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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 92-2933

HIGHLANDS INSURANCE COMPANY,
Plaintiff-Appellee,
versus
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, ET AL.,
Defendant-Appellants.

Appeals from the United States District Court
for the Southern District of Texas

(July 21, 1994)
Before GOLDBERG, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This is an appeal from a judgment in favor of an excess
insurance carrier and against the primary carrier for failure to
disclose the full extent of its primary coverage for an automobile
accident. Victims of a car accident sued a construction company
and the City of New York. National Union carried the primary
coverage for both defendants. Highlands, the excess carrier for
the construction company, contributed $1,100,000 to a settlement.
Highlands later sued National Union and two of its affiliated
agents, claiming that not disclosing that National Union insured
the City led Highlands to contribute too much to the settlement.
The trial court found the defendants liable under New York law and

entered judgment for Highlands. We hold that New York law does not
support the trial court's award of attorney fees for common law
fraud. We affirm the judgment in all other respects.
I.
In 1985, a Jeep carrying four young men collided with
construction debris left on a New York City bridge by Naclerio
Contracting Company. Two of the men suffered severe injuries and
a third died. The two men and the estate of the third sued
Naclerio and the City of New York for damages in early 1986.
Naclerio was insured by a general liability policy issued by
National Union, with a policy limit of $1,000,000, and an excess
liability policy issued by Highlands, with a policy limit of
$5,000,000. National Union had also issued an Owners' and
Contractors' Protective policy to the City of New York. The City's
policy insured its vicarious liability for the acts of Naclerio,
and also against liability arising from its negligent supervision
of the construction activity.
The tort suit against Naclerio and the City settled in 1989
before the jury's verdict on liability was returned. National
Union contributed its Naclerio policy limits of $1,000,000 while
Highlands contributed $1,100,000. The driver's automobile insurer
contributed its policy limits of $60,000.
In 1990, Highlands sued National Union and two of its
affiliated agents, American International Group and American
International Adjustment Company, alleging that they withheld the
existence of the OCP policy from Highlands during settlement
2

negotiations.1 As a result, Highlands argued, it paid funds from
its excess policy in settling the Naclerio litigation that National
Union should have paid from primary coverage. A jury returned a
verdict for Highlands in 1992 for $1,100,000, finding that
Highlands had proven fraud, negligent misrepresentation, and breach
of fiduciary duty under New York law.

II.
National Union argues that no reasonable jury could have
found2 that Highlands justifiably relied on any fraudulent or
negligent misrepresentation because Highlands had notice of the OCP
policy. On April 10, 1986, National Union's broker sent a letter
to National Union, on which the broker copied Highlands, saying to
"[b]e aware Nat'l Union also insured the City of N.Y. under OCP
Policy #GLA169666." The broker copied Highlands again on May 27,
1986 with a second letter containing a similar warning. At some
point, Highlands also received copies of the City's letter
notifying National Union of the auto accident and National Union's
reply, which both referenced the OCP policy.
Highlands counters by focusing on the context in which it
sought information. With days to go before trial, a law firm that
worked exclusively for National Union took over as the City's trial
1This opinion refers to the three defendants collectively as
"National Union."
2See Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.
1969).
3

counsel from the City's in-house counsel.3 Highlands' claims
supervisor and Highlands' attorney called National Union to find
out why this change occurred. They spoke to National Union's
Naclerio file manager and his supervisor but neither called back
with the requested information.4 Highlands' supervisor also spoke
to the new City counsel, who said he believed he was on the case
because the City was an additional insured on the Naclerio policy.5
In the absence of contrary indication from National Union, and
wanting to act before the jury returned its verdict, Highlands
settled the case on the assumption that Naclerio's policy was the
only primary coverage available.
Highlands also points out that its file contained other
information about National Union's coverage of the City. A report
prepared by Naclerio's attorney indicated that the City was self-
insured. The file also contained a November 17, 1987 letter from
a National Union litigation manager indicating that "we do not
insure the City of New York."6 While conceding that it did not
3The City appears to have represented itself for most of the
litigation, although lawyers employed by National Union answered
for the City.
4Evidence showed that the two conferred and decided not to
return Highlands' calls. The supervisor felt that the OCP policy
did not cover the accident, and was concerned that revealing
information about the OCP policy would breach a duty to the City.
5Testimony conflicted on this point. Highlands' claims
supervisor remembered the lawyer making this statement, but the
lawyer did not remember it.
6Testimony also conflicted about the meaning of this letter.
Because the letter only referenced National Union's Naclerio
policy, it could be read as accurately saying that the City was
not insured under that policy. On the other hand, it could be
4

