Opinion
3:21-cv-00502-JR
02-21-2023
MT. HAWLEY INSURANCE COMPANY, a foreign corporation, Plaintiff, v. WATERSIDE, LLC, an Oregon limited liability company; VANCE JEANNET, an individual, Defendants.
SUPPLEMENTAL FINDINGS AND RECOMMENDATION
JOLIE A. RUSSO United States Magistrate Judge
In this insurance coverage lawsuit, plaintiff Mt. Hawley Insurance Company seeks a declaration that it has no duty to indemnify or defend in an underlying action in which defendant Vance Jeannet alleges he sustained injuries while working on construction of the Waterside apartment complex. Plaintiff and defendant Waterside, LLC each moved for summary judgment on the issue of plaintiff's duty to defend Waterside in the underlying action. On August 15, 2022, this Court issued a Findings and Recommendation (F&R) finding Mt. Hawley has a duty to defendant and recommending the denial of its motion for summary judgment and granting Waterside's motion for summary judgment. (ECF 63).
While the matter was pending before Judge Karin Immergut, Mt. Hawley submitted a letter, dated January 12, 2023, notifying the Court of a recent decision involving an endorsement similar to the contractor's condition of coverage endorsement at issue in this case. Accordingly, Judge Immergut ordered supplemental briefing and remanded the matter to the undersigned.
As noted in the F&R, the commercial general liability (CGL) policy provides:
We shall have no obligation to defend or indemnify any “insured” for any “bodily injury,” “property damage,” and/or “personal and advertising injury” arising directly or indirectly from work by a “contractor” unless each and every one of the following conditions is satisfied:
1. Certificates of insurance are obtained from each and every “contractor” prior to commencement of such “contractor's” work. Such certificates of insurance must list primary commercial general liability coverage in effect at all times the work is performed with limits equal to or greater than $1,000,000 per occurrence for “bodily injury” and “property damage”, $1,000,000 “personal and advertising injury,” $2,000,000 general aggregate, and $1,000,000 products- completed operations aggregate.
2. Written agreements are obtained from each and every “contractor” which hold harmless and indemnify each “insured” under this policy against whom the claim is made for all injuries, damages, claims, and suits arising directly or indirectly from the “contractor's” work (including any work performed by the “contractor's” subcontractors or subsubcontractors). Such agreements must expressly provide indemnification to the maximum extent permitted by law.
3. Such agreements must be signed by the parties to the agreement prior to the “occurrence” or offense giving rise to the claim against this policy's “insured(s)”. The written agreements required in condition 2. above must also require that the “contractor” will obtain additional insured coverage under the “contractor's” primary commercial general liability policy for each “insured” under this policy against whom the claim is made. Such agreements must be signed by the parties to the agreement prior to the date of the “occurrence” or offense giving rise to the claim against this policy's “insured(s)”. Such agreements must require limits of additional insured coverage equal to or greater than the limits listed in condition 1 above. Such agreements must state that the additional insured coverage is to be primary and noncontributory.
As used in this endorsement only, “contractor” means any person or entity that any “insured” hires or contracts with for the performance of any work for construction, renovations, maintenance (including, but not limited to, snow removal), or repairs, regardless of where such work is performed, and regardless of whether such person or entity is described as a contractor, construction manager, general contractor, subcontractor, vendor, supplier, materialman, service provider
or by any other term.CGL Policy (ECF 1-3 at p. 35) (emphasis added).
This endorsement could prevent a duty to defend if certain certificates of insurance and hold harmless agreements are not provided in the event the alleged injury for which the insured seeks coverage directly or indirectly arises from work by a “contractor.” However, this Court found that:
Regardless of whether a subcontractor played any role in the placement of the staircase, Jeannet can and did assert claims solely against Waterside for its own negligence resulting in bodily injury. A broadly worded claim for negligence encompassing acts of sole negligence against the insured may be sufficient to prevent application of a contractor's condition precedent to coverage. Cf, ProBuilders Specialty Ins. Co. v. Phoenix Contracting, Inc., 2017 WL 11536055, at *2 (D. Or. May 3, 2017), affd, 743 Fed.Appx. 876 (9th Cir. 2018) (“It may well be that under certain circumstances, a broadly-worded claim for “negligent supervision” could encompass such acts of sole negligence.”).F&R at p. 10 (ECF 63).
