Pella Corp. v. Liberty Mut. Ins. Co.

• Decision Date: 22 March 2017
• Docket Number: No. 4:11–cv–00273–JEG,4:11–cv–00273–JEG
• Parties: PELLA CORPORATION, Pella Windows and Doors, Inc., and Pella Windows and Doors of Ontario Corp., Plaintiffs, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant. Liberty Mutual Insurance Company, Third–Party Plaintiff, v. Pella Corporation and Pella Windows and Doors of Ontario Corp., Third–Party Defendants.
• Court: U.S. District Court — Southern District of Iowa

244 F.Supp.3d 931

PELLA CORPORATION, Pella Windows and Doors, Inc., and Pella Windows and Doors of Ontario Corp., Plaintiffs,

v.LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

Liberty Mutual Insurance Company, Third–Party Plaintiff,

v.Pella Corporation and Pella Windows and Doors of Ontario Corp., Third–Party Defendants.

No. 4:11–cv–00273–JEG

United States District Court, S.D. Iowa, Central Division.

Signed March 22, 2017

As corrected Aug. 15, 2017, nunc pro tunc

Adam S. Ziffer, Pro Hac Vice, Kenneth H. Frenchman, Pro Hac Vice, Marc Thomas Ladd, Pro Hac Vice, John P. Winsbro, Pro Hac Vice, Keith McKenna, Pro Hac Vice, Robin L. Cohen, Pro Hac Vice, McKool Smith, Burt M. Garson, Pro Hac Vice, Kasowitz Benson Torres & Friedman LLP, New York, NY, Stephen R. Eckley, Richard W. Lozier, Jr., Belin McCormick, P.C. Des Moines, IA, for Plaintiffs/Third–Party Defendants.

Maryanne B. Foster, Pro Hac Vice, Charles W. Browning, Pro Hac Vice, Jeffrey C. Gerish, Pro Hac Vice, Kenneth C. Newa, Pro Hac Vice, Lauren Beth McMillen, Pro Hac Vice, Plunkett Cooney, Bloomfield Hills, MI, Robert V.P. Waterman, Jr., Lane & Waterman LLP, Davenport, IA, Shannon L. H. Phillips, Pro Hac Vice, Collins Einhorn Farrell PC, Southfield, MI, for Defendant/Third–Party Plaintiff.

ORDER

JAMES E. GRITZNER, Senior Judge

This matter comes before the court on cross-motions for partial summary judgment filed by Plaintiffs Pella Corporation, Pella Windows and Doors of Ontario Corporation, and Pella Windows and Doors, Inc. (collectively, Pella), and Defendant Liberty Mutual Insurance Company (Liberty). Both parties have filed responses and replies. A hearing on the Motions was held on February 15, 2017. Attorneys Keith McKenna, Marc Ladd, and Richard Lozier were present on behalf of Pella, and attorneys Charles Browning, Jeffrey Gerish, and Robert Waterman were present on behalf of Liberty. The matter is fully submitted and ready for disposition.

I. BACKGROUND

Pella purchased annual liability insurance policies from Liberty covering the years between 2000 and 2008. These insurance policies fell under two categories. Comprehensive general liability policies (CGL Policies) insured Pella for certain damages and costs, including defense costs, subject to deductibles called self- insured retentions (SIRs). "Aggregate SIR Policies," also referred to as "Excess Indemnity Policies," offered coverage for payment of SIRs under each of the GCL Policies, subject to a separate deductible, called "Insured's Retentions."

In the present action, Pella seeks reimbursement of certain expenses incurred in defending against and resolving (by settlement or damage awards) various claims against Pella. Because there are many disputed underlying lawsuits against Pella, the litigation focuses on fifteen of the highest value claims (the Sample Claims). With a few exceptions, the Sample Claims generally allege that Pella's windows were defectively designed, manufactured, or installed, and allowed water intrusion to buildings that resulted in third-party property damage or personal injury.

The parties have made a number of summary judgment motions bearing on disputed issues in this litigation. This Court has already resolved two, holding that the Sample Claims did allege property damage caused by an occurrence and thus triggered Liberty's defense coverage obligation under the CGL Policies. ECF No. 222; see also Pella Corp. v. Liberty Mut. Ins. Co. , No. 11–cv–00473–JEG, 221 F.Supp.3d 1107, 2016 WL 6514171, at *20 (S.D. Iowa Nov. 1, 2016). Also pending before the Court are a motion by Pella for a declaration that costs incurred for settlements and judgments in connection with the Sample Claims are covered under the CGL Policies, ECF No. 170, a motion by Pella that each Sample Claim constitutes exactly one "occurrence" as defined in the CGL Policies, ECF No. 171, and a motion by Liberty to dismiss claims by Pella relating to Aggregate SIR Policies from 2002–2008, ECF No. 117.