review its file before settling the case, Highlands argues that it
would still have needed clarification had it done so.
These facts provide an adequate foundation on which to uphold
the jury verdict. National Union correctly states that a line of
New York cases holds that a plaintiff's reliance is not justifiable
when it has the means to find the truth on its own,7 as Highlands
did here for some time before trial.8 Those cases, however,
involved arms' length transactions between plaintiff and
defendant.9 The key is that here, as a primary carrier, National
Union owed Highlands the same fiduciary obligation it owed its
insureds.10 Under these circumstances, having told the defendants
read as inaccurately stating that only the Naclerio policy was
relevant to the case, particularly since the letter suggested
that the author had the power to make decisions about the City's
defense and was thus aware of the OCP policy.
7See Grumman Allied Indus., Inc. v. Rohr Indus., Inc., 748
F.2d 729, 737 (2d Cir. 1984) (buyer had unlimited access to
seller's plants, personnel, and documents); Marine Midland Bank
v. Palm Beach Moorings, Inc., 403 N.Y.S.2d 15, 17 (N.Y. App. Div.
1978) (guarantor had "unlimited access to the relevant financial
records" before guaranteeing note).
8Testimony indicated that data about insurance coverage was
public information available from the broker who sold the policy.
9See Leasco Corp. v. Taussig, 473 F.2d 777, 783 (2d Cir.
1972); Long Island Lighting Co. v. Transamerica Delaval, Inc.,
646 F. Supp. 1442, 1452 (S.D.N.Y. 1986) (both holding that a
plaintiff cannot sue for misrepresentations occurring after the
defendant has made truthful representations, in arms-length
transactions).
10See Hartford Accident & Indemnity Co. v. Commercial Union
Ins. Co., 772 F. Supp. 741, 743 (E.D.N.Y. 1991), aff'd, 962 F.2d
1 (2d Cir. 1992) (table); Hartford Accident & Indemnity Co. v.
Michigan Mutual Ins. Co., 463 N.E.2d 608, 610 (N.Y. 1984); Zurich
Ins. Co. v. State Farm Mut. Auto. Ins. Co., 524 N.Y.S.2d 202, 203
(N.Y. App. Div. 1988).
5

of its confusion and its need for a quick answer, Highlands could
justifiably rely on them to clarify the situation.11
National Union urges that Rotanelli v. Madden12 defines the
insured-insured relationship differently. Rotanelli dismissed a
claim against a representative of an insurance company for
negligently representing there was coverage, reasoning that an
insured is presumed to have read its policy.13 We read Rotanelli
as applying the presumption that a person understands the contracts
he executes.14 That presumption does not extend to contracts
executed by others and does not control this case.
The same analysis holds for negligent misrepresentation. As
this court has recently noted, it is not clear that justifiable
reliance is an element of negligent misrepresentation under New
York law.15 Whether it is, or whether New York employs a more
flexible analysis focusing on the relationship between the parties,
11See Brown v. Lockwood, 432 N.Y.S.2d 186, 193-94 (N.Y. App.
Div. 1980) (noting that "a fiduciary or confidential relationship
warrant[s] the trusting party to repose his confidence in the
defendant"). See also Benson v. RMJ Securities Corp., 683
F.Supp. 359, 377 (S.D.N.Y. 1988) (holding that "[r]eliance on the
representations of fiduciaries would certainly be reasonable").
See generally United States v. Chestman, 947 F.2d 551, 568-69 (2d
Cir. 1991), cert. denied, 112 S. Ct. 1759 (1992).
12569 N.Y.S.2d 187 (N.Y. App. Div. 1989).
13Id. at 188.
14See Humble Oil & Ref. Co. v. Jaybert Esso Serv. Station,
294 N.Y.S.2d 190, 192 (N.Y. App. Div. 1968) (cited by Rotanelli,
569 N.Y.S.2d at 188).
15Thomas v. N.A. Chase Manhattan Bank, 1 F.3d 320, 327 (5th
Cir. 1993) (citing White v. Guarente, 401 N.Y.S.2d 474, 478 (N.Y.
1977)).
6

