Greenwich Insurance Company et al v. Capsco Industries, Inc. et al

Filing 145

ORDER denying 140 Motion for Reconsideration Signed by Chief District Judge Louis Guirola, Jr on 09/17/2017 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
GREENWICH INSURANCE
COMPANY and INDIAN HARBOR
INSURANCE COMPANY
v.

PLAINTIFFS
CAUSE NO. 1:14CV297-LG-JCG

CAPSCO INDUSTRIES, INC., and
GROUND CONTROL, LLC
GROUND CONTROL, LLC

DEFENDANTS
COUNTER-PLAINTIFF

v.
GREENWICH INSURANCE
COMPANY and INDIAN HARBOR
INSURANCE COMPANY

COUNTER-DEFENDANTS

ORDER DENYING GROUND CONTROL’S
MOTION FOR RECONSIDERATION
BEFORE THE COURT is Ground Control, LLC’s Motion for
Reconsideration [140] of this Court’s Memorandum Opinion and Order [139]
granting partial summary judgment in favor of Greenwich Insurance Company and
Indian Harbor Insurance Company (hereafter collectively referred to as “the
Insurers”) as to the duty to defend Capsco Industries, Inc., in a state court action
filed by Ground Control. The parties have fully briefed the Motion. After reviewing
the submissions of the parties, the record in this matter, and the applicable law, the
Court finds that the Motion for Reconsideration should be denied.

BACKGROUND
The underlying state court action remains pending after approximately eight
years of litigation, extensive motion practice, one trial, and two appeals to the
Mississippi Supreme Court. 1 Ground Control sued Capsco and others seeking
payment for work performed on the Margaritaville Spa and Hotel construction
project in Biloxi, Mississippi. After the first appeal, Ground Control attempted to
amend its complaint to add numerous tort, contractual, and statutory claims
against several defendants. As a result, the Mississippi Supreme Court
emphatically stated:
Based on what transpired following our mandate in Ground Control I,
we feel compelled to make ourselves very clear. The only plaintiff on
remand is Ground Control. The only defendant is Capsco. The only
issue is quantum meruit damages. And the only options available to
Ground Control and Capsco are to agree to a $199,096 damages award
or proceed to a new trial on quantum meruit damages.
Ground Control, LLV v. Capsco Indus., Inc., 214 So. 3d 232, 249 (¶74) (Miss. 2017)
(hereafter referred to as “Ground Control II”). The parties have decided to proceed
to a new trial on quantum meruit damages. Ground Control has once again filed a
Motion to Amend its Complaint in state court. This time, it claims that it merely
wants to clarify its quantum meruit damages claims.
In this declaratory judgment action, Capsco’s Insurers argued that they do
not owe a duty to defend Capsco in the lawsuit filed by Ground Control because

A complete discussion of the facts and procedural history of this case are included
in this Court’s Memorandum Opinion and Order [139] granting partial summary
judgment in favor of the Insurers, which is incorporated by reference.
1

-2-

Ground Control’s remaining claim for quantum meruit does not seek recovery for
“property damage” or “bodily injury” as required by the insurance policies at issue.
The Insurers also argued that Ground Control’s remaining claim does not constitute
an “occurrence” under the policies. It is undisputed that no “bodily injury” is
alleged in Ground Control’s Supplemental Complaint, but Ground Control claims
that it has alleged “property damage” caused by an “occurrence.” This Court
granted the Insurers’ Motion for Partial Summary Judgment, finding that the
Insurers have no duty to defend Capsco in the state court action.2
DISCUSSION
As this Court previously explained, the policies at issue are commercial
general liability (CGL) policies that require the Insurers to “pay those sums that the
insured becomes legally obligated to pay as damages because of ‘bodily injury’ or
‘property damage’” caused by an “occurrence.” (Insurers’ Mot., Ex. G at 36, Ex. H at
35, ECF Nos. 131-7, 131-8). The policies further provide that the Insurers “will
have the right and duty to defend the insured against any ‘suit’ seeking those
damages.” (Id.) “Property damage” under the policies means “[p]hysical injury to
tangible property, including all resulting loss of use of that property[,]” as well as
the “[l]oss of use of tangible property that is not physically injured.” (Insurers’ Mot.,
Ex. G at 49, Ex. H at 48, ECF Nos. 131-7, 131-8). Ground Control alleges that it has
asserted claims for both damage to tangible property and loss of use of tangible

