Chet Morrison Contractors, LLC v. One Beacon American Insurance
Docket: Civil Action No. 14-1958
Court: District Court, E.D. Louisiana; September 18, 2015; Federal District Court
The legal dispute centers on an insurance claim involving a commercial general liability policy provided by Continental Insurance Company to Offshore Marine Contractors, Inc. Plaintiff Chet Morrison Contractors, LLC incurred litigation costs and was found liable in an underlying lawsuit involving Offshore Marine, which alleged breach of contract over unpaid charter fees for the vessel L/B NICOLE EYMARD. Chet Morrison seeks compensation from Continental for these costs and the judgment amount. Both parties filed cross motions for summary judgment, with the Court ruling in favor of Continental and denying Chet Morrison's motion.
In the underlying Offshore Marine litigation, Chet Morrison was found liable for the charter fees related to two jobs, while the Court determined that neither Chet Morrison nor Palm Energy was responsible for certain repair costs. Chet Morrison had requested a defense from Continental, which was denied, leading to the current litigation where Chet Morrison claims that Continental, along with other insurers, failed to provide defense coverage despite his status as an "additional insured." The other defendants, Onebeacon America and Markel American, had their claims dismissed after the Court found no coverage under their policies. Chet Morrison's claims against Continental remain unresolved.
The Marine Services Liability Policy (ML 0871842) issued by Continental to Offshore Marine includes a blanket additional insured endorsement, allowing coverage for any person obligated by an “insured contract” to be included as an additional insured, specifically concerning “your work.” For Chet Morrison to qualify as an additional insured, there must be an “insured contract” between Offshore Marine and Chet Morrison, defined as a contract involving the assumption of tort liability for bodily injury or property damage. The Policy provides coverage for claims related to bodily injury or property damage, with Continental obligated to pay damages and defend the insured against related lawsuits, except where exclusionary provisions apply. Coverage is limited to occurrences within the designated coverage territory, and specific exclusions apply, particularly concerning property damage to property owned, rented, or occupied by the named insured.
Chet Morrison and Continental have filed cross motions for summary judgment. Chet Morrison asserts it is covered as an additional insured based on five “insured contracts” with Offshore Marine and contends that allegations in the Offshore Marine Litigation—which involve the vessel L/B NICOLE EYMARD becoming stuck and sustaining damage—trigger Continental’s duty to defend and indemnify. Chet Morrison argues these allegations indicate potential liability for property damage, necessitating coverage for defense costs and losses incurred. Continental, while assuming Chet Morrison's status as an additional insured for its motion, argues that its duty to defend is negated by several policy exclusions.
Summary judgment is appropriate when the moving party demonstrates no genuine dispute exists regarding any material fact and is entitled to judgment as a matter of law, as outlined in Federal Rule of Civil Procedure 56(a) and supported by case law. The court evaluates all evidence but avoids making credibility assessments or weighing evidence. Reasonable inferences are drawn in favor of the non-moving party, but mere unsupported allegations or conclusory statements cannot suffice to oppose a motion for summary judgment. If the moving party bears the burden of proof at trial, it must present evidence that would warrant a directed verdict if unchallenged. Conversely, the non-moving party can counter the motion with evidence or show that the moving party’s evidence is insufficient to convince a reasonable fact-finder. If the non-moving party bears the burden of proof, the moving party can meet its obligation by demonstrating the absence of sufficient evidence for an essential element of the non-moving party’s claim, shifting the burden back to the non-moving party to identify specific facts that show a genuine issue exists. Summary judgment can be granted if, after adequate discovery, a party fails to establish an essential element of its case.
The insurer's duty to defend is distinct from its duty to indemnify. An insurer has a broader obligation to defend its insured in lawsuits than to indemnify for damages after a judgment. Under Louisiana law, the "Eight Corners" rule is applied: if the policy terms and complaint allegations reveal any facts that, if true, suggest a claim not clearly excluded from coverage, the insurer is obligated to defend the insured.
An insurer is obligated to defend an insured if the allegations in a complaint, when assumed true, indicate both coverage under the policy and potential liability to the plaintiff. This obligation is assessed liberally, focusing on factual allegations rather than unsupported conclusions. If a complaint presents at least one claim within the policy’s coverage, the insurer must defend the entire lawsuit, even if other claims fall outside coverage.
In this case, the court evaluated Continental's duty to defend based on Offshore Marine’s complaint and Palm Energy’s cross-claim against Chet Morrison. The court typically conducts a two-step analysis: first, determining if the allegations fall within policy coverage, and second, assessing whether any policy exclusions apply. However, the court found that Continental successfully demonstrated that a policy exclusion precluded coverage. Therefore, it did not need to analyze the coverage aspect in detail.