the standard is not more demanding than that for fraud, so our
finding on the fraud issue disposes of this one as well.16
III.
National Union next attacks the jury's finding of a breach of
fiduciary duty, arguing that no causal link connected any act by
National Union to the money Highlands paid. We note initially that
National Union enjoyed the benefit of an incorrect standard for
causation. The jury was told that the measure of damages for
breach of fiduciary duty was the difference between the amount
Highlands paid in settlement and the amount they "would have paid"
absent a breach of fiduciary duty. Under New York law, however,
the question is not whether the plaintiff has shown but for
causation,17 but whether the plaintiff has satisfied a less
demanding "substantial factor" standard.18
Regardless, there is sufficient evidence to sustain the
verdict under either standard. When the case settled, the
bifurcated trial had just finished the liability phase. The jury
had announced, but not returned its verdict on liability.
Highlands' representative testified that if he had known about the
OCP policy at this point, he would have let the jury come back
instead of settling. The argument continues that the risk of
16See id.
17Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543
(2d Cir. 1994); Northwestern Nat'l Ins. Co. v. Alberts, 769 F.
Supp. 498, 506 (S.D.N.Y. 1991).
18Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270,
284 (2d Cir. 1992).
7

verdict would have been quite different with a second primary
carrier at risk. If the City's share was large enough, Highlands'
excess policy would be reached only at higher verdict levels or
perhaps not at all. There is little question but that the jury
could have found the City liable, and for the City's own
negligence. That is, Highlands argues its exposure was much less
than it thought--as a result of defendants' failure to disclose.
National Union also argues that if it had disclosed before
settlement, Highlands would still have paid the same amount of
money because Naclerio, Highlands' insured, had a contractual
obligation to indemnify the City for the City's losses. The
evidence showed that Naclerio's obligation was limited to
indemnifying the City for its vicarious liability for Naclerio's
torts. Ample testimony addressed the distinction between vicarious
liability and liability for the City's own negligence in
supervising Naclerio, which fell outside Naclerio's indemnity
obligation.
IV.
National Union next makes several challenges to the jury
charge for the first time on appeal. In the context of Federal
Rule of Criminal Procedure 52(b), the Supreme Court has recently
announced that for an appellant in a criminal case to prevail with
a new argument on appeal, he must show: (1) that an error
occurred; (2) that the error was plain, which means clear or
obvious; (3) the plain error must affect substantial rights; and
(4) not correcting the error would "seriously affect the fairness,
8

integrity or public reputation of judicial proceedings."19 Federal
Rule of Civil Procedure 5120 is even more restrictive than Criminal
Rule 52(b);21 indeed, one circuit holds that it allows no new
attacks on instructions on appeal.22 We thus agree with the Sixth
Circuit that "[t]he principles and decision enunciated in Olano
apply a fortiori in the civil context where courts pay less strict
attention to procedural protocol."23 Olano augments this court's
longstanding rule that reversal for plain error is "not a run-of-
the-mill remedy" and will occur "only in exceptional circumstances
to avoid a miscarriage of justice."24
Olano's requirement of an "obvious" error is stringent. The
Court said that "at a minimum" an alleged error must be "clear
19United States v. Olano, 113 S. Ct. 1770, 1779 (1993).
20Federal Rule of Civil Procedure 51 states: "No party may
assign as error the giving or the failure to give an instruction
unless that party objects thereto before the jury retires to
consider its verdict, stating distinctly the matter objected to
and the grounds of the objection."
21Federal Rule of Criminal Procedure 52(b) states: "Plain
errors or defects affecting substantial rights may be noticed
although they were not brought to the attention of the court."
22Hammer v. Gross, 932 F.2d 842, 847 (9th Cir.) (declining
to recognize a plain error exception in civil cases because of
Rule 51's plain language), cert. denied, 112 S. Ct. 582 (1991).
The language of Rule 51 offers powerful support for this view,
but this panel is not free to adopt it. Olano pulls this circuit
back from its drift from Rule 51, but it did not free this panel
to follow the 9th Circuit.
23Smith v. Gulf Oil Co., 995 F.2d 638, 646 (6th Cir. 1993).
24Peveto v. Sears, Roebuck & Co., 807 F.2d 486, 489 (5th
Cir. 1987).
9

