Auto-Owners Ins. Co. v. Xytex Tissue Servs., LLC

• Decision Date: 16 September 2019
• Docket Number: CV 118-031
• Parties: AUTO-OWNERS INSURANCE COMPANY, Plaintiff, v. XYTEX TISSUE SERVICES, LLC ; Xytex Tissue Storage, Inc. d/b/a Xytex Tissue Services ; Xytex Cryo International, LTD. ; Xytex Research, Inc.; Xytex Corporation; Xytex Laboratories, Inc.; Lindsey Meagher; Mary Margaret Meagher; and Emma Grace Meagher, Defendants.
• Court: U.S. District Court — Southern District of Georgia

421 F.Supp.3d 1369

AUTO-OWNERS INSURANCE COMPANY, Plaintiff,

v.XYTEX TISSUE SERVICES, LLC ; Xytex Tissue Storage, Inc. d/b/a Xytex Tissue Services ; Xytex Cryo International, LTD. ; Xytex Research, Inc.; Xytex Corporation; Xytex Laboratories, Inc.; Lindsey Meagher; Mary Margaret Meagher; and Emma Grace Meagher, Defendants.

CV 118-031

United States District Court, S.D. Georgia, Augusta Division.

Signed September 16, 2019

ORDER

J. RANDAL HALL, CHIEF JUDGE

Before the Court are Plaintiff Auto-Owners Insurance Company's ("Auto-Owners") Motion for Summary Judgment (Doc. 41) and Motion to Exclude or Limit the Report and Testimony of the Xytex Defendants' Expert, Eric J. Zuckerman (Doc. 42). The Clerk of Court gave notice satisfying the requirements of Griffith v. Wainwright, 772 F.2d 822, 825 (11th Cir. 1985) (per curiam), to Defendants Xytex Tissue Services, LLC; Xytex Tissue Storage, Inc.; Xytex Cryo International, LTD.; Xytex Research, Inc.; Xytex Corporation; and Xytex Laboratories, Inc. (collectively, "Xytex Defendants"); and Defendants Lindsey Meagher, Mary Margaret Meagher, and Emma Grace Meagher (collectively, "Meagher Defendants"). (Doc. 43.) Xytex Defendants filed responses in opposition to both motions (Docs. 44, 45), Plaintiff filed replies in support (Docs. 49, 50), and Xytex Defendants filed sur-replies (Docs. 53, 54). Both motions are ripe for consideration. For the reasons explained below, the Court GRANTS Auto-Owners' summary judgment motion. Thus, Auto-Owners' motion to exclude is DENIED AS MOOT.

I. BACKGROUND

On February 14, 2018, Auto-Owners filed a declaratory judgment action in this Court to determine its responsibilities in connection with a lawsuit arising out of a nitrogen leak. (Compl., Doc. 1.) The Court decides Auto-Owners' Motion for Summary Judgment based on Auto-Owners' argument that Xytex Defendants breached the notice condition in their insurance policy with Auto-Owners. Thus, the Court only outlines the facts related thereto.

William "Bill" Bates is an insurance agent at the Cohen-Bailie Insurance Agency. (Resp. to Mot. for Summ. J., Doc. 44, at 1; Decl. of Mr. Blalock, Doc. 44-3, ¶ 5.) On July 13, 2016, Mr. Bates signed a commercial insurance application ("Insurance Application") for Xytex Defendants as "producer."¹ (Insurance Appl., at 4.) Auto-Owners' Policy Number 074618-48132332-17 (the "Policy") was issued on December 12, 2016, and in effect when the nitrogen leak occurred. (Policy, Doc. 41-6, at 9; Notice of Occurrence, Doc. 41-4, at 11.)

In the Policy, Section IV - Commercial General Liability Conditions provides the following notice requirement:

2. Duties In The Event Of Occurrence, Offense, Claim Or Suit

a. You must see to it that we are notified as soon as practicable of an "occurrence" ....

* * *

b. If any claim is made or "suit" is brought against any insured, you must:

* * *

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of any claim or "suit" as soon as practicable.

(Id. at 133.) The Policy also includes the following "no action" clause:

3. Legal Action Against Us

No person or organization has a right under this Coverage Part:

a. To join us as a party or otherwise bring us into a "suit" asking for damages from an insured; or

b. To sue us on this Coverage Part unless all of its terms have been fully complied with.

(Id. )

On February 5, 2017, there was a nitrogen leak in Xytex Tissue Services, LLC's building located at 1100 Emmett Street, Augusta, Georgia 30904 resulting in fatalities. (See Notice of Occurrence, at 11.) Jan Scholer, Ph.D., President of Xytex Cryo International, states, "I notified [Mr.] Bates of the accident which forms the basis of the underlying lawsuit within days of same. This notification was either by telephone or email." (Decl. of Dr. Scholer, Doc. 44-5, ¶¶ 6, 8.) On February 9, 2017, Mr. Bates prepared a "General Liability Notice of Occurrence/Claim" based on the February 5, 2017 incident for Evanston Insurance Company, not Auto-Owners. (Notice of Occurrence, at 11.)

