RSC Equip. Rental, Inc. v. Cincinnati Ins. Co.
| Decision Date | 07 August 2014 |
| Docket Number | Case No. 6:14–CV–00003. |
| Citation | 54 F.Supp.3d 480 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | RSC EQUIPMENT RENTAL, INC., n/k/a United Rentals (North America), Inc., Plaintiff, v. The CINCINNATI INSURANCE COMPANY, M.V.E., Inc. and NGM Insurance Company, Defendants. |
Christine A. Williams, Durrettecrump, PLC, Richmond, VA, Phillip A. Perez, Tracy Alan Saxe, Saxe Doernberger & Vita, P.C., Hamden, CT, for Plaintiff.
Terry Lynn, Law Offices of Terry Lynn, PLLC, Earlysville, VA, Charles Edward Gallagher, Jr., Richard Alan Yeagley, Decaro, Doran, Siciliano, Gallagher & Deblasis, LLP, Fairfax, VA, for Defendants.
This matter is before me upon consideration of the motions to dismiss filed by Defendants Cincinnati Insurance Company (“Cincinnati”) and M.V.E., Inc. (“MVE”). The principal issue in this case is whether Virginia Code § 11–4.1, which voids indemnification provisions in construction contracts, invalidates an indemnification clause in a rental contract for a forklift because the forklift was used during construction. As I determine that it does not invalidate the indemnification clause, I will deny the motions to dismiss.
On September 3, 2008, RSC Equipment Rental, Inc. (“RSC”)1 rented a fork lift to MVE, which was serving as the general contractor on a project to construct a Bojangles restaurant in Rustburg, Virginia (“the Restaurant Site”).
The rental agreement contained an indemnification provision requiring MVE to indemnify RSC under certain circumstances. In full, the provision reads:
Customers Indemnification Customer agrees to reimburse, indemnify, hold harmless and defend, at Customer's expense, RSC, its subsidiaries, parent company, affiliate companies, and their agents, officers, directors and employees, from and against all losses, liabilities, damages, injuries, demands, costs, expenses (including lawyer and investigate fees), claims, fines, settlements or penalties including, without limitation, bodily injury, death, property damage or other damage arising out of any use of the Equipment, any breach of this Agreement, Customer's violation of any applicable regulations, or improper use, possession, operation, erection, dismantling, servicing, or transport involving the Equipment, Customer's contamination of the Equipment by any party, strict liability or negligence claims arising by any party arising out of any defect in the design, manufacture, warnings, instructions, operation, repair or failure to discover a defect, or incurred by RSC in any matter from this transaction, including claims of or liabilities to third parties. Customer agrees to present any claim to his insurance carrier for all such expenses and in the event Customer has no insurance to cover such losses, Customer agrees to pay RSC for such losses.
The rental agreement also contained an insurance provision requiring MVE to procure and maintain a commercial general liability policy providing $1 million bodily injury/property damage liability insurance. In relevant part, the provision reads:
Customer's Insurance Obligation Physical Damage to Equipment: All Customers must provide to RSC, at the time the equipment is rented, a certificate of insurance naming RSC as a loss payee and/or additional insured on said certificate evidencing coverage for physical damage to Equipment. Such physical damage insurance covering the Equipment may not be canceled or materially modified except upon twenty (20) days prior written notice to RSC at the branch office identified on this Agreement. In the event of Customer's failure to provide said certificate of insurance at the time the Equipment is rented, Customer will be charged the LDW Insurance fee as set forth in the agreement. Bodily Injury/Property Damage Responsibility to Third Parties: In addition to the foregoing physical damage insurance for the Equipment, Customer will at Customer's expense, at all times during the term of this Agreement, maintain in force a commercial general liability insurance policy covering bodily injury/property damage liability on the Equipment in an amount not less than one million dollars ($1,000,000) combined single limit. Such third party liability coverage shall be primary, and not in excess or on a contributory basis, and shall provide coverage for liability for injuries and/or damages sustained by any person or persons agents or employees of Customer, and Customer's indemnity obligations herein.
