Nat'l Grange Mut. Ins. Co. v. Judson Constr., Inc.

• Citation: 931 F.Supp.2d 373
• Decision Date: 21 March 2013
• Docket Number: Civil No. 3:08CV981(AWT).
• Court: U.S. District Court — District of Connecticut
• Parties: NATIONAL GRANGE MUTUAL INSURANCE COMPANY, INC., Plaintiff/Counterclaim Defendant, v. JUDSON CONSTRUCTION, INC., Nathan Judson, Patric Murray, Peter Oliver, and The Estate of Crystal Slater, Defendants/Counterclaim Plaintiff.

931 F.Supp.2d 373

NATIONAL GRANGE MUTUAL INSURANCE COMPANY, INC., Plaintiff/Counterclaim Defendant,

v.JUDSON CONSTRUCTION, INC., Nathan Judson, Patric Murray, Peter Oliver, and The Estate of Crystal Slater, Defendants/Counterclaim Plaintiff.

Civil No. 3:08CV981(AWT).

United States District Court,

D. Connecticut.

March 21, 2013.

Sean R. Caruthers, Stephen G. Murphy, Jr., Milano & Wanat, Branford, CT, for Plaintiff/Counterclaim Defendant.

Elizabeth K. Acee, Richard W. Bowerman, LeClairRyan, New Haven, CT, for Defendants/Counterclaim Plaintiff.

RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT

ALVIN W. THOMPSON, District Judge.

Plaintiff/counterclaim defendant National Grange Mutual Insurance Company, Inc. (“National Grange”), and defendants Judson Construction, Inc., Nathan Judson and Patric Murray and defendant/counterclaim plaintiff The Estate of Crystal Slater have filed cross motions for summary judgment. For the reasons set for below, the plaintiff's motion for summary judgment is being denied, and the motion for summary judgment filed by the defendants/counterclaim plaintiff is being granted in part and denied in part.

I. FACTUAL BACKGROUND

National Grange Mutual Insurance Company, Inc. (“National Grange”) is an insurance company organized under the laws of the State of Florida. In April 2005, National Grange issued a Contractors Omnibus General Liability Policy (the “2005 Policy”) to Nathan Judson d/b/a Judson Construction. At the time, Nathan Judson was doing business as Judson Construction with a principal place of business located in Millerton, New York. The 2005 Policy had liability limits of $1,000,000 for each occurrence and a policy term of one year, from April 18, 2005 to April 18, 2006.

For purposes of the policy, Judson Construction was classified as Carpentry NOC, which stands for “Carpentry not otherwise classified.” The classification “Carpentry NOC” includes carpentry of a commercial or industrial nature as well as carpentry on structures greater than three stories in height and incidental roofing work. National Grange's underwriting guidelines provide illustrations of what might be considered “incidental” roofing work. In a section entitled “Roofing Exposure,” the guidelines state:

It is not unusual for our typical carpentry contractor to be involved with incidental roofing work over a period of time. This is most likely to occur as part of a remodeling or small addition job but may be a re-roofing job not associated with other work for that customer ... We do not want to write insureds that do roofing as described above if it is more than incidental to their operation. Incidental is defined as 1–2 roofs per year for a one or two-man operation and 3–5 roofs per year for a three to five-man operation. It is referred to in number of roofs per year since that is the easiest way to quantify the amount of work, but [this] could also equate to approximately 5–10% of annual receipts.... Risks that do more roofing than this must be classed and rated as roofers and as such are not acceptable as part of our Main Street America market.

(Defs.' Local Rule 56(a)(1) Statement (“Defs.' 56(a)(1)”), Ex. 8, Doc. No. 91.)

In 2006, the policy was renewed (the “2006 Policy”) with a policy term of April 18, 2006 to April 18, 2007. On January 1, 2007, Nathan Judson incorporated his business, forming Judson Construction, Inc., which also had its principal place of business in Millerton, New York. On April 18, 2007, the policy was renewed again (the “2007 Policy”), with a policy term extending from April 18, 2007 to April 18, 2008.

The 2007 Policy contained the following provision in the section, “Businessowners Common Policy Conditions”:

C. Concealment, Misrepresentation or Fraud

This policy is void in any case of fraud by you as it relates to this policy at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:

1. This policy;

2. The Covered Property;

3. Your interest in the Covered Property; or

4. A claim under this policy.(Defs.' 56(a)(1), Ex. 19, NG–39.) The above provision of the 2007 Policy was amended by the following endorsement, entitled “New York Changes—Fraud”:

The CONCEALMENT, MISREPRESENTATION OR FRAUD Condition is replaced by the following:

FRAUD

We do not provide coverage for any insured (“insured”) who has made fraudulent statements or engaged in fraudulent conduct in connection with any loss (“loss”) or damage for which coverage is sought under this policy.

