Selective Ins. Co. of S.C. v. Miami Valey Paper Tube Co.
| Decision Date | 11 January 2021 |
| Docket Number | CIVIL ACTION NO.: 2:18-CV-174-(WOB-CJS) |
| Parties | SELECTIVE INS. CO. OF SOUTH CAROLINA, Plaintiff v. MIAMI VALEY PAPER TUBE CO., et al., Defendants |
| Court | U.S. District Court — Eastern District of Kentucky |
James Michael Inman, Pamela Adams Chesnut, Green, Chesnut & Hughes PLLC, Lexington, KY, for Plaintiff.
Robert B. Cetrulo, Cetrulo, Mowery & Hicks P.S.C., Edgewood, KY, for Defendant Miami Valley Paper Tube Company.
Philip Taliaferro, III, Taliaferro, Carran & Cowherd, PPLC, Covington, KY, Ronald R. Parry, Strauss & Troy Co., LPA, Cincinnati, OH, for Defendant Kristian Collins.
Christian D. Foisy, Pro Hac Vice, Salvatore J. LoPresti, Pro Hac Vice, Timothy A. Marcovy, Pro Hac Vice, LoPresti, Marcovy & Marotta, LLP, Cleveland, OH, W. Kenneth Nevitt, Nevitt Law Offices, Louisville, KY, for Defendants Crown Services, Inc., American Zurich Insurance Company.
William O. Bertelsman, United States District Judge This matter is before the Court on several motions for summary judgment, which the Court previously took under submission following oral arguments. (Docs. 76, 77, 78). Having given the matter further study, the Court now issues the following Memorandum Opinion and Order.
Defendant Crown Services, Inc. ("Crown") is a staffing agency that entered into a labor contract with Defendant Miami Valley Paper Tube Company ("Miami Valley"). (Doc. 69-1 at ¶ 9). The contract required Crown to provide employees to Miami Valley and obtain workers’ compensation insurance, while Miami Valley was required to provide a safe workplace. (Doc. 67 at ¶¶ 15, 21-22; Doc. 60-1 at ¶ 11).
Crown assigned Kristian Collins ("Collins") to work at Miami Valley pursuant to that staffing contract. (Doc. 67 at ¶¶ 15, 21-22). While working at Miami Valley's factory, Collins suffered a scalp avulsion
and broken neck when her hair "became entangled in a cutting machine." (Id. at ¶ 16). Crown and its insurer, defendant American Zurich Insurance Company ("American Zurich"), paid nearly two million dollars in workers’ compensation benefits on behalf of Collins. (Doc. 60-2 at ¶ 13).
The injury precipitated several lawsuits, including the current one before the Court. First, Collins filed suit against Miami Valley in Kentucky state court alleging that Miami Valley was grossly negligent1 by creating unsafe work conditions at the factory that led to her injury. (Doc. 67 at ¶¶ 17-18). Second, Crown and American Zurich filed suit against Miami Valley in Ohio state court, alleging breach of contract for failing to provide a safe workplace to Crown's workers. (Doc. 60-2 at ¶¶ 4-13, Doc. 67 at ¶ 20). Crown and American Zurich also allege indemnification and subrogation. (Doc. 60-2 at ¶¶ 16, 19).
Plaintiff Selective Insurance Company ("Selective") has provided coverage for both lawsuits pursuant to two insurance policies it issued to Miami Valley: the "Commercial Liability Insurance Policy" and the "Workers’ Compensation and Employers Liability Insurance Policy." (Doc. 67 at ¶ 33). None of the defendants argue that coverage is triggered under the workers’ compensation policy, and thus the only relevant policy is the "Commercial Liability Insurance Policy." That policy has two types of coverages: commercial general liability coverage (CGL) and umbrella coverage. The only difference between the two policies are the policy limits, and thus the two coverages are referred to jointly as the "CGL policy." (Doc. 73-1 at 6; Doc. 1-3).
Substantial discovery has occurred in each of the state court lawsuits, but neither have yet been resolved. (Doc. 76 at 2). Crown and American Zurich's action ("the Crown action"), which was originally filed in state court in Cuyahoga County, Ohio, has been refiled in Hamilton County, Ohio. (Doc. 98).
With respect to Collins's lawsuit against Miami Valley ("the Collins action"), the Kentucky state court recently dismissed Collins's case. (Doc. 88-1). Collins has appealed. (Doc. 88).
