Allied World Surplus Lines Ins. Co. v. Richard Goettle, Inc.

• Decision Date: 28 May 2019
• Docket Number: Case No. 1:17-cv-670
• Parties: Allied World Surplus Lines Insurance Company, Plaintiff/Counterclaim Defendant, v. Richard Goettle, Inc., Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — Southern District of Ohio

Allied World Surplus Lines Insurance Company, Plaintiff/Counterclaim Defendant, v. Richard Goettle, Inc., Defendant/Counterclaim Plaintiff.

Case No. 1:17-cv-670

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

May 28, 2019

Judge Susan J. Dlott

Order on Cross-Motions for Summary Judgment

This matter is before the Court on cross-Motions for Summary Judgment. In this insurance case, Allied World Surplus Lines Insurance Company ("Allied World") seeks a declaration that it does not owe its insured, Richard Goettle, Inc. ("Goettle"), a duty of defense or indemnification arising from a construction lawsuit pending in Louisiana. Goettle has filed a Counterclaim against Allied World for defense and indemnification. For the reasons that follow, the Court will DENY IN PART Allied World's Motion for Summary Judgment (Doc. 62) and GRANT IN PART Goettle's Motion for Summary Judgment (Doc. 61).

I. BACKGROUND¹

Allied World, a subsidiary of Allied World Assurance Company Holdings, GmbH, is an Arkansas corporation with its principal place of business in New York. Allied World provides professional liability coverage to engineering and contracting firms for their liability risks.

Goettle is an Ohio corporation with its principal place of business in Ohio. It is an engineering and construction firm that provides commercial engineering, earth retention, pile foundation systems, and other related services.

Goettle utilized USI Insurance Services ("USI Insurance") as its insurance broker. (Ginter Dep., Doc. 41 at PageID 510.) USI Insurance contacted Cincinnati Intermediaries, a wholesale insurance brokerage firm, to assist with applying for Goettle's professional liability insurance through Allied World.

In April 2016, Goettle applied for an architects and engineers professional liability policy from Allied World using an application sent to Allied World by Richard Bolan of Cincinnati Intermediaries. On June 15, 2016, Denise Rose, an underwriter with Allied World, emailed Mr. Bolan of Cincinnati Intermediaries a quote for the insurance, a copy of the draft policy, and various draft endorsements to the policy. Among those endorsements sent by Allied World to Cincinnati Intermediaries was a draft endorsement entitled "COVERED OPERATIONS—POLLUTION COVERAGE ENDORSEMENT." On June 24, 2016, Mr. Bolan sent to Ms. Rose an email suggesting an amendment to the pollution coverage endorsement which would add a new category to "who might also be an Additional Insured." (Doc. 41-1 at PageID 571-572.) On June 27, 2016, John Savickas, a senior underwriter at Allied World, emailed Mr. Bolan an amended version of the pollution coverage endorsement. Later that day, Beth Malone of USI Insurance instructed Cincinnati Intermediaries to "bind and issue the Professional/Pollution Liability and Excess Professional/Pollution Liability as follows: . . . 1. With the revised Pollution form attached." (Doc. 41-2 at 579.)

A. The Professional Liability Policy

Allied World issued Goettle a Constructors Professional Liability and Protective Policy No. 0310-2122 for the Policy Period from June 28, 2016 to June 28, 2017 ("2016-2017 Policy"). (Doc. 41-3 at PageID 631.) Allied World is referred to as the Company and Goettle as the Insured in the Policy. The Declarations Page stated that "This Policy is comprised of the Declarations Page, the Policy Form, the Schedules, the Application and [seven] endorsements." (Doc. 41-3 at PageID 632; Doc. 41-7 at PageID 689.)² The Declarations Page stated on its face:

THIS IS A CLAIMS MADE AND REPORTED POLICY WHICH APPLIES ONLY TO CLAIMS FIRST MADE DURING THE POLICY PERIOD AND REPORTED IN WRITING TO THE COMPANY PURSUANT TO THE TERMS OF THE POLICY.

PLEASE READ THE ENTIRE POLICY CAREFULLY AND DISCUSS THE COVERAGE HEREUNDER WITH YOUR INSURANCE BROKER.

(Doc. 41-3 at PageID 631; Doc. 41-7 at PageID 688.)

The 2016-2017 Policy provided claim limits of $5,000,000 for Each Claim Limit and for Policy Term Aggregate Limit. (Doc. 41-3 at PageID 631.) Goettle paid a total premium of $135,550 for the 2016-2017 Policy. (Id.)

1. The Policy Form

Coverage Part A of § I. INSURING AGREEMENT of the Policy Form provided in relevant part as follows:

A. The Company will pay Damages and Defense Expenses that the Insured shall become legally obligated to pay as a result of a Claim first made during the Policy Period and reported in writing to the Company during the Policy Period or within sixty (60) days thereafter arising out of a Wrongful Act in the rendering or failure to render Professional Services to others by the Insured or by any person or entity for whom the Insured is legally liable and to which this Policy applies.

