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ADI Worldlink, L.L.C. v. Rsui Indemnity Co.

United States Court of Appeals, Fifth Circuit

August 2, 2019

ADI WORLDLINK, L.L.C., Plaintiff - Appellant

          Appeal from the United States District Court for the Eastern District of Texas

          Before DENNIS, OWEN, and SOUTHWICK, Circuit Judges.

          LESLIE H. SOUTHWICK, Circuit Judge:

         The defendant insurance company denied the plaintiff policyholder's claims under a directors and officers liability policy. The district court held that the insured had learned of a related claim when the previous year's policy was in effect; under clear policy provisions, the first policy was therefore the one to cover all of the claims. The court then concluded that all claims were properly denied because, even though the insured gave timely notice of the later claims, it had failed to give timely notice of the initial one.

         We AFFIRM.


         Beginning in late 2012, the plaintiff ADI Worldlink, L.L.C. annually purchased directors and officers liability insurance policies from the defendant RSUI Indemnity Company. The 2014 policy had a coverage period from December 31, 2013 to December 31, 2014, while the 2015 policy covered the subsequent year, ending December 31, 2015. The 2015 policy was later extended through January 14, 2016.

         Significant provisions in the 2014 and 2015 policies include RSUI's obligation to pay "all Loss [Worldlink] is legally obligated to pay" in relation to "a Claim for a Wrongful Act . . . first made against [Worldlink] during the Policy Period" and timely noticed by Worldlink to RSUI under the terms of the policies.

         The 2015 policy also contained a provision that deemed all claims related in a specific manner to have been made at the time of the earliest such claim. We label it the 2015 interrelatedness provision, and it stated:

All Claims based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, transactions or events, or the same or related series of facts, circumstances, situations, transactions or events, shall be deemed to be a single Claim for all purposes under this policy, . . . and shall be deemed first made when the earliest of such Claims is first made, regardless of whether such date is before or during the Policy Period.

         The purpose of this provision appears obvious. An initial claim is made; the insured gives notice of the claim; if in later policy years new claims are made that are related in the relevant ways to the first one, their handling continues consistently under that first policy. The relevant claims in this case concern Wordlink's employment practices, primarily an alleged failure to pay overtime wages to nonexempt employees. The insurance dispute arises because of Worldlink's failure to give notice to RSUI of the first employee's claim, which it received in August 2014. In April 2015, other employees filed similar claims against Worldlink. Finally, in September 2015, Worldlink first notified RSUI of the claims.

         Relying on the 2015 interrelatedness provision, RSUI deemed all the employment claims to be a single claim that were controlled by the 2014 policy. The 2014 policy states that "it shall be a condition precedent to the Insurer's obligation to pay, that the Insured give written notice of such Claim to the Insurer as soon as practicable" after Worldlink learns of the claim. Comparable language is in the 2015 policy. A final deadline for notice was no later than the expiration of the 2014 policy. Worldlink does not argue it complied with that obligation as to the 2014 claim. Because of the absence of notice of the first claim and the deeming of all later claims to be related to that initial claim, RSUI denied coverage on all.

         Worldlink sought a declaratory judgment to compel RSUI to cover all the claims. It also sought damages for breach of contract and violations of the Texas Unfair Insurance Practices Act, the Texas Deceptive Trade Practices Act, and the Texas Prompt Payment of Insurance Claims Statute. The parties filed cross motions for summary judgment. The district court granted summary judgment for RSUI. It concluded that timely notice of the 2014 claim was not given. Further, it found the 2015 claims related back to the 2014 claim and were governed by the 2014 policy, thus making it proper for RSUI to deny coverage of all the claims. Because RSUI had no obligation to cover any claims, the district court held it also had no liability under the Texas statutes. This same analysis would reasonably apply to Worldlink's breach of contract claim, which the district court dismissed without a separate analysis.


         On an appeal from the grant of a summary judgment, we generally are concerned at least in part with whether the district court properly determined that there were no genuine disputes of material fact. See Fed. R. Civ. P. 56(a). Today's appeal concerns only legal issues, though, namely, the interpretation of insurance policy provisions. Regardless of the questions posed, we review the district court's ruling on a summary judgment de novo. RSUI Indem. Co. v. Am. States Ins. Co., 768 F.3d 374, 377 (5th Cir. 2014).

         Worldlink's principal challenge is to the district court's reliance on the interrelatedness provision in the 2015 policy, joined with the provision in the 2014 policy obligating the insured to give timely notice, to deny the claims that arose in 2015 and for which it gave notice. A central component of our review is the effect of a 2013 Texas Court of Appeals decision about a similar policy. The only state statutory claim Worldlink pursues on appeal concerns the Texas Prompt Payment Statute.

         I. Interrelatedness of the 2014 and 2015 Claims

         There was some dispute in district court as to whether Texas law applies in this diversity suit. The district court determined that it did, and the issue is not renewed on appeal. We thus accept that Texas law controls.

         Most relevant to our analysis would be applicable authority from the Texas Supreme Court. CHS, Inc. v. Plaquemines Holdings, L.L.C., 735 F.3d 231, 235 (5th Cir. 2013). We have no such decisions. In their absence, we "defer to intermediate state appellate court decisions, 'unless convinced by other persuasive data that the highest court of the state would decide otherwise.'" Memorial Hermann Healthcare Sys., Inc. v. Eurocopter Deutschland, GMBH, 524 F.3d 676, 678 (5th Cir. 2008) (quoting Herrmann Holdings Ltd. v. Lucent Tech., Inc., 302 F.3d 552, 558 (5th Cir. 2002)).

         One Texas intermediate court opinion has been the center of attention in this case: Gastar Exploration Ltd. v. U.S. Specialty Insurance Co., 412 S.W.3d 577 (Tex. App.-Houston [14th Dist.] 2013, pet. denied). The parties have not proposed nor have we found any reason to form a conviction that the Texas Supreme Court would reject that court's application of state law to policy provisions similar to those at issue here. The district court distinguished Gastar but did not suggest the opinion was inconsistent with what the Texas Supreme ...

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