Barrs v. Auto-Owners Ins. Co.

• Decision Date: 29 September 2021
• Docket Number: CIVIL ACTION NO. 5:19-cv-00494-TES
• Citation: 564 F.Supp.3d 1362
• Parties: Earl D. BARRS, Plaintiff, v. AUTO-OWNERS INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Georgia

564 F.Supp.3d 1362

Earl D. BARRS, Plaintiff,

v.AUTO-OWNERS INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 5:19-cv-00494-TES

United States District Court, M.D. Georgia, Macon Division.

Signed September 29, 2021

Duke R. Groover, Lauren N. Schultz, James Bates Brannan Groover, LLP, Bruce D. Dubberly, IV, Macon, GA, for Plaintiff.

Chad M. Brock, Sylvia Hoard Cobb, Michael C. Kendall, Douglasville, GA, for Defendant.

ORDER

TILMAN E. SELF, III, JUDGE

This action ultimately raises the question of whether an insurer's commercial general liability policy affords coverage to an insured whose negligence allowed its contractor/agent to steal from one of its customers.

Specifically, Plaintiff Earl D. Barrs ("Plaintiff") seeks to enforce a consent judgment against AAA General Contractors, Inc. ("AAA")—an insured of Defendant Auto-Owners Insurance Company ("Defendant")—for damages from a failed construction project. Defendant contends that the commercial general liability policy (the "Policy") it issued to AAA does not provide coverage for the claims underlying Plaintiff's consent judgment.¹ Both parties have filed motions for summary judgment on the issue of coverage. Therefore, after review of the record and applicable law, the Court GRANTS in part and DENIES in part Defendant's Motion for Summary Judgment [Doc. 26] and GRANTS in part and DENIES in part Plaintiff's Motion for Summary Judgment [Doc. 27].

BACKGROUND

A. Preliminary Facts ²

Plaintiff owns the property located at 211 Third Street West, Tifton, Georgia, and the building on it—the "Horizon Mill." [Doc. 31-1, ¶ 1]. In May 2016, Plaintiff contracted with AAA to deconstruct the Horizon Mill and salvage its wood and brick for his personal use. [Id. at ¶ 2]; [Doc. 34, ¶¶ 4, 6]. In turn, AAA hired Z & H Enterprises, LLC and/or Zachary Hood (collectively, "Hood")³ to oversee the deconstruction. [Doc. 31-1, ¶ 3]; [Doc. 34, ¶ 7]. At some point during deconstruction, Plaintiff noticed that (1) work was not being completed on a consistent basis and (2) lumber and other materials belonging to Plaintiff were missing from the job site. [Doc. 31-1, ¶ 4]; [Doc. 34, ¶ 10]. As to the missing lumber and other building materials, Plaintiff later discovered that Hood had stolen them from the job site. [Doc. 31-1, ¶ 5]; [Doc. 34, ¶ 11]. Ultimately, Plaintiff terminated his contract with AAA, claiming its negligence allowed the theft and caused the delay in deconstruction. [Doc. 31-1, ¶ 8]; [Doc. 34, ¶ 13].

On July 10, 2017, Plaintiff notified Defendant that he had retained counsel and was potentially filing suit "as a result of possible breach of contract and negligence on the part of [its] insured, AAA General Contract[ors], Inc. and/or its subcontractors." [Doc. 1-1, pp. 10–11]. One month later, Defendant issued a letter to AAA declaring that it had investigated the incident giving rise to the potential lawsuit and determined that coverage did not exist under the Policy. [Doc. 1-1, pp. 14–18]. On August 31, 2017, Plaintiff filed suit to recover damages for, among other things, AAA's alleged negligent acts regarding the deconstruction of the Horizon Mill. [Doc. 31-1, ¶ 10 (citing Earl D. Barrs v. AAA General Contractors, Inc., et al. , No. 5:17-CV-335-MTT, 2018 WL 3090396 (M.D. Ga. 2018) (the "Underlying Lawsuit"))]. Specifically, the complaint in the Underlying Lawsuit alleged AAA acted negligently when it: (1) improperly selected workers, subcontractors, and employees; (2) improperly directed workers and subcontractors; (3) inadequately supervised and managed contractors, workers, subcontractors, and employees; (4) inadequately supplied equipment for the deconstruction of the building; and (5) failed to hire an adequate number of skilled workers for the deconstruction. [Doc. 31-1, ¶ 11]; [Doc. 34, ¶ 14]. Based on these allegations, Plaintiff brought the following claims against AAA: negligent deconstruction (Count I), vicarious liability/respondeat superior (Count II), negligent hiring and retention (Count III), negligent supervision (Count IV), breach of contract (Count V), and breach of warranty (Count VI). [Doc. 28-2].

