Opposition Brief — Amoco Production Co. v. Vesta Insurance

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NO. 92-1942 RiLéE WD

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| JUL 2 1898 |

IN THE | Of IME CLERS

Supreme Court Of The Ani

OCTOBER TERM, 1992

AMOCO PRODUCTION COMPANY,

Petitioner,

Vv.

VESTA INSURANCE COMPANY,

Respondent.

On Petition For Writ Of Certiorari To

The United States Court Of Appeals

For The Fifth Circuit

RESPONDENT'S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

ROBERT D. GREEN

3400 One Allen Center

500 Dallas Street

Houston, Texas 77002

(713) 654-9222

Attorney of Record

I.

QUESTIONS PRESENTED FOR REVIEW

Pursuant to Rule 24.2, Supreme Court Rules,

Respondent Vesta Insurance Company adopts the Questions

as Stated by Petitioner Amoco Production Company.

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CERTIFICATE OF INTERESTED PARTIES AND

PARTIES BELOW

Respondent Vesta adopts the Certificate of Interested

Parties and Parties Below as stated by Petitioner Amoco.

The following information may also assist this Court.

Vesta Insurance Company’s name in Norwegian is Vesta

Forsikring A/S. It is a wholly owned subsidiary of

Forsakrings AB SkandiaNord.

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TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ....... 1

CERTIFICATE OF INTERESTED

PARTIES AND PARTIES BELOW ........... il

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ys 9 | iv

OPINION SOUGHT TO BE REVIEWED ........ Vv

STATEMENT OF JURISDICTION ............ V

Sueeeememeres Sr bt CASE... ... 11.2... l

Ee 4

i Amoco Offers No "Special And

Important Reasons" For Granting

Discretionary Review Of This Case,

And No Such Reasons Exist ........ 4

II. Amoco’s Allegations Of Error Are Not

ES Se 6

Rs The appellate court applied the

proper standard of

0 ee 6

= The appellate court did not

ignore Amoco’s arguments, nor

grant relief on an_un-pled —

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TABLE OF AUTHORITIES

CASES Page

East v. Romine, Inc., 518 F.2d 332, 338

Eo) Reape: ele. Be FLAS ete Dp et Dim ane 7

Layne & Bowler Corp. v. Western Well Works,

261 U.S. 387, 393, 43 S.Ct. 422, 423, 67

Ec. ee es ie tae ee ae een ean eat 5

Republic Nat’l Life Ins. Co. v. Spillars,

Se ee ee in ee EA Se ee 7

Rice v. Sioux City Memorial Park Cemetery,

349 U.S. 70, 74, 75 S.Ct. 614, 616, 99 L.Ed.

PRN 6 we ee oe ale eee i a ee

Securities & Exchange Com’n. v. National Securities,

393 U.S. 453, 460, 89 S.Ct. 564, 568,

ra ee ei a er 4

STATUTES

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RULES

Rule 10, Supreme Court Rules .......... 4,5, 6, 10

Rule 24.2, Supreme Court Rules ............

OPINION SOUGHT TO BE REVIEWED

Respondent Vesta adopts the statement of Petitioner

Amoco concerning the opinion sought to be reviewed. Vesta

also adopts the verbatim reproductions of the trial court

opinion, the appellate court opinion and the appellate court’s

denial of rehearing, which are reproduced in the Appendix to

the Petition for Writ of Certiorari.

STATEMENT OF JURISDICTION

Respondent Vesta adopts the statement of jurisdiction

contained in the Petition for Writ of Certiorari.

NO. 92-1942

IN THE

Supreme Court Of The United States

OCTOBER TERM, 1992

AMOCO PRODUCTION COMPANY,

Petitioner,

Vv;

VESTA INSURANCE COMPANY,

Respondent.

On Petition For Writ Of Certiorari To

The United States Court Of Appeals

For The Fifth Circuit

RESPONDENT'S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

STATEMENT OF THE CASE

Amoco's Statement of the Case is correct with respect

to the underlying facts.

Gonzales, an employee of Cantu, was injured while

Cantu was performing work for Amoco under contract. The

provisions of the Texas Worker's Compensation Act

prevented Gonzales from suing Cantu, so Gonzales sued

Amoco, asserting that Amoco's negligence caused his

o,

“

injuries. Gonzales’ claim was ultimately settled «for

$6,215,000.

