Indiana Ins. Companies v. Granite State Ins. Co., IP 86-650-C.
| Decision Date | 13 July 1988 |
| Docket Number | No. IP 86-650-C.,IP 86-650-C. |
| Parties | INDIANA INSURANCE COMPANIES, Plaintiff, v. GRANITE STATE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
Stephen Hensleigh Thomas, Statham McCray Thomas & Krahn, Charles C. Griffith, Johnson Carrol & Griffith, P.C., Evansville, Ind., for plaintiff.
George V. Heins, Smith Maley & Douglas, Indianapolis, Ind., for defendant.
Defendant's Motion for New Trial Denied July 13, 1988.
Plaintiff's Motion to Amend Granted July 13, 1988.
MEMORANDUM ENTRY
This cause comes before the court upon a declaratory judgment action filed by the plaintiff, Indiana Insurance Companies (Indiana) against the defendant, Granite State Insurance Company (Granite State). Indiana is seeking contribution from Granite State for a personal injury settlement arising out of a swimming pool accident. A court trial was held on January 15, 1988. Additionally, both parties submitted trial briefs, post-trial briefs and reply briefs. The court having reviewed the briefs submitted by the parties and the evidence submitted at trial now finds that the defendant, Granite State, provided insurance which is applicable in this case and finds that Indiana is entitled to contribution from Granite State for settlement in the amount of Five Hundred Thousand Dollars ($500,000) and for one half of the attorney's fees and expenses associated with the defense of the underlying claim, namely Eight Thousand Four Hundred and Seven Dollars ($8,407). In accordance therewith, the court submits the following findings of fact and conclusions of law.
1. Paul and Robert Hatfield, d/b/a Hatfield and Hatfield Associates (Hatfields), were the general contractors for the construction of the Regency Apartment Complex in Evansville, Indiana, including both the indoor and outdoor swimming pools.
2. The Hatfields owned and managed the Regency Complex from the time of its completion until July 1, 1983, when it was sold to Regency Associates.
3. In accordance with the sale, the Indiana policy denominated as XX-XXX-XXX which provided comprehensive general liability insurance on the complex and had previously been issued to the Hatfields was amended to substitute Regency Associates as the named insured.
4. Pursuant to an agreement, the Hatfields continued as managers of the apartments after the sale and as such were additional insureds under the Indiana policy.
5. The Indiana policy provided comprehensive general liability insurance with limits of liability of $1,000,000.
6. Granite State issued policy number POP 280-2239 to the Hatfields which provided comprehensive general liability coverage with liability limits of $500,000 and included completed operations coverage. This policy was in effect both at the time of the sale and the accident.
7. On August 2, 1983, Donnie Ray Snider, II was a guest at the Regency Apartment Complex. Snider was involved in an accident in which he struck his head on the bottom of the outdoor swimming pool. He sustained severe personal injuries resulting in quadraplegia.
8. In September, 1983, Diane M. Snider, as Guardian of Donnie Ray Snider, II filed suit against the Hatfields in both their capacity as general contractors and as managers of the Regency Complex and against Regency Associates as owners of the apartment complex.
9. Although the theories of the pleadings are commingled, Snider alleged negligence in design, construction, maintenance and operation of the swimming pool in her complaint; thus, the Hatfields had claims filed against them which were separate and distinct from the claims of negligent maintenance and operation, concurrently alleged against the owners.
10. Upon the filing of the claim the Hatfields and Regency Associates notified their insurance agent, Phil Heston, of the accident and the claim. Mr. Heston was the agent who sold both the Indiana and the Granite State policy; thus, he notified both companies of the claim.
11. In September, 1983, Indiana retained counsel to represent Regency Associates and the Hatfields in their capacity as insureds, owner and manager respectively, under the Indiana policy.
12. Granite State assigned this file to Tom Bell an independent insurance adjuster for investigation. Mr. Bell and the Indiana representative discussed the case. Indiana's position was that Granite State had pro-rata coverage. Mr. Bell disagreed with the Indiana position and stated that if there was coverage under the Granite State policy it would be "excess at best." There is some evidence in the record that Mr. Bell was given periodic updates on the progress of the litigation and presumably he passed the information on to Granite State.
