Walsh Constr. Co. v. Zurich Am. Ins. Co.

• Decision Date: 28 March 2017
• Docket Number: Court of Appeals Case No. 45A04-1606-PL-1284
• Citation: 72 N.E.3d 957
• Parties: WALSH CONSTRUCTION COMPANY, Appellant–Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, Appellee–Defendant, and Roadsafe Holdings, Inc. d/b/a Roadsafe Traffic Systems, Inc., Appellee–Intervener.
• Court: Indiana Appellate Court

72 N.E.3d 957

WALSH CONSTRUCTION COMPANY, Appellant–Plaintiff,

v. ZURICH AMERICAN INSURANCE COMPANY, Appellee–Defendant,andRoadsafe Holdings, Inc. d/b/a Roadsafe Traffic Systems, Inc., Appellee–Intervener.

Court of Appeals Case No. 45A04-1606-PL-1284

Court of Appeals of Indiana.

March 28, 2017

Attorney for Appellant : Michael L. Schultz, Parr Richey Obremskey Frandsen & Patterson LLP, Indianapolis, Indiana

Attorneys for Appellee Zurich American Insurance Company : Kyle A. Lansberry, Lewis S. Wooton, Michael R. Giordano, Lewis Wagner, LLP, Indianapolis, Indiana

Attorneys for Appellee Roadsafe Holdings, Inc. : T. Allon Renfro, Swanson, Martin & Bell, LLP, Chicago, Illinois, Robert P. Conlon, Joyce F. Noyes, Walker Wilcox Matousek LLP, Chicago, Illinois

Najam, Judge.

Statement of the Case

[1] Walsh Construction Company ("Walsh") appeals the trial court's entry of summary judgment in favor of Zurich American Insurance Company ("Zurich") on Walsh's complaint for declaratory judgment. Walsh raises three issues for our review, which we consolidate and restate as whether the trial court erred when it entered summary judgment for Zurich. As a matter of first impression, we hold that a self insured retention endorsement to a commercial general liability insurance policy requires the named insured to satisfy the amount of the endorsement, whether on its own behalf or on behalf of an additional insured, before the additional insured may seek to enforce the policy against the insurer. As that has not occurred here, we affirm the trial court's entry of summary judgment for Zurich.

Facts and Procedural History

[2] In January of 2009, Walsh, a general contractor, hired Roadsafe Holdings, Inc. d/b/a Roadsafe Traffic Systems, Inc. ("Roadsafe") to be Walsh's subcontractor in the construction of a traffic exchange involving Interstates 65 and 80 in Lake County. Roadsafe's work obligations included providing a safe traffic pattern through the work zone. Walsh's contract with Roadsafe required Roadsafe to indemnify Walsh for any liability resulting from Roadsafe's failure or negligence in its work. Accordingly, Walsh's contract required Roadsafe to procure a commercial general liability insurance policy ("CGL policy") that named Walsh as an additional insured on a primary and noncontributory basis.

[3] Roadsafe obtained its CGL policy from Zurich. The CGL policy defined Roadsafe as the "Named Insured" and stated that, "[t]hroughout this policy[,] the words ‘you’ and ‘your’ refer to the Named Insured.... The word ‘insured’ means any person or organization qualifying as such under Section II—Who Is An Insured." Appellant's App. Vol. 3 at 72. An endorsement attached to the CGL policy named as additional insureds any "person and organization where required by written contract," such as Roadsafe's contract with Walsh, "but only with respect to liability for ‘bodily injury’ ... by your [Roadsafe's] acts or omissions...." Id. at 99. The CGL policy then provided as follows: "We [Zurich] will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ ... to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages." Id. at 72.

[4] However, Roadsafe also obtained a $500,000-per-occurrence self insured retention endorsement ("the SIR endorsement") to the CGL policy. The SIR endorsement amended the CGL policy as follows:

The insurance provided by this policy is subject to the following additional provisions, which in the event of conflict with any other provisions elsewhere in the policy, shall control the application of the insurance to which this endorsement applies:

1. Self Insured Retention and Defense Costs—Your Obligations

A. The "self insured retention" amounts stated ... apply as follows:

1. If a Per Occurrence Self Insured Retention Amount is shown in this endorsement, you shall be responsible for payment of all damages and "pro rata defense costs" for each "occurrence"[ ] until you have paid damages equal to the Per Occurrence amount ....

* * *

B. Defense Costs

Except for any "defense costs" that we may elect to pay, you shall pay "pro rata defense costs" as they are incurred....

C. Settlement of Claim

1. Within Self Insured Retention

If any final judgment or settlement is less than the "self insurance retention" indicated ... above, you shall have the right and obligation to settle all such claims or suits....

