Commerce & Indus. Ins. Co. v. Century Sur. Co., Case No. 2:16–CV–00320
| Decision Date | 19 March 2018 |
| Docket Number | Case No. 2:16–CV–00320 |
| Citation | 313 F.Supp.3d 877 |
| Parties | COMMERCE AND INDUSTRY INSURANCE COMPANY, Plaintiff, v. CENTURY SURETY COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Steven G. Janik, Crystal L. Maluchnik, Janik L.L.P., Cleveland, OH, Matthew S. Sorem, Pro Hac Vice, Richard H. Nicolaides, Jr., Pro Hac Vice, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Chicago, IL, for Plaintiff.
Richard M. Garner, Jeffery Scott Maynard, Collins Roche Utley & Garner, LLC, Dublin, OH, for Defendant.
This matter is before the Court on the Cross–Motions for Summary Judgment of Plaintiff Commerce and Industry Insurance Company (C & I) and Defendant Century Surety Company (Century). (ECF No. 36, 37). For the reasons set forth below, the Court DENIES C & I's Motion for Summary Judgment and GRANTS Century's Motion for Summary Judgment.
This is a case about the obligations of two insurance companies—Commerce and Industry Insurance Company (C & I) and Century Surety Company—to each other. The underlying event giving rise to this litigation was an ATV accident in Alaska. The accident victim filed a personal injury lawsuit against various insured parties. Based on the allegations in the underlying complaint, both insurance companies became involved in defending those insured parties. All of the underlying personal injury claims have been resolved. C & I and Century now dispute which insurer should bear which defense costs.
Kathryn Daniel was an engineer who worked in Port Heiden, Alaska, the site of an environmental remediation project. (ECF No. 1 at 2). The general contractor on the project was Weston Solutions, Inc.; Aniakchak Contractors, Inc., was a subcontractor that provided local transportation. (Id. ). On September 14, 2009, Ms. Daniel was riding home from a work-related barbeque on the back of an ATV driven by Konan Lind, an employee of Aniakchak. (Id. ).
The ATV crashed, and Ms. Daniel was injured. (Id. ). She asserted claims against Mr. Lind as well as against Weston and Aniakchak. (Id. at 3). She later settled her claims against Mr. Lind and Aniakchak, leaving Weston as the sole Defendant. (Id. at 4).
Ms. Daniel's case against Weston went to trial in the Superior Court of the State of Alaska. (Id. ). The jury returned a verdict for Weston, allocating one hundred percent of the fault for the accident to Ms. Daniel and Mr. Lind. (Id. ). Ms. Daniel's claims were thus fully resolved.
Weston was insured by C & I, and Aniakchak was insured by Century. (ECF No. 36, Exh. 1). Both policies contain identical language governing the extent to which acts of employees are covered: employees are insured "for acts within the scope of their employment ... or while performing duties related to the conduct of [the] business." (ECF. No. 37–6 at 9, ECF No. 37–13 at 8). The complaint alleged that Mr. Lind's work was directed and controlled by both companies. (ECF No. 37–4 at 18).
During the litigation surrounding Ms. Daniel's claims, Century—as the insurer of Aniakchak—also agreed to defend Mr. Lind. (ECF No. 36 at 4–5). Mr. Lind's defense counsel tendered defense to C & I as well, but C & I refused to participate in Mr. Lind's defense. (Id. at 5).
C & I did agree to defend the allegations against Weston. (ECF No. 37 at 7). Weston's defense counsel also tendered defense to Century, on the basis that the Century Policy included additional coverage for Weston. (ECF No. 36 at 5). Century agreed that it might be responsible for some of Weston's coverage, but because C & I and Century could not agree as to the extent to which the policies interacted, C & I defended Weston alone. (ECF No. 37 at 7).
It is against this backdrop that the current litigation arose. The sole question at issue is: as between Century and C & I, who is obligated to pay for Weston's and Mr. Lind's defenses?
C & I now argues it had no responsibility whatsoever to defend Weston, so it sued Century, seeking reimbursement for 100% of the defense costs incurred in defending Weston—costs to the tune of $1.2 million. (ECF No. 37 at 8). Century argues that, at best for C & I, both companies were jointly responsible for Weston's defense, and that the costs should be allocated on a pro-rated basis. (ECF No. 36 at 2).
Century also counterclaimed, arguing that because the Century Policy only provided coverage in excess of C & I's coverage, C & I was 100% responsible for Mr. Lind's defense. (ECF No. 36 at 8).
