Continental Casualty Company, et al v. Winder Laboratories, LLC, et al

[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-11758
____________________
CONTINENTAL CASUALTY COMPANY,
VALLEY FORGE INSURANCE COMPANY,
Plaintiffs-Appellants-
Cross Appellees,
versus
WINDER LABORATORIES, LLC,
STEVEN PRESSMAN,
Defendants-Appellees-
Cross Appellants,
CONCORDIA PHARMACEUTICALS, S.A.R.L.,
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2 Opinion of the Court 21-11758
Defendant-Appellee.
____________________
Appeals from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 2:19-cv-00016-RWS
____________________
Before WILSON, BRANCH , and L AGOA , Circuit Judges.
BRANCH, C IRCUIT J UDGE :
Continental Casualty Company and Valley Forge Insurance
Company (collectively, “the insurers”) and Winder Laboratories,
LLC and Steven Pressman (collectively, “the insureds”) appeal and
cross-appeal from the district court’s judgment in this insurance
coverage dispute. In short, the parties’ insurance agreements
required the insurers to defend the insureds against certain third-
party lawsuits. After being sued by non-party Concordia
Pharmaceuticals Inc., S.A.R.L. (“Concordia”), the insureds sought
coverage under the policies. The insurers agreed to defend the
insureds against Concordia, subject to a reservation of rights,
including the right to seek reimbursement of defense costs
incurred for claims not covered by the policies. The insurance
agreements themselves, however, did not provide for
reimbursement.
This appeal presents two questions. The more
straightforward question is whether the insurers had a duty to
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21-11758 Opinion of the Court 3
defend the insureds against the Concordia action. Then, as a
matter of first impression under Georgia law, we must decide
whether a reservation of rights letter that includes a right to
reimbursement entitles an insurer to reimbursement of defense
costs even though the underlying insurance contract does not
include such a right. The district court granted judgment on the
pleadings to the insurers on the first issue—holding that an
exclusion in the contract meant there was no duty to defend—but
granted summary judgment to the insureds on the second issue—
holding that the insurers had no right to reimbursement. For the
reasons below, and with the benefit of oral argument, we affirm
both determinations.
I. Background
A. Facts
In 2015, Winder Laboratories, LLC (“Winder”)—a generic
pharmaceutical manufacturer managed by Steven Pressman—
purchased two insurance policies: a Primary General Liability
Policy from Valley Forge Insurance Company (“VFI”) and an
Umbrella Policy from Continental Casualty Company
(“Continental”). The materially identical policies required the
insurers to “defend the insured[s] against any ‘suit’” seeking
damages for “personal and advertising injury.” In pertinent part,
“personal and advertising injury” was defined to include an injury
“arising out of ” either “[o]ral or written publication, in any
manner, of material that slanders or libels a person or organization
or disparages a person’s or organization’s goods, products or
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4 Opinion of the Court 21-11758
services” or “[t]he use of another’s advertising idea in [the
insureds’] ‘advertisement.’”1 The policies also had a “failure to
conform” provision that excluded coverage for injuries “[a]rising
out of the failure of goods, products or services to conform with
any statement of quality or performance made in [the insureds’]
‘advertisement.’” Notably, neither policy included a
reimbursement provision allowing the insurers to recoup defense
costs.2
On January 6, 2016, Concordia sued Winder and Pressman
in the United States District Court for the Northern District of
Georgia, asserting various claims under the Lanham Act and
Georgia law.3 In the Concordia action, the Fourth Amended
Complaint became the operative complaint after a series of claim
dismissals and amendments.4 The crux of Concordia’s Fourth
1 Advertisement is also defined in the policy: “‘Advertisement’ means a notice
that is broadcast or published to the general public or specific market segments
about your goods, products or services for the purpose of attracting customers
or supporters.”
2 The policies also did not define the details of the defense. For example, the
policies did not mention which party would choose defense counsel if the
insureds were sued.
3 We call this lawsuit the “underlying litigation” or “Concordia action”
throughout this opinion.
4 Concordia’s initial complaint included eight claims. After a series of motions
to dismiss and several amended complaints, the operative complaint (Fourth
Amended Complaint) asserted the following claims: false advertising in
violation of Lanham Act § 43(a)(1)(B); contributory false advertising in
violation of Lanham Act § 43(a)(1)(B); common law unfair competition;
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21-11758 Opinion of the Court 5
Amended Complaint was that Winder “falsely or misleadingly
advertised their B-Donna product, and subsequently their
Phenohytro product, as generic [equivalents] to [Concordia’s
product] DONNATAL directly to the pharmaceutical industry,
including to potential purchasers.”
In light of the Concordia action, on February 19, 2016, the
insurers jointly sent the insureds a letter agreeing to provide their
defense—subject to a fairly standard reservation of rights to
disclaim coverage. Importantly, however, the letter also included
a not-so-standard reimbursement provision: “VFI specifically
reserves its right to seek reimbursement of defense costs incurred
on [the insureds’] behalf for all claims which are not potentially
covered by the VFI Policy.”5 Pressman—on behalf of the
insureds—signed and returned an “Acknowledgement of Defense
under a Reservation of Rights,” that noted “[the insureds] elect to
retain independent counsel6 to represent them in the Underlying
violations of the Georgia Uniform Deceptive Trade Practices Act; and tortious
interference with contract or business relationships.
