EMJ Corporation et al v. Hudson Specialty Insurance Company et al
Filing
65
MEMORANDUM OPINION re 64 Order on Motion for Summary Judgment, Order on Motion for Partial Summary Judgment, 63 Order on Motion to Strike,. Signed by Glen H. Davidson on 3/22/13. (tab)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
EMJ CORPORATION and
WESTCHESTER FIRE INSURANCE COMPANY
v.
PLAINTIFFS
CIVIL ACTION NO. 2:11-CV-00228-GHD-JMV
HUDSON SPECIALTY INSURANCE COMPANY
DEFENDANT
MEMORANDUM OPINION DENYING PLAINTIFFS' MOTION FOR PARTIAL
SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Presently before the Court in this declaratory judgment action are Plaintiffs' motion for
partial summary judgment [21] and Defendant's motion for summary judgment [40]. Upon due
consideration, the Court finds that both motions should be denied, because genuine disputes of
material fact exist that preclude the granting of summary judgment.
A. Summary Judgment Standard
This Court grants summary judgment "if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law." See FED. R. CIV. P. 56(a);
Celotex Corp. v. Catrett, 477 U.S. 317,322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986);
Weaver v. CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir. 2008). The rule "mandates the entry of
summary judgment, after adequate time for discovery and upon motion, against a party who fails
to make a sufficient showing to establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at
322, 106 S. Ct. 2548.
The party moving for summary judgment bears the initial responsibility of informing the
district court of the basis for its motion and identifying those portions of the record it believes
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demonstrate the absence of a genuine issue of material fact. ld. at 323, 106 S. Ct. 2548. Under
Rule 56(a) of the Federal Rules of Civil Procedure, the burden then shifts to the non-movant to
"go beyond the pleadings and by ... affidavits, or by the 'depositions, answers to interrogatories,
and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.' "
ld. at 324, 106 S. Ct. 2548; Littlefield v. Forney lndep. Sch. Dist., 268 F.3d 275, 282 (5th Cir.
2001).
B. Factual and Procedural Background
On or about February 15, 2005, EMJ Corporation ("EMJ") and Contract Steel
Construction, Inc. ("Contract Steel") entered into a subcontractor agreement for the execution of
work on a JC Penney Project in Southaven, Mississippi (the "Project"). EMJ was the general
contractor on the Project. Contract Steel was the contractor, performing, in relevant part, the
installation of a steel stairway, which was designed and constructed by another entity. With
regard to requisite liability insurance coverage, the subcontractor agreement provides in relevant
part:
[Contract Steel] shall maintain, at its own cost, such insurance as
will protect it and [EMJ] from ... any claim for bodily injury, ...
both physical and loss of use, which may arise from the Work or
any performance under the [s]ubcontract, whether such work or
performance are by [Contract Steel] or its officers, agents,
subcontractors, suppliers, employees[,] or those with whom it
controls for any part of the Work . . .. This indemnification shall
only be applicable to the conduct attributable to [Contract Steel] or
anyone directly or indirectly employed, contracted[,] or supervised
by [Contract Steel] or by anyone for whose acts [Contract Steel]
may be liable.
Subcontractor Agreement [1-1] at 2 , 5.
In accordance with the subcontractor agreement,
Contract Steel took out insurance policies, including one from Hudson Specialty Insurance
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Company ("Hudson Specialty"). In relevant part, the Hudson Specialty Policy provides that an
insured under the policy includes:
(a]ny person or organization for whom you (Contract Steel] have
agreed in writing prior to any "occurrence" or "offense" to provide
insurance such as is afforded by this policy, b,ut only with respect
to operations performed by you [Contract Steel] or on your behalf,
or facilities owned or used by you [Contract Steel].
Hudson Specialty Policy [1-4] at 22, Part III(2)(f).
