Leaf River Cellulose, LLC v. Mid-Continent Casualty Company
Filing
126
ORDER granting 40 Motion for Partial Summary Judgment; denying 62 Motion for Summary Judgment; granting 87 Motion for Partial Summary Judgment; denying 107 Motion for Partial Summary Judgment; denying 108 Motion for Partial Summary Judgment; and granting 109 Motion for Partial Summary Judgment. Signed by District Judge Keith Starrett on May 25, 2012 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
HATTIESBURG DIVISION
LEAF RIVER CELLULOSE, LLC
v.
PLAINTIFF
CIVIL ACTION NO. 2:11-CV-54-KS-MTP
MID-CONTINENT CASUALTY COMPANY
DEFENDANT
MEMORANDUM OPINION AND ORDER
For the reasons stated below, the Court finds that Mid-Continent Casualty
Company – pursuant to a commercial and general liability policy issued to Jackson &
Jackson Industrial Contractors – has a duty to defend and to indemnify Jackson &
Jackson against the claims of Leaf River Cellulose, LLC. The Court also finds that the
policy requires Mid-Continent to defend and indemnify Leaf River against the claims
of Buddie Calhoun. Consequently:
•
The Court grants the Motion for Partial Summary Judgment [40]
filed by Jackson & Jackson as to Mid-Continent’s duty to defend it
against Leaf River’s claims.
•
The Court denies the Cross-Motion for Partial Summary
Judgment [62] filed by Mid-Continent as to Jackson & Jackson’s
claims against it.
•
The Court grants the Motion for Partial Summary Judgment [109]
filed by Jackson & Jackson as to Mid-Continent’s duty to
indemnify it for the damages awarded to Leaf River in this matter.
•
The Court grants the Motion for Partial Summary Judgment [87]
filed by Jackson & Jackson as to Mid-Continent’s duty to defend
Leaf River in the Calhoun case.
•
The Court denies the Cross-Motion for Partial Summary
Judgment [107] filed by Mid-Continent as to its duty to defend
Leaf River in the Calhoun case.
•
The Court denies the Motion for Partial Summary Judgment [108]
filed by Mid-Continent as to Leaf River’s claims against it.
I. BACKGROUND
In June 2007, Leaf River and Jackson & Jackson entered into a Master
Agreement addressing work to be performed by Jackson & Jackson at Leaf River’s pulp
mill in New Augusta, Mississippi. The Master Agreement contained an indemnification
provision and a provision in which Jackson & Jackson agreed to maintain liability
insurance that would protect Leaf River from any damages arising from work done
under the agreement. Mid-Continent issued a commercial and general liability policy
to Jackson & Jackson, and the policy included an endorsement which named Leaf
River as an additional insured under certain conditions.
Buddie Calhoun, an employee of Jackson & Jackson, worked at Leaf River’s pulp
mill pursuant to the Master Agreement. On or around April 15, 2008, he tripped over
a metal pipe, injuring himself. On April 9, 2010, he filed a complaint in the Circuit
Court of Perry County, Mississippi, alleging that Leaf River’s negligence caused his
injury and demanding a variety of damages. Leaf River removed Calhoun’s lawsuit to
this Court. On September 14, 2010, it filed a third-party complaint against Jackson &
Jackson for breach of the Master Agreement’s indemnification and insurance
provisions.
On March 8, 2011, Leaf River filed the present action [1] against Mid-Continent,
alleging that Mid-Continent breached the policy by refusing to provide a copy of it,
2
refusing to defend Leaf River in the Calhoun case, and refusing to indemnify Leaf
River in the event of a judgment in Calhoun’s favor. Jackson & Jackson later
intervened [12], asserting that Mid-Continent had breached the policy by refusing to
defend Jackson & Jackson and Leaf River in the Calhoun case. Mid-Continent filed a
Counterclaim/Third-Party Complaint [19, 20], seeking a declaratory judgment with
respect to its obligations under the Policy with respect to both the Calhoun case and
this case. Mid-Continent asserts that it has no defense, indemnity, or coverage
obligations to Leaf River, Mid-Continent, or Buddie Calhoun.
