Opinion
Civil Action No. 3:02-CV-1616-L
February 19, 2004
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Pursuant to the provisions of 28 U.S.C. § 636(b) and an Order of Referral, Defendant's Motion to Join Third-Party Defendant, Zurich American Insurance Company has been referred to the United States Magistrate Judge for review. The Court has considered Defendant's motion, Plaintiff's response, Defendant's reply, the briefs, and the material in the appendixes. The findings, conclusions, and recommendation of the Magistrate Judge follow.
FINDINGS AND CONCLUSIONS Background
Plaintiff, The Kirby Company ("Kirby"), is an additional insured on a policy issued by Hartford Casualty Insurance Company ("Hartford"). Some people who were injured in an automobile accident sued Kirby for damages in state court. Plaintiff sued Defendant on July 31, 2002, seeking a declaratory judgment that Hartford owes Kirby a duty to defend him in the state court action and must indemnify Kirby for any damages he might have to pay in that case. Kirby also claimed that Hartford (1) breached the insurance contract by failing to defend Kirby in the underlying lawsuit, (2) violated article 21.21 of the Texas Insurance Code, and (3) breached the duty of good faith and fair dealing. After Kirby filed this action, Hartford agreed to defend Kirby in the state court action, subject to a full reservation of rights.
This Court has recently recommended that the claim for undemnity be dismissed wihtout prejudice as moot.
Kirby voluntarily dismissed this claim.
Hartford's Motion
Hartford claims the District Court should allow it to add a Third Party Claim against Zurich Insurance Company, another insurer of Kirby. Hartford believes that Zurich may have a concurrent duty to defend Kirby because "the mutual excess provisions contained in the Hartford and Zurich policy may cancel each other out, establishing each carrier's independent duty to defend." Hartford claims it is entitled to contribution from Zurich under principles of equitable subrogation. Hartford relies upon FED. R. Civ. P. 14, 15, and 19 in support of its motion to add a third party claim against Zurich.
Analysis 1. Whether Zurich is a Party Needed for a Just Adjudication under FED. R. CIV. P. 19
The terms of FED. R. CIV. P. 14 explain when a defendant may bring in a third party. Leave of Court is required if, as in this case, joinder is sought more than ten days after the answer is filed.
The terms of Rule 19(a) direct that an entity whose joinder will not deprive the court of jurisdiction shall be joined as a party if the entity is a party needed for a just adjudication. A party needed for a just adjudication is one who has such an interest in a controversy that a final judgment may not be entered without either affecting that interest or leaving the controversy in such a condition that the judgment may be wholly inconsistent with equity and good conscience. Lumberman's Mutual Casualty Co. v. Elbert, 348 U.S. 48, 52 (1954) (citations omitted). Here, Hartford's argument that Zurich is needed for a just adjudication lacks merit. Hartford has not shown that Zurich has such a significant interest in the present controversy that adjudication without Zurich would be inconsistent with equity and good conscience. Instead, Hartford asserts that the primary purpose for joining Zurich is the interest of judicial economy — to avoid litigation of the apportionment issues between the two insurance companies in a separate lawsuit. (Motion at 9.)
In a Joint Status Report filed January 6, 2004, Hartford set forth the following issues that remain ripe for determination.
I. Whether Hartford is liable for breach of contract when it agreed to defend Kirby in the underlying case (subject to its reservation of rights under the policy); assigned the defense to separate counsel as requested by Kirby; and agreed to Kirby's chosen counsel at a reasonable and necessary rate.
ii. Whether Hartford is liable under article 21.21 of the Texas Insurance Code in light of case law holding that the statute is not applicable in the context of this third party case, and the alleged statutory violation has not damaged Kirby, as Hartford has agreed to defend and, indeed, has paid Kirby's post-tender defense costs.
Motions for summary judgment, filed by both Hartford and Kirby, are pending before the Court.
Hartford has failed to show that in Zurich's absence, complete relief cannot be accorded between those who are already parties, Hartford and Kirby. Further, Hartford has not shown that Zurich claims an interest relating to the subject of the action and is so situated that the disposition of the action in Zurich's absence may impair or impede Zurich's ability to protect that interest, or leave either Hartford or Kirby subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations as a result of Zurich's interest. See FED. R. CIV P. 19.
The interest of judicial economy would not be served by adding Zurich at this stage of the proceedings. The issues have been submitted in motions for summary judgment. Zurich is not a party needed for a just adjudication under Rule 19(a).
2. Whether Hartford was Dilatory in Requesting the Amendment.
Hartford urges that leave to amend under FED. R. CIV P. 15(a) should be freely given. Hartford admits that it did not file its motion within the May 5, 2003-deadline for joining third parties. Nevertheless, it asserts that the Court would abuse its discretion by not permitting it to amend pursuant to FED R. CIV P. 15(a) to add Zurich as a third party defendant. This Court disagrees.
Kirby notes a number of significant dates in its response, In a Joint Status Report dated September 24, 2002, Hartford stated it was uncertain whether the joining of additional parties would be necessary. The District Court entered an order on October 22, 2002, setting a deadline of May 9, 2003, for filing any motions for leave to join other parties. On February 19, 2003, Hartford issued its "reservation of rights" letter, reserving, inter alia, "its ability to seek an apportionment of defense costs among any other carriers," and specifically referencing the Zurich policy. Hartford waited until July 9, 2003, after both parties had filed and responded to summary judgment motions, to file the motion to add Zurich as a third party. Hartford's explanation, that it expected this lawsuit to be abated pending completion of the state court litigation, does not excuse its dilatory conduct. This is particularly true in light of the fact that Zurich is not needed for a just adjudication of this lawsuit.