First Specialty Ins. Corp. v. Supreme Corp.

• Decision Date: 28 September 2018
• Docket Number: C/w Case No. 3:14-CV-1613,Case No. 3:12-CV-186 JD
• Parties: FIRST SPECIALTY INSURANCE CORPORATION, Plaintiff, v. SUPREME CORPORATION, a subsidiary of SUPREME INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

FIRST SPECIALTY INSURANCE CORPORATION, Plaintiff, v. SUPREME CORPORATION, a subsidiary of SUPREME INDUSTRIES, INC., Defendant.

Case No. 3:12-CV-186 JD

C/w Case No. 3:14-CV-1613

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA SOUTH BEND DIVISION

September 28, 2018

OPINION AND ORDER

This insurance coverage dispute arises from a 2012 lawsuit filed in Washington state courts against Supreme Corporation. In that case, King County (Washington) alleged various defects and problems with 35 medium duty buses that Supreme sold to it. Those defects caused noxious fumes to leak into the buses' cabins, leading to numerous complaints from drivers and passengers of "burning and irritation in their eyes, ears, noses, and throats, as well as nausea and headaches." [DE 3-1 ¶ 35] Supreme's insurer, First Specialty Insurance Corporation, denied coverage and filed these now-consolidated actions for declaratory judgment.

The King County lawsuit has long since settled, and in September 2015, this Court (then, Judge James T. Moody) ruled on summary judgment that First Specialty owed Supreme a duty to defend in the underlying litigation. [DE 34 (the "Duty to Defend Order")] Over two years later, First Specialty filed a motion to reconsider Judge Moody's opinion on the issue of its duty to defend. [DE 99] That motion is now ripe for review, as are both parties' cross motions for partial summary judgment on the issues of defense costs, number of occurrences, prejudgment interest, and First Specialty's duty to indemnify.¹ [DE 98; DE 102; DE 104] For the reasons stated herein, the Court will deny First Specialty's motion to reconsider the issue of its duty to defend, deny First Specialty's motions for partial summary judgment, and grant partial summary judgment in favor of Supreme on all these issues.

I. Motion for Reconsideration

As stated above, the Court previously held that First Specialty had a duty to defend in the King County litigation. [DE 34] In reaching that conclusion, Judge Moody reasoned that the underlying complaint contained broad enough allegations so as to include claims for damages "because of 'bodily injury,'" which, as defined in the policy, triggered coverage. [DE 3-2 at 26-27] In particular, "under the liberal standards which apply to notice pleading," King County could seek damages for "its own financial losses caused by drivers' and passengers' efforts to hold [it] liable" for their illnesses, as well as damages for any loss of services resulting from the bodily injury to its drivers. [DE 34 at 7] In so holding, the Court rejected First Specialty's arguments regarding the complaint's lack of express language, allegations of bus driver and passenger illnesses, Washington workers' compensation law, and King County's discovery responses. See generally id.

Turning to the instant motion, under Rule 54(b), an order adjudicating "fewer than all the claims or rights and liabilities of fewer than all the parties ... may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed. R. Civ. P. 54(b). "Courts have the inherent power to reconsider non-final orders, as justice requires, before entry of judgment." Bd. of Trustees of Univ. of Ill. v. Micron Tech., Inc., 245 F. Supp. 3d 1036, 1044 (C.D. Ill. 2017) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr.Corp., 460 U.S. 1 (1983); Sims v. EGA Prods., Inc., 475 F.3d 865, 870 (7th Cir. 2007)). Motions to reconsider interlocutory orders "serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence." Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1269 (7th Cir. 1996). "A manifest error is not demonstrated by the disappointment of the losing party. It is the wholesale disregard, misapplication, or failure to recognize controlling precedent." Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (internal citations omitted). The Seventh Circuit has emphasized that appropriate issues for reconsideration "rarely arise and the motion to reconsider should be equally rare." Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990).

