Westchester Fire Insurance Co. v. Haspel-Kansas Investment Partnership

A party's act may be a substantial factor in bringing about harm when the act is a cause-in-fact in bringing about the injury when the harm would not have occurred without it. While a party's conduct does not have to be the sole cause of the harm, it is a necessary antecedent essential to an assessment of liability.

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Insurance Law Click here for the full text of this decision FACTS: Westchester Fire Insurance Co. (“Westchester”) filed a subrogation action in tort and contract against the the appellees (collectively, “Haspel-Kansas”) seeking to recover $1 million that Westchester contributed to a settlement for K&B Drug Stores. The settlement was paid to Jermol Stinson for injuries he sustained in a shooting incident which occurred in a parking lot of the shopping center where K&B was a tenant and which Haspel-Kansas owns. HOLDING: Affirmed. Westchester argues that the district court erred by failing to properly apply Louisiana’s “cause-in-fact” analysis when it determined that Haspel-Kansas was not liable for Stinson’s injuries. Westchester also argues that the district court ignored well-established 5th Circuit caselaw when it held that Westchester waived its right to seek contractual indemnity from Haspel-Kansas by voluntarily participating in the settlement. In light of Lasyone v. Kansas City Southern Railroad, 786 So. 2d 682 (La. 2001), it appears that the Louisiana Supreme Court has transformed the earlier threshold test that the conduct have “something to do” with the plaintiff’s injuries into an inquiry of “to what extent” did the defendant’s conduct have something to do with the plaintiff’s injuries. For example, in cases involving multiple causes, a substantial factor test is used. Under this standard, the court finds that the district court’s findings were not clearly erroneous. There is ample evidence in the record to support the district court’s findings that the actions or inactions of Haspel-Kansas were not the cause-in-fact of Stinson’s injuries. The district court was in the best position to weigh the evidence and test the credibility of the experts provided by the parties. The district court held that despite its finding that K&B was not liable for Stinson’s injuries, and that K&B did not admit liability as part of its settlement, “the fact remains that K&B’s (and Westchester’s) payment to Stinson was to settle his negligence claim against K&B. Because that payment was due solely to K&B’s choice to terminate the danger of being cast in judgment on Stinson’s negligence claim against it, K&B cannot benefit from the indemnity clause.” Westchester contends that it may pursue its contractual indemnity claim against Haspel-Kansas under this court’s decision in Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co., 89 F.3d 243 (5th Cir. 1996). In Pine Bluff Sand & Gravel Co., the plaintiff, Newberg, sued under an indemnification provision contained in a contract for dredging work along the Red River. Newberg sued to recover monies it had contributed to a settlement and the costs of defending itself in the underlying action. The indemnification provision stipulated that Pine Bluff was not required to indemnify Newberg “to the extent that” Newberg caused the loss. Pine Bluff argued, inter alia, that Newberg had waived its right to seek indemnification because it participated and contributed to the settlement, precluding a trial on the merits which would have determined whether Newberg was free from fault. Pine Bluff argued that by avoiding a determination of fault (i.e. if Newberg was at fault, then there is no indemnification), Newberg should not be able to recover for the money it paid in the settlement or the cost to defend. This court rejected Pine Bluff’s waiver argument, stating that: “Louisiana law does not bar Newberg from pursuing a post-settlement determination of fault through an action against Pine Bluff to enforce the terms of their indemnification agreement. Indeed, such a bar would conflict with firmly established public-policy encouraging settlements.” This court further noted that because the settlement was a multi-party settlement, this “makes evident the inadvisability of precluding Newberg from having its day in court on the apportionment of fault issue.” The court declined to “punish Newberg for its willingness to help advance a multi-party settlement.” The instant case, however, is distinguishable from Pine Bluff Sand & Gravel Co. Unlike Pine-Bluff, Haspel-Kansas has not asserted a “waiver” argument. Moreover, unlike Newberg, Haspel-Kansas did not participate in the settlement of the underlying suit. Under the indemnification provision at issue in this case, Haspel-Kansas indemnifies K&B for “any responsibility for injury to person . . . not due to negligence of Lessee.” The district court’s analysis is consistent with the terms of the indemnity provision. Under the indemnity provision, K&B is entitled to indemnity for any responsibility not due to its negligence. Although K&B did not admit liability as part of the settlement, it did unilaterally decide to settle a negligence suit, thereby creating K&B’s “responsibility” under the indemnity provision. We conclude that neither K&B nor Westchester should benefit from the indemnity provision where, as Haspel-Kansas argues, only its unilateral decision to avoid risk forms the basis for the so-called “responsibility” which triggers the obligation to indemnify under the lease. Such a holding would lead to a perverse result, that is, an indemnitee would have the incentive to settle even frivolous claims in order to avoid the costs and risks associated with litigation, and then demand indemnity for the pay-out. OPINION: Stewart, J.; King, C.J., Reavley and Stewart, JJ.

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