Burlington Ins. Co. v. PMI Am., Inc.

• Decision Date: 23 March 2012
• Docket Number: Case No. 2:08–CV–1054.
• Citation: 862 F.Supp.2d 719
• Parties: The BURLINGTON INSURANCE COMPANY, Plaintiff, v. PMI AMERICA, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

862 F.Supp.2d 719

The BURLINGTON INSURANCE COMPANY, Plaintiff,

v.PMI AMERICA, INC., et al., Defendants.

Case No. 2:08–CV–1054.

United States District Court,

S.D. Ohio,

Eastern Division.

March 23, 2012.

Edward J. Stoll, Jr., The Law Offices of Edward J. Stoll, Westlake, OH, Tamara Lynn Karel, Redgrave LLP, Washington, DC, for Plaintiff.

James D. Abrams, Taft Stettinius & Hollister LLP, Christopher Haas, Greta M. Kearns, Squire Sanders (US) LLP, Martha Cawein Brewer, William J. Pohlman, Vorys, Sater, Seymour & Pease LLP, Columbus, OH, Hugh C. Carlin, Gross Shuman Brizdle & Gilfillan, P.C., Buffalo, NY, Colin R. Jennings, Squire Sanders (US) LLP, Cleveland, OH, Kenneth Bruce Flacks, Katzman Logan Halper & Bennett, LPA, Cincinnati, OH, for Defendants.

OPINION AND ORDER

EDMUND A. SARGUS, JR., District Judge.

This matter is before the Court for consideration of the following five motions: (1) Defendant–Counterclaimant, PMI America, Inc.'s (“PMI”) Motion for Summary Judgment Against Plaintiff Burlington Insurance Company (“Burlington”) (Doc. No. 85), which is hereby GRANTED; (2) Plaintiff Burlington's Motion for Partial Summary Judgment Against Defendant Liberty Mutual Insurance Company (“Liberty”) (Doc. No. 98), which is hereby DENIED; (3) Defendant Carmeuse Lime, Inc.'s (“Carmeuse”) Combined Motion for Summary Judgment Against Plaintiff Burlington and Defendant Liberty (Doc. No. 111), which is hereby GRANTED IN PART AND DENIED IN PART; (4) Defendant Liberty's Motion for Summary Judgment (Doc. No. 112), which is hereby DENIED; and (5) Defendant Liberty's Motion for Leave to File Surreply in Opposition to Plaintiff Burlington's Partial Motion for Summary Judgment (Doc. No. 128), which is hereby GRANTED.

I. BACKGROUND

A. Facts

The facts set forth in this Opinion and Order are taken from the material in the record before this Court and from the trial testimony and record before the Pennsylvania state court in the underlying state court case, discussed infra, of which this Court takes judicial notice. Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 n. 5 (6th Cir.2005) (district court has discretionary authority to take judicial notice of the record in a state court proceeding).

Defendant Carmeuse owns a facility in Chicago, Illinois, that produces lime and limestone products using large, rotary kilns. This case involves Kiln No. 5, which is more than 485 feet long and is comprised of a kiln shell, refractory lining, support tires and rollers, support piers, a drive gear, and pinions. The kiln shell is made up of six steel segments that are welded together. Kiln No. 5 rests on tires and rollers that are situated on six reinforced concrete piers. The kiln was installed at a slight slope. As the kiln rotates, limestone is fed into the high end of the kiln. Heat from ignited pulverized coal is continuously introduced from the discharge end of the kiln. As the limestone moves down the kiln and is exposed to heat, it is chemically converted into calcium oxide, i.e., lime.

Carmeuse hired PMI to replace five sections of the kiln shell on Kiln No. 5 during scheduled kiln outages in 2004 and 2005. PMI completed its work in July 2005 and Kiln No. 5 was restarted in August 2005. When Kiln No. 5 was restarted, the tire on pier three immediately began lifting off of the left support roller, and the tire on pier four began lifting off of the right support roller, which caused cracked spokes on the tires. The “lift offs” were caused by an excessive “dogleg” that was ultimately determined to have been created by PMI's work. Imperfections in the alignment of kiln shell segments are called doglegs and can, when sufficiently serious, cause the support tires to lift off their support rollers, which causes structural stresses and pressure, and lead in turn to damage and excessive wear on the kiln, the gears, and related equipment. PMI representatives inspected Kiln No. 5 in August 2005 and attempted to remedy the dogleg by adjusting the rollers. PMI's adjustments failed to correct the defects.

Carmeuse continued to operate the kiln and in August 2006, the kiln suffered a major crack necessitating a shut-down to make emergency repairs. Carmeuse shut down Kiln No. 5 again in February 2007 in order to have correction cuts performed to remedy the defects in the kiln. In May 2007, Carmeuse again was required to shut down the kiln in order to perform repairs on the bull gear.

