Taja Invs. LLC v. Peerless Ins. Co.

• Decision Date: 21 July 2016
• Docket Number: Case No. 1:15-cv-01647-GBL-TCB
• Parties: TAJA INVESTMENTS LLC, et al., Plaintiffs, v. PEERLESS INSURANCE CO., a/k/a Liberty Mutual Insurance Co., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

196 F.Supp.3d 587

TAJA INVESTMENTS LLC, et al., Plaintiffs,

v.PEERLESS INSURANCE CO., a/k/a Liberty Mutual Insurance Co., Defendant.

Case No. 1:15-cv-01647-GBL-TCB

United States District Court, E.D. Virginia, Alexandria Division.

Signed July 21, 2016

C. Thomas Brown, Silver & Brown, Fairfax, VA, for Plaintiffs.

Roman Lifson, Edwin Ford Stephens, Christian & Barton LLP, Richmond, VA, for Defendant.

MEMORANDUM OPINION AND ORDER

Gerald Bruce Lee, United States District Judge

THIS MATTER is before the Court on Plaintiff Taja Investments LLC and Taja Construction & Rehab, Inc. ("Plaintiff" or "Taja") and Defendant Peerless Insurance Co., a/k/a Liberty Mutual Insurance Co.'s ("Defendant" or "Peerless") Cross-Motions for Summary Judgment under Federal Rule of Civil Procedure 56. (Doc. 33; Doc. 31). This case concerns Plaintiff's insurance coverage for the collapse of a wall at a Washington, DC residential property where Plaintiff was conducting renovations. The issue before the Court is whether either of the two exclusions identified by Peerless in the insurance policy, the workmanship exclusion ("Workmanship exclusion") or the earth movement exclusion ("Earth Movement exclusion"), exclude Plaintiff's claim for the building's east wall collapse. The Court grants Defendant's Motion for Summary Judgment and denies Plaintiff's Motion for Summary Judgment for two reasons. First, the Workmanship exclusion precludes coverage because Plaintiff's acts, errors, and omissions related to the excavation of the basement coupled with the failure to install underpinning to secure the building's foundation caused the east wall's collapse. Furthermore, the ensuing loss exception fails to restore coverage because no independent and covered peril contributed to the collapse other than Plaintiff's excluded conduct. Second, the Earth Movement exclusion is also precludes Plaintiff's coverage claim because although Plaintiff's relevant conduct occurred below grade, it still involved movement of soil and clay at the earth's surface. Accordingly, Defendant's Motion for Summary Judgment (Doc. 33) is GRANTED and Plaintiff's' Motion for Summary Judgment (Doc. 31) is DENIED because both the workmanship exclusion and the earth movement exclusion of the insurance policy entitle Defendant to withhold coverage and deny Plaintiff's claim.

I. BACKGROUND

The material facts in this case are not in dispute. Plaintiff Taja is a construction company organized under the laws of Maryland with its principal place of business in Maryland, and Defendant Peerless is an insurance company organized under the laws of New Hampshire and maintains its principal place of business in New Hampshire. (Compl. at ¶¶ 1-2). The insurance policy ("the Policy") is an "all risk" policy which covers all risk of loss except those expressly excluded under the Policy's terms. (Compl. at ¶ 8; Doc. 36-1, at 73). The insured property at issue is a row house on New York Avenue in Northwest Washington, DC. Taja began renovating the property's four-to-five foot basement as part of a restoration plan, which involved excavating the existing crawl space in order to create a depth of nine feet to allow living areas to be created. (Doc. 34, at 1-2). The project's structural plans reveal that Taja was to excavate the basement in discrete stages, underpinning the structure at every step to prevent risk of collapse. (Doc. 40, at 3-4).

Taja principal Michael Watson received cautionary warnings about the importance of underpinning from project engineer Dennis Anibaba as far as three weeks prior to the incident. (Doc. 36-3, at 21:3-27:20). Approximately two days before the incident, Brian Brown, the owner of NextGen Construction that had renovated the building next door, raised his concern with Watson about the lack of underpinning. He informed Watson that he was "concerned about the stability of [the] below grade soil ... [the] subcontractor is not doing what he should be doing." (Id. at 10:6-13:6; Doc. 36-5, at 6:14-9:9). Owen Wilson, owner of the excavation contractor, confirmed that the traditional method is to do a "little bit of digging and [then] do your underpinning," and inserted a special clause in the contract with Taja to refuse responsibility for any collapse due to lack of underpinning. (Doc. 36-6, at 19:20-21:14).

