Travelers Casualty and Surety Company of America v. University Facilities, Inc. et al

Filing 110

ORDER & REASONS: for the reasons stated, the Court DENIES State Farm's 82 Motion for Summary Judgment and DENIES AS MOOT Stanley Smith's and CBC's 91 99 Motions for Relief under Rule 56(d). Signed by Chief Judge Sarah S. Vance on 7/13/2011. (Reference: 10-2082)(rll, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA

CIVIL ACTION

VERSUS

NO: 10-1682
c/w 10-2082

UNIVERSITY FACILITIES, INC.,
CAPSTONE DEVELOPMENT CORPORATION,
CAPSTONE BUILDING CORPORATION

SECTION: R (1)

ORDER & REASONS
In this insurance coverage dispute, State Farm Fire and
Casualty Company moves for summary judgment on the grounds that
it has no duty to defend and indemnify Stanley Smith Drywall or
Capstone Building Corporation in the pending arbitration.1
Because the Court finds that State Farm did not demonstrate that
coverage is foreclosed considering, inter alia, the statement of
claims in the arbitration, the motion for summary judgment is
denied.

I.

BACKGROUND2
On August 1, 2004, University Facilities, Inc. (UFI) and

Capstone Development Corporation (CDC) contracted with
Southeastern Louisiana University for the design and construction

1

2

R. Doc. 82.

.

All record citations refer to documents in Civil Action
10-1682, unless noted otherwise.

of student housing facilities in Hammond, Louisiana.3

CDC

contracted with Capstone Building Corporation (CBC) to act as
general contractor on the project.

CBC in turn contracted with

Stanley Smith to perform undisclosed work at the facility
believed to involve the installation of drywall.4
On May 19, 2009, after allegedly discovering construction
and design defects in the work performed, UFI sued CDC and
Capstone On-Campus Management, LLC in state court.5
later removed to this court.6

The case was

On March 16, 2010, the matter was

stayed pending arbitration.7
On July 26, 2010, State Farm filed the present declaratory
judgment action.8

State Farm asserts that Stanley Smith and CBC

have made claims under Stanley Smith’s insurance policy for
coverage and defense in the arbitration.9

State Farm thus seeks

a declaration that it has no duty (1) to insure Stanley Smith or
CBC, or (2) to defend or indemnify any party against UFI’s claims

3

R. Doc. 82-4, Ex. A at 1-3.

4

10-2082, R. Doc. 1 at 9.

5

R. Doc. 82-4, Ex. A.

6

09-4178, R. Doc. 1.

7

09-4178, R. Doc. 13.

8

10-2082, R. Doc. 1.

9

Id. at 9.
2

in the pending arbitration.10

State Farm asserts that the

construction and design defect claims are not covered by or are
excluded under the policy.11

State Farm now moves for summary

judgment on its duty to defend and indemnify.12

Stanley Smith

and CBC oppose State Farm’s motion for summary judgment and have
filed motions for relief under Rule 56(d) of the Federal Rules of
Civil Procedure.13

II.

LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the

discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
FED. R. CIV. P. 56(c)(2); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d
1069, 1075 (5th Cir. 1994).

When assessing whether a dispute as

to any material fact exists, the Court considers “all of the
evidence in the record but refrains from making credibility
determinations or weighing the evidence.”

Delta & Pine Land Co.

v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir.

10

Id. at 11.

11

Id. at 9-10.

12

R. Doc. 82.

13

R. Doc. 88; R. Doc. 91; R. Doc. 96; R. Doc. 99.
3

2008).

All reasonable inferences are drawn in favor of the

nonmoving party, but “unsupported allegations or affidavits
setting forth ‘ultimate or conclusory facts and conclusions of
law’ are insufficient to either support or defeat a motion for
summary judgment.”

Galindo v. Precision Am. Corp., 754 F.2d

1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’”

Int’l

Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th
Cir. 1991).

The nonmoving party can then defeat the motion by

either countering with sufficient evidence of its own, or
“showing that the moving party’s evidence is so sheer that it may
not persuade the reasonable fact-finder to return a verdict in
favor of the moving party.”

Id. at 1265.

If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in
the record is insufficient with respect to an essential element
of the nonmoving party's claim.

See Celotex, 477 U.S. at 325.

The burden then shifts to the nonmoving party, who must, by
submitting or referring to evidence, set out specific facts
showing that a genuine issue exists.

4

See id. at 324.

The

nonmovant may not rest upon the pleadings, but must identify
specific facts that establish a genuine issue for trial.

See,

e.g., id. at 325; Little, 37 F.3d at 1075; Isquith ex rel.
Isquith v. Middle South Utils., Inc., 847 F.2d 186, 198 (5th Cir.
1988), cert. denied, 488 U.S. 926 (1988).

III. DISCUSSION
State Farm argues that it has no duty to defend or indemnify
Stanley Smith or CBC in the pending arbitration because UFI’s
construction and design defect claims are not covered by or are
excluded under the policy.

Specifically, State Farm contends

that: (1) there is no “occurrence” to trigger coverage under the
policy; (2) only breach of contract claims are asserted; (3)
there is no property damage alleged; and (4) various coverage
limitations and exclusions apply to prevent coverage.14
An insurer’s duty to defend an insured is “a separate and
distinct inquiry from that of the insurer’s duty to indemnify a
covered claim after judgment against the insured in the
underlying liability case.”

