Transportation Insurance Company v. Selective Insurance Company of America

Filing 54

ORDER denying 37 Motion for Partial Summary Judgment; denying 42 Motion to Strike and granting 35 Defendant's Motion for Summary Judgment. Clerk shall enter judgment in favor of Defendant, and close case. Signed by Judge Richard W. Story on 11/13/2012. (bdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
TRANSPORTATION
INSURANCE COMPANY,
Plaintiff,
v.
SELECTIVE WAY INSURANCE
COMPANY,
Defendant.

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CIVIL ACTION NO.
1:11-CV-01383-RWS

ORDER
This case comes before the Court on Defendant’s Motion for Summary
Judgment [35], Plaintiff’s Motion for Partial Summary Judgment [37], and
Plaintiff’s Motion to Strike the Examination Under Oath of Larry Lewallen
[42]. After reviewing the record, the Court enters the following Order.
Background
Plaintiff Transportation Insurance Company (“Transportation” or
“Plaintiff”) initiated this litigation by filing a Complaint in the Superior Court
of Gwinnett County, Georgia, seeking contribution from Defendant Selective
Way Insurance Company (“Selective” or “Defendant”) for the cost of defending

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and indemnifying an insured in an underlying state court action. (See generally
Compl., Dkt. [1-1] at 3-9 of 79.) In the two-count Complaint, Transportation
seeks to recover contribution from Selective for amounts paid by Transportation
to defend and settle the underlying state court action (Count I) and attorney’s
fees and expenses pursuant to O.C.G.A. § 13-6-11 (Count II). Selective timely
removed the case to this Court on the basis of diversity of citizenship
jurisdiction. (Notice of Removal, Dkt. [1] at 2.) Both parties now move for
summary judgment on the issue of Selective’s liability for contribution. (See
generally Def.’s Mot. for Summ. J., Dkt. [35]; Pl.’s Mot. for Summ. J., Dkt.
[37].) Selective also moves for summary judgment on the issue of its liability
for attorney’s fees and expenses. (See generally Def.’s Mot. for Summ J., Dkt.
[35].) The facts are as follows and, except where otherwise indicated, are
undisputed.
I.

The Underlying Litigation
Lewallen Construction (“Lewallen”) was hired to build the Silver Comet

Trail, a biking and walking path that spans from Marietta, Georgia to the
Alabama border. (Def.’s Statement of Material Facts in Supp. Mot. for Summ.
J. (“Def.’s SMF”), Dkt. [35-21] ¶ 1.) Part of the trail runs through a 600-acre
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property owned by Duane West (“Mr. West”). (Id. ¶ 2.) During the entirety of
the construction of the trail on Mr. West’s property, and until October 1, 2004,
Lewallen was the named insured on a commercial general liability policy issued
by Transportation (the “Transportation Policy”). (Id. at 5.)
A.

The “First Complaint”

On September 18, 2002, Mr. West filed a complaint against Lewallen in
the Superior Court of Polk County, Georgia, raising claims arising out of
Lewallen’s construction of the trail on Mr. West’s property (the “first
complaint” or “first lawsuit”). (Id. ¶ 7.) Mr. West alleged that “[o]n or about
May 22, 2002, [Lewallen] . . . cut [Mr. West’s] fences, entered the Subject
Property, graded such property, and poured concrete upon such property.” (Id.
¶ 8; Def.’s Mot. for Summ. J., Ex. E, Dkt. [35-6] at 13 of 28 (first complaint ¶
21).) Mr. West asserted claims against Lewallen for trespass, negligence per se,
and intentional infliction of emotional distress. (Def.’s SMF, Dkt. [35-21] ¶ 8;
Def.’s Mot. for Summ. J., Ex. E, Dkt. [35-6] at 15, 19, & 23 of 28 (first
complaint Counts II, IV, & VI).) Transportation received a copy of the first
complaint and hired defense counsel to represent Lewallen. (Def.’s SMF, Dkt.
[35-21] ¶ 9.) Defense counsel began defending the case, filing an answer on
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behalf of Lewallen, consulting with an engineer, and drafting and delivering
status reports to Transportation representatives. (Id.) Defense counsel sent
copies of some or all of the reports and correspondence to Lewallen’s owners.
(Id. ¶ 10.)
On February 23, 2004, Mr. West was deposed. (Id. ¶ 11.) In his
deposition, he described the damages to his property that allegedly were caused
by Lewallen’s work on the trail. (Id. ¶ 12.) He stated that as a result of
Lewallen’s construction work, he had incurred and was incurring the following
effects: surface water runoff onto his property; ponding of water and flooding
on his property; sediment and silt deposits on his property; erosion of the land
on his property; and the removal of a fence from his property when the
construction began. (Id. ¶ 12.) Mr. West claimed that these damages were
caused by the following actions taken by Lewallen during construction of the
trail: addition of fill dirt to the old railroad bed; filling in of ditches; failure to
add or retain culverts in areas where necessary; the addition of inadequate
culverts; and the failure to timely install silt fences during construction. (Id. ¶
13.)

