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Pennsylvania National Mutual Casualty Insurance Company v. J.F. Morgan General Contractors, Inc.

United States District Court, N.D. Alabama, Eastern Division

January 7, 2015

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, Plaintiff,
v.
J.F. MORGAN GENERAL CONTRACTORS, INC., et al., Defendants

Page 1246

For Pennsylvania National Mutual Casualty Insurance Company, Plaintiff, Counter Defendant: Steve R Burford, SIMPSON MCMAHAN GLICK & BURFORD PLLC, Birmingham, AL.

For J F Morgan General Contractors Inc, Defendant: A Joe Peddy, Jennifer W Pickett, SMITH SPIRES & PEDDY PC, Birmingham, AL.

For Harleysville Mutual Insurance Company, Defendant: Connie Ray Stockham, John K Pocus, WHITE ARNOLD & DOWD PC, Birmingham, AL; Steve R Burford, SIMPSON MCMAHAN GLICK & BURFORD PLLC, Birmingham, AL.

For Harleysville Mutual Insurance Company, Counter Claimant: Connie Ray Stockham, WHITE ARNOLD & DOWD PC, Birmingham, AL.

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MEMORANDUM OPINION

KARON OWEN BOWDRE, CHIEF UNITED STATES DISTRICT JUDGE.

This matter is before the court on Plaintiff Pennsylvania National Mutual Casualty Insurance Company's " Renewed Motion for Summary Judgment," (Doc. 56); Defendant Nationwide Mutual Insurance Company's " Motion for Summary Judgment on the Claims of Pennsylvania National Mutual Casualty Insurance Company and Motion for Summary Judgment on its Counterclaim," (Doc. 58); and Penn National's " Motion for Leave to Amend Complaint," (Doc. 89).

This declaratory judgment case arises from a dispute over insurance coverage for the underlying case of Miranda McFry v. J.F. Morgan Contractors, Inc., Civil Action No. CV-2009-900346, in the Circuit Court of Calhoun County, Alabama. To resolve that case against their purported insured, J.F. Morgan General Contractors, Penn National and Nationwide agreed to each pay half of a settlement and ask this court to resolve ultimate responsibility in this case. So here we are.

The parties dispute which insurance company should ultimately be responsible for the full settlement amount. Penn National argues that it is not responsible for the settlement because nobody reported McFry's lawsuit to it for over a year after the lawsuit was filed and argues that Nationwide should pay Penn National back its portion of the settlement.

Penn National wins this dispute because nobody sent it the suit papers from McFry's lawsuit until 13 months after McFry filed suit. Thus, the court GRANTS Penn National's motion for summary judgment; DENIES Nationwide's motion for summary judgment; and DENIES AS MOOT Penn National's motion to amend the complaint.

I. Facts

On September 1, 2007, Anniston Concrete Company entered into a commercial general liability policy, numbered CL90625603, with Penn National. Anniston Concrete purchased its Penn National policy through Jim Garmon's insurance agency, Insurance Planning Services (" IPS" ). IPS sold Penn National policies under an " agency-company agreement," which outlined the relationship between IPS and Penn National. (Doc. 57, ¶ 1; Doc. 59, ¶ ¶ 4, 8, 10; Doc. 60-2; Doc. 60-5).

On March 28, 2008, Jacksonville City Schools awarded J.F. Morgan a contract to remodel Jacksonville High School and other schools. On April 8, 2008, J.F. Morgan, in turn, sub-contracted with Anniston Concrete to perform site and grading work at Jacksonville High School. The sub-contract required Anniston Concrete to have a commercial general liability policy and to name J.F. Morgan as an " additional insured" under the policy. (Doc. 57, ¶ ¶ 7-9; Doc. 59, ¶ ¶ 1-3; Doc. 60-1).

Upon entering into the sub-contract, J.F. Morgan became an " additional insured" to Anniston Concrete's Penn National policy by operation of the policy's " Automatic Additional Insureds -- Owners, Contractors and Subcontractors (Ongoing Operations)" endorsement. IPS provided J.F. Morgan with certificates of insurance

Page 1248

that showed Anniston Concrete's insurance coverage. The certificates of insurance listed J.F. Morgan as a " certificate holder" and stated: " IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed." (Doc. 21-4, 2-7; Doc. 57, ¶ 11; Doc. 59, ¶ 7).

Harleysville Mutual Insurance Company (Nationwide's predecessor) also directly insured J.F. Morgan through a commercial general liability policy, numbered MPA1M1453. J.F. Morgan employed someone to manage all its insurance contracts. (Doc. 57, ¶ 13; Doc. 59, ¶ 14; Doc. 60-6).

On June 2, 2008, Ricky Smith, an employee of Anniston Concrete, died while performing soil compaction work at Jacksonville High School. The sub-contract between J.F. Morgan and Anniston Concrete covered Smith's work at the time of his death.[1] (Doc. 57, ¶ ¶ 23-4; Doc. 59, ¶ 17).

