Insurance Co. of Pa. v. Apac-Southeast

• Decision Date: 17 April 2009
• Docket Number: No. A09A0081.,A09A0081.
• Citation: 677 S.E.2d 734,297 Ga. App. 553
• Parties: INSURANCE COMPANY of the State OF PENNSYLVANIA v. APAC-SOUTHEAST, INC. et al.
• Court: Georgia Court of Appeals

677 S.E.2d 734

297 Ga. App. 553

INSURANCE COMPANY of the State OF PENNSYLVANIA v. APAC-SOUTHEAST, INC. et al.

No. A09A0081.

Court of Appeals of Georgia.

April 17, 2009.

Michael S. French, Wargo & French, Atlanta, for Appellant.

James D. Meadows, Kenneth A. Khoury, Balch & Bingham, Earl W. Gunn, Scott P. Kerew, M. Craig Hall, Weinberg, Wheeler, Hudgins, Gunn & Dial, Atlanta, for Appellee.

BERNES, Judge.

This appeal concerns the construction of an insurance contract resolved by the trial court on summary judgment. The question presented is whether the plaintiff, APAC-Southeast, Inc., is an additional insured under an excess liability insurance policy issued by one of the defendants, the Insurance Company of the State of Pennsylvania ("ICSOP"). The trial court answered the question in the affirmative. We agree and therefore affirm.

Summary judgment is appropriate if the pleadings and evidence "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." OCGA § 9-11-56(c). On appeal from the grant or denial of summary judgment, we conduct a de novo review, with all reasonable inferences construed in the light most favorable to the nonmoving party. Northwest Carpets v. First Nat. Bank of Chatsworth, 280 Ga. 535, 538(1), 630 S.E.2d 407 (2006). "A grant of summary judgment must be affirmed if right for any reason, whether stated or unstated. It is the grant itself that is to be reviewed for error, and not the analysis employed." (Citations omitted.) Albany Oil Mill v. Sumter Elec. Membership Corp., 212 Ga.App. 242, 243(3), 441 S.E.2d 524 (1994). Mindful of these principles, we turn to the record here.

The Subcontract. APAC is a transportation construction contractor engaged in the business of road construction and paving. In 2002, APAC entered into a contract with the Georgia Department of Transportation to serve as the general contractor on a road rehabilitation project in Monroe County (the "Contract"). Later that year, APAC entered into a subcontract with Costello Industries, Inc., under which Costello agreed to perform part of the road rehabilitation work (the "Subcontract"). Pursuant to Paragraph 5 of the Subcontract, Costello was required to procure insurance on behalf of APAC:

5. INSURANCE: [Costello] shall, and shall cause each of its subcontractors to, maintain (i) worker's compensation and employer's liability insurance to fully protect against loss from personal injury, including death, to any of their employees, (ii) comprehensive automobile liability, general liability (including blasting, collapse and underground, product liability and completed operations coverages,) contractual liability, owners and contractor's liability, builders risk, and property damage insurance, (iii) and any and all other insurance required by the Contract. All such insurance shall be written by insurers acceptable to [APAC], having minimum coverage of $1,000,000 combined single limit, on an "occurrence" basis and not on a "claims made" basis. All policies, except for worker's compensation policies, shall name [APAC] as an additional insured with primary coverage (with any other third-party coverage provided for [APAC] to be deemed as excess only) and shall indemnify, defend and protect [APAC] from all claims, expenses and liabilities in any way connected with any act or omission of [Costello], its invitees, or any person performing Work directly or indirectly on behalf of [Costello], regardless of whether [APAC] is partially at fault.... Before starting the Work, and at any time [APAC] so requests, [Costello] shall furnish certificates satisfactory to [APAC] evidencing the required insurance....

The Liberty Mutual Policy. After executing the Subcontract, Costello procured various insurance policies through an independent insurance broker, Lockton Insurance Agency, Inc., including a commercial general liability insurance policy issued by Liberty Mutual Insurance Company (the "Liberty Mutual Policy"). The Liberty Mutual Policy provided primary coverage up to a limit of $1 million per each "occurrence."