Martco Ltd. P’ship v. Wellons, Inc.,

588 F.3d 864, 872 (5th Cir. 2009) (citing Elliott v. Cont’l Cas.
Co., 2006-1505 (La. 2/22/07) ; 949 So. 2d 1247, 1250).
Court, therefore, will address each duty separately.

14

R. Doc. 82-1 at 17-26.
5

The

A) Duty to Defend
Under Louisiana law, an insurer’s duty to defend is
determined by comparing the language of the insurance policy with
the allegations in the complaint.

See id. (“Under Louisiana’s

‘Eight Corners Rule,’ we must assess whether there is a duty to
defend by applying the allegations of the complaint to the
underlying policy without resort to extrinsic evidence.”); La.
Stadium & Exposition Dist. v. BFS Diversified Prods., LLC, 20100587, p. 3 (La. App. 4 Cir. 9/15/10); 49 So. 3d 49, 51 (“The duty
to defend is determined solely from the plaintiff’s pleadings and
the face of the policy without consideration of extraneous
evidence.”).

The insurer has a duty to defend unless the

allegations “unambiguously preclude coverage.”
at 872 (citing Elliott, 949 So. 2d at 1250).

Martco, 588 F.3d
The duty to defend

“arises whenever the pleadings against the insured disclose a
possibility of liability under the policy.”

Martco, 588 F.3d at

872-73 (citing Meloy v. Conoco, Inc., 504 So. 2d 833, 839 (La.
1987)).
State Farm asserts it has no duty to defend Stanley Smith or
CBC in the arbitration.

Whether State Farm has a duty to defend

in the arbitration must be determined by considering the claims
asserted in the arbitration.

See Sigma Marble & Granite-Houston

v. Amerisure Mut. Ins. Co., No. 09-3942, 2010 WL 5464257, at *2
n.14 (S.D. Tex. Dec. 28, 2010) (“The parties agree that the
6

amended statement of [arbitration] claim is the relevant pleading
for determining the duty to defend.”).

Although State Farm

asserts that under the “eight corners” rule the Court may
consider only UFI’s state court petition, the demand for
arbitration and the insurance policy, Stanley Smith and CBC were
not defendants in the lawsuit filed by UFI.15

Further, the

demand for arbitration contains only a brief and general
description of the nature of the dispute.16

The Court finds that

UFI’s and CBC’s statements of arbitration claims are the relevant
pleadings for determining State Farm’s duty to defend.

See id.

at *7 (stating that to determine an insurer’s duty to defend a
subcontractor in arbitration, the Court would compare the policy
to the allegations in the owner’s and general contractor’s
statements of arbitration claims).

State Farm has not provided

the Court, however, with the statements of arbitration claims.
Because State Farm’s duty to defend can be determined only after
reviewing the statements of arbitration claims, the Court cannot

15

R. Doc. 82-4, Ex. A.

16

The demand for arbitration states:
This is a third-party claim in AAA case No. 69 110 Y
00578 09. Capstone Building Corp. (“CBC”) demands
defense and indemnification from its subcontractors to
the extent CBC may be liable to claimant University
Facilities, Inc. (“UFI”) or other parties for the
claims asserted against CBC in this arbitration
proceeding related to student housing at Southeastern
Louisiana University in Hammond, Louisiana.
R. Doc. 82-6, Ex. C.
7

determine as a matter of law State Farm’s duty to defend on the
present record.

B) Duty to Indemnify
In determining an insurer’s duty to indemnify, the Court is
not limited to the allegations in the complaint, but rather “must
apply the Policy to the actual evidence adduced at the underlying
liability trial together with any evidence introduced in the
coverage case.”

Martco, 588 F.3d at 877.

Although the

interpretation of an insurance contract presents a question of
law rather than of fact, the Court must apply the policy to the
evidence presented to determine whether there is coverage under
the insuring clause and whether a policy exclusion applies.

See

id. at 878-84 (applying Louisiana law to determine whether “[a]
review of the evidence adduced at trial, the resulting verdict
and judgment, and the applicable Louisiana law reveals that [the
insured] clearly carried its burden of establishing coverage
under the insuring clause”).

Here, State Farm has not presented

the Court at a minimum with the statement of claims in the
arbitration.

Additionally, Stanley Smith and CBC assert that

State Farm’s motion for summary judgment was filed before any
discovery was conducted in the arbitration proceeding or in this
case.

The Court finds that State Farm has failed to develop the

record sufficiently to establish that there is no genuine issue
8

of material fact as to its duty to indemnify Stanley Smith or CBC
in the arbitration.
Accordingly, the Court denies State Farm’s motion for
summary judgment on its duty to defend and indemnify.

IV.

CONCLUSION
For the foregoing reasons, the Court DENIES State Farm’s

motion for summary judgment at this time.

Because the Court has

denied State Farm’s motion for summary judgment, the Court DENIES
AS MOOT Stanley Smith’s and CBC’s motions for relief under Rule
56(d).17

New Orleans, Louisiana, this 13th

day of July, 2011.

SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

17

R. Doc. 91; R. Doc. 99.
9