                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 17a0494n.06

                                       Case No. 15-4291

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                                                                  FILED
IMG WORLDWIDE, INC., et al.,                      )                         Aug 23, 2017
                                                  )                     DEBORAH S. HUNT, Clerk
       Plaintiffs,                                )
                                                  )
and                                               )       ON APPEAL FROM THE UNITED
                                                  )       STATES DISTRICT COURT FOR
WESTCHESTER FIRE INSURANCE                        )       THE NORTHERN DISTRICT OF
COMPANY,                                          )       OHIO
                                                  )
       Plaintiff-Appellee,                        )
v.                                                )
                                                  )
GREAT DIVIDE INSURANCE COMPANY,                   )
    Defendant-Appellant.                          )

Before: COLE, Chief Judge; BOGGS and SILER, Circuit Judges.

       SILER, Circuit Judge. This appeal involves a dispute between two insurers over which

insurer bears the liability for defense costs incurred by their joint insured in an underlying

lawsuit.   Great Divide Insurance Company (“Great Divide”), the primary insurer of IMG

Worldwide, Inc. (“IMG”), appeals from the district court’s grant of partial summary judgment to

Westchester Fire Insurance Company1 (“Westchester”), IMG’s excess insurer. The district court

held that under the principle of equitable indemnity, Great Divide was liable to Westchester for

approximately $8,000,000 in defense costs that IMG incurred in the underlying litigation when

neither Great Divide nor Westchester would defend IMG. IMG itself had already been made

whole: it received $250,000 of its defense costs from Great Divide in a settlement and the

       1
       Although the briefs identify Westchester as a cross-appellant, the parties represent that
Westchester does not cross appeal from a decision below.
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


remainder of its costs from Westchester after IMG sued Westchester for breach of its duty to

defend and prevailed on appeal.        On remand, Westchester added a third-party equitable-

indemnification claim against Great Divide on which the district court granted Westchester

partial summary judgment and from which Great Divide now appeals. We affirm the grant of

partial summary judgment because Great Divide (as IMG’s primary insurer) had primary liability

for IMG’s defense costs, thus allowing Westchester to assert equitable indemnification to

recover those costs from Great Divide.

                                                  I

       This case is a fight between two insurers over which insurer bears the liability for defense

costs incurred by their joint insured in an underlying lawsuit.

       Great Divide was IMG’s primary commercial general-liability (“CGL”) insurer from

2005 until 2009. The CGL policies obligated Great Divide both to indemnify IMG against

certain liability to third parties for “bodily injury” or “property damage”—subject to a

$1,000,000-per-occurrence limit and an annual $2,000,000 general-aggregate limit—and to

defend IMG against any lawsuit seeking damages that Great Divide would be obligated to pay,

with no limit on Great Divide’s liability for defense costs.

       Westchester was IMG’s excess (i.e., umbrella) insurer from 2007 to 2009. Westchester

provided IMG with various insurance coverages (including $25,000,000 in umbrella coverage in

excess of the Great Divide CGL coverage), obligating Westchester to indemnify IMG for

liability to third parties if the CGL policy failed to provide coverage or if its per-occurrence or

general-aggregate limits had been reached. Westchester also owed a duty to defend IMG,

without limitation, against any suit seeking damages that Westchester would be obligated to pay.




                                                -2-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


That arrangement did not alter Great Divide’s status as primarily liable for all costs of defending

any lawsuit in which Great Divide would be obligated to pay.

       In 2008, several individuals sued IMG, alleging injury from a real-estate project in

Florida. IMG forwarded the complaint to Great Divide and Westchester, seeking defense and

indemnity. Both insurers refused to defend on grounds that the IMG’s potential liability to the

plaintiffs did not fall within the policies because the claims were not for “property damage.” In

May 2010, IMG settled the Florida litigation and sought reimbursement from Great Divide and

Westchester for the roughly $5 million that IMG agreed to pay to the plaintiffs and roughly

$8 million in defense costs.