5 This letter did not specify a similar right to seek reimbursement for
Continental. But, as the underlying litigation proceeded (eventually reaching
a Fourth Amended Complaint), the insurers sent updated reservation of rights
letters that eventually included a right to reimbursement for both insurers (not
just VFI): “[T]he [insurers] reserve their rights to disclaim coverage and seek
reimbursement of legal fees and costs.”
6 In the reservation of rights letters, the insurers provided the insureds this
option:
VFI will retain counsel to represent you and Winder in the
Underlying Suit. Alternatively, you and Winder can retain
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6 Opinion of the Court 21-11758
Suit, subject to [VFI’s] reservation of rights . . . .”
B. Procedural History
During the pendency of the Concordia action, on January
17, 2019, the insurers filed suit in the Northern District of Georgia
seeking a declaratory judgment that they had no duty to defend or
to indemnify the insureds under the policies and were entitled to
“reimbursement of legal costs and fees spent in providing [the
insureds] a defense” in the Concordia suit under the reservation of
rights. Following the insureds’ answer denying that both the
insurers had no duty to defend and that the insurers were entitled
to reimbursement, the insurers moved for judgment on the
pleadings. Focusing on the duty to defend, they argued that they
had no duty to defend the insureds against Concordia’s operative
complaint because Concordia did not allege a “personal or
advertising injury,” and—even if there were such an injury—the
“failure to conform” provision excluded coverage. The district
court granted the insurers’ motion, holding that Concordia’s
allegations were “squarely” excluded by the “failure to conform”
provision because the “operative complaint [was] based entirely
upon allegations that [Winder] misrepresented the quality” of
counsel of your choice to represent you in this matter. If
Winder elects to retain its own defense counsel, please be
advised that VFI will only agree to reimburse you or Winder
for necessary and reasonable defense costs incurred by defense
counsel at a rate charged by commensurate counsel typically
retained by VFI in the Northern District of Georgia, where the
suit is pending.
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21-11758 Opinion of the Court 7
Winder’s products.7 The court also noted that the insurers had
“not shown entitlement to reimbursement [for defense costs
already paid],” and encouraged the parties to confer “in an effort to
resolve any remaining dispute regarding the reimbursement issue.”
The insureds moved for reconsideration, which was denied. After
this ruling, the insurers stopped paying for the insureds’ defense.
In November 2020, having not reached an agreement, the
parties cross-moved for summary judgment on the insurers’
reimbursement claim. The district court denied the insurers’
motion and granted the insureds’. The district court noted that the
question presented—whether an insurer had a right to
reimbursement when that right was included only in a reservation
of rights letter but not the parties’ insurance contract—was an open
question under Georgia law. The district court found in favor of
the insureds, reasoning that an effective reservation of rights
necessarily required a preexisting contract right: “[A]bsent a
provision in the insurance policy—or some other express
agreement—an insurer who issued an otherwise valid, unilateral
reservation of rights cannot recoup its defense fees or costs.”
The insurers appeal the district court’s reimbursement
decision and the insureds cross-appeal the duty to defend
determination.
7 The district court did not address whether Concordia’s allegations presented
a “personal and advertising injury” because the “failure to conform” exclusion
was dispositive as to the insurers’ duty to defend.
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8 Opinion of the Court 21-11758
II. Standard of Review
We review a “district court’s grant of judgment on the
pleadings de novo.” Bankers Ins. Co. v. Fla. Residential Prop. & Cas.
Joint Underwriting Ass’n, 137 F.3d 1293, 1295 (11th Cir. 1998) (per
curiam). Judgment on the pleadings is appropriate when “there are
no material facts in dispute and the moving party is entitled to
judgment as a matter of law.” Cannon v. City of W. Palm Beach, 250
F.3d 1299, 1301 (11th Cir. 2001). “We must accept the facts alleged
in the complaint as true and view them in the light most favorable
to the nonmoving party.” Id.
We review a district court’s summary judgment
determinations de novo. Great Am. All. Ins. Co. v. Anderson, 847 F.3d
1327, 1331 (11th Cir. 2017). In this posture, “[w]e view the evidence
and draw all reasonable inferences in favor of . . . the party
opposing summary judgment.” Munoz v. Selig Enters., Inc., 981 F.3d
1265, 1272 (11th Cir. 2020). The moving party must “show[] that
there is no genuine dispute as to any material fact” so that it is
“entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); Smith
v. Owens, 848 F.3d 975, 978 (11th Cir. 2017).
Because this federal action is premised on diversity
jurisdiction, “Georgia’s substantive law governs.” AEGIS Elec. &
Gas Int’l Servs. Ltd. v. ECI Mgmt. LLC, 967 F.3d 1216, 1223 (11th Cir.
2020).
III. Discussion
We start with the insureds’ cross-appeal on the duty to
defend before considering the insurers’ appeal of the
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21-11758 Opinion of the Court 9
reimbursement decision.
A. Duty to Defend
The insureds argue that because Concordia alleged a
“personal and advertising injury,” which is a covered claim, the
insurers were obligated to defend the insureds against the
Concordia action. Specifically, the insureds argue that Concordia’s
complaint alleged a “personal and advertising injury” because it
included allegations that Winder copied Concordia’s DONNATAL
label inserts.8 The insurers argue that no “personal and advertising
injury” was alleged; rather, they contend that Concordia’s
allegations of false and misleading advertising triggered the “failure
to conform” exclusion such that there was no coverage under the
policies. The district court held that the allegations fell under the
“failure to conform” exclusion, and the insurers had no duty to
defend. We agree with the insurers and the district court.