J.F. Morgan immediately learned about the accident, which occurred on its job site, and informed Harleysville. Additionally, J.F. Morgan told Anniston Concrete that it needed to notify its insurance carrier of the accident. J.F. Morgan did not contact Penn National. (Doc. 57, ¶ ¶ 25-7; Doc. 93-3, 8).

One day after the accident, on June 3, 2008, Anniston Concrete informed IPS about Smith's accident. IPS notified Anniston Concrete's workers compensation insurance carrier of the accident, but not Penn National. Anniston Concrete did not directly inform Penn National about Smith's accident either. (Doc. 57, ¶ ¶ 28-9; Doc. 59, ¶ 18).

About 15 months after the accident, on October 29, 2009, Miranda McFry, Smith's daughter, filed a lawsuit against J.F. Morgan. Around November 9, 2009, McFry served J.F. Morgan with a summons and a copy of the complaint. J.F. Morgan, in turn, notified Harleysville of McFry's lawsuit on the same day, but did not notify Penn National. J.F. Morgan also told Anniston Concrete about McFry's lawsuit. (Doc. 57, ¶ ¶ 31-2, 34; Doc. 59, ¶ 19; Doc. 93-3, 10; Doc. 93-3, 9).

On November 12, 2009, Anniston Concrete informed IPS about McFry's lawsuit. Anniston Concrete had a copy of the complaint, but did not give the complaint to IPS and IPS did not ask for the complaint. IPS reviewed copies of the certificates of insurance it provided to J.F. Morgan and incorrectly determined that Anniston Concrete's Penn National policy did not include J.F. Morgan as an additional insured. Neither IPS nor Anniston Concrete communicated this incorrect information to J.F. Morgan, however. Further, neither IPS nor Anniston Concrete contacted Penn National about McFry's lawsuit or forwarded the complaint to Penn National. (Doc. 57, ¶ ¶ 37, 39; Doc. 59, ¶ 20; Doc. 91-3, 36; Doc. 93-3, 6).

On December 15, 2010, J.F. Morgan asked IPS, by letter, to provide a defense and indemnity for McFry's lawsuit. IPS forwarded the letter to Penn National on December 20, 2010, 13 months after McFry filed her lawsuit and two-and-a-half years after Smith's accident. (Doc. 57, ¶ 46; Doc. 93-3, 9).

On May 20, 2011, Penn National filed a complaint asking this court to determine

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which insurance company, Penn National or Nationwide, had to defend and ultimately pay for the defense and settlement of McFry's lawsuit. (Doc. 1). McFry's lawsuit settled on August 6, 2012 and Penn National and Nationwide each paid one half of the settlement under a reservation of rights. (Doc. 59, ¶ 23). Penn National subsequently amended its complaint on August 23, 2012 to reflect settlement of McFry's underlying lawsuit. (Doc. 36).

No genuine issues of material fact exist. The only issue for the court is which insurance company has to pay for the settlement of McFry's lawsuit.

II. Standard of Review

Summary judgment is an integral part of the Federal Rules of Civil Procedure. Summary judgment allows a trial court to decide cases when no genuine issues of material fact are present and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56. When a district court reviews a motion for summary judgment, it must determine two things: (1) whether any genuine issues of material fact exist; and if not, (2) whether the moving party is entitled to judgment as a matter of law. Id.

The moving party " always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56).

After both parties have addressed the motion for summary judgment, the court must grant the motion if no genuine issues of material fact exist and if the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56.

The applicable Rule 56 standard is not affected by the filing of cross motions for summary judgment. See, e.g. United States v. Oakley, 744 F.2d 1553, 1555-56 (11th Cir. 1984). When parties file cross motions for summary judgment, " each side must still establish the lack of genuine issues of material fact and that it is entitled to judgment as a matter of law." Busby v. JRHBW Realty, Inc., 642 F.Supp.2d 1283, 1288 (N.D. Ala. 2009). However, " cross-motions may be probative of the non-existence of a factual dispute when . . . they demonstrate a basic agreement concerning what legal theories and material facts are dispositive." Oakley, 744 F.2d at 1555-56.

III. Analysis

Penn National argues that it is not required to pay for the settlement of McFry's lawsuit because J.F. Morgan failed to timely notify Penn National of Smith's accident or McFry's lawsuit and failed to timely forward suit papers from McFry's lawsuit as required by the Penn National policy.

A. Preliminary Matters

Before examining Penn National's lack of notice defense, the court must determine whether the Penn National policy even applies to J.F. Morgan. Nationwide bears the burden of establishing that J.F. Morgan, its insured, is covered by the Penn National policy by demonstrating the claims made against J.F. Morgan fall within the policy coverage. See Colonial Life & Acc. Ins. Co. v. Collins, 280 Ala. 373, 194 So.2d 532, 533 (Ala. 1967).

Here, the Penn National policy states:

We will pay those sums that the insured becomes legally obligated to pay as damages

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because of " bodily injury" or " property damage" to which this insurance applies. We will have the right and duty to defend the insured against any " suit" seeking those damages. However, we will have no duty to defend the insured against any " suit" seeking damages for " bodily injury" or " property damage" to which this insurance does not apply. We may, at our discretion, investigate any " occurrence" and settle any ...

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