The opinion of the court was delivered by: BYRON CUDMORE, Magistrate Judge
This matter comes before the Court on cross-motions for summary
judgment filed by Plaintiff Commonwealth Insurance Company
(Commonwealth) and Defendant/Cross-claimant Titan Tire
Corporation (Titan). See Commonwealth Insurance Company's
Motion for Summary Judgment (d/e 33) (Commonwealth's Summary
Judgment Motion); Motion for Summary Judgment Pursuant to
Fed.R.Civ.P. 56 (a) & (b) (d/e 38) (Titan's Summary Judgment
Motion). Commonwealth is a Canadian company with its principal
place of business in Vancouver, British Columbia, and Titan is an
Illinois corporation with its principal place of business in Des
Moines, Iowa. The amount in controversy exceeds $75,000.00; thus,
jurisdiction is proper under 28 U.S.C. § 1332. The parties have consented to a determination of this case by the
United States Magistrate Judge, pursuant to 28 U.S.C. § 636.
Order, November 27, 2002 (d/e 17). For the reasons set forth
below, Commonwealth's Summary Judgment Motion is allowed, in
part, and denied, in part. Titan's Summary Judgment Motion is
Commonwealth provided general liability insurance to Titan
under a comprehensive policy, number CRX57220, and an umbrella
policy, number CRX57221, both of which were effective for the
period from June 1, 1998 through June 1, 1999 (policy period).
Under the policies, Titan had a self-insured retention (SIR) of
$100,000.00. Policy CRX57220 provided a limit on Commonwealth's
liability as follows:
The limit of the insurer's liability under this
Policy shall be the amount stated in the Declarations
as "each Occurrence" for damages for any one
Occurrence or series of Occurrences resulting form
one cause, and subject to such limit the amount
stated in the Declarations as "aggregate" for any
number of Occurrences in any one policy period, if
caused by the Products Hazard or Completed Operations
Hazard as defined herein.
Complaint (d/e 1), Ex. A, Insuring Agreements, p. 12. The
Declarations of policy CRX57220 stated the limits of liability as
"$5,000,000.00 Inclusive Each Occurrence; $5,000,000.00 In the
Aggregate with respect to Products and Completed Operations Liability." Id., Ex. A,
Declarations, p. 1. The Umbrella Policy, policy CRX57221,
contained limits on liability as follows: "$25,000,000.00
Inclusive Each Occurrence; $25,000,000.00 In the Aggregate with
respect to Products and Completed Operations Liability." Id.,
Ex. B, Declarations, p. 2.
During the policy period, an accident occurred in which eight
people were killed. This accident gave rise to several lawsuits
against Titan in state court in Duval County, Texas, which
alleged that the deaths were the result of a defect in a tire
produced by Titan (collectively, "the Ramirez case").
Commonwealth paid its applicable policy limits, $5 million under
policy CRX57220 and $25 million under policy CRX57221, to settle
the Ramirez case. It was Commonwealth's decision, not Titan's, to
pay the policy limits in the Ramirez case. During settlement
negotiations in the Ramirez matter, Titan's General Counsel Cheri
Holley expressed concern about exhausting Titan's insurance
coverage for the policy period. Indeed, Commonwealth's outside
counsel in the Ramirez case, James Brennan, addressed the issue in a September 10, 1999, facsimile that was
carbon copied to Holley. The fax stated:
Titan's concern, as Commonwealth understands it, is
that Titan must consider the consequences of
accepting the settlement demand in the Ramirez law
suit, which will leave Titan with no insurance
coverage for the defence [sic] and/or settlement of
other suits which might be filed with respect to
unrelated Products and Completed Operations claims
within the same policy term. Further, Titan is
exposed to fresh suits arising out of its Products
and Completed Operations once the plaintiff bar
learns that Titan has settled this claim. Titan,
therefore, as we understand it, has a substantial
uninsured risk with respect to the policy term June
1, 1998 to June 1, 1999 even if the Ramirez claims
can be settled in accordance with the terms of the
settlement demand. . . . [T]he resolution of the
Ramirez claims for the amount of the demand will
leave Titan without coverage for an entire year of
Products and Completed Operations claim exposures.
Declaration of Lawrence D. Mason in Support of Commonwealth's
Motion for Summary Judgment (d/e 36) (Mason Declaration), Ex.
