Nat'l Quarry Servs., Inc. v. First Mercury Ins. Co., 1:17CV997

• Court: United States District Courts. 4th Circuit. Middle District of North Carolina
• Writing for the Court: OSTEEN, JR., District Judge
• Citation: 372 F.Supp.3d 296
• Parties: NATIONAL QUARRY SERVICES, INC., Plaintiff, v. FIRST MERCURY INSURANCE COMPANY, INC., Defendant.
• Docket Number: 1:17CV997
• Decision Date: 11 March 2019

372 F.Supp.3d 296

NATIONAL QUARRY SERVICES, INC., Plaintiff,
v.
FIRST MERCURY INSURANCE COMPANY, INC., Defendant.

1:17CV997

United States District Court, M.D. North Carolina.

Signed March 11, 2019

372 F.Supp.3d 299

Allen T. Wiggins, William R. Sparrow, Bugg & Wolf, P.A., Durham, NC, for Plaintiff.

David Leonard Brown, Goldberg Segalla, LLP, Greensboro, NC, for Defendant.

MEMORANDUM OPINION AND ORDER

OSTEEN, JR., District Judge

Currently before this court is Defendant First Mercury Insurance Company, Inc.'s Motion for Judgment on the Pleadings, (Doc. 13), and Plaintiff National Quarry Services, Inc.'s Motion for Judgment on the Pleadings, (Doc. 16). Each party asks this court to enter judgment in its favor on the issue of whether, under Plaintiff's commercial general liability insurance policy, Defendant owes a duty to defend Plaintiff against an Alabama lawsuit alleging damages from Plaintiff's blasting operations. The cross-motions for judgment on the pleadings are each brought pursuant to Fed. R. Civ. P. 12(c).

For the reasons that follow, this court finds that Plaintiff's motion should be granted as to the declaratory judgment count and that Defendant's motion should be denied. Accordingly, judgment will be entered for Plaintiff on the duty to defend issue.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is a North Carolina corporation that conducts "commercial rock drilling & blasting throughout the Southeastern United States." (Complaint ("Compl.") (Doc. 3) ¶¶ 1, 4.) Plaintiff purchased a commercial general liability insurance policy from Defendant on June 13, 2014, which was effective from June 1, 2014 to June 1, 2015. (Id. ¶ 3; Ex. A, General Liability Policy (the "Policy") (Doc. 3-1).) The Policy provides that Defendant will defend Plaintiff against any lawsuit seeking damages for covered conduct and pay any damages that are ultimately proved at trial. (Id., Ex. A at 4.) The Policy contains a "Subsidence Exclusion" that reads as follows:

This insurance does not apply to:

"Bodily injury" or "property damage" directly or indirectly arising out of caused by, resulting from, contributed to, aggravated by or related to the subsidence, settling, settlement, expansion, sinking, slipping, falling away, tilting, caving in, shifting[,] eroding, rising, heaving, landslide, flood or mud flow, earthquake, volcanic eruption or other tectonic processes or any other movement, of land or earth, however caused, and whether by natural, manmade, accidental or artificial means. This exclusion

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applies regardless of any other cause or event that contributes concurrently or in any sequence to the "bodily injury" or "property damage."

We shall have no duty or obligation on our part under this insurance to defend, respond to, investigate or indemnify any insured against any loss, claim, "suit," or other proceeding alleging damages arising out of or related to "bodily injury" or "property damage" to which this endorsement applies.

This exclusion also applies to any obligation to, share damages with, repay or indemnify someone else who must pay damages because of such "bodily injury" or "property damage."

(Id. at 44.)

While the Policy was in effect,¹ Plaintiff performed "rock drilling & blasting work [ ] under contract in ... Cullman County, Alabama." (Compl. (Doc. 3) ¶¶ 7–8.) Plaintiff, as subcontractor, performed blasting work on behalf of the general contractor for the project, ASI Constructors, Inc. (Id., Ex. B, Complaint (the "Cullman Complaint") (Doc. 3-2) at 6–7.) On November 10, 2016, a group of homeowners in Cullman County (the "Cullman residents") filed suit against Plaintiff in the Circuit Court of Cullman County. (See Compl. (Doc. 3) ¶ 7; Cullman Complaint (Doc. 3-2).)