8 The insureds did not make this label-copying argument until their motion for
reconsideration. Generally, parties cannot use motions for reconsideration
“to relitigate old matters, raise argument[,] or present evidence that could
have been raised prior to the entry of judgment.” Michael Linet, Inc. v. Vill. of
Wellington, 408 F.3d 757, 763 (11th Cir. 2005). As the district court noted, it
was improper for the insureds to make these arguments for the first time in
their motion for reconsideration. Nevertheless, the district court addressed
the merits of the new argument. Accordingly, we will consider the merits of
this argument as well. However, because we are considering the district
court’s ruling in the context of its denial of the insureds’ motion for
reconsideration, we review the denial of the motion for reconsideration for
abuse of discretion and review the underlying legal conclusions de novo. See
Equity Inv. Partners, LP v. Lenz, 594 F.3d 1338, 1342 (11th Cir. 2010).
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10 Opinion of the Court 21-11758
Whether the insurers have a duty to defend the insureds
against the underlying litigation hinges on whether Concordia’s
contributory false advertising claim was based on Winder’s alleged
label copying.9 If so, the alleged injury arose out of “[Winder’s]
use of another’s advertising idea”—i.e., Concordia’s labels—and
the insurers have a duty to defend under the “personal and
advertising injury” provision. If, however, the claim rested on
allegations that Winder actively misrepresented its drugs, then the
alleged injury arose from the “failure of goods . . . to conform with
any statement of quality or performance made in [the insureds’]
‘advertisement,’” and the insurers do not have a duty to defend
under the “failure to conform” exclusion.
Georgia law treats insurance as “a matter of contract” so
that “the parties to the contract of insurance are bound by its plain
and unambiguous terms.” Lima Delta Co. v. Glob. RI-022 Aerospace,
Inc., 789 S.E.2d 230, 233 (Ga. Ct. App. 2016) (quotation omitted).
“The construction of an unambiguous contract is a question of law
for the court.” Id. (quotation omitted).
9 The series of amendments and dismissals in the underlying litigation left
contributory false advertising as the only claim that possibly relied on
Concordia’s label-copying allegations. To make out a contributory false
advertising claim under the Lanham Act, plaintiffs must (1) “show that a third
party . . . directly engaged in false advertising that injured the plaintiff,” and
(2) “allege that the defendant contributed to that conduct either by knowingly
inducing or causing the conduct, or by materially participating in it.” Duty Free
Ams., Inc. v. Estée Lauder Cos., 797 F.3d 1248, 1277 (11th Cir. 2015).
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21-11758 Opinion of the Court 11
Under Georgia law, an unambiguous contract “must be
enforced as written,” and we should not expand “the rights of the
parties to an insurance policy . . . beyond the terms of the policy.”
Giddens v. Equitable Life Assurance Soc’y of the U.S., 445 F.3d 1286,
1297 (11th Cir. 2006). This principle is true even for “exclusions in
insurance policies” that are normally “strictly construed against the
insurer.” Fid. Nat’l Title Ins. Co. of N.Y. v. OHIC Ins. Co., 619 S.E.2d
704, 706 (Ga. Ct. App. 2005) (quotation omitted). That is, an
exclusion that is “plain and unambiguous binds the parties to its
terms and must be given effect, even if beneficial to the insurer and
detrimental to the insured.” Id. (quotation omitted). Georgia
courts counsel against “strain[ing] to extend coverage where none
was contracted or intended.” Id. (quotation omitted).
An insurer’s duty to defend is determined by “comparing the
allegations of the complaint with the provisions of the policy.” Pilz
v. Monticello Ins. Co., 599 S.E.2d 220, 221 (Ga. Ct. App. 2004)
(quotation omitted). Under Georgia law, when the policy uses the
broad term “suit,” the insurer has a duty “to defend the entire suit
if any of the individual claims could be covered under the [p]olicy.”
S. Tr. Ins. Co. v. Mountain Express Oil Co., 828 S.E.2d 455, 458 (Ga. Ct.
App. 2019); City of Atlanta v. St. Paul Fire & Marine Ins. Co., 498
S.E.2d 782, 784 (Ga. Ct. App. 1998) (“If the facts as alleged in the
complaint even arguably bring the occurrence within the policy’s
coverage, the insurer has a duty to defend the action.” (emphasis
added)). If, however, the complaint “does not assert any claims
upon which there would be insurance coverage, the insurer is
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12 Opinion of the Court 21-11758
justified in refusing to defend the insured’s lawsuit.” St. Paul Fire,
498 S.E.2d at 784.
With Georgia law in mind, we now look to the operative
complaint to see if Concordia’s allegations relating to its
contributory false advertising claim (a) triggered coverage under
the “personal and advertising injury” provision or (b) triggered the
“failure to conform” exclusion.10 We hold that the “failure to
conform” exclusion applied.
In the contributory false advertising count, Concordia
focused on Winder’s allegedly false and misleading representations
about its products:
[Winder] actively and materially furthered such false
or misleading, or false and misleading, advertising
and promotion of [its] B-Donna or Phenohytro
products by making false or misleading, or false and
misleading, representations about the products on
their labels and product inserts, making false or
misleading, or false and misleading representations to
the Drug Databases to list [its] B-Donna or
Phenohytro products with the Drug Databases,
listing the products with the Drug Databases, and/or
marketing the products as “generics” that are
10 To reiterate a critical point, “personal and advertising injury” was defined to
include “[t]he use of another’s advertising idea in [the insureds’]
‘advertisement.’”
