HM International, LLC v. Twin City Fire Insurance Co., No. 20-20122 (5th Cir. 2021)
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The Fifth Circuit reversed the district court's grant of summary judgment in favor of Twin City in an action brought by HMI, alleging that Twin City had breached its duty to indemnify. HMI provides various accounting and financial services for Greg and Kathy Geib. The district court interpreted the policy as not covering settlement payments made after limitations for the underlying negligent conduct had expired.
The court concluded that the district court erred for two reasons: first, the district court did not account for the policy's definition of the term "claim," instead treating it as synonymous with "cause of action;" and second, the district court interpreted the phrase "legally liable to pay" to mean effectively that HMI actually lost or would have lost had the Geibs filed suit. With these two clarifications, the court concluded that HMI's settlement payment constitutes a loss because it is an amount that HMI is legally liable—through contract—to pay to the Geibs as a result of the demand letter. Furthermore, the fact that the Geibs never filed their threatened suit and that the limitations period had seemingly run does not change that. Finally, the court rejected Twin City's two alternative arguments.
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