The Court considered both the Supplemental Complaint, which currently governs
the state court proceedings, as well as the proposed amended complaint in its
Memorandum Opinion and Order.
2

-3-

property. The Court will once again discuss these types of alleged property damage
separately. The parties agree that Alabama law governs this insurance dispute.
I. DAMAGE TO TANGIBLE PROPERTY
Ground Control argues that this Court incorrectly classified its claims
against Capsco as breach of contract claims. However, this Court noted the
Mississippi Supreme Court’s mandate that only quantum meruit claims remain
multiple times in its Memorandum Opinion and Order. (Mem. Op. & Order at 3, 4,
7, & 15, ECF No. 139). It was impossible to analyze this case, however, without
referencing the sub-subcontract between Capsco and Ground Control as well as
Capsco’s alleged failure to pay Ground Control in accordance with that subsubcontract, because the relationship between these parties and this lawsuit itself
arose out of that sub-subcontract. The Court recognizes that the Mississippi
Supreme Court subsequently voided the sub-subcontract pursuant to Miss. Code
Ann. § 31-3-15 and reformed Ground Control’s claims as quantum meruit claims.
Ground Control also argues that this Court erred by relying on Westfield
Insurance Co. v. Nautilus Insurance Co., 154 F. Supp. 3d 259, 262 (M.D.N.C. 2016),
because the Westfield decision concerned a breach of contract claim and the present
case involves a quantum meruit claim. However, a quantum meruit claim is not so
distinct from a breach of contract claim as Ground Control claims. The Mississippi
Supreme Court has explained that “[q]uantum meruit is the measure of liability for
a contract implied in law . . . .” McLain v. W. Side Bone & Joint Ctr., 656 So. 2d

-4-

119, 123 (Miss. 1995). 3 It has also held that “[q]uantum meruit recovery is a
contract remedy which may be premised either on express or implied contract, and
a prerequisite to establishing grounds for quantum meruit recovery is claimant’s
reasonable expectation of compensation.” In re Estate of Smith, 69 So. 3d 1, 7 (¶22)
(Miss. 2011). The elements of a quantum meruit claim are:
(1) valuable services were rendered or materials furnished; (2) for the
person sought to be charged; (3) which services and materials were
accepted by the person sought to be charged, used and enjoyed by him;
and (4) under such circumstances as reasonably notified [the] person
sought to be charged that [the] plaintiff, in performing such services,
was expected to be paid by [the] person sought to be charged.
In re Estate of Fitzner, 881 So. 2d 164, 173-74 (¶25) (Miss. 2003).
As this Court explained in its Memorandum Opinion and Order:
According to Ground Control’s Supplemental Complaint, Capsco,
Yates, and Harrah’s directed Ground Control to perform repairs on
work that had previously been completed at the project site. (Insurers’
Mot., Ex. A at 7-8 (¶¶ 12-14), ECF No. 131-1). Ground Control further
asserts that it has not been compensated for these repairs. (Id.)
Ground Control’s proposed amended complaint contains similar
allegations. (Ground Control’s Mot., Ex. C at 6-8 (¶¶ 9-13), ECF No.
127-3).
(Mem. Op. & Order at 11, ECF No. 139). Ground Control itself did not suffer any
damages as a result of damage to tangible property. Ground Control claims that it
performed work and provided materials for the benefit of Capsco, but Capsco failed
to pay for the work and materials provided. These quantum meruit claims are

Since Mississippi law governs the underlying state court action, the Mississippi
courts’ explanation of the doctrine of “quantum meruit” is most applicable to the
determination of whether a quantum meruit claim is analogous to a breach of
contract claim, as well as the issue of whether a quantum meruit claim seeks
recovery for economic loss.
3

