Am. Towers LLC v. BPI, Inc.

• Decision Date: 14 September 2015
• Docket Number: Civil No. 12–139–ART
• Citation: 130 F.Supp.3d 1024
• Parties: American Towers LLC, Plaintiff, v. BPI, Inc., et al., Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

130 F.Supp.3d 1024

American Towers LLC, Plaintiff,

v.BPI, Inc., et al., Defendants.

Civil No. 12–139–ART

United States District Court, E.D. Kentucky, Southern Division. Pikeville.

Signed September 14, 2015

Christen M. Steimle, Dinsmore & Shohl, LLP, Christopher Ray McDowell, Strauss & Troy Co., LPA, Cincinnati, OH, for Plaintiff.

Lee A. Smith, Reynolds Law Offices, PSC, Prestonsburg, KY, Leigh Gross Latherow, W. Mitchell Hall, Jr., Vanantwerp Attorneys, LLP, Ashland, KY, Drew Byron Meadows, J. Dale Golden, Kellie Marie Collins, Walters Meadows Richardson, PLLC, Lexington, KY, William H. Wilhoit, Grayson, KY, for Defendants.

MEMORANDUM OPINION AND ORDER

Amul R. Thapar

, United States District Judge

In 2011 in Prestonsburg, Kentucky, a piece of road fell down a hill and damaged the Rising Son Church. The church has since been repaired. But the road's owner, American Towers LLC ("ATC"), and the road's builder, BPI, Inc. ("BPI"), disagree about who is responsible for its collapse. They do agree on one thing, however: regardless of who is responsible, the builder's insurance company, Nationwide Mutual Insurance Company ("Nationwide") has to pay for the damage. But Nationwide is not on their side. Nationwide claims that it has no duty to pay for the damage to the church because the road builder violated Nationwide's insurance policy when it settled with the church. ATC and BPI moved for summary judgment, claiming that Nationwide must pay for the damage as a matter of law. Nationwide also moved for summary judgment, arguing that it has no duty to pay for the repairs. For the reasons stated below, ATC's and BPI's motions are granted. Nationwide's motion is denied.

BACKGROUND

ATC wanted to build a cell tower. R. 134 at 18–19. The company leased property from Rising Son Church in Prestonsburg, Kentucky. Id. at 19. ATC hired BPI to build the cell tower, compound, and access road according to ATC's specifications. Id. at 18–20; R. 139–5 at 8. The two companies executed a Master Contractor Agreement ("MCA"), and BPI began building. See R. 138–2(MCA); R. 134 at 19–20. As a condition of the MCA, BPI secured a commercial general liability insurance policy ("CGLI policy") from Nationwide. R. 138–2 at 9; R. 27–1. The CGLI policy listed ATC as an additional named insured. Id. at 63.

While building, BPI concluded that ATC's road design was flawed. R. 134 at 74. The construction plans called for two "switchback curves" near the top of the hill, but BPI thought it better to eliminate the switchbacks and take the road straight up the hill. Id. ATC approved the change. Id. at 74–75.

Less than one year after construction, the access road collapsed in a landslide, damaging the Rising Son Church. R. 132 at 40–43; R. 134 at 23. The collapse also left the cell-tower compound inaccessible and useless. Id. ATC quickly settled with Rising Son, agreeing to pay for repairs to the church and the surrounding property. R. 137–2 (settlement and release). ATC also began repairing the access road. R. 212 at 3. The rebuilt road differed from the road called for in the MCA. Id. at 11.

Then came a flurry of litigation. ATC sued BPI, alleging that BPI breached the MCA and that BPI's faulty construction led to the collapse of the road. R. 9. Nationwide sought a declaratory judgment that it had no duty to indemnify BPI. R. 27. ATC sued Nationwide, alleging that Nationwide was responsible to ATC as an additional named insured. R. 9. BPI sued its subcontractors, and the subcontractors sued each other. R. 42; R. 50.

The Court winnowed the issues in this case in a series of opinions. ATC's breach-of-contract claim against BPI is set for resolution at trial. R. 162 (memorandum opinion and order, granting ATC's motion for summary judgment in part and denying BPI's motion for summary judgment). The parties also disputed whether the CGLI policy covers the damages resulting from BPI's allegedly faulty workmanship. R. 137–2. Under the CGLI, Nationwide was obligated to pay for expenses ATC and BPI incurred from "occurrences" as defined by the policy. See R. 27–1. Thus, if the road collapse qualified as an occurrence, Nationwide had to pay for the resulting damages.

In 2011, when BPI and Nationwide executed the CGLI policy, faulty workmanship was not an occurrence. Under then-existing West Virginia law, which governs the coverage dispute, see R. 163 at 3–5, property damage resulting from faulty workmanship was not an "occurrence" triggering coverage under a CGLI policy. SeeWebster Cnty. Solid Waste Auth. v. Brackenrich & Assocs., Inc., 217 W.Va. 304, 617 S.E.2d 851, 858 (2005)

, overruled byCherrington v. Erie Ins. Prop. & Cas. Co., 231 W.Va. 470, 745 S.E.2d 508 (2013).

