Monongalia Cnty. Dev. Auth. v. Traveler's Indem. Co. of Conn., Civil Action No. 1:18CV22
| Decision Date | 27 March 2019 |
| Docket Number | Civil Action No. 1:18CV22 |
| Citation | 377 F.Supp.3d 633 |
| Parties | The MONONGALIA COUNTY DEVELOPMENT AUTHORITY, Plaintiff, v. The TRAVELER'S INDEMNITY COMPANY OF CONNECTICUT, The Traveler's Indemnity Company, The Phoenix Insurance Company and The Traveler's Insurance Company, Defendants. |
| Court | U.S. District Court — Northern District of West Virginia |
David M. Jecklin, James A. Gianola, Gianola, Barnum & Wigal, LC, John Fulton Gianola, Gianola, Barnum, Bechtel & Jecklin, LC, Morgantown, WV, for Plaintiff.
Jeffrey S. Zurbuch, Peter G. Zurbuch, Busch, Zurbuch & Thompson, PLLC, Elkins, WV, for Defendants.
The plaintiff, The Monongalia County Development Authority ("MCDA"), originally filed its complaint in the Circuit Court of Monongalia County, West Virginia. ECF No. 1-2. The defendants, The Phoenix Insurance Company ("Phoenix") and The Travelers Insurance Company ("Travelers"), timely removed the civil action to this Court.1 ECF No. 1. The plaintiff alleges that it was provided insurance under a policy for the Monongalia County Commission ("County Commission") sold and serviced by the Dyer Insurance Group ("Dyer"). ECF No. 1-2 at 7. MCDA was also allegedly insured under a separate Travelers policy. Id.
SouthCo Development LLC ("SouthCo") had previously filed a civil action against MCDA. Id. The plaintiff contends that the County Commission, on behalf of MCDA filed a claim under Travelers Policy # ZLP-14T25627 seeking indemnification and defense from defendants in the SouthCo action. Id. at 8. The plaintiff further alleges that Phoenix summarily denied coverage under that policy, and transferred the claim to Travelers Policy # 680-241L2418. Id. Travelers purportedly denied the claim stating that the alleged injury did not fall under the coverage, and that Phoenix later provided a detailed denial of coverage under Travelers Policy # ZLP-14T25627. Id. Phoenix allegedly determined that MCDA was not entitled to insurance coverage since it was not a "board" of the County Commission. Id. The plaintiff alleges claims based on breach of contract, unfair trade practices in violation of West Virginia Code § 33-11-1, et seq., bad faith, and promissory estoppel. Id. at 8-13. The plaintiff seeks damages, interest, attorneys' fees, and all costs of the action. Id. at 13.
On October 26, 2018, the defendants filed a motion for summary judgment. ECF No. 35. The defendants assert that the sole issue in this case is whether MCDA would constitute a "board" and, therefore, would be insured under the County Commission's policy with Phoenix. ECF No. 36 at 10. The defendants cite the insurance contract language which defines "board" as "any board, commission, or other governmental unit or department that: (1) is under your jurisdiction; and (2) is funded and operated as part of your total operating budget." Id. at 11. The defendants conclude that MCDA is not an insured under the Public Entity Management Liability Coverage Form of Phoenix's policy insuring the County Commission, because it is not under the County Commission's jurisdiction, and is not funded and operated as part of the County Commission's total operating budget. Id. For support that MCDA is a public corporation which is not under the jurisdiction or control of the County Commission, but rather is an autonomous public corporation managed and controlled by its board of members, defendants cite the following: the enabling statute for the Development Authority, W. Va. Code § 7-21-1, et seq., the Development Authority Bylaws, the County Commission Jurisdictional Statute, W. Va. Code § 7-1-3, et seq., and the testimony of MCDA's corporate designee. Id. at 11-15. Moreover, defendants assert that the doctrine of estoppel cannot extend insurance coverage since there was no representation of coverage made by Phoenix or its agent. Id. at 18-23. Defendants further contend that the terms set forth in the SouthCo complaint are excluded by the terms of Phoenix's policy insuring the County Commission.2 Id. at 23-34.
