Siloam Springs Hotel, LLC v. Century Sur. Co.

• Citation: 392 P.3d 262
• Decision Date: 22 February 2017
• Docket Number: No. 114,872,114,872
• Parties: SILOAM SPRINGS HOTEL, LLC, Plaintiff, v. CENTURY SURETY COMPANY, Defendant.
• Court: Supreme Court of Oklahoma

392 P.3d 262

SILOAM SPRINGS HOTEL, LLC, Plaintiff,

v.CENTURY SURETY COMPANY, Defendant.

No. 114,872

Supreme Court of Oklahoma.

FILED FEBRUARY 22, 2017

Tom E. Mullen and Sterling E. Pratt, Fenton, Fenton, Smith, Reneau & Moon, Oklahoma City, Oklahoma, for Plaintiff.

Phil R. Richards and Randy Lewin, Richards & Connor, Tulsa, Oklahoma, for Defendant.

COMBS, C.J.:

¶ 1 The United States District Court for the Western District of Oklahoma (Western District) certified a single question of state law to this Court under the Revised Uniform Certification of Questions of Law Act, 20 O.S. 2011 §§ 1601 –1611. The question certified is:

Does the public policy of the State of Oklahoma prohibit enforcement of the Indoor Air Exclusion, which provides that the insurance afforded by the policy does not apply to " ‘Bodily injury’, ‘property damage’, or ‘personal and advertising injury’ arising out of, caused by, or alleging to be contributed to in any way by any toxic, hazardous, noxious, irritating pathogenic or allergen qualities or characteristics of indoor air regardless of cause"?

We answer the question in the negative.

CERTIFIED FACTS AND PROCEDURAL HISTORY

¶ 2 The underlying facts in this cause are set out in the certification order from the Western District. In answering a certified question, the Court does not presume facts outside those offered by the certification order. Howard v. Zimmer, Inc. , 2013 OK 17, n.5, 299 P.3d 463 ; In re Harris , 2002 OK 35, ¶ 4 n.5, 49 P.3d 710 ; Jones v. Univ. of Cent. Okla. , 1995 OK 138, ¶ 5, 910 P.2d 987. Although this Court will neither add nor delete such facts, we may consider uncontested facts supported by the record. Howard , 2013 OK 17, n.5, 299 P.3d 463 ; McQueen, Rains, & Tresch, LLP v. CITGO Petroleum Corp. , 2008 OK 66, n.4, 195 P.3d 35 ; In re Harris , 2002 OK 35, ¶ 4, 49 P.3d 710.

¶ 3 Defendant Century Surety Company (Century) issued a Commercial Lines Policy to Plaintiff Siloam Springs Hotel, L.L.C. (Siloam). This policy included general liability insurance coverage of Siloam's hotel in Siloam Springs, Arkansas, for the policy period from November 13, 2012, through November 13, 2013. The insuring agreement of the general liability coverage form provided that Century would pay sums the insured was legally obligated to pay as damages because of bodily injury to which the insurance applies and that Century would have the right and duty to defend the insured against any suit seeking such damages.

¶ 4 The coverage provided by the policy was modified by an "Arkansas—Special Exclusions and Limitations Endorsement" (Exclusions) which added certain exclusions to the policy. At issue in the underlying cause is the interpretation of section (A)(6) of the Exclusions (Indoor Air Exclusion), specifically subsection (j) which provides that the insurance afforded by the policy does not apply to:

"Bodily injury", "property damage", or "personal and advertising injury" arising out of, caused by, or alleging to be contributed to in any way by any toxic, hazardous, noxious, irritating pathogenic or allergen qualities or characteristics of indoor air regardless of cause.

Century Surety Policy, CGL 1701AR 0711, Section A(6)(j), p.1.

¶ 5 On January 17, 2013, several guests inside of the hotel allegedly suffered bodily injury due to carbon monoxide poisoning. The carbon monoxide allegedly escaped into the air due to leakage from the hotel's indoor swimming pool heater. Siloam sought coverage under its policy from Century, which Century denied based on the Indoor Air Exclusion at issue.

¶ 6 After Century denied coverage, Siloam filed suit seeking a declaration that the policy provides coverage for the bodily injury of the guests which occurred on January 17, 2013. Siloam originally filed suit in the District Court of Oklahoma County on May 12, 2013, but the cause was removed to the Western District after Century filed a notice of removal on June 4, 2013.

¶ 7 Both parties moved for summary judgment in the Western District on April 1, 2014. In an order filed on May 14, 2014, the Western District granted Century's motion for summary judgment and denied Siloam's motion. The court determined: 1) the Indoor Air Exclusion was not ambiguous; and 2) the exclusion applied to Siloam's claim for the injuries of its guests and therefore the policy issued by Century afforded no coverage for the loss. Accordingly, the court entered judgment for Century.

