Chartis Specialty Ins. Co. v. Am. Contractors Ins. Co.
| Decision Date | 27 January 2015 |
| Docket Number | Case No. 3:13-CV-01669-KI |
| Parties | CHARTIS SPECIALTY INSURANCE COMPANY, f/k/a American International Specialty Lines Insurance Company, Plaintiff, v. AMERICAN CONTRACTORS INSURANCE COMPANY RISK RETENTION GROUP, HOFFMAN CORPORATION, and HOFFMAN CONSTRUCTION COMPANY OF OREGON, Defendants. |
| Court | U.S. District Court — District of Oregon |
Matthew J. Fink
Charles A. Hafner
Nicolaides Fink Thorpe
Michaelides Sullivan LLP
71 South Wacker Drive, Suite 4400
Chicago, IL 60625
Christopher J. Nye
Reed McClure
Two Union Square
601 Union Street, Suite 1500
Seattle, WA 98101-1363
Attorneys for Plaintiff
Michael E. Farnell
Ian Hale
Parsons Farnell & Grein, LLP
1030 SW Morrison Street
Portland, OR 97205
Patrick J. Wielinski
Cokinos, Bosien & Young
105 Decker Court, Suite 800
Irving, Texas 75062
Attorneys for Defendants
This is an insurance coverage dispute between Chartis Specialty Insurance Company ("Chartis") and American Contractors Insurance Company Risk Retention Group ("ACIG"), both of which provided insurance policies covering the development of the Meriwether Condominium Complex. Hoffman Corporation and Hoffman Construction Company of Oregon (collectively, "Hoffman") successfully intervened as defendants in this dispute and filed counterclaims against Chartis. I previously resolved the parties' cross-motions for partial summary judgment, in favor of ACIG and Hoffman and against Chartis, on the sole issue of whether more than one "occurrence" "caused" the "property damage." The parties have filed supplemental cross-motions for summary judgment to resolve the case once and for all.
For the following reasons, I grant in part Chartis' Motion for Summary Judgment, grant in part defendants' motion for declaratory judgment, and deny Hoffman's Motion for Summary Judgment on its breach of contract claim.
Chartis issued a Commercial Umbrella Policy to Hoffman and a group of developers ("Developers") who were building a mixed-use, multi-unit condominium complex called the Meriwether Condominiums. The Chartis Policy provides coverage for "those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law . . . because of . . . Property Damage . . . that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world." Chartis Policy 46. The "Retained Limit" is $2 million per occurrence with a $4 million aggregate limit.
ACIG issued a Commercial General Liability Policy to Hoffman and the developers for the same project. The ACIG Policy provides coverage for "'property damage' . . . caused by an "occurrence'" in an amount of $2 million for each occurrence. ACIG Policy 29. Its products-completed operations aggregate limit is $4 million. For each "occurrence," Hoffman is required to pay a retention of $500,000 in indemnity and $250,000 in defense costs.
The Meriwether developed structural problems, triggering a lawsuit by the Meriwether Condominium Owners Association against the Developers in 2011.1
ACIG and Chartis together paid $3.6 million to settle that lawsuit in February 2013. ACIG paid $2 million and Chartis paid $1.6 million with a reservation of rights to seek reimbursement from ACIG.
Chartis then sought a declaratory judgment that the property damage alleged in the lawsuit was caused by more than one "occurrence," such that the ACIG Policy should have been exhausted up to the $4 million aggregate limit; Chartis alleged it should be reimbursed the $1.6 million it paid to help settle the lawsuit.2 ACIG denied the allegations and alleged several affirmative defenses. It did not assert a counterclaim.
I permitted Hoffman to intervene in the case. Hoffman filed a breach of contract counterclaim and a counterclaim for a declaratory judgment against Chartis. Hoffman's breach of contract counterclaim alleges:
91. The Chartis Policy is a valid and enforceable contract between Chartis and Hoffman, among others.
92. The damages alleged by the Association as part of the Claims against the Developers involve only a single "occurrence," or must be treated as involving only one occurrence under the facts and circumstances that existed when the Claims were resolved.