Thereafter, Contract Steel installed a steel stairway at the Project and tendered the
installation of the stairway to EMJ, which accepted it. Approximately two weeks later, JC
Penney apparently engaged Professional Services Industries, Inc. to inspect an entrance canopy
at the construction site. John Meeker, an employee of Professional Services Industries, Inc., was
assigned the job. In the course of conducting the inspection, Meeker fell while descending the
steel stairway previously installed by Contract Steel. Meeker sustained injuries that rendered
him a paraplegic.
On or about April 24, 2008, Meeker and his wife sued Contract Steel, EMJ, and others in
the Circuit Court of Desoto County in an action styled John Meeker et al. v. J C. Penney Corp.,
Inc., et al., Civil Action No. CV2008-0148, seeking damages for Meeker's personal injuries.
Apparently, the claims asserted include allegations that the steps, as installed, were too steep to
be safely navigated and lacked an anti-slip surface application. The state-court litigation is still
ongoing.
However, the state-court judge has dismissed the claims by the Meekers against
Contract Steel, as well as a cross-claim by EMJ against Contract Steel for indemnity. In his
opinion, the state-court judge explained that under Mississippi law once a contractor or owner
accepts the work of a subcontractor or contractor, liability for injuries related to the work
accepted shifts to the party accepting the work, regardless of the subcontractor's negligent
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performance of the contract. Consequently, the state-court judge held that Contract Steel owed
no duty to Meeker; only EMJ could owe such a duty to Meeker. The state-court judge further
found that that the responsibility for applying a non-slip coating to the steps was outside the
scope of Contract Steel's contractual obligations; thus, Contract Steel was found to have no
liability to Meeker on that basis, as well. According to Contract Steel and EMJ, the Meekers'
sole remaining allegation in the underlying state-court litigation is one for unspecified
"independent" or "sole" negligence of EMJ.
This Court notes that the state-court judge
expressly reserved ruling on whether EMJ might nevertheless allocate fault to Contract Steel at
the state-court trial. After Contract Steel was dismissed from the state-court case, the state-court
judge stayed the proceeding pending EMJ's appeal of the state-court rulings to the Mississippi
Court of Appeals. That court recently affirmed the state court's granting of summary judgment
to Contract Steel, holding in accordance with the Desoto County Circuit Court judge that
[t]he general rule is well established that an independent contractor
is not liable for injuries occurring to a third person after the
contractor has completed the work and turned it over to the owner
or employer and it has been accepted by him, even though the
injury results from the contractor's failure properly to carry out his
contract. When the work is finished by the contractor and accepted
by the employer, the latter is substituted as the party responsible
for existing defects, and the same rule is applied to subcontractors,
so as to relieve them from liability to the original employer where
their work has been finished and accepted by the original
contractor.
EMJ Corp. v. Contract Steel Constr., Inc., 81 So. 3d 295, 299-300 (Miss. Ct. App. 2012)
(emphases added).
Meanwhile, on November 28, 2011, Plaintiffs EMJ and Westchester Fire Insurance
Company ("Westchester") (collectively, "Plaintiffs") filed this action for a declaratory judgment
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against Hudson Specialty in this Court. l
Plaintiffs seek a declaration of the rights and
obligations of all persons interested under the Hudson Specialty Policy, pursuant to Rule 57 of
the Federal Rules of Civil Procedure; the United States Declaratory Judgment Act, 28 U.S.C. §
2201; and otherwise. Plaintiffs ask the Court to find, inter alia, that EMJ is owed coverage
under the Hudson Specialty Policy, that Hudson Specialty is the primary insurer, and that
Hudson Specialty breached the terms of the Hudson Specialty Policy by not defending and
indemnifying EMJ in the underlying state-court litigation. By way of the instant motion for
partial summary judgment [21], EMJ seeks a determination that it is an additional insured under
the Hudson Specialty Policy. By way of the instant motion for summary judgment [40], Hudson
Specialty seeks a determination that, inter alia, EMJ is not an additional insured.