In the Calhoun case, Leaf River filed a motion to dismiss without prejudice its
third-party complaint as to Jackson & Jackson, believing that its claims against
Jackson & Jackson were more appropriately litigated in the present case. The Court
granted the motion and dismissed Leaf River’s third-party complaint as to Jackson &
Jackson without prejudice. Leaf River then filed a Cross-Claim [27] against Jackson
& Jackson in the present case, alleging that it had breached the indemnification and
insurance provisions of the Master Agreement. Leaf River seeks indemnification for
any liability or expenses incurred in both cases.
On November 23, 2011, the Court entered a Memorandum Opinion and Order
in the Calhoun case granting Leaf River’s Motion for Summary Judgment as to the
claims of Buddie Calhoun. Calhoun v. Leaf River Cellulose, LLC, No. 2:10-CV-118-KSMTP, 2011 U.S. Dist. LEXIS 135722 (S.D. Miss. Nov. 23, 2011). The Court held that
Calhoun had not presented any evidence that Leaf River caused the hazard which
purportedly caused his injury. Id. at *5. The Court further held that Calhoun had not
3
presented sufficient evidence to create a genuine dispute of material fact as to whether
Leaf River knew or should have known about the hazard. Id. at *10-*11. Accordingly,
the Court granted Leaf River’s Motion for Summary Judgment and entered a Final
Judgment in its favor.
After all of the insurance coverage claims were consolidated in this case, the
parties began filing dispositive motions:
•
Jackson & Jackson filed a Motion for Partial Summary Judgment
[40] as to Mid-Continent’s duty to defend it against Leaf River’s
breach of contract claims.
•
Jackson & Jackson also filed a Motion for Partial Summary
Judgment [42] as to its own duty to defend Leaf River in the
Calhoun case.
•
Mid-Continent filed a Cross-Motion for Partial Summary
Judgment [62] as to its duty to defend Jackson & Jackson against
Leaf River’s claims.
•
Leaf River filed its own Motion for Partial Summary Judgment
[72] as to Jackson & Jackson’s indemnification and defense
obligations under the Master Agreement.
•
Finally, Jackson & Jackson filed a Motion for Partial Summary
Judgment [87] as to Mid-Continent’s duty to defend Leaf River in
the Calhoun case.
On March 27, 2012, the Court denied Jackson & Jackson’s Motion for Partial
Summary Judgment [42] as to its duty to defend and indemnify Leaf River in the
Calhoun case, and the Court granted Leaf River’s Motion for Partial Summary
Judgment [72] on the same issues. Leaf River Cellulose, LLC v. Mid-Continent Ca. Co.,
No. 2:11-CV-54-KS-MTP, 2012 U.S. Dist. LEXIS 41593 (S.D. Miss. Mar. 27, 2012). The
Court held that Jackson & Jackson was obligated to defend and indemnify Leaf River
4
against Buddie Calhoun’s claims, as those claims arose from work done pursuant to the
Master Agreement and were not the result of Leaf River’s own negligence. Id. at *28.
The parties then filed more dispositive motions:
•
Mid-Continent filed a Cross-Motion for Partial Summary
Judgment [107] as to its duty to defend Leaf River in the Calhoun
case.
•
Mid-Continent filed a Motion for Partial Summary Judgment [108]
as to Leaf River’s claims against it.
•
Finally, Jackson & Jackson filed a Motion for Partial Summary
Judgment [109] as to Mid-Continent’s duty to indemnify it for any
damages awarded to Leaf River.
After months of briefing, the Court may finally address Mid-Continent’s
obligations under the policy. There are four issues the Court must address: 1) MidContinent’s duty to defend Jackson & Jackson against the claims of Leaf River, 2) MidContinent’s duty to indemnify Jackson & Jackson against the claims of Leaf River, 3)
Mid-Continent’s duty to defend Leaf River against the claims of Buddie Calhoun, and
4) Mid-Continent’s duty to indemnify Leaf River against the claims of Buddie Calhoun.
