United States District Court, E.D. Louisiana
November 18, 2014
PENNSYLVANIA GENERAL INSURANCE COMPANY, ET AL., Section I
ORDER AND REASONS
LANCE M. AFRICK, District Judge.
Before the Court is a motion filed by defendant, Huntington Ingalls Incorporated ("Avondale"), for partial summary judgment regarding plaintiffs' Louisiana Civil Code Articles 1821-1823 claims relative to certain "buy-back" agreements. Plaintiffs have filed an opposition. For the following reasons, the motion is GRANTED.
Plaintiffs allege that decedent, Michael Comardelle ("Comardelle"), was "exposed to asbestos and asbestos-containing products manufactured, distributed, and sold" by defendants during the course of his employment from 1963 through 1979. Plaintiffs allege, "As a result of these exposures to toxic substances, including asbestos, [Comardelle] contracted cancer, mesothelioma, and lung cancer, which was first diagnosed on approximately September 25, 2013." Comardelle died on May 3, 2014, and his widow and children were substituted as plaintiffs.
Among a myriad of other claims, plaintiffs seek to recover from Avondale's executive officers individually via certain insurance policies purchased by Avondale which insured against the executive officers' individual liability for actions taken within the scope of their employment. Highlands Insurance Company ("Highlands") and American Motorists Insurance Company ("American Motorists"), the insurers who issued the subject policies,  are now insolvent,  but plaintiffs assert that Avondale assumed its insurers' responsibilities under the policies pursuant to so-called "buy-back" agreements. Plaintiffs claim that Avondale assumed the role of an "additional insurer" under the policies and that it is obligated to plaintiffs for its executive officers' individual liability because Avondale stands in the shoes of Highlands and American Motorists. Avondale asserts that it is not liable for its executive officers' individual liability under the policies.
STANDARD OF LAW
Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines that there is no genuine issue of material fact. See Fed.R.Civ.P. 56. "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id.; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its burden pursuant to Rule 56, the nonmoving party must come forward with specific facts showing that there is a genuine issue of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue is not satisfied by creating "some metaphysical doubt as to the material facts, ' by conclusory allegations, ' by unsubstantiated assertions, ' or by only a scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, "is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor." Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).
A. Louisiana Law
The Louisiana Civil Code provides "special regulations for assumptions of obligations." La. Civ. Code art. 1821 cmt. (b); see generally Saul Litvinoff, 5 La. Civ. L. Treatise, Law of Obligations, ch. 10 (2d ed. 2012). "An obligor [Highlands and American Motorists] and a third person [Avondale] may agree to an assumption by the latter of an obligation of the former." La. Civ. Code art. 1821. "A person [Avondale] who, by agreement with the obligor [Highlands and American Motorists], assumes the obligation of the latter is bound only to the extent of his assumption. The assuming obligor [Avondale] may raise any defense based on the contract by which the assumption was made." La. Civ. Code art. 1822.
B. The Buy-Back Agreements
The buy-back agreement between Avondale and Highlands states, "In exchange for the mutual covenants, promises and consideration which are described throughout this Agreement, the Settling Parties hereby agree to compromise, release and settle all claims arising out of or incident to the Policies and to undertake the acts and obligations set forth in this section." In exchange for the payment of a one-time lump sum settlement,  the agreement states that Avondale "expressly releases, acquits and forever discharges... Highlands from any and all obligations arising under or related in any way to the Policies." Avondale also agreed that its "interest in the Policies shall be deemed exhausted in its entirety" and that "any obligation of Highlands to [Avondale] under the Policies shall be void ab initio, and all past, present or future obligations to [Avondale] for liabilities known or unknown of any kind under the Policies are forever discharged." Avondale agreed to defend and indemnify Highlands in the event that Highlands or its receiver are subject to "claims arising out of the Policies brought by third parties, additional insureds and/or individuals or entities claiming coverage under the Policies against Highlands, " including any claims brought against Highlands pursuant to the Louisiana Direct Action Statute.
The buy-back agreement between Avondale and American Motorists is similar. The recitals at the beginning of the agreement state that "the Parties intend to fully and forever extinguish all rights, duties and coverage under the POLICIES and to render them null and void, as if they had never been issued." In exchange for the payment of a one-time lump sum settlement,  the agreement states that Avondale "hereby fully, forever, and irrevocably releases and discharges [American Motorists] from any and all INSURANCE COVERAGE CLAIMS arising out of, or in any manner relating to, the POLICIES." Avondale agreed that "all limits of liability, including, but not limited to, all occurrence and aggregate limits, of the POLICIES, are fully exhausted, " and the agreement provides that "the POLICIES are hereby rescinded for all purposes, [are] null and void, and are void ab initio, as if they had never been issued." Avondale also agreed to defend and indemnify American Motorists "against any and all INDEMNIFIED CLAIMS under the POLICIES" but limited to "those claims arising out of the POLICIES brought by third parties, additional insureds and/or individuals or entities claiming coverage under the POLICIES against [American Motorists]."