-5-

purely economic in nature. Therefore, they do not constitute claims for “property
damage” under the CGL policies at issue. See Am. States Ins. Co. v. Martin, 662 So.
2d 245, 248 (Ala. 1995) (holding the purely economic damages are not included in
the CGL policy definition of “property damage”).
Contrary to Ground Control’s assertions, the fact that Ground Control was
already performing other work at the construction site does not affect the analysis
of Ground Control’s claims. Furthermore, the fact that some of Ground Control’s
work was damaged and repaired does not affect this analysis. Ground Control’s
President testified that Ground Control only agreed to repair the damaged work
because the general contractor promised to pay Ground Control additional funds for
performing the repairs. (See generally Ground Control’s Mot., Ex. E, ECF No. 1276). He testified that Ground Control was not otherwise obligated to perform the
repairs. (Id.) Thus, once Ground Control completed its work, the work was not
Ground Control’s property and it had no obligation to repair the damage to the work
absent the separate arrangement made with the general contractor. Since Ground
Control had no obligation to repair the work, it suffered no damages until after
Capsco failed to pay for repairing the work.
Ground Control implies that this Court’s holding would negate all claims for
coverage for negligent property damage. (Ground Control’s Mem. at 5, ECF No.
141). However, if Ground Control ever had a claim for negligent property damage
against Capsco, that claim has been dismissed by the state court. Ground Control
was hired to repair damage at a construction site, but it claims it was not paid for

-6-

that work. As the Mississippi Supreme Court explained, Ground Control can seek
recovery pursuant to quantum meruit because “its ‘services were rendered under
the reasonable expectation that they would be paid for by’ Capsco.” Ground Control
II, 214 So. 3d at 244 (¶44); see also Ground Control, LLC v. Capsco Indus., Inc., 120
So. 3d 365, 372 (¶15) (Miss. 2013) (“Ground Control should not be precluded from
having the opportunity to proceed in court under a claim for the value of what it
expended in labor and supplies on the project.”) This is a claim for economic loss,
not a claim for property damage. Ground Control’s request for reconsideration of its
arguments concerning coverage for damage to tangible property must be denied.
II. LOSS OF USE
Ground Control argues that the Court made improper findings of fact when it
held that the claims for loss of use did not constitute an “occurrence” under the
policies. This Court considered Ground Control’s allegations in its proposed
amended complaint, as well as testimony given by Ground Control’s President.4
The Court made no findings of fact; it merely considered Ground Control’s own
allegations.
The Memorandum Opinion and Order contains the following description of
the loss of use allegations:
At trial, Beaton testified that Capsco deducted funds from
checks paid to Ground Control to purchase pipe from a company called
Ferguson and laser sighting equipment from a company called ICM.
(Ground Control’s Mot., Ex. E at 677-78, 684, ECF No. 127-5). Beaton
No loss of use allegations were included in the Supplemental Complaint. The
testimony of Ground Control’s President was reviewed at the request of Ground
Control.
4

-7-

testified that Ground Control did not have an agreement with Capsco
to pay for the pipe and Ground Control did not purchase the pipe from
Ferguson. (Id. at 678). He also testified that the funds for the laser
were taken without Ground Control’s permission, and as far as he
knew, Capsco retained possession of the laser. (Id.) In an affidavit,
Beaton claims that Capsco told him that Ground Control is the owner
of the laser and promised to deliver the laser to Ground Control’s
office. (Ground Control’s Mot., Ex. D at 11, (¶15), ECF No. 127-4). He
also testified that Capsco’s representatives had assured Beaton that
Ground Control would retain an ownership interest in the pipe and
other materials Capsco purchased from Ferguson and “that Capsco
would pay Ground Control for its interest in these materials once the
outstanding pay applications were paid by Yates.” (Id. at 9 (¶9)).
In its proposed amended complaint, Ground Control alleges that
“Capsco arbitrarily and without consent deducted from these vested
earnings the sum of $358,367.98 for the purchase of the piping
material.” (Ground Control’s Mot., Ex. C at 8 (¶14), ECF No. 127-3). It
further alleges that “Ground Control suffered the loss of this piping
material and its use when its [sic] was transferred by Capsco without
any compensation or reimbursement to Ground Control for its interest
in these materials.” (Id. at 9 (¶14)). The proposed amended complaint
contains similar allegations concerning the laser sighting device. (Id.
at 9 (¶15)).
(Mem. Op. & Order at 13-14).
The policies provide that an “occurrence” is “an accident, including
continuous or repeated exposure to substantially the same general harmful
conditions.” (Insurers’ Mot., Ex. G at 48, Ex. H at 48, ECF Nos. 131-7, 131-8). The
Alabama Supreme Court has accepted the following definitions of “accident”: (1)
“[a]n unintended and unforeseen injurious occurrence; something that does not
occur in the usual course of events or that could be reasonably anticipated;” and (2)
“something unforeseen, unexpected, or unusual.” Hartford Cas. Ins. Co. v.
Merchants & Farmers Bank, 928 So. 2d 1006, 1012 (Ala. 2005).

