James W. Fowler Co. v. QBE Ins. Corp.

• Decision Date: 24 July 2020
• Docket Number: Case No. 3:18-cv-1705-SI
• Citation: 474 F.Supp.3d 1149
• Parties: JAMES W. FOWLER CO., an Oregon corporation, Plaintiff, v. QBE INSURANCE CORPORATION, a foreign insurance company, Defendant.
• Court: U.S. District Court — District of Oregon

474 F.Supp.3d 1149

JAMES W. FOWLER CO., an Oregon corporation, Plaintiff,

v.QBE INSURANCE CORPORATION, a foreign insurance company, Defendant.

Case No. 3:18-cv-1705-SI

United States District Court, D. Oregon.

Signed July 24, 2020

Larry Setchell, Setchell NW Legal Services ps, PO Box 8470, Spokane, WA 99203; Andrew J. Kinstler and Shawn Q. Butler, Helsell Fetterman llp, 1001 Fourth Avenue, Suite 4200, Seattle, WA 98154. Of Attorneys for Plaintiff.

Brian R. Talcott and Eric A. Kekel, Dunn Carney Allen Higgins & Tongue llp, 851 SW Sixth Avenue, Suite 1500, Portland, OR 97204. Of Attorneys for Defendant.

OPINION AND ORDER

Michael H. Simon, District Judge.

James W. Fowler Co. ("Fowler") brings this action against its insurer, QBE Insurance Corporation ("QBE"), over QBE's refusal to cover the alleged loss of Fowler's micro-tunnel boring machine ("MTBM"). QBE contends that Fowler's insurance policy does not cover the alleged loss because the MTBM suffered no physical damage, while Fowler contends that the policy does not require physical damage for a loss to be covered. Both parties have moved for summary judgment. For the following reasons, Plaintiff's Motion for Partial Summary Judgment (ECF 43) is GRANTED and Defendant's Cross-Motion for Summary Judgment (ECF 48) is DENIED.

STANDARDS

A party is entitled to summary judgment if 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 moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc. , 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ... ruling on a motion for summary judgment," the "mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient ...." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).

When parties file cross-motions for summary judgment, the court "evaluate[s] each motion separately, giving the non-moving party in each instance the benefit of all reasonable inferences." A.C.L.U. of Nev. v. City of Las Vegas , 466 F.3d 784, 790-91 (9th Cir. 2006) (quotation marks and citation omitted); see also Pintos v. Pac. Creditors Ass'n , 605 F.3d 665, 674 (9th Cir. 2010) ("Cross-motions for summary judgment are evaluated separately under [the] same standard."). In evaluating the motions, "the court must consider each party's evidence, regardless under which motion the evidence is offered." Las Vegas Sands, LLC v. Nehme , 632 F.3d 526, 532 (9th Cir. 2011). "Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case." In re Oracle Corp. Sec. Litig. , 627 F.3d 376, 387 (9th Cir. 2010). Thereafter, the non-moving party bears the burden of designating "specific facts demonstrating the existence of genuine issues for trial." Id. "This burden is not a light one." Id. The Supreme Court has directed that in such a situation, the non-moving party must do more than raise a "metaphysical doubt" as to the material facts at issue. Matsushita , 475 U.S. at 586, 106 S.Ct. 1348.

BACKGROUND

Fowler is an Oregon corporation based in Dallas, Oregon. Fowler is a diversified general contractor providing heavy civil and tunneling construction solutions for municipalities, agencies, and private owners across America. Fowler has completed varied projects, including water and wastewater treatment facilities; fish hatcheries, fish passage facilities, and marine projects; bridge and highway interchange construction and rehabilitation; sewer, water, and utility pipelines; subdivision infrastructure; pipeline relining; and tunneling, auger boring, pipe ramming, and pipe bursting. QBE is a Pennsylvania insurance company that does business in Oregon and elsewhere.