under current law."25 United States v. Frady,26 an opinion cited by
Olano, required error so clear that "the trial judge and prosecutor
were derelict in countenancing it, even absent the defendant's
timely assistance in detecting it."27 It is the unusual case that
will present such an error.
These claimed errors must meet all of the Olano elements.
They meet none of them. We discuss them only to give guidance to
the bar on what Olano requires, first observing that each are
subtle legal arguments and emphasize isolated portions of the
charge. There is nothing obvious about these errors so much so
that a contrary contention borders on the frivolous.
Few jury charges in cases of complexity will not yield "error"
if pored over, long after the fact in the quiet of the library--if
such an enterprise is to be allowed. It is not. The reality is
that most such "errors" will be washed away if the trial court is
given a fair opportunity to consider them. In short, so long as
the trial judge gives counsel a fair opportunity to object, we will
listen to unobjected to rulings only in those handful of cases that
can
meet the exacting requirements
of plain error.
Olano and Rule 51 do not interpose technical barriers or lay
traps. These rules vindicate powerful interests in orderliness and
finality. They also reflect the central role of the United States
District Court. It is not a way station or entry gate. Rather,
25113 S. Ct. at 1777.
26456 U.S. 150 (1982).
27Id. at 163.
10

trials are the heart of the system. Trial, not appeal, is the main
event. The rules we enforce today tether these statements to
reality.
National Union first argues that the instructions fail to say
that New York law requires proof of deceitful intent as an element
of a claim for breach of fiduciary duty. The case on which it
relies, Horn v. 440 E. 57th Co.,28 does not support its argument.
Horn found that the elements of a claim under the Martin Act, a New
York securities law, paralleled the elements of negligent
misrepresentation and breach of fiduciary duty because "both these
causes of action omit the element of a deceitful intent."29 It went
on to dismiss the plaintiffs' common law claims as preempted
because of their similarity to the statute, not because of any
failure of proof on the part of the plaintiffs.30 The correct
statement of New York law is that a plaintiff alleging a breach of
fiduciary duty can recover for loss "regardless of the existence of
deceitful intent."31
28547 N.Y.S.2d 1 (N.Y. App. Div. 1989).
29Id. at 120.
30See id. See also id. at 4 (assuming that the Martin Act
did not forbid the defendants from making the representations on
which the lawsuit focused). National Union also cites Flickinger
v. Harold C. Brown & Co., 947 F.2d 595 (2d Cir. 1991).
Flickinger cites only Horn as authority for the proposition that
breach of fiduciary duty claims under New York law require proof
of deceitful intent. Id. at 599. As that is not Horn's holding,
we do not find Flickinger persuasive.
31Eagle Tenants Corp. v. Fishbein, 582 N.Y.S.2d 218, 219
(N.Y. App. Div. 1992). See also Brown v. Lockwood, 432 N.Y.S.2d
186, 193-94 (N.Y. App. Div. 1980).
11

National Union next argues that part of the fiduciary duty
instruction presupposed National Union's liability and invaded the
province of the jury. The contested part begins: "If you find that
defendants' failure to provide Highlands with correct information
. . . , your verdict will be for the plaintiff." The next
sentence, however, gives the jury an alternative, stating that "if
the correct information was provided to Highlands by defendants .
. . or if defendants acted in good faith and in the exercise of
honest discretion, you are to find for defendants." This
instruction did not have a plainly erroneous tendency to confuse or
mislead the jury.32
National Union finally complains that the fiduciary duty
instruction allowed the jury to award damages without finding
causation. The language it challenges reads: "If you find that
there was damage to Highlands, your verdict will be for Highlands
and in such an amount as you find to be actual pecuniary loss it
suffered, that is . . . the amount of money Highlands would have
paid had the defendants not breached their fiduciary duties to
Highlands." The first sentence says that Highlands was damaged if
"the amount of money it paid . . . is greater than the amount of
money it would have paid if Highlands had been aware of the type
and amount of insurance available to the city of New York."
32Wells v. Hico Indep. School Dist., 736 F.2d 243, 250 (5th
Cir. 1984), cert. dismissed, 473 U.S. 901 (1985).
12

