Capital City Ins. Co. v. Forks Timber Co.
| Decision Date | 28 August 2012 |
| Docket Number | CV 511-039 |
| Parties | CAPITAL CITY INSURANCE COMPANY, INC., and REDLAND INSURANCE COMPANY Plaintiffs, v. FORKS TIMBER COMPANY, INC, AND HERITAGEBANK OF THE SOUTH, AS SUCCESSOR-IN-INTEREST TO THE TATTNALL BANK, Defendants. |
| Court | U.S. District Court — Southern District of Georgia |
Presently before the Court are three motions for summary judgment, one filed by Plaintiffs Capital City Insurance Company, Inc. ("Capital City") and Redland Insurance Company ("Redland") (collectively "Insurers"), Dkt. No. 22, and one by each of the two Defendants, Forks Timber Company, Inc. ("Forks"), Dkt. No. 19, and HeritageBank of the South ("HeritageBank"), Dkt. No. 24, (collectively "Defendants"). Fo the reasons stated below, the Insurers' motion is GRANTED and Defendants' motions are DENIED.
BACKGROUND1
Forks is a logging company that entered into a business relationship with James Hardwick ("Hardwick") to remove timber from Hardwick's land. Hardwick represented that he owned the timber and that it was unencumbered by liens. Pursuant to the agreement with Hardwick, Forks took no steps to confirm Hardwick's representations. Forks harvested approximately eighty thousand dollars worth of timber from Hardwick's property.2 Shiver Aff. 1 8, Dkt. No. 24, Ex. A.
Unbeknownst to Forks, HeritageBank (or its predecessor-in-interest) held a security interest in the timber. After learning that Forks had harvested the timber, HeritageBank initiated a lawsuit in the Superior Court of Bacon County, Georgia ("Bacon County Litigation"). HeritageBank's complaint in the Bacon County Litigation asserts that Forks is liable for conversion of HeritageBank's security interest. Bacon Cnty. Compl., Dkt. No. 24, Ex. B. Forks contacted the Insurers - the issuers of Forks's commercial general liability insurance policies ("CGL Policies") - seeking indemnification and representation in the Bacon County Litigation. The Insurersrefused, arguing that Forks's conduct and the resulting harm did not constitute a covered loss. Specifically, the Insurers stated that the circumstances of the timber harvest did not constitute an "occurrence" as the CGL policies define that term. The Insurers filed this suit seeking a declaratory judgment regarding the Insurers' obligations under the CGL Policies.
LEGAL STANDARD
"Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Fed. R. Civ. P. 56(c); Eberhardt v. Waters, 901 F.2d 1578, 1580 (11th Cir. 1990)). The court must view the evidence and draw all inferences in the light most favorable to the nonmovant. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (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 (1986). To discharge this burden, the movant must show the court that there is an absence of evidence to support the nonmoving party's case. Id. at 325. The burden then shifts to the nonmovant to go beyond the pleadings and present affirmative evidence to show that agenuine issue of fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
DISCUSSION
The Insurers seek declaratory judgment that "they are not required nor obligated under law to provide any coverage, indemnification or defense in regards to the underlying complaint." Dkt. No. 22, at 6. Forks and HeritageBank are named defendants in this suit, and both argue that the Insurers are obligated to defend and indemnify Forks. Forks Mot. Summ. J., Dkt No. 19; HeritageBank Mot. Summ. J., Dkt. No. 24. All parties agree that Forks's CGL policies are the controlling agreements, and that the issue is whether the facts in this case constitute an "occurrence" under those policies. The parties further agree that the CGL policies define an occurrence as an "accident," but that the policies fail to define the term accident. The parties disagree on whether the facts of this case constitute an accident under the policies.
On the surface, the Insurers' argument is simple: Forks intentionally cut down the disputed trees - i.e., Forks meant to cut down the timber, and did just that - and an intentional act does not constitute an accident. The Insurers support their argument by pointing to the underlying Bacon County complaint. In the Bacon County complaint, HeritageBank asserts that Forks is liable for conversion, which is an intentional tort. Forks,on the other hand, argues that it was negligent in failing to perform a title search before cutting down the trees, and therefore an "accident" occurred, as that term is contemplated by the CGL policy. Forks's Mot. Summ. J. 2, Dkt. No. 19.