The Cullman Complaint alleges that Plaintiff and other parties were negligent in their blasting operations, are strictly liable for damages caused by an ultra-hazardous activity, and committed trespass and nuisance. (Id. ¶¶ 25-43.) The Cullman residents further claim both compensatory and punitive damages for structural impairment to their homes, harm to livestock and other property, and emotional distress. (See id. ) The Cullman Complaint defines blasting as "the violent disruption of a natural mass of land through the use of explosives."² (Id. ¶ 31.)

After being served with the Cullman Complaint, Plaintiff informed Defendant of the lawsuit. (Compl. (Doc. 3) ¶ 9.) In response, Defendant disclaimed any obligation under the Policy to either defend Plaintiff or to indemnify Plaintiff for damages. (Id. ¶ 10; Ex. C (Doc. 3-3); Ex. D (Doc. 3-4).) Specifically, Defendant asserted that all allegations in the Cullman Complaint "fall within the terms of the Subsidence Exclusion and preclude a present duty to defend National Quarry in the Litigation." (Ex. C (Doc. 3-3) at 3.) After receiving Defendant's letters disclaiming any coverage obligation, Plaintiff brought the instant action seeking a declaratory judgment that Defendant owes a duty to defend Plaintiff against the Cullman Complaint, a declaratory judgment that Defendant must indemnify Plaintiff for any resulting losses, and asserting a breach of contract claim.³ (Compl. (Doc. 3) ¶¶ 22-28.)

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Defendant answered the complaint. (See Doc. 7.) Defendant then moved for judgment on the pleadings, (Doc. 13), and filed a brief in support of its motion. (Doc. 14.) Plaintiff responded in opposition, (Doc. 20); and Defendant replied, ("Def.'s Reply" (Doc. 21).) Plaintiff cross-moved for judgment on the pleadings, (Doc. 16), and filed a memorandum in support of its motion. ("Pl.'s Mem." (Doc. 17).) Defendant responded in opposition, ("Def.'s Resp. Br." (Doc. 19) ); and Plaintiff replied, (Doc. 22).

II. LEGAL FRAMEWORK

A. Standard of Review

This court applies the same standard to a Rule 12(c) motion for judgment on the pleadings as to a Rule 12(b)(6) motion to dismiss. Occupy Columbia v. Haley, 738 F.3d 107, 115–16 (4th Cir. 2013). This court assumes the truth of all factual allegations in the complaint, draws all reasonable inferences in favor of the plaintiff, and asks whether the complaint plausibly states a claim for relief. Id. In other words, the plaintiff must plead facts that "allow[ ] the court to draw the reasonable inference that the defendant is liable" and demonstrate "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). When, as here, each party has moved for judgment on the pleadings, this court will grant judgment only when the opposing party has not pleaded facts demonstrating the plausibility of its claim or defense.

When evaluating a Rule 12(c) motion, this court may consider only the pleadings, any exhibits thereto that are essential to the allegations, and matters of public record susceptible to judicial notice. See Massey v. Ojaniit, 759 F.3d 343, 347 (4th Cir. 2014) ; Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (stating that documents attached to the complaint may be considered "so long as they are integral to the complaint and authentic").

B. Applicable Law

A federal court sitting in diversity or supplemental jurisdiction generally applies the relevant substantive law of the state in which the court sits, while applying federal procedural law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 72–73, 79–80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Hanna v. Plumer, 380 U.S. 460, 465–66, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) ; see also United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) (holding that federal courts are "bound to apply state law" to pendant claims).

Where the insurer and insured are citizens of different states, courts apply "the law of the place where the policy is delivered" to interpret the contract.⁴ Myers v. Ocean Accident & Guarantee Corp., 99 F.2d 485, 488 (4th Cir. 1938) (citing Mut. Life Ins. Co. of N.Y. v. Johnson, 293 U.S. 335, 339, 55 S.Ct. 154, 79 L.Ed. 398 (1934) ); see also Roomy v. Allstate Ins. Co., 256 N.C. 318, 322–23, 123 S.E.2d 817, 820 (1962) (holding that the law of the state where a contract is entered into governs its interpretation). This court, sitting in diversity jurisdiction, "has a duty to apply the operative state law as would the highest court of the state in which the suit was brought."

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Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 957 F.2d 1153, 1156 (4th Cir. 1992). If the state's highest court has not addressed an issue, then a "state's intermediate appellate court decisions constitute the next best indicia of what state law is, although such decisions may be disregarded if the federal court is convinced by other persuasive data that the highest court of the state would decide otherwise." Id. (internal quotation marks and citation omitted).

C. Interpreting Insurance Contracts

Under North Carolina law, "[t]he interpretation of language used in an insurance policy is...