Reading these two sentences in conjunction, we find no plain
error.33
V.
During closing arguments, the parties disagree over whether
the jury should consider the OCP policy limits. The district judge
ruled that she would decide the OCP policy limits, and would grant
a new trial if the verdict was inconsistent with her determination.
She then instructed the jury to not determine the OCP policy
limits. After the jury returned its verdict, the judge entered
judgment without making a finding on policy limits.
National Union argues that the judgment should be reduced to
$500,000 because the judge made an error of law in interpreting the
contract. The argument is that this court should deem the judge to
have found a $3,000,000 policy limit, the only limit suggested by
the evidence that is consistent with the $1,100,000 verdict.34
National Union then argues that the judge erred in making this
finding because the $3,000,000 limit lapsed when the original
contract term expired several days before the accident. The
correct limit at the time of the accident, contends National Union,
was $500,000, the limit in an endorsement the parties executed when
they agreed to extend the life of the original contract.
The flaw in National Union's argument is that it does not
challenge the judge's legal conclusion about the proper
interpretation of the contract, but rather challenges the judge's
33See id.
34Fed. R. Civ. P. 49(a).
13

factual finding that the contract had two relevant endorsements
rather than one.35 Highlands points to a second endorsement, which
took effect a few days after the first, that maintained the
$3,000,000 policy limit for a short period that included the date
of the accident. The parties adopted this endorsement, Highlands
contends, because the City wanted to maintain $3,000,000 of
coverage while shifting $2,500,000 to a different carrier. When
the new carrier had difficulty preparing the policy on time,
Highlands contends that the City came back to National Union and
kept the original policy in force until the new one was ready.
National Union contends that this endorsement was not signed and
did not become part of the contract, while Highlands contends that
industry practice was to only sign one copy of the endorsement. In
other words, National Union attempts to challenge the judge's
implicit factual finding that Highlands' witnesses about the effect
of signatures were more credible and that the contract included the
second endorsement.
National Union waived this factual challenge. New York law
places the burden on an insurer to prove the existence of limits on
liability,36 and National Union pled policy limits as an affirmative
defense before the trial court. Despite having and recognizing
this burden, National Union did not ask for an instruction on this
3522 John Alan Appleman et al., Insurance Law & Practice �
12851 (1979 & 1993 Supp.).
36See Burroughs Wellcome Co. v. Commercial Union Ins. Co.,
632 F. Supp. 1213, 1223 (S.D.N.Y. 1986); Emons Indus. v. Liberty
Mut. Fire Ins. Co., 545 F. Supp. 185, 189 (S.D.N.Y. 1982).
14

defense, waiving its right to complain that the jury was not guided
on it.37 We will not now let National Union complain that the judge
accepted the jury's verdict, when the jury could not have
considered the argument with which National Union now attacks the
verdict. Nor can National Union complain that the judge denied it
a jury trial on this factual issue, because it had already waived
that right. A judge is presumed to have made all fact findings
necessary in favor of its judgment entered or a Rule 49 verdict.
A party cannot complain that the fact issue ought to have gone to
the jury unless it has requested their submission to the jury.38
VI.
National Union argues that the district court had no basis for
awarding $133,185.17 in attorneys fees to Highlands. The court
held that New York law allows recovery of attorneys fees when a
suit seeks to overcome the consequences of fraud. Noting that
"there is clear evidence supporting the jury's finding of
fraudulent misrepresentation," it awarded the plaintiff its
attorneys fees.
The district court erred. The New York rule is that counsel
fees are incidents of litigation which a prevailing party may not
collect unless an award is authorized by agreement between the
parties, statute, or court rule.39 No general exception to the
37Fed. R. Civ. P. 51.
38Fed. R. Civ. P. 49.
39Cross v. Zyburo, 587 N.Y.S.2d 670, 672 (N.Y. App. Div.
1992).
15

"American Rule" exists for common law fraud.40 The cases Highlands
cite involve a statute allowing fee awards for fraudulent property
transfers to defraud creditors.41 Another says that where a
defendant's fraud has caused a plaintiff to spend money defending
other lawsuits, those legal expenses are compensable as damages.42
None establish a general rule allowing recovery of fees for common
law fraud.
AFFIRMED IN PART AND REVERSED IN PART.
40See id. See also 60 N.Y. Jur. 2d, Fraud and Deceit � 244
(1992) ("The general rule that, in actions for torts, counsel
fees and other expenses in conducting the suit cannot be taken
into consideration in assessing damages, applies to actions for
fraud and deceit.").
41Fread v. Grabowsky, 552 N.Y.S.2d 415, 416 (N.Y. App. Div.
1990); Bagnall v. Dahajorn, Inc., 452 N.Y.S.2d 658, 659 (N.Y.
App. Div. 1982) (both applying N.Y. Debt. & Cred. Law � 276-a).
42Penn-Ohio Steel Corp. v. Allis-Chalmers Mfg. Co., 184
N.Y.S.2d 58 (N.Y. App. Div. 1959).
16