B. For this Policy to apply, both of the following conditions must be met:

1. The Wrongful Act must first take place on or after the Retroactive Date shown in Item 6. of the Declarations and prior to the end of the Policy Period;

2. Prior to the Effective Date of this Policy, no officer, director, principal, partner, insurance manager, risk manager or in-house counsel of any Insured had knowledge of the actual or alleged Wrongful Act or circumstance that reasonably could give rise to a Claim under this Policy. If such officer, director, principal, partner, insurance manager, risk manager or in-house counsel of any Insured knew, prior to the effective date of this Policy, of any Wrongful Act or circumstance that reasonably could give rise to a Claim under this Policy, then any continuation, change or resumption of such Wrongful Act or circumstance during or after this Policy Period will be deemed to have been known prior to this Policy Period;

(Doc. 41-3 at PageID 652; Doc. 41-7 at PageID 715.)

The Defense Provisions in § I(D) required Allied World to provide a defense to Goettle in the following circumstances:

The Company will have the right and duty to defend any Claim made against the Insured seeking Damages payable under this Policy. The Company shall undertake and manage the defense of such Claim even if the allegations of the Claim are groundless, false or fraudulent. . . .

(Doc. 41-3 at PageID 653; Doc. 41-7 at PageID 716.)

The Policy Form contained the following relevant definitions in § IV. DEFINITIONS:

B. Claim means a demand received by an Insured for money or services including the service of suit or institution of arbitration proceedings. Claim does not include a Disciplinary Proceeding.

* * *

Q. Potential Claim means an actual or alleged act, error or omission in the performance of Professional Services which may reasonably be expected to give rise to a Claim.

* * *

S. Professional Services means those services that:

1. the Insured is qualified to perform; and

2. are performed for others, in the Insured's capacity as an architect, engineer, land surveyor, landscape architect, scientist, technical consultant or Construction Manager, including such services when performed on projects seeking LEED certification and/or utilizing Building Information Modeling (BIM).

* * * T. Wrongful Act means a negligent act, error or omission, in the rendering of or failure to render Professional Services by an Insured.

(Doc. 41-3 at PageID 659-662; Doc. 41-7 at PageID 722-725.)

Pursuant to the provisions above, the Policy provided coverage for wrongful acts in the rendering or failure to render professional services, including negligence in performing engineering services. However, the Policy Form contained § III. EXCLUSIONS, including a coverage exclusion for faulty construction services:

This insurance does not apply to and the Company will not pay Damages, Defense Expenses and/or Loss for any Claim based upon or arising out of:

* * *

C. CONSTRUCTION

Any actual or alleged obligation on the part of the Insured for construction means, methods, techniques, sequences or procedures.

* * *

I. FAULTY WORKMANSHIP

The cost to repair or replace any faulty workmanship including, but not limited to faulty: assembly, construction, erection, fabrication, installation, remediation, dismantling, excavation or manufacturing by the Insured or any subcontractor of the Insured.

(Doc. 41-3 at 655-657; Doc. 41-7 at PageID 718-720.)

The Policy Form at § VIII. CONDITIONS required Goettle to provide notice to Allied World of a Claim made against it as a condition precedent to coverage:

As a condition precedent to the right of coverage under this Policy, the Insured must do all of the following:

A. INSURED'S DUTIES WHEN THERE IS A CLAIM

1. If a Claim is made against an Insured, the Insured shall give written notice to the Company, as soon as practicable, but in no event later than sixty (60) days after the expiration date or earlier termination date of the Policy.

Such written notice shall include all of the following:

a. The actual or alleged Wrongful Act which is the subject of the Claim;

b. A description of the Professional Services rendered by the Insured;

c. The date(s) that such Professional Services were rendered;

d. A description of the alleged injury or damage that is the subject of the Claim;

e. The identities and addresses of the claimant(s); and

f. The project(s) involved in the Claim.

Written notice shall also include every demand, notice, summons or other process received by the Insured or the Insured's representatives.

(Doc. 41-3 at PageID 663-664; Doc. 41-7 at PageID 726-727.) Section VIII. also provided Goettle with an option to provide notice of a Potential Claim under Coverage Part A:

B. NOTICE OF A POTENTIAL CLAIM UNDER COVERAGE PART A

1. If during the Policy Period, any Insured becomes aware of a Potential Claim, the Insured may provide written notice to the Company during the Policy Period containing all the information listed under paragraph 2. below. Any Potential Claim that subsequently becomes a Claim shall be deemed to have been first made and reported on the date and time when the Company was first notified of the Potential Claim. Such Claim shall be subject to the terms, conditions and limits of coverage of the Policy under which the Potential

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