State Auto Prop. & Cas. Ins. Co. v. H.E. Neumann Co., CIVIL ACTION NO. 2:14-cv-19679

Decision Date23 September 2016
Docket NumberCIVIL ACTION NO. 2:14-cv-19679
PartiesSTATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff, v. H.E. NEUMANN COMPANY, et al., Defendants.
CourtU.S. District Court — Southern District of West Virginia
MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiff's Motion for Declaratory Judgment (the "Motion"). (ECF No. 11.) For the reasons discussed herein, the Court DENIES the Motion.1

I. Background

This case concerns whether Plaintiff is obligated to indemnify and defend Defendant H.E. Neumann Company ("Defendant") for costs associated with a third-party action filed by Defendants Kevin Francis ("Francis") and Susan Francis against Defendant—and numerous other defendants—on March 19, 2010, in the Circuit Court of Kanawha County, West Virginia (the "Underlying Litigation"). (ECF No. 1 ¶ 2. See generally ECF No. 1-34 (providing the complaint in the Underlying Litigation).) Plaintiff is "a corporation with its principal place of businesslocated in Des Moines, Iowa." (ECF No. 1 ¶ 6.) Defendant is "a corporation organized under the laws of the State of West Virginia." (Id. ¶ 7.)

A. The Relevant Insurance Policies

"[Plaintiff] issued liability policies to [Defendant] with effective dates of coverage from January 1, 2006 to January 1, 2014."2 (ECF No. 12 at 3.) Three parts of these policies are pertinent for the instant action: the Commercial General Liability Coverage Forms (the "CGLs"), the Employer's Liability Coverage Forms (the "Employer's Liability Policies"), and the Commercial Umbrella Coverage Forms (the "Umbrella Policies") (together, the "Policies"). (See, e.g., ECF No. 1 ¶¶ 22-25.) While Defendant's annual policies with Plaintiff varied—to some extent—in successive years, the relevant language for purposes of addressing Plaintiff's Motion remained materially identical during this time period. (See, e.g., ECF No. 12 at 11-15.)

1. The CGLs

Each of the Policies include a CGL, which provide the following, in pertinent part:

SECTION I - COVERAGES
COVERAGE A BODILY INJURY . . . LIABILITY
1. Insuring Agreement
a. [Plaintiff] will pay those sums that [Defendant] becomes legally obligated to pay as damages because of "bodily injury" . . . to which this insurance applies. [Plaintiff] will have the right and duty to defend [Defendant] against any "suit" seeking those damages. However, [Plaintiff] will have no duty to defend [Defendant] against any "suit" seeking damages for "bodily injury" . . . to which this insurance does not apply.

. . .

b. This insurance applies to "bodily injury" . . . only if:
(1) The "bodily injury" . . . is caused by an "occurrence" that takes place in the "coverage territory"; [and]
(2) The "bodily injury" . . . occurs during the policy period . . . .

(ECF No. 1-2 at 1; ECF No. 1-6 at 1; ECF No. 1-10 at 34; ECF No. 1-15 at 1; ECF No. 1-19 at 1.) The CGLs include the following exclusion relating to liability arising out of Defendant's position as an employer (the "CGL Employee Exclusion Provision"):

2. Exclusions
This insurance does not apply to:

. . .

e. Employer's Liability
"Bodily injury" to:
(1) An "employee" of [Defendant] arising out of and in the course of:
(a) Employment by [Defendant]; or
(b) Performing duties related to the conduct of [Defendant's] business; or
(2) The spouse, child, parent, brother or sister of that "employee" as a consequence of Paragraph (1) above.
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity . . . .

(ECF No. 1-2 at 2; ECF No. 1-6 at 2; ECF No. 1-10 at 35; ECF No. 1-15 at 2; ECF No. 1-19 at 2.) The CGLs also provide these pertinent definitions:

SECTION V - DEFINITIONS
3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
4. "Coverage territory" means . . . [t]he United States of America . . . .
5. "Employee" includes a "leased worker". "Employee" does not include a "temporary worker".

. . .

10. "Leased worker" means a person leased to [Defendant] by a labor leasing firm under an agreement between [Defendant] and the labor leasing firm, to perform duties related to the conduct of [Defendant's] business. "Leased worker" does not include a "temporary worker".

. . .

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

. . .

18. "Suit" means a civil proceeding in which damages because of "bodily injury" . . . to which this insurance applies are alleged. . . .
19. "Temporary worker" means a person who is furnished to [Defendant] to substitute for a permanent "employee" on leave or to meet seasonal or short-term workload conditions.

(ECF No. 1-2 at 12-15; ECF No. 1-6 at 12-15; ECF No. 1-10 at 45-48; ECF No. 1-15 at 12-15; ECF No. 1-19 at 12-15.)

