Ric-Man Constr., Inc. v. Pioneer Special Risk Ins. Servs., Inc.
| Decision Date | 26 February 2021 |
| Docket Number | Case Number 19-13374 |
| Parties | RIC-MAN CONSTRUCTION, INC., Plaintiff, v. PIONEER SPECIAL RISK INSURANCE SERVICES, INC. d/b/a Pioneer Underwriters, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Ashley Lynn McAlpine, John T. Peters, Jr., McAlpine PC, Mark L. McAlpine, McAlpine & McAlpine, Auburn Hills, MI, Don William Blevins, Blevins Sanborn Jezdimir Zack PLC, Detroit, MI, for Plaintiff.
William S. Cook, Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, Livonia, MI, for Defendant.
In this insurance coverage dispute, plaintiff Ric-Man Construction, Inc. moves for summary judgment declaring that defendant Pioneer Special Risk Insurance Services, Inc. breached its duty to defend, and ultimately to indemnify, the plaintiff in litigation ending in a state court. The record amply indicates that factual matters must be resolved before the fact of coverage can be determined. The motion for summary judgment, therefore, will be denied.
Most of the circumstances of a troubled water drainage construction project and resulting underlying litigation are undisputed. The main question presented is whether the claims for which plaintiff Ric-Man seeks a defense and indemnity fall within the coverage period of the insurance policy defendant Pioneer issued.
Pioneer issued a policy of insurance to Ric-Man Construction, Inc. which was in effect from December 15, 2018 through June 30, 2020. The claims-made policy provided coverage for any "professional claims" made against the plaintiff by any entity alleging deficiency of its work as a commercial construction contractor, and it also provided that the defendant had a duty to defend the insured in any related litigation.
Section I(B) of the insurance policy at issue, which was labeled "Professional Liability," stated the following coverage:
The Insurer shall pay on behalf of the Insured all sums in excess of the Self-Insured Retention stated in the Declarations which the Insured is legally obligated to pay as Damages because of a Professional Claim first made against the Insured during the Policy Period and reported to the Insurer, in writing, during the Policy Period, or any applicable Extended Reporting Period, provided that ... the Professional Claim arises out of an actual or alleged act, error, or omission with respect to the rendering of or failure to render Professional Services by the Insured or by a Design Professional for whom the Insured is legally responsible.
Policy, ECF No. 20-2, PageID.458. The "Policy Period" was defined in the declarations as December 15, 2018 through June 30, 2020. Id. at PageID.456. The declarations further stated that "Section I. Coverages A, B and F of this Policy provide claims made and reported coverage [that applies] only to claims which are both first made by or against the insured and reported to the insurer during the policy period." Ibid.
The policy defined the term "Professional Claim" as "any demand, demand for arbitration or mediation or suit received by an Insured seeking Damages or correction of Professional Services and alleging liability or responsibility on the Insured's part or on the part of any entity or person for whom the Insured is legally responsible." Id. at PageID.466. The term "Professional Services" was defined to include "construction management, program management, project management, owner's representation and any design delegated responsibility or design assist performed by the Insured, including but not limited to constructability reviews or value engineering." Ibid.
The policy stated the following about "Multiple Claims":
Two or more ... Professional Claims ... arising out of a single act, error, omission [or] incident ... or arising out of a series of acts, errors, omissions or incidents related to each other, will be considered a single claim subject to a single Each Claim Limit of Liability and one Self-Insured Retention.... All such claims, whenever made, shall be considered first made during the Policy Period as of the date the earliest claim was first made.
Id. at PageID.472. The policy in its original form had included a choice of law provision stating that it would be governed by the law of the State of New York, but that provision was deleted without substitution by an endorsement.
According to the pleadings in the underlying state court action, in September 2014, the Oakland County Water Resource Commission (OCWRC) awarded Ric-Man a contract for a project known as the Middlebelt Transport and Storage Tunnel, the purpose of which was to transmit "combined overflow" runoff and wastewater. The contract included a designation of Wade Trim Associates, Inc. to provide engineering services for the project.