93. Pursuant to the Chartis Policy and applicable law, Chartis had a duty to indemnify or otherwise pay all amounts required to compromise the damages alleged by the Association as part of the Claims in excess of the Schedule of Retained Limits of the Chartis Policy.
94. The Schedule of Retained Limits of the Chartis Policy provides for Retained Limits of "$2M OCC/$4 AGG Each Occurrence."
95. The Chartis Policy defines the relevant portions of the term, "occurrence," as an
96. Chartis breached this duty by wrongfully asserting that it is not responsible for any portion of the settlement because the Claims involved multiple "occurrences" under the ACIG Policy and therefore the entire $4,000,000 aggregate limit of the ACIG Policy was triggered, and by otherwise attempting to improperly interpret and allocate the settlement amounts paid in ways detrimental to Hoffman, ACIG and others.
97. The breach by Chartis of its Policy damages Hoffman in that $2,000,000 per "occurrence"/$4,000,000 aggregate limits of the ACIG Policy are inclusive of a $500,000 per "occurrence" retention as to indemnity and a $250,000 retention as to defense costs, and Hoffman is solely responsible for the payment of any and all retentions owed under the ACIG Policy.
98. All conditions, including any conditions precedent, required of Hoffman by the ACIG Policy and the Chartis Policy have been satisfied, or have been waived or otherwise excused by the actions of ACIG and Chartis.
99. Hoffman is entitled to recover its attorney fees relating to this matter pursuant to ORS 742.061.
Hoffman's counterclaim for a declaratory judgment incorporates the allegations above, and then reports "[a]n actual and justiciable controversy exists between the parties as to whether . . . the Claims involved multiple 'occurrences' such that the Retained Limits of the Chartis Policy were not satisfied, entitling Chartis to repayment[.]" Hoffman Answer and Countercl. ¶ 105. Additionally, "[a] judicial declaration as to the parties' respective rights and duties is thus necessary and appropriate at this time." Id. at ¶ 107. Hoffman also seeks its attorney fees pursuant to ORS 742.061.
On cross-motions for summary judgment on the sole issue of whether more than one "occurrence" "caused" the "property damage," I issued an Opinion and Order on August 12, 2014 concluding the property damage at the Meriwether Condominium Complex was caused by a single occurrence.
After I issued that opinion, ACIG filed an unopposed amended answer alleging a counterclaim, in relevant part, as follows:
89. Eventually, however, Chartis Specialty agreed to conditionally pay $1,600,000 toward the settlement of the remaining damages alleged by the Association as part of the Claims, but only on the condition that ACIG agree to allow Chartis Specialty to reserve its right to argue that (1) the Claims involved multiple occurrences such that ACIG was responsible for the payment of at least $4,000,000 before Chartis Specialty was required to pay any amount, (2) Chartis was not obligated to pay $1,600,000 toward the settlement, and (3) Chartis was entitled to recoup its conditional payment of $1,600,000 from ACIG and, because of the above-referenced per "occurrence" deductible, from Hoffman.
90. Chartis Specialty and ACIG entered into an agreement whereby Chartis Specialty and ACIG would be allowed to litigate the single issue of whether or not the Retained Limits of the Chartis Policy had been exhausted by payments made toward the damages alleged by the Association as part of the Claims.
95. Under the Chartis Policy, and pursuant to its other terms, conditions and provisions, Chartis Specialty is obligated to unconditionally pay all damages in excess of "the limits listed in Schedule of Retained Limits and then up to the amount not exceeding the Each Occurrence Limits as stated in the Declarations."
98. An actual and justiciable controversy exists between the parties as to whether, under all of the facts and circumstances, the Claims involved a single "occurrence" such that the Retained Limits of the Chartis Policy were satisfied and Chartis Specialty is obligated to pay $1,600,000 toward the settlement of the damages alleged by the Association against the Developers as part of the Claims.
99. A judicial declaration as set forth in the preceding paragraph, as well as the parties' other respective rights and duties under the two insurance policies at issue, is thus necessary and appropriate at this time.
ACIG Am. Answer and Countercl.
Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the court "must view the evidence on summary judgment in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party." Nicholson v. Hyannis Air Service, Inc., 580 F.3d 1116, 1122 n.1 (9th Cir. 2009) (citation omitted).
As an initial matter, Chartis stipulated that...
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