Plaintiff filed a response in opposition to defendants' motion for summary judgment. ECF No. 41. In its response to defendants' motion for summary judgment, plaintiff asserts that there are factual issues that preclude ruling on coverage, namely that defendants' representatives were found to have affirmatively stated to the County Commission that MCDA was covered by the policy. Id. at 3-5. Plaintiff further contends that MCDA falls under the County Commission's jurisdiction, arguing, among other things, that: (1) MCDA is a creation of the County Commission, (2) that the County Commission is the only entity that is capable of appointing or removing members from MCDA's Board of Directors, and (3) that certain expenditures of development funds require the approval of the County Commission. Id. at 6. Next, plaintiff argues that with regards to funding, there is no policy provision requiring that the entirety of funds spent by MCDA come from the County Commission or a provision that defines funding. Id. at 8. Referencing the County Commission's annual budget, plaintiff asserts that the County Commission provides funding to MCDA in a variety of ways. Id. at 8-9. Plaintiff further contends that defendants have waived the right to raise other policy exclusions, because they failed to list the exclusions in its declination of coverage letter that found MCDA not insured under the County Commission's policy. Id. at 13-16. Lastly, plaintiff asserts that, with respect to the underlying claims in the SouthCo civil action, the negligence claims are distinct enough from the contract claims under West Virginia law to allow for coverage. Id. at 18.
Defendants then filed a reply to plaintiff's response in opposition to defendants' motion for summary judgment. ECF No. 42. In their reply, defendants state that there are no material issues of fact precluding summary judgment on MCDA's reasonable expectations or estoppel claims for coverage. Id. at 2. Specifically, defendants state that MCDA failed to provide proof of a representation, to offer any evidence of prejudice, and that it had been issued a separate policy of insurance through Travelers from 2001 to 2016, in which it had property coverage and general liability coverage on a building that it owned and out of which it operated. Id. at 2-5. Next, defendants reiterate that MCDA is not under the jurisdiction of the County Commission and is not funded and operated as part of the County Commission's total operating budget. Id. at 6. Specifically, defendants indicate that MCDA failed to address: (1) the County Commission's jurisdictional statute that fails to specifically list MCDA; (2) MCDA's broad range of powers granted by statute; (3) that MCDA is a legal entity being a public corporation by statute; and (4) that the County Commission does not have the power to manage and control MCDA. Id. at 7-8. Moreover, defendants state that plaintiff fails to explain how MCDA is operated out of the County Commission, and to provide sufficient evidence of funding that it received that enables it to function. Id. at 8. Defendants further argue that principles of contract interpretation do not support a finding that MCDA is insured under the County Commission's policy. Id. at 10. In response to plaintiff's argument that defendants waived their right to raise other policy exclusions, defendants note that Phoenix determined that MCDA was not an insured and so those other potential exclusions were moot and that MCDA's attempt to create coverage by an implied waiver runs against law set forth in Syl. Pt. 6, Potesta v. United States Fid. & Guar. Co., 202 W. Va. 308, 504 S.E.2d 135 (1998), which held that an implied waiver could not be used to extend insurance coverage beyond the terms of the insurance contract. Id. at 11. Lastly, defendants assert that the underlying claims in the SouthCo civil action are barred by breach of contract, fraudulent conduct, and unlawful personal gains policy exclusions. Id. at 11-13.
Plaintiff also filed a motion and memorandum in support of summary judgment on the issue of insurance coverage. ECF Nos. 37 and 38. First, plaintiff asserts that insurance coverage was denied based upon an erroneous belief that MCDA is not funded or under the jurisdiction of the County Commission. ECF No. 38 at 4. With respect to the jurisdictional issue, plaintiff asserts that the County Commission created MCDA, is the sole entity capable of appointing and removing members of the Board of Directors of MCDA, and that certain expenditures of development funds require the explicit approval of the County Commission. Id. at 5-6. With respect to the funding issue, plaintiff contends that MCDA is funded by the County Commission in a variety of ways (i.e. grants of real estate and the partial payment of the salary of MCDA's director). Id. at 9-12. Plaintiff also references the County Commission's annual budget to support its conclusion. Id. at 13. Plaintiff then states that coverage exists even if MCDA is not a "board" under the policy, because MCDA and the County Commission reasonably expected insurance coverage. Id. at 12-19.
Defendants Phoenix and Travelers filed a memorandum in opposition to plaintiff's motion for summary judgment on the issue of insurance. ECF No. 40. First, defendants assert that MCDA is not insured by Phoenix since it is not under the jurisdiction of the County Commission and since MCDA is not funded and operated as part of the County Commission's total operating budget. Id. at 6-16. Second, defendants argue that the doctrine of reasonable expectations does not afford coverage to MCDA under the County Commission's policy. Id. at 16. Specifically, defendants refer to plaintiff's complaint which alleges a claim based on promissory estoppel. Id. at 19-20. But, even...
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