Although the Court concludes that the motion should be granted based on the unambiguous language of the buy-back agreements, which do not constitute an assumption of any obligation to plaintiffs under the insurance policies, the Court briefly outlines the parties' wide-ranging arguments. Avondale contends that plaintiffs' claims under the buy-back agreements are an attempt to circumvent a state-law venue ruling, Trascher v. Northrop Grumman Ship Systems, Inc., 43 So.3d 961 (La. 2010). Avondale also asserts that it cannot be sued pursuant to the Louisiana Direct Action Statute because it is not an "insurer" within the meaning of the Louisiana Insurance Code. Avondale argues that Articles 1821-1823 are not applicable to this case because "[b]oth Highlands and American Motorists are in bankruptcy proceedings, and therefore plaintiffs no longer have a right or cause of action against them. There is no debt owed by Highlands and American Motorists.... Accordingly, there is no debt or obligation between plaintiffs and Highlands or American Motorists to be assumed or satisfied by Avondale...." Avondale contends that "[a]ny change to the rights of third parties is strictly due to the fact that Highlands and American Motorists are now insolvent, " and not due to the buy-back agreements, which "have no relevance regarding executive officers, and at most, they establish only that Avondale is self-insured for the relevant time periods-a fact Avondale is willing to stipulate."
Plaintiffs dismiss Avondale's discussion of Trascher and the Louisiana Direct Action Statute as a distraction, and they urge the Court to focus on the buy-back agreements and whether Avondale assumed its insurers' obligations pursuant to Articles 1821-1823. The only provisions in the buy-back agreements that plaintiffs identify in support of their claims are the releases and the defense and indemnity agreements which, plaintiffs note, refer to the Louisiana Direct Action Statute. Plaintiffs conclude that, because the insurance policies underlying the buy-back agreements covered Avondale's executive officers,  "[t]he buy-back agreements make Avondale, [Highlands], and [American Motorists] solidarily liable under those insurance policies and Louisiana law, and plaintiffs have both a right of action and a cause of action against Avondale pursuant to Louisiana contract law, as standing in the shoes of its insurers under the insurance policies covered by the written buy-back agreements."
Based on the unambiguous language of the buy-back agreements, the Court finds that Avondale did not assume any obligations to plaintiffs under the insurance policies issued by Highlands and American Motorists, and Avondale, Highlands, and American Motorists are not solidarily obligated to plaintiffs. The obvious purpose of the buy-back agreements was not to substitute Avondale as the obligor under the insurance policies, but to extinguish the obligations under the insurance policies altogether: the policies are "void ab initio, " "as if they had never been issued." The defense and indemnity obligations upon which plaintiffs rely are triggered only in the event that Highlands or American Motorists is subject to a claim by a third-party claimant. Plaintiffs did not bring claims against either insurer due to their insolvency, so Avondale's defense and indemnity obligations were never triggered. If the agreements use the word "assume" at all, plaintiffs have not noted it, the Court has not discovered it, and plaintiffs' conclusory statement that an obligation was assumed is completely disconnected from the actual language of the buy-back agreements. As stated previously, "a promise to pay the debt of a third person must be explicit, clear, and in writing, " Park Towers, 8 F.3d at 310, and the buy-back agreements fall far short of this standard., 
The cases cited by plaintiffs are either irrelevant or distinguishable and fail to address the issue of whether the buy-back agreements constitute an assumption of any obligation under the policies. Furthermore, plaintiffs' insistence that they are third-party beneficiaries of the policies is unavailing because those policies were terminated by the buy-back agreements before plaintiffs ever made any claims. See La. Civ. Code art. 1978 ("Once the third party has manifested his intention to avail himself of the benefit, the parties may not dissolve the contract by mutual consent without the beneficiary's agreement."); La. Civ. Code art. 1979 ("The stipulation may be revoked only by the stipulator and only before the third party has manifested his intention of availing himself of the benefit."); Mobil Exploration & Producing U.S. Inc. v. Certain Underwriters Subscribing to Cover Note 95-3317(A), 837 So.2d 11, 35 (La.App. 1 Cir. 2003) ("In order for the consequences of La. C.C. arts. 1978-1982 to be triggered, the third party must evidence his intent to avail himself of the stipulated benefits."), writs denied, 841 So.2d 805, 843 So.2d 1129; see generally Fred McGaha, Comment, Third-Party Beneficiary Contracts, 45 La. L. Rev. 797, 801-02 (1985).
The buy-back agreements were both executed in 2004,  but Comardelle was not diagnosed with mesothelioma until 2013. Clearly plaintiffs could not have manifested any intention to avail themselves of that insurance coverage prior to the policies' dissolution, and there is no evidence that plaintiffs even knew that these insurance policies existed prior to this litigation.
Although plaintiffs' convoluted claims are a creative attempt to recover from otherwise unreachable defendants, such claims are untethered from the clear language and purpose of the buy-back agreements. Accordingly,
IT IS ORDERED that the motion is GRANTED and that plaintiff's Louisiana Civil Code Articles 1821-1823 claims relative to the buy-back agreements are DISMISSED WITH PREJUDICE.