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In an April 2004 report, defense counsel updated Transportation about
the status of the case and gave an in-depth summary of Mr. West’s deposition
testimony. (Id. ¶ 14.) The owner of Lewallen was copied on this report.
(Def.’s Mot. for Summ. J., Ex. A, Dkt. [35-1] (report from defense counsel to
Transportation).) In the report, defense counsel explained, “[Mr. West] alleges
that Lewallen violated county and state drainage regulations in part by not
[placing] culverts in certain areas, and that the trail bed now acts as a dam,
ponding and flooding two different areas of the property.” (Id. ¶ 16.) The
report identified the specific areas of the property where Mr. West claimed
ponding and flooding were occurring and outlined specific shortcomings on the
part of Lewallen (i.e., lack of or inadequate culverts) that allegedly caused the
ponding and flooding. (Id. ¶ 17.) Defense counsel also informed the recipients
of the report that “[Mr. West] also testified that dirt which Lewallen placed on
the property (to build up the trail) was deposited as silt outside the right of way,
in violation of state and county regulations because silt fencing was not placed
along the full length of the trail.” (Id. ¶ 18.) Additionally, defense counsel
informed the recipients of the report that an engineer, who had inspected Mr.
West’s property, advised the following:
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[W]e cannot dispute that water may be seeping under the trail and,
as a general proposition, the trail has increased surface water
runoff. He also tells us that drainage could be improved by the
addition of some culverts and the clearing of some overgrown
ditches. [The engineer] also is unable to dispute that an
undetermined amount of sediment was deposited on Plaintiff’s
property, and that there were some violations of Georgia’s Soil and
Sediment Control Act during the construction, albeit technical
ones.
(Id. ¶ 19.) At the close of the report, defense counsel stated, “Lewallen is
willing to undertake reasonable repairs to the drainage system at his own
expense as part of a settlement.” (Id. ¶ 20.)
On October 1, 2004, Transportation’s coverage of Lewallen ceased and
Selective issued Lewallen a commercial general liability policy, which provided
coverage until October 1, 2009. (Id. ¶ 26.) When Selective took over as
Lewallen’s insurer, Transportation did not notify Selective about the suit or
request that Selective participate in the defense. (Id. ¶ 27.) Transportation
continued to defend Lewallen on its own and continued to seek settlement of
the case on its own. (Id. ¶ 28.)
B.

The “Second Complaint”

On July 10, 2006, the first lawsuit was dismissed without prejudice due
to Mr. West’s failure to appear at a calendar call on July 7, 2006. (Id. ¶ 31.)
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Mr. West reinitiated the suit on November 21, 2006, however, by filing a
second complaint (the “second complaint” or “second lawsuit”) pursuant to
Georgia’s renewal statute, O.C.G.A. § 9-2-61. (Id.; Def.’s Mot. for Summ. J.,
Ex. J, Dkt. [35-13] (second complaint).) At Transportation’s request, the same
defense counsel continued to defend Lewallen. (Def.’s SMF, Dkt. [35-21] ¶
32.)
The claims and causes of action asserted in the second complaint were
virtually identical to the claims and causes of action asserted in the first
complaint. (Id. ¶ 33.) In the second complaint, like the first complaint, Mr.
West alleged that “[o]n or about May 22, 2002, [Lewallen] . . . cut Plaintiff’s
fences, entered the Subject Property, graded such property, and poured concrete
upon such property.” (Def.’s Mot. for Summ. J., Ex. J, Dkt. [35-13] at 13 of 30
(second complaint ¶ 27).) Mr. West again raised claims against Lewallen for
trespass, negligence per se, and intentional infliction of emotional distress. (Id.
at 17, 21, & 25 of 30 (second complaint Counts III, V, & VII).)
In February or March 2007, Transportation notified Selective, for the first
time, of the lawsuit against Lewallen. (Id. ¶ 35.) Deborah Bryant, a Selective
representative, issued a reservation of rights letter, informing Lewallen that
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“[t]here is a question as to whether or not there is coverage under the policy for
the allegations in the complaint,” and that Selective will undertake any
investigation and/or defense, which may appear necessary under a complete
Reservation of Rights.” (Id. ¶ 38.) At the close of the letter, Ms. Bryant
informed Lewallen that she would notify him regarding Selective’s coverage
opinion once Selective completed its investigation. (Id. ¶ 40.) Ms. Bryant
subsequently was copied on defense counsel’s status reports to Transportation.
(Id. ¶¶ 41-42, 44.)
A compromise and settlement eventually was reached in the action
against Lewallen. (Pl.’s Statement of Additional Material Facts Which Present
a Genuine Issue For Trial (“Pl.’s SAMF”), Dkt. [46-1] ¶ 33.) Selective did not
contribute towards the settlement. (Id.) Transportation paid $87,500.00 toward
the settlement on behalf of Lewallen and incurred $107,677.23 in attorney’s
fees and expenses in defending against the suit. (Id. ¶¶ 34-35.)
Subsequent to the compromise and settlement reached in the underlying
action, Transportation filed this suit against Selective, seeking contribution for
the costs of defending and indemnifying Lewallen in the underlying action and
attorney’s fees. Selective contends, however, that under the provisions of the
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Selective Policy, in particular, the “known loss” exclusion, it was not obligated
to defend or indemnify Lewallen and therefore is not liable for contribution or
attorney’s fees. (See generally Def.’s Br. in Supp. of Mot. for Summ. J.
(“Def.’s Br.”), Dkt. [35-19].)
II.

