Secura Ins. Co. v. Gray Const., Inc.

• Decision Date: 12 July 2010
• Docket Number: Case No. 1:09-CV-00073-TBR
• Citation: 717 F.Supp.2d 710
• Parties: SECURA INSURANCE COMPANY, Plaintiff v. GRAY CONSTRUCTION, INC. d/b/a James N. Gray Construction Company, and Green Mechanical Construction, Inc., Defendants.
• Court: U.S. District Court — Western District of Kentucky

717 F.Supp.2d 710

SECURA INSURANCE COMPANY, Plaintiff

v.GRAY CONSTRUCTION, INC. d/b/a James N. Gray Construction Company, and Green Mechanical Construction, Inc., Defendants.

Case No. 1:09-CV-00073-TBR.

United States District Court,

W.D. Kentucky,

Bowling Green Division.

June 3, 2010.

Opinion Granting Clarification and Modifying Previous Opinion July 12, 2010.

Dawn Gonzalez, Litchfield Cavo, Chicago, IL, Timothy L. Edelen, Bell, Orr, Ayers & Moore, PSC, Bowling Green, KY, for Plaintiff.

W. David Kiser, Ackerson & Yann PSC, Ridley M. Sandidge, Jr., Reed Weitkamp Schell & Vice PLLC, Louisville, KY, for Defendants.

MEMORANDUM OPINION

THOMAS B. RUSSELL, Chief Judge.

This matter is before the Court upon Plaintiff, Secura Insurance Company's, Motion for Determination of Coverage (DN 30). Defendant Gray Construction, Inc., has filed a response (DN 36). Defendant Green Mechanical Construction, Inc.,has filed a response (DN 37). Plaintiff has filed a reply (DN 42). This matter is now ripe for adjudication. For the following reasons, Plaintiff's motion is DENIED.

Also before the Court is Defendant Gray Construction, Inc.'s, Motion for Summary Judgment (DN 33). Defendant Green Mechanical Construction, Inc., has filed a response (DN 38). Plaintiff has filed a response (DN 39). Defendant Gray Construction, Inc., has filed a reply (DN 40). This matter is now ripe for adjudication. For the following reasons, Defendant Gray Construction, Inc.'s, motion is GRANTED.

Also before the Court is Defendant Green Mechanical Construction, Inc.'s, Motion for Summary Judgment (DN 34). Plaintiff has filed a response (DN 39). Defendant Green Mechanical Construction, Inc., has filed a reply (DN 41). This matter is now ripe for adjudication. For the reasons that follow, Defendant Green Mechanical Construction, Inc.'s, motion is GRANTED.

BACKGROUND

In 2001 and 2002, TOYO Tire & Rubber Co., Ltd., ("Toyo") built an automotive parts plant in Franklin, Kentucky. The Defendant, Gray Construction, Inc., ("Gray") was the general contractor for the project and entered into a subcontract with Defendant Green Mechanical Construction, Inc., ("Green") in June or July of 2001. The subcontract was for Green to install all the plumbing, heating, air conditioning, process piping and mechanical work at the Toyo facility. Richard Hughes was the project manager for Green.

The subcontract between Gray and Green set forth various requirements regarding insurance. First, the subcontract stated "Gray shall be named as an additional insured on the Subcontractor's Commercial (Comprehensive) General Liability policy." Section 15.1.2. set forth the details of Green's Commercial General Liability coverage requiring Green to purchase a Commercial General Liability policy with a one million dollar per occurrence limit of liability. This section also described the Commercial General Liability as including "Products and Completed Operations" coverage with a statement providing "[t]his policy shall add Gray as an insured thereunder by proper endorsement." However, there was no specific time period noted for length of completed operations coverage. Section 15.1.5 also required Green purchase an Umbrella Liability policy with a five million dollar per occurrence limit of liability.

The subcontract also addressed payment of attorney fees. The Subcontract states in Section 17.5 that Green is required to reimburse Gray for any

attorney's fees, court costs and other expenses incurred in enforcing or declaring the Subcontractor's obligations under this Agreement, incurred in exercising any right or remedy hereunder or under law or equity in the event of a default by the Subcontractor, or incurred in any litigation or arbitration in which Gray without its fault, becomes involved by reason of the existence of this Agreement.

