St. Paul Fire & Marine Ins. Co. v. Renegade Super Grafix, Inc., CIVIL NO. 1:15CV104-HSO-JCG

• Decision Date: 15 September 2016
• Docket Number: CIVIL NO. 1:15CV104-HSO-JCG
• Citation: 209 F.Supp.3d 895
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY and Travelers Property Casualty Company of America, Plaintiffs v. RENEGADE SUPER GRAFIX, INC., and Gulf Coast Shipyard Group, Inc., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

209 F.Supp.3d 895

ST. PAUL FIRE & MARINE INSURANCE COMPANY and Travelers Property Casualty Company of America, Plaintiffs

v.RENEGADE SUPER GRAFIX, INC., and Gulf Coast Shipyard Group, Inc., Defendants.

CIVIL NO. 1:15CV104-HSO-JCG

United States District Court, S.D. Mississippi, Southern Division.

Signed September 15, 2016

Charles Greg Copeland, Laurie R. Williams, Copeland, Cook, Taylor & Bush, PA, Ridgeland, MS, Edward Louis Fenasci-PHV, Kenneth J. Gelpi-PHV, Jr., Montgomery Barnett, LLP, New Orleans, LA, for Plaintiffs.

William Alex Brady, II, Michelle E. Luber, Brady Law Firm, PLLC, Long Beach, MS, James M. Garner-PHV, Joshua A. Force-PHV, Ryan O. Luminais, Sher, Garner, Cahill, Richter, Klein, & Hilbert, LLC, New Orleans, LA, for Defendants.

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS ST. PAUL FIRE & MARINE INSURANCE COMPANY AND TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA'S MOTION FOR SUMMARY JUDGMENT [28]

HALIL SULEYMAN OZERDEN, UNITED STATES DISTRICT JUDGE

BEFORE THE COURT is Plaintiffs St. Paul Fire & Marine Insurance Company and Travelers Property Casualty Company of America's Motion for Summary Judgment [28] seeking a declaratory judgment that it owes no duty to defend or indemnify either Defendant in this case under the terms of two insurance policies. After this Motion was briefed, the Court requested additional briefing which was completed on July 13, 2016. See Order [59]. Having considered the parties' submissions, the record as a whole, and all relevant legal authority, the Court is of the opinion that the Motion should be denied, and that Plaintiffs should be directed to show cause by Friday, September 30, 2016 , why the Court should not grant summary judgment in favor of Defendants as to Plaintiffs' duty to defend under the terms of the relevant insurance Policies.¹ Defendants Renegade Super Grafix, Inc., and Gulf Coast Shipyard Group, Inc., shall file any responsive memoranda on or before Friday, October 14, 2016 , and any rebuttal memoranda by Plaintiffs are due on or before Friday, October 21, 2016 .

I. BACKGROUND

A. State Court Litigation

In 2009, Defendant Gulf Coast Shipyard Group, Inc.² ("Gulf Coast"), began construction of a vessel, the T-051, pursuant to a "vessel construction contract dated December 18, 2006." State Court First Am. Compl. [28-3] at 17.³ According to the pleadings ultimately filed in the underlying state court lawsuit relevant to this dispute, Gulf Coast hired Defendant Renegade Super Grafix, Inc. ("Renegade") "to provide all labor and materials to sand blast, prime, fair and paint the T-051."Id. [28–3] at 17. Gulf Coast and Renegade determined that the T-051 would be "painted and faired" using the "blue topcoat Awlgrip system"⁴ that would provide "top quality marine painting and fairing products." Id. [28–3] at 18.

Renegade began the painting and fairing work on the T-051 in mid-2010. Id. [28–3] at 18. In late November or early December 2011, cracks began to appear in the paint which eventually worsened into a "catastrophic failure" of the Awlgrip system. Id. [28–3] at 19–20. Renegade's attempts to repair the defects in the Awlgrip system during 2012 and 2013 were unsuccessful. Id. [28–3] at 19–20. Gulf Coast, in an effort to mitigate its damages, undertook the removal of the defective Awlgrip system and the subsequent re-fairing and re-painting of the T-051. Id. [28–3] at 19–20.

On October 8, 2013, Gulf Coast filed suit against Renegade, Akzo Nobel Coatings, Inc. ("Azko"), and International Paint, LLC ("International"), in the Circuit Court of Harrison County, Mississippi, First Judicial District, seeking to recover approximately $7,000,000.00 in damages. The Complaint advanced the following claims: (1) Breach of Contract (Renegade); (2) Breach of Express Warranty (Renegade, Akzo, and International); (3) Fraud in the Inducement—Misrepresentations (Akzo and International); (4) Fraud in the Inducement—Omissions of Material Fact (Renegade, Akzo, and International); (5) Negligent Misrepresentation (Renegade, Akzo, and International); (6) Conspiracy to Commit Fraud (Renegade, Akzo, and International); (7) Breach of Implied Warranty of Fitness for a Particular Purpose (Renegade, Akzo, and International); (8) Breach of Implied Warranty of Merchantability (Renegade, Akzo, and International); (9) Violation of the Magnuson-Moss Warranty Act (Renegade, Akzo, and International); and (10) Deceptive Advertising (Akzo and International). State Court First Am. Compl. [28-3] at 1, 20-37; Mem. in Supp. Mot. Summ. J. [29] at 3.