The Selective Policy
The relevant provisions of the Selective Policy are as follows:
SECTION I - COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY
DAMAGE LIABILITY
1.

Insuring Agreement
a.

We will pay those sums that the insured becomes
legally obligated to pay as damages 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 damages” to which this
insurance does not apply. . . .

b.

This insurance applies to “bodily injury” and
“property damage” only if:
(1)

The “bodily injury” or “property damage” is
caused by an “occurrence” that takes place in
the “coverage territory”;
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(2)

(3)

d.

The “bodily injury” or “property damage”
occurs during the policy period; and
Prior to the policy period, no insured . . . knew
that the “bodily injury” or “property damage”
had occurred, in whole or in part. If [the
insured] . . . knew, prior to the policy period,
that the “bodily injury” or “property damage”
occurred, then any continuation, change or
resumption of such “bodily injury” or “property
damage” during or after the policy period will
be deemed to have been known prior to the
policy period.1

“[P]roperty damage” will be deemed to have been
known to have occurred at the earliest time when any
insured . . .
(1)

Reports all, or any part, of the . . . “property
damage” to us or any other insurer;

(2)

Receives a written or verbal demand or claim
for damages because of the . . . “property
damage”; or

(3)

Becomes aware by any other means that . . .
“property damage” has occurred or has begun
to occur.

(Id. ¶¶ 65, 69.)

1

This provision is referred to by the parties and the Court as the “known loss”
exclusion.
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Discussion
I.

Plaintiff’s Motion to Strike the Examination Under Oath of Larry
Lewallen [42]
Transportation moves to strike the Examination Under Oath of Larry

Lewallen (“Lewallen EUO” or “EUO”) pursuant to Federal Rule of Civil
Procedure (“Rule”) 37(c), arguing that Selective failed to comply with its
discovery obligations by failing to produce the Examination before the
discovery period expired. (See generally Pl.’s Br. in Supp. of Mot. to Strike
Lewallen EUO (“Pl.’s Br.”), Dkt. [42-1].) Rule 37(c) provides, “If a party fails
to provide information or identify a witness as required by Rule 26(a) or (e), the
party is not allowed to use that information or witness to supply evidence on a
motion, at a hearing, or at trial, unless the failure was substantially justified or is
harmless.” Fed. R. Civ. P. 37(c)(1). Rule 26(a) governs a party’s initial
disclosure obligations and requires that a party disclose “the name . . . or each
individual likely to have discoverable information—along with the subjects of
that information—that the disclosing party may use to support its claims or
defenses . . .” and “a copy—or a description by category and location—of all
documents, electronically stored information, and tangible things that the

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disclosing party has in its possession, custody, or control and may use to
support its claims or defenses . . . .”2 Fed. R. Civ. P. 26(a)(1)(A)(i)-(ii). The
Court sets out the factual background of Transportation’s Motion to Strike
before considering the motion on the merits.
A.

Factual Background

Selective relies on the Lewallen EUO in support of its argument that the
“known loss” exclusion of the Selective Policy precludes coverage of Lewallen
because Lewallen knew of the damages giving rise to the West action prior to
the Selective Policy period. (See Def.’s SMF, Dkt. [35-12] ¶¶ 15, 23-25
(relying on Lewallen EUO to show that Lewallen was aware of Mr. West’s
claims in the underlying action prior to the Selective Policy period).) Discovery
relevant to the Lewallen EUO occurred as follows. Selective’s Initial
Disclosures included the following statements:
3.

Provide a detailed factual basis for the defense or defenses
and any counterclaims or crossclaims asserted by defendant
in a responsive pleading.

2

Rule 26(e) requires a party to supplement any disclosure made pursuant to
Rule 26(a) upon learning that the disclosure is incomplete or incorrect. Fed. R. Civ. P.
26(e)(1).
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. . . Defendant has multiple grounds for denying
coverage to Lewallen. . . . Defendant contends that the
facts of the underlying loss are within the “known loss”
exclusion found in the policy because Lewallen was
aware of the damage that ultimately formed the basis for
the underlying action prior to Defendant’s policy period.
4.

Provide the name . . . of each individual likely to have
discoverable information that you may use to support your
claims or defenses . . . .
. . . All . . . parties and their representatives in [the
second lawsuit].

(Def.’s Rule 26 Initial Disclosures, Dkt. [15] at 2.) Selective’s responses to
Transportation’s First Interrogatories were as follows:
2.

State the name . . . of each person who, to your knowledge,
information or belief or to the knowledge, information or
belief of anyone acting on your behalf, has knowledge of
any of the events or happenings leading to the occurrence(s)
which is the subject of this litigation.
. . . [A]ll . . . parties and their representatives in [the first
and second lawsuits].

