liability policy with Continental. Under Alaska law, the “implied insurance doctrine” permits an unnamed party to claim rights as an implied beneficiary of an insurance contract “where the risk to the insurer is unchanged, and where the third party is within the class intended to be benefited by the parties .... ” Stewart-Smith Haidinger, Inc. v. Avi-Truck, Inc., 682 P.2d 1108, 1113 (Alaska 1984). The doctrine, as explained by the Alaska Supreme Court, is based in part on the equitable principle that when an insurance policy is ultimately paid for by a party not named as a beneficiary in the policy, that party “should be able to benefit from that payment unless the [party] has clearly bargained away that benefit, it being the natural expectation of the parties that they should benefit from what they pay for.” Great Am. Ins. Co. v. Bar Club, Inc., 921 P.2d 626, 628 n. 1 (Alaska 1996) (quotation omitted). The determinative question in deciding whether to apply the implied insured doctrine is whether the risk undertaken by the insurer would be affected by implying an additional insured. Avi-Truck, 682 P.2d at 1112.

Bristol Bay originally obtained its insurance policy in 1989. At that time, Bristol Bay would have been liable for the negligent acts of its employees; by extension, Continental would be required to discharge Bristol Bay’s obligations under the terms of the liability policy. Between 1989 and 1994, no significant changes were made to the terms of the policy. Significantly, no mention was made in the terms of the policy of the effect of the 1990 amendments to the ISDEAA, which provided for the United States to assume tort liability for the negligent acts of ISDEAAauthorized organizations’ employees by subjecting the United States to suit under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 2671 et seq. 25 U.S.C. § 450f(d); Snyder v. Navajo Nation, 371 F.3d 658, 662 (9th Cir.2004). If the policy were intended to cover only those potential liabilities not subsumed by the FTCA, there ought to have been some mention of that in the policy’s exclusions. By the time of the incident at issue here, Bristol Bay’s potential liability, and consequently Continental’s risk, had been eviscerated by the amendments to the ISDEAA. Nonetheless, Bristol Bay continued to maintain its policy with Continental at premiums which were never reduced to reflect Bristol Bay’s correspondingly lessened liability.

Under Continental’s interpretation of the United States’ relationship to the policy, Continental could never incur liability under Bristol Bay’s policy. Such a result is inherently inequitable; indeed, it would be inimical to public policy to permit insurance policies which insure nothing. On the other hand, deeming the United States to be an implied insured, and thereby obligating Continental to compensate the United States for damages arising from the negligence of Bristol employees, is inherently equitable: the United States gets the benefit of an insurance policy which by its own terms covered losses for which the United States was exclusively liable; and Continental is precluded from a “windfall” whereby it “eseape[s] liability for protection it was paid to provide.” See Bar Club, 921 P.2d at 628 n. 1.

The United States was the only party which could have been held hable for the negligence of Bristol Bay’s employees. Thus, Continental’s risk would not be broadened by implying the United States as an additional insured beneficiary. Bristol Bay’s premiums were unaffected by changes in federal law which imposed liability for such damages on the United States exclusively; hence, it would be fundamentally unfair to hold that Continental could avoid all liability under the policy merely because of the change in federal law. Summary judgment in favor of Continental was therefore inappropriate.

B.

Since we -reverse the district court’s summary judgment order on behalf of Continental on the implied insured theory, we need not address the United States’ alternative argument that it was entitled to implied indemnification from Continental.

C.

Continental cross-appeals the district court’s conclusion that it is not entitled to attorneys’ fees under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(b), or Alaska Civil Rule 82. Continental argues that “federal common law” exposes the United States to liability under Rule 82. In support of its argument, however, Continental cites to federal courts which apply fee-shifting statutes while sitting in diversity jurisdiction. The fact that diversity courts apply state fee-shifting statutes because they are applying state substantive law certainly does not establish that federal common law permits a court exercising supplemental jurisdiction over state law claims to apply a fee-shifting statute like Rule 82.

Thus, Continental would only be entitled to attorneys’ fees if the United States waived its sovereign immunity “under the terms of any statute which specifically provides for such an award.” 28 U.S.C. § 2412(b). Courts which have interpreted § 2412(b) have universally held that the “any statute” language applies only to federal statutes. See United States v. Parsons Corp., 1 F.3d 944, 946 (9th Cir.1993). Continental identifies no such statute, and we have encountered none. The district court’s denial of Continental’s request for attorneys’ fees was therefore correct.

REVERSED.

This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.