       In September 2010, Great Divide settled with IMG for $1,250,000, agreeing that

$1 million exhausted the per-occurrence limit and that the remaining $250,000 would satisfy

IMG’s claim against Great Divide to indemnify IMG’s defense costs. IMG released Great

Divide from “any and all [c]laims based upon or arising out of” the Florida litigation.

       In 2011, IMG sued Westchester, alleging failure to indemnify covered losses and breach

of the duty to defend IMG in the Florida litigation. A jury returned a verdict for IMG as to the

failure to indemnify, finding IMG had suffered $3,900,000 in covered losses. Westchester

moved for leave to join Great Divide as an indemnitor. Great Divide voluntarily intervened in

the lawsuit for the purpose of opposing Westchester’s motion for leave, “in order to avoid

becoming a party.” Before ruling on the motion for leave, however, the district court entered a

final judgment upholding the jury’s award of $3,900,000 as covered losses but denying IMG’s

motion for judgment against Westchester as to defense costs, concluding that Westchester owed

no duty to defend IMG in the Florida litigation. IMG Worldwide, Inc. v. Westchester Fire Ins.

Co., 945 F. Supp. 2d 873, 883, 890 (N.D. Ohio 2013). The district court dismissed as moot



                                               -3-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


Westchester’s motion for leave to amend to join claims against Great Divide. Both IMG and

Westchester appealed the final judgment.

        In 2014, this court affirmed the jury’s award, but reversed the judgment on the issue of

Westchester’s duty to defend. IMG Worldwide, Inc. v. Westchester Fire Ins. Co., 572 F. App’x

402, 409, 412 (6th Cir. 2014). We concluded that “Westchester was obligated to defend IMG

when Great Divide improperly refused to do so.” Id. at 411. Although Westchester could not

obtain a credit or setoff from IMG for amounts that should have been paid by Great Divide, we

observed that Westchester may still have had recourse against Great Divide:

        [W]e note that Westchester can still seek reimbursement from Great Divide under
        various equitable principles including equitable contribution and subrogation.
        The district court dismissed Westchester’s claims against Great Divide as moot.
        We decline to take any position on the merits of these claims, which are not
        before us at this time, but we find that Westchester’s claims against Great Divide
        have been adequately preserved such that the district court can and should revisit
        these issues on remand.

Id. at 412.

        On remand, Westchester was granted leave to file a third-party complaint against Great

Divide. Great Divide filed an answer, and Westchester moved for partial summary judgment

against Great Divide. Westchester asked the court to declare that Great Divide had breached a

duty to defend IMG in the underlying litigation, was obligated to pay all defense costs associated

with the underlying litigation, and owed reimbursement to Westchester for the costs paid by

Westchester, none of which was extinguished by Great Divide’s settlement with IMG. In its

opinion granting Westchester’s motion for partial summary judgment, the district court

concluded that “Great Divide is liable under the principles of equity to reimburse Westchester for

the defense costs it was ordered to pay to IMG.” IMG Worldwide, Inc. v. Westchester Fire Ins.

Co., No. 1:11 CV 1594, 2015 U.S. Dist. LEXIS 114659, at *37 (N.D. Ohio Aug. 28, 2015).

                                              -4-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


After determining the theories of equitable contribution and equitable subrogation to be

inapplicable, the district court concluded that equitable indemnification was Westchester’s

appropriate remedy because the doctrine prevents a primary insurer like Great Divide from using

a settlement to avoid defense costs for which it is responsible:

       IMG cannot be held directly accountable for its acceptance of the settlement
       agreement, or its breach of the subrogation clause in its contract with Westchester.
       As between Great Divide and Westchester, which are the only two entities this
       Court is now allowed to consider, Great Divide had the ultimate duty to pay the
       defense costs, and Westchester did not.

Id. at *36–37. The district court entered judgment in favor of Westchester for an additional

amount of $9,157,284.66, reflecting $7,996,655.57 in defense costs plus interest.             IMG

Worldwide, Inc. v. Westchester Fire Ins. Co., No. 1:11 CV 1594, 2015 U.S. Dist. LEXIS 144868,

at *16 (N.D. Ohio Oct. 26, 2015).