On June 10, 2014, the east wall of the building collapsed. (Compl. at ¶ 7). At the time of the wall's collapse, Watson confirmed that no underpinning had been performed. (Doc. 36-4, at 81:9-82:25). Taja paid $142,275 for the immediate shoring and bracing of the damages following the collapse, and repairs to place the building back into pre-collapse condition are $407,885.89, not including any costs for excavation or installation of a foundation. (Doc. 34, at 3). Taja made an insurance claim on Peerless, and Peerless visited the site on June 20, 2014 for inspection. (Doc. 34, at 3-4). Peerless hired engineer Mr. Zachary Kates of Thornton Tomasetti, who determined that the contractor should not have excavated the entire basement without performing underpinning, and that as a result the soil and clay below the east wall became unstable and contributed to the collapse of the east wall. (Doc. 34, at 4).

In February 2015, eight months after the collapse and Peerless' site inspection, Peerless stated it would not cover Taja's sustained losses, citing that both the Workmanship exclusion and the Earth Movement exclusion entitled them to withhold coverage. (Doc. 34, at 8; Doc. 34-6, at 1-2). The Workmanship exclusion states that "defects, errors, and omissions relating to design, specifications, construction, or workmanship are not covered, but if loss by another covered peril results, Peerless will pay for the resulting loss." (Doc. 34-1, at 75-76). The Earth Movement exclusion states that Peerless "will not pay for loss caused by any earth movement (other than sinkhole collapse)," and defines the term as encompassing "any movement or vibration of the Earth's surface including but not limited to earthquake, landslide, mudflow, mudslide, mine subsidence, or sinking, rising, or shifting of the Earth." (Id. at 73).

After Peerless refused to cover Taja's losses, Taja filed suit in the Circuit Court of Fairfax County on August 28th, 2015, alleging one count of breach of policy of insurance. (Compl. at ¶ 1). Taja maintains that it is entitled to damages approximating $400,000, plus interest from the date of loss until the time of judgment at the legal rate, with other associated relief costs that the Court may seem fit. (Id. at 4). Peerless subsequently filed for removal to this Court pursuant to 28 U.S.C. §§ 1441 and 1446. (Id. at ¶ 1). This case is properly before the Court pursuant to the diversity jurisdiction requirements set out in 28 U.S.C. § 1332. Taja and Peerless subsequently filed cross-motions for summary judgment on May 27, 2016. (Doc. 31; Doc. 33).

II. DISCUSSION

A. Standard of Review

Under Federal Rule of Civil Procedure 56, the Court must grant summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c) (2013).

In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the nonmoving party. Boitnott v. Corning, Inc. , 669 F.3d 172, 175 (4th Cir.2012) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Bouchat v. Baltimore Ravens Football Club, Inc. , 346 F.3d 514, 522 (4th Cir.2003). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Emmett v. Johnson , 532 F.3d 291, 297 (4th Cir.2008) (quoting Anderson , 477 U.S. at 247–48, 106 S.Ct. 2505 ).

A "material fact" is a fact that might affect the outcome of a party's case. Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ; JKC Holding Co. v. Wash. Sports Ventures, Inc. , 264 F.3d 459, 465 (4th Cir.2001). Whether a fact is considered to be "material" is determined by the substantive law, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ; Hooven–Lewis v. Caldera , 249 F.3d 259, 265 (4th Cir.2001).

A "genuine" issue concerning a "material" fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Resource Bankshares Corp. v. St. Paul Mercury Ins. Co. , 407 F.3d 631, 635 (4th Cir.2005) (quoting Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ). Rule 56(e) requires the nonmoving party to go beyond the pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett , 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

B. Analysis

The Court grants Defendant's Motion for Summary Judgment and denies Plaintiff's Motion for Summary Judgment for two reasons. First, the Workmanship exclusion is applicable because the Court readily finds that Plaintiff's own acts, errors, and omissions related to the over-excavation of the basement coupled with the failure to install necessary underpinning to secure the building's foundation caused the east wall's collapse. The Court further holds that the ensuing loss exception fails to restore coverage because no other independent or interceding covered peril contributed to the collapse other than Plaintiff's excluded conduct. Second,...