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21-11758 Opinion of the Court 13
comparable to and/or substitutable for [Concordia’s]
DONNATAL.
Thus, Concordia’s contributory false advertising claim
clearly rested on Winder’s false and misleading representations—
not its label copying. Accordingly, we conclude that the allegations
in the complaint do not arise out of a “personal and advertising
injury” stemming from “[t]he use of another’s advertising idea”—
i.e., Concordia’s labels—that would have required the insurers to
defend the insureds against Concordia’s Fourth Amended
Complaint. See Pilz, 599 S.E.2d at 221; St. Paul Fire, 498 S.E.2d at
784 (“[W]here the complaint filed against the insured does not
assert any claims upon which there would be insurance coverage,
the insurer is justified in refusing to defend the insured’s lawsuit.”).
In fact, Concordia’s count-specific allegation that Winder
made “false or misleading” representations and statements about
its products by “marketing the products as ‘generics’ that are
comparable to and/or substitutable for [Concordia’s] DONNATAL,” is
a textbook example of an injury “[a]rising out of the failure of
goods, products or services to conform with any statement of quality
or performance made in [Winder’s] ‘advertisement.’”11 Thus,
contrary to the insureds’ argument, Concordia’s allegation that
11 Concordia’s allegations also include that “[s]uch false or misleading, or false
and misleading, statements about the B-Donna or Phenohytro products by
Drug Databases, pharmacies, insurers and/or other members of the
pharmaceutical industry have actually deceived or have the tendency to
deceive a substantial segment of their audience as to the nature, quality, and
characteristics of the B-Donna or Phenohytro products.”
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Winder marketed its products as comparable to Concordia’s brand-
name drug when it was not in fact equivalent falls squarely within
the “failure to conform” exclusion of the insurance policy. Under
Georgia law, we must give effect to this exclusion and cannot
“strain to extend coverage where none was contracted or
intended.” Fid. Nat. Title Ins. Co., 619 S.E.2d at 706.
The insureds resist our conclusion with the following
counter-arguments.
For one, the insureds maintain that Concordia’s complaint
involved a “personal and advertising injury” because it included
allegations of label copying. This statement is true. In the section
of the complaint containing factual allegations, Concordia did
reference label copying:
• “Upon information and belief, the labels and package
inserts for [Winder’s] B-Donna products have been
copied from the labels and package inserts for
[Concordia’s] DONNATAL, including the
‘Indications and Usage’ section, which claims that the
product has been reviewed and classified by FDA.”
• “Upon information and belief, the labels and package
inserts for [Winder’s] Phenohytro products have also
been copied from the labels and package inserts for
[Concordia’s] DONNATAL.”
• “Upon information and belief, [Winder’s] copying of
[Concordia’s] drug labels and product inserts was not
done as part of a submission to the FDA or other
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21-11758 Opinion of the Court 15
government agency, nor was it permitted or
contemplated under any legislative provision
authored by Congress.”
But these factual allegations provided the foundation for
some of Concordia’s previously dismissed claims. The only thing
tying the label-copying allegations to Concordia’s false advertising
count is that count’s language incorporating by reference “each
and every allegation contained in the [preceding] paragraphs.” We
conclude that this tangential connection—fastened through
boilerplate language—is inconsequential because, as analyzed
above, the actual count-specific allegations for the contributory
false advertising claim centered on Winder’s allegedly false and
misleading representations about its products.12
Moving forward, the insureds also argue that the “failure to
conform” exclusion does not apply because Concordia’s false
advertising claim stems from (1) false advertisements made by non-
party drug databases (such that Winder is not responsible), and
(2) true statements about Winder’s products which cannot
“fail . . . to conform with any statement of quality or
performance . . . .”
12 This discrepancy between the count-specific allegations, on the one hand,
and the generalized factual allegations that do not actually go toward
Concordia’s contributory false advertising claim, on the other hand, is the
reason the district court called the insureds’ argument an attempt to “distort”
the Fourth Amended Complaint.
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16 Opinion of the Court 21-11758
First, we reject the insureds’ argument that the “failure to
conform” exclusion does not apply because only the third-party
drug databases—not Winder—made the allegedly false statements.
Their argument must fail because Concordia clearly alleged that
Winder’s initial misrepresentations to the drug databases were the
“but for” cause of its injuries. See Hays v. Ga. Farm Bureau Mut. Ins.
Co., 722 S.E.2d 923, 927 (Ga. Ct. App. 2012) (“Claims arise out of
[t]he excluded conduct when but for that conduct, there could be
no claim against the insured.” (quotations omitted)). Further, the
allegations of Winder’s initial involvement were necessary to
Concordia’s contributory false advertising claim, which required a
showing that Winder “contributed to” the false advertising. See
Estée Lauder, 797 F.3d at 1277.
Second, we also reject the insureds’ argument that the
“failure to conform” provision does not apply because the
representations Winder made to the drug databases were true. At
this juncture, our analysis looks only to the allegations in the
complaint and the terms of the insurance agreement. See Pilz, 599
S.E.2d at 221 (“An insurer’s duty to defend is determined by
comparing the allegations of the complaint with the provisions of the
policy.” (emphasis added and quotation omitted)). And
Concordia’s complaint was littered with allegations that Winder
misrepresented its drugs which in turn caused the drug databases
to make misrepresentations. Accordingly, Concordia’s allegations
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21-11758 Opinion of the Court 17
(albeit not yet proven) triggered the “failure to conform”
exclusion.13
In the end, after our close comparison of the complaint and
insurance policies, we conclude that the “failure to conform”
exclusion applied such that the district court properly determined
that the insurers did not have an ongoing duty to defend the Fourth
Amended Complaint.