C. Plaintifft' Arguments
As earlier noted, the Hudson Specialty Policy provides in pertinent part that an insured
includes:
[a]ny person or organization for whom you [Contract Steel] have
agreed in writing prior to any "occurrence" or "offense" to provide
insurance such as is afforded by this policy, but only with respect
to operations performed by you [Contract Steel] or on your behalf,
or facilities owned or used by you [Contract Steel].
Hudson Specialty Policy [1-4] at 22 § III (2)(f). Plaintiffs maintain that because the language of
the subcontractor agreement provides that EMJ is to be named an "additional insured" on
Contract Steel's insurance policies covering the Project, Contract Steel is an "additional insured"
under that policy-even if the Meekers seek recovery from EMJ for its independent acts of
negligence, rather than merely on account of any negligence of its subcontractor, Contract Steel.
Plaintiffs argue that this Court should rule that EMJ is an "additional insured" on the Hudson
I Amerisure was also originally named as a defendant, but it has since been terminated from the case per
the mutual agreement of the parties.
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Specialty Policy, because "[a] number of courts have held that [the policy language: "but only
with respect to operations perfonned by you or on your behalf, or facilities owned or used by
you"] does not preclude additional insured coverage where the injuries were caused by the
additional insured's sole negligence." PIs.' Mem. Supp. Mot. PSJ [22] at 12 (citing cases)
(emphasis added). According to Plaintiffs, Meeker's injuries arise with respect to Contract
Steel's operations at the Project site (the installation of the steel ladder); thus, Plaintiffs assert
that this Court should find that EMJ is an additional insured under the Hudson Specialty Policy
for its own independent acts of negligence. Plaintiffs additionally argue that Meeker's injuries
arise with respect to Contract Steel's ownership or use of the facilities at the Project site,
"notwithstanding that the accident may have been detennined [in the underlying state-court
litigation] to have not been caused by the fault of Contract Steel." Id. at 22 (emphasis added).
Plaintiffs further assert that the policy definition of "additional insured" should be interpreted
against Hudson Specialty, because the definition is akin to an exclusionary clause and/or is
ambiguous.
D. Hudson Specialty's Arguments
Hudson Specialty argues in both its response and its subsequent motion for summary
judgment [40] that EMJ is not an "additional insured" on the Hudson Specialty Policy, because
even under the cases cited by Plaintiffs in support of their argument that case law does not
preclude a finding that a party is an "additional insured" merely because independent acts of
negligence are the only allegations against that party, the underlying claim at issue must be
shown to bear at least a sufficient causal nexus to any "facilities owned or used" by the named
insured (in this case, Contract Steel), or the named insured's (Contract Steel's) "operations" at
the Project site. Hudson Specialty further argues that there is no sufficient causal nexus, because
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the underlying claim at issue does not bear a sufficient causal nexus to any "facilities owned or
used" by the "named insured" and Meeker's accident, or the "named insured's" "operations" at
the subject job-site and Meeker's accident.
Hudson Specialty further argues that Plaintiffs have failed to demonstrate an
"occurrence" to trigger coverage under the Hudson Specialty Policy, and that even if an
"occurrence" has been demonstrated, coverage is excluded by Hudson Specialty Policy's
"expected or intended" injury exclusion and/or its "professional services" exclusion.
Hudson Specialty Policy Defines an "occurrence" as an "accident."
The
According to Hudson
Specialty, under applicable Mississippi law, an intentional act that the actor foresees and
anticipates will result in the injury suffered is not an accident. Hudson Specialty argues that
Meeker's injury was not an accident, because the Mississippi Court of Appeals affinned the
Desoto County Circuit Court's finding that EMJ, with knowledge of the fact that the subject
stairway was shorter than anticipated, nevertheless ordered its installation.