13. Granite State requested that Mr. Bell submit the file to the Indianapolis law firm of Smith, Maley and Douglas for a coverage opinion in March, 1984. The record reflects that there was some delay in getting all documents which defense counsel requested to formulate a coverage opinion to Granite State's attorney; however, the documents were provided at some point in April, 1985.
14. In early November, 1985, Indiana began serious settlement negotiations with Snider, as discovery had been completed and the case was set for trial in January, 1986. Indiana contacted representatives of Granite State to again formally request participation in evaluation and settlement of the claim.
15. On November 8, 1985, the Hatfields made a demand on Indiana to settle the claim, because of the perceived potential for excess personal exposure.
16. On November 11, 1985, Smith, Maley and Douglas advised Granite State of its opinion that the Granite State policy did not afford coverage to this claim.
17. On November 13, 1985, Granite State notified its named insureds, the Hatfields, that they had no coverage for the claim arising from the August 2, 1983, swimming pool accident under the Granite State comprehensive general liability policy. The record is silent as to any prior notice from Granite State to its insureds that there was a coverage issue.
18. In an attempt to effectuate settlement, Granite State and Indiana entered into an agreement whereby Granite State agreed to the reasonableness of the settlement in the amount of $1,000,000, waived the claim that Indiana was acting as a volunteer, and agreed to negotiate or litigate the coverage issue in a contribution action after settlement was finalized.
19. At the trial of this case, the parties stipulated that the attorney's fees generated by Indiana in the defense of the underlying claim were reasonable. In addition, the parties stipulated that in the event that Granite State was found to have provided concurrent coverage to the Snider claim and contribution was ordered, Granite State would be responsible for one half of the fee arising out of its co-existing duty to defend.
20. In January, 1986, the Snider claim was settled for $1,000,000. The settlement was structured such that the plaintiff received $750,000 at the time of the settlement, with the other $250,000 contingent upon the outcome of the contribution action.
21. On May 20, 1986, Indiana filed this declaratory judgment action, seeking contribution from Granite State for the settlement of the Snider personal injury claim, and for attorney's fees and costs associated with the defense of the Snider claim.
22. Any finding of fact stated above, to the extent that it constitutes a conclusion of law, is herein incorporated by reference as an additional conclusion of law by the court.
1. Granite State's denial of coverage in this case was erroneous. When the Hatfields sold the Regency Apartment Complex on July 1, 1983, it became a completed operation and a new exposure under the Granite State policy. Granite State's policy provides for a 90-day period of automatic coverage for newly-created exposures arising during the effective dates of the policy. Snider's accident occurred on August 2, 1983, a date well within the period of automatic coverage. Snider's complaint asserted a claim for negligent design and construction of the swimming pool, which remained pending at the time of settlement. Such a claim falls squarely within the Completed Operations Coverage of the Granite State policy. Granite State's insurance policy affords coverage to the Snider claim pursuant to its automatic coverage provision for newly-created exposures.
2. Even if the sale of the complex did not create a new exposure subject to automatic coverage, Granite State still cannot deny coverage in this case. Granite State relies on the "Description of Hazards" section of the declaration sheet and a phrase printed directly beneath it as its sole basis for denying coverage, asserting that the phrase constitutes an exclusion. However, the phrase is ambiguous in its use of the term hazard. Therefore, it is ineffective as an exclusion and it does not defeat coverage for the Snider claim under the Granite State policy.
3. Indiana has satisfied the prerequisites for contribution in this case. The right of contribution exists between two insurance companies providing concurrent coverage if the policies cover (1) the same parties, (2) in the same interest, (3) in the same property, (4) against the same casualty. Both the Indiana policy and the Granite State policy afford coverage to the Hatfields, the same party, in the same property, the Regency Apartment Complex. In addition, both policies insure the same interest, the safety of those who might bring suit against the insured because of an accident occurring at the Regency Complex. In other words, the insurable interest under both policies is an idemnity interest for any liability claims arising out of the complex.
Finally, the policies both cover the same casualty. The identity of casualty or risk does not require identity of...
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