In 2013—after BPI and Nationwide executed the CGLI policy and after American Towers filed this suit—the West Virginia Supreme Court of Appeals reversed course. In Cherrington,

West Virginia's highest court held that faulty workmanship does constitute a CGLI-policy "occurrence." Cherrington, 745 S.E.2d at 521. In response to a certified question from this Court, R. 163, the West Virginia Supreme Court of Appeals held that Cherrington applies retroactively. BPI, Inc. v. Nationwide Mut. Ins. Co., 235 W.Va. 303, 773 S.E.2d 647, 656 (2015). Thus, under West Virginia law, all of BPI's liabilities for faulty workmanship stem from a policy "occurrence," so the liabilities are covered by the CGLI policy.

As such, the only issues before the Court are: (1) the appropriate measure of damages for ATC's breach-of-contract claim against BPI and (2) Nationwide's obligations toward ATC and BPI. ATC, BPI, and Nationwide filed renewed motions for summary judgment on these two issues in the wake of the West Virginia Supreme Court decision. R. 205 (request for leave to seek a ruling on measure of damages); R. 213 (BPI's motion for summary judgment against Nationwide); R. 214 (Nationwide's motion for summary judgment against ATC and BPI); R. 215 (ATC's motion for summary judgment against Nationwide).

DISCUSSION

The parties' motions present four issues to resolve: (1) whether the settlement ATC signed with Rising Son Church frees Nationwide of any indemnification obligations, (2) whether exclusions in the CGLI policy relieve Nationwide of its obligation to indemnify ATC, (3) whether the CGLI policy covers ATC's breach-of-contract claims against BPI, and (4) the appropriate measure of damages ATC may recover from BPI for the road collapse.

Summary judgment is appropriate when "the record, viewed in the light most favorable to the nonmoving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Laster v. City of Kalamazoo, 746 F.3d 714, 726 (6th Cir.2014)

(citing Fed. R. Civ. P. 56(c) ). If the evidence is insufficient "to reasonably support a jury verdict in favor of the nonmoving party, the motion for summary judgment will be granted." Cox v. Ky. Dep't of Transp., 53 F.3d 146, 150 (6th Cir.1995) (citing Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir.1989) ).

I. ATC's settlement and release with Rising Son Church

After the road collapse, ATC signed a settlement and release with Rising Son Church. ATC agreed to pay the church $4,840 for the damage and to make necessary repairs to the church and surrounding property. R. 141–9 at ¶¶ 1–3. In return for ATC signing the settlement agreement, the church agreed to release ATC and its insurers and contractors from any further claims. R. 141–9 at 6. Nationwide argues that the release precludes any recovery by ATC for two reasons. First, Nationwide argues that ATC released any claim ATC might have had against Nationwide. Second, Nationwide argues that ATC breached the insurance contract by signing the release without notice to or consent from Nationwide. Nationwide claims this breach of the insurance contract bars recovery.

a. The settlement and release between ATC and Rising Son Church does not release Nationwide from indemnifying ATC.

Nationwide first argues that the settlement and release signed by Rising Son Church and ATC extinguished Nationwide's liability to ATC. Nationwide acknowledges that Rising Son Church, as the owner of the damaged property, could have asserted property damage claims under the CGLI policy. But Nationwide claims the settlement extinguished those claims. The settlement also stated that it released claims against all insurers, R. 137–2 at 4. Because Nationwide is an insurer, Nationwide argues, the settlement released Nationwide from paying for the road collapse.

Nationwide is mistaken. The settlement with Rising Son extinguished all of Rising Son's claims against Nationwide. So under the terms of the settlement, Rising Son may not sue Nationwide. But the release says nothing about whether ATC may do so. The CGLI policy requires Nationwide to pay "those sums that [ATC] is required to pay as damages to a third party." R. 214–1 at 8. Nothing in the settlement bars ATC from recovering from Nationwide "those sums" it was "required to pay as damages to a third party," namely, Rising Son Church. And this makes sense. After all, this was a settlement between Rising Son and ATC. Obviously, Rising Son simply wanted to be made whole. In a settlement, it is routine for the defendant to make sure their insurers are released. Rising Son would not ask for and did not care if ATC received indemnification from its insurers.

Nationwide's relies on Abney v. Nationwide Mutual Insurance Co., 215 S.W.3d 699 (Ky.2006)

, to support its position that the settlement extinguished any claims ATC had against Nationwide. In Abney, a plaintiff sought to recover from both a tortfeasor and her insurance company. Id. Here, ATC is the tortfeasor and seeks indemnification from its own insurer. So Abney does not apply.

Nationwide also argues that it need not indemnify ATC because ATC voluntarily settled with Rising Son. Because ATC was under no duty to pay money to Rising Son, Nationwide asserts that it cannot be expected to...