from the United States District Court for the Southern
District of Mississippi
HIGGINBOTHAM, JONES, and HAYNES, Circuit Judges.
HAYNES, Circuit Judge
insurance coverage dispute, the district court granted
partial summary judgment in favor of Singing River Health
System and Singing River Health System Foundation and partial
summary judgment in favor of Federal Insurance Company. The
parties appeal, and we affirm in part, and reverse and render
Insurance Company ("Federal") provided insurance to
Singing River Heath System ("SRHS") (collectively
with Singing River Health System Foundation, "Medical
Insureds"). This coverage dispute between Federal and
Medical Insureds relates to various underlying lawsuits
arising from SRHS's alleged underfunding of its
Retirement Plan and Trust ("SRHS Lawsuits"). The
SRHS Lawsuits involve various claims, such as breach of
fiduciary duty, breach of contract, violations of the United
States Constitution and the Mississippi constitution, and
violations of 42 U.S.C. § 1983.
relevant to this appeal, Federal issued to SRHS a Health Care
Portfolio, Policy No. 8211-9592, which had a policy period of
March 1, 2014 to March 1, 2015 (the "2014-2015
Policy"). The 2014-2015 Policy contains two parts, both
of which are written on a claims-made basis: (1) a Fiduciary Coverage Section
("Fiduciary Coverage"), and (2) an Executive
Liability, Entity Liability, and Employment Practices
Liability Section ("ELI/EPL Coverage"). The policy
limit for Fiduciary Coverage is $1 million for each claim,
and the policy limit for ELI/EPL Coverage is $5 million for
each claim. Under the Fiduciary Coverage, "[Federal]
shall pay, on behalf of the Insureds, Loss for which the
Insureds become legally obligated to pay on account of any
Fiduciary Claim [under certain conditions]." The ELI/EPL
Coverage contains a similar obligation to pay for loss.
2014-2015 Policy contains the following language relevant to
The applicable limit(s) of liability to pay "loss"
will be reduced, and may be exhausted, by "defense
costs" unless otherwise specified herein. . . . .
The limit of liability to pay "loss" will be
reduced and may be exhausted by "defense costs",
unless otherwise specified herein, and "defense
costs" will be applied against the retention. In no
event will the company be liable for "defense
costs" or other "loss" in excess of the
applicable limit(s) of liability. . . . .
If the Optional Separate Defense Costs Coverage is not
purchased, Defense Costs shall be part of, and not in
addition to, the Limits of Liability set forth . . . for this
coverage section, and the payment by the Company of Defense
Costs shall reduce and may exhaust such applicable Limits of
(emphasis omitted). SRHS did not purchase the Optional
Separate Defense Costs Coverage. The application for the
2014-2015 Policy states:
The limit of liability to pay damages or settlements will be
reduced and may be exhausted by "defense costs, "
and "defense costs" will be applied against the
retention amount. In no event will the company be liable for
"defense costs" or other "loss" in excess
of the applicable limit of liability.
(emphasis omitted). In this application, SRHS did not check
the box for Optional Separate Defense Costs Coverage.
2014-2015 Policy defines Defense Costs as "that part of
Loss consisting of reasonable costs, charges, fees (including
but not limited to attorneys' fees and experts' fees)
and expenses . . . incurred in defending any Claim."
"Loss, " in turn, is defined as "the amount
that any Insured . . . becomes legally obligated to pay on
account of any covered [Claim], including but not limited to
. . . Defense Costs." Finally, the ELI/EPL Coverage
contains Exclusion 7(e), which provides that:
The Company shall not be liable for Loss on account of any
Claim . . . for any actual or alleged violation of the
responsibilities, obligations or duties imposed by any
federal, state, or local statutory law or common law anywhere
in the world (including but not limited to the Employee
Retirement Income Security Act of 1974 (except section 510
thereof) and the Consolidated Omnibus Budget Reconciliation
Act of 1985), . . . that governs any employee benefit
arrangement program, policy, plan or scheme of any type . . .
("Employee Benefits Program Laws"), including but
not limited to any . . . retirement income or pension benefit
program . . . [or] similar arrangement, program, plan or
and various individual insureds tendered defense of the SRHS
Lawsuits to Federal, and Federal defended SRHS and the
individual insureds under a reservation of
rights. In its reservation of rights
letter, Federal stated that, pursuant to the policy, Defense
Costs deplete the policy limits. Federal also denied ELI/EPL
Coverage on the grounds that Exclusion 7(e) covered the
subject matter of the SRHS Lawsuits.
subsequent declaratory action, Federal sought a declaration
that, inter alia, "the Limit of Liability under the
Fiduciary Coverage Section is $1 million, subject to a $1
million aggregate limit, and a $10, 000.00 Retention, with
Defense Costs eroding or depleting those limits." It
also sought a declaration that no coverage exists under the
ELI/EPL Coverage section. SRHS filed a counterclaim, which
named as a party Singing River Health System Foundation,
formerly known as Coastal Medical Healthcare Foundation Inc.
(the "Foundation"). The counterclaim alleged
"causes of action" for waiver, estoppel, civil
conspiracy, breach of contract, tortious breach of contract,
breach of fiduciary duty, breach of the duty of good faith
and fair dealing, bad faith, interference with contract and
business relations, and conversion, and sought declaratory
Insureds moved for partial summary judgment and injunctive
relief, or in the alternative for a preliminary injunction.
By this motion, Medical Insureds requested the court order
Federal to continue to pay all Defense Costs in the SRHS
Lawsuits without regard to the policy limits. The district
court granted the motion, entering judgment that
"defense costs paid in the underlying pension plan
litigation . . . should not be deducted from the policy
Medical Insureds' motion was pending, Federal moved for
summary judgment, requesting the district court issue a
declaratory judgment that Federal's defense and indemnity
obligations for the SRHS Lawsuits are limited to the
policy's $1 million Limits of Liability for Fiduciary
Liability Coverage and that Defense Costs erode this limit.
Medical Insureds then moved to join necessary parties and for
the court to continue its ruling on Federal's motion so
Medical Insureds could conduct discovery pursuant to Federal
Rules of Civil Procedure 56(d). The district court denied
Medical Insureds' motion and granted Federal's motion
in part. After determining that there was no just reason for
delay, the court entered a partial final judgment.
district court exercised diversity jurisdiction under 28
U.S.C. § 1332. Both parties appealed from the district
court's Rule 54(b) partial final judgment. Because the
district court properly entered a partial final judgment
under Rule 54(b), see Eldredge v. Martin Marietta
Corp., 207 F.3d 737, 740 (5th Cir. 2000), we have
review a grant of summary judgment de novo, applying the same
standard as the district court. United States v.
Lawrence, 276 F.3d 193, 195 (5th Cir. 2001). Summary
judgment is proper where there is no genuine dispute of
material fact, ...