Colony Insurance Company v. First Mercury Insurance Company, No. 22-51114 (5th Cir. 2023)
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In this case, the United States Court of Appeals for the Fifth Circuit considered an appeal by Colony Insurance Company against First Mercury Insurance Company related to a settlement agreement for an underlying negligence case. Both companies had consecutively insured DL Phillips Construction, Inc. (DL Phillips) under commercial general liability insurance policies. After the settlement, Colony sued First Mercury, arguing that First Mercury needed to reimburse Colony for the full amount of its settlement contribution, as it contended that First Mercury's policies covered all damages at issue. The district court granted summary judgment in favor of First Mercury, prompting Colony's appeal.
In the underlying negligence case, DL Phillips was hired to replace the roof of an outpatient clinic in Texas. Shortly after completion, the roof began leaking, causing damage over several months. The clinic's owner sued DL Phillips for various claims, including breach of contract and negligence. A verdict was entered against DL Phillips for over $3.7 million. Both Colony and First Mercury contributed to a settlement agreement, and then Colony sued First Mercury, arguing it was responsible for all the property damage at issue.
The appellate court held that under the plain language of First Mercury's policies and relevant case law, First Mercury was only liable for damages that occurred during its policy period, not all damages resulting from the initial roof defect. The court also found that Colony failed to present sufficient evidence to create a genuine dispute of material fact about whether there was an unfair allocation of damages, which would be necessary for Colony's contribution and subrogation claims. As such, the court affirmed the district court's decision to grant summary judgment in favor of First Mercury and denied summary judgment for Colony.
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