3.

Of those persons identified in answer to the preceding
Interrogatory, please identify whom, you or anyone acting
for or on your behalf have contacted in any way. Please also
identify from whom you or anyone acting on your behalf
have taken a written, oral, or recorded statement from.
Please identify the type of statement given (oral, written,
transcribed, etc.), the person taking said statements, the date
said statement was given, and the person having possession,
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custody, or control of the original or a copy of said
statement.
. . . Defendant took a recorded Examination Under Oath
of Mr. Larry Lewallen on April 26, 2010 and has
possession of same . . . .
(Def.’s Resps. to Pl.’s First Interrogs., Dkt. [49-4] at 4-5 of 14.) Finally,
Selective’s responses to Transportation’s Requests for Production of
Documents included the following:
2.

All written and/or transcribed statements pertaining to this
incident.
Defendant objects to Request 2 on grounds that it would
require it to respond by disclosing information protected
by the attorney client privilege, as work product, and/or
as prepared in anticipation of litigation or for trial.
Subject to and without waiving the foregoing objections,
see attached transcript of February 23, 2004 deposition
of Duane West.

3.

Any and all documents identified in your response to
Transportation’s First Interrogatories to Selective.
Defendant objects to Request 3 on grounds that it would
require it to respond by disclosing information protected
by the attorney client privilege, as work product, and/or
as prepared in anticipation of litigation or for trial.
Subject to and without waiving the foregoing objections,
all discoverable documents in Defendant’s possession
have been produced.

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(Def.’s Resps. to Pl.’s First Request for Production of Docs., Dkt. [49-5] at 4 of
8.)
In accordance with the foregoing objections to Transportation’s First
Request for Production of Documents, Selective did not produce a copy of the
Lewallen EUO to Transportation. In support of its Motion for Summary
Judgment, however, Selective relies on the EUO, among other evidence, in
support of its argument that coverage was precluded under the Selective
Policy’s “known loss” exclusion, given Lewallen’s knowledge, prior to the
Selective Policy period, of the damages giving rise to Mr. West’s claims. (See
generally Def.’s Resp. to Pl.’s Mot. to Strike (“Def.’s Resp.”), Dkt. [49], [49-1];
Def.’s Br. in Supp. of Mot. for Summ. J., Dkt. [35-19].)
B.

Analysis

In its motion, Transportation argues that Selective violated Rule 26 by
failing to produce the Examination during discovery and thus that the
Examination should be stricken:
Selective identified the Examination in its responses to
Transportation’s First Interrogatories, but failed and refused to
produce the examination during the discovery period on grounds
that it was work product and information prepared in anticipation
of litigation or for trial and also protected by the attorney-client
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privilege. Selective clearly took the position that the Examination
was not discoverable in light of its statement that it had produced
“all discoverable documents in Defendant’s possession” . . . .
Accordingly, Selective cannot shield the Examination during
discovery and then use it as a weapon in support of its Motion for
Summary Judgment.
(Pl.’s Br., Dkt. [42-1] at 7-8.) Selective argues, on the contrary, that it fulfilled
its obligations under Rule 26, notwithstanding the fact that it did not provide
Transportation with a copy of the Examination. (Def.’s Resp., Dkt. [49], [49-1]
at 11-16.) To this end, Selective argues:
Selective made clear to Transportation that it considered Lewallen
Construction and its representatives (which includes Mr. Lewallen,
its owner) to be potential witnesses in the case. Additionally, and
most importantly, Selective explicitly informed Transportation that
it had taken a recorded EUO of Mr. Lewallen on April 26, 2010
and that it had a copy of the transcript in its possession. Selective
clearly stated its grounds for declining to produce a copy of the
Lewallen EUO, and Transportation never took issue with
Selective’s stance and never sought to obtain a copy (either on its
own or with Court action).
(Def.’s Resp., Dkt. [49-1] at 15-16.) Selective further argues that even if it
violated Rule 26 by failing to produce a copy of the Lewallen Examination, the
Examination should not be stricken under Rule 37(c) because the failure to
produce was substantially justified or harmless. (Id. at 16-21.)