II. STANDARD OF REVIEW
Rule 56 provides that “[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a); see also Sierra Club, Inc.
v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010). “Where the
burden of production at trial ultimately rests on the nonmovant, the movant must
merely demonstrate an absence of evidentiary support in the record for the
5
nonmovant’s case.” Cuadra v. Houston Indep. Sch. Dist., 626 F.3d 808, 812 (5th Cir.
2010) (punctuation omitted). The nonmovant “must come forward with specific facts
showing that there is a genuine issue for trial.” Id. (punctuation omitted). “An issue is
material if its resolution could affect the outcome of the action.” Sierra Club, Inc., 627
F.3d at 138. “An issue is ‘genuine’ if the evidence is sufficient for a reasonable jury to
return a verdict for the nonmoving party.” Cuadra, 626 F.3d at 812.
The Court is not permitted to make credibility determinations or weigh the
evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009). When deciding
whether a genuine fact issue exists, “the court must view the facts and the inference
to be drawn therefrom in the light most favorable to the nonmoving party.” Sierra
Club, Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials,
speculation, improbable inferences, unsubstantiated assertions, and legalistic
argumentation do not adequately substitute for specific facts showing a genuine issue
for trial.” Oliver v. Scott, 276 F.3d 736, 744 (5th Cir. 2002).
Before addressing the specific issues raised in the parties’ motions, the Court
must briefly discuss the relevant Mississippi law and policy terms.
III. GENERAL PRINCIPLES OF MISSISSIPPI INSURANCE LAW
“A liability insurance company has an absolute duty to defend a complaint which
contains allegations covered by the language of the policy, but it has absolutely no duty
to defend those claims which fall outside the coverage of the policy.” Farmland Mut.
Ins. Co. v. Scruggs, 886 So. 2d 714, 719 (Miss. 2004). Accordingly, to determine
whether an insurance company has a duty to defend its insured, the Court “must look
6
at the facts alleged in the complaint, together with the policy.” Auto. Ins. Co. v.
Lipscomb, 75 So. 3d 557, 559 (Miss. 2011). “These allegations, and particularly the
conduct alleged in the complaint, determine whether an insurer is required to defend
an action. No such duty arises when the alleged conduct falls outside the policy’s
coverage.” Id. However, “an insurer has a duty to defend when presented with extrinsic
facts, of which the insurer has knowledge or could obtain knowledge by means of a
reasonable investigation, that trigger coverage under the policy.” Mulberry Square
Prods. v. State Farm Fire & Cas. Co., 101 F.3d 414, 422 (5th Cir. 1996).
“Under Mississippi law, an insurer’s duties to defend and indemnify its insured
are distinct and separate duties requiring the use of different standards.” Estate of
Bradley v. Royal Surplus Lines Ins. Co., 647 F.3d 524, 529 (5th Cir. 2011). “Unlike the
duty to defend, which can be determined at the beginning of the lawsuit, an insurer’s
duty to indemnify generally cannot be ascertained until the completion of litigation,
when liability is established, if at all.” Id. at 531. “This is because, unlike the duty to
defend, which turns on the pleadings and the policy, the duty to indemnify turns on the
actual facts giving rise to liability in the underlying suit, and whether any damages
caused by the insured and later proven at trial are covered by the policy.” Id.
The Court’s ultimate goal in applying an insurance policy is to “render a fair
reading and interpretation of the policy by examining its express language and
applying the ordinary and popular meaning to any undefined terms.” Corban v. United
Servs. Auto. Ass’n, 20 So. 3d 601, 609 (Miss. 2009).
In Mississippi, insurance policies are contracts, and as such, they are to
7
be enforced according to their provisions. When parties to a contract
make mutual promises (barring some defense or condition which excuses
performance), they are entitled to the benefit of their bargain. Thus,
insurance companies must be able to rely on their statements of coverage,
exclusions, disclaimers, definitions, and other provisions, in order to
receive the benefit of their bargain and to ensure that rates have been
properly calculated.