MVE delivered a certificate of insurance from Cincinnati that provided commercial general liability coverage, named MVE as an insured, and complied with the terms of the rental agreement's insurance provision. In addition to this primary policy, MVE obtained a policy from Cincinnati that provided excess coverage of $5 million per occurrence and $5 million in the aggregate. MVE subcontracted with Commonwealth Mechanical Corporation on September 15, 2008, to work at the Restaurant Site, and the subcontract obligated Commonwealth to procure insurance naming MVE as an additional insured and cover MVE for operations at the Restaurant Site. Pursuant to that contract, Commonwealth procured from NGM Insurance Company a policy that provided liability coverage and contained a “Virginia—Contractors Extension Endorsement” which qualified MVE as an additional insured.
On November 24, 2008, Joseph Woods was installing a driveway as part of the construction of the Bojangles in Rustburg. Woods was an employee of J & J Paving, another subcontractor of MVE. While working, Woods was hit in the head and seriously injured by a light post that was moved by the forklift rented by RSC. The forklift was operated by an employee of Commonwealth. J & J Paving paid Woods worker's compensation, his exclusive remedy against J & J Paving and all of the other contractors on the Bojangles job. Woods filed suit on November 9, 2010, in the Circuit Court of the City of Richmond naming RSC Equipment Rental, Inc., Bojangles' International, LLC, LAT Land Company, LLC, Mountain Food Services, LLC, and GEHL Company as defendants. The case was transferred to the Circuit Court of Campbell County and is currently pending against RSC only, the other defendants having been dismissed. RSC demanded that MVE defend and indemnify RSC against this suit pursuant to the terms of the rental agreement. In a letter to RSC's counsel dated March 2, 2011, Cincinnati agreed to defend RSC; however, Cincinnati reserved its right to assert that the indemnification clause violated Virginia Code 11–4.1 and disputed that the terms of the rental agreement required RSC to be named as an additional insured. RSC claims it had no notice prior to January 6, 2014 that MVE planned to disclaim its defense and indemnification obligations.
Woods' case is scheduled for trial in the Circuit Court of Campbell County in September 2014. Accordingly, the parties seek a declaration of the obligations and rights owed to RSC pursuant to the rental contract.
In order to survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain facts sufficient “to raise a right to relief above the speculative level” and “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). When considering a Rule 12(b)(6) motion, a court must accept all factual allegations in the complaint as true, and must draw all reasonable inferences in favor of the nonmoving party. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). However, a court is not required to “accept the legal conclusions drawn from the facts” or “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir.2000) (citations omitted).
This insurance contract dispute is before the Court under its diversity jurisdiction, and therefore state law will apply. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Here, the parties agree that Virginia law applies.
RSC contends that MVE and Cincinnati waived their right to contest the validity of the indemnity provision and that they are equitably estopped from disclaiming their defense obligations. “Waiver is the intentional relinquishment of a known right, with both knowledge of its existence and an intention to relinquish it.” Creteau v. Phoenix Assur. Co. of N.Y., 202 Va. 641, 644, 119 S.E.2d 336, 339 (1961). Dairyland Ins. Co. v. Hughes, 317 F.Supp. 928, 938 (W.D.Va.1970).
By contrast, a liability insurer is not deemed to have waived, nor is it estopped from asserting a lack of coverage defense, if it informs the insured of its position during the defense and gives timely notice. Norman v. Ins. Co. of N. Am., 218 Va. 718, 239 S.E.2d 902 (1978). Notably, “the reservation of rights procedure that is timely pursued does not admit a duty to defend and, in fact, it expressly preserves the right to challenge any obligations under the relevant policy.” Mount Vernon Fire Ins. Co. v. Adamson, No. 3:09–cv–817, 2010 WL 3937336, at *6, 2010 U.S. Dist. LEXIS 106758, at *16 (E.D.Va. Sept. 15, 2010).
In the March 2, 2011 letter from Cincinnati to RSC's counsel,2 Cincinnati stated that it “a...
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