Rain Cii Carbon, LLC v. Turner Indus. Grp., LLC

• Decision Date: 18 March 2020
• Docket Number: 19-403
• Citation: 297 So.3d 797
• Parties: RAIN CII CARBON, LLC v. TURNER INDUSTRIES GROUP, LLC, et al.
• Court: Court of Appeal of Louisiana — District of US

297 So.3d 797

RAIN CII CARBON, LLC

v.TURNER INDUSTRIES GROUP, LLC, et al.

19-403

Court of Appeal of Louisiana, Third Circuit.

March 18, 2020

James Michael Garner, Sher, Garner, Cahill, Richter, Klein & Hilbert, LLC, 909 Poydras Street, 28th Floor, New Orleans, Louisiana 70112, (504) 299-2100, COUNSEL FOR PLAINTIFF/APPELLANT: Rain CII Carbon, LLC

Joseph Anthony Delafield, Attorney at Law, 3401 Ryan Street, Suite 307, Lake Charles, Louisiana 70605, (337) 477-4655, COUNSEL FOR DEFENDANT/APPELLEE: Turner Industries Group, LLC

Robert I. Siegel, Alistair M. Ward, Gieger, LaBorde & Laperouse, 701 Poydras Street, Suite 4800, New Orleans, Louisiana 70139-4800, (504) 561-0400, COUNSEL FOR DEFENDANT/APPELLEE: Catlin Specialty Insurance Company

Ashley Belleau, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, 601 Poydras Street, Suite 2775, New Orleans, Louisiana 70130, (504) 568-1990, COUNSEL FOR DEFENDANT/APPELLEE: Victory Energy Operations, LLC

Christopher Paul Ieyoub, Plauche, Smith & Nieset, Post Office Drawer 1705, Lake Charles, Louisiana 70602, (337) 436-0522, COUNSEL FOR DEFENDANT/APPELLEE: ReCon Engineering, Incorporated

Patrick J. McShane, Danica B. Denny, Kathleen P. Rice, Frilot, LLC, 1100 Poydras Street, Suite 3700, New Orleans, Louisiana 70163, (504) 599-8000, COUNSEL FOR DEFENDANT/APPELLEE: Alterra America Insurance Company

Kristopher Todd Wilson, Heather N. Sharp, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, 601 Poydras Street, Suite 2775, New Orleans, Louisiana 70130, (504) 568-1990, COUNSEL FOR DEFENDANT/APPELLEE: First Financial Insurance Company

Sidney W. Degan, III, Karl H. Schmid, Degan, Blanchard & Nash, 400 Poydras Street, Suite 2600, New Orleans, Louisiana 70130, (504) 529-3333, COUNSEL FOR DEFENDANT/APPELLEE: Illinois National Insurance Company Chartis Specialty Insurance Company

Catherine N. Thigpen, Degan, Blanchard & Nash, 5555 Hilton Avenue, Suite 620, Baton Rouge, Louisiana 70808, (225) 610-1110, COUNSEL FOR DEFENDANT/APPELLEE: Illinois National Insurance Company Chartis Specialty Insurance Company

Gerald L. Jackson, Crowe & Dunlevy, 321 South Boston Avenue, #500, Tulsa, Oklahoma 74103-3313, (918) 592-9800, COUNSEL FOR DEFENDANT/APPELLEE: Victory Energy Operations, LLC

Court composed of John E. Conery, Van H. Kyzar, and Candyce G. Perret, Judges.

CONERY, Judge.

Following arbitration proceedings, the plaintiff returned to the Fourteenth Judicial District Court advancing purported tort claims against the initial defendant's insurers. The insurers filed exceptions of no right of action, asserting that the plaintiff's only cause of action arose from the contracts between the plaintiff and the insured. The insurers further filed motions for declaratory judgment and for summary judgment denying coverage based on policy exclusion language. The trial court dismissed the plaintiff's claims against the insurers, finding merit both in the exceptions of no right of action and on the motions for declaratory and summary judgments regarding coverage. The plaintiff appeals. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

Plaintiff, Rain CII Carbon LLC (Rain), engaged ReCon Engineering, Inc., among others, to build a waste heat recovery power generation unit at its Calcasieu Parish facility in order to reduce electrical costs of the plant's operation. Rain instituted this matter in the Fourteenth Judicial District Court by its March 2013 petition alleging a delay in the completion of the project resulted in "egregiously higher" costs than initially estimated. By its First and Second Supplemental and Amended Petitions, Rain eventually included both ReCon Engineering and ReCon Management Services, Inc. (collectively ReCon) as defendants as well as their professional liability insurer, XL Specialty Insurance Company (XL Specialty). It further defined its claimed damages as including and "not limited to, extra construction costs and expenses, including extra costs due to resulting construction compression and accelerating cost expenses."