                                                 II

       We review de novo a district court’s grant of partial summary judgment. Guyan Int’l,

Inc. v. Prof’l Benefits Adm’rs, Inc., 689 F.3d 793, 797 (6th Cir. 2012). A grant of summary

judgment is proper if no genuine dispute of material fact exists and the moving party is entitled

to judgment as a matter of law. Fed. R. Civ. P. 56(a). We consider the evidence in the light

most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

                                                 III

       Great Divide argues that the district court erred on two grounds. Great Divide first

contends that it received no benefit from Westchester to justify relief in equity. Great Divide

asserts that it gained nothing from the litigation between IMG and Westchester because Great

Divide’s obligations were released years before Westchester was found liable. Great Divide


                                                -5-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


contends that if the judgment below is affirmed, Great Divide would “pay more than its fair

share” by making it liable to both IMG and Westchester. According to Great Divide, the district

court ignored the settlement between IMG and Great Divide in upholding the right of

Westchester, a party that breached its obligations to IMG, to seek relief in equity. IMG’s

execution of the release, Great Divide argues, extinguished any obligation it may have had to pay

any further defense costs, thereby preventing Westchester from acquiring any rights against

Great Divide that could be enforced in equity or otherwise. Great Divide notes that Westchester

did not acquire subrogation rights by contract from IMG, and it argues that Westchester should

not be permitted to resort to indemnification to seek what it could not obtain through

subrogation.

       Second, Great Divide asserts that Westchester failed to prove all the elements of

equitable indemnification.     Great Divide posits that it did not have a relationship with

Westchester that could give rise to tort liability. Great Divide argues that this absence of a

relationship means that any claim for relief in equity is grounded in subrogation, not indemnity.

In addition, Great Divide contends that while it may have had notice of the Florida litigation

against IMG, it did not have notice of Westchester’s claim for indemnity in the underlying

dispute. Westchester did not place Great Divide on notice of a claim for indemnification until

after IMG won at trial, which according to Great Divide, negated any incentive by Great Divide

to assist in the litigation. Great Divide concludes by urging that Westchester should be stuck

with the result of its poor choice to litigate rather than settle with IMG.

       Westchester counters that the district court was correct in concluding that an excess

insurer has a right to seek equitable reimbursement from a primary insurer. Westchester posits

that the right to equitable indemnification comes from the costs it bore, which should have been



                                                 -6-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


paid by Great Divide from the outset had Great Divide not refused to defend IMG. Westchester

argues that it had the kind of relationship with Great Divide that is required for equitable-

indemnification relief because Westchester’s policy was an umbrella policy expressly made

secondary to Great Divide’s CGL policy, and Westchester’s duty to defend arose solely because

of Great Divide’s action (exhausting its policy) or inaction (breaching its policy). According to

Westchester, the settlement between IMG and Great Divide released IMG’s contractual claims,

but not Westchester’s third-party rights vis-à-vis Great Divide. Westchester emphasizes that

Great Divide was solely liable in the first instance for all the defense costs, which the district

court properly awarded after finding that IMG’s settlement with the Florida litigants occurred

after IMG had incurred all its defense costs. Westchester maintains that Great Divide had notice

of its potential indemnification obligations because Westchester moved for leave to file third-

party claims against Great Divide and to add Great Divide as a party. Westchester also disagrees

that proper notice requires meaningful participation in the underlying lawsuit between IMG and

the Florida litigants. Equity would be illusory, says Westchester, if an insured’s settlement with

one insurer could be used to force all other insurers to bear costs they would not otherwise

assume. We agree with Westchester.

       When resolving an issue of state law in a diversity case, “we look to the final decisions of

that state’s highest court, and if there is no decision directly on point, then we must make an Erie

guess to determine how that court, if presented with the issue, would resolve it.” Conlin v.

Mortg. Elec. Registration Sys., Inc., 714 F.3d 355, 358–59 (6th Cir. 2013). “Intermediate state

appellate courts’ decisions are also viewed as persuasive unless it is shown that the state’s

highest court would decide the issue differently.” Savedoff v. Access Grp., Inc., 524 F.3d 754,

762 (6th Cir. 2008) (quoting In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005)).