¶ 8 Siloam appealed the Western District's ruling to the United States Court of Appeals for the Tenth Circuit (Tenth Circuit). The Tenth Circuit issued its opinion in the matter on March 31, 2015. Siloam Springs Hotel, L.L.C. v. Century Sur. Co. , 781 F.3d 1233 (10th Cir. 2015). The Tenth Circuit did not reach the merits of the underlying cause because it noticed a potential jurisdictional defect in the notice of removal to federal court filed by Century at the onset of litigation. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1235. The Tenth Circuit determined that Century's notice of removal incorrectly identified Siloam as a "corporation" organized under Oklahoma law with its principle place of business in Arkansas, when in fact Siloam is an Oklahoma limited liability company. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1235.

¶ 9 Because Siloam is an Oklahoma limited liability company, the Tenth Circuit determined that references to its state of organization and state of its primary business operations were insufficient to determine citizenship for purposes of federal diversity jurisdiction. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1237–38. Instead, the Tenth Circuit joined other circuits that have previously considered the issue and determined that in determining the citizenship of an unincorporated association for purposes of diversity, federal courts must include all of the entity's members. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1237–38. The Tenth Circuit held that for diversity purposes, Siloam Springs takes the citizenship of all of its members, because under Oklahoma law an LLC is an unincorporated association or proprietorship. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1237.

¶ 10 The Tenth Circuit further held that the time period for determining the existence of complete diversity is at the time of the filing of the complaint. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1239. Because the allegations in Century's notice of removal did not properly allege diversity of citizenship, and because the court could not determine the existence or non-existence of diversity jurisdiction based on the record before it, the Tenth Circuit remanded to the district court for further proceedings. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1239.

¶ 11 In the closing paragraph of its opinion, however, the Tenth Circuit provided guidance to the Western District that is relevant to this Court's task in analyzing the certified question posed to it. The Tenth Circuit noted:

In light of the need to remand this case for further development of the jurisdictional record, it is worth noting that states have a particularly strong interest in insurance regulation. Cf., e.g., The Aransas Project v. Shaw, 775 F.3d 641, 650 (5th Cir.2014) ; Gov't Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1232 (9th Cir.1998) (en banc) (Alarcon, J., dissenting) (collecting cases); Ford Motor Co. v. Ins. Comm'r, 874 F.2d 926, 934 (3d Cir.1989). Furthermore, although the parties argue the coverage issue exclusively by reference to generally applicable contract principles, it is far from clear the coverage issue at the center of this case is completely devoid of public policy implications. Given these factors, should the district court conclude on remand that diversity jurisdiction is proper, it would be well advised to move on to consider whether the state's interest in insurance regulation would be best served by certifying the coverage questions at issue in this case to the appropriate state supreme court.

Siloam Springs Hotel, L.L.C. , 781 F.3d at 1239.

The Tenth Circuit also noted that to determine the proper court for certification, the Western District would need to definitively decide whether the cause is governed by Arkansas or Oklahoma law. Siloam Springs Hotel, L.L.C. , 781 F.3d at 1239, n.3.

¶ 12 On remand, the Western District ordered Century to file a brief with supporting evidence concerning whether complete diversity existed at the time Siloam filed suit in state court. Having reviewed the evidence, the Western District issued an order on February 9, 2016, determining it had jurisdiction over the matter. The court determined complete diversity of citizenship existed at the time Siloam's suit was filed and at the time it was removed to federal court by Century. The Western District further determined that the questions at issue in the cause should be certified to the appropriate state supreme court per the Tenth Circuit's opinion, and it ordered the parties to submit briefs regarding: 1) which state supreme court is the appropriate state supreme court for certification, Arkansas or Oklahoma, and 2) what question(s) should be certified.

¶ 13 During briefing on the above two questions, the parties differed as to the scope of the question(s) they believed it appropriate for the Western District to certify. Siloam argued Oklahoma law applies, and asserted two questions directly addressing the ambiguity of the Indoor Air Exclusion and its application to the instant cause should be certified to this Court. Century also argued Oklahoma law is applicable, but asserted the only question certified should be whether the public policy of this state prohibits enforcement of the Indoor Air Exclusion. In an order filed March 21, 2016, the Western District held that Oklahoma law applies, and determined the question certified should be narrowly tailored to address only the policy concern expressed by the Tenth Circuit. Accordingly, it certified the following question:

Does the public policy of the State of Oklahoma prohibit

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