Certain Underwriters at Lloyd's v. Stock Bldg. Supply, LLC
| Decision Date | 24 August 2021 |
| Docket Number | 5:14-CV-367-BO |
| Parties | CERTAIN UNDERWRITERS AT LLOYD'S, LONDON subscribing to Policy Nos. TCNR001338, TCNR005665 and TCNR012269, Plaintiff, v. STOCK BUILDING SUPPLY, LLC n/k/a BMC East, LLC, Defendant. and Stock Building Supply, LLC., Third-Party Plaintiff, v. Woomer Insurance Group, Inc., Third-Party Defendant. |
| Court | U.S. District Court — Eastern District of North Carolina |
Kevin Michael O'Brien, Robert M. Kennedy, Jr., Phelps Dunbar LLP, Raleigh, NC, Neal R. Novak, Karen J. Andersen Moran, Novak Law Offices, Chicago, IL, for Plaintiff.
Jeffrey L. Schulman, Patrick, Harper & Dixon, LLP, Hickory, NC, Paul M. Cox, Elizabeth Carson Lane, Thomas Hamilton Segars, Ellis & Winters LLP, Raleigh, NC, Preetha Suresh Rini, Robinson, Bradshaw & Hinson, P.A., Chapel Hill, NC, Jeffrey L. Schulman, Pasich LLP, New York, NY, for Third-Party Plaintiff Stock Building Supply, LLC.
Jeffrey L. Schulman, Pasich LLP, New York, NY, Preetha Suresh Rini, Robinson, Bradshaw & Hinson, P.A., Chapel Hill, NC, Thomas Hamilton Segars, Elizabeth Carson Lane, Ellis & Winters, LLP, Raleigh, NC, for Defendant Stock Building Supply, LLC.
Jeffrey B. Kuykendal, John Timothy Jeffries, McAngus Goudelock & Courie, PLLC, Charlotte, NC, for Third-Party Defendant Woomer Insurance Group, Inc.
This matter is before the Court on two motions for summary judgment. The first [DE 124] was filed by plaintiff Certain Underwriters at Lloyd's, London ("Underwriters" or "plaintiff") and the second [DE 122] by third-party defendant Woomer Insurance Group, Inc. ("Woomer Insurance"), The appropriate responses and replies have been filed and a hearing was held before the undersigned on March 17, 2021, at Elizabeth City, North Carolina. In this posture, the motions are ripe for ruling.
Plaintiff commenced this action on June 24, 2014 by filing a complaint [DE 1] against Carlos O. Garcia and CNNC (hereinafter collectively referred to as "Garcia"), Stock Building Supply, LLC ("Stock"), and New Bern Riverfront Development, LLC ("New Bern Riverfront"). Plaintiff filed an amended complaint [DE 75] on February 6, 2018, against sole remaining defendant Stock. Plaintiff seeks the following declarations: that it has no duty to defend or indemnify Stock under the relevant policies because Stock is not a named insured; that Stock does not qualify as an insured or additional insured for coverage; that there are no allegations in the Underlying Action seeking damages to which the relevant policies apply; that the Underlying Action does not allege property damage caused by an occurrence within the meaning of the policies and thus the policies are not triggered; that there is no allegation of property damage during the relevant policy periods; and that the relevant policies do not provide contractual liability coverage. Id.
Stock answered the complaint and asserted a counterclaim against Underwriters and a third-party complaint [DE 10] against Woomer Insurance, which it later amended. [DE 16; 84]. In its second amended counterclaim, Stock alleges that it is entitled to recover from Underwriters the costs to defend in the Underlying Action because it was a third-party beneficiary under the relevant policies; that it is entitled to a declaration that Underwriters owe a duty to defend Stock in connection with the Underlying Action; that Underwriters has a duty to indemnify Stock in the Underlying Action; that Underwriters engaged in unfair and deceptive trade practices; and finally for reformation of the contract. [DE 84]. In its amended third-party complaint against Woomer, Stock alleges claims for negligent misrepresentation, unfair and deceptive trade practices, and negligence under North Carolina law. [DE 16].
Underwriters and Woomer moved to dismiss Stock's claims against them. By order entered August 12, 2020, the Court1 denied Woomer's motion to dismiss and granted in part and denied in part Underwriters’ motion to dismiss. Specifically, the Court dismissed Stock's unfair and deceptive trade practices and reformation counterclaims. The Court also dismissed Stock's counterclaim seeking a declaration that Underwriters have a duty to indemnify Stock as the final decree in the Underlying Action had been issued and all rulings had been in Stock's favor. The Court declined to dismiss as duplicative Stock's claim seeking a declaration of a duty to defend. [DE 117].
