Tampa Electric Co. v. Stone & Webster Engineering Corp.

• Citation: 367 F. Supp. 27
• Decision Date: 26 October 1973
• Docket Number: Civ. No. 69-479 T-K.
• Parties: TAMPA ELECTRIC COMPANY et al., Plaintiffs v. STONE & WEBSTER ENGINEERING CORPORATION et al., Defendants-3rd Party Plaintiffs, v. ROYAL INDEMNITY COMPANY, Third-Party-Defendant.
• Court: U.S. District Court — Middle District of Florida

367 F. Supp. 27

TAMPA ELECTRIC COMPANY et al., Plaintiffs v. STONE & WEBSTER ENGINEERING CORPORATION et al., Defendants-3rd Party Plaintiffs, v. ROYAL INDEMNITY COMPANY, Third-Party-Defendant.

Civ. No. 69-479 T-K.

United States District Court, M. D. Florida, Tampa Division.

October 26, 1973.

COPYRIGHT MATERIAL OMITTED

C. Lawrence Stagg and John Germany of Holland & Knight, Tampa, Fla., for Tampa Electric Co.

William R. Hapner of Wagner, Cunningham, Vaughan, Hapner & May, Tampa, Fla., for Continental Ins.

William C. Frye, Trenam, Simmons, Kemker, Scharf & Barkin, Tampa, Fla. (on Stone & Webster's Counterclaim) (C. Lawrence Stagg, Tampa, Fla., on main claim), for Royal Indemnity Co.

T. Paine Kelly, Jr., Macfarlane, Ferguson, Allison & Kelly, Tampa, Fla., for Westinghouse Electric.

Ralph C. Dell of Allen, Dell, Frank & Trinkle, Tampa, Fla., Laurence V. Senn, Jr., Donald J. Zoeller, John J. Kirby of Mudge, Rose, Guthrie & Alexander, New York City, for Stone & Webster Eng.

T. Paine Kelly, Jr., Macfarlane, Ferguson, Allison & Kelly, Tampa, Fla., for Liberty Mutual Ins. Co., John Peter Fredk Green (Lloyd's # CU6407).

R. Corbin Glos, W. M. Carson of Glos & Carson, Tampa, Fla., for Geoffrey Valentine.

Don M. Stichter, Tampa, Fla., and Robert G. Schloerb & Richard L. Blatt of Peterson, Ross, Rall, Barber & Seidel, Chicago, Ill., for George Milton (Lloyd's # # CU 8147, 8148).

William A. Gillen of Fowler, White, Gillen, Humkey, Kinney & Boggs, Tampa, Fla., Harding A. Orren of Robins, Davis & Lyons, Minneapolis, Minn., for Royal Indemnity Co. (third party defendant).

MEMORANDUM OPINION AND ORDER

KRENTZMAN, District Judge.

This is a suit for damages arising out of a fire which occurred on November 30, 1968, at Gannon Station, an electric generating plant owned by Tampa Electric Company (TECO) located in Hillsborough County, Florida.

In late 1964 Westinghouse Electric Corporation submitted a proposal to sell a turbine generator unit to TECO in response to an invitation to bid and specifications prepared by Stone & Webster Engineering Corporation. TECO bought the unit from Westinghouse for $6,216,999.02 and paid Stone & Webster $1,634,614 for services relating to the erection of the turbine generator. This new addition to the Gannon station generator family was named Unit number 6.

For some reason a fracture occurred in a high pressure oil line on the Unit 6 generator. A fire erupted which caused substantial damages. Unit 6 was inoperative until August 18, 1969, and some of the other turbine generator units at Gannon Station were out for lesser periods.

TECO sued both Stone & Webster and Westinghouse to recover the damages it sustained because of the fire. Each party proffered its theory as to how the blame should rightly rest on the other two. Eventually Continental Insurance Company (Continental) and Royal Insurance Company (Royal) were joined as party plaintiffs; various other insurance companies were added as defendants. Finally, after nearly four years of pleadings, motions and discovery, the lawsuit spawned by the conflagration showed signs of being under control.

At the pretrial conference it was agreed that there were a number of issues that could be severed and treated separately. It was further agreed that some of these issues could be determined by the Court prior to the trial on liability. An order was entered to that effect on September 28, 1973.

Accordingly, this opinion will resolve the following pretrial issues.¹ (1) Does Royal Insurance Company have a duty to defend Stone & Webster; (2) Has Continental waived its right to subrogation against Westinghouse; (3) Has Royal waived its right to subrogation against Westinghouse; (4) Are plaintiffs entitled to interest on damages to property under the circumstances of the instant claims; (5) Can TECO claim loss of "capacity charges" as an element of its damages; (6) Can damages be apportioned among joint tortfeasors under the law of Florida applicable in this case; (7) Is comparative negligence a defense to claims other than simple negligence.