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The Court agrees with Selective that the Lewallen Examination is not due
to be stricken under Rule 37(c). Assuming, without deciding, that Selective’s
failure to produce a copy of the Examination constituted a violation of Rule 26,
the Court finds the violation harmless. As Selective points out (Def.’s Resp.,
Dkt. [49-1] at 19), it explained in its Initial Disclosures that one of its defenses
would be that Lewallen knew, prior to the Selective Policy period, of the
property damages giving rise to the underlying action, thus triggering the
“known loss” exclusion of the Selective Policy. Selective further disclosed to
Transportation that it had taken a sworn statement from Mr. Lewallen.
Accordingly, Transportation was put on notice that the knowledge of Lewallen
and its owner, Mr. Lewallen, would be central to one of Selective’s defenses.
Given Transportation’s knowledge of Selective’s “known loss” defense, the
Court cannot find that Transportation was harmed by Selective’s failure to
produce a copy of the Examination, which only corroborates that defense.
Additionally, Selective is correct that the Examination does not contain
information that Transportation could not have obtained on its own. As stated
immediately above, Transportation knew of Selective’s intention of raising a
“known loss” defense and knew that Selective had taken a sworn statement
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from Mr. Lewallen. Transportation could have obtained its own sworn
statement from Mr. Lewallen or taken his deposition to obtain information
relevant to this defense.
Finally, the Court agrees with Selective that the EUO does not contain
new information but, rather, is cumulative of other evidence in the record. That
is, the Lewallen EUO merely corroborates other record evidence, which
demonstrates Lewallen’s awareness of the damages giving rise to Mr. West’s
claims prior to the Selective Policy period. For example, even without
considering the EUO, the evidence shows that Mr. Lewallen was copied on
defense counsel’s April 2004 status report to Transportation (months before the
inception of the Selective Policy in October 2004), which report summarized
Mr. West’s deposition testimony and the substance of his claims against
Lewallen. (Def.’s Mot. for Summ. J., Ex. A, Dkt. [35-1].) Furthermore, in the
same status report, defense counsel informed Transportation of Lewallen’s
willingness to “undertake reasonable repairs at his own expense as part of a
settlement.” (Id. at 11 of 12.) This evidence–in particular, that of Lewallen’s
willingness to settle Mr. West’s claims–amply demonstrates that Lewallen
knew of the damages giving rise to the West action prior to the inception of the
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Selective Policy period. Introduction of the Lewallen EUO, which only
corroborates this evidence, thus is not harmful to Transportation.
In sum, pretermitting the issue of Selective’s compliance with Rule 26,
the Court finds that the Lewallen EUO is not due to be stricken under Rule
37(c). Plaintiff’s Motion to Strike accordingly is DENIED.3
II.

The Parties’ Motions for Summary Judgment [35] & [37]
As stated in the Background section above, both parties move for

summary judgment on Transportation’s Count I claim for contribution.
Selective additionally moves for summary judgment on Transportation’s Count
II claim for statutory attorney’s fees. The Court sets out the legal standard
governing a motion for summary judgment before considering the parties’
motions on the merits.
A.

Legal Standard

Federal Rule of Civil Procedure 56 requires that summary judgment be
granted “if the movant shows that there is no genuine dispute as to any material

3

This ruling ultimately is of no moment. As is apparent from the following
discussion of the parties’ respective motions for summary judgment, the Court need
not–and therefore does not–rely on the Lewallen EUO in determining whether the
property damages alleged in the underlying litigation fall within the Selective Policy’s
“known loss” exclusion.
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fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
56(a). “The moving party bears ‘the initial responsibility of informing the . . .
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.’” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259
(11th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(internal quotations omitted)). Where the moving party makes such a showing,
the burden shifts to the non-movant, who must go beyond the pleadings and
present affirmative evidence to show that a genuine issue of material fact does
exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
The applicable substantive law identifies which facts are material. Id. at
248. A fact is not material if a dispute over that fact will not affect the outcome
of the suit under the governing law. Id. An issue is genuine when the evidence
is such that a reasonable jury could return a verdict for the non-moving party.
Id. at 249-50.
In resolving a motion for summary judgment, the court must view all
evidence and draw all reasonable inferences in the light most favorable to the
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non-moving party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th
Cir. 2002). But, the court is bound only to draw those inferences which are
reasonable. “Where the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no genuine issue for trial.”
Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
“If the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations
omitted); see also Matsushita, 475 U.S. at 586 (once the moving party has met
its burden under Rule 56(a), the nonmoving party “must do more than simply
show there is some metaphysical doubt as to the material facts”).
Finally, the filing of cross-motions for summary judgment does not give
rise to any presumption that no genuine issues of material fact exist. Rather,
“[c]ross-motions must be considered separately, as each movant bears the
burden of establishing that no genuine issue of material fact exists and that it is
entitled to judgment as a matter of law.” Shaw Constructors v. ICF Kaiser
Eng’rs, Inc., 395 F.3d 533, 538-39 (5th Cir. 2004).

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B.

Analysis
1.

Selective’s Liability for Contribution (Count I)

The Court agrees with Selective that under the plain language of the
Selective Policy, in particular, the “known loss” exclusion, Selective had no
duty to defend or indemnify Lewallen in connection with the underlying West
litigation. Based on the allegations of the second complaint, filed on November
21, 2006 (during the Selective Policy period), it is clear that the property
damage giving rise to the suit was known to Lewallen prior to the Selective
Policy period and thus was not covered under the Selective Policy.
As a threshold matter, under Georgia law, “contracts of insurance are
interpreted by ordinary rules of contract construction.” Boardman Petrol., Inc.
v. Federated Mut. Ins., 498 S.E.2d 492, 494 (Ga. 1998) (citation omitted).
“Terms in an insurance policy are given their ordinary and common meaning,
unless otherwise defined in the contract.” Id. (citation omitted). At issue in this
case are Selective’s duties to defend and indemnify under the terms of the
Selective Policy. Because under Georgia law, “an insurer’s duty to pay and its
duty to defend are separate and independent obligations,” Penn-Am. Ins. Co. v.

