Spirtas Co. v. Federal Ins. Co.
| Citation | 481 F.Supp.2d 993 |
| Decision Date | 07 March 2007 |
| Docket Number | No. 4:06CV00255 AGF.,4:06CV00255 AGF. |
| Parties | SPIRTAS COMPANY, d/b/a Spirtas Wrecking Company, Plaintiff, v. FEDERAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
Timothy E. Hayes, Thomas M. Payne, III, Timothy E. Hayes and Associates, St. Louis, MO, for Plaintiff.
Douglas S. Crosno, Jonathan A. Constine, Hogan and Hartson, Washington, DC, Gerald P. Greiman, Spencer and Fane, LLP, St. Louis, MO, for Defendant.
This matter is before the Court on Defendant Federal Insurance Company's ("Federal") motion for summary judgment and Plaintiff Spirtas Company's ("Spirtas") motion for partial summary judgment.1 In this removal diversity action, Spirtas claims that Federal breached a Directors and Officers liability insurance policy issued by Federal to Spirtas, by failing to defend and indemnify Spirtas in a lawsuit brought against Spirtas, as subcontractor, by MIG/Alberici LLC ("MIG"). Spirtas further asserts that Federal's breach was in bad faith. Pursuant to, the Case Management Order, the issue of coverage was to be resolved first, with the issue of bad faith to be resolved if the Court found that coverage existed. Federal now moves for summary judgment on the ground that the policy in question excludes from coverage Spirtas's claim for defense and indemnification. Spirtas asserts that the policy provides for coverage, and moves for partial summary judgment on the question of whether the policy exclusion relied upon by Federal precludes, coverage. Oral argument was held on these two motions on March 1, 2007. For the reasons set forth below, the Court, concludes that Federal is entitled to summary judgment.
Spirtas is a Missouri corporation engaged in the business of demolition and environmental abatement of structures. Spirtas has no subsidiaries, and all of its offices are located in Missouri. Federal is an insurance corporation organized and existing under the laws of Indiana, with its principal place of business in New Jersey. Federal provided Spirtas, as the named Insured Organization, with two insurance policies that included a Directors and Officers Liability Coverage Section. One policy covered the period of April 28, 2004, through May 28, 2005, and the other from May 28, 2005 through May 28, 2006. The policies contained a number of "Missouri Amendatory Endorsements," including two to the Directors and Officers Liability Coverage Section.
Insuring Clause. C in the Directors and Officers Liability Coverage Section of each policy relates to Corporate Liability Coverage, and provides as follows: "The Company shall pay Loss on behalf of the Insured Organization resulting from any Insured Organization Claim first made against such Insured Organization during the policy period, or any applicable Extended Reporting Period, for Wrongful Acts." Section IX(A)(1) of the policies provides in pertinent part: The applicable limit of liability was $3 million.
The policies also contain an Exclusions Section (Section III). Section III(C)(2), which both parties agree contain the operative language at issue before the Court, provides as follows:
(C) No coverage will be available under Insuring Clause (C) for any Insured Organization Claim:
* * *
(2) based upon, arising from, or in consequence of any actual or alleged liability of an Insured Organization under any written or oral contract or agreement, provided that this Exclusion (C)(2) shall not apply to the extent that an Insured Organization would have been liable in the absence of the contract or agreement.
On March 5, 2004, Spirtas and MIG entered into a written Subcontract Agreement, whereby Spirtas was to serve as demolition subcontractor on a project located in New Jersey. It is undisputed that all negotiations for the Subcontract Agreement took place in Missouri, and that the Subcontract Agreement was signed in Missouri by `all parties to the transaction. Under the terms of the Subcontract Agreement, Spirtas was to receive approximately $4 million in exchange for its services, and was to pay a portion of that payment to its own subcontractors, suppliers, or laborers who performed work on the project. Article II of the Subcontract Agreement required the parties to participate in industry mediation regarding disputes that might arise out of or relate to the subcontract, before recourse to any other form of binding dispute resolution, and further provided that "any disputes not resolved by mediation shall be decided by litigation on the Circuit Court of Wayne County, Michigan."