The third lawsuit related to Collins's injury is the current action. Here, Selective seeks a declaratory judgment that the insurance policies it issued to Miami Valley do not provide coverage nor obligate Selective to defend the two state court actions filed against Miami Valley. (Doc. 67 at 24).
Following oral arguments held on September 29, 2020, this Court held that the coverage issues related to the Collins action would be held in abeyance pending a decision from the Kentucky Court of Appeals, inasmuch as such decision may impact the questions before this Court. (Doc. 93). However, the Court indicated that it would proceed to decide the coverage issues related to the Crown action.
On October 26, 2020, Miami Valley filed a supplemental memorandum suggesting that the Court should now also hold in abeyance the coverage issues related to the Crown action. (Doc. 98). Selective opposes this suggestion (Doc. 100). For the reasons previously stated at oral argument, the Court will proceed to rule on the coverage issues underlying the Crown action.
A. Legal Standards
In a diversity action such as this one, the Court applies "the substantive law of the forum state and federal procedural law." Hoven v. Walgreen Co. , 751 F.3d 778, 783 (6th Cir. 2014) ; Fed. R. Civ. P. 57. Thus, all arguments are evaluated using Kentucky substantive law and the Federal Rules of Civil Procedure.
Summary judgment under Rule 56 is appropriate only when the Court, viewing the record in the light most favorable to the nonmoving party, determines that there exists no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a)–(c) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The summary judgment standard does not change simply because the parties presented cross-motions." Profit Pet v. Arthur Dogswell, LLC , 603 F.3d 308, 311 (6th Cir. 2010). The "court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Id. (citations and internal quotation marks omitted).
"A policy of insurance is to be construed liberally in favor of the insured ...." St. Paul Fire & Marine Ins. Co. v. Powell–Walton–Milward, Inc. , 870 S.W.2d 223, 227 (Ky. 1994). If any provision of the policy is ambiguous, the Court will use the "reasonable expectations doctrine" to interpret the policy in a way most favorable to the insured's reasonable expectations. Id. However, "where not ambiguous, the ordinary meaning of the words chosen by the insurer is to be followed." James Graham Brown Found. v. St. Paul Fire & Marine Ins. Co. , 814 S.W.2d 273, 279 (Ky. 1991).
Under Kentucky law, an insurer's duty to defend its insured is broader than its duty to indemnify. James Graham Brown Found., Inc. , 814 S.W.2d at 280. "The insurer has a duty to defend if there is any allegation which potentially, possibly or might come within the coverage of the policy." Id. at 279 (internal citations omitted). This determination is made by comparing the allegations in the underlying complaint with the terms of the insurance policy. Id. "The determination of whether a defense is required must be made at the outset of the litigation" by analyzing the complaint and known facts. Id.
The CGL policy only covers liability stemming from a "bodily injury" caused by an "occurrence" as caused by an "accident." Selective first argues that Crown's complaint does not allege an "occurrence." This argument requires a brief summation of Kentucky's cases analyzing whether an "accident" occurred for purposes of triggering coverage under a CGL policy.
In Bituminous Cas. Corp. v. Kenway Contr., Inc. , 240 S.W.3d 633, 635-36 (Ky. 2007), an employee of a construction company was sent to destroy a carport, but he misunderstood the scope of the planned demolition and instead tore down much of the adjoining property. Id. at 636. The Kentucky Supreme Court reasoned that an intentional action may nonetheless cause unintentional damages. Id. at 638-39. Even though the employee intentionally operated the demolition equipment, the construction company never intended to destroy anything but the carport, and thus the event was an accident which triggered coverage. Id. at 639, 642.
In Cincinnati Ins. Co. v. Motorists Mut Ins. Co. , the Kentucky Supreme Court analyzed whether the faulty construction of a house was an "accident." 306 S.W.3d 69, 71-75 (Ky. 2010). Reasoning that merely focusing on the intent of the insured would be illogical, the court analyzed the issue using the "doctrine of fortuity." The doctrine of fortuity examines not only the intent of the insured, but the control of the insured. If the insured had control over the event, then the event was not a "chance event beyond the control of the insured [and] beyond the power of any human being" to cause or control and thus not an accident, even if the insured had not intended to cause the resulting damages. Id. at 76.
The court reasoned the homebuilder had complete control over how the home was built, and thus the faulty construction of the home was not a "fortuitous, truly accidental, event." Id. at 76. If such an event were an accident, CGL insurance policies would effectively become performance bonds. Id. at 75.
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