£. Analysis and Discussion
The Court finds that upon consideration of Plaintiffs' motion for partial summary
judgment, the response, reply, accompanying briefs, rules, and authorities, summary judgment is
not proper on the issue of whether EMJ was an "additional insured" on the Hudson Specialty
Policy. The judge in the underlying state-court litigation dismissed Contract Steel from the case,
finding that Contract Steel breached no duty to the Meekers as a matter of law. However, the
state-court judge did not rule that the injuries were not incurred with respect to the operations of
Contract Steel at the Project site. In fact, the state-court judge expressly reserved ruling on the
issue of "whether [the state-court judge's] ruling would affect EMJ's right to 'place the blame'
on Contract [Steel] at trial," stating that "[s]uch evidentiary issues should be brought before the
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[state-court judge] as a motion in limine" or "during the jury instruction phase of the trial." See
Desoto Cnty. Cir. Ct.'s Order Granting Contract Steel's MSJ [27-1].
The state court's
reservation in this respect is consistent with Mississippi Court of Appeals' recitation that under
Mississippi law a subcontractor has no liability to a third party for injuries related to a job that
has been accepted by the owner or contractor--even though the injuries may relate to mal
performance by the subcontractor.
In other words, with one narrow exception,2 contrary to
Hudson Specialty's argument, there has been no judicial resolution in the state court of the
degree of relationship,
if any,
between the injuries
suffered by Meeker to
the
operations/ownership or use of Contract Steel's facilities. Any ruling concerning the existence
of any such causal nexus by this Court is dependent on any ruling by the state court in the
underlying state-court litigation. At this juncture, it is not sufficiently clear from the arguments
of counsel and the record what degree of relationship, if any, exists between Meeker's injuries
and the operations of Contract Steel at the Project site.
Accordingly, genuine disputes of
material fact exist that preclude the granting of summary judgment on this issue to Plaintiffs.
Similarly, the Court finds upon due consideration that Hudson Specialty's motion for
summary judgment should also be denied. As stated above, genuine disputes of material fact
exist with respect to whether EMJ is an "additional injured" under the Hudson Specialty Policy.
Genuine disputes also exist with respect to whether an "occurrence" is demonstrated that would
trigger coverage under the Hudson Specialty Policy, and with respect to whether in any event the
policy's "expected or intended" injury exclusion and/or its "professional services" exclusion
would bar coverage.
Hudson Specialty maintains that there was no occurrence to trigger
2 The issue of whether Contract Steel bore any responsibility for the application/non-application of a non
slip surface on the subject stairway has been judicially established in the state-court action not to have been the
responsibility of Contract Steel, because it was not within Contract Steel's scope of work under the subcontract.
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coverage, but there was instead an intentional act that was foreseen and anticipated. Although
the Mississippi Court of Appeals found that EMJ ordered the installation of the stairway despite
its knowledge that the stairway was shorter than anticipated, that court also found that EMJ
poured a concrete base under the stairway prior to its installation. It is simply unclear from the
record whether the intent of that concrete base was to ameliorate the shortfall in the stairway's
height. Moreover, there is no undisputed evidence in the record that EMJ consciously withheld
application of the anti-slip skid surface to the stairway.
Hudson Specialty's remaining efforts to avoid coverage by reliance on certain policy
exclusions-namely the intentional injury exclusion and/or the professional services exclusionare similarly flawed. Hudson Specialty has failed to demonstrate to this Court's satisfaction that
no genuine dispute of fact exists with respect to whether the Meeker injuries were intentional, or
that the professional services exclusion has any application here. Instead, the Court finds that
genuine disputes of material fact exist in this case which preclude summary judgment to Hudson
Specialty. Therefore, the Court finds that Hudson Specialty's motion for summary judgment
should also be denied.
F. Conclusion
In sum, the Court finds that Plaintiffs' motion for partial summary judgment [21] and
Hudson Specialty's motion for summary judgment [40] should be DENIED.
An order in accordance with this opinion shall issue this day.
~
THIS, the
;)J day of March, 2013.
SENIOR JUDGE
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