B. Right to Reimbursement
The duty to defend determination answers only the first of
the two questions presented in this appeal. In other words, we have
concluded that the insurers no longer have a duty to defend the
Fourth Amended Complaint, but that does not mean that the
insurers never had a duty to defend at earlier stages of the case.
Rather, because insurers under Georgia law have a broad duty to
defend when there is “even arguably” a covered claim, see St. Paul
Fire, 498 S.E.2d at 784, the insurers had an active duty to defend up
13 Admittedly, we have not addressed the effect of literal truth on a “failure to
conform” exclusion. We note, however, that the Eighth Circuit has
considered an argument that an advertisement being “literally true” means
that the allegations “do not fall within the scope of the failure-to-conform
provision because they do not make a ‘statement of quality or performance.’”
Westfield Ins. Co. v. Robinson Outdoors, Inc., 700 F.3d 1172, 1175 (8th Cir. 2012).
In rejecting this argument, the Eighth Circuit emphasized that, no matter if
some statements were true, “[t]he underlying lawsuits allege[d] that Robinson
misled consumers into buying hunting clothing that did not perform as it was
advertised.” Id. That is, the truthfulness of certain statements was not
determinative because, in aggregate, the allegations that supported the claim
were about deceit or misrepresentation.
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18 Opinion of the Court 21-11758
until the point when the district court ruled otherwise.14 Simply put,
under the facts of this case, the insurers were under a duty to
defend until the district court ruled that they were not.
14 The insurers point to two of our cases as well as dicta from a Georgia case
to argue that the duty to defend either does or does not exist at the time the
complaint was filed. These cases are not on point. First, in our cases, there
was unquestionably no duty to defend from the outset so there was never
“even arguably” a basis for coverage. See Mt. Hawley Ins. Co. v. Miami River
Port Terminal, LLC, 713 F. App’x 951, 957 (11th Cir. 2017) (per curiam)
(determining that there was “no duty to defend because [d]efendant was never
covered by the policy” (emphasis added)); Bandy v. Avondale Shipyards, Inc., 458
F.2d 900, 904 (5th Cir. 1972) (“The insurance policy excludes coverage for
injury caused by these cranes while being used for loading. Because the
allegations ‘unambiguously exclude coverage,’ [e]mployers [were] not under
a duty to defend . . . .”). The logic underlying these cases does not translate to
this case in which an arguable duty to defend eroded into non-existence as the
underlying litigation progressed from an initial complaint to a Fourth
Amended Complaint with different allegations and claims. Additionally, Mt.
Hawley, 713 F. App’x at 957, is an unpublished case that has no precedential
value.
Similarly, we put little stock in dicta from Georgia Interlocal Risk
Management Agency v. City of Sandy Springs, 788 S.E.2d 74, 80 (Ga. Ct. App.
2016). That case dealt with whether an insurer had a right to reimbursement
of defense costs after it was determined that the insurer had no duty to defend.
Id. at 79–80. In addressing the reimbursement issue, the Court of Appeals of
Georgia stated in passing that if the insurer “actually has a right to recoup
defense costs in this case, then such a right would have existed [at the time the
complaint was filed],” and because the complaint was filed four years before
the insurer attempted to reserve its right to reimbursement, its reservation
was not timely made. Id. at 80. Contrary to the insureds’ argument, the
court’s statement does not establish that it did not have a duty to defend from
the initial filing of the complaint. Moreover, the statement is dicta. See
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21-11758 Opinion of the Court 19
This determination brings us to the second issue on
appeal—whether, under Georgia law, asserting a right to
reimbursement in a reservation of rights letter entitles an insurer
to reimbursement even if the insurance contract did not
contemplate a right to recoupment. The district court answered
that question in the negative and held that the insurers had no right
to seek reimbursement. The insurers argue that this determination
was erroneous.
Following the insurers’ line of argument, we break our
analysis into two questions. First, did the insurers’ reservation of
rights letters create a new contract? We conclude that a new
contract was not created and proceed to the second question that
is novel under Georgia law: Would the Supreme Court of Georgia
recognize a right to reimbursement absent a contractual right to
such reimbursement? See Ga. Interlocal Risk Mgmt. Agency v. City of
Sandy Springs, 788 S.E.2d 74, 79 (Ga. Ct. App. 2016) (“The issue of
whether insurers are entitled to recoup defense costs where there
is no contractual provision creating such a right is an issue of first
impression in Georgia courts, but we need not reach that issue
here.”). We conclude that it would not and, therefore, affirm the
district court.
Edwards v. Prime, Inc., 602 F.3d 1276, 1298 (11th Cir. 2010) (“[D]icta is not
binding on anyone for any purpose.”).
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20 Opinion of the Court 21-11758
i. Did the insurers’ reservation of rights letters
including a reimbursement provision create a
new contract?
The insurers argue that the insureds implicitly and explicitly
agreed to the terms of the reservation of rights letters which
included the reimbursement provision. This argument centers on
a day-one principle of contract law: consideration. We must decide
whether the insurers’ reservation of rights letters created a new
contract—either explicitly (because one of the letters was signed
by the insureds) or implicitly (because the insureds accepted the
defense while aware of the letters’ terms).15
Express contracts and implied-in-fact contracts are
exceedingly similar. See Turfgrass Grp., Inc. v. Ga. Cold Storage Co.,
816 S.E.2d 716, 721 (Ga. Ct. App. 2018). The only difference is how
the parties’ will to be bound is shown—either “expressly in some
form recognized by law” or “by circumstances from which assent
may be inferred as a conclusion of fact.” Id. (emphasis added). Both
must meet the standard contract requirements.
