Peterson Contractors, Inc. v. Travelers Indem. Co., C14-0063

• Decision Date: 01 July 2015
• Docket Number: No. C14-0063,C14-0063
• Court: U.S. District Court — Northern District of Iowa
• Parties: PETERSON CONTRACTORS, INC., Plaintiff, v. THE TRAVELERS INDEMNITY COMPANY, Defendant.

PETERSON CONTRACTORS, INC., Plaintiff, v. THE TRAVELERS INDEMNITY COMPANY, Defendant.

No. C14-0063

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA CEDAR RAPIDS DIVISION

July 1, 2015

RULING ON MOTIONS FOR PARTIAL SUMMARY JUDGMENT

TABLE OF CONTENTS

I.INTRODUCTION ...................................... 2

II.PROCEDURAL HISTORY ................................. 2

III.RELEVANT FACTS ..................................... 3

A.The Project ....................................... 3

B.Cofferdam Failure .................................. 3

C.State Lawsuit ..................................... 4

D.Insurance ........................................ 5

IV.MOTIONS FOR PARTIAL SUMMARY JUDGMENT ............... 7

V.DISCUSSION ......................................... 8

A.Was the University's Loss of Use Claim Caused by an "Occurrence?".................................... 8

B.Does the University's Loss of Use Claim Constitute "Property Damage?"............................... 11

C.Does the University's Loss of Use Claim Fall Within an Exclusion to the Policy? .................................... 12

VI.ORDER ............................................ 18

I.INTRODUCTION

This matter comes before the Court on the Motion for Partial Summary Judgment(docket number 21) filed by Plaintiff on December 16, 2014, the Resistance (docket number 26) filed by Defendant on January 27, 2015, and the Reply (docket numbers 27 and 28) filed by Plaintiff on February 3.

Also before the Court is the Motion for Partial Summary Judgment(docket number 29) filed by Defendant on April 20, the Resistance (docket number 32) filed by Plaintiff on May 22, and the Reply (docket number 36) filed by Defendant on June 5.

Pursuant to Local Rule 7.c, the motions will be decided without oral argument.

II.PROCEDURAL HISTORY

On May 20, 2014, PlaintiffPeterson Contractors, Inc.("PCI") filed a complaint against DefendantThe Travelers Indemnity Company("Travelers"), seeking damages for breach of contract.PCI claims Travelers wrongfully failed to indemnify PCI for money it paid to a third-party to settle a claim for property damages arising from a cofferdam collapse on May 16, 2007.Travelers filed an answer on July 14, 2014, denying the material allegations and asserting certain affirmative defenses.

On October 16, 2014, the Court adopted a proposed Scheduling Order and Discovery Plan submitted by the parties.Also at that time, the case was referred to me for the conduct of all further proceedings and the entry of judgment, in accordance with 28 U.S.C. § 636(c) and the consent of the parties.After consulting with counsel, the case was scheduled for trial on November 16, 2015.

On December 16, 2014, PCI timely filed the instant motion for partial summary judgment.PCI argues that there are no genuine issues of material fact, and the Court should find, as a matter of law, that Travelers breached the insurance contracts by failing to defend and indemnify PCI.On April 20, 2015, Travelers timely filed its motion forpartial summary judgment, asking the Court to summarily dismiss PCI's "loss of use" claim.

III.RELEVANT FACTS

A.The Project

On December 21, 2006, the Board of Regents for the State of Iowa contracted with Maxwell Construction Company, Inc.("Maxwell") for the construction of a chilled water project.The purpose of the project was to allow the University of Iowa ("the University") to use an existing chilled water facility on one side of the Iowa river to supply chilled water to the campus facilities on the other side of the river.The cost of the project was approximately $5.25 million.The project, known as the North Chilled Water River Crossing, included the construction of a cofferdam across the Iowa River to facilitate the installation of the chilled water piping in the riverbed.On January 22, 2007, Maxwell and PCI executed a subcontract, which included the installation of the cofferdam across the Iowa River by PCI.The cost of the subcontract was approximately $715,000.The project was to have been completed by July 2, 2007.

B.Cofferdam Failure

On May 16, 2007, the cofferdam being constructed by PCI failed.According to its later claim for damages, PCI had performed and was paid for 34.26% of the cofferdam work before its collapse.Following the cofferdam failure, PCI was instructed to recover and rebuild the cofferdam.In September 2007, however, Maxwell terminated PCI and contracted with Iowa Bridge & Culvert, L.C. ("IBC") to complete the work.IBC completed construction of the cofferdam, but only after the University approved substantial changes to the cofferdam design.These changes were not part of the Project plans and specifications before Maxwell terminated PCI.