                                               -7-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


       Under Ohio law, courts may allocate liability among multiple insurers in certain contexts,

such as when all insurers at issue provide primary coverage or when all provide second-tier

excess coverage.     See generally Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co.,

769 N.E.2d 835, 841 (Ohio 1995) (adopting the “all sums” approach for allocating

environmental-pollution liability among multiple primary insurance policies). In the context of

equity, equitable contribution and equitable indemnification are distinct under Ohio law. See

generally Elkins v. Access-Able, Inc., No. 04AP-101, 2004 Ohio App. LEXIS 3745, at ¶ 22

(Ohio Ct. App. 2004). Equitable contribution may apply when multiple actors, usually joint

tortfeasors, are each held partially at fault for another’s injuries; equitable indemnification, in

contrast, imposes derivative liability on a party (i.e., the indemnitor) to cover the liability that an

actor (i.e., the indemnitee) owes directly and in full to the injured party. See Travelers Indem.

Co. v. Trowbridge, 321 N.E.2d 787, 789–90 (Ohio 1975) (overruled on other grounds by

Motorists Mut. Ins. Co. v. Huron Rd. Hosp., 653 N.E. 2d 235 (Ohio 1995)).

         Although neither this court nor the Supreme Court of Ohio has addressed the effect of a

settlement on the settling insurer’s equitable-indemnification liability for defense costs to a non-

settling insurer, state appellate courts recognize that “indemnity arises from contract, express or

implied, and is the right of a person, who has been compelled to pay what another should have

paid, to require complete reimbursement.”         Elkins, 2004 Ohio App. LEXIS 3745, at ¶ 22

(quoting Trowbridge, 321 N.E.2d at 787). “Implied contracts of indemnity are reserved for those

‘situations involving related tortfeasors, where the one committing the wrong is so related to a

secondary party as to make the secondary party liable for the wrongs committed solely by the

other.’” Motorists Mut. Ins. Co. v. Huron Rd. Hosp., 653 N.E.2d 235, 238 (Ohio 1995) (quoting

Reynolds v. Physicians Ins. Co., 623 N.E.2d 30, 31 (Ohio 1993)). As the Supreme Court of Ohio



                                                 -8-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


has observed, “one secondarily liable, who is forced to pay because of the refusal, or failure after

demand, of the one primarily liable to discharge the obligation, has the right of indemnity from

the one primarily liable.” Aetna Cas. & Sur. Co. v. Buckeye Union Cas. Co., 105 N.E.2d 568,

571–72 (Ohio 1952). Indemnity in this context is rooted in equitable principles of restitution and

is not based on a statute. Elkins, 2004 Ohio App. LEXIS 3745, at ¶ 22; see also Swenson v. Ewy,

No. 77AP-17, 1977 WL 200156, at*1–2 (Ohio Ct. App. May 17, 1977) (recognizing the right to

equitable indemnification between successive, rather than joint, tortfeasors when one party bears

primary liability). One claiming equitable indemnification must therefore show that, as between

two liable parties, fairness requires one party to compensate the other party.          See Elkins,

2004 Ohio App. LEXIS 3745, at ¶ 22; Nationwide Mut. Ins. Co. v. Grossi, No. CV 2012 12

6660, 2014 Ohio Misc. LEXIS 87, at *48 (Ohio C.P. Feb. 24, 2014).2

       The district court did not err in concluding that equitable indemnification is the

appropriate remedy. In the previous appeal, we determined that “Westchester was obligated to

defend IMG when Great Divide improperly refused to do so.” IMG Worldwide, 572 F. App’x at

411. Westchester did not owe IMG a duty to defend initially, and Great Divide should have

defended IMG in the Florida litigation in which all the defense costs accumulated. Id.; see also

Dixie Fuel Co., LLC v. Dir., Office of Workers’ Comp. Programs, 820 F.3d 833, 843 (6th Cir.