A. The Construction Project

In 2013, Fowler contracted with the North Dakota State Water Commission ("NDSWC") for the Southwest Pipeline Project (the "Project"). The Project called for Fowler to construct an approximately 2,700 lineal foot pipeline under Lake Sakakawea near Beulah, North Dakota. The pipeline is designed to collect lake water through a raw water intake caisson at the bottom of Lake Sakakawea. Lake water is to be piped to the shore and screened, where a water treatment plant operated by the NDSWC will supply potable water for both domestic and livestock use in Southwest North Dakota. Fowler constructed a 151-foot-deep vertical launch shaft on the shore of Lake Sakakawea. From the launch shaft, Fowler deployed the MTBM to tunnel horizontally under the lake in order to install the underground water intake pipeline through pipe-jacking. Fowler began tunneling in 2015. This first tunneling effort failed when the tunnel filled with sand and water, leading to the loss of that MTBM (a loss disclosed to QBE in 2016). Fowler redesigned the project, changing the tunnel position, the type of pipe, and other details. Fowler kept many of the same elements from the first plan, including the use of an MTBM and pipe-jacking as well as the plan to dig out the MTBM from about ten feet below the lakebed and remove it from the lake. Fowler resumed construction in 2017. For this resumed construction, Fowler secured contractors’ equipment coverage from QBE to cover the MTBM for a value of $2,206,947.

B. The Alleged Loss

Fowler relaunched the MTBM from a new location in the existing shaft. By October 5, 2017, Fowler had tunneled about 1,080 feet. On that day, Fowler's employees noticed that in the middle of the constructed tunnel a section of reinforced concrete jacking pipe was cracked and deformed. The jacking pipe could no longer be pushed, and the creation of the tunnel could not advance forward. The pipe section with the most noticeable deformation was pipe section 58. Pipe 58 and other surrounding pipes were inspected and found to have proper steel reinforcement within the concrete. Later investigation revealed that the earth above the section of pipe unexpectedly moved or shifted and point-loaded or wedged the jacking pipe sections in place, preventing the tunnel from moving. At that time, pipe 109 had been set in place for jacking but could not progress any further. Because the jacking pipe could no longer be pushed forward, the MTBM could not progress forward, stranding and immobilizing it some 100 feet below the surface. The MTBM cannot be recovered according to Fowler's original plans. Fowler contends that the MTBM will remain permanently where it is now because it cannot move forward and cannot be removed backward through the tunnel because, by necessity and design, its dimensions are larger than the jacking pipe that pushes it forward. Fowler has considered ways to recover the MTBM and ultimately salvaged portions of the MTBM, which Fowler does not claim as losses here. Fowler, however, has determined that there is no feasible and cost-effective way to recover the remaining portions of the MTBM. Fowler seeks to recover insurance proceeds from QBE on those remaining portions.

C. The Policy

Under the Contractors’ Equipment Policy (the "Policy") issued by QBE to Fowler, QBE insured Fowler's "Scheduled Equipment," which included the MTBM by endorsement. The Policy covers "direct physical loss caused by a covered peril" to Fowlers’ contractors’ equipment. The Policy identifies "covered perils" as "risks of direct physical loss unless the loss is limited or caused by a peril that is excluded." The Policy excludes direct and indirect loss or damage covered by certain governmental and related activities (orders of civil authorities, nuclear hazard, and war and military action). The Policy also excludes loss or damage caused by or resulting from other perils (contamination or deterioration, criminal acts, loss of use, mechanical breakdown, missing property, pollutants, temperature/humidity, voluntary parting, and wear and tear). The Policy then sets forth what must be done in the event of a loss, including that property cannot be abandoned to QBE without its written consent.

The Policy also provides how property is valued, how much is paid for a loss, how losses are paid, and other conditions. For covered losses, QBE only pays amounts above the $5,000 deductible. QBE then has several payment options available to it, including to:

1) pay the value of the lost or damaged property;

2) pay the cost of repairing or replacing the lost or damaged property;

3) rebuild, repair, or replace the property with other property of equivalent kind and quality, to the extent practicable, within a reasonable time; or

4) take all or any part of the property at the agreed or appraised value.

In the event QBE pays for a loss and "lost or damaged property is recovered," the following additional provisions apply, in relevant part:

a. "you" must notify "us" promptly if "you" recover property or receive payment;

b. "we" must notify "you" promptly if "we" recover property or receive payment;

c. any recovery expenses incurred by either are reimbursed first;

d. "you" may keep the recovered property but "you" must refund to "us" the amount of the claim paid or any lesser amount to which "we" agree[.]

Amended Complaint Exhibit A, ECF 9-1 at 74.

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