Black & Veatch Corp. v. Aspen Ins. (Uk) Ltd.

• Decision Date: 29 March 2019
• Docket Number: No. 12-2350-SAC,12-2350-SAC
• Citation: 378 F.Supp.3d 975
• Parties: BLACK & VEATCH CORPORATION, Plaintiff, v. ASPEN INSURANCE (UK) LTD., et al., Defendants.
• Court: U.S. District Court — District of Kansas

378 F.Supp.3d 975

BLACK & VEATCH CORPORATION, Plaintiff,

v.ASPEN INSURANCE (UK) LTD., et al., Defendants.

No. 12-2350-SAC

United States District Court, D. Kansas.

Signed March 29, 2019

Christopher P. Sobba, Roy Bash, Polsinelli PC, Kansas City, MO, David L. Beck, Pro Hac Vice, David T. Dekker, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman, LLP, Washington, DC, for Plaintiff.

Andrew C. Patton, Pro Hac Vice, Robert J. Franco, Pro Hac Vice, Scott O. Reed, Pro Hac Vice, Franco & Moroney, LLC, Chicago, IL, Michael T. Crabb, Michael J. Kuckelman, Kuckelman Torline Kirkland, Overland Park, KS, for Defendants.

MEMORANDUM AND ORDER

Sam A. Crow, U.S. District Senior Judge This insurance dispute over coverage and amount of recovery comes before the court on a second wave of summary judgment motions following the Tenth Circuit's order (ECF# 329) vacating and remanding this court's prior summary judgment order and the United States Supreme Court's denial of the defendants' petition for certiorari (ECF# 349), Black & Veatch Corp. v. Aspen Insurance (Uk) Ltd. , 882 F.3d 952 (10th Cir.), cert. denied , ––– U.S. ––––, 139 S.Ct. 151, 202 L.Ed.2d 35 (2018). The plaintiff Black & Veatch Corporation ("B & V") has filed a motion for partial summary judgment (ECF# 337) and a motion to amend the pretrial order (ECF# 339). The defendants Aspen Insurance (UK) Ltd. and Lloyd's Syndicate 2003 (collectively "Aspen" or "Excess Insurers") have filed a motion for summary judgment. ECF# 340. The motions are fully briefed and ripe for decision. For the sake of brevity and convenience, the court will incorporate by reference from its prior order the summary judgment standards (ECF# 230, pp. 2-3) and general New York law governing interpretation of insurance contracts and the respective burdens of establishing coverage, exclusions and exceptions (ECF# 230, pp. 11-17).

FACTUAL BACKGROUND

The plaintiff B & V is suing the defendants who are first layer excess umbrella liability insurers under a manuscript commercial general liability ("CGL") policy for coverage of B & V's claimed liability for damages to seven Jet Bubble Reactors ("JBRs"). B & V contracted with American Electric Power ("AEP") "to engineer, procure and construct ["EPC"] wet flue gas desulfurization systems (JBRs) for eight installations." (ECF# 294, ¶ 1, PTO). "Under an EPC contract, B & V delivers services under a single contract. It supervises the project and typically subcontracts most—if not all—of the actual procurement and construction work." 882 F.3d at 954.

B & V procured CGL policies to cover its JBR work. Zurich American Insurance Company ("Zurich") provided the primary layer of coverage having the following limits: $ 2,000,000 per occurrence and $ 4,000,000 for general and products-completed operations aggregate limits. Aspen provided the first layer of excess/umbrella liability coverage with per occurrence and aggregate limits of $ 25,000,000.

As for the property damage claim made against B & V, the Tenth Circuit summarizes it in these terms:

For at least seven of these JBRs, which were located at four different power plants in Ohio and Indiana, B & V subcontracted the engineering and construction of the internal components to Midwest Towers, Inc. ("MTI"). Deficiencies in the components procured by MTI and constructed by MTI's subcontractors caused internal components of the JBRs to deform, crack, and sometimes collapse.

After work on three of the JBRs was completed, and while construction of four others was ongoing, AEP alerted B & V to the property damage arising from MTI's negligent construction. AEP and B & V entered into settlement agreements resolving their disputes relating to the JBRs at issue here. Under the agreements, B & V was obligated to pay more than $ 225 million in costs associated with repairing and replacing the internal components of the seven JBRs.

882 F.3d at 954. The parties also stipulate in the pretrial order to the following facts that are relevant to these motion proceedings:

11. After Black & Veatch completed construction of the Cardinal 1 and 2 and Conesville JBRs, the Owners alleged deficiencies in the work.

12. Cardinal 1 was completed and began operating in March 2008. Deficiencies in the JBR components were discovered as early as August 2008, and Cardinal 1 had to be shut down and repaired.

13. Cardinal 2 was completed and began operating in December 2007. Deficiencies in the JBR components were discovered as early as May 2008, and Cardinal 2 had to be shut down and repaired.

14. Conesville was completed and began operating in January 2009. In the fall of 2009, it was determined that the gas risers installed at Conesville, as well as the gas risers installed at each of the other six JBRs, were deficient and required removal.