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Disabled Am. Veterans, Inc., 490 S.E.2d 374, 376 (Ga. 1997), the Court will
consider these duties separately, taking first Selective’s duty to defend.
i.

Duty to Defend

The Court finds that Selective had no duty to defend Lewallen against the
underlying suit because the property damage alleged in the second complaint
fell within the “known loss” exclusion of the Selective Policy. Under Georgia
law,
[a]n insurer’s duty to defend turns on the language of the insurance
contract and the allegations of the complaint asserted against the
insured. We look to the allegations of the complaint to determine
whether a claim covered by the policy is asserted. If the facts as
alleged in the complaint even arguably bring the occurrence within
the policy’s coverage, the insurer has a duty to defend the action.
However, . . . where the complaint filed against the insured does
not assert any claims upon which there would be insurance
coverage, the insurer is justified in refusing to defend the insured’s
lawsuit.
Nationwide Mut. Fire Ins. Co. v. Somers, 591 S.E.2d 430, 433 (Ga. App. 2003)
(citations omitted).
As stated in the Background section, supra, under the terms of the
Selective Policy, Selective had a “duty to defend [Lewallen] against any ‘suit’
seeking [damages for property damage],” so long as the Policy applied to the

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property damage at issue. (Def.’s Mot. for Summ. J., Ex. L Part 1, Dkt. [35-15]
at 3 of 10 (Selective Policy subsection 1.a).) Under the Policy’s “known loss”
exclusion, however, the Policy did not apply to property damage if, “[p]rior to
the policy period,” “[Lewallen] knew that the . . . ‘property damage’ had
occurred, in whole or in part.”4 (Id. (Selective Policy subsection 1.b(3)).)
Moreover, under the plain terms of the exclusion,
If [Lewallen] . . . knew, prior to the policy period, that the . . .
‘property damage’ occurred, then any continuation, change or
resumption of such . . . ‘property damage’ during or after the
policy will be deemed to have been known prior to the policy
period.
(Id.)
It is apparent from the face of the second complaint that Lewallen knew
of the alleged property damage prior to the Selective Policy period. The second
complaint explicitly alleges that it was filed as a “renewal” of an original
complaint (i.e., the first complaint), the latter of which was filed on September
18, 2002 and dismissed without prejudice on July 7, 2006, due to Mr. West’s

4

Nor did the Policy apply to property damage that did not occur “during the
policy period[.]” (Def.’s Mot. for Summ. J., Ex. L Part 1, Dkt. [35-20] at 3 of 10
(Selective Policy subsection 1.b(2)).)
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failure to appear at a calendar call. The opening paragraphs of the second
complaint read as follows:
COMES NOW, Duane West, Plaintiff in the above styled
action, who files this Complaint for Damages, pursuant to the
renewal provisions of the O.C.G.A. § 9-2-61 and respectfully
shows this Court the following:
1.
Plaintiff filed his original action . . . against the above
named Defendants [including Lewallen] on September 18, 2002.
2.
On July 10, 2006, this Court entered an ORDER dismissing
Plaintiff’s case without prejudice for Plaintiff’s counsel’s failure to
appear at a peremptory calendar call on July 7, 2006.
3.
Plaintiff has never utilized the provisions of the above
referenced code section in renewing his complaint.
4.
Plaintiff has paid all court costs in the original action, and
hereby renews his Complaint for damages against the above-styled
Defendants [including Lewallen] within the time period allowed
by law.
(Def.’s Mot. for Summ. J., Ex. J, Dkt. [35-13] at 3, 5 of 30 (second complaint
¶¶ 1-4 (emphasis added)).) Because it is apparent from the face of the second
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complaint that the second lawsuit was merely a renewal of the first lawsuit,
filed before the Selective Policy period, it is apparent from the face of the
second complaint that Lewallen had notice of Mr. West’s claims against it, and
the property damage underlying those claims, prior to the Policy period.
Moreover, the substantive allegations of the second complaint
demonstrate that Lewallen knew of the property damage underlying Mr. West’s
claims prior to the Selective Policy period. In the second complaint, Mr. West
raised claims against Lewallen for trespass and negligence per se.5 (Def.’s Mot.
for Summ. J., Ex. J, Dkt. [35-13] at 17 & 21 of 30 (second complaint Counts III
& V).) In support of these claims, Mr. West alleged that “[o]n or about May
22, 2002, [Lewallen] . . . cut Plaintiff’s fences, entered the Subject Property,
graded such property, and poured concrete upon such property.” (Id. at 13 of