B. Complaint for Declaratory Judgment [1] and Summary Judgment Briefing

Renegade sought defense and indemnification from Gulf Coast's claims from St. Paul Fire & Marine Insurance Company ("St. Paul") under a Marine General Liability Insurance Policy No. 0L04200970 [28–1] issued to Renegade for the period July 12, 2011, to July 12, 2012, and from Travelers Property Casualty Company of America ("Travelers") under a Marine General Liability Insurance Policy No. Z0L–10T65168–12–ND [28–2] issued to Renegade for the period July 12, 2012, to July 12, 2013.⁵ Compl. [1] at 3, 14.

On March 27, 2015, St. Paul and Travelers instituted the present lawsuit in this Court by filing a Complaint for Declaratory Judgment [1] against Defendants Renegade and Gulf Coast pursuant to 28 U.S.C. §§ 1331, 1332, 2201, and 2202. Compl. [1] at 1-2. The Complaint asserts that the St. Paul and Travelers' Marine General Liability Insurance Policies ("the Policies") do not afford any coverage to Renegade for the alleged losses and damages suffered by Gulf Coast in the construction of the T-051. Compl. [1] at 15. The Complaint further alleges that since the Policies do not provide coverage, St. Paul and Travelers are entitled to a judgment declaring that they are not obligated to defend or indemnify Renegade for the claims asserted by Gulf Coast in the state court litigation. Compl. [1] at 15-19.

On January 5, 2016, St. Paul and Travelers filed the present Motion for Summary Judgment [28] positing that, based upon the clear language of the Policies, neither owe a duty to defend or indemnify Renegade for the claims asserted by Gulf Coast in state court for damages Gulf Coast allegedly sustained as a result of Renegade's "painting and fairing the motoryacht hull number T-051" because there was no "occurrence," as defined by the Policies, and because Gulf Coast's claims against Renegade, even if covered, are "specifically excluded by several exclusions in the [P]olicies." Mot. [28] at 1-2; Mem. in Supp. [29] at 1-2.

On February 22, 2016, Gulf Coast filed its Response [46] arguing that there was an "occurrence" such that the Policies do provide coverage for the property damage Renegade caused to Gulf Coast's T-051 yacht hull. Gulf Coast Resp. [46] at 1-4. Gulf Coast maintains that

[r]eading the Policies as a whole and in the light most favorable to Gulf Coast, the nonmoving party, coverage is provided for the property damage to Gulf Coast caused by Renegade. Renegade applied for, received, and thus paid a premium for the "Ship Repairer's Legal Liability" endorsement. In its application for the Policies, Renegade specifically indicated that its business was "boat service & repair—painting of hulls on land." Therefore [sic], in addition to the general "Ship Repairer's Legal Liability" endorsement, the Policies paid for by Renegade included a specific "Other Work" endorsement for "boat service and repair—painting of hulls." Gulf Coast's property damage caused by Renegade while it faired, painted, and attempted to repair the T-051 hull must be covered, or both the general ship repairer's endorsement and the specific endorsement for painting of hulls would provide, at best, only illusory coverage to Renegade. The Court should hold, therefore, that the Policies provide coverage to Renegade for Gulf Coast's claims in the state court suit.

Gulf Coast Resp. [46] at 3, ¶ 6. Alternatively, Gulf Coast argues that the Policies are ambiguous and, under Mississippi law, should be construed against the drafters, St. Paul and Travelers. Gulf Coast Resp. [46] at 3, ¶ 7.

Renegade has also filed a Response [48] and contends that any liability that could be assessed against it in the state court litigation was predicated upon acts that were "accidental and unintended and, as such, qualify as an ‘occurrence’ under the Policies, triggering coverage." Renegade Resp. [48] at 2; Mem. in Supp. [49] at 7-9. Renegade argues that summary judgment would be improper and that St. Paul and Travelers must provide Renegade a defense until such time as the state court litigation "progresses to a point where liability can be sufficiently determined through expert witnesses, dispositive motions and/or trial on the merits." Renegade Resp. [48] at 2-3.

On February 29, 2016, St. Paul and Travelers filed a Rebuttal [55] to the Responses [46] [48] reurging their position that the Policies do not afford coverage to Renegade because there was no " ‘occurrence’—no accidental, unintentional conduct by Renegade" sufficient to trigger coverage. Rebuttal [55] at 1. The Rebuttal also posits that

[t]he "Ship Repairers Legal Liability" Endorsement generally expands coverage provided by the Policies to certain types of damage incurred to watercraft while in the insured's care, custody, or control for the purpose of repair or alteration. However, that endorsement is expressly subject to its own exclusions, as well as the terms, conditions, and exclusions of the remainder of the Policies. Thus, the addition of the "Ship Repairers Legal Liability" Endorsement does not convert the Policies into performance bonds guaranteeing the quality of Renegade's product and work.

Rebuttal [55] at 6.

C. Order for Additional Briefing [59]

After initial briefing on the Summary Judgment Motion concluded, the Court ordered additional briefing on the question of what effect, if any, the rider to the Policies titled "Other Work Endorsement" had on whether coverage existed based upon...