Spirtas Co. v. Nautilus Ins. Co.
| Decision Date | 14 September 2012 |
| Docket Number | Case No. 4:11CV00829 AGF. |
| Citation | 897 F.Supp.2d 790 |
| Parties | SPIRTAS COMPANY, d/b/a Spirtas Wrecking Company, Plaintiff/Counterclaim Defendant, v. NAUTILUS INSURANCE COMPANY, Defendant/Counterclaim Plaintiff. |
| Court | U.S. District Court — Eastern District of Missouri |
OPINION TEXT STARTS HERE
Thomas M. Payne, III, Timothy E. Hayes, Timothy E. Hayes and Associates, St. Louis, MO, for Plaintiff/Counterclaim Defendant.
Bethany K. Culp, Hinshaw and Culbertson, LLP, Minneapolis, MN, Christopher M. Garcia, Terese A. Drew, Hinshaw and Culbertson, LLP, St. Louis, MO, for Defendant/Counterclaim Plaintiff.
Plaintiff Spirtas Company (“Spirtas”) brings this action for a declaratory judgment and to recover damages under a commercial general liability (“CGL”) insurance policy issued by Defendant Nautilus Insurance Company. Defendant has filed a counterclaim for a declaration that under the terms and/or exclusions in the Policy, Defendant owes no duty to indemnify or cover Plaintiff for any claimed loss. Now before the Court are the Parties' cross motions for summary judgment. For the reasons set forth below, Defendant's motion (Doc. No. 26) shall be granted, and Plaintiff's motion (Doc. No. 40) shall be denied.
On February 5, 2010, Plaintiff, as subcontractor, entered into a Subcontract Agreement with Edward Kraemer & Sons, Inc. (“Kraemer”), as contractor, whereby Plaintiff agreed to provide demolition work to “Remove Exist[ing] Structure” of the Seneca Bridge over the Illinois River (also called the Seneca River), in exchange for payment by Kraemer of $285,000.00. (Doc. No. 28–1.) Demolition of the bridge was part of a highway project for which Kraemer was the general contractor for the Illinois Department of Transportation, the owner of the bridge.
The Subcontract Agreement between Plaintiff and Kraemer included the following provisions:
8. Indemnity for Delay. [Plaintiff] shall indemnify and hold [Kraemer] harmless from all damage, loss, cost, liability or expense (“damage”) which [Kraemer] may sustain by reason of any delays caused or contributed to by [Plaintiff].
16. Back Charges and Setoffs. In the event [Plaintiff] shall fail to perform ... any of the subcontract work ..., or in the event [Kraemer] suffers any damage whatsoever or is caused any expense, loss or liability by [Plaintiff], all such payments made and all related costs incurred by [Kraemer] ... may be deductedby [Kraemer] from amounts otherwise due hereunder to [Plaintiff].
25. Public Liability and Indemnity. [Plaintiff] shall be liable and responsible for ... damage or injuries to any property whether belonging to [Plaintiff], [Kraemer] or to others, resulting or arising from acts, omissions and negligence of [Plaintiff] or its agents, employees or sub-subcontractors or suppliers. [Plaintiff] shall indemnify and hold [Kraemer] and its agents and employees harmless from any and all loss, liability, penalties, damages, costs, attorneys' fees, expenses, causes of action, claims or judgments resulting ... from damage, injury to or destruction of property (including, but not limited to the loss of use of such property) arising out of, sustained, or in any way connected with the performance of the subcontract work under this Agreement, regardless of whether or not such damage, injury, harm or death, affected by or results from the contributory or comparative negligence of [Kraemer], its agents, servants and employees, but only to the extent caused by [Plaintiff].
The Subcontract Agreement required Plaintiff to maintain certain insurance, including CGL insurance with an occurrence limit and project limit of $1 million each, for an aggregate limit of $2 million.
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.
“Occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Policy did not define “accident” or “legally obligated to pay as damages.” Coverage was subject to a $1 million limit of liability that applied to each “occurrence.”
The Policy contained numerous exclusions, including the following:
This insurance does not apply to:
* * *
j. Damage To Property
“Property damage” to:
* * *
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
* * *
m. Damage To Impaired Property Or Property Not Physically Injured “Property damage” to “impaired property” or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to “your product” or “your work” after it has been put to its intended use.
The Policy defined “impaired property” as
tangible property, other than “your product” or “your work”, that cannot be used or is less useful because:
(a) It incorporates “your product” or “your work” that is known or thought to be defective, deficient, inadequate or dangerous; or
(b) you have failed to fulfill the terms of a contract or agreement;
if such property can be restored to use by:
(a) the repair, replacement, adjustment or removal of “your product” or “your work”; or
(b) your fulfilling the terms of the contract or agreement.
The Policy included a “Demolition Contractors—Mistaken Demolition”
Endorsement that provided in pertinent part that Exclusion j.5 did “not apply to ‘property damage’ arising out of the inadvertent or mistaken demolition of property resulting from the insured's demolition and/or wrecking operations.” (Doc. No. 2–5.)
On November 4, 2010, Plaintiff entered into a subcontract with Dykon Explosive Demolition Corp. (“Dykon”) to carry out demolition work on the main span of the Seneca Bridge. The Project Manager for Plaintiff attested by affidavit as follows:
According to the Demo Plan, the top strut of the Seneca Bridge was to be left intact, so that each of the bridge panels that were separated from one another when the charges detonated would still be connected along the top. The idea was for the Seneca Bridge to be cut by the charges like a loaf of bread, but still connected by the top strut. Under the Demo Plan, the Seneca Bridge would then sit in the river bed, with each panel still connected by the top strut to ensure that each piece would be easy to locate. Workers would then hand cut each of the pieces from the top strut one at a time, removing the separated piece by crane before moving on to the next piece. The process was to be similar to removing a slice at a time from a loaf of bread. The Demo Plan scheduled sixteen (16) hours for the complete demolition and removal of the bridge span. The completion time for the demolition and removal was critical because barge traffic on the Seneca River had to be stopped from the start of the demolition through completion of the removal process. What occurred deviated significantly from what was contemplated in the Demo Plan. At 7:00 a.m. on November 18, 2010, after all barge traffic had been stopped clear of the demolition site, Dykon detonated the charges. Only five (5) of the fourteen (14) charges set on the bottom chord of the Seneca Bridge detonated. 1 This left part of the bridge span connected to the intermediate abutment, with the rest of the bridge span in the water with the pieces twisted and mangled together.
The Project Manager attests that as a result, Plaintiff had to hire divers to determine which pieces were still connected to one another and set underwater charges to cut the bridge span into pieces. Plaintiff then removed the pieces, reset and detonated charges on the bridge piece that was still attached to the abutment, and removed that piece. The demolition that was projected to take 16 hours actually took approximately 60 hours, with the river not reopened for barge traffic at the site until the evening of November 21, 2010. Id.
According to the Project Manager's affidavit, due to the flawed demolition, Plaintiff incurred additional costs totaling $81,951.95 (“Additional Costs”) to complete the demolition project. The record does not contain an itemization of these costs. By letter dated November 26, 2012, Kraemer informed Plaintiff that Kraemer intended to hold Plaintiff responsible for costs resulting from the delay in the demolition due to the failure of some of the explosives to detonate. The letter stated that...
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