Amoco sought indemnity from Cantu pursuant to

provisions of the Cantu-Amoco contract. Cantu’s

underwriters paid their policy limits of $3,500,000.

Amoco was insured by Vesta under a policy that had

a self-insured retention of $5,000,000 "ultimate net loss,"

meaning that Vesta was required to respond only when

Amoco’s "ultimate net loss" exceeded $5,000,000. The

Vesta Policy defined "ultimate net loss" as "the total sum

which the Assured, or any company as his insurer becomes

obligated to pay by reason of personal injury or property

damage... ." (Petition, A-3).

Amoco claimed that the first $5,000,000 spent to

settle the Gonzales claim all constituted "ultimate net loss"

within the meaning of the Vesta Policy, including the money

from Cantu. Amoco therefore argued that Vesta was

responsible for the final $1,215,000 required to settle

Gonzales’ claim. Vesta disagreed for two reasons. First,

Vesta argued that Cantu’s indemnity payment was not part of

Amoco’s “ultimate net loss," meaning. that Amoco’s

“ultimate net loss" in the Gonzales case was only

$2,715,000, which would not trigger Vesta’s obligations.

Alternatively, Vesta argued that it was subrogated to

Amoco’s indemnity claim against Cantu, and that if Vesta

did pay any amount over $5,000,000, it was entitled to be

reimbursed from the Cantu payment.

To resolve that impasse and effect settlement, Vesta

temporarily acquiesced to Amoco’s position. Because the

insurance policy made Vesta liable in proportion to Amoco’s

ownership of the facility where any accident occurred, and

because Amoco had a 65.7% ownership interest in the

3

facility where Gonzales was hurt, Vesta paid $798,255, or

65.7% of $1,215,000. By letter agreement, the parties

denominated the Vesta payment as a “loan/advance," and

agreed that Vesta could bring a declaratory judgment action

to seek a refund.

Vesta’s declaratory judgment action was tried to the

bench on stipulated facts, and the court found for Amoco on

two grounds.’ First, it said that Vesta, as an insurer, could

not exercise its subrogation rights against Amoco, its

insured. (Conc. of Law No. 1, Petition, A-5 to A-6).

Second, the trial court noted that Amoco could insure its

$5,000,000 retention, and declared that the Cantu indemnity

agreement was essentially a form of insurance (Conc. of

Law No. 2, Petition, A-6 to A-7). That being so, the trial

court said that the $5,000,000 paid to Gonzales was all part

of Amoco’s "ultimate net loss."

Vesta appealed, and the Fifth Circuit Court of

Appeals reversed and rendered.’ The appellate court said

that Vesta was not seeking to exercise any subrogation rights

against Amoco, but rather, was invoking subrogation

principles in order to exercise Amoco’s rights against Cantu.

The appellate court said that Vesta’s direct claim against

Amoco was for a refund pursuant to the "loan/advance"

agreement between the parties. (Petition, A-18). While the

appellate court agreed that Amoco could insure any or all of

its $5,000,000 self-insured retention, it held that the

indemnity agreement with Cantu was not "insurance" under

Texas law or within the meaning of the Vesta Policy.

1

The trial court’s Final Judgment and Order is reproduced as A-|

to A-10 of the Petition for Writ of Certioran.

The appellate court opinion is reproduced as A-1] to A-23 of the

Appendix to the Petition for Wnt of Certiorari.

4

(Petition, A-14 to A-17). Having so declared, the appellate

court reversed and rendered. It ordered that Amoco refund

the "loan/advance" to Vesta, with interest. It also overturned

the trial court’s award to Amoco of the attorneys’ fees spent

in defending the Gonzales case. (Petition, A-22 to A-23).

Amoco filed a petition for rehearing, which the Fifth

Circuit denied. (Petition, A-24). Amoco now seeks

discretionary review from this Court.

ARGUMENTS

I. Amoco Offers No "Special And

Important Reasons" For Granting

Discretionary Review Of This Case,

And No Such Reasons Exist.

