Woods Masonry, Inc. v. Monumental General Cas., C01-4045-MWB.
| Decision Date | 23 April 2002 |
| Docket Number | No. C01-4045-MWB.,C01-4045-MWB. |
| Citation | 198 F.Supp.2d 1016 |
| Parties | WOODS MASONRY, INC., Plaintiff, v. MONUMENTAL GENERAL CASUALTY INSURANCE CO., Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Daniel L. Hartnett, Crary, Huff, Inkster, Hecht, Sheehan, Ringenberg, Hartnett, Storm, Sioux City, IA, for plaintiff.
Steven L. Nelson, Davis, Brown, Koehn, Shors & Roberts, Des Moines, IA, Paul W. Deck, Jr., Deck & Deck, Sioux City, IA, for defendant.
This declaratory judgment action stems from a job-related accident that occurred on March 17, 1999 in Spencer, Iowa. On that date, the plaintiff, Woods Masonry Inc. ("Woods Masonry") was performing work as a subcontractor in the construction of a commercial building. Shortly before the accident, Woods Masonry, an Arkansas corporation, hired James Eischeid ("Eischeid"), an Iowa resident. Mr. Eischeid was seriously injured when a gust of wind toppled one of the block walls under construction, collapsing on Mr. Eischeid. Woods Masonry's workers' compensation carrier, defendant Monumental General Casualty Insurance Co. ("Monumental"), refused coverage, claiming that Woods Masonry's policy covered only Arkansas employees hired in Arkansas.
While at first blush this case may appear to be a simple contract action, it implicates complex legal issues that are not readily ascertainable. In order to decide the issues raised by the parties in their respective motions for summary judgment, the court must determine whether parol evidence is admissible to aid in the interpretation of the parties' contract and, furthermore, whether an Arkansas statute providing for attorneys' fees and penalties is procedural or substantive, because a federal court sitting in diversity must make this critical determination when choosing which forum's law applies.
In this action, Woods Masonry seeks a declaratory judgment, pursuant to the federal Declaratory Judgment Act, 28 U.S.C. § 2201, that Monumental is responsible for providing workers' compensation coverage of the Eischeid claim, which arose out of Mr. Eischeid's March 17, 1999 work-related accident in Spencer, Iowa. In addition, Woods Masonry seeks penalties and attorneys' fees pursuant to an Arkansas statutory provision that provides for damages and attorneys' fees to an insured when an insurer fails to timely pay a compensable claim.1 Monumental denies that Woods Masonry's workers' compensation policy covers the Eischeid claim, because Monumental contends that the policy's coverage is limited to injuries sustained by Arkansas residents who were hired by the plaintiff in Arkansas. Monumental asserts that Woods Masonry knew of this limitation and assured Monumental that only Arkansas employees would be taken to the Iowa job site. Monumental contends that, based on these assurances, Monumental issued proof of workers' compensation coverage for the Spencer, Iowa construction job.
Furthermore, Monumental disputes that the Arkansas statute invoked by the plaintiff applies in this action because Monumental argues that the statute is procedural. Monumental argues that, under the Erie doctrine, federal courts sitting in diversity should apply the procedural law of the forum state, rather than the law of the state with the most significant contacts to the cause of action. Therefore, according to the defendant, the Erie doctrine precludes application of the Arkansas statute in question.
Subject matter jurisdiction in this matter is predicated on diversity of citizenship. The plaintiff is an Arkansas corporation, and its principal place of business is in Arkansas as well. The defendant is incorporated in Maryland, and its principal place of business is likewise in Maryland. The amount in controversy in this case has been plead in good faith to exceed $75,000, exclusive of interest and costs. Diversity jurisdiction, therefore, is proper pursuant to 28 U.S.C. § 1332.
In a separate action pending before this court, Eischeid v. Dover Construction, Inc., et al., C00-4100-MWB, (hereinafter referred to as the personal injury action), Mr. Eischeid seeks compensation for his injuries from, among other parties, Woods Masonry. Woods Masonry filed this lawsuit against Monumental on May 9, 2001 in response to Mr. Eischeid's amended complaint, which added Woods Masonry as a party to his personal injury action after he learned that Monumental had refused coverage of his claim. However, in the personal injury action, Woods Masonry contends that it is immunized from Mr. Eischeid's suit under the Iowa Workers' Compensation Act, Iowa Code § 85 et seq., which provides that workers' compensation benefits "shall be the exclusive and only rights and remedies of ... an [injured] employee ... at common law or otherwise, on account of such injury ... against ... the employee's employer." IOWA CODE § 85.20 (2001). In other words, the Iowa Workers' Compensation Act bars employees from suing their employers for injuries arising out of and in the course of employment. See id. Because coverage of Mr. Eischeid's injuries would prevent Mr. Eischeid from pursuing his negligence claim against Woods Masonry in the personal injury action, this court stayed the Eischeid personal injury lawsuit pending disposition of this action.
On January 11, 2002, Monumental filed a motion for partial summary judgment on Woods Masonry's bad faith tort claim and on the applicability of the Arkansas statute providing for attorneys' fees and penalties.2 Monumental did not move for summary judgment on Woods Masonry's coverage claim, asserting that there are factual issues that preclude summary judgment. On February 19, 2002, Woods Masonry filed a resistance to Monumental's motion for partial summary judgment. In its resistance, Woods Masonry asserts that it is entitled to penalties and attorneys' fees provided for by Arkansas law. In lieu of rehashing the arguments in support of Woods Masonry's own motion for partial summary judgment, which was filed February 8, 2002, Woods Masonry's resistance to Monumental's motion referenced the arguments made in support of Woods Masonry's motion for summary judgment with respect to Woods Masonry's contention that the Arkansas statute applies in this action. However, in its resistance papers, Woods Masonry concedes that it lacks the requisite elements necessary to sustain a bad faith tort claim under Arkansas law. Woods Masonry, therefore, withdrew that claim.
On February 8, 2002, Woods Masonry filed a motion for partial summary judgment, asserting that there are no genuine issues of material fact in dispute on the coverage claim because the workers' compensation policy speaks for itself and provides coverage of the Eischeid accident. In addition, Woods Masonry argues that any prior or contemporaneous agreements between the parties that the policy would cover only employees of Woods Masonry who were residents of Arkansas and were hired in Arkansas, even if true, are extrinsic evidence, extinguished by the policy's merger clause and barred by the parol evidence rule. Furthermore, Woods Masonry contends that the Arkansas statutory provision providing for attorneys' fees and penalties is substantive and, therefore, should apply, even though this court sits in Iowa.
A jury trial in this case is scheduled for June 10, 2002. Further, both parties requested oral arguments on their respective motions for partial summary judgment. The court granted the parties' requests and heard arguments, which took place telephonically, on April 17, 2002. The plaintiff, Woods Masonry, was represented at these arguments by Daniel L Hartnett of Crary-Huff-Inkster-Hecht-Sheehan-Ringenberg-Hartnett-Storm, Sioux City, Iowa. The defendant, Monumental, was represented by both Steven L. Nelson of Davis Brown Koehn Shors & Roberts, Des Moines, Iowa and Paul W. Deck, Jr. of Deck & Deck, Sioux City, Iowa.
The court will discuss here only the nucleus of undisputed facts and...
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