On October 5, 2020, Underwriters filed a motion [DE 124] for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. On the same day, third-party defendant Woomer Insurance, as an agent of Underwriters, claimed no breach of duty or responsibility for Stock's alleged damages, and also moved for summary judgment [DE 122] pursuant to Rule 56 of the Federal Rules of Civil Procedure.
This matter involves alleged construction defects at a New Bern, North Carolina condominium development commonly referred to as SkySail Luxury Condominiums ("SkySail"). New Bern Riverfront, as the developer of the project, retained Weaver Cooke Construction, LLC ("Weaver Cooke") as the general contractor to coordinate construction of the condominiums. Weaver Cooke subcontracted the installation of windows and sliding glass doors to Stock, who further subcontracted the installation to Garcia. The Underlying Action referenced throughout involves New Bern Riverfront's suit against Weaver Cooke for numerous deficiencies in the condominium's construction, including faulty windows and doors, all of which culminated in Weaver Cooke's complaints against Stock, Stock's third-party complaints against Garcia, and ultimately, the present motions for summary judgment.
Stock maintains that the condominium project's functional and structural problems were due to the work of the subcontracted party, Garcia, and accordingly pursued coverage and indemnity as an additional named party on Garcia's insurance policy with Underwriters. The following facts are undisputed. [DE 132].
Between 2007 and 2009, Underwriters issued three Commercial General Liability Policies to Garcia: (1) Policy No. TCNR001338, effective from January 26, 2007 to January 26, 2008 ("the 2007 Policy"), (2) Policy No. TCNR005665, effective from January 26, 2008 to January 2009 ("the 2008 Policy"), and (3) Policy No. TCNR012269, valid from May 14, 2009 to July 30, 2009, when it was effectively cancelled. Id. ¶ 3. Neither plaintiff nor defendant disputes the language of these policies, which include a provision specifically stating that only the individual or organization specified under Section II will be "insured." Id. ¶ 4. Nor do the parties dispute the Coverage Form's language specifying that Underwriters "[have] no duty to defend the insured against any ‘suit’ ... to which this insurance does not apply." Id. ¶ 5. Both parties concede Section II states that when a policy is issued to an "individual," that individual and their spouse will be insured, "but only with respect to the conduct of business of which [they] are the sole owner." Id. ¶ 7.
Stock entered an agreement with Garcia calling for installation of glass doors and windows at the project site in March of 2007 and the contract between the two parties included the requirement that Stock be named as an additionally insured entity under Garcia's policy with Underwriters. [DE 84 at 3]. Garcia's 2008 and 2009 policies contained an endorsement naming Stock and its affiliated subsidiaries as an additional insured party, however the nature of the coverage was modified to include insurance "only with respect to liability for ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ " that might occur during construction and as a result of the primary insured party's actions. [DE 132 ¶ 8]. Once the actual construction at the project site was completed, the policies’ coverage for bodily injury and property damage ceased to exist for the additional insured party. Id.
On May 6, 2010, New Bern Riverfront filed a first amended complaint against Weaver Cooke and others in the United States Bankruptcy Court for the Eastern District of North Carolina, No. 09-10340-8-JRL. Id. ¶ 9. On June 14, 2012, Weaver Cooke filed a second third-party complaint naming Stock, among others, as third-party defendants. Id. ¶ 13. In response to the general contractor's third-party complaint for this alleged "property damage," Stock filed its own third-party complaint against Garcia in the Underlying Action in January 2013, alleging equitable indemnity, contractual indemnity, and negligence. Id. ¶ 15. All rulings in the Underlying Action ultimately were in Stock's favor and Stock is no longer seeking indemnity from Underwriters based upon the outcome of the underlying action. Id. ¶ 17. Underwriters now seek a declaration that it has no duty under the relevant policies to defend Stock in the Underlying Action. Stock contends that Underwriters does have a duty to reimburse Stock's defense costs.
As discussed above, Stock, in response to Underwriter's request for declaratory judgment and denial of coverage, filed counterclaims against Underwriters and a third-party complaint against Woomer Insurance. As to Stock's claims against Woomer, the following facts are not in dispute.2 [DE 134]. Under its contract with Stock, Garcia was contractually obligated to obtain comprehensive general liability insurance which would show that Stock and its affiliates were additional insureds and that the policy would include both contractual liability and completed operations liability. Id. ¶ 1. Such a requirement is standard in this context. Id. ¶ 2. For the 2007 Policy, Woomer believed that it had procured additional insured coverage for Stock, but due to human error it failed to notify the proper party that Stock needed to be added to the policy. Id. ¶ 3. Woomer did secure Stock's additional insured status under the 2008 and 2009 Policies. Id. ¶...
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