Georgia-Pacific LLC vs United States Fidelity & Guaranty Company

FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
AUGUST 29, 2011
JOHN LEY
CLERK
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 10-11904
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D.C. Docket No. 1:07-cv-01460-HTW
GEORGIA-PACIFIC LLC,
f.k.a. Georgia-Pacific Corporation,
Plaintiff-Appellant,
versus
UNITED STATES FIDELITY & GUARANTY COMPANY,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(August 29, 2011)
Before EDMONDSON, MARTIN and COX, Circuit Judges.
PER CURIAM:
The Plaintiff, Georgia-Pacific, LLC (“Georgia-Pacific”) appeals the entry of
summary judgment in favor of the Defendant, United States Fidelity & Guaranty
Company (“USF&G”). Georgia-Pacific filed this action seeking a declaratory

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judgment requiring USF&G to undertake the defense of Georgia-Pacific in three
Mississippi lawsuits under general commercial liability policies issued by USF&G.
Georgia-Pacific’s Complaint also seeks damages, alleging that USF&G wrongly
failed to defend the lawsuits and wrongfully failed to reimburse Georgia-Pacific for
costs of defense.
The district court granted USF&G summary judgment, holding that at this stage
of the litigation USF&G was not obligated to defend Georgia-Pacific and not
obligated to reimburse Georgia-Pacific for defense costs it had incurred. The court
also held that there was no coverage under the policies for the claims alleged in the
Mississippi lawsuits.
Georgia-Pacific presents two arguments on appeal. First, it argues that the
district court did not properly construe provisions of the policy that address the
insurer’s duty to defend and duty to reimburse the insured for defense costs. Second,
it argues that the district court erred in holding that there was no coverage under the
policies for the claims alleged in the Mississippi lawsuits. We address each argument
in turn.
The two unusual commercial liability policies at issue are materially identical
for the purposes of the issues presented by this case. They contain a Self-Funded
Retention Endorsement (the “Retention Endorsement”) equivalent to a deductible of
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$2.5 million per “incident,” which modifies the Commercial General Liability
Coverage Form. The district court viewed the Retention Endorsement as clear and
unambiguous. (Dkt. 36 at 9.) We do too. And, Georgia law is clear: “Construction
of an insurance policy is governed by the ordinary rules of contract construction, and
when the terms of a written contract are clear and unambiguous, the court is to look
to the contract alone to find the parties’ intent.” BB&-McCarthy, LLC v. Baldwin
Paving Co., 646 S.E.2d 682, 685 (Ga. Ct. App. 2007) (quotation and citation
omitted.) The Retention Endorsement acknowledges USF&G’s right and duty to
defend covered claims, but delegates that duty to Georgia-Pacific. And, as the district
court properly concluded, under the Retention Endorsement USF&G has no
obligation to indemnify Georgia-Pacific for any litigation expenses until such time
as Georgia-Pacific’s obligation to pay damages exceeds the $2.5 million self-funded
retention. (No obligation to pay damages had been determined while this case was
pending in the district court.) These conclusions are dispositive. The district court’s
well-reasoned opinion supports these conclusions. (Dkt. 36.)
Georgia-Pacific contends that the district court violated basic rules of contract
construction and failed to follow the basic principles of Georgia law on the
construction of insurance contracts. These arguments are meritless. The Retention
Endorsement in these policies is atypical. No similar provisions are found in the
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Georgia decisions that Georgia-Pacific cites. Georgia-Pacific argues that the district
court’s interpretation of the Retention Endorsement is “illogical and unjust.”
(Appellant Br. at 22.) We view the district court’s interpretation as neither illogical
nor unjust. There are reasons why a company like Georgia-Pacific would seek
coverage of this kind. Two reasons are readily apparent. First, the duty to defend
was delegated to Georgia-Pacific, giving it the right to direct the defense of the
Mississippi lawsuits, including the right to select defense attorneys. Second, the $2.5
million self-funded retention surely resulted in a premium substantially less than the
premium that would have been payable without the self-funded retention. But,
whether logical or illogical, just or unjust, this is the contract the parties made.
We turn now to Georgia-Pacific’s second argument: that the district court
erred in holding that there was no coverage under the policies for the claims alleged
in the Mississippi lawsuits.
Georgia-Pacific did not assert in its Complaint, or at any time during the
pendancy of this case, that it had become obligated to pay damages in any of the three
Mississippi lawsuits. The district court nevertheless proceeded “in order to complete
the record” (Dkt. 36 at 16) to a determination as to whether the Mississippi lawsuits
alleged claims covered by the policies, concluding that none of them did. We need
not make this determination at this time. While there is no jurisdictional bar to
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deciding this issue, prudential considerations suggest it is premature to decide this
question at this time. We have already concluded that USF&G has no obligation to
indemnify Georgia-Pacific for defense costs. Furthermore, no obligation to pay
damages has been fixed; we do not know what claims, if any, will be successful; and
a loss in excess of $2.5 million is purely speculative. We therefore amend the order
of the district court to eliminate that part of the district court’s order that appears
under the heading “Underlying Complaints do not Implicate any Coverage under the
Policies.” (Dkt. 36 at 16-18.) The district court’s judgment, as amended, is affirmed.
JUDGMENT AS AMENDED AFFIRMED.1
We concluded that the Complaint in this diversity case included an insufficient allegation1
of Georgia-Pacific’s citizenship, and we invited the filing of a motion for leave to amend to correct
the deficient allegations. Georgia-Pacific has now filed an unopposed motion for leave to amend
which sufficiently alleges diversity jurisdiction. The motion in GRANTED.
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