Summary
finding insurer had no obligation to defend or indemnify insured where CGL policy excluded the type of damage caused by insured's work to insured's product
Summary of this case from Celina Mut. Ins. Co. v. GallasOpinion
No. 1:02-cv-1733-LJM-WTL.
June 30, 2004
ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
This cause is now before the Court on the plaintiff's, Transcontinental Insurance Co. ("Transcontinental"), Motion for Summary Judgment on its claim for declaratory judgment that Transcontinental has no duty to indemnify defendant RTW Industries, Inc., doing business as Indiana Bridge Division("RTW"), for the claims made against RTW by defendant Advanced Ground Systems Engineering, Inc. ("AGSE") in the lawsuit styled Advanced Ground Systems Engineering, Inc. v. United Airlines, Inc., IP00-0076-C-M/S (S.D. Ind.) (" AGSE v. United Airlines"). Transcontinental contends that its insurance contract with RTW does not cover the claims brought by AGSE against RTW. AGSE asserts that the plain language of the insurance contract between Transcontinental and RTW covers the type of property damage that occurred in the underlying accident.
For the reasons stated herein, the Court GRANTS Transcontinental's Motion for Summary Judgment.
I. BACKGROUND
In 1992, AGSE entered into a contract with Indianapolis Airport Authority ("IAA") for the construction of a horizontal tail section work platform for the purpose of performing maintenance on aircraft. Compl. ¶ 4; Am. Ans. ¶ 4. In 1993, AGSE and RTW entered into an agreement for RTW to provide all materialand labor, fabricate, blast clean, and shop paint the work platforms inaccordance with the specifications and drawings provided by AGSE. Def. AGSE's Resp. to Pl.'s Req. for FRCP 36 Admissions No. 1 ("AGSE's Resp. to RFA").On or about May 13, 1999, there was a partial collapse of a work platform. Compl. ¶ 6; Am. Ans. ¶ 6. As a result, an inspection was performed of the other platforms, which disclosed potential welding and other fabrication problems of some of them that were subsequently corrected. AGSE's Resp. to RFA No. 2.
As a result of the partial collapse and subsequent inspection and repair of the other docks, United Airlines ("UAL") made a claim against AGSE consisting of the following elements:
a. Consulting fees $239,000.00 b. Repairs $285,000.00 c. Disruption damages $275,000.00 ___________ Total: $799,000.00
Compl. ¶ 8; Am. Ans. ¶ 8; AGSE's Resp. to RFA No. 3. AGSE arbitrated with UAL and IAA, which resulted in an award in favor of UAL and IAA and against AGSE in the amount of $661,150.00. Compl. ¶ 10; Am Ans. ¶ 10. In turn, AGSE made a demand upon RTW that it defend and indemnify AGSE against the claim. Compl. ¶ 9; Am. Ans. ¶ 9.
On March 19, 2002, the Court determined that RTW had a contractual obligation to defend and indemnify AGSE with respect to UAL's claims against it due to an indemnity clause contained in the Terms and Conditions of the Purchase Order between AGSE and RTW. Compl. ¶ 11; Am. Ans. ¶ 11. See Order, Advanced Ground Sys. Eng'g, Inc. v. United Airlines, Cause No. IP00-0076-C-M/S (S.D. Ind. May 19, 2002).
RTW is the named insured under Transcontinental's policy C1 68869792, which became effective on 10/10/98 and expired on 10/10/99. Compl. ¶ 12; Am. Ans. ¶ 12. Among its numerous coverages is a General Liability Coverage Form (or Comprehensive General Liability policy) ("CGL") that includes the following provisions:
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement.
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. . . .
b. This insurance applies to "bodily injury" and "property damage" only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence". . . .
* * *
2. Exclusions.
This insurance does not apply to:
* * *
b. Contractual Liability
"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) that the insured would have in the absence of the contract or agreement; or
(2) assumed in a contract or agreement that is an "insured contract", [sic] provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an "insured contract", [sic] reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of "bodily injury" or "property damage", [sic] provided:
(a) liability to such party for, or for the cost of, that party's defense has also been assumed in the same "insured contract"; and
(b) such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.
* * *
j. Damage to Property
"Property Damage" to:
* * *
(6) That particular part of any property that must be restored, repaired or replaced because "your work" was in correctly performed on it. Paragraph (6) of this exclusion does not apply to "property damage" included in the "products-completed operations hazard".
k. Damage to Your Product
l. Damage to Your Work
"Property damage" to "your product" arising out of it or any part of it.
"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard".
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
m. Damage to Impaired Property or Property Not Physically Injured
"Property damage" to "impaired property" or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work"; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.
Compl., Exh. A, Policy No. C1 68869792, at LR66-67, 68-69 ("Policy"). The Policy insuring RTW also includes the following definitions:
SECTION V — DEFINITIONS
* * *
7. "Impaired property" means tangible property, other than "your product" or "your work", that cannot be used or is less useful because:
a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement;
If such property can be restored to use by:
a. The repair, replacement, adjustment or removal of "your product" or "your work"; or
b. Your fulfilling the terms of the contract or agreement.8. "Insured contract" means:
* * *
f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for "bodily injury" or "property damage" to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.