( Id. at NG–45.)

Part of the Commercial Insurance Application Nathan Judson submitted in April 2005 included a form called a Contractor Supplement. The Contractor Supplement contained various questions related to, inter alia, Judson's general exposure to liability. Judson was asked, “Does the applicant do any roofing or re-roofing? If yes, how many in the past year?” (Defs.' 56(a)(1), Ex. 3, NG–348.) Judson answered the first question, “no” and thus did not provide a number of roofing jobs Judson Construction had performed in the prior year.

On July 2, 2007, Crystal L. Slater (“Slater”) suffered a fatal injury while working for Judson Construction, Inc. at a job site. On August 16, 2007, an employee in National Grange's Claim Department prepared a Report on Risk Characteristics regarding the incident, which recited that Slater was a 17 year-old female summer employee who fell off a three-story roof and died nine days later. It also stated that the insured was doing roofing work at the time. The report concluded that the incident entailed a risk by the insured that appeared to be misclassified, that the insured engaged in unsafe practices and that the insured employed minors.

The Report on Risk Characteristics was sent to National Grange's Underwriting Department on August 17, 2007. National Grange underwriter Tom Green reviewed the report, conferred with another underwriter, David Hall, and took the following action: “Discussed this with the agent and I will be cancelling mid term for an increase in hazard. The contractors supplemental in file indicated that the insured did not do any roofing work. Dave Hall and I discussed prior to me calling the agent. I also discussed with Stacy and It appears we will be denying the claim.” (Defs.' 56(a)(1), Ex. 23.)

On the Underwriting Department Processing Route Slip generated after the incident, Green notes, “Please cancel MP.... A material change in the nature or extent of the risk which causes the risk of loss to be substantially and materially increased beyond that contemplated at the time the policy was last renewed.” (Defs.' 56(a)(1), Ex. 24.) The form provided for several forms of notice that could be sent to the insured, including a termination notice and a cancellation notice. Green checked the box indicating that a cancellation notice was to be sent.

On August 22, 2007, National Grange mailed a written notice of policy cancellation, effective September 14, 2007. This cancellation notice stated that the policy was being cancelled because: “Type of operations unacceptable to company. A material change in the nature or extent of the risk which causes the risk of loss to be substantially and materially increased beyond that contemplated at the time the policy was last renewed.” (Defs.' 56(a)(1), Ex. 25.) It is undisputed that this letter reflects that in August 2007, National Grange elected to cancel rather than rescind the 2007 Policy.

In response to the fatal injuries sustained by Slater, on or about April 1, 2008, The Estate of Crystal Slater (the “Estate”) instituted a wrongful death action against Judson Construction, Inc., Nathan Judson and Patric Murray (the “Judson Defendants”), and the owner of the home where Slater was fatally injured, Peter Oliver. National Grange defended the wrongful death action under a reservation of rights.

On June 30, 2008, National Grange instituted this action seeking a declaratory judgment that (1) under the policy it had no duty to indemnify or defend the Judson Defendants because of an exclusion in the policy for bodily injury to “employees” of the insured; (2) Nathan Judson and Patric Murray are not insureds under the policy because they are “executive officers” of Judson Construction, Inc.; (3) coverage is excluded under the policy because the Judson Defendants committed illegal and/or intentional acts; and (4) punitive damages are excluded from coverage under the policy. On June 12, 2009, National Grange moved in the declaratory action for summary judgment on the First and Fourth Counts of the Complaint, namely its claims that Slater was an “employee” under the policy and therefore excluded from coverage under the policy, and that punitive damages are excluded from coverage under the policy.

On July 28, 2009, the Judson Defendants and the Estate reached a settlement in the wrongful death action. The terms of the settlement agreement provided that a stipulated judgment would enter against only Judson Construction, Inc. and in the amount of $1,000,000, and that the Judson Defendants would assign their rights under the policy with National Grange to the Estate. The Estate, in turn, agreed that it would only pursue National Grange to satisfy the judgment against Judson Construction, Inc. The preamble to the settlement agreement reads:

WHEREAS, each and all parties are aware that there exists a dispute between the defendants and their insurance company National Grange Mutual Insurance Company (“National Grange”), relating to an insurance policy issued to Judson Construction, Inc. including, without limitation a certain business owner's insurance policy bearing number MPV49430;

WHEREAS, the Estate has had full and adequate opportunity to review the Defendants' potential claims against National Grange and the underlying facts on which those claims are based as well as the claims made by National Grange in an action pending in the United States District Court, District of...