The Motions addressed in this Order concern the manner in which payments for covered occurrences should be allocated across various insurance policies. Pella's Motion for Partial Summary Judgment on the Issue of Allocation (Pella's Motion), ECF No. 98, seeks a declaration that under Iowa law, each Aggregate SIR Policy purchased from Liberty during the relevant period jointly and severally provides coverage for covered expenses (i.e. , defense costs and indemnity payments that satisfy the SIRs of the corresponding CGL Policies), subject to applicable deductibles and policy limits.¹ (Pella's Motion 1) Pella's request would require the Court to determine that the CGL Policies call for "all-sums" allocation rather than pro rata allocation, which would allow Pella to allocate its full covered expenses for a given occurrence to one CGL Policy (and thus one corresponding Aggregate SIR Policy), rather than spread the expenses across each triggered policy period. (Pella's Motion 3) Liberty's Motion for Partial Summary Judgment on Allocation (Liberty's Motion), ECF No. 167, seeks a declaration that under Iowa law, the pro rata, time-on-the-risk allocation method applies to the CGL Policies. (Liberty Motion 3) Liberty also seeks a declaration regarding the particular policy years triggered by each of the Sample Claims and thus subject to (or available for) allocation.² (Liberty Motion 3)

II. APPLICABLE LEGAL STANDARDS

The Court shall grant 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. "The movant 'bears the initial responsibility of informing the district court of the basis for its motion,' and must identify 'those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.' " Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (alterations in original) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). If the movant makes such a showing, to avoid summary judgment the nonmovant must "set out 'specific facts showing that there is a genuine issue for trial.' " Id. (quoting Celotex , 477 U.S. at 324, 106 S.Ct. 2548 ). A genuine issue for trial requires more than "some metaphysical doubt as to the material facts." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).

As with the other motions in this case, Iowa law governs this diversity action. "In interpreting state law, [federal courts] are bound by the decisions of the state's highest court." Allstate Indem. Co. v. Rice , 755 F.3d 621, 623 (8th Cir. 2014) (citation omitted). Where definitive guidance from a state's highest court is lacking, this Court must attempt to predict how the state's highest court—the Iowa Supreme Court—would rule. See Sletten & Brettin Orthodontics, LLC v. Cont'l Cas. Co. , 782 F.3d 931, 934 (8th Cir. 2015). Decisions of the Iowa Court of Appeals are persuasive authority when they are the best evidence of Iowa law, but state intermediate appellate court decisions do not control. See Allstate , 755 F.3d at 624. The opinions of state trial courts may provide "some evidence" of how a state's highest court would rule but are considerably less persuasive than reported appellate rulings; contrary authority may lurk within an extensive body of unreported trial court decisions. See Brown v. Youth Servs. Int'l of S. D., Inc. , 89 F.Supp.2d 1095, 1102 (D.S.D. 2000) ; see also Hampton Co. Nat'l. Sur., LLC v. Tunica Cty., Miss. , 543 F.3d 221, 226 (5th Cir. 2008) ("State trial court decisions are treated somewhat differently, and quite naturally, with somewhat less deference than is given to state appellate courts.") (quoting 19 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 4507 (3d ed. 2008) ); Twin City Fire Ins. Co. v. Ben Arnold–Sunbelt Beverage Co. of S.C. , 433 F.3d 365, 370 (4th Cir. 2005) ("[A] federal court sitting in diversity is not bound by a state trial court's decision on matters of state law."); Houbigant, Inc. v. Fed. Ins. Co. , 374 F.3d 192, 199 n.9 (3d Cir. 2004) ("Because Villa[ Enters. Mgmt., Ltd. v. Fed. Ins. Co. , 360 N.J.Super. 166, 821 A.2d 1174 (N.J. Super. Ct. Law Div. 2002) ] is only a trial court decision, it is not necessarily entitled to such deference. Nonetheless, we consider the Villa decision to the extent that the quality of its analysis convinces us that the New Jersey Supreme Court would decide the issue similarly."). Additionally, where there is a paucity of authority from the Iowa Supreme Court, or even from the Iowa Court of Appeals, this Court may look to the reasoning from other states' courts for guidance. See Vennemann v. Badger Mut. Ins. Co. , 334 F.3d 772, 773 (8th Cir. 2003).

Iowa's general "rules governing the construction and interpretation of insurance policies are well-settled."

Amish Connection, Inc. v. State Farm Fire & Cas. Co. , 861 N.W.2d 230, 236 (Iowa 2015). The cardinal rule is that the "intent of the parties at the time the policy was sold must control." Id. (quoting Le M ars Mut. Ins. Co. v. Joffer , 574 N.W.2d 303, 307 (Iowa 1998) ). Iowa courts distinguish between interpretation and construction of insurance policies. Boelman v. Grinnell Mut. Reinsurance Co. , 826 N.W.2d 494, 501 (Iowa 2013). Interpretation involves giving meaning to the words of the policy. "Policy interpretation is always an issue for the court, unless [the court is] required to rely upon extrinsic evidence or choose between reasonable inferences from extrinsic evidence." Id. Iowa courts give undefined words in an insurance policy their ordinary meaning. "The plain meaning of the insurance contract generally prevails." Id. Iowa courts will not interpret an insurance policy to render any part superfluous, unless doing so is reasonable and necessary to preserve the structure and format of the provision....