Orchard, Hiltz & McCliment, Inc. v. Phx. Ins. Co.

• Decision Date: 19 November 2015
• Docket Number: CASE NO. 2:14-cv-11902
• Parties: Orchard, Hiltz & McCliment, Inc., Plaintiff, v. Phoenix Insurance Company and Federated Mutual Insurance Company, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

146 F.Supp.3d 879

Orchard, Hiltz & McCliment, Inc., Plaintiff,

v.Phoenix Insurance Company and Federated Mutual Insurance Company, Defendants.

CASE NO. 2:14-cv-11902

United States District Court, E.D. Michigan, Southern Division.

Signed November 19, 2015

Gregory I. Thomas, Michael F. Healy, Thomas, Degrood, Southfield, MI, for Plaintiff.

Michele A. Chapnick, Gregory and Meyer, Troy, MI, for Defendant, Phoenix Insurance Company.

John J. Gillooly, Megan K. Cavanagh, Garan Lucow Miller, P.C., Detroit, MI, for Defendant, Federated Mutual Insurance Company.

OPINION AND ORDER GRANTING DEFENDANT PHOENIX INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT (Doc. 33), DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST PHOENIX INSURANCE COMPANY (Doc. 31), GRANTING DEFENDANT FEDERATED MUTUAL INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT (Doc. 30), and DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST FEDERATED MUTUAL INSURANCE COMPANY (Doc. 32)

MARIANNE O. BATTANI

, United States District Judge

I. INTRODUCTION

This matter is before the Court on two sets of cross motions for summary judgment. Plaintiff Orchard, Hiltz & McCliment, Inc., seeks summary judgment against Defendant Phoenix Insurance Company (Doc. 31) and against Defendant Federated Mutual Insurance Company (Doc. 32). Likewise, Defendant Phoenix has submitted a motion for summary judgment (Doc. 33), and Defendant Federated has filed a motion for summary judgment (Doc. 30). The facts underlying this case involve Orchard Hiltz's work as a project engineer designing upgrades to a wastewater treatment plant. During the course of the project, two subcontractors' employees were injured and killed as a result of an explosion on the jobsite. Orchard Hiltz, named as a defendant in two underlying tort actions proceeding in Washtenaw County Circuit Court, initiated the present declaratory action seeking a judgment that both Defendant insurance companies owe it a duty to defend and indemnify in the underlying actions. The parties dispute whether Orchard Hiltz is covered as an additional insured under the Defendants' respective insurance policies and endorsements and whether the exclusions for professional engineering services apply. For the following reasons, the Court GRANTS Phoenix Insurance Company's Motion for Summary Judgment; DENIES Orchard Hiltz's Motion for Summary Judgment against Phoenix Insurance Company; GRANTS Federated Mutual Insurance Company's Motion for Summary Judgment; and DENIES Orchard Hiltz's Motion for Summary Judgment against Federated Mutual Insurance Company.

II. STATEMENT OF FACTS

Plaintiff Orchard, Hiltz & McCliment, Inc., (“OHM”) was retained by the Village of Dexter as the project engineer to design upgrades to Dexter's wastewater treatment plant (“WWTP”), specifically, its sludge handling system. (Doc. 33, Ex. 4.) OHM's responsibilities as project engineer included preparing a proposed design for the job, preparing construction drawings, contract documents, and specifications for the bidding of the project, and providing an on-site project engineer to oversee and supervise observation of the general contractor's activities during the construction phase, as well as coordinate the contractor's activities with the daily operations of the WWTP in order to minimize delays. (Doc. 33, Exs. 4, 5, 6.)

The Village of Dexter hired nonparty A.Z. Shmina, Inc., (“Shmina”) as the general contractor for the project. (Doc. 33, Ex. 3.) The contract between Dexter and Shmina (the “Prime Contract”) identified OHM as the project engineer, and Section 00 80 00 of the agreement required that Shmina purchase and maintain liability insurance throughout the term of the project. (Id. ) Specifically, the provision at issue stated:

Prior to commencement of work, the CONTRACTOR shall purchase and maintain during the term of the project such insurance as will protect him, the OWNER(s), and Orchard Hiltz & McCliment, Inc., Consulting Engineers, from claims arising out of the work described in this Contract and performed by the CONTRACTOR, subcontractor(s) or sub-subcontractor(s)....