2. The Umbrella Policies

Defendant augmented its insurance with Plaintiff by procuring the Umbrella Policies. (See, e.g., ECF No. 1 ¶ 25.) The Umbrella Policies provide for the following coverage, in relevant part:

Coverage A Bodily Injury . . . Liability
1. Insuring Agreement
a. [Plaintiff] will pay on behalf of [Defendant] the "ultimate net loss" in excess of the "retained limit" because of "bodily injury" . . . to which this insurance applies. [Plaintiff] will have the right to associate with the "underlying insurer" and [Defendant] to defend against any "suit" seeking those damages. But:

. . .

(3) [Plaintiff has] a right and duty to defend [Defendant] against any "suits" to which this insurance applies . . . . However, [Plaintiff] will have no duty to defend [Defendant] against any "suits" seeking damages for "bodily injury" . . . to which this insurance does not apply . . . .

. . .

b. It is agreed that this insurance only applies if:
(1) The "bodily injury" . . . occurs during the policy period of this policy;
(2) With respect to [Defendant's] liability (other than under a contract) for "bodily injury" to [Defendant's] "employees" arising out of and in the course of their employment by [Defendant]:
(a) Any "bodily injury" by disease is caused or aggravated by the conditions of that employment; and
(b) An "employee's" last day of last exposure to conditions causing or aggravating such disease occurs during the policy period of this policy; and
(3) The "bodily injury" . . . is caused by an "occurrence", and such "occurrence" takes place in the "coverage territory".

(ECF No. 1-2 at 48; ECF No. 1-6 at 33; ECF No. 1-11 at 20; ECF No. 1-17 at 18; ECF No. 1-21 at 1.)3 The Umbrella Policies include definitions of the terms "bodily injury," "coverageterritory," "employee," "leased worker," "suit," and "temporary worker" that are identical to the definitions for these terms provided in the CGLs. (See ECF No. 1-2 at 64-65, 67-68; ECF No. 1-6 at 52-53; ECF No. 1-7 at 1; ECF No. 1-11 at 39-40, 42-43; ECF No. 1-17 at 37-38, 40-41; ECF No. 1-21 at 20-21, 23-24.) The Umbrella Policies also include the following unique definition of the term "occurrence":

15. "Occurrence" means:
a. With respect to "bodily injury" . . . , an accident, including continuous or repeated exposure to substantially the same general harmful conditions. This does not apply to [Defendant's] liability (other than under a contract or agreement) for "bodily injury" to [Defendant's] "employees" arising out of and in the course of employment by [Defendant]; or
b. With respect to [Defendant's] liability (other than under a contract or agreement) for "bodily injury" to [Defendant's] "employees" arising out of and in the course of employment by [Defendant], "bodily injury" caused by accident or disease.

(ECF No. 1-2 at 66; ECF No. 1-6 at 54; ECF No. 1-11 at 41; ECF No. 1-17 at 39; ECF No. 1-21 at 22.)

3. The Employer's Liability Policies

Defendant also supplemented its policies with Plaintiff by procuring the Employer's Liability Policies, which modify the CGLs. (See ECF No. 1-2 at 31 (noting that the Employer's Liability Policies "modif[y] insurance provided under . . . [the CGL]"); ECF No. 1-6 at 17 (same); ECF No. 1-11 at 10 (same); ECF No. 1-15 at 26 (same); ECF No. 1-20 at 1 (same).) While theprecise language of the Employer's Liability Policies changed between 2006 and 2010, the provisions that are pertinent here remained consistent. In particular, the Employer's Liability Policies state that "[P]laintiff will pay those sums that [Defendant] becomes legally obligated to pay as damages because of . . . 'bodily injury by disease' to [Defendant's] 'employee' to which this insurance applies." (ECF No. 1-6 at 17; ECF No. 1-11 at 10; ECF No. 1-15 at 26; ECF No. 1-20 at 1; cf. ECF No. 1-2 at 31 (constituting the 2006 Employer's Liability Policy, which differs slightly insofar as it provides that "[Plaintiff] will pay those sums that the insured becomes legally obligated by West Virginia Law to pay as damages because of . . . 'bodily injury by disease' to [Defendant's] 'employee' to which this insurance applies" (emphasis added)).) The Employer's Liability Policies then provide, in pertinent part, that "[t]his insurance applies to . . . 'bodily injury by disease' only if": (1) the "'bodily injury by disease' arises out of and in the course of the injured 'employee's' employment by [Defendant];" (2) the "'bodily injury by disease' takes place in the 'coverage territory;'" and (3) the "'[b]odily injury by disease' is caused by or aggravated by conditions of [Defendant's] employment" and the "'employee's' last day of last exposure to the conditions causing or aggravating such 'bodily injury by disease' must occur during the policy period." (ECF No. 1-6 at 17; ECF No. 1-11 at 10; ECF No. 1-15 at 26; ECF No. 1-20 at 1; cf. ECF No. 1-2 at 31-32 (constituting the 2006 Employer's Liability Policy, which provides the following materially identical language as to the third listed condition for coverage: "'Bodily injury by disease' is caused by or aggravated by conditions of employment by [Defendant] and the injured 'employee's' last day of last exposure to...

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