Brit Uw Ltd. v. Hallister Prop. Dev., LLC

• Decision Date: 13 March 2014
• Docket Number: Civil Action No. 1:11–CV–4396–JEC.
• Citation: 6 F.Supp.3d 1321
• Parties: BRIT UW LIMITED and Hiscox Dedicated Corporate Member Limited, Plaintiffs, v. HALLISTER PROPERTY DEVELOPMENT, LLC and David Baerwalde, Defendants.
• Court: U.S. District Court — Northern District of Georgia

6 F.Supp.3d 1321

BRIT UW LIMITED and Hiscox Dedicated Corporate Member Limited, Plaintiffs,

v.HALLISTER PROPERTY DEVELOPMENT, LLC and David Baerwalde, Defendants.

Civil Action No. 1:11–CV–4396–JEC.

United States District Court,

N.D. Georgia,

Atlanta Division.

Signed March 13, 2014.

Nicholas Elias Deeb, McLain & Merritt, P.C., Paul Lindsey Fields, Jr., Richard Edward Zelonka, Jr., Ann Theresa Kirk, Fields Howell Athans & McLaughlin, LLP, Atlanta, GA, for Plaintiffs.

James K. Creasy, The Law Offices of James K. Creasy, Peter A. Law, Edward Alexander Piasta, Law & Moran, Atlanta, GA, for Defendants.

ORDER & OPINION

JULIE E. CARNES, Chief Judge.

This case is before the Court on plaintiffs' Motion for Summary Judgment [52]. The Court has reviewed the record and the arguments of the parties and, for the reasons set out below, concludes that plaintiffs' Motion [52] should be GRANTED.

BACKGROUND

I. Overview

The facts underlying this case are not in dispute. In November 2009, defendant Baerwalde was paralyzed after being thrown from a horse he was sitting on. The accident occurred at the Goat Farm, an Atlanta-area living and workspace community for artists. (Compl. [1] at 6.) Baerwalde sued several parties in connection with accident, including his co-defendant in this action, Hallister Property Development, LLC (“Hallister”). ( Id. at Ex. B.) At the time of the accident, Hallister was covered by an insurance policy (the “Policy”) that was issued by plaintiffs. ( Id. at 9.) When Baerwalde filed suit, Hallister sought coverage under the Policy. ( Id.)

Plaintiffs subsequently filed this complaint, seeking a declaratory judgment that they have no duty to defend or indemnify Hallister in the Baerwalde action. ( Id. at 1.) According to plaintiffs, the Policy does not provide coverage for Baerwalde's accident because (1) the Policy was limited to Hallister's operations as a “General Contractor” and (2) Hallister failed to provide timely notice of the accident. (Pls.' Br. in Supp. of Summ. J. (“Pls.' Br.”) [52] at 2–3.) Alternatively, plaintiffs argue that the Policy should be rescinded because of Hallister's material representations during the application process. ( Id.)

II. The Policy

The Policy provides coverage to Hallister for the period of February 12, 2009 to February 12, 2010. (Policy [52] at Ex. C.) It contains a notice clause, which provides:

Section IV—Commercial General Liability Conditions

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” or an offense which may result in a claim.

( Id. at 33.) The term “occurrence” is defined by the Policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” ( Id. at 37.)

The Policy also contains a “Classification Limitation Endorsement” that states:

Coverage under this policy is specifically limited to those operations described by the classification(s) in the Commercial General Liability Coverage. This policy does not apply to any operation not specifically listed in the Commercial General Liability Coverage or endorsed hereon.

( Id. at 59.) The “Commercial General Liability Coverage Part Declarations” of the Policy list the following two codes with accompanying descriptions:

Code:

Classification:

91580

CONTRACTORS–EXECUTIVE SUPERVISORS OR EXECUTIVE SUPERINTENDENTS INCLUDING PRODUCTS/COMPLETED OPERATIONS

91583

CONTRACTORS–SUBCONTRACTED WORK–IN CONNECTION WITH BUILDING CONSTRUCTION, RECONSTRUCTION, REPAIR OR ERECTION–ONE OR TWO FAMILY DWELLINGS

( Id. at 12.) The Policy does not further define any of the key words found in the codes or the accompanying descriptive language.

III. Hallister's Activities at the Goat Farm

Hallister is a limited liability corporation with two members, Christopher Melhouse and Anthony Harper. (Melhouse Dep. [48] at 124.) In April 2008, Hallister signed an agreement (the “Agreement”) with the owners of the Goat Farm permitting Hallister to possess and develop the property. (Agreement [52] at Ex. H.) The Agreement was intended to help Hallister determine the feasability of converting the Goat Farm property into apartment buildings with some commercial retail space. (Melhouse Dep. [48] at 15–16 & 97–98.)