Motions for reconsideration are "not an appropriate forum for rehashing previously rejected arguments or arguing matters that could have been heard during the pendency of the previous motion." Caisse, 90 F.3d at 1269-70 (7th Cir. 1996); In re Oil Spill by "Amoco Cadiz" Off Coast of France on March 16, 1978, 794 F. Supp. 261, 267 (N.D. Ill. 1992), aff'd, 4 F.3d 997 (7th Cir. 1993) ("[M]otions to reconsider are not at the disposal of parties who want to 'rehash' old arguments."). First Specialty's motion to reconsider ignores this rule, however, as the majority of the arguments contained therein were already raised before, considered, and rejected by this Court nearly three years ago. To illustrate, First Specialty argues that King County's lawsuit did not create a duty to defend because: King County's complaint itself did not expressly seek to hold Supreme liable for damages due to bodily injury; the allegations regarding bus driver and passenger illnesses in King County's complaint merely provided illustration and had no legal effect; Washington workers' compensation law precluded King County from recovering damages for bodily injury suffered by its employees, including incidental or consequential damages stemming from those injuries; and King County's discovery responses had no bearingon the duty to defend. [DE 101 at 4-14] Yet, the Court rejected these arguments and set forth its rationale as to each in the Duty to Defend Order. First Specialty's concerns at this stage thus boil down to a disagreement with Judge Moody's reasoning, which does not provide the proper basis for a motion to reconsider. Broaddus v. Shields, 665 F.3d 846, 860 (7th Cir. 2011) ("It is well established that a motion to reconsider is only appropriate where ... the court has made an error of apprehension (not of reasoning) ....") (emphasis added).

First Specialty additionally cites to Madison Mutual Ins. Co. v. Diamond State Ins. Co., which post-dates the Duty to Defend Order, in support of its position that the allegations of driver and passenger illnesses in the King County complaint provided only explanatory background and did not create a duty to defend. 851 F.3d 749, 756 (7th Cir. 2017). But Madison Mutual promulgates no new law that would upset Judge Moody's ruling, and it can be distinguished on factual grounds. In Madison Mutual, the plaintiff alleged that the insurer breached its duty to defend a real estate agent in a harassment suit under the professional liability errors and omissions policy the insurer provided her. See generally id. In ruling that the insurer had no duty to defend, the district court reasoned that factual statements in the complaint regarding the real estate agent's omissions about a permit did not trigger coverage because they stood apart from the wrongful acts alleged in the harassment complaint. Id. at 752-53. The Seventh Circuit affirmed, noting that the permit allegations constituted a "small subset of factual allegations that overlap[ped] with the factual underpinnings" of an earlier lawsuit arising out of the professional services the real estate agent provided. Id. at 755. While these allegations provided explanatory background for the alleged harassment, the harassment lawsuit itself contained "no allegation of injury resulting from" the realtor's failure to disclose the permitissue. Id. at 755-56. Therefore, the harassment allegations at issue did not invoke the realtor's professional liability coverage. Id. at 756.

Here, Judge Moody rejected First Specialty's contention that King County included the allegations of bus driver and passenger illness in its complaint merely as context for the County's decision to remove the defective buses from service. [DE 34 at 5-7] In contrast to Madison Mutual, the allegations regarding drivers and passengers falling ill from breathing in noxious fumes - a "bodily injury" triggering coverage under the policy - provided more than just "explanatory background" and were not separate and distinct from King County's theories of recovery. Indeed, the Court reasoned that the complaint left open the potential for King County to seek damages for financial losses it incurred from the drivers being sick (i.e., overtime pay or temporary hires to cover their absences), as well as drivers' and passengers' independent efforts to hold it liable for their illnesses.² Contesting the Court's Duty to Defend Order in this regard with nothing more than a factually distinguishable case (albeit a recent one) represents, again,mere disappointment with the earlier outcome on First Specialty's part. This is not a satisfactory foundation for a motion to reconsider.

For related reasons, First Specialty's reliance on another recent decision, Carrera v. Olmstead, 196 Wash. App. 240 (Wash. Ct. App. 2016), is misplaced. In Carrera, the Washington appellate court addressed whether, under state statute, the assignee of an injured employee's worker's compensation claim could independently pursue a separate cause of action. See generally id. First Specialty cites Carrera for the proposition that King County, as an employer, "ha[d] no separate claim of its own by which it [could] seek recovery against a third party (such as Supreme) for any bodily injury to its employee (the bus operators) even if the employee ha[d] assigned his or her claim to the employer ...." [DE 101 at 7] The Court need not concern itself with whether First Specialty accurately interprets Carrera, however, because even if Carrera prevented King County from pursuing claims for bodily injury on behalf of its injured drivers, such an interpretation has no bearing on First Specialty's duty to defend under the policy, especially where the policy defines "damages because of bodily injury"...