* * *
12. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
* * *
14. "Products-completed operations hazard":
a. Includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned. However, "your work" will be deemed completed at the earliest of the following times:
(a) When all of the work called for in your contract has been completed;
(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project. Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
b. Does not include "bodily injury" or "property damage" arising out of:
(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the "loading or unloading" of that vehicle by any insured;
(2) The existence of tools, uninstalled equipment or abandoned or unused materials; or
(3) Products or operations for which the classification, listed in the Declarations or in the policy schedule, states that products-completed operations are subject to the General Aggregate Limit.
* * *
18. "Your product" means:
a. Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:
(1) You;
(2) Others trading under your name; or
(3) A person or organization whose business or assets you have acquired; and
b. Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.
"Your product" includes:
a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product"; and
b. The providing of or failure to provide warnings or instructions.19. "Your work" means:
a. Work or operations performed by you or on your behalf; and
b. Materials, parts or equipment furnished in connection with such work or operations.
"Your work" includes:
a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work"; and
b. The providing of or failure to provide warnings or instructions.
Compl., Exh. A, Policy, at LR 76-79.
On November 7, 2002, Transcontinental filed its Complaint for Declaratory Judgment requesting that the Court adjudicate and declare that it has no duty to defend or indemnify RTW for the claims made against it by AGSE in the underlying suit. Compl. ¶¶ 14-18.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is genuine only if the evidence is such that a reasonable jury could return a verdict for the opposing party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A disputed fact is material only if it might affect the outcome of the suit in light of the substantive law. Id.
The moving party has the initial burden to show the absence of genuine issues of materialfact. See Wollin v. Gondert, 192 F.3d 616, 620 (7th Cir. 1999); Schroeder v. Barth, Inc., 969 F.2d 421, 423 (7th Cir. 1992). This burden does not entail producing evidence to negate claims on which the opposing party has the burden of proof. See Green v. Whiteco Indus., Inc., 17 F.3d 199, 201 n. 3 (7th Cir. 1994). The party opposing a summary judgment motion bears an affirmative burden of presenting evidence that a disputed issue of material fact exists. See Wollin, 192 F.3d at 621.
Inconsidering a summary judgment motion, a court must draw all reasonable inferences "in the light most favorable" to the opposing party. Spraying Sys. Co. v. Delavan, Inc., 975 F.2d 387, 392 (7th Cir. 1992). If a reasonable fact finder could find for the opposing party, then summary judgment is inappropriate. See Shields Enters., Inc. v. First Chi. Corp., 975 F.2d 1290, 1294 (7th Cir. 1992). When the standard embraced in Rule 56(c) is met, summary judgment is mandatory. See id.
III. DISCUSSION
Transcontinental has brought this suit seeking a declaration that it is not obligated to indemnify AGSE under the CGL policy with RTW. AGSE contends that Transcontinental either misconstrues the CGL policy or should be estopped from relitigating the cause of the losses. The Court addresses the estoppel argument first.A. WAIVER OR ESTOPPEL
AGSE contends that Transcontinental waived its right to bring this claim because it failed to participate in the arbitration proceeding between AGSE and UAL/IAA when it was given the opportunity to do so. AGSE argues Transcontinental rejected the proffered tender of defense made to it by its insured, RTW, and cannot now collaterally attack the result. In other words, Transcontinental breached its duty to defend and indemnify RTW from a potential loss in this case, therefore, AGSE avers, Transcontinental is estopped from relitigating those issues here. AGSE cites no law in support of these arguments
What AGSE really seems to argue is that collateral estoppel should bar Transcontinental from litigating whether or not the CGL policycovers AGSE's claims against RTW. The Indiana Supreme Court addressed this issue in 2002:
An insurer may avoid the effects of collateral estoppel by: (1) defending the insured under a reservation of rights in the underlying tort action, or (2) by filing a declaratory judgment action for a judicial determination of its obligations under the policy. Either of these actions will preserve an insurer's right to later challenge a determination in the prior action.
An insurer may also elect not to defend an insured party in a lawsuit if, after investigation of the complaint, the insurer concludes that the claim is "patently outside the risks covered by the policy."[ Liberty Mut. Ins. Co. v. Metzler, 586 N.E.2d 897, 902 (Ind.Ct.App. 1992)] (citing State Farm Mut. Auto Ins. Co. v. Glasgow, 478 N.E.2d 918 (Ind.Ct.App. 1985)). Such a course is taken at the insurer's peril because the insurer will be "bound at least to the matters necessarily determined in the lawsuit." Frankenmuth Mut. Ins. Co. v. Williams, 645 N.E. 2d 605, 608 (Ind. 1995).State Farm Fire Cas. Co. v. T.B. ex rel. Bruce, 762 N.E.2d 1227, 1231 (Ind. 2002) (other citations omitted, emphasis by Indiana Supreme Court).