One phase of the construction required the drilling of "groundwater control" dewatering wells, which involved numerous bores and pumping stations. According to Wade Trim, Ric-Man failed to provide complete and accurate reports about site conditions and how it drilled those wells, which was contrary to the detailed specifications in the contract. Ric-Man allegedly drilled many of the wells to depths far greater than stated in plan documents and reports that were transmitted to Wade Trim, effectively dewatering a neighborhood. It also failed diligently to monitor the effect of groundwater removal on nearby residential wells. When complaints arose that residential wells had run dry due to Ric-Man's careless work, Wade Trim was forced to undertake expensive redesign work on the project to correct the impact — work for which it allegedly never was paid fully by the County. Wade Trim alleged that Oakland County was liable for the unpaid work under the contract, and it also alleged that Ric-Man contractually was obligated to indemnify it for any damages sought by the County due to the project's impact on residential water supplies.
On May 29, 2018, before Pioneer's insurance policy went into effect, non-party Wade Trim Associates, Inc. filed an amended complaint in the Wayne County, Michigan circuit court pleading claims for breach of contract against the OCWRC and plaintiff Ric-Man. Wade Trim pleaded three counts: (1) breach of contract against Ric-Man, (2) breach of contract against the OCWRC, and (3) unjust enrichment against the OCWRC. The first count recited numerous provisions of a contract between the OCWRC and Ric-Man that defined the work to be performed in the ground water control project. The salient provisions stated that the County had retained Ric-Man to perform the ground water control work, that Wade Trim was designated as the engineer for the project, and that Ric-Man agreed to indemnify Wade Trim against all claims "arising out of, resulting from or occurring in connection with [ ] [Ric-Man's] breach of, or failure to comply with, the Agreement," except to the extent that any damages were caused solely by the negligence of Wade Trim in performing its design engineering work. Mot. Summ. J. Ex. 1, ECF No. 20-2, PageID.408-09. The amended complaint pleaded that Ric-Man had breached the contract in numerous respects, but principally by (1) drilling drainage wells to depths far below those that were specified by the project specifications, and which were reported in diaries of the drilling work that were returned by Ric-Man, (2) after becoming aware that the wells had impacted nearby residential water supplies, failing to halt use of the improperly drilled wells, and (3) failing to correct the faulty work or to come up with any plan to correct the problems. Id. at PageID.415-16.
Wade Trim further alleged that Oakland County then demanded that it perform redesign work to fix the problems affecting the residential wells, and it did so, but the County subsequently refused to pay Wade Trim for more than $500,000 in costs for its redesign work. Wade Trim alleged that as a result of Ric-Man's failure to comply with the specifications and performance obligations under the contract, it had suffered extensive damages due to those breaches.
The amended complaint quoted several contract provisions and alleged that Ric-Man breached them. Of note is the reference to the Specification Section 31-2319, which defines the scope of the work as follows: "The Contractor [Ric-Man] will be responsible for design of groundwater control system components ...." Id. at PageID.411. The contract also required Ric-Man to "[s]ubmit design and support data for all excavations where dewatering or depressurization is necessary to maintain a stable and dry excavation," and to "[s]ubmit working drawings of the groundwater control system ...." Id. at PageID.411. Wade Trim alleged that Ric-Man "failed to perform each and every one of the obligations required by the Contract Documents, specifically failing to perform in accordance with Articles 10 and 23 of the General Conditions, and in accordance with Specification Sections 31-2319 ...." Id. at PageID.416.
As noted above, all of that occurred, and Wade Trim's claims were made, before the effective date of Pioneer's policy.
On April 19, 2019, after the policy coverage commenced, OCWRC filed a cross-claim in the Wayne County litigation pleading similar claims for breach of contract and indemnification, alleging that Ric-Man had failed to perform its work under the contract safely and prudently in conformance with detailed specifications for the construction and operation of the groundwater control systems. OCWRC also alleged that Ric-Man was obligated to cover any losses due to residential well depletion, road closures, and delays in completing the work, as well as any claims by aggrieved parties such as Wade Trim for unpaid expenses of corrective work.
OCWRC's crossclaim referenced Ric-Man's design, supervision, and performance obligations and alleged that Ric-Man's breaches included "[f]...
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