Continental's policy only covers "bodily injury" or "property damage" resulting from an "occurrence" within a specified "coverage territory." "Property damage" is defined to include either physical injury to tangible property or loss of use of such property. Exclusion j(l) specifically denies coverage for property damage to property owned, rented, or occupied by the named insured, Offshore Marine Contractors, as listed on the policy’s declarations page. Consequently, this exclusion effectively negates any coverage for claims related to property owned, rented, or occupied by Offshore Marine.
Offshore Marine is undisputedly the owner of the L/B NICOLE EYMARD. The underlying litigation primarily concerns allegations against Chet Morrison related to damage to this vessel. Offshore Marine's complaint states that Chet Morrison chartered the L/B NICOLE EYMARD for a job with Palm Energy at West Delta 54. Initially, the vessel operated without issues, but during the jacking down process, the crew discovered that the legs were stuck in the seabed, immobilizing the vessel and preventing its removal from the charter. Despite Offshore Marine sending invoices, both Chet Morrison and Palm Energy allegedly refused payment.
As Hurricane Fay approached, posing a threat to the immobilized vessel, Offshore Marine, Chet Morrison, and Palm Energy reached an agreement allowing the legs to be cut to facilitate the vessel's movement in exchange for a commitment to pay for the repairs and maintain the vessel “on charter” until it was ready for sea. Offshore Marine claims it fulfilled its part by allowing the leg cuts and completing repairs, but Chet Morrison and Palm Energy failed to reimburse the costs incurred.
Offshore Marine's complaint seeks damages for breaches of both the charter and the repair contract. All alleged damages pertain to Offshore Marine's own vessel, as the L/B NICOLE EYMARD sustained damage during the leg-cutting incident. The policy's exclusion j(l) precludes coverage for damage to property owned by Offshore Marine, thus barring coverage for claims related to the L/B NICOLE EYMARD.
Chet Morrison argues that the Policy’s In Rem Endorsement overrides exclusion j(l) by extending coverage for liabilities arising from the operation of Offshore Marine’s vessels. However, this endorsement applies only if an in rem action is taken against a vessel. Since Offshore Marine did not sue the vessel itself but rather Chet Morrison and Palm Energy, this argument is deemed ineffective.
Chet Morrison contends that exclusion j(l) does not apply to additional insureds, arguing that the term "you" in the exclusion refers only to the named insured, Offshore Marine. The Court finds this argument unpersuasive, clarifying that exclusion j(l) specifically addresses damage to property owned, rented, or occupied by the named insured without limiting the exclusion to the named insured alone. Thus, the exclusion applies to damage to Offshore Marine’s property, irrespective of who seeks coverage under the Policy. The claims in the Offshore Marine Litigation pertained to damage to the L/B NICOLE EYMARD, a vessel owned by Offshore Marine, which falls within the scope of exclusion j(l). Consequently, the Court concludes that Continental had no duty to defend Chet Morrison and grants Continental’s motion for summary judgment.
Regarding the duty to indemnify, the Court notes that this duty is narrower than the duty to defend, which exists if there is any possibility of liability. Here, there was no possibility of liability under the Policy, thus impacting the indemnification issue as well. The exclusion of claims related to the L/B NICOLE EYMARD means Continental is not responsible for any liabilities incurred by Chet Morrison in the Offshore Marine Litigation. The Court denies Chet Morrison’s motion for summary judgment and grants Continental’s motion for summary judgment on the indemnification matter.
Lastly, Chet Morrison's derivative statutory bad faith claims under La. R.S. 22:1892 and 22:1973 fail because the Court found no duty to defend, negating any claims of bad faith related to defense cost reimbursement. Therefore, Continental is not liable for any statutory penalties, attorneys’ fees, costs, or interest.
The Court has denied Chet Morrison's motion for summary judgment and granted Continental's motion for summary judgment in the Offshore Marine Litigation case (No. 10-4151). The judgment was later amended to limit Chet Morrison's liability for the West Delta 55 job to charter fees incurred from July 28 to July 31, 2008. Chet Morrison's and Continental's respective statements of uncontested facts are noted, along with admissions from both parties regarding their roles. The document also outlines that CIC disputes CMS's claim about CMWS being an additional insured under Policy ML0871842, but for the current motion, CIC assumes that CMC and CMWS are additional insureds. Additionally, Palm Energy has filed a cross-claim against Chet Morrison, alleging that its vessel suffered significant damage during the activities related to the case and seeking defense and indemnification for claims made by Offshore Marine against Palm Energy.