5

As stated in the Background section, supra, Mr. West also raised a claim for
intentional infliction of emotional distress. The Court finds that the Selective Policy
did not cover this claim. While the Policy provided coverage not only for “property
damage” but also for “bodily injury,” this coverage does not apply to claims for
intentional infliction of emotional distress, as Selective correctly argues. See
Presidential Hotel v. Canal Ins. Co., 373 S.E.2d 671, 672 (Ga. App. 1988) (“Used in
an insurance policy, the term ‘bodily injury’ means just that—‘bodily injury.’ It
pertains to physical injury to the body. It does not include non-physical, emotional or
mental harm. And it cannot be equated with the broader term ‘personal injury.’”
(citations omitted)). Transportation does not dispute Selective’s argument in this
regard.
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30 (second complaint ¶ 27 (emphasis added)).) With respect to his claim for
trespass, Mr. West further alleged, “[Mr. West] warned all Defendants
[including Lewallen] before their entry on the property that the entry would be
trespass and directed Defendants not to enter on the property.” (Id. at 17 of 30
(second complaint ¶ 39 (emphasis added)).)
Based on the foregoing allegations, Lewallen knew of Mr. West’s
trespass claim on or before May 22, 2002—well before the start of the Selective
policy period. Furthermore, Mr. West’s claim for negligence per se was
predicated on Lewallen’s alleged violation of Georgia’s law of trespass. (Id. at
23 of 30 (second complaint ¶¶ 52-55).) Accordingly, because Lewallen knew
of Mr. West’s trespass claim prior to the Selective Policy period, he likewise
had knowledge of the property damage giving rise to the negligence per se
claim, prior to the Selective Policy period.
Transportation seeks to avoid the foregoing by arguing that the second
complaint alleged damages commencing on May 22, 2002 but continuing into
the Selective Policy period, and thus not covered by the “known loss”
exclusion: “[T]he Second Complaint does not allege when Lewallen completed
its work. Instead, the Second Complaint alleges that Lewallen remained on the
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property as of November 21, 2006 [the date the second complaint was filed]
causing damage by its negligent acts while the Selective Policy was in effect.”
(Pl.’s Opp’n Br., Dkt. [46] at 13 (citations to record omitted).) The second
complaint indeed alleged that Lewallen was “remain[ing] upon [Mr. West’s]
property” at the time the second complaint was filed. (Def.’s Mot. for Summ.
J., Ex. J, Dkt. [35-13] at 19 of 30 (second complaint ¶ 41).) However, as
Selective correctly argues, “any trespass occurring after Selective’s policy
period began was a ‘continuation’ of the alleged ongoing property damage that
began on May 22, 2002, and thus was subject to the know-loss exclusion.”
(Def.’s Reply in Supp. of Mot. for Summ. J. (“Def.’s Reply”), Dkt. [50] at 4.)
(See Def.’s Mot. for Summ. J., Ex. L Part 1, Dkt. [35-15] at 3 of 10 (Selective
Policy subsection 1.b(3) (“known loss exclusion”)) (“If [the insured] . . . knew,
prior to the policy period, that the . . . ‘property damage’ occurred, then any
continuation, change or resumption of such . . . ‘property damage’ during or
after the policy period will be deemed to have been known prior to the policy
period.”).)6

6

Transportation relies on E&L Chipping Co., Inc. v. Hanover Ins. Co., 962
S.W.2d 272 (Tex. App. 1998) in support of its argument that the “known loss” defense
cannot apply given the allegation in the second complaint that the property damage
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In sum, based on the allegations of the second complaint and the plain
language of the Selective Policy, Selective had no duty to defend Lewallen
against the claims raised in the underlying litigation, as the claims were based
on property damage that fell within the Policy’s “known loss” exclusion.
ii.

Duty to Indemnify

For the same reasons stated above in connection with the duty to defend,
the Court finds that Selective had no duty to indemnify Lewallen for losses

continued through the time the second complaint was filed. (Pl.’s Opp’n Br., Dkt.
[46] at 11-12.) In E&L Chipping, the plaintiff-insured alleged property damage that
began prior to the insurance policy period but that continued into the insurance policy
period and was continuing as of the date the complaint was filed. 962 S.W.2d at 275.
The insurance company defended on several grounds, including on the basis of the
“known loss” doctrine—arguing that “the underlying claims were ‘known losses’ or
‘losses in progress’ prior to the inception of [the insurance] policy and [were] not
covered by the policy.” Id. at 276. The court rejected this defense based on the plain
language of the insurance policy at issue, which provided coverage for any property
damage that occurred during the policy period: “According to the policy, property
damage must occur during the policy period; on the face of the pleadings, at least
some of the property damage did so. In looking at the ‘eight corners’ of the insurance
policy and the underlying pleadings, it is apparent the facts pleaded are within the
scope of the policy period.” Id. at 275.
The Court in this case has undertaken the same analysis as the Court in E&L
Chipping, but reaches a different conclusion in light of the particular provisions of the
Selective Policy. Unlike the insurance policy at issue in E&L Chipping, which
covered any property damage occurring during the policy period and did not speak to
known losses, the Selective Policy contains an express “known loss” exclusion.
Because the property damages alleged in this case fall within that exclusion, Selective
had no duty to defend.
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sustained in the underlying litigation. As stated above, the property damage at
issue in the West litigation was not covered by the Selective Policy but, rather,
fell within the “known loss” exclusion. Accordingly, because the Policy did not
provide coverage for the damages claimed in the West litigation, Selective was
under no duty to indemnify Lewallen for losses sustained therein.7 See Elan v.
7