On August 31, 2017, Meagher Defendants filed a complaint in the Superior Court for Richmond County, Georgia against Xytex Defendants ("Underlying Lawsuit"). (See Underlying Lawsuit Compl., Doc. 1-1.) The same day the lawsuit was served, Dr. Scholer emailed Mr. Bates the following: "We were served today with a lawsuit.... The suit is attached. Would you please notify our insurance carriers." (Sept. 7, 2017 Email to Mr. Bates, Doc. 44-6, at 1.) Mr. Bates never sent notice of the lawsuit to Auto-Owners because he believed the "location of 1100 Emmett St was deleted from [the] policy." (See Feb. 5, 2018 Email from Mr. Bates, Doc. 44-12, at 1.) Xytex Defendants never provided notice of the occurrence or lawsuit directly to Auto-Owners, only to Mr. Bates. (See Sept. 7, 2017 Email to Mr. Bates, at 1; Decl. of Mr. Blalock, ¶¶ 8-9.) Mr. Bates failed to notify Auto-Owners of either the occurrence or lawsuit.

In the current action, Auto-Owners moved for summary judgment arguing, in part, that it has no duty to defend or indemnify Xytex Defendants because Xytex Defendants failed to satisfy the notice provision in the Policy, which is a condition precedent for coverage. For the following reasons, the Court agrees with Auto-Owners.

II. SUMMARY JUDGMENT STANDARD

The Court should grant summary judgment only if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The purpose of the summary judgment rule is to dispose of unsupported claims or defenses, which, as a matter of law, raise no genuine issues of material fact suitable for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute of those material facts "is ‘genuine’ ... [only] if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "The mere existence of a scintilla of evidence in support of the [nonmovants'] position will be insufficient" for a jury to return a verdict for the nonmoving parties. Id. at 252, 106 S.Ct. 2505 ; accord Gilliard v. Ga. Dep't of Corrs., 500 F. App'x 860, 863 (11th Cir. 2012) (per curiam).

As required, the Court views the record evidence "in the light most favorable to the [nonmovants]," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and will "draw all justifiable inferences in [their] favor." United States v. Four Parcels of Real Prop., 941 F.2d 1428, 1437 (11th Cir. 1991) (en banc) (internal punctuation omitted). Additionally, the parties opposing summary judgment "may not rest upon the mere allegations or denials in [their] pleadings. Rather, [their] responses ... must set forth specific facts showing that there is a genuine issue for trial." Walker v. Darby, 911 F.2d 1573, 1576-77 (11th Cir. 1990).

III. DISCUSSION

For the reasons discussed below, the Court finds Xytex Defendants did not provide timely notice to Auto-Owners, a condition precedent to coverage under Georgia Law. Thus, Auto-Owners owes no duty to Xytex Defendants to defend or indemnify.

"The obligations of parties to an insurance policy are a matter of contract, and the parties are bound by the terms of the policy." Auto-Owners Ins. Co. v. DFH Dev., Inc., No. 1:08-CV-1465-JOF, 2009 WL 2515638, at *3 (N.D. Ga. Aug. 12, 2009) (citing Resolution Tr. Corp. v. Artley, 24 F.3d 1363, 1367 (11th Cir. 1994) ). Under Georgia law:

It is well established that a notice provision expressly made a condition precedent to coverage is valid and must be complied with, absent a showing of justification. Where an insured has not demonstrated justification for failure to give notice according to the terms of the policy, then the insurer is not obligated to provide either a defense or coverage.

Kay-Lex Co. v. Essex Ins. Co., 286 Ga.App. 484, 649 S.E.2d 602, 606 (2007) (quoting Federated Mut. Ins. Co. v. Ownbey Enters., Inc., 278 Ga.App. 1, 627 S.E.2d 917, 919 (2006) ). Notice provisions in insurance policies play an important role by enabling the insurer "to investigate promptly the facts surrounding [an] occurrence while they are still fresh and the witnesses are still available, to prepare for a defense of the action, and, in a proper case, to determine the feasibility of settlement of the claim." S.C. Ins. Co. v. Coody, 957 F. Supp. 234, 237 (M.D. Ga. 1997) (quoting Richmond v. Ga. Farm Bureau Mut. Ins. Co., 140 Ga.App. 215, 231 S.E.2d 245, 250 (1976) ).

Plaintiff states that the notice provision coupled with the "no action" clause creates a condition precedent. Xytex Defendants do not dispute this, and the Court agrees that the notice requirement is a condition precedent. Therefore, the "condition must be performed before the contract becomes absolute and obligatory on the other party." KHD Deutz of Am. Corp. v. Utica Mut. Ins. Co., 220 Ga.App. 194, 469 S.E.2d 336, 338 (1996) (quoting Glass v. Stewart Title Guar. Co., 181 Ga.App. 804, 354 S.E.2d 187, 189 (1987) ).

The Policy's Commercial General Liability Conditions section provides that the insured is required to "notify us as soon as practicable" of a claim and "see to it that we are notified as soon as practicable of an ‘occurrence.’ " The Policy defines "we" and "us" as "the company providing this insurance," which is Auto-Owners. (Policy, at 2, 9, 122.) Xytex Defendants, therefore, needed to provide notice to Auto-Owners of the occurrence and claim "as soon as practicable." Auto-Owners and Xytex Defendants do not dispute this summary of their respective obligations. The current dispute is whether Xytex Defendants provided the required notice. The Court discusses (A) whether Xytex Defendants complied with the Policy's notice provision and (B) if not, whether the noncompliance...