Federal Insurance Company v. Traveler's Casualty, (11th Cir. 2002)

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UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 01-13734

Non-Argument Calendar

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



(January 31, 2002)



Before BLACK, MARCUS and GODBOLD, Circuit Judges.

PER CURIAM:

This case raises two issues. First, whether a primary insurance carrier owes

a duty to an excess carrier in its conduct of the defense of a mutual insured.

Second, whether an excess insurer can be equitably subrogated to the rights of an

insured against the primary carrier in the conduct of its defense of the mutual

insured. Because these issues are questions of state law which appear to control

the outcome of this appeal and there are no clear controlling precedents in the

decisions of the Alabama Supreme Court, we certify both questions to the

Alabama Supreme Court under Rule 18 of the Alabama Rules of Appellate

Procedure.

CERTIFICATION FROM THE UNITED STATES COURT OF

APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME

COURT OF ALABAMA, PURSUANT TO RULE 18, ALABAMA

RULES OF APPELLATE PROCEDURE.

I. Style of the case

The style of the case in which this certification is made is 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, case No. 01-13734-AA, United States Court of

Appeals for the Eleventh Circuit on appeal from the United States District Court

for the Northern District of Alabama.

II. Facts

The facts of this case are undisputed. A construction accident occurred on

June 27, 1995. Barry Wayne Gulley, an employee of Kennon Excavating &

Construction Company, was killed on that date when a masonry wall fell on him

and crushed him to death. Pearce Construction Company had constructed the wall

in 1987.

Gulley's personal representative filed a lawsuit against Pearce Construction

Company in the Circuit Court of Morgan County, Alabama. Pearce Construction

Company had a general comprehensive policy of primary liability insurance with

Aetna (now Travelers). This policy afforded Plaintiff $1 million of primary

liability coverage. Pearce Construction Company had purchased excess insurance

from Plaintiff Federal Insurance Company. The policy limits of the excess

coverage were $10 million. The parties engaged in settlement negotiations prior

to the jury trial in Gulley. The settlement negotiations were unsuccessful. Prior to

the jury verdict in Gulley, the highest verdict ever returned by a Morgan County

jury was $225,000. The Gulley case could have been settled for $350,000 but

Aetna would not agree to pay that amount.

The case proceeded to trial, and the jury returned a verdict for $4.6 million.

The judgment was appealed, but the parties settled the case, with Defendant

paying the limits of its primary coverage ($1 million) and Plaintiff paying the

balance of $3.6 million.

III. Questions to be certified

1) Whether 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. The relevant

duties are: duty of good faith to settle; duty of good faith in deciding

whether to settle; duty of good faith to keep excess carrier informed

of settlement negotiations and adverse defense developments.

2) Whether an excess insurer can be equitably subrogated to the rights

of an insured arising out of any of the foregoing duties against the

primary carrier in the conduct of its defense of the mutual insured.

The particular phrasing used in the certified question is not to restrict the

Supreme Court's consideration of the issues in its analysis of the record certified

in this case. This latitude extends to the Supreme Court's restatement of the issue

or issues and the manner in which the answers are given. See Lashburn v. Rabun,

755 F.2d 1404 (11th Cir. 1985).

The clerk of this court is directed to transmit this certificate, as well as the

briefs and record filed with the court, to the Supreme Court of Alabama, and

simultaneously to transmit copies of the certificate to the attorneys for the parties.

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