B. State Court Litigation

On February 4, 2008, Carmeuse filed a lawsuit against PMI in the Court of Common Pleas of Allegheny County, Pennsylvania, captioned Carmeuse Lime, Inc. v. PMI America, Inc., GD No. 08–2335, in which it alleged that PMI breached its contractual obligations by failing to properly perform the kiln shell replacement, which caused damage to Kiln No. 5. A trial to the court was held September 2, 2009 through September 10, 2009. On September 15, 2009, the court issued its verdict, finding for Carmeuse in the amount of $978,558.41. The Court also awarded $199,466.40 in delay damages, entered judgment on the verdict on July 10, 2010, and issued its opinion in support of the verdict in October 2010.

PMI appealed the judgment to the Pennsylvania Superior Court. On July 19, 2011, the Superior Court affirmed the $978,558.41 verdict and reversed the award of delay damages. The Superior Court determined that the trial court incorrectly awarded delay damage instead of prejudgment interest. The court remanded to the trial court for a recalculation of interest on the verdict. In accordance with the Superior Court's opinion, the trial court conducted a hearing on August 25, 2011, regarding prejudgment interest. On October 4, 2011, the trial court issued an Order awarding prejudgment interest of 6% on the verdict and amended the judgment to include interest in the amount of $94,746.54. Thus, the total judgment entered in favor of Carmeuse and against PMI was $1,073,304.90.

C. PMI's Commercial General Liability Policies

PMI and its corporate parent purchased consecutive commercial general liability policies from Plaintiff Burlington and Defendant Liberty. Burlington's policy was effective July 10, 2004, through September 30, 2005 (“Burlington Policy” ¹). Burlington defended PMI in the Pennsylvania state court action. Liberty issued a subsequent commercial general liability policy to PMI and its corporate parent, effective September 30, 2005, through September 30, 2006 (“Liberty Policy” ²). Both Burlington and Liberty have denied coverage of PMI's claim for indemnification of the judgment entered against it in the Pennsylvania action.

D. Procedural Posture

On November 6, 2008, Burlington commenced this litigation against Liberty and PMI, seeking a declaration that the Burlington Policy does not cover PMI's loss and for indemnification and contribution from Liberty for the cost of defending PMI in the Pennsylvania action and for any amounts Burlington is found to owe PMI. (Doc. No. 1.) PMI asserted a counterclaim against Burlington and a crossclaim against Liberty seeking declarations that both insurers are contractually obligated to indemnify PMI for the Pennsylvania judgment and pay the cost of defense of PMI in that action. (Doc. No. 15.) In January 2010, this action was stayed pending the outcome of the Pennsylvania action. (Doc. No. 52.)

After the stay was lifted, the Court granted Burlington leave to file a second amended complaint, which brought Carmeuse into this litigation. (Doc. No. 65.) Carmeuse has since counterclaimed against Burlington and crossclaimed against Liberty, seeking declarations that both insurers are contractually obligated to indemnify PMI for the Pennsylvania judgment. (Doc. No. 70.)

All of the parties filed numerous motions for extensions of time in which to file their dispositive motions, memoranda in opposition to the dispositive motions, and replies in support of the motions. (Doc. Nos.86, 93, 96, 101, 103, 107, 114, 115, 118, 121, 125, 133.) For good cause shown, the Court granted those motions. (Doc. Nos. 87, 94, 97, 102, 106, 108, 116, 122, 126, 135.) The dispositive motions briefing is now complete and consists of the following.

On June 7, 2011, Defendant PMI filed it Motion for Summary Judgment. (Doc. No. 85.) On August 23, 2011, Plaintiff Burlington filed its memorandum in opposition (Doc. No. 99), and on October 13, 2011, PMI filed its reply brief (Doc. No. 109).

On August 20, 2011, Plaintiff Burlington filed its Motion for Partial Summary Judgment Against Defendant Liberty. (Doc. No. 98.) On October 31, 2011, Defendant Liberty opposed that motion (Doc. No. 113), on November 28, 2011, Burlington filed its reply in support of its motion (Doc. No. 120), and on November 29, 2011, Burlington filed the Exhibits to its reply brief (Doc. No. 123). On December 21, 2012, Liberty filed a Motion for Leave to File Surreply. to allegedly respond to new arguments Burlington made in its reply brief. (Doc. No. 128.)

On October 19, 2011, Defendant Carmeuse filed its Combined Motion for Summary Judgment Against Plaintiff Burlington and Defendant Liberty. (Doc. No. 111.) On November 15, 2011, Liberty filed is memorandum in opposition (Doc. No. 117), and on November 28, 2011, Burlington filed its memorandum in opposition ³ (Doc. No. 119). On December 21, 2011, Carmeuse filed its reply brief. (Doc. No. 131.)

On October 31, 2011, Defendant Liberty filed its Motion for Summary Judgment. (Doc. No. 112.) On December 21, 2011, Plaintiff Burlington filed its memorandum in opposition (Doc. No. 127), Defendant PMI filed its memorandum in opposition (Doc. No. 129), and Defendant Carmeuse filed its memorandum in opposition (Doc. No. 131). On January 23, 2012, Liberty filed its reply brief. (Doc. No. 136.)

II. SURREPLY

Defendant Liberty filed a Motion for Leave to File a Surreply so that it could address arguments that Plaintiff Burlington purportedly raised for the first time in its reply in support of its motion for partial summary judgment. (...