Upon receiving notice of the complaint, Defendant issued a letter to AAA stating that no coverage existed under the Policy for such claims and, further, that it refused to defend AAA in the Underlying Lawsuit. [Doc. 31-1, ¶ 12]; [Doc. 1-1, pp. 19–20]. The Underlying Lawsuit proceeded along its procedural path, and Plaintiff and AAA eventually negotiated a settlement agreement (the "Settlement Agreement"), wherein AAA admitted liability in the amount of $557,500.00 to the claims of negligent deconstruction (Count I), negligent hiring and retention (Count III), and negligent supervision (Count IV). [Doc. 28-3]; [Doc. 31-1, ¶¶ 13–14]; [Doc. 34, ¶¶ 17–18].

On May 29, 2019, a consent judgment (the "Consent Judgment") was entered against AAA that largely tracked the Settlement Agreement. [Doc. 31-1, ¶ 16]; [Doc. 34, ¶¶ 18, 20]; [Doc. 28-5]. In addition, the Settlement Agreement also assigned Plaintiff any and all of AAA's right to claim coverage and recover available funds under Defendant's Policy. [Doc. 28-3]; [Doc. 34, ¶ 18]. The Consent Judgment did not indicate which portions of the damages award the parties attributed to which claims. [Doc. 34, ¶ 20]; see generally [Doc. 28-5]. Soon thereafter, Plaintiff made a demand to Defendant for payment pursuant to the Consent Judgment. [Doc. 31-1, ¶ 22]. Defendant made no payments in response to this demand. [Id. at ¶ 23]. Plaintiff then filed the instant action, requesting this Court to (1) declare as a matter of law that Defendant's Policy covers the claims underlying the Consent Judgment and (2) enforce the Consent Judgment against Defendant. See generally [Doc. 1]; [Doc. 27-1].

B. The Relevant Policy Terms

Defendant issued Policy No. 984617-38029181-16 to AAA for the term period of January 1, 2016 to January 1, 2017. [Doc. 31-1, ¶¶ 24–25]; [Doc. 34, ¶ 1]. The Policy specifies coverage conditions for any insured, as that term is defined under the Policy. [Id. ]. Neither party disputes that the acts covered in the Consent Judgment occurred while the Policy was in effect. [Doc. 28-5]. Accordingly, there are several provisions within the Policy that are arguably relevant to the issue of coverage. The Court cites the relevant coverage provisions below:

SECTION I – COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreementa. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies.

[...]

b. This insurance applies to "bodily injury" and "property damage" only if:

1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

2) The "bodily injury" or "property damage" occurs during the policy period[.]

[...] [Doc. 26-3, p. 125].

As important as it is to note those claims that the Policy covers, it is equally as important to note those claims that the Policy expressly does not cover, i.e., the exclusions. The relevant exclusion provisions Defendants contend apply are:

2. Exclusions

This insurance does not apply to:

a. Expected Or Intended Injury

"Bodily injury" or "property damage" expected or intended from the standpoint of the insured. This exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.

b. Contractual Liability

"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

1) Assumed in a contract or agreement that is an "insured contract", provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement. However, if the insurance under this policy does not apply to the liability of the insured, it also does not apply to such liability assumed by the insured under an "insured contract".

2) That the insured would have in the absence of the contract or agreement.

[...] [Id. at p. 126].

j. Damage To Property

"Property damage" to:

[...]

5) Personal property in the care, custody or control of, or over which physical control is being exercised for any purpose by any insured;

6) That particular part of real property on which any insured or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or

7) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.

[...] [Id. at pp. 128–29].

m. Damage To Impaired Property Or Property Not Physically Injured

"Property damage" to "impaired property" or property that has not been physically injured, arising out of:

1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work"; or

2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.

This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.

[Id. at p. 129].

SECTION II – WHO IS AN INSURED

1. If you are designated in the Declarations as:

[...]

d. An organization other than a partnership, joint venture or limited liability company, you are an insured.

[...]

2. Each of the following is also an insured:

a. Your "employees", other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.

[Id. at p. 134].

SECTION V – DEFINITIONS

[...]

9. "Impaired property" means

...