43. Nevertheless, the Ramirez matter was settled, and
Commonwealth paid the $30 million to the Ramirez plaintiffs in
February 2000. The Ramirez settlement fell under Titan's Products
and Completed Operations insurance coverage. The parties agree on
summary judgment that the Ramirez settlement exhausted the limits
of the policies only with respect to Products and Completed
Operations Liability and not with respect to other types of
claims, including personal injury claims. In February 1999, Mark and Lisa New sued Titan in Iowa state
court for personal injuries resulting from an incident that
occurred on January 8, 1999. The News alleged that Mark New was
injured when he fell into an uncovered service pit while
attempting to make a delivery to a Titan production facility in
Des Moines, Iowa. Policy No. CRX57220 provided personal injury
liability coverage as follows:
The insurer agrees to pay on behalf of the insured,
all sums which the insured shall become legally
obligated to pay as damages.
1. Personal Injury Liability
because of Personal Injury sustained by any person or
persons during the Policy Period.
Complaint, Ex. A, Insuring Agreements, p. 1.
While Titan now agrees that coverage remains for the New claim
under the policies after the Ramirez settlement, Titan asserts
that Titan did not know there was coverage under the policy for
Mark New's injuries until after the New case had been tried.
Nevertheless, Titan informed Commonwealth of the New lawsuit
during the Spring of 1999, and Commonwealth assigned the matter
to Claims Examiner Coral Davis. On May 28, 1999, Davis sent a fax
to Jennifer Cramm, a paralegal with Titan, regarding the New
lawsuit. Mason Declaration, Ex. 4. Davis inquired whether Titan had been able to establish the severity of Mark
New's injuries and whether "[i]f a settlement is made or if an
award is given, if this matter proceeds to trial, will it exceed
your $100,000.00 SIR." Id. Cramm responded by letter dated June
10,1999, stating that Titan had not received any information
regarding the amount of money involved in the New lawsuit. Id.,
Ex. 5. Cramm's letter stated "Titan Tire Corporation does not
believe at this time that this matter will go to an amount in
which your insurance company will need to be involved but, we
just wanted to make you aware of the matter." Id. After
receiving Cramm's response, Davis periodically contacted Cramm by
letter, seeking information as to the status of the New case.
Cramm consistently responded to Davis's letters with letters of
her own. All of Cramm's letters advised Davis to contact her if
additional information was needed; Davis, however, never
requested additional information or advised Cramm that her
letters were not responsive to Commonwealth's requests.*fn1
Titan hired outside counsel, Gene La Suer, to defend the New
lawsuit. The New lawsuit was set for trial on January 24, 2000.
By letter dated January 3, 2000, La Suer informed Titan that the
trial date was being pushed back to May 8, 2000. Davis sent Cramm
a brief letter dated February 21, 2000, which stated "Have you
been able to determine the extent of the Plaintiff's injuries and
quantum. Please advise." Mason Declaration, Ex. 15. Cramm
responded by letter dated March 10, 2000, stating:
Titan Tire Corporation's counsel has been in
contacted [sic] with Mr. New's counsel regarding a
settlement demand in this matter. To date Titan Tire
Corporation's counsel has not received a demand from
plaintiff's counsel in this matter. Once I have
received that demand or any other information on the
progress of this matter I will forward it onto [sic]
Id., Ex. 17.
La Suer testified in his deposition that he spoke to Brennan in
the spring of 2000, regarding a South Dakota case that La Suer
was handling for Titan. According to La Suer, one of his
questions for Commonwealth's outside counsel was whether the
South Dakota case fell in the same policy period as the Ramirez and New cases. Titan's Summary Judgment
Motion, Ex. D, Deposition of Gene R. La Suer, p. 25. According
to La Suer, La Suer commented that the Ramirez case had exhausted
the limits for the New case, stating "words to the effect, `So
it's not like the New case, where I don't have coverage?'" Id.
According to La Suer, Brennan responded, "`It's different than
the New case, yes.'" Id. at 25-26.
On March 21, 2000, the News's attorney submitted a settlement
proposal to La Suer. Mason Declaration, Ex. 18. The settlement
proposal outlined past medical expenses in the amount of
$24,714.46, and proposed settlement in the amount of $700,000.00,
with Titan paying all court costs. Id. Titan countered with an
offer to settle for $54,000.00, which the News rejected by letter
dated May 3, 2000. Id., Ex. 19. The News proposed settlement in
the amount of $390,000.00. Id. Titan rejected this offer on May
3, 2000, and offered to settle for $100,000.00. Id., Ex. 20.
The News rejected the $100,000.00 offer on May 4, 2000, and
offered to settle for $310,000.00. Id., Ex. 21. Titan rejected
this demand, instead offering to settle for $125,000.00. Id.,
Ex. 22. The News rejected this offer on May 5, 2000, and demanded
$275,000.00 to settle the matter. Id., Ex. 23. Titan did not
accept the News's offer, and the matter proceeded to jury trial
on May 8, 2000.