ReCon had provided services for Rain pursuant to a 2008 Service Contract and, during the course of work on the power generation unit, Rain issued six purchase orders with included specific language that "Rain CII Service Contract General Conditions & Terms apply to all service purchases." After Rain instituted this matter, ReCon cited an arbitration clause contained within those purchase orders and sought a stay of the Fourteenth Judicial District Court proceedings.

By September 2015 order, the trial court entered the stay and compelled the parties to arbitration. Rain thereafter filed its demand for arbitration in November 2015 in New Orleans, as provided in the contract.

With that arbitration demand against ReCon proceeding in New Orleans, Rain filed a March 2016 Third Supplemental and Amended Petition in the trial court and included ReCon's insurers (collectively Insurers) as Defendants pursuant to the direct action statute, La.R.S. 22:1269. Rain alleged coverage under policies issued by:

First Financial Insurance Company (First Financial) as insurer under a commercial general liability policy issued to ReCon for the year September 1, 2010-September 1, 2011.

Chartis Specialty Insurance Company (Chartis) as insurer under an excess/liability policy issued to ReCon for the year September 1, 2010-September 1, 2011.

Catlin Specialty Insurance Company (Catlin) as insurer under a commercial general liability policy issued to ReCon for the year September 1, 2011-September 1, 2012.

Chartis as insurer under an excess/liability policy issued to ReCon for the year September 1, 2011-September 1, 2012.

Illinois National Insurance Company (Illinois National) as the insurer under a commercial general liability policy issued to ReCon for the year September 1, 2012-September 1, 2013.

Alterra American Insurance Company (Alterra) as the insurer under an excess/liability policy issued to ReCon for the year September 1, 2012-September 1, 2013.

Rain included in the Third Supplemental and Amended Petition an allegation that ReCon's "failure to properly expedite equipment on the Project, failure to adequately schedule deliveries of equipment, and failure to ensure timely delivery of equipment has caused Rain to lose tangible property, i.e., money." The policies issued by the Insurers, Rain asserted, provided coverage "for all of Rain's claims against ReCon in this suit" as they "provide coverage for ‘property damage,’ including the loss of use of tangible property."¹ Rain contended by the petition that Louisiana law equates "tangible property" with "corporeal property," which "includes money." In support, Rain included a citation to Dietrich v. Travelers Insurance Co. , 551 So.2d 64, 66 (La.App. 1 Cir. 1989), writ denied , 559 So.2d 121 (La.1990), a case discussed by Rain in the matter now under consideration and presented for the proposition that property damage resulting in loss of use of tangible property that is not physically injured includes loss of money. Alleging solidary liability of the Insurers with ReCon, Rain sought all sustained damages from the Insurers.

The Insurers responded to the Third Supplemental and Amended Petition with exceptions of prematurity, asserting that Rain was required to proceed against ReCon in arbitration before proceeding against the Insurers, as well as exceptions of lis pendens and no right of action. The latter exception challenged Rain's ability to pursue the Insurers in a direct action due to what the Insurers characterized as a purely contractual claim.²

The trial court rendered a November 29, 2016 judgment sustaining the exceptions of no right of action upon a finding that Rain had no right of action under the direct action statute, La.R.S. 22:1269, "as its claims against ReCon Engineering, Inc. arise solely out of contractual obligations." It therefore dismissed Rain's claims against the Insurers with prejudice, but "only on the petitions previously filed in this record." The trial court reserved a ruling on the exceptions of prematurity and lis pendens.

The trial court further permitted Rain's filing of a Fourth Supplemental and Amended Petition, which Rain represented as a "comprehensive restatement" of its earlier petitions.³ By the petition, Rain maintained ReCon as a defendant, but explained that "Rain has entered into a settlement with ReCon whereby ReCon will be dismissed from this lawsuit only for its uninsured liability and for any and all liability of ReCon covered by and within the limits of XL Specialty's [professional liability policy]." Rain noted a reservation of rights to "proceed against ReCon to the extent of other available insurance, such that ReCon remains a defendant so as to satisfy Louisiana's Direct Action Statute, La.R.S. 22:1269, relative to Plaintiffs’ reserved claims" against the Insurers. Rain also explained that ReCon assigned its rights under the pertinent policies to Rain for "all proceeds, payments, coverage, benefits, and amounts due under the Policies for all post-loss claims, rights, and causes of action" arising from the project.

In an effort to distance the restated claims from the dismissed, contract-based petitions, Rain noted that Rain and ReCon entered into a general Service Contract in February 2008, well before the contemplation of the waste heat recovery power generation project. It thus alleged that the Service Contract did not, and could not, detail ReCon's specific work on the project and "did not reference the estimating, planning, sequencing, expediting, or scheduling that ReCon was to perform[.]" Rather, those tasks began to be discussed in 2010, with ReCon estimating its costs of the project in 2011. The resulting work was not performed pursuant to the 2008 Service Contract according to Rain, but arose from extra-contractual duties. Specifically, Rain alleged that ReCon "negligently" performed as expeditor of materials for the project, failed to maintain an adequate schedule of delivery of equipment to the site,...