The Liberty Mutual Policy also contained an endorsement entitled "ADDITIONAL INSURED—OWNERS, LESSEES OR CONTRACTORS," which modified the definition of "Who is an Insured" under the policy (the "Additional Insured Endorsement"). The Additional Insured Endorsement provided in relevant part:

SCHEDULE

Name of Person or Organization:

Any Person or Organization with whom you have a written contract that requires them to be named as additional insured. WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, or, if no person or organization is shown in the Schedule, then any person or organization to whom you are obligated by a written agreement to procure additional insurance] coverage, provided that:

(a) the "bodily injury", "property damage", "personal injury" or ["]advertising injury" giving rise to liability occurs subsequent to the execution of the agreement; and

(b) the written agreement is in effect at the time of the "bodily injury", "property damage", "personal injury" or "advertising injury" for which coverage is sought.

That person or organization shall be referred to as the "Additional Insured."

...

The insurance provided by this endorsement applies only to coverages and limits of insurance required by written agreement, but in no event exceeds either the scope of coverage or the limits of insurance provided by this policy.[¹] The Excess Policy. In addition to the Liberty Mutual Policy, Costello had Lockton procure an excess liability insurance policy issued by ICSOP (the "Excess Policy"). The Excess Policy provided an additional $10 million in coverage per each "occurrence," over and above the coverage provided in the underlying insurance policies issued to Costello, including the Liberty Mutual Policy. The named insured in the Excess Policy was Costello, and the Excess Policy was silent as to coverage for additional insureds. Instead, the Excess Policy contained a "following form" provision,² which stated: "Except for the terms, definitions, conditions and exclusions of this policy, the coverage provided by this policy shall follow the terms, definitions, conditions and exclusions of the [Liberty Mutual Policy]." In light of this provision, the definition of additional insured contained in the Additional Insured Endorsement of the Liberty Mutual Policy was incorporated into and made part of the Excess Policy. See generally Coleman Co. v. California Union Ins. Co., 960 F.2d 1529, 1533-1534 (10th Cir. 1992); Home Ins. Co. v. American Home Products Corp., 902 F.2d 1111, 1113 (2d Cir. 1990).

The Graves Action and Settlement. In 2003, three people were seriously injured while driving through the construction zone where Costello was performing its work under the Subcontract. They filed suit against a number of defendants, including APAC and Costello (the "Graves Action"). As a result, APAC demanded that Costello indemnify and defend APAC from any and all costs incurred in the Graves Action. Liberty Mutual acknowledged that APAC was an additional insured under the Liberty Mutual Policy and agreed to undertake APAC's defense subject to a reservation of rights. ICSOP, in contrast, failed to acknowledge APAC as an additional insured under the Excess Policy and did not assist in the defense. Ultimately, APAC settled the Graves Action, but without any contribution from ICSOP to the settlement.

The Present Lawsuit. After ICSOP failed to contribute to the settlement in the Graves Action, APAC brought the present suit against ICSOP, Lockton; Costello, and Costello Southeast, Inc. APAC alleged that it was an additional insured under the Excess Policy entitled to $10 million in coverage. Among other things, APAC prayed for damages as a result of ICSOP's alleged failure to settle the Graves Action within the policy limits of the Excess Policy and also alleged bad faith for ICSOP's failure to defend APAC.

The trial court appointed a special master to the case. APAC, Lockton, and ICSOP each moved for summary judgment on the limited issue of whether APAC was an additional insured under the Excess Policy. APAC and Lockton contended that APAC was an additional insured under the Excess Policy; ICSOP asserted that APAC was not.

After receiving extensive briefing and hearing oral argument, the special master entered proposed findings of fact and conclusions of law. The special master recommended that the trial court rule that APAC was an additional insured under the Excess Policy based on the language of the Subcontract, the language of the Additional Insured Endorsement that was incorporated into the Excess Policy, and the applicable rules of insurance contract construction. The trial court adopted the special master's recommendations.

On appeal, ICSOP contends that the trial court erred in concluding that APAC was an additional insured under the Excess Policy. In particular, ICSOP maintains that the Additional Insured Endorsement, incorporated into the Excess Policy, extended additional insured coverage to a noninsured "only to coverages and limits of insurance required by written agreement." Consequently ICSOP maintains that whether APAC was an additional insured under the Excess Policy turned on what "coverages" and "limits of insurance" Costello was required to procure under Paragraph 5 of the Subcontract. Because the Subcontract did not require Costello to procure a general liability policy with limits in excess of $1 million, ICSOP asserts that the Excess Policy did not provide additional insured coverage to APAC.

"Construction of an insurance policy is governed by the ordinary rules of contract construction, and when the terms of a written contract are clear and unambiguous, the court is to look to the contract alone to find the parties' intent." (Citation and punctuation...