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The Shaw Group Inc. v. Zurich American Insurance Company

United States District Court, M.D. Louisiana

November 20, 2014



JAMES J. BRADY, District Judge.

This matter is before the Court on numerous motions for summary judgment and partial judgment filed by both plaintiffs, The Shaw Group and Shaw Process Fabricators (Collectively "Shaw"), and by Zurich American Insurance Company (Zurich), the defendant. All these motions are opposed. Zurich filed two additional motions-to strike privileged documents (Doc. 346) associated with Shaw's motion and a motion to defer ruling or, alternatively, deny (Doc. 347) Shaw's motion. Oral argument is unnecessary.


The following facts are undisputed. Shaw and Zurich agreed to an insurance contract that granted coverage to Shaw from September 1, 2008 to September 1, 2009. The policy had a $2, 000, 000 "per occurrence" limit and a $4, 000, 000 aggregate cap. Shaw was responsible for a deductible of $750, 000 "per occurrence" as well. By agreement, the parties used a third party adjustor, F.A. Richard and Associations (FARA), which entered into separate, individual contracts with Shaw and Zurich. FARA would handle and administrate claims related to the policy, and Zurich would pay claims. This arrangement-where different entities are responsible for paying claims and administrating claims, respectively-is known as an "unbundled" policy.

In 2009, REC Solar Grade Silicon (REC) sued Shaw, alleging faulty pipes that REC received from Shaw had caused damages. Shaw sent the complaint to FARA, and FARA sent it to Zurich on June 29, 2009. In September of 2009, FARA determined that Shaw was likely liable for REC's claims and informed Zurich. On September 9, 2010, Zurich submitted a letter stating that it would defend Shaw under a "full reservation of rights." Prior to this letter, neither FARA nor Zurich undertook any defense of the claim, [1] and Shaw retained, and paid, its own counsel. Shaw retained three firms at various junctures of the litigation process: Oles Morrison, Griffith Nixon, and finally, Baker Donelson. Both sides agree that these law firms aggressively and adequately defended[2] Shaw.

The REC lawsuit settled in October of 2011. Several settlement conferences occurred beforehand. The first settlement conference was in December of 2009, approximately nine months before Zurich issued the "reservation of rights" letter. Although the other conferences were after Zurich's letter, Zurich participated in none of them. Ultimately, the case settled for $24, 554, 520.50: $20, 750, 000 in damages and Shaw's agreement not to pursue an uncontested counterclaim valued at $3, 804, 520.50. Zurich paid $4, 000, 000 to Shaw toward the settlement amount in accordance with the policy's aggregate cap; Shaw paid at least one $750, 000 deductible.


Shaw asserts, essentially, four claims against Zurich. First, Shaw asserts that Zurich breached the insurer's duty to defend by failing to promptly pay defense costs. Second, Shaw asserts that Zurich failed to attempt to settle Shaw's suit with REC in good faith by refusing to attend settlement conferences and mediations. Third, Shaw claims that Zurich violated Washington's Consumer Protection Act (CPA). Fourth, Shaw asserts that Zurich violated Washington's Insurance Fair Conduct Act (IFCA).


Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact." Fed. Rule Civ. P. 56(a). The party seeking summary judgment carries the burden of demonstrating that there is an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). When the burden at trial rests on the non-moving party, the moving party need only demonstrate that the record lacks sufficient evidentiary support for the non-moving party's case. Id. The moving party may do this by showing that the evidence is insufficient to prove the existence of one or more essential elements of the non-moving party's case. Id. A party must support its summary judgment position by "citing to particular parts of materials in the record" or "showing that the materials cited do not establish the absence or presence of a genuine dispute." Fed. Rule Civ. P. 56(c)(1).

Although the Court considers evidence in a light most favorable to the non-moving party, the non-moving party must show that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). Conclusory allegations and unsubstantiated assertions will not satisfy the non-moving party's burden. Grimes v. Tex. Dep't of Mental Health, 102 F.3d 137, 139-40 (5th Cir. 1996). Similarly, "[u]nsworn pleadings, memoranda or the like are not, of course, competent summary judgment evidence." Larry v. White, 929 F.2d 206, 211 n.12 (5th Cir. 1991), cert. denied, 507 U.S. 1051. If, once the non-moving party has been given the opportunity to raise a genuine fact issue, no reasonable juror could find for the non-moving party, summary judgment will be granted for the moving party. Celotex, 477 U.S. at 322.


I. Choice of Law (Docs. 323, 330, 331, 349, 352)

In several of its memoranda, Zurich argues that Louisiana law applies to the bad faith failure to attempt to settle claim. It points out that under the depe├žage doctrine, a different state's law can apply to different issues in the case. Although Zurich acknowledges the Court has already ruled on choice of law, it argues that those rulings only applied Washington law to the duty to promptly defend issue and not the failure to attempt to settle claim. The Court does not find this argument persuasive; the ruling on the motion for reconsideration conclusively determined that Washington law applies to Shaw's claims against Zurich. (Doc. 132 at 10-12).

II. Zurich's responsibility for FARA (Doc. 311)

Shaw and Zurich both seek summary judgment on the issue of whether Zurich is responsible for the actions of FARA, the third party administrator. This liability affects all of Shaw's claims. Shaw offers two arguments: first, that under the contract's language, Zurich assumes responsibility for all of FARA's actions, including the essentially non-delegable duties to act in good faith. See, e.g., Natividad v. Alexsis, Inc., S.W.2d 695, 698 (Tex. 1994). Second, that FARA is Zurich's agent, and under Washington's common law of agency, Zurich, as principal, is responsible for FARA's actions. Chicago Title Ins. Co. v. Office of Ins. Comm'r, 309 P.3d 372, 380 (Wash. 2013). The Court agrees ...

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