       2
        Courts reviewing equitable indemnification under other states’ laws adopt a flexible
approach when applying this remedy. See, e.g., Pierce Assocs., Inc. v. Nemours Found.,
865 F.2d 530, 544 (3d Cir. 1988) (noting that “[c]ourts in other jurisdictions have applied a more
expansive doctrine which essentially dispenses with the need to show an express or implied
contractual promise of indemnity when the equities of a given situation require it”); Molett v.
Penrod Drilling Co., 826 F.2d 1419, 1428–30 (5th Cir. 1987) (recognizing tort-based
indemnification claim); Parfait v. Jahncke Service, Inc., 484 F.2d 296, 302 (5th Cir. 1973)
(recognizing indemnification based on implied warranty of workmanlike performance); St. Paul
Fire & Marine Ins. Co. v. Ins. Co. of the State of Pa., No. 15-CV-02744-LHK, 2016 U.S. Dist.
LEXIS 41659, at *17–20 (N.D. Cal. Mar. 28, 2016) (citing cases approving equitable
indemnification in the insurance context).
                                               -9-
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


2016) (addressing law of the case). The district court was correct to determine that this case is

about indemnification—as opposed to contribution—because Great Divide was obligated to

defend IMG and to pay all the defense costs, without limit, for any lawsuit where any part of the

damages owed by IMG would fall within the CGL policy limits. All defense costs accrued

before IMG’s settlement with the Florida litigants.          And when Great Divide settled its

obligations with IMG, that settlement never shifted the duty to defend or to pay defense costs

onto Westchester. At that point, the Florida litigation was over and Westchester could do

nothing about the defense costs. No party suggests that Great Divide acted in bad faith. Still,

but for Great Divide’s refusal to defend the Florida litigation, Westchester would have incurred

no liability for the defense costs. Thus, as the district court concluded, fairness dictates an

equitable adjustment to reflect the obligation owed by Great Divide as the primary insurer. See

Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 214 (2002) (“Thus, for restitution

to lie in equity, the action generally must seek not to impose personal liability on the defendant,

but to restore to the plaintiff particular funds or property in the defendant’s possession.”).

       Great Divide fails to persuade that reimbursement here undermines the integrity of

settlements elsewhere. The parties do not dispute that Great Divide was obligated to and should

have defended IMG. And the parties do not dispute that Westchester was obligated to defend

IMG only after Great Divide refused to defend IMG and later settled after the accumulation of

defense costs. Westchester had no contractual obligation to reserve indemnity rights. Requiring

Great Divide to carry its burden to pay IMG’s defense costs here will not jeopardize the sanctity

of settlements.

       Having determined that a claim for equitable relief exists under Ohio law, we agree with

the district court’s conclusion that no genuine issue of material fact existed as to Great Divide’s



                                                - 10 -
Case No. 15-4291, IMG Worldwide, Inc. v. Great Divide Ins. Co.


equitable-indemnification liability to Westchester. Great Divide fails to establish it received no

benefit from Westchester’s absorbing the defense costs because those costs would have been

borne by Great Divide as the primary insurer. Great Divide had the sole duty to defend the

lawsuit, and its obligations to a known excess insurer did not vanish when Westchester’s liability

accrued as a consequence of Great Divide’s inaction.            To the extent that      equitable

indemnification requires a showing of notice and a close relationship between the indemnitor and

indemnitee, the undisputed record shows that Great Divide had notice of the dispute between

Westchester and IMG—both before and after trial—and had an opportunity to present its

positions once Great Divide joined the lawsuit. Great Divide fails to cite caselaw requiring

control of or input into the litigation strategy before notice is consummated, and we decline to

countenance such a limiting principle. Great Divide’s course of conduct with Westchester and

efforts to intervene upon suspicion of liability belie any contention that the parties were not

sufficiently related for purposes of imposing indemnity obligations.       Despite the dearth of

controlling decisions on the issue, the facts and circumstances of this case favor affirming the

district court’s grant of partial summary judgment.

       AFFIRMED.




                                              - 11 -