Rule 10 of the Supreme Court Rules states that "[a]

petition for a writ of certiorari will be granted only when

there are special and important reasons therefor." Amoco

has made no effort to show that any such reasons exist in this

case. Indeed, Amoco’s petition conclusively shows that no

such reasons exist, as the following demonstrates:

l. The underlying dispute involves _ the

interpretation of the rights and liabilities of an insurance

company and one of its policyholders, a matter that Congress

has, by statute, committed to state regulation. 15 U.S.C. §

1012, Securities & Exchange Com’n. v. National Securities,

393 U.S. 453, 460, 89 S.Ct. 564, 568, 21 L.Ed.2d 668

(1969). Thus, the substantive dispuie between Amoco and

Vesta is purely a matter of state law, and does not even

arguably implicate a federal interest.

4: In the same vein, it 1s worth noting that this

case was brought in federal court because the parties are

5

diverse under 28 U.S.C. § 1332 (Petition, A-1). This Court

is being asked to sit as a super-supreme court for the State of

Texas. Where there are no federal or constitutional

questions at issue, there is no reason for this Court to take on

that role.

3. Perhaps mindful of the lack of any federal

interest in the underlying substantive insurance issues,

Amoco does not directly argue that the appellate court

reached the wrong result, but rather, argues that the appellate

court committed procedural errors, namely, applying an

improper standard of review and failing to consider certain

arguments. In so arguing, Amoco is asking this Court to act

aS an error-correcter rather than as a law-declarer, a request

which simply cannot be "special and important" within the

meaning of Rule 10.

4. Amoco does not and cannot contend that the

appellate decision sets any sort of broad precedent, but

argues only that the decision adversely affects its own

interests. In seeking discretionary review of such a decision,

Amoco overlooks the fact that this Court, unlike a federal

circuit court of appeals, "does not sit for the benefit of the

particular litigants," and that the “special and important

reasons" requirement implies "a reach to a problem beyond

the academic or the episodic." Rice v. Siow City Memorial

Park Cemetery, 349 U.S. 70, 74, 75 S.Ct. 614, 616, 99

L.Ed. 897 (1955). As an earlier case had said:

[I]t is very important that we be consistent in

not granting the writ of certiorari except in

cases involving principles the settlement of

which is of importance to the public, as

distinguished from that of the parties . . .

6

Layne & Bowler Corp. v. Western Well Works, 261 U.S.

387, 393, 43 S.Ct. 422, 423, 67 L.Ed. 712 (1923).

Specific procedural errors with no federal implications

and no precedential importance are simply not "special and

important" cases within the meaning of Rule 10 of this

Court’s rules. Even if Amoco’s allegations of error were

correct, review by this Court would not be warranted.

II. Amoco’s Allegations Of Error Are Not

Correct.

1. The appellate court applied the

proper standard of review.

Amoco first takes issue with the appellate court’s

Statement that de novo review was appropriate. According

to Amoco, the trial court made critical findings of fact that

were entitled to deferential review under a_ "clearly

erroneous” standard.

The finding that Amoco contends received insufficient

deference is Finding of Fact No. 8, in which the trial court

said:

The Gonzales litigation settled prior to trial

for $6,215,000. Amoco was obligated to pay

the entire amount, therefore, Amoco incurred

‘ultimate net loss’ in excess of the underlying

limits of the Vesta Policy.

7

(Petition, A-4)(emphasis added). Amoco contends that the =

emphasized portion was a finding of fact’ that should have

been reviewed under the clearly erroneous standard, and

should not have received de novo review.

Amoco’s characterization of the emphasized sentence

is incorrect. The underlying events--that is, who paid how

much to whom and when--were al! matters of fact, and were

all resolved through stipulation. The trial court’s statements

that Amoco may have been “obligated" to pay a certain

amount, and that in so doing, Amoco incurred an "ultimate

net loss" as defined by the Vesta Policy, are pure conclusions

of law, because those statements involve the legal effects of

the undisputed facts. Texas law, which applies in this

diversity case, treats the question of whether an undisputed

Set of facts gives rise to insurance coverage aS a pure

question of law for the court to resolve. Republic Nat’l Life

Ins. Co. v. Spillars, 368 S.W.2d 92 (Tex. 1963). The

appellate court therefore applied the proper standard of

review. a

Amoco also argues that the trial court made a fact-

finding when it held that Cantu, in honoring the indemnity

demand, was "acting" as Amoco’s insurer. (Petition, 10).

