Arrow Exterminators, Inc. v. Zurich American Ins.

• Decision Date: 30 March 2001
• Docket Number: No. CIV.A.1:99CV1959-TWT.,CIV.A.1:99CV1959-TWT.
• Parties: ARROW EXTERMINATORS, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY and Tig Insurance Company, Defendants.
• Court: U.S. District Court — Northern District of Georgia

Page 1340

136 F.Supp.2d 1340

ARROW EXTERMINATORS, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY and Tig Insurance Company, Defendants.

No. CIV.A.1:99CV1959-TWT.

United States District Court, N.D. Georgia, Atlanta Division.

March 30, 2001.

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Frederick Newman Sager, Jr., Weinberg Wheeler Hudgins Gunn & Dial, Jay Michael Barber, Kevin Morgan Elwell, Ogletree Deakins Nash Smoak & Stewart, Atlanta, GA, for Plaintiff.

Stephen E. Marshall, Anthony F. Vittoria, phv, Goodell DeVries Leech & Gray, Baltimore, MD, Frederick Newman Sager, Jr., Weinberg Wheeler Hudgins Gunn & Dial, Atlanta, GA, Scott M. Seaman, Michael M. Marick, J. Robert Hall, Eileen King Bower, phv, Meckler Bulger & Tilson, Chicago, IL, Philip Wade Savrin, Freeman Mathis & Gary, Atlanta, GA, for Defendants.

ORDER

THRASH, District Judge.

This is a diversity action arising from Defendants Zurich American Insurance Company and TIG Insurance Company's refusal to pay insurance claims for termite damage. It is before the Court on Defendant TIG's Motion for Partial Summary Judgment [Doc. 54], Plaintiff Arrow's Motion for Partial Summary Judgment [Doc. 56], Defendant Zurich's Motion for Partial Summary Judgment as to coverage trigger [Doc. 57], Defendant Zurich's Motion for Partial Summary Judgment as to Arrow's alleged unpaid deductibles [Doc. 58], and Defendant Zurich's Motion for Summary Judgment as to TIG's contribution and subrogation claims [Doc. 59]. For the reasons set forth below, the Court grants in part and denies in part Defendant TIG's Motion for Partial Summary Judgment, grants Plaintiff Arrow's Motion for Partial Summary Judgment, denies Defendant Zurich's Motion for Partial Summary Judgment as to coverage trigger, grants in part and denies in part Defendant Zurich's Motion for Partial Summary Judgment as to Arrow's alleged unpaid deductibles, and grants in part and denies in part Defendant Zurich's Motion for Summary Judgment as to TIG's contribution and subrogation claims.

I. BACKGROUND

Plaintiff Arrow Exterminators, Inc. ("Arrow") is a Georgia corporation with its principal place of business in Atlanta, Fulton County, Georgia. It is in the business of termite extermination. Defendant Zurich Insurance Company ("Zurich") is a New York corporation with its principal place of business in Schaumburg, Illinois. It is in the business of underwriting and selling insurance policies in the state of Georgia and elsewhere through its authorized agents. Defendant TIG Insurance Company ("TIG") is a California corporation with its principal place of business in Irving, Texas. Like Arrow, TIG underwrites and sells insurance policies in the state of Georgia and elsewhere through its authorized agents.

The facts of this case are as follows. Zurich issued to Arrow a general liability insurance policy effective from August 1, 1993, through August 1, 1994, with an aggregate coverage limit of $2 million and a $10,000 deductible per claim for property damage. The next year, Zurich issued to Arrow a general liability insurance policy effective from August 1, 1994, until August 1, 1995, with an aggregate coverage limit of $2 million and a $5,000 deductible per claim for property damage. The next year, Zurich issued to Arrow a general liability insurance policy effective from August 1, 1995, until August 1, 1996, with an aggregate coverage limit of $2 million and a $10,000 deductible per claim for property damage.

Beginning in August, 1996, Arrow acquired its general liability insurance from TIG instead of Zurich. TIG issued to Arrow a general liability insurance policy effective from August 1, 1996, until August 1, 1997, with an aggregate coverage limit of $2 million and a $5,000 deductible per claim for property damage. TIG also issued to Arrow a general liability insurance policy effective from August 1, 1997, until August 1, 1998, with an aggregate coverage limit of $2 million and a $5,000 deductible per claim for property damage. On November 14, 1997, TIG notified Arrow that TIG would be canceling its coverage of Arrow, effective January 15, 1998. Arrow thereafter was required to obtain insurance coverage from other carriers.