15. Because of defective gas risers and other deficiencies in the JBRs, the Owners demanded that Black & Veatch make repairs.

16. At the time the Owners made their demands on Black & Veatch, the Cardinal 1 and 2 projects, and the Conesville project were completed operations.

17. During the summer of 2010, Black & Veatch and the Owners of the JBRs, entered into settlement agreements resolving their disputes relating to eight JBRs, including the seven at issue here.

18. As part of the settlements, Black & Veatch agreed, among other things, to replace most internal components of the JBRs.

19. In replacing the internal components, Black & Veatch has obtained contribution from various parties responsible for the costs incurred.

(Dk. 294, pp. 4-5).

As it did in the prior summary judgment order, the court sets out the general nature of the plaintiff's claims deferring to its characterization. The plaintiff is claiming coverage for property damage resulting directly from the work of the subcontractors on behalf of B & V and from B & V's failure to deliver professional services both of which resulted in the installation of defective risers. For the three completed and operating JBRs, Cardinal 1 and 2 and Conesville, B & V's claim is for the property damage resulting from alleged deficiencies with the installation and errors with the design and supervision of the risers that "resulted in excessive mineral deposits accumulating on the decks and other internal components of the JBRs, the weight of which in turn caused those components to deform, crack, and, in some cases, collapse entirely." ECF# 294, Pretrial Order, p. 7. Cardinal 1 and 2 JBRs were so badly damaged that the owners no longer considered them viable. Id. at p. 8. The owners demanded complete replacement of the badly damaged internal components. Id. Thus, B & V is making a coverage claim for its liability incurred to repair or replace the property damaged from the occurrence of the continual, ongoing and unforeseen buildup of deposits in the JBRs. ECF #297-3, Wood Dep. pp. 14-17. For the uncompleted JBRs, B & V's claim is for property damage to other non-defective internal components that resulted from work done to access, remove and replace the installed defective gas risers. Thus, B & V is making a coverage claim for its liability for the damage done to non-defective internal components from being removed based on the occurrence of the defective gas risers being installed and then needing to be torn out. Id. at 297-3, pp. 29-30; ECF# 297-8, Miller Dep. p. 157-158.

ASPEN'S MOTION FOR SUMMARY JUDGMENT (ECF# 340)

Aspen advances numerous arguments, and the court will follow the order used by Aspen in its original memorandum. At the outset, some of Aspen's arguments trigger deciding whether these matters were resolved by the Tenth Circuit on appeal and are subject to the law of the case doctrine or the mandate rule. The law of the case doctrine recognizes that, " ‘[w]hen a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.’ " Mason v. Texaco, Inc. , 948 F.2d 1546, 1553 (10th Cir. 1991) (quoting Arizona v. California , 460 U.S. 605, 618, 103 S.Ct. 1382, 1391, 75 L.Ed.2d 318 (1983) ), cert. denied , 504 U.S. 910, 112 S.Ct. 1941, 118 L.Ed.2d 547 (1992). "[W]hen a case is appealed and remanded, the decision of the appellate court establishes the law of the case and ordinarily will be followed by both the trial court on remand and the appellate court in any subsequent appeal." Rohrbaugh v. Celotex Corp. , 53 F.3d 1181, 1183 (10th Cir. 1995) (citation omitted). The doctrine "applies to all issues previously decided, either explicitly or by necessary implication." Rohrbaugh , 53 F.3d at 1183 (internal quotation marks and citation omitted). "The law of the case doctrine is intended to prevent ‘continued re-argument of issues already decided,’ Gage v. Gen. Motors Corp. , 796 F.2d 345, 349 (10th Cir. 1986), and to preserve scarce court resources—to avoid ‘in short, Dickens's Jarndyce v. Jarndyce syndrome,’ McIlravy v. Kerr–McGee Coal Corp. , 204 F.3d 1031, 1035 (10th Cir. 2000)." Huffman v. Saul Holdings Ltd. Partn. , 262 F.3d 1128, 1132 (10th Cir. 2001).

"An ‘important corollary’ to the law of the case doctrine, ‘known as the "mandate rule," provides that a district court must comply strictly with the mandate rendered by the reviewing court.’ " Id. (quoting Ute Indian Tribe v. Utah , 114 F.3d 1513, 1520–21 (10th Cir. 1997) ). Put another way, the law of the case doctrine "requires a trial court to follow an appellate court's previous ruling on an issue in the same case.... This is the so-called ‘mandate rule.’ " United States v. Quintieri , 306 F.3d 1217, 1225 (2d Cir. 2002) (footnote omitted), cert. denied , 539 U.S. 902, 123 S.Ct. 2246, 156 L.Ed.2d 110 (2003). Thus, an issue decided on appeal may not be relitigated in the same case and "there must be compliance with the reviewing court's mandate." Grigsby v. Barnhart , 294 F.3d 1215, 1218 (10th Cir. 2002). In this circuit, "[t]he mandate consists of our instructions to the district court at the conclusion of the opinion, and the entire opinion that preceded those...