Transportation seeks to avoid this result by arguing that “the ‘known loss’
exclusion does not apply since a new loss occurred subsequent to Lewallen’s attempt
to correct water runoff issues.” (Pl.’s Opp’n Br., Dkt. [46] at 14-15.) In support of
this argument, Transportation relies on Lone Star Steakhouse & Saloon v. Liberty
Mut. Ins. Co., 343 F. Supp. 2d 989, 1008-09 (D. Kan. 2004) for the proposition that a
“known loss” defense does not apply in cases where the insured has taken remedial
steps to correct known property damage, which steps ultimately were unsuccessful,
leading to “new” or continuing property damage. (Pl.’s Opp’n Br., Dkt. [46] at 14-15;
Br. in Supp. of Pl.’s Mot. for Partial Summ. J., Dkt. [37-2] at 13-15.) Transportation’s
argument is unpersuasive.
The facts of Lone Star are inapposite to the facts of this case for several
reasons, including that the insurance policy at issue in Lone Star did not contain an
express “known loss” exclusion, as does the Selective Policy at issue in this case. On
the contrary, the policy at issue provided that coverage would extend to property
damage caused by an “accident” or “occurrence” but would not extend to property
damage that was “expected or intended from the standpoint of the insured.” Lone
Star, 343 F. Supp. 2d at 996. While the defendant-insurance company raised a
“known loss” defense, the defense was not based on an express exclusion under the
policy, but rather on the “known loss” or “loss in progress” doctrine under Kansas
law. Id. at 993, 1009-10.
The “known loss” issue in this case, by contrast, is one of contract
interpretation, and the language of the “known loss” exclusion in the Selective Policy
is unambiguous: where an insured knows of property damage prior to the Policy
period, any “continuation, change or resumption” of that damage will be “deemed to
have been known prior to the policy period.” (Def.’s Mot. for Summ. J., Ex. L Part 1,
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Pharm. Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372, 1375
(11th Cir. 1998) (“[U]nder Georgia law, . . . an insurer need not indemnify an
insured for a liability the insured incurs outside the terms of the insurance
contract . . . .”). Moreover, “an insurer’s duty to defend is broader than its duty
to indemnify.” Shafe v. Am. States Ins. Co., 653 S.E.2d 870, 873 (Ga. App.
2007). Accordingly, in light of the Court’s finding that Selective had no duty to
defend Lewallen, Selective had no duty to indemnify it for losses it sustained in
connection with the underlying litigation.
In accordance with the foregoing, Selective’s Motion for Summary
Judgment [35] on the issue of its liability for contribution is due to be
GRANTED. Transportation’s Motion for Partial Summary Judgment [37] is
due to be DENIED.
2.

Selective’s Liability for Attorney’s Fees and Litigation
Expenses (Count II)

Dkt. [35-15] at 3 of 10 (Selective Policy subsection 1.b(3).) Transportation contends
that the exclusion does not apply because “attempts [by Lewallen] to correct the water
runoff were ultimately unsuccessful resulting in runoff during the effective dates of
the Selective Policy.” (Pl.’s Br. in Opp’n, Dkt. [46] at 15.) However, by
Transportation’s own characterization of events, any water runoff that occurred after
Lewallen undertook remedial efforts (assuming he did so) and during the Selective
Policy period was a “continuation” of the original water runoff, thus falling within the
“known loss” exclusion.
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In Count II of the Complaint, Transportation seeks attorney’s fees and
litigation expenses, pursuant to O.C.G.A. § 13-6-11, alleging that Selective “has
acted in bad faith, has been stubbornly litigious, and has caused Transportation
unnecessary trouble and expense in refusing to contribute any amounts towards
the defense and indemnity of its insured, Lewallen, during Selective’s coverage
period.” (Compl., Dkt. [1-1] ¶ 22.) “A prerequisite to any award of attorney
fees under O.C.G.A. § 13-6-11 is the award of damages or other relief on the
underlying claim.” United Cos. Lending Corp. v. Peacock, 475 S.E.2d 601, 602
(Ga. 1996). In light of the Court’s finding that Transportation’s claim for
contribution fails as a matter of law, there is no basis upon which to award
Transportation attorney’s fees and litigation expenses.8 Selective’s Motion for
Summary Judgment [35] on the issue of its liability for attorney’s fees and
litigation expenses therefore is due to be GRANTED.
Conclusion
In accordance with the foregoing, Defendant Selective Way Insurance
Company’s Motion for Summary Judgment [35] is GRANTED. Plaintiff
8

The Court further notes that there is no evidence in the record of bad faith or
any other course of conduct by Selective that could warrant the imposition of
attorney’s fees and expenses under O.C.G.A. § 13-6-11.
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Transportation Insurance Company’s Motion for Partial Summary Judgment
[37] is DENIED. Finally, Plaintiff Transportation Insurance Company’s
Motion to Strike the Examination Under Oath of Larry Lewallen [42] is
DENIED. The Clerk shall enter judgment in favor of Defendant, and close the
case.
SO ORDERED, this 13th day of November, 2012.

_______________________________
RICHARD W. STORY
UNITED STATES DISTRICT JUDGE

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