On May 11, 2000, the jury returned a verdict in favor of the
News against Titan in the amount of $328,071.00. Titan filed a
motion for judgment notwithstanding the verdict or a new trial on
May 22, 2000. On May 23, 2000, La Suer faxed Titan a proposed
settlement offer for the News in the amount of $300,000.00.
Mason Declaration, Ex. 26. La Suer's fax sought Titan's
permission to send the proposal "to get this case settled." Id.
La Suer advised Titan, "I do NOT believe there is an issue that
we can win on appeal because the judge was very good about giving
us the instructions we needed and there was NO evidence that was
submitted that would reverse the judgment." Id. Titan instead
offered $200,000.00 to settle the matter. The News's attorney
rejected this offer on May 24, 2000, stating that he would
recommend that his clients settle for $325,000.00. Id., Ex. 27.
On May 25, 2000, La Suer participated in a settlement conference
with the News's attorney, which resulted in an offer to settle by
the News for $325,000.00.
In a letter dated May 31, 2000, La Suer suggested that Titan
accept the News's $325,000.00 settlement offer. Mason
Declaration, Ex. 29. La Suer noted that, while Titan had appeal
issues, he "seriously doubt[ed]" that Titan could prevail on appeal. Id. Holley rejected La
Suer's advice, instructing him to appeal the matter. On June 13,
2000, the News withdrew their settlement offer. On June 21, 2000,
the trial court denied Titan's post-trial motion. Titan appealed.
By letter dated July 14, 2000, Cramm informed Davis that the
New case had proceeded to trial, resulting in an award of
$328,071.00 in favor of the News. Mason Declaration, Ex. 32.
Cramm forwarded Davis a copy of the verdict form. Id. Cramm's
letter did not ask Commonwealth to pay the judgment. According to
Titan, it was Titan's understanding, after the Ramirez
settlement, that the limits of liability available under the
policies had been exhausted and there was no coverage remaining
for the New case.
On October 20, 2000, Commonwealth's Senior Vice-President of
Claims Dennis Shave wrote to Holley to express his "serious
concerns with respect to the way that claims against Titan are
being handled." Mason Declaration, Ex. 33. Shave requested full
information on every claim where the total of the claim and
defense costs could exceed $100,000.00. Attached to the Shave
letter was a document entitled "Schedule of Titan Claims per
Policy Year." With respect to the policy year June 1, 1998 to June 1, 1999, the schedule noted, "This is the year of the Duval
County claim. The policy limits have been exhausted." However,
the schedule went on to address the two additional Commonwealth
files for that year. With respect to the New case, the schedule
File 181 New (Iowa)
Date of Loss January 8, 1999
Reported to Commonwealth in April 1999. This is a
slip and fall on Titan's property and therefore the
policy limits defence is not available.
Coral Davis called Titan's para-legal, Jennifer
Cramm, and was told it would be within the
self-insured retention of $100,000. Commonwealth sent
several letters asking for details, which were
ignored. Then a jury judgment in excess of $300,000
was handed down in July. Titan says they are
appealing but no further particulars are given.
On October 24, 2000, Commonwealth's outside counsel, Brennan,
sent a letter to Cramm which stated as follows:
Commonwealth is surprised to see that the jury
awarded Mr. and Mrs. New $328,071.00 in damages in
that Titan had asserted that the claim, including
defense costs, would not exceed the $100,000.00
deductible. We understand that Titan attends [sic] to
appeal this decision.
In order to determine the extent to which
Commonwealth may be obliged to cover Titan for this
judgment, it requires a complete copy of your internal file, including
specifically all trial and deposition transcripts,
all reports from the defense attorney, together with
a copy of their file. Commonwealth also requires that
Titan authorize its defense Attorney to speak to us
freely with respect to his conduct of the case from
beginning to end. We require the particulars of all
demands and settlement offers.
Commonwealth reserves all of its rights with respect
to coverage for this claim and waives none. We will
give you our views with respect to coverage once we
obtain the material which is requested herein.
Mason Declaration, Ex. 34. Titan did not respond to either the
October 20 or 24, 2000, letters.
On August 29, 2001, the appellate court affirmed the New
judgment. Titan then petitioned the Iowa Supreme Court for
review. The Iowa Supreme Court denied review in December 2001. By
letter dated December 3, 2001, La Suer forwarded Holley a copy of
the Iowa Supreme Court order, and suggested that Titan pick a
date to pay the total due, which had grown with the addition of
interest to $382,581.35, to the Clerk of the Court to ...