ROYAL'S DUTY TO DEFEND STONE & WEBSTER

In a third party complaint, Stone & Webster asserts that since the action brought against it by TECO is of a type covered by a Royal insurance policy, Royal is obligated to defend Stone & Webster and thus to pay any costs of defending.²

It is undisputed that Royal issued a Comprehensive General Liability Policy and that the policy and related contract were in full force and effect on the date of the accident giving rise to instant case.

A liability insurer's duty to defend an insured must be determined from the allegations contained in the complaint filed in the suit or proceeding against the insured. If the pleading states claims of injury or damage which are covered by the policy, the insurer must defend. Coblentz v. American Surety Co. of N. Y., 416 F.2d 1059, 1062 (5 Cir. 1969); Burton v. State Farm Mutual Automobile Insurance Co., 335 F.2d 317, 321 (5 Cir. 1964); Tampa Ship Repair & Dry Dock Co., Inc. v. Aetna Casualty & Surety Co., No. 72-187 Civ. T-K, M.D.Fla., Sept. 27, 1973; New Amsterdam Casualty Co. v. Knowles, 95 So.2d 413 (Fla.1957). And while it is true that an insurance company need not defend against a suit claiming damages not covered by its policy, the determination of whether a duty exists is made at the time the suit is brought, not after the suit is reduced to judgment.

Therefore since the duty to defend is controlled by the original pleadings, and since the effect of the policy clauses is that the insurer undertakes to defend claims of the type for which it would have to make payment, the complaint against Stone & Webster should be examined to determine if it claims liability of a type covered by the Royal policy. If some of the claims are within the coverage provided, and some are outside the policy provisions, and the covered claim alone would compel coverage, then Royal is obligated to defend against both the covered and non-covered claims. See St. Paul Fire & Marine Insurance Co. v. Icard, Merrill, Cullis & Timm, P.A., 196 So.2d 219 (2d D. C.A.1967). See also Gulf Insurance Co. v. Dooley, 286 F.Supp. 16 (N.D.Ill. 1968); Vappi & Co. v. Aetna Casualty & Surety Co., 348 Mass. 427, 204 N.E.2d 273 (1965); Lionel Freedman, Inc. v. Glen Falls Insurance Co., 27 N.Y.2d 364, 318 N.Y.S.2d 303, 267 N.E.2d 93 (Ct. App.1971).

The Tampa Electric Company complaint contains the following allegations upon which it has based its claim for property damages against Stone & Webster:

"S&W breached the 1954 contract in a number of respects, including, but not limited to, its failure to make all necessary engineering studies and determinations, to recommend to TECO the type and character of equipment and of construction required, to prepare proper plans and specifications for equipment, material and construction work and to execute the construction and install the machinery and equipment as required under the said contract." (Count I p. 13).

"In connection with its agreement to design and construct Unit 6, S&W made the following implied warranties to TECO: a) Unit No. 6 would be merchantable; b) that Unit No. 6 would be fit for the generation of electricity, which was the purpose for which TECO intended to use it, as was known to S&W." (Count III p. 3).

"The Defendants, and each of them, were negligent in the design, construction, installation, inspection, adjustment and testing of Unit 6 . . ." (Count IV p. 2).

The pertinent portion of the insurance policy reads as follows:

"INSURING AGREEMENTS

XXX

Coverage B — Property Damage Liability

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof.

"With respect to such insurance as is afforded by this policy, the company shall: a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent. . . ."

"EXCLUSIONS

This policy does not apply: . . . under coverage B . . . to injury to or destruction of property caused by the insured's improper, inadequate or faulty plans, design or specifications."

The claims charging Stone & Webster with negligent installation of Unit 6 are clearly within the policy coverage. The allegations of negligent design, however, are not covered by virtue of the exclusionary clause quoted above.

Since the complaint states a covered claim, Royal has a duty to defend Stone & Webster even though a non-covered claim is also alleged. Royal must pay Stone & Webster's cost of conducting its defense of the TECO complaint.³

Royal urges that because the claim of negligent design is not covered by its policy, but may be covered by another insurer,⁴ that the costs of defendant Stone & Webster must be somehow prorated to reflect the respective costs of defending the covered and non-covered claims.

The duty of Royal to defend both the covered and non-covered claims gives rise to a correlative duty to pay the costs of defending both such claims. See St. Paul Fire & Marine Insurance Co. v. Hodor, 200 So.2d 205 (3 D.C.A. Fla.1967); Town and Beach Plumbing Co. v. American Fire & Casualty Co., 157 So.2d 700 (2 D.C.A.Fla.1963). Whether there is another insurance company involved which should also be responsible for all defense costs, and, if so, whether the two insurance companies would then be entitled to split the costs of defending, are issues not now before the Court.

The determination of Royal's duty to defend Stone & Webster was initiated on opposing motions for partial summary judgment. For the reasons enumerated herein, Stone & Webster's motion for partial summary judgment is hereby granted as to Royal's duty to defend and to pay the costs of defending. Royal's motion for partial summary judgment is hereby denied.

Although Royal's liability for...