15 On summary judgment at the district court, the insurers did not contend
that the reservation of rights letters constituted an express contract. Rather,
the insurers focused on an implied contract theory. As such, there is support
for waiving the insurers’ express contract argument that was “raised for the
first time on appeal,” see Finnegan v. Comm’r of Internal Revenue, 926 F.3d 1261,
1271 (11th Cir. 2019), but because it fails for the same reason as their implied
contract argument (lack of consideration), we do not undertake a waiver
analysis.
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21-11758 Opinion of the Court 21
“To constitute a valid contract, there must be parties able to
contract, a consideration moving to the contract, the assent of the
parties to the terms of the contract, and a subject matter upon
which the contract can operate.” O.C.G.A. § 13-3-1 (emphasis
added). There is consideration when “a performance or a return
promise [is] bargained for by the parties to a contract.” Id. § 13-3-
42(a). To be “bargained for,” the performance or return promise
must be “sought by the promisor in exchange for his promise and
[] given by the promisee in exchange for that promise.” Id. § 13-3-
42(b). Importantly, “a promise to perform a preexisting contractual
obligation does not constitute consideration for a new agreement.”
Glisson v. Global Sec. Servs., LLC, 653 S.E.2d 85, 87 (Ga. Ct. App.
2007); see also, e.g., Codner v. Siegel, 271 S.E.2d 465, 466 (Ga. 1980)
(discussing the need for “new consideration”).
The original insurance contracts between the parties
provided that insurers had the “duty to defend the insured[s]
against any ‘suit’ seeking [] damages” for “‘personal and advertising
injury.’” The policies did not expound on the details of the defense.
For example, the policies did not mention which party would
choose defense counsel if the insureds were sued.
In a series of reservation of rights letters that the insurers
sent to the insureds after Concordia brought the underlying
litigation, the insurers included terms that were not part of the
original insurance contract. Critically, the first letter specified that:
“VFI specifically reserves its right to seek reimbursement of
defense costs incurred on [the insureds’] behalf for all claims which
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22 Opinion of the Court 21-11758
are not potentially covered by the VFI Policy.”16 These letters also
included more particulars for the legal defense, including that:
“[The insurers] will retain defense counsel to represent [the
insureds] in the Georgia Suit. Alternatively, [the insureds] can
retain counsel of [their] choice.” Pressman—on behalf of the
insureds—signed and returned to the insurers an
“Acknowledgement of Defense under a Reservation of Rights” in
October 2018.
For the insurers’ implicit and explicit contract arguments,
the issue of consideration is dispositive. The insurers argue that
there was adequate consideration stemming from the reservation
of rights letters in two ways: (1) the insureds were provided a
defense and (2) the insureds were able to choose their defense
counsel. We hold that because the parties’ contracts already
required the insurers to defend the insureds against certain third-
party lawsuits, there is no new consideration for the reimbursement
provision in the reservations of rights letters and thus no new
contract under Georgia law.
The insurers’ first argument is easy to reject. The
underlying contract required the insurers to defend the insureds
against certain third-party lawsuits. The reservation of rights
letters also provided for such defense. That is, the letters were the
quintessential “promise to perform a preexisting contractual
16 This reimbursement language was also “incorporate[d] [] by reference” in
the later reservation of rights letters, and the second insurer (Continental)
eventually claimed the right to seek reimbursement as well.
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21-11758 Opinion of the Court 23
obligation” that “does not constitute consideration for a new
agreement.” Glisson, 653 S.E.2d at 87; see also Codner, 271 S.E.2d at
466 (discussing the need for “new consideration”).
The insurers’ second argument is colorable—but still
inadequate. The underlying contract did not contemplate which
party would select legal counsel for the promised defense, but the
reservation of rights letters gave the insureds the ability to either
(a) choose their legal representation or (b) have it chosen for them
by the insurers. Boiled down, the insurers went from having to
provide a defense (under the underlying contract) to having to
provide a defense through counsel of their own choosing or
counsel chosen by the insureds (under the reservation of rights).
Either way, however, the insurers were obligated to provide a
defense. In other words, because the insurers did not have the
explicit right to choose counsel for the insureds under the original
contract, the insurers did not give anything up to reach the new
arrangement wherein the insureds have the option of selecting
their own counsel. As such, there is no consideration under
Georgia law. See O.C.G.A. § 13-3-42(b).
ii. Unjust Enrichment
Alternatively, the insurers contend that the insureds were
unjustly enriched because they retained the benefit of an expensive
defense to which they knew they were not entitled. See Campbell v.
Ailion, 790 S.E.2d 68, 73 (Ga. Ct. App. 2016) (“[A] claim for unjust
enrichment exists where a plaintiff asserts that the defendant
induced or encouraged the plaintiff to provide something of value
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24 Opinion of the Court 21-11758
to the defendant; that the plaintiff provided a benefit to the
defendant with the expectation that the defendant would be
responsible for the cost thereof; and that the defendant knew of the
benefit being bestowed upon it by the plaintiff and either
affirmatively chose to accept the benefit or failed to reject it.”).