2. Excess of Self Insured Retention

You may not settle any claim or suit which exceeds any "self insured retention" amount indicated ... without our written permission to do so....

* * *

H. Compliance

Compliance with the requirements set forth in this endorsement is a condition precedent to coverage ....

II. Our Rights and Obligations Excess of the Self Insured Retention

* * *

B. Damages Excess of Self Insured Retention—Per Occurrence or Per Claim

We shall be liable only for the amounts of our share of "pro rata defense costs" and damages in excess of the "self insured retention" amounts ... above....

* * *

D. Settlement of Claims

1. Within Self Insured Retention

We shall have, at our option, the right but not the obligation or duty[ ] to negotiate the settlement of any claim within the applicable "self insured retention" amount, which in our opinion is deemed expedient. But we shall obtain your consent prior to entering into any settlement of any claim which is equal to or less than the "self insured retention" amount....

2. Excess of Self Insured Retention

With respect to any claim under this insurance which has been tendered to us and which may exceed the "self insured retention" amount shown ... we have the right and duty to negotiate the settlement of such claim and may pay any or all damages and "defense costs" on your behalf, both within and excess of the applicable "self insured retention" amount. Any such payments made by us for damages or "defense costs" within the "self insured retention" amount shall be reimbursed promptly by you.

Definitions—

A. "Self insured retention" means:

the amount or amounts which you or any insured must pay for all compensatory damages and "pro rata defense costs" which you or any insured shall become legally obligated to pay because of damages arising from any coverage included in the policy .

* * *

D. "Occurrence[,]" for purposes of this endorsement only, means an "occurrence[,]" offense, accident, act, error or omission[,] or any other such similar event, as defined or used in our policy, that must occur in order to initiate payment of covered losses under the policy terms and conditions.

Id. at 68–71 (emphases added).

[5] On June 15, 2009, Boguslaw Maczuga was injured while operating his motor vehicle through the work zone's traffic pattern. On June 27, 2011, Maczuga served Walsh with a Second Amended Complaint in which Maczuga alleged that Walsh had negligently created an unsafe traffic pattern.¹ As a result of Maczuga's complaint, on January 18, 2012, Walsh filed a third-party complaint against Roadsafe. In its complaint, Walsh alleged, in relevant part, that Roadsafe had failed to indemnify Walsh and that Roadsafe had breached its contract with Walsh. Specifically, Walsh's third-party complaint stated that "[t]he Maczuga lawsuit seeks recovery from Walsh for its alleged negligence in connection with work that was to be performed by Road[s]afe" and that, "[f]ollowing service of process of the Maczuga lawsuit, Walsh tendered its defense and indemnity to Road[s]afe" but Roadsafe had "failed to either agree to indemnify or undertake Walsh's defense." Appellant's App. Vol. 2 at 54–55.

[6] Thereafter, Walsh notified Zurich, pursuant to the terms of the CGL policy, of Maczuga's lawsuit and requested that Zurich defend Walsh in that suit. Zurich denied Walsh's request, and Walsh filed a complaint for declaratory judgment against Zurich in which Walsh alleged that Zurich had a duty to defend and indemnify Walsh. Id. at 61–62. Roadsafe intervened in the declaratory judgment action, and the parties moved for summary judgment. After a hearing, the trial court entered summary judgment for Zurich, stating:

Zurich has no contractual obligation to cover Walsh as an additional insured at this time. First of all, the policy is a liability policy between Zurich and Roadsafe and no person or entity has sued or even made a claim against Roadsafe for any type of negligence. Also there is a [SIR endorsement] that requires the insured to pay the first $500,000.00 of costs and damages of any claim before Zurich becomes obligated to pay out on the policy. Since there has been no claim for negligence against Roadsafe, Roadsafe has paid nothing and has made no claim under the policy.

Id. at 7. This appeal ensued.

Discussion and Decision

[7] Walsh appeals the trial court's entry of summary judgment for Zurich. Our standard of review is clear:

We review summary judgment de novo, applying the same standard as the trial court: "Drawing all reasonable inferences in favor of ... the non-moving parties, summary judgment is appropriate ‘if the designated evidentiary matter shows 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.’ " Williams v.Tharp , 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C) ). "A fact is ‘material’ if its resolution would affect the outcome of the case, and an issue is ‘genuine’ if a trier of fact is required to resolve the parties' differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences." Id. (internal citations omitted).

The initial burden is on the summary-judgment movant to "demonstrate [ ] the absence of any genuine issue of fact as to a determinative issue," at which point the burden shifts to the non-movant to "come forward with contrary evidence" showing an issue for the trier of fact. Id. at 761–62 (internal quotation marks and substitution omitted). And "[a]lthough the non-moving party

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