The Insurers rely primarily on Mindis Metals, Inc. v. Transp. Ins., Co., 209 F.3d 1296 (11th Cir. 2000). Mindis Metals is a single paragraph opinion, relying almost entirely on a district court order issued in an unrelated dispute, Macon Iron & Paper Stock Co. Inc. v. Transcontinental Ins., Co., 93 F. Supp. 2d 1370 (M.D. Ga. 1999).3
In Macon Iron, the plaintiff, Macon Iron, was in the scrap metal business. Macon Iron purchased several used railroad cars from an individual who worked for Georgia Central Railroad. However, the individual had no authority to sell the cars. Upon learning of the sale, Georgia Central brought suit against Macon Iron for racketeering, fraud, conversion, and punitive damages. Macon Iron's insurers refused to defend the suit, arguing that the transactions were not covered occurrences. Like the CGL Policies in this dispute, the commercial general liabilitypolicies in Macon Iron defined an occurrence as an accident, but did not define accident. Thus, the issue before the Macon Iron court was whether the transactions, and resulting harm to Georgia Central, constituted accidents under the CGL policies.
The court held that Macon Iron's conduct did not constitute an accident. In reaching its conclusion, the court cited a treatise on insurance law that described an accident as "an unusual or unexpected event, happening without negligence; chance or contingency; happening by chance or unexpectedly; an event from an unknown cause or an unexpected event from a known cause." Mindis Metals, 209 F.3d at 1300 (quoting 11 Couch on Insurance § 44:288 at 443 (2d ed. 1982)). The court further stated: Id. at 1301 (emphasis added). Ultimately, the court concluded that there was "nothing accidental" about Macon Iron's actions or the consequences of those actions.
The Insurers in the present case are confident that Macon Iron resolves the issue before the Court. The Insurers state that Forks's mistake about the absence of encumbrances on the disputed timber is essentially the same as Macon Iron's mistakeabout the true ownership of the rail cars. Although Forks may have made a mistake about the legal consequences of its conduct, the Insurers argue that Forks's actions and the consequences were purely intentional.
While the Insurers rely on Macon Iron, Forks and HeritageBank rely on the Georgia Supreme Court's recent decision American Empire Surplus Lines Ins. Co. v. Hathaway Devel. Co., Inc., 707 S.E.2d 369 (Ga. 2011). In Hathaway, the plaintiff, a contractor, sued its subcontractor for damages caused by the subcontractor's faulty workmanship. The subcontractor's faulty plumbing work caused property damage to neighboring property being built by the contractor. The subcontractor failed to answer, and default judgment was entered in favor of the contractor. The contractor then sought payment from American Empire, the subcontractor's insurer. American Empire refused to pay, arguing that the contractor's claim was not covered under the subcontractor's CGL policy. American Empire argued that the faulty workmanship performed by the subcontractor was not anoccurrence because it was not an "accident" as that term is used in the CGL policy.
The Georgia Supreme Court held that damage to surrounding property caused by the subcontractor's faulty workmanship was an "accident" and therefore covered by the policy. Hathaway, 707 S.E.2d at 369. The Hathaway court began by looking at the commonly accepted meaning of the term accident. The court stated:
It is commonly accepted that, when used in an insurance policy, an "accident" is deemed to be "an event happening without any human agency, or, if happening through such agency, an event which, under the circumstances, is unusual and not expected by the person to whom it happens. . . . [I]n its common signification the word means an unexpected happening without intention or design.
Id. at 371 (citing Black's Law Dictionary, 6th ed.). The court further pointed to Georgia case law defining accident as "an unexpected happening rather than one occurring through intention or design." Id. (citing City of Atlanta v. St. Paul Fire and Marine Ins. Co., 498 S.E.2d 782 (1998)). The court concluded that "an occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property" and rejected the argument that the faulty workmanship could not be considered an accident merely because it was performed intentionally. Id. at 372. The court further stated, "[A] deliberate act, performed negligently, is an accident if the effect is not theintended or expected result; that is, the result would have been different had the deliberate act been performed correctly." Id. (citing Lamar Homes v. Mid-Continent Cas. Co., 242 S.W.3d 1, 16 (Tex. 200...
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