Assuming the insurers’ unjust enrichment argument does not
immediately fail due to the existence of a written contract, it
nonetheless fails on the merits. Cf. Bogard v. Inter-State Assurance Co.,
589 S.E.2d 317, 319 (Ga. Ct. App. 2003) (“[T]he existence of the
contract between the parties precludes [appellant’s] unjust
enrichment claim.”). Simply put, there is nothing “unjust” about
requiring the insurers to fulfill their contractual obligations and
imposing such a requirement would not confer a “windfall” on the
insureds.17
17 Further, there is no one-sided enrichment here. The insurers benefit from
fulfilling their contractual obligations and following Georgia insurance law to
avoid a lawsuit and maintain their reputation, among other things. To borrow
applicable language from another state’s supreme court: “[W]e cannot say that
an insured is unjustly enriched when its insurer tenders a defense in order to
protect its own interests, even if it is later determined that the insurer did not
owe a defense.” Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co.,
828 N.E.2d 1092, 1103 (Ill. 2005); see also Terra Nova Ins. Co. v. 900 Bar, Inc., 887
F.2d 1213, 1220 (3d Cir. 1989) (holding that, in a similar situation, the insurer
provided a defense “at least as much for [its] own benefit”). And, while the
insureds undoubtedly benefit from an expensive legal defense, that benefit is
precisely the bargain the parties agreed to. There is no reason that the insureds
should “return” or “compensate for” receiving the benefit of their bargain. See
Wachovia Ins. Servs., Inc. v. Fallon, 682 S.E.2d 657, 665 (Ga. Ct. App. 2009)
(“Unjust enrichment is an equitable concept and applies when . . . the party
sought to be charged has been conferred a benefit by the party contending an
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21-11758 Opinion of the Court 25
iii. Predicting Georgia Law on Reimbursement
The final question we face is whether, under Georgia law, an
insurer can recoup defense costs when such a right is provided for
in a reservation of rights letter but not the parties’ operative
insurance contract. Georgia courts have not addressed this
question.18 See Ga. Interlocal, 788 S.E.2d at 79.
Without any state court guidance, we attempt to “predict
state law” without “creat[ing] or modify[ing] it.” Salinero v. Johnson
& Johnson, 995 F.3d 959, 969 (11th Cir. 2021) (internal citations
omitted); see Bravo v. United States, 577 F.3d 1324, 1325 (11th Cir.
2009) (per curiam) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64
(1938)). As part of this inquiry, we “consider whatever might lend
[us] insight, including relevant state precedents, analogous
decisions, considered dicta, scholarly works, and any other reliable
unjust enrichment which the benefitted party equitably ought to return or
compensate for.” (emphasis added)).
18 Federal district courts applying Georgia law have reached different,
competing results. We note only in passing that most district courts have held
that insurers do not have a right to reimbursement in these situations. See,
e.g., Am. Fam. Ins. Co. v. Almassud, 522 F. Supp. 3d 1263, 1269 (N.D. Ga. 2021)
(adopting a “no-recoupment default rule” because in cases where the contract
does not allow for recoupment but the reservation of rights letter inserts such
a right, “the insurer should not be able to unilaterally alter the terms of an
insurance policy”). Only one district court has held that insurers do have a
right to reimbursement. See Ill. Union Ins. Co. v. NRI Constr. Inc., 846 F. Supp.
2d 1366, 1377 (N.D. Ga. 2012) (“A right of reimbursement is justified under
either an unjust enrichment or implied in fact contract theory.”).
Nevertheless, these decisions do not bind us.
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26 Opinion of the Court 21-11758
data tending convincingly to show how the [Supreme Court of
Georgia] would decide the issue at hand.” SA Palm Beach, LLC v.
Certain Underwriters at Lloyd’s London, 32 F.4th 1347, 1357 (11th Cir.
2022) (quoting GuideOne Elite Ins. Co. v. Old Cutler Presbyterian
Church, Inc., 420 F.3d 1317, 1326 n.5 (11th Cir. 2005)). We “presume
that [state] courts would adopt the majority view on a legal issue
in the absence of indications to the contrary.” Id. at 1358.
The duty to defend is extremely broad under Georgia law.19
See, e.g., Landmark Am. Ins. Co. v. Khan, 705 S.E.2d 707, 710 (Ga. Ct.
App. 2011) (“[I]f the facts as alleged in the complaint even arguably
bring the occurrence within the policy’s coverage, the insurer has a
duty to defend the action. Indeed, to excuse the duty to defend the
petition must unambiguously exclude coverage under the
policy . . . .” (quotation omitted)); St. Paul Fire, 498 S.E.2d at 784.
An insurer “may be obligated to defend, even though it [may not
be] ultimately liable for any judgment . . . .” Penn-Am. Ins. Co. v.
Disabled Am. Veterans, Inc., 490 S.E.2d 374, 376–77 (Ga. 1997); see also
Elan Pharm. Rsch. Corp. v. Emps. Ins. of Wausau, 144 F.3d 1372, 1375
(11th Cir. 1998) (“[U]nder Georgia law . . . [a]lthough an insurer
need not indemnify an insured for a liability the insured incurs
19 Under Georgia law, the “duty to defend and the duty to indemnify . . . are
separate and independent obligations.” Nationwide Mut. Fire Ins. Co. v. Somers,
591 S.E.2d 430, 433 (Ga. Ct. App. 2003) (quotation omitted); see also Colonial
Oil Indus. Inc. v. Underwriters Subscribing to Pol’y Nos. TO31504670 &
TO31504671, 491 S.E.2d 337, 339 (Ga. 1997). The broad duty to defend is
“broader than [the insurers’] duty to indemnify.” Shafe v. Am. States Ins. Co.,
653 S.E.2d 870, 873 (Ga. Ct. App. 2007).
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21-11758 Opinion of the Court 27
outside the terms of the insurance contract, an insurer must
provide a defense against any complaint that, if successful, might
potentially or arguably fall within the policy’s coverage.”).