Green was insured by Secura Insurance Company ("Secura"). Secura issued to Green a primary policy number CP 3117471 ("Primary Policy") which was effective September 1, 2006 through September 1, 2007. Secura also issued Green an umbrella policy number CU 3117473 ("Umbrella Policy") which was effective September 1, 2006 through September 1, 2007.

Green began work on the Toyo project in 2001 and completed work sometime in 2002. In January, March and May of 2002, Gray executed nine Change Orderswhich supplemented the scope of work to be performed by Green on the Toyo project. Green continued to perform the work required by at least one of these change orders until June 11, 2002.

Green contracted with Thermal Balance, Inc., to perform balancing tests on the mechanical systems installed by Green. These tests were within the scope of work contemplated by the subcontract with Gray and were required in order to obtain a certificate of occupancy from the State. The tests performed by Thermal Balance, Inc., could not be performed until all of Green's work on a unit to be tested had been completed. Thermal Balance, Inc., performed a series of tests on May 1, 2002. Another series of tests were performed on June 11, 2002, at which time HVAC unit number 8, which serviced this mixing room, was balanced.

The Kentucky Department of Housing issued a Temporary Certificate of Occupancy for the entire Toyo facility on June 12, 2002. Toyo began operating the plant sometime thereafter.

On June 1, 2007, a fire started in the mixing room of the Toyo facility which allegedly caused injuries to Tina Ann Hall, a then employee of Toyo. Eleven days later, Hall died allegedly as a result of her injuries. L.V. Hall, Tina Ann Hall's widower, was appointed Administrator of her estate and he filed suit on behalf of himself and the estate in Simpson Circuit Court located in Franklin, Kentucky, on May 29, 2008. Both Gray and Green, as well as several others, are named as a defendants in the tort action in Simpson Circuit Court. Each of the defendants is alleged to have been negligent in the design, construction, inspection or maintenance of the Toyo facility.

Pursuant to the subcontract between Gray and Green, Gray demanded that Green provide a defense and indemnify it in the state court action. In turn, Green notified Secura of the demand by Gray. Neither Green nor Secura has provided a defense for Gray.

Secura filed this action for declaratory judgment in federal court on May 29, 2009. Secura seeks to resolve whether Secura currently owes a duty to defend or indemnify Gray as an "additional insured." Count I of Secura's Petition for Declaratory Judgment seeks a declaration that the scope of "additional insured" coverage in Secura's Primary Policy issued to Green does not cover Gray for the claims at issue in the state court action. Count II seeks declaration that the subcontract between Gray and Green did not require Green to include Gray as an "additional insured" under any excess or umbrella policy.

STANDARD

Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

"[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir.1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir.1996). The plaintiff must present more than a mere scintilla of evidence in support of his position; the plaintiff must present evidence on which the trier of fact could reasonablyfind for the plaintiff. See id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment: "the mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir.1996).

Finally, while Kentucky state law is applicable to this case pursuant to Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court in a diversity action applies the standards of Fed.R.Civ.P. 56, not "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky.1991)." Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir.1993).

DISCUSSION

Secura first argues Gray is not covered under the Primary Policy issued by Secura to Green for the claims raised in the underlying suit. Secura states Gray was covered as an additional insured; however, Gray was not entitled to completed operations coverage. Secura argues the subcontract between Gray and Green did not require Green purchase completed operations coverage for Gray, only for itself. Secura then argues that even if Gray was entitled to completed operations coverage, that coverage was subject to limitations which exclude coverage for the underlying claim. Specifically, Secura asserts Green's work was completed on or about May 1, 2002 and therefore completed operations coverage expired five years later, before the date of the accident on June 1, 2007. Gray and Green refute that the completed operations coverage was not required by the subcontract and argue Green's work was not completed until mid-June 2002, at the earliest.

Secura also argues Gray is not entitled to coverage under Green's Umbrella Policy as the subcontract did not require Green to purchase such coverage. Gray and Green assert Gray is entitled to coverage based on a policy...