Citizens Ins. Co. of Am. v. Panzica Bldg. Corp.
| Decision Date | 14 December 2020 |
| Docket Number | CAUSE NO. 3:19-cv-387 DRL-MGG |
| Citation | 507 F.Supp.3d 1047 |
| Parties | CITIZENS INSURANCE CO. OF AMERICA and Hanover Insurance Co., Plaintiffs, v. PANZICA BUILDING CORP. et al., Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
Margaret A. Cernak, Patrick D. Crandell, Collins Einhorn Farrell PC, Southfield, MI, for Plaintiffs.
Martin J. Gardner, Andria M. Oaks, Christopher J. Uyhelji, Gardner & Rans PC, South Bend, IN, for Defendant Panzica Building Corporation.
Daniel H. Pfeifer, Ryan G. Milligan, James P. Barth, Pfeifer Morgan & Stesiak, South Bend, IN, for Defendants Jennifer Pennington, Josh Pennington.
Damon R. Leichty, Judge Panzica Building Corporation (PBC) is insured by Citizens Insurance Company of America and Hanover Insurance Company. Jennifer and Josh Pennington sued PBC in state court for its negligent design and construction of a swimming pool. Citizens and Hanover seek here a declaratory judgment saying they aren't required to defend or indemnify PBC in the underlying state litigation. The insurers move for summary judgment. The court grants their motion.
On January 22, 2015, PBC contracted with Beacon Health System to design and construct a fitness center at Beacon's Mishawaka campus, which included a lap pool (ECF 41-2 at 3-5). The contract said that the (Id. at 36).
PBC and another company, Panzica Construction Company, created a joint venture named Panzica2 (ECF 41-5). Subsequently, PBC and Beacon amended the contract through a partial assignment agreement with Panzica2 (ECF 41-3 at 2-3). The assignment, which assigned to Panzica2 all of PBC's rights and obligations except for the design services, provided as follows:
[PBC] does hereby assign to [Panzica2]: (a) all of [PBC's] rights and obligations under the [Contract], except [PBC] reserves to itself, and does not assign to [Panzica2], all design obligations of [PBC] under the [Contract], which design obligations include all design services that are required by law to be performed by a person or entity who is lawfully licensed to practice architecture[.]"
(ECF 41-3 ¶ 1). Beacon consented to the assignment (ECF 41-3 at 3). The pool was subsequently designed and constructed.
Citizens issued a business liability policy (ECF 41-10) and Hanover issued a commercial umbrella insurance policy (ECF 41-12) to PBC. Both policies cover damages from a "bodily injury" that is caused by an "occurrence" (assuming no exclusion) (ECF 41-10 at 192; ECF 41-12 at 14). Both policies exclude coverage for various professional services (ECF 41-10 at 232 (Citizens’ Engineers, Architects or Surveyors Professional Liability Exclusion); ECF 41-10 at 233 (Citizens’ Contractors Professional Liability Exclusion); ECF 41-12 at 24, 33 (Hanover's Professional Liability Exclusions); ECF 41-12 at 47 (Hanover's Contractors Errors and Omissions Exclusion)).
On November 16, 2016, Jennifer Pennington was doing a backstroke in the pool and hit her head on a concrete wall (ECF 48-4 ¶ 17). She and her husband filed claims against PBC and other defendants in Indiana state court (ECF 41-4). They asserted multiple theories of liability against PBC regarding the pool: negligent and defective design in count one (ECF 48-4 ¶¶ 19-24), failure to warn and instruct in count two (ECF 48-4 ¶¶ 25-29), and negligence in construction of project in count four (ECF 48-4 ¶¶ 34-39).1 PBC was sued as a corporation with regard to design defects in counts one and two and as a joint venturer for negligent construction in count four.
Citizens and Hanover say they aren't required to defend or indemnify PBC in the underlying state litigation. The insurance companies seek summary judgment to that effect.
Summary judgment is warranted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The non-moving party must present the court with evidence on which a reasonable jury could rely to find in his favor. Goodman v. Nat'l Sec. Agency, Inc. , 621 F.3d 651, 654 (7th Cir. 2010). The court must construe all facts in the light most favorable to the non-moving party, view all reasonable inferences in that party's favor, Bellaver v. Quanex Corp. , 200 F.3d 485, 491-92 (7th Cir. 2000), and avoid "the temptation to decide which party's version of the facts is more likely true." Payne v. Pauley , 337 F.3d 767, 770 (7th Cir. 2003).