On July 19, 2007, the University wrote to Maxwell, responding to Maxwell's earlier letter making a claim for payment.The University's letter notes that "time is ofthe essence" on the project, and gave Maxwell notice that the University intended to seek payment from Maxwell "for damages in the form of costs and expenses incurred as a result of the delay of this project's completion."(Pl.App. 119)The project was not completed until the summer of 2009.Because the pipe installed as part of the project could not be used until the project was completed, it was necessary for the University to pay for temporary chillers to cool the east side campus facilities during the summers of 2007 and 2008.On October 23, 2009, the University's Deputy General Counsel wrote to Maxwell's attorney, attaching a claim for "[e]xtra expenditures resulting from initial cofferdam failure and resulting breach of contract by not completing the Work within the contract period."(Pl.App. 137)The University's claims totaled approximately $1.26 million, with approximately $835,000 of that amount represented by the rental of temporary chillers.

Also included in the University's damage estimate was $75,000 for "[r]ecovery of project site following City of Iowa City siphon project."During the summer of 2008, the Iowa River suffered substantial flooding.Because the temporary replacement cofferdam was still in place at that time, it is claimed that the City of Iowa City sustained sanitary sewer system damage in the amount of $75,000.

C.State Lawsuit

On April 6, 2010, Maxwell sued the University in the Iowa District Court for Johnson County, also naming PCI and others as defendants.Maxwell claimed PCI breached its contract "by failing to complete its work under that contract on the subject project in a timely fashion."According to the state court petition, Maxwell employed IBC to complete the work for a total contract price of approximately $1.35 million, which exceeded the price in the PCI subcontract by approximately $725,000.Maxwell asked that judgment enter against PCI for that amount.

There were multiple counterclaims and cross-claims filed in the state court action.In its answer and counterclaim, PCI denied any fault for the cofferdam failure and assertedthat Maxwell was at fault for providing PCI with a deficient cofferdam design.PCI claimed that it was owed for the costs it incurred to recover and rebuild the cofferdam after its collapse, in the approximate amount of $732,131.¹The University sued PCI for negligence, and claimed its damages exceeded $1.2 million.

In December 2012, Maxwell, the University, PCI, and the other defendants in the state court action reached a settlement of all claims.As part of the settlement agreement, PCI paid Maxwell $439,875,² and released its claims against all other parties, including PCI's claim that Maxwell owed it $610,000.³During the course of the state court action, PCI incurred approximately $644,000 in legal fees.⁴

D.Insurance

On July 14, 2006, PCI purchased a commercial general liability ("CGL") insurance policy from Travelers.On July 10, 2006, PCI purchased a commercial excess liability ("umbrella") insurance policy from Travelers.Both policies had a policy period from July 1, 2006 through July 1, 2007.The CGL policy provided $1 million of coverage for each occurrence, and the umbrella policy provided additional coverage to an aggregate of $10 million.

After the cofferdam collapsed on May 16, 2007, PCI immediately notified Travelers.PCI asserts in its statement of facts that "Scott Skifstad from Travelers conferred with PCI regarding the cofferdam failure and informed PCI that there was no coverage for the University's claims."In support of its allegation, PCI refers to paragraph 45 of its complaint and Travelers' answer to the complaint.In its complaint, PCI claims that Skifstad "incorrectly" informed PCI that there was no insurance coverage.In its answer to the complaint, Travelers does not specifically admit or deny that Skifstad told PCI there was no coverage.However, Travelers admits that Skifstad conferred with PCI, and denies PCI's allegation that a statement denying coverage would be "incorrect."

Both parties also cite an email from Lauren Call, a safety director for PCI, to Cordell Peterson, another PCI employee, dated July 23, 2007.Call reports that she and Kevin Boyle, another PCI employee, had a discussion with Skifstad that afternoon.The email discusses whether Travelers would have to defend the University as an additional insured, or any engineering firm which might claim they were an agent of the University.The email states that "[t]he U of I could file a counter claim against PCI and there would be no coverage for this."(Pl.App. 225)

Apparently, PCI did not immediately tender the defense of the state court action to Travelers when PCI was sued in April 2010.After "reexamining" the issue, PCI provided Travelers with a written request for coverage on May 15, 2012 — after the case had been pending for two years.Travelers denied PCI's request for coverage on June 20, 2012.Travelers confirmed its coverage denial in letters dated July 12, 2012 and September 20, 2012.On November 20, 2012, PCI notified Travelers...