C & I filed the instant litigation against Century seeking reimbursement for 100% of defense costs C & I incurred in defending Weston. Century counterclaimed for 100% of the defense costs Century incurred in defending Mr. Lind. The parties filed cross Motions for Summary Judgment, upon which the Court now opines. (ECF No. 36, 37).
Federal Rule of Civil Procedure 56(a) provides, in relevant part, that summary judgment is appropriate "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." In evaluating such a motion, the evidence must be viewed in the light most favorable to the nonmoving party, and all reasonable inferences must be drawn in the non-moving party's favor. United States Sec. & Exch. Comm'n v. Sierra Brokerage Servs., Inc. , 712 F.3d 321, 327 (6th Cir. 2013) (citing Tysinger v. Police Dep't of City of Zanesville , 463 F.3d 569, 572 (6th Cir. 2006) ). This Court then asks "whether ‘the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’ " Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "[S]ummary judgment will not lie if the dispute is about a material fact that is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson , 477 U.S. at 248, 106 S.Ct. 2505.
In a diversity case, this Court "appl[ies] the choice of law principles of the forum State, here Ohio." Sims Buick–GMC Truck, Inc. v. Gen. Motors LLC , 876 F.3d 182, 185 (6th Cir. 2017), reh'g denied (Nov. 30, 2017) (citing State Farm Mut. Auto. Ins. Co. v. Norcold, Inc. , 849 F.3d 328, 331 (6th Cir. 2017) ). Under Ohio law, "[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied unless either the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or application of the law of the chosen state would be contrary to the fundamental policy of a state having a greater material interest in the issue than the chosen state and such state would be the state of the applicable law in the absence of a choice by the parties." Sekeres v. Arbaugh , 31 Ohio St. 3d 24, 25, 508 N.E.2d 941, 942 (1987).
Here, the Century Policy was issued to an Alaskan insured—Aniakchak—and governs risks located entirely within Alaska. It is therefore governed by Alaska law. The C & I Policy was issued to a Pennsylvanian insured—Weston—and covers Weston's risks nationwide. It is therefore governed by Pennsylvania law. The parties do not dispute these conclusions. (ECF No. 36 at 7; ECF No. 37 at 8).
Under Alaska law, the duty to defend arises "if the complaint on its face alleges facts which, standing alone, give rise to a possible finding of liability covered by the policy or, if the complaint does not contain such allegations, where ‘the true facts are within, or potentially within, the policy coverage and are known or reasonably ascertainable to the insurer.’ " Attorneys Liab. Prot. Soc'y, Inc. v. Ingaldson Fitzgerald, P.C. , 370 P.3d 1101, 1111–12 (Alaska 2016) (quoting CHI of Alaska, Inc. v. Emp'rs Reinsurance Corp. , 844 P.2d 1113, 1115 n. 5 (Alaska 1993) (emphasis in original) (citation omitted) ).
The duty to defend arises under Pennsylvania law in virtually identical circumstances: " ‘An insurer is obligated to defend its insured if the factual allegations of the complaint on its face encompass an injury that is actually or potentially within the scope of the policy’ ... This broad duty to defend is mutually beneficial as it protects the insured ‘from the cost of defense’ while allowing the insurer ‘to control the defense to protect itself against potential indemnity exposure.’ " Babcock & Wilcox Co. v. Am. Nuclear Ins. , 635 Pa. 1, 20, 131 A.3d 445, 456 (2015) (quoting Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc. , 606 Pa. 584, 607–16, 2 A.3d 526, 540–45 (2010) ).
C & I, as the primary insurer of Weston, paid all of Weston's defense costs during the underlying litigation, incurring approximately $1.2 million in costs. (ECF No. 37–7). It now argues that Century must reimburse C & I for the full amount of Weston's defense costs incurred after the date of tender. (ECF No. 37 at 8).
Specifically, C & I maintains that the Century Policy provides primary coverage to Weston with no right of contribution against Weston's own insurers. In support of this contention, C & I points to a clause of the Century Policy it refers to as the Primary Additional Insured (AI) Endorsement.1 That clause appears to incorporate by reference any Additional Insured "as required by written contract." Weston's subcontract required Aniakchak to carry insurance covering Weston as an additional insured.2 And the subcontract specifically noted that "[p]olicies required to be maintained by [Aniakchak] shall be considered as primary insurance and any similar policy maintained by Weston shall be considered excess and non-contributing." (ECF No 1–4). Therefore, in C & I's view, the...
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