(Id. ) Shmina obtained a commercial general liability insurance policy through Defendant Phoenix Insurance Company (“Phoenix”). (Doc. 33, Ex. 9, Bates No. 00058.) This policy (the “Phoenix Policy”) contains a Blanket Additional Insured Endorsement extending coverage as follows:

1. WHO IS AN INSURED—(Section II) is amended to include any person or organization that you agree in a “written contract requiring insurance” to include as an additional insured on this Coverage Part, but:

a) Only with respect to liability for “bodily injury”, “property damage” or “personal injury”; and

b) If, and only to the extent that, the injury or damage is caused by acts or omissions of you or your subcontractor in the performance of “your work” to which the “written contract requiring insurance” applies. The person or organization does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization.

(Id. ) The endorsement also contains an exclusion to coverage for liability for bodily injury, property damage, or personal injury “arising out of the rendering of, or failure to render, any professional architectural, engineering or surveying services,” such as supervisory, inspection architectural, or engineering activities. (Id. )

Part of the overall project plan designed by OHM involved work on two sludge-processing digester tanks at the WWTP and required the removal and replacement of the tanks' covers. (Doc. 30, Ex. 3 at 65:23-66:5.) Shmina, however, directed the manner in which that stage of the job would be carried out. (Doc, 30, Ex. 3 at 65:23-66:24.) Shmina subcontracted with Platinum Mechanical, Inc., (“Platinum”) to provide all labor and materials on the digester cover installation work. (Doc. 32, Ex. 5.) Platinum, in turn, contracted with Regal Rigging & Demolition (“Regal”) to remove the covers from the digesters, as well as to provide concrete and steel grid demolition work. (Doc. 32, Ex. 9.) The subcontract between Shmina and Platinum (the “Platinum Subcontract”) required Platinum to purchase and maintain a commercial general liability insurance policy to protect itself and to endorse that policy “to add A.Z. Shmina. Inc. [,] the Owner, and any additional parties as required by the Prime Contract Document, as additional insured[s], on a primary and non-contributory basis, with respect to the performance of [Platinum's] operations under this Subcontract Agreement and the Contract Documents.” (Doc. 32, Ex. 5 at Exhibit E.) Exhibit A to the Platinum Subcontract incorporated by reference various other documents, including Section 00 80 00 of the Prime Contract. (Doc. 32, Ex. 5.) Accordingly, Platinum obtained a commercial general liability insurance policy through Defendant Federated Mutual Insurance Company (“Federated”). (Doc. 32, Ex. 1.) The terms of this policy (the “Federated Policy”) are very similar to the terms of the Phoenix Policy. The Federated Policy contains an Additional Insured Endorsement extending coverage as follows:

Section II—Who Is An Insured is amended to include as an additional insured any person or organization, other than a joint venture, for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability for “bodily injury”, “property damage”, or “personal and advertising injury” caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured.

(Id. ) The endorsement also contains the following limitation excluding coverage for:

Any person or organization whose profession, business or occupation is that of an architect, surveyor or engineer with respect to liability arising out of the preparation or approval of or the failure in preparation or approval of maps, shop drawings, opinions, reports, surveys...or the performance of any other professional services by such person or organization.

(Id. )

The incident forming the basis of the underlying tort actions (the “underlying actions”) took place on April 22, 2013. Michael Koch, employed by Platinum as a pipefitter, was killed, and David McBride, employed by Regal as a laborer, was seriously injured when McBride used a torch to remove the digester tank covers, which ignited the methane gas inside the tanks and caused an explosion. At the time of the explosion, OHM engineer Chris Nastally was present on the site making observations. The Estate of Michael Koch brought a wrongful death suit, and David McBride filed a bodily injury suit, both of which are currently pending in Washtenaw County Circuit Court. The complaints allege negligence and gross negligence on the parts of OHM and the various other contractors in the performance of their respective duties on the WWTP project. The complaints aver that OHM breached its duty as the project engineer by failing to ensure that the general contractor and subcontractors complied with all engineering plans and specifications and implemented all safety precautions, as well as by failing to require implementation of methane detection devices and other precautions. More specifically, the complaints allege facts such as, “Rather than stop this dangerous cutting in the presence of methane gas, John Franklin from Shmina and Chris Nastally from Defendant OHM provided McBride with plywood in an attempt to prevent sparks from the cutting torch [from] igniting the methane gas.” (Doc. 33, Ex. 8 at ¶ 100.) Further, the complaints state that “Michael Koch was not informed by anyone, including Chris Nastally of Defendant OHM that the digester still contained explosive methane gas on that date, and had not been...