On May 10, 2005, MIG filed a five-count complaint against Spirtas in the Circuit Court for the County of Wayne, Michigan, alleging that Spirtas failed to perform its work when and as directed by MIG, thereby causing delays and disruptions in the orderly sequence of the work; submitted unjustified requests for additional compensation; and "[d]uring the course of its performance, in violation of the terms and conditions of the Subcontract, Spirtas has failed to pay some of its subcontractors, suppliers, and other job creditors from the sums paid to it by MIG for that purpose, and to deliver its work on the Project free from liens and claims from its creditors." Doc. # 22-6 ¶ 15. MIG also asserted that in violation of the forum selection clause quoted above, Spirtas initiated litigation against MIG in St. Louis County, Missouri, without first submitting the dispute to nonbinding mediation, a condition precedent to litigation.
Plaintiff incorporated the above allegations into each of the five counts of its complaint. In Count I, MIG seeks declaratory relief directing the parties to submit their dispute to mediation, and staying MIG's lawsuit pending completion of the mediation process. In Count II, MIG asserts a claim of breach of contract based upon Spirtas's failure to complete its work at the times and in the manner required under the Subcontract Agreement, submission of unjustified claims, failure to pay its job creditors, failure to initiate mediation, and filing suit in Missouri. Count III sounds in conversion and asserts that Spirtas wrongfully converted funds paid to it by MIG by refusing to pay over these funds to Spirtas's subcontractors, suppliers, and job creditors. Count W, titled, "Express or Implied Trust," asserts that as a result of the Subcontract Agreement between it and Spirtas, "an express trust relationship was established relating to payments made by MIG to Spirtas for the benefit of the Spirtas subcontractors, suppliers and job creditors on the Project." MIG claims that Spirtas's failure to do so constituted a material breach of its trust obligations. In Count V for unjust enrichment, MIG claims that Spirtas had not paid its subcontractors and suppliers, who in turn had asserted claims against MIG for nonpayment, and that Spirtas would be unjustly enriched if it were allowed to retain the benefit of MIG's payments without fully compensating Spirtas's subcontractors and suppliers. In each count except Count IV, MIG states that it has been damaged in an amount greater than $25,000.
It is undisputed that by letter dated November, 16, 2005, Spirtas presented a claim to Federal for defense and indemnity regarding MIG's action. Federal denied coverage on January 6, 2006, whereupon Spirtas filed the present action. Federal argues that as all counts in MIG's lawsuit "are based upon, arising from, or in consequence of Spirtas's "actual or alleged liability" under a written contract with MIG, and as Spirtas would not have been liable to MIG in the absence of the Subcontract Agreement, coverage for defense and indemnification is excluded. Spirtas contends that MIG's counts for declaratory judgment, conversion, breach of trust, and unjust enrichment are not contingent upon the existence of a contract between MIG and Spirtas, and thus, under the proviso to the exception in question, coverage is not excluded.
Summary judgment is proper where 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); First S. Co. v. Jim Lynch Enterps. Inc., 932 F.2d 717, 718 (8th Cir. 1991). In considering a motion for summary judgment, the facts must be viewed in a light most favorable to the non-moving party, and the non-moving party must be given the benefit of all reasonable inferences that can be drawn from the facts. St. Paul Fire & Marine Ins. Co. v. Compaq Computer Corp., 457 F.3d 766 (8th Cir.2006); Price v. Xerox Corp., 445 F.3d 1054, 1056 (8th Cir.2006). The moving party has the burden to establish both the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. United Fire & Cas. Co. v. Gravette, 182 F.3d 649, 654 (8th Cir.1999). If this burden is discharged, the burden then shifts to the non-moving party, who is required to set forth specific facts showing there exists a genuine dispute on a material factual issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
At oral argument, both parties agreed, with respect to the issue of coverage under the policy, that there are no material issues of fact, and the issue is ripe for determination as a matter of law, based upon the language of the policy.
Spirtas argues that New Jersey...
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