Once in possession of the property, Hallister began to build artist studios. (Harper Dep. [47] at 105–06.) Hallister planned to rent out the studios in order to create the necessary cash flow to qualify for a loan, and then complete its purchase and commercial development of the property. ( Id.) When this more expansive plan was derailed by the recession, Hallister decided to maintain the property as an artist community. (Melhouse Dep. [48] at 100–102.)

At his deposition, Hallister member Harper admitted to “managing the property” on behalf of Hallister. (Harper Dep. [47] at 89.) According to Harper, Hallister'smanagement activities included “collecting rent” and “leasing [the] property out.” ¹ ( Id.) His fellow Hallister member, Melhouse, disavowed the characterization of Hallister as a “property manager” but he admitted that Hallister took responsibility for addressing issues with tenant live/work spaces that arose after Hallister's involvement with the property. (Melhouse Dep. [48] at 108–109.) Although there was no formal agreement, Goat Farm's owner apparently took responsibility for problems that preexisted Hallister' s presence at there. ( Id. at 108–110.) The owner employed two on-site maintenance workers to complete these repairs. ( Id. at 109–110, 124.)

IV. The Accident and Underlying Lawsuit

The Goat Farm derives its name from the fact that the property contains an animal pen with several pygmy goats, a turkey, and a sheep dog. ( Id. at 41–42.) Shortly before the accident, Goat Farm tenant Christina Dolan asked Harper whether she could temporarily board a horse at the Goat Farm while a more permanent home was secured. (Harper Dep. [47] at 13–14.) Harper agreed, believing the horse could serve as a novelty item like the other animals in the pen. ( Id. at 15.) Ms. Dolan and her daughter were responsible for preparing the pen for the horse. ( Id.)

Baerwalde's accident took place on the same day that Ms. Dolan brought the horse to the Goat Farm. (Baerwalde Dep. [59] at 35–36.) Sometime after Dolan brought the horse onto the property, she offered to allow Baerwalde to sit on the horse. ( Id.) Melhouse was present at the time, and he helped Baerwalde mount the horse. ( Id. at 131.) Although Baerwalde intended only to sit and not ride on the animal, the horse immediately took off, bucked and threw Baerwalde off its back. ( Id. at 25.) Baerwalde collided with an old flagpole in the middle of the pen and broke his back. ( Id.)

After the accident, Harper and Melhouse visited Baerwalde in the hospital and modified his studio to make it wheelchair accessible. (Baerwalde Dep. [59] at 126–27, 129–30.) The parties did not have any substantive discussions about Hallister's potential liability for Baerwalde's injuries, but Melhouse admits that at some point after the accident, Baerwalde mentioned the issue of a lawsuit “but just in passing.” (Melhouse Dep. [65] at 60.) Also during this time period, Baerwalde told Harper that he believed in the mission of the Goat Farm and would not do anything to jeopardize that. (Harper Dep. [47] at 23.)

On September 30, 2011, defendant Baerwalde filed suit in Fulton County State Court against Hallister, Christina Dolan, and the owners of the Goat Farm. (Baerwalde Compl. [52] at Ex. H.) The complaint generally alleges that the facilities where defendants boarded the horse “were not adequately equipped to handle horses or horse riding.” ( Id. at ¶ 24.) The complaint only specifically names Hallister once, when it alleges that Hallister and the owners of the property “negligently designed, developed, prepared, and addressed [the pen area] prior to permitting horse riding activities.” ( Id.)

After receiving notice of the Baerwalde complaint, Hallister requested a defense and indemnity from plaintiffs pursuant to the Policy. (Pls.' Mot. for Summ. J. [52] at Ex. I.) The underwriters of the Policy offered to provide Hallister a defense subject to a reservation of rights. ( Id. at Ex. J.) When Hallister rejected their offer, plaintiffs filed this action to determine their rights and obligations to Hallister under the Policy. (Pls.' Br. [52] at 10.)

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate when the “pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). A fact's materiality is determined by the controlling substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmovant. Id. at 249–50, 106 S.Ct. 2505.

Summary judgment is not properly viewed as a device that the trial court may, in its discretion, implement in lieu of a trial on the merits. Instead, Rule 56 of the Federal Rules of Civil Procedure mandates the entry of summary judgment against a party who fails to make a showing sufficient to establish the existence of every element essential to that party's case on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In such a situation, there can be “ ‘no genuine issue as to any material fact,’ ” as “a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.” Id. at 322–23, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(c)).

The movant bears the initial responsibility of asserting the basis for his motion. Id. at 323, 106 S.Ct. 2548. However, the movant is not...