-8-

Ground Control is now attempting to classify its alleged loss of use
allegations as negligent or reckless misrepresentation claims, but none of Ground
Control’s allegations, even in its proposed amended complaint, resemble allegations
of negligent or even reckless misrepresentations.5 Ground Control now claims that
there is “neither any evidence nor substantiated allegations that Capsco
intentionally divested Ground Control of this property.” (Mem. at 18, ECF No. 141).
However, deducting funds without permission to purchase materials without
repayment cannot reasonably be considered an accident. Ground Control has not
alleged that Capsco accidentally deducted funds from its payments or accidentally
made false promises. It alleges intentional conduct: that Capsco took its money,
used the money to buy equipment without permission, and refused to either refund
the money or deliver the equipment to Ground Control. Therefore, Ground
Control’s request for reconsideration of its arguments concerning loss of use must be
denied.
III. REQUEST FOR AMENDMENTS TO MEMORANDUM OPINION
AND ORDER
In its Motion, Ground Control asserts that:
the Court’s Memorandum Opinion and Order should be corrected in
order to accurately reflect i) the negligence claims asserted by Ground
Control, ii) the preclusion by the Mississippi Supreme Court of any
claims for breach of contract or other contractual claims by Ground
Control for expectation damages due under its contract with Capsco,
and iii) the case law governing CGL claims for unintentional property
damage caused by an insured contractor that would allow recovery by
Ground Control for such damages in this instance.
As explained previously, the state court has refused to allow Ground Control to
assert tort claims against Capsco.
5

-9-

(Ground Control’s Mem. at 3, ECF No. 141). Although these requests for
amendment overlap with some of the arguments previously addressed, the Court
will discuss these requests separately for the sake of clarity.
As for the first request, the Court cannot amend the Memorandum Opinion
and Order to reflect that Ground Control has filed negligence claims because there
are no such claims. The Mississippi Supreme Court refused to allow Ground
Control to amend its Supplemental Complaint to add tort claims. The only
remaining claim is a quantum meruit claim.
Second, it is not necessary to amend the Memorandum Opinion and Order to
reference the “preclusion by the Mississippi Supreme Court of any claims for breach
of contract or other contractual claims by Ground Control for expectation damages
due under its contract with Capsco,” because that fact was repeatedly stated in this
Court’s Memorandum Opinion and Order. (See Mem. Op. & Order at 3, 4, 7, & 15,
ECF No. 139).
The third request is to amend the Memorandum Opinion and Order to add
“case law governing CGL claims for unintentional property damage caused by an
insured contractor that would allow recovery by Ground Control for such damages
in this instance.” It is unclear what case law Ground Control is referring to in this
instance, but the Court assumes that Ground Control is referring to the cases cited
on pages 13 through 16 of Ground Control’s Memorandum. All of those cases are
distinguishable. In the present case, Ground Control has not alleged that Capsco
caused the damage to the work or that it owned the tangible property that was
-10-

damaged. Furthermore, Ground Control has not asserted any claims for diminution
in value.
In its pleadings, Ground Control frequently claims that the alleged “property
damage” at issue was caused by Capsco and “other insureds.” Neither Ground
Control’s Supplemental Complaint nor its proposed amended complaint contain
allegations that Capsco damaged tangible property. Ground Control also has not
produced evidence that Capsco damaged tangible property. Ground Control has
alleged that the other companies damaged property at the Margaritaville project,
but those companies were either dismissed by the state court or they were never
sued at all. The sole question at issue in the Insurers’ Motion for Partial Summary
Judgment was whether the Insurer had a duty to defend Capsco — not other
entities that are not parties to the state court lawsuit — against Ground Control’s
quantum meruit claim.
For the reasons stated previously in this Order and in the Court’s prior
Memorandum Opinion and Order [139], Ground Control has no claims for
unintentional property damage caused by an insured contractor; it merely has
claims for failure to pay, pursuant to the doctrine of quantum meruit, for work
performed and materials provided. Therefore, this third request for an amendment
of the Memorandum Opinion and Order is without merit.
IT IS, THEREFORE, ORDERED AND ADJUDGED that Ground Control,
LLC’s Motion for Reconsideration [140] is DENIED.
SO ORDERED AND ADJUDGED this the 14th day of September, 2017.

-11-

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

-12-