In the instant case, Transcontinental seeks a determination of the scope of RTW's coverage under the CGL policy. There is no evidence that this issue was litigated in AGSE v. United Airlines. However, to the extent that an issue was " necessarily determined" in that suit that informs the inquiry in this suit, Transcontinental is bound to the findings in the prior suit. AGSE has presented no evidence, however, that issues "necessarily determined" in AGSE v. United Airlines informs the inquiry in this suit.
For this reason, the Court declines to accept AGSE's invitation to deny Transcontinental summary judgment on grounds of waiver or estoppel.
B. SCOPE OF THE CGL POLICY
Transcontinental contends that AGSE is not entitled to indemnification from it for four reasons: (1) because RTW's work or work product does not constitute "covered property damage" under Transcontinental's CGL policy with RTW; (2) because damage to RTW's work product is excluded by Transcontinental's exclusion for "your own work/your own product"; (3) because damage caused by faulty workmanship is not the result of an "occurrence," therefore, it is not covered under Transcontinental's policy; or (4) because to the extent that RTW's product was incorporated into platforms that were not completely fabricated by RTW, coverage is excluded under the "impaired property" exclusion.AGSE contends that RTW did not provide a product, it provided a service — welding and fabrication of a portion of a gantry — negligently. Negligence is covered under the CGL, which is what happened with respect to the failure of welds that directly caused AGSE's property damage.
The parties agree that the coverage issue in this case turns on interpretation of the Transcontinental policy under Indiana law. Under Indiana law, insurance policies are construed in the same manner as contracts. Microvote Corp. v. GRE Ins. Group, 779 N.E.2d 94, 96 (Ind.Ct.App. 2002) (citing Erie Ins. Co. v. Am. Painting Co., 678 N.E.2d 844, 845 (Ind.Ct.App. 1997), trans. denied). The Court's primary objective is to ascertain the parties' mutual intent at the time they entered into the contract and to effectuate that intent. See First Fed. Savings Bank v. Key Markets, 559 N.E.2d 600, 603-04 (Ind. 1990). To ascertain this intent, the Court looks at the contract language that expresses the parties' rights and duties. See id. The Court will accept an interpretation of the contract that harmonizes its provisions. See id.
The parties seem to dispute the scope of RTW's "work product" with respect to the damages at issue in AGSE v. United Airlines. But, AGSE admitted that RTW contracted to provide "all material and labor, to fabricate, blast clean and shop paint the work platforms inaccordance with the specifications and drawings provided by AGSE. . . ." Def. AGSE's Resp. to Pl.'s Req. for FRCP 36 Adm., Req. for Adm. No. 1. Moreover, AGSE admitted that "[t]he consulting fees and disruption damages claimed by United Airlines against AGSE resulted from the partial collapse, inspection, and repairs to the platforms." Id. Req. for Adm. No. 3. The scope of RTW's work then, was the platforms themselves, not just the welds as AGSE argues.
Based on this finding, from the language of the CGL policy between Transcontinental and RTW, the damages are not covered because the only damage alleged was to the platforms themselves, or in other words, the only damage alleged is damage to RTW's "work" or RTW's "product." The CGL defines "Your product" as "[a]ny goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by: (1) You. . . ." Policy Sec. V, ¶ 18a. Moreover, the CGL defines "Your work" as " a. Work . . . performed by you . . . and b. Materials, parts or equipment furnished in connection with such work. . . ." Id. Sec. V, ¶ 19. Therefore, at least two of the CGL policy exclusions apply.
The CFL policy provides exclusions for:
k. Damage to Your Product
l. Damage to Your Work
"Property damage" to "your product" arising out of it or any part of it.
"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard".
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on you behalf by a subcontractor.Id. Id. Ind. Ins. Co. v. DeZutti,408 N.E.2d 12751278See also Jim Barna Log Sys. v. Gen'l Cas. Ins.,791 N.E.2d 816823-24R.N. Thompson Assocs., Inc.,686 N.E.2d 160163DeZutti DeZutti,408 N.E.2d at 1279
The Court has found that the CGL policy excludes the type of damage caused by RTW's work to RTW's product. Therefore, summary judgment in favor of Transcontinental should be GRANTED. As a matter of law, Transcontinental has no obligation to defend or indemnify RTW for any losses claimed by AGSE.
IV. CONCLUSION
For the foregoing reasons, the plaintiff's, Transcontinental Insurance Co., Motion for Summary Judgment is GRANTED. Plaintiff, Transcontinental Insurance Co., has no obligation to defend or indemnify defendant, RTW Industries, Inc. d/b/a Indiana Bridge Division, for any losses claimed by codefendant, Advanced Ground Systems Engineering, Inc., under Transcontinental Insurance Co.'s policy number C1 68869792 with RTW Industries, Inc.
IT IS SO ORDERED.