Arrow alleges that the insurance agreements that it entered into with both Zurich and TIG provided that the insurance companies would defend and indemnify Arrow from any termite damage its customers suffered because of Arrow's activities. The Complaint alleges that in 1996, Arrow customers began to make claims for termite damage discovered at that time. When Zurich later was presented with these claims for termite damage — damage that was discovered after the Zurich policies had lapsed, but that allegedly occurred before the lapse — Zurich refused to pay the claims. Arrow then submitted these claims to TIG, which paid them. Eventually, the $2 million TIG policy limit was exhausted, and TIG informed Arrow that it would no longer pay claims by Arrow customers for termite damage or defend Arrow in lawsuits. Arrow now alleges that the TIG policy limit was exhausted only because TIG paid some unwarranted claims.

As a result, Arrow filed suit in this Court against both Zurich and TIG. Arrow seeks a declaratory judgment on (1) TIG's refusal to pay any additional claims, and (2) whether Zurich is responsible for termite damage that allegedly arose before its policies expired, but that was not discovered until after the Zurich policies expired. Arrow seeks damages for breach of contract against both Zurich and TIG. Arrow also seeks damages against TIG (1) for its alleged negligence in paying unwarranted claims, which eventually exhausted the TIG policy limit, and (2) for false representations it allegedly made.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate only when the pleadings, depositions, and affidavits submitted by the parties show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court should view the evidence and any inferences that may be drawn in the light most favorable to the nonmovant. Adickes v. S.H. Kress and Co., 398 U.S. 144, 158-159, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). The party seeking summary judgment must first identify grounds that show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. DISCUSSION

A. COVERAGE TRIGGER.

This is a diversity action governed by Georgia law. The principal issue raised in the pending summary judgment motions is what coverage trigger the Court should apply to an insurance policy providing that coverage is triggered upon an "occurrence" where the property damage is latent and discovered only later after the expiration of the policy term. "When latent property damages are discovered after the dates of insurance coverage, an issue arises as to whether coverage applies." Boardman Petroleum, Inc. v. Federated Mut. Ins. Co., 926 F.Supp. 1566, 1570 (S.D.Ga.1995), rev'd on other grounds, 150 F.3d 1327, 1328 (11th Cir. 1998). In the law of property damage, products liability, and mass torts, different "coverage triggers" have been applied to determine liability insurance coverage. These include an exposure trigger, an injury in fact trigger, a manifestation trigger, a continuous trigger, and a multiple trigger. In the context of property damage claims, with an exposure trigger, coverage is triggered when the injury-producing agent first makes contact with the property. Martin J. McMahon, Annotation, Event triggering liability insurance coverage as occurring within period of time covered by liability insurance policy where injury or damage is delayed — modern cases, 14 A.L.R.5th 695, 724 (1993). With an injury in fact trigger, coverage is triggered at the point in time when actual injury first occurs. Id. at 729. With a manifestation trigger, coverage is triggered only when damage occurs and is discovered, that is "manifests" itself as readily obvious, within the policy period. Id. at 725. With a continuous trigger, all liability policies in effect from the exposure to manifestation provide coverage and are responsible for the loss. Id. at 727. The same is true with a multiple trigger. The only difference is that with a multiple trigger all the other individual trigger tests (exposure, injury in fact, and manifestation) are combined in a notion of continuity rather than singularity. James M. Fischer, Insurance Coverage for Mass Tort Claims: the Debate over the Appropriate Trigger Rule, 45 Drake L.Rev. 625, 646-47 (1997).

In the context of property damage claims, neither the Georgia General Assembly nor the Georgia appellate courts have ever adopted any of the above coverage triggers by either statute or case law. There are two federal district court cases, one from Judge Bowen in the Southern District of Georgia and the other from Judge Owens in the Middle District of Georgia, that are instructive. In Boardman Petroleum, Inc. v. Federated Mutual Insurance Company, 926 F.Supp. 1566, 1577 (S.D.Ga.1995), rev'd on other grounds, 150 F.3d 1327, 1328 (11th Cir. 1998), a case involving liability for leaking underground gasoline storage tanks, Judge Bowen concluded that the insurance policy at issue provided for a continuous trigger.¹ The policy stated that it would pay for bodily injury and property damage caused by an "occurrence." Judge Bowen rejected the defendants' argument that the appropriate trigger was a manifestation trigger and accepted the plaintiffs argument for a continuous trigger. Judge Bowen noted that the case presented an issue of first impression in Georgia, and was "guided only by...