In performing its review, the court "is not to sift through the evidence, pondering the nuances and inconsistencies, and decide whom to believe." Waldridge v. Am. Hoechst Corp. , 24 F.3d 918, 920 (7th Cir. 1994). Nor is the court "obliged to research and construct legal arguments for parties." Nelson v. Napolitano , 657 F.3d 586, 590 (7th Cir. 2011). Instead, the "court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Id. The court must grant a summary judgment motion when no such genuine factual issue—a triable issue—exists under the law. Luster v. Ill. Dep't of Corrs. , 652 F.3d 726, 731 (7th Cir. 2011).
Under the Declaratory Judgment Act, the court "may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a). There must be an actual and justiciable controversy. See MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) ; Aetna Life Ins. Co. v. Haworth , 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937). There must be a "substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ; accord MedImmune , 549 U.S. at 127, 127 S.Ct. 764. Such a controversy exists here. See MedImmune , 549 U.S. at 127, 127 S.Ct. 764 ; NUCOR Corp. v. Aceros Y Maquilas de Occidente , 28 F.3d 572, 579 (7th Cir. 1994) (articulating five factors).
Indiana substantive law applies here.2 See Allen v. Cedar Real Estate Grp., LLP , 236 F.3d 374, 380 (7th Cir. 2001). "The interpretation of an insurance policy is primarily a question of law for the court, and it is therefore a question [that] is particularly suited for summary judgment." Wagner v. Yates , 912 N.E.2d 805, 808 (Ind. 2009). Indiana courts generally interpret insurance contracts under the same rules as other contracts. Eli Lilly & Co. v. Home Ins. Co. , 482 N.E.2d 467, 470 (Ind. 1985). "[C]lear and unambiguous language in an insurance policy should be given its plain and ordinary meaning ... even if those terms limit an insurer's liability." Everett Cash Mut. Ins. Co. v. Taylor , 926 N.E.2d 1008, 1012 (Ind. 2010) (citation omitted). When terms are ambiguous, Indiana courts construe them strictly against the insurer. Id. An ambiguity doesn't exist merely "because an insured and an insurer disagree about the meaning of a provision, but only if reasonable people could disagree about the meaning of the contract's terms." Empire Fire v. Frierson , 49 N.E.3d 1075, 1079 (Ind. Ct. App. 2016).
An insurer's duty to defend or indemnify rests on the allegations in the complaint and from those facts known or ascertainable by the insurer after reasonable investigation. Newnam Mfg., Inc. v. Transcontinental Ins. Co. , 871 N.E.2d 396, 401 (Ind. Ct. App. 2007). "Typically, an insurer has a duty to defend its insured against suits alleging facts that might fall within the coverage." Fed. Ind. Co. v. Stroh Brewing Co. , 127 F.3d 563, 566 (7th Cir. 1997) (applying Indiana law).
Both the Citizens and Hanover policies cover damages when an "occurrence" causes "bodily injury," absent any other policy exclusion (ECF 41-10 at 192; ECF 41-12 at 14). An "occurrence" under both policies is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions" (ECF 41-10 at 206; ECF 41-12 at 30). The first issue is whether the alleged negligence in design or failure to warn was an "occurrence."
As the insured, PBC has the burden of proving that insurance coverage exists. Nat'l Fire & Cas. Co. v. West By & Through Norris , 107 F.3d 531, 535 (7th Cir. 1997) (applying Indiana law). Curiously, PBC hasn't argued that it is covered under the insurance policy's terms, choosing instead to argue only that the claims fall outside the policy's exclusions. Citizens and Hanover contend that the negligent design claims didn't involve an "occurrence," but were instead based on a "professional error and omission."
An occurrence is an accident. Indiana broadly construes "accident" as "an unexpected happening without an intention or design." Tri-Etch, Inc. v. Cincinnati Ins. Co. , 909 N.E.2d 997, 1002 (Ind. 2009). Indiana distinguishes between an "occurrence" in a commercial general liability (CGL) policy and claims based on "commercial or professional conduct." Id. Claims based on commercial or professional conduct are ordinarily insured under "errors and omissions" policies. Id. ; see Ind. Farmers Mut. Ins. Co. v. N. Vernon Drop Forge, Inc. , 917 N.E.2d 1258, 1272 (Ind. Ct. App. 2009) (). For this reason, CGL policies such as those here "typically exclude claims arising out of professional or other business services." Tri-Etch , 909 N.E.2d at 1002 (citing cases). Notably, a "[l]ack of...
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