Mt. Hawley asserts Judge Stacie Beckerman's November 29, 2022 F&R in Contractors Bonding & Ins. Co. v. Radian Constr. Corp., 2022 WL 18156677, (D. Or. Nov. 29, 2022), report and recommendation adopted, 2023 WL 136571 (D. Or. Jan. 4, 2023), demonstrates that even when only the insured's work allegedly caused the damage, the endorsement applies and therefore it has no duty to defend in this case.
In the Contractors Bonding case, the insured asserted a claim for breach of contract against its client when it refused to pay following completion of a construction project. Id. at * 2. The client filed counterclaims against the insured for breach of contract and negligence for certain alleged failures regarding the project. The insured filed a third-party complaint against several subcontractors (from whom it had not obtained the appropriate certificates and agreements) asserting they had “performed the work that was the subject of the counterclaims.” Id.
The insurer in Contractors Bonding sought a declaration that it had no duty to indemnifythe insured against the counterclaims because the special condition endorsement was a condition precedent to coverage, and it is undisputed that Radian failed to satisfy the conditions set forth in the endorsement. Id. at *3. Contrary to Mt. Hawley's assertion, it was not the insured's work that was at issue but rather the subcontractor's work that was the subject of the counterclaims by the insured's own admission in filing the third-party complaint. Indeed, the issue was not whether the endorsement precluded coverage based on who performed the work, but whether it was condition precedent rather than a condition of forfeiture. In addition, the insured did not dispute that it was required to comply with the endorsement only that “if a subcontractor performed the work and Radian did not get the certificates of insurance [nor satisfy the other conditions], the coverage that otherwise exists for property damages might be forfeited (upon a showing of prejudice). Id. at *7. Judge Beckerman concluded that the special condition endorsement was a condition precedent and not a condition of forfeiture and, therefore, the insurer did not owe a duty to indemnify.
The Court notes that the duty to defend at issue in this case is broader than the duty to indemnify.
“[A] condition of forfeiture ... potentially result[s] in the loss of benefits if the insurance company proves it has suffered prejudice.” Richardson v. Guardian Life Ins. Co. of Am., 984 P.2d 917, 924 (Or. Ct. App. 1999).
Here, the applicability of the condition precedent is directly at issue and defendants did not assert an issue of fact based on whether the insurer suffered any prejudice as a result of the failure to obtain required certificates or agreements. Rather, the issue is whether the underlying complaint provides any basis for coverage. This Court determined:
It is a plausible interpretation of the policy as a whole, that Mt. Hawley has a duty to defend in the underlying action. Arguably the parties intended the condition
precedent regarding contractor's conditions of coverage not to apply for claims asserted directly against the insured Waterside for bodily injury resulting from its sole negligence apart from the work of a subcontractor. Because the underlying complaint alleges claims against Waterside, who is not a “contractor” but rather is the insured, for negligence that is arguably based on its direct fault and not directly or indirectly arising from work by a subcontractor, the condition precedent is not applicable, and Coverage A is implicated triggering a duty to defend. See Underwriters of Int. Subscribing to Pol'y No. A15274001 v. ProBuilders Specialty Ins. Co., 241 Cal.App.4th 721, 734, 193 Cal.Rptr.3d 898, 910 (2015), as modified on denial of reh'g (Nov. 13, 2015)F&R at p. 10 (ECF 63).
The Contractors Bonding case has no bearing on the issue presented in this case regarding whether Mt. Hawley has a duty to defend in the underlying action.
CONCLUSION
After a review of the supplemental briefing, this court affirms its recommendations that plaintiff Mt. Hawley's motion for summary judgment (ECF 48) should be denied and defendant Waterside's cross-motion for summary judgment (ECF 55) should be granted as stated in the August 15, 2022 F&R (ECF 63).
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.