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Pennsylvania National Mutual Casualty Insurance Co. v. Retirement Systems of Alabama

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

April 21, 2015

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, Plaintiff,
v.
THE RETIREMENT SYSTEMS OF ALABAMA, ALABAMA REAL ESTATE HOLDINGS, INC., QUALITY COATINGS & DRYWALL, INC., THE OHIO CASUALTY INSURANCE COMPANY, and LIBERTY MUTUAL GROUP, INC., Defendants

For Pennsylvania Mutual Casualty Insurance Company, Plaintiff: Howard K Glick, LEAD ATTORNEY, SIMPSON MCMAHAN GLICK & BURFORD PLLC, Birmingham, AL.

For The Retirement Systems of Alabama, Alabama Real Estate Holdings, Inc., Defendants: Winston Raul Grow, LEAD ATTORNEY, PARTRIDGE SMITH PC, Mobile, Al.

For Quality Coatings & Drywall, Inc., The Ohio Casualty Insurance Company, Liberty Mutual Group, Inc, Defendants: Edward E Wilson, Jr, LEAD ATTORNEY, TATUM WILSON PC, Huntsville, AL; William W Watts, III, LEAD ATTORNEY, S. Wesley Pipes, V, PIPES HUDSON & WATTS LLP, Mobile, AL.

For The Ohio Casualty Insurance Company, Liberty Mutual Group, Inc, Quality Coatings & Drywall, Inc., Counter Claimants: Edward E Wilson, Jr, LEAD ATTORNEY, TATUM WILSON PC, Huntsville, AL; William W Watts, III, LEAD ATTORNEY, S. Wesley Pipes, V, PIPES HUDSON & WATTS LLP, Mobile, AL.

For Pennsylvania Mutual Casualty Insurance Company, Counter Defendant: Howard K Glick, LEAD ATTORNEY, SIMPSON MCMAHAN GLICK & BURFORD PLLC, Birmingham, AL.

MEMORANDUM OPINION AND ORDERS

C. LYNNWOOD SMITH JR, United States District Judge.

Plaintiff, Pennsylvania National Mutual Casualty Insurance Company, filed this action on February 12, 2014.[1] The company seeks a judgment declaring that it has no duty to defend or indemnify defendant Quality Coatings & Drywall, Inc., and its sureties, defendants The Ohio Casualty Insurance Company, and Liberty Mutual Group, Inc., for claims asserted against those entities by defendants Retirement Systems of Alabama, and Alabama Real Estate Holdings, Inc., in the state court action pending in the Circuit Court of Lauderdale County, Alabama, as Civil Action No. CV-2013-900131 ( The Retirement Systems of Alabama, et al. v. Quality Coatings and Drywall, Inc., et al. ).[2]

Defendants Quality Coatings & Drywall, Inc., The Ohio Casualty Insurance Company, and Liberty Mutual Group, Inc. assert counterclaims for breach of contract and bad faith denial of coverage.[3] Those counterclaims are based upon plaintiff's alleged refusal to defend The Ohio Casualty Insurance Company and Liberty Mutual Group, Inc., in the underlying action.

The case presently is before the court on two motions: plaintiff's motion for summary judgment, and defendants' cross-motion for partial summary judgment on plaintiff's claim for declaratory relief and on their own counterclaim for breach of contract.[4] Upon consideration, the court concludes that summary judgment is due to be entered in favor of plaintiff on its motion for summary judgment, as well as on defendants' cross-motion for partial summary judgment.

I. RELEVANT PROCEDURAL HISTORY

The underlying, state-court action arose out of the construction of the " River Heritage Hotel" in Florence, Alabama (" the Hotel" ). Defendant Quality Coatings & Drywall, Inc. (" Quality Coatings" ), entered into a Construction Trade Contract with defendant Alabama Real Estate Holdings (" AREH" ) in March of 2004. Among other work to be performed, Quality Coatings was responsible for cold formed metal wall framing, gypsum drywall, and wall installation at the Hotel.[5] AREH and defendant The Ohio Casualty Insurance Company (" Ohio Casualty" ) later executed a performance bond in the amount of $2,151,655. Ohio Casualty subsequently was acquired by defendant Liberty Mutual Group, Inc. (" Liberty Mutual" ), and both companies are parties to the underlying, state-court action, based upon Ohio Casualty's agreement to act as a surety for Quality Coatings under the Construction Trade Contract.[6]

The Retirement Systems of Alabama (" RSA" ) is a successor-in-interest to AREH on Quality Coatings' Construction Trade Contract. RSA and AREH commenced the underlying, state-court action against Quality Coatings and its sureties, Ohio Casualty and Liberty Mutual, seeking the recovery of damages arising out of the allegedly defective construction work performed by Quality Coatings at the Hotel.[7]

Plaintiff, Pennsylvania National Mutual Casualty Insurance Company, issued Commercial General Liability Policy No. CX9 0675702 (" the Policy" ) to Quality Coatings for the period beginning September 1, 2011.[8] Plaintiff currently is providing a defense to Quality Coatings in the underlying, state-court action under a reservation of rights, and Ohio Casualty and Liberty Mutual also have sought a defense and indemnity from plaintiff.[9]

II. DISCUSSION

The complaint filed by RSA and AREH in the underlying, state-court action alleges, among other things, that

RSA and AREH were damaged by these Defendants as a result of their negligent conduct in performing their scope of work such that there was a separation in the firewall, a separation which renders the firewall non-compliant with the City of Florence's ordinances and defective, and caused the growth of mold in the subject building.
38. As a direct and proximate consequence of the negligence of Defendants Quality Coatings . .., RSA and AREH have suffered damages, ...

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