Again, though, the question was not really how Cantu

"acted" in the abstract, which was undisputed. The question

was whether its payment under its indemnity contract with

Amoco made it an "insurer" as that term was used in the

Vesta Policy. Again, then, this question involved application

Amoco does not appear to be arguing that the statement is a

finding of fact simply because it was denominated as uch. The trial

court's categorization is not controlling, East v. Romine, Inc., 518 F.2d

332, 338 (Sth Cir. 1975), as the trial court itself recognited when it said,

“Any finding of fact which may be deemed a conclusion of law 1s deemed

as such.” (Finding of Fact No. 11, Petition, A-5).

ma woes mem cam menace ae ences ore

8

of insurance policy language to a set of undisputed facts,

namely, the Amoco-Cantu indemnity contract and Cantu’s

payment pursuant to that contract. So again, the appellate

court correctly treated this as an issue of law.

2. The appellate court did not ignore

Amoco’s arguments, nor grant relief

on an un-pled theory.

Amoco next argues that the appellate court "never

addressed the merits of Amoco’s argument that Vesta had no

subrogation right to exercise against Cantu at the time Vesta

made its payment to Amoco." (Petition, 11). This is a

puzzling assertion for two reasons. First, the appellate court

did specifically address that issue, and it explained why

Amoco’s argument was incorrect. (Petition, A-18 to A-19).

Second, it is hard to see how not addressing an argument can

ever be error per se. An unaddressed contention is simply

a contention rejected sub silentio. The error, if any, would

have to lie in the rejection of the argument rather than in the

failure to address the argument. Yet again, perhaps because

the underlying substantive issue is a purely state-law matter,

Amoco does not even argue that the appellate court

committed substantive error in affirming Vesta’s subrogation

rights. It does not appear that Amoco has presented a

reviewable issue.

The gist of Amoco’s complaint appears to be the

assertion that the appellate court relied on an un-pled theory

when it stated that if Amoco destroyed Vesta’s subrogation

rights, then Vesta’s insuring obligation was also terminated.

(Petition, 12). This theory was nothing more than rebuttal.

Amoco raised the argument (which it repeats in the Petition)

that Cantu honored its indemnity obligation before Vesta

made any payments, so that at the time Vesta paid, Amoco

no longer had any rights against Cantu to which Vesta could

9

be subrogated. Faced with that "timing is of the essence"

argument, Vesta responded by citing Texas authority holding

that if an insured settles before his insurer makes a payment,

and if in so doing he extinguishes his insurer’s subrogation

rights, the insurer’s obligations to the insured are

extinguished. Vesta never used this "extinction of

obligation" theory offensively, but used it only to

demonstrate that the "timing is of the essence" theory did not

benefit Amoco, which is exactly the use to which the

appellate court put Vesta’s theory. (Petition, A-18).

Lastly, Amoco complains that the appellate court

adopted a theory never advanced below, namely, that Vesta

could have pursued Cantu directly without reference to any

subrogation rights. (Petition, 11). As the appellate opinion

shows (Petition, A-19), that statement was cumulative. If it

was error, it cannot be harmful error.

10

SUMMARY AND CONCLUSION

Amoco asks this Court to review an appellate court

decision involving Texas insurance law, which does not in

any way implicate any federal interest. Amoco argues that

the appellate court applied the wrong standard of review, and

that it ignored certain arguments. Vesta disagrees with

Amoco’s characterizations. However, even if Amoco were

correct, the writ of certiorari should not be granted. Amoco

does not argue that the alleged errors have any precedential

importance, but simply argues that because the court used

improper procedures, it may have reached an erroneous

result. This case, then, affects only the rights of the

particular litigants, and has no federal or constitutional

implications whatsoever. It is simply not a case appropriate

for review by this Court under Rule 10 of the Supreme Court

Rules. The petition should be denied.

Respectfully submitted,

ROBERT D. GREEN

3400 One Allen Center

S00 Dallas Street

Houston, Texas 77002

(713) 654-9222

Attorney of Record

for Respondent