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UNITED STATES v. INSURANCE CO. OF NORTH AMERICA

October 12, 1994

UNITED STATES OF AMERICA, Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA, Defendant.



The opinion of the court was delivered by: JOYCE HENS GREEN

 Plaintiff United States of America ("U.S." or "the government") initiated this action against defendant, Insurance Company of North America ("INA") pursuant to the Federal Coal Mine Health and Safety Act of 1969, as amended ("the Coal Act"), codified at 30 U.S.C. § 801 et seq. Plaintiff seeks recovery on two bonds which defendant provided to Kaiser Steel Corporation ("Kaiser") to insure payments to miners qualifying for black lung benefits under the Coal Act. Presently pending are the parties' cross-motions for summary judgment. For the reasons expressed below, plaintiff's motion is granted in part and defendant's motion is denied.

 I. Background

 Plaintiff United States brought this action to recover on two indemnity bonds entered into by Kaiser as Principal and INA as Surety to secure Kaiser's obligations under the Coal Act. In 1973, Kaiser was authorized by the Secretary of Labor to act as a self-insured coal mine operator pursuant to § 423 of the Coal Act, 30 U.S.C. § 933. Section 933 and its corresponding regulations require coal mine operators who elect to self insure to secure the payment of benefits for which they are liable "in the form of either an indemnity bond or negotiable securities." 20 C.F.R. § 726.101. Kaiser elected to fulfill its obligations by obtaining and filing the indemnity bonds at issue in this case. *fn1"

 In May 1993, the Secretary of Labor demanded that INA pay to the government the full value of Bond No. K01388670, totalling $ 3,304,000. The Secretary determined that the full value of the bond was needed to cover all obligations under the bond, namely, lifetime benefit payments to 37 claimants. INA refused to pay, and this suit ensued.

 II. Discussion

 Summary judgment is appropriate when there is "no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "The inquiry performed is the threshold inquiry of determining whether there is a need for trial -- whether, in other words, there are any genuine issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In considering a motion for summary judgment, the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. At the same time, however, Rule 56 places a burden on the nonmoving party to "go beyond the pleadings and by [its] own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 The Court finds that no dispute of material fact exists in this case and liability can appropriately be determined through summary judgment. The only dispute other than the scope of INA's liability concerns the amount of damages to which the plaintiff is entitled, a question which the Court defers pending further proceedings in this case.

 A. Statute of Limitations

 In its cross-motion for summary judgment, defendant INA urges the Court to find that the United States' claims are time barred. The parties agree that 28 U.S.C. § 2415(a) sets the relevant statute of limitations for this case -- six years after the right of action accrues. The critical issue thus becomes, at what point did the government's right of action accrue?

 INA argues that the triggering date for the statute of limitations is February 13, 1987, the date on which Kaiser filed for bankruptcy. INA's position is that because the principal (Kaiser) breached its obligations to the claimants when it filed for bankruptcy, the date of bankruptcy is the date the government's claim arose. INA relies on a recent case from the Federal Circuit, United States v. Cocoa Berkau, 990 F.2d 610 (Fed. Cir. 1993), to support its position. In Cocoa Berkau, the Federal Circuit held that "the surety incurs derivative liability when the principal breaches the bond", and thus the right of action on a bond arises at the time of the principal's breach. Cocoa Berkau, 990 F.2d at 614. INA urges the Court to find that the principal, Kaiser, breached the bond when it filed for bankruptcy on February 13, 1987. In that this case was not deemed filed until June 2, 1993, *fn2" more than six years after Kaiser's bankruptcy, INA argues that the government missed the statute of limitations and the case should therefore be dismissed.

 The government bolsters its argument by pointing to language in paragraph three of the bond agreement. ...


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