As an initial matter, we disagree with the insurers’ argument
that there is a clear “majority” rule favoring recoupment across the
nation. See SA Palm Beach, 32 F.4th at 1357 (“We therefore consider
whatever might lend [us] insight, including . . . analogous
decisions . . . scholarly works, and any other reliable data tending
convincingly to show how the [Supreme Court of Georgia] would
decide the issue at hand.” (quotations omitted)). This description
of a “majority rule” may have been correct in the past, but it is not
an accurate depiction of the current case law, which appears to be
more-or-less in equipoise with the recent trend favoring the “no
recoupment” rule. See Gen. Star Indem. Co. v. Driven Sports, Inc., 80
F. Supp. 3d 442, 461 n.14 (E.D.N.Y. 2015) (“Although the parties
dispute which is the majority rule in other jurisdictions, both
parties referred to an article published by the American Bar
Association in 2011, noting that ‘[t]here is a fairly even split among
state and federal courts’ concerning recoupment. However, . . .
there has been a recent trend toward courts rejecting claims for
recoupment.” (internal citation omitted)); Westchester Fire Ins. Co. v.
Wallerich, 563 F.3d 707, 715 (8th Cir. 2009) (“[T]he most recent
decisions reflect the [no recoupment] position.” (quotations
omitted)). The Restatement of the Law of Liability Insurance
confirms this switch in trend:
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28 Opinion of the Court 21-11758
Over the past few decades, the pro-recoupment cases
have been viewed as stating the majority position,
while anti-recoupment cases have been labeled the
minority. But in recent years, several state courts,
including several state high courts, have faced
recoupment of defense costs as an issue of first
impression and have rejected a right of recoupment
for the insurer, unless that right is established
expressly by contract.
Restatement of the Law of Liability Insurance § 21, cmt. a (Am. L.
Inst. 2019). Jurisdictions not allowing recoupment tend to focus on
the deleterious effect that such a rule would have on the distinction
between the duty to defend and the duty to indemnify. See, e.g., Am.
& Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526, 544 (Pa. 2010)
(“[P]ermitting reimbursement . . . would amount to a retroactive
erosion of the broad duty to defend in Pennsylvania by making the
right and duty to defend contingent upon a court’s determination
that a complaint alleged covered claims, and would therefore
narrow Pennsylvania’s long-standing view that the duty to defend
is broader than the duty to indemnify.”). We are persuaded by the
recent trend of state high courts holding that there is no right to
reimbursement in similar cases.
The most important consideration in our predictive analysis,
however, is the structure of Georgia’s insurance law. See SA Palm
Beach, 32 F.4th at 1357 (“We therefore consider whatever might
lend [us] insight, including relevant state precedents . . . and any
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21-11758 Opinion of the Court 29
other reliable data . . . .”). The broad duty to defend is
foundational. See, e.g., Landmark Am., 705 S.E.2d at 710. If we were
to adopt a rule allowing for broadscale reimbursement without any
contractual provision securing that right, the duty to defend would
collapse into the duty to indemnify. That is, if the duty to defend
required insurers to mount a defense but the defense was widely
reimbursable upon a court’s determination that no ongoing duty
to defend exists, the duty to defend would simply become the duty
to indemnify. Simply put, wide-ranging reimbursement is
necessarily inappropriate in a system—like Georgia’s—that is
predicated on a broad duty to defend and a more limited duty to
indemnify. See Shafe, 653 S.E.2d at 873; Penn-Am., 490 S.E.2d at 376–
77. We find the logic of the “no recoupment” cases that illustrate
this point persuasive, and we predict that the Supreme Court of
Georgia would follow that logic to adopt a “no recoupment” rule
to protect its insurance system.20 See, e.g., Jerry’s Sport Ctr., 2 A.3d
at 544.
We think it clear based on Georgia’s substantive law as well
as its general insurance framework that the Supreme Court of
Georgia would not allow an insurer to recoup its expenses based
on a reservation of rights letter without any contractual provision
allowing for reimbursement. This position comports with the
national trend that disfavors recoupment in similar circumstances.
20 Because we find that there is no right to reimbursement under Georgia law
in these situations, we need not address the insureds’ additional argument that
the insurers did not adequately reserve their rights in the first place.
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30 Opinion of the Court 21-11758
While insurers can certainly contract for a right to reimbursement,
they cannot do so in a subsequent reservation of rights after a
reimbursement-less bargain has been struck.
IV. Conclusion
We affirm both of the district court’s holdings. First, we
agree that the insurers did not have a duty to defend the insureds
in the underlying action. To supplement this analysis, we hold that
the duty to defend was extinguished when the district court’s ruling
was issued. Second, we agree that the insurers do not have a right
to reimbursement because the reservation of rights letters did not
create a new contract, the insurers’ unjust enrichment argument is
untenable, and we do not believe the Supreme Court of Georgia
would upend the State’s insurance law framework by establishing
a right to reimbursement for an insurer who has no contractual
right to recoupment.
AFFIRMED.
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