***
[I]f a contract is clear and unambiguous, then it must be interpreted as
written. . . . If a contract contains ambiguous or unclear language, then
ambiguities must be resolved in favor of the non-drafting party.
Ambiguities exist when a policy can be logically interpreted in two or
more ways, where one logical interpretation provides for coverage.
However, ambiguities do not exist simply because two parties disagree
over the interpretation of a policy. Exclusions and limitations on coverage
are also construed in favor of the insured. Language in exclusionary
clauses must be clear and unmistakable, as those clauses are strictly
interpreted.
Id. (punctuation omitted); see also Guidant Mut. Ins. Co. v. Indem. Ins. Co. of N. Am.,
13 So. 3d 1270, 1281 (Miss. 2009); United States Fid. & Guar. Co. v. Martin, 998 So.
2d 956, 963 (Miss. 2008).
IV. THE POLICY’S TERMS
The section of the policy titled “COVERAGE A BODILY INJURY AND
PROPERTY DAMAGE LIABILITY” provides, in pertinent part:
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 damage” to which this insurance does not apply.
The insurance “applies to ‘bodily injury’ or ‘property damage’ only if . . . the ‘bodily
injury’ or ‘property damage’ is caused by an ‘occurrence’ . . . ” during the policy period.
8
The “Exclusions” section of “COVERAGE A” provides that the insurance does
not apply to “Contractual Liability” – “‘bodily injury’ or ‘property damage’ for which the
insured is obligated to pay damages by reason of the assumption of liability in a
contract or agreement.” There is an exception to the contractual liability exclusion,
though, for damages “[a]ssumed in a contract or agreement that is an ‘insured
contract,’ provided the ‘bodily injury’ or ‘property damage’ occurs subsequent to the
execution of the contract or agreement.”
The policy also contains several definitions which are relevant to this case. First,
an “insured contract” is:
That part of any other contract or agreement pertaining to your business
. . . under which you assume the tort liability of another party to pay for
“bodily injury” or “property damage” to a third person or organization,
provided the “bodily injury” or “property damage” is caused, in whole or
in part, by you or by those acting on your behalf. Tort liability means a
liability that would be imposed by law in the absence of any contract or
agreement.
Second, “bodily injury” is “bodily injury, sickness or disease sustained by a person . .
. .” For purposes of liability assumed in an “insured contract,” the definition of “bodily
injury” includes “reasonable attorney fees and necessary litigation expenses incurred
by or for a party other than an insured” if the insured assumed liability for the third
party’s cost of defense in an “insured contract” and the costs are expended in defending
an action “in which damages to which this insurance applies are alleged.” Finally, an
“occurrence” is “an accident, including continuous or repeated exposure to substantially
the same general harmful conditions.”
In summary, the policy requires Mid-Continent to pay sums that an insured
9
becomes obligated to pay because of bodily injury caused by an accident during the
policy period, but the policy generally excludes damages which an insured is required
to pay because of the assumption of liability in a contract. The contractual liability
exclusion does not apply, though, to contracts in which Jackson & Jackson assumes the
tort liability of another party for bodily injury to a third party caused by Jackson &
Jackson’s own negligence.
V. MID-CONTINENT’S DUTY TO DEFEND JACKSON & JACKSON
The Court will first address Mid-Continent’s duty to defend Jackson & Jackson
against the claims of Leaf River, an issue primarily addressed in Jackson & Jackson’s
Motion for Partial Summary Judgment [40] and Mid-Continent’s Cross-Motion for
Partial Summary Judgment [62]. As demonstrated by the policy language quoted
above, Mid-Continent agreed to defend Jackson & Jackson against any suit seeking
damages for bodily injury to which the policy applies, and the policy generally applies
to bodily injury caused by an occurrence. The policy specifically excludes bodily injury
for which Jackson & Jackson is obligated to pay because of an indemnity agreement,
but the exclusion does not apply to liability for damages assumed in an “insured
contract,” as defined by the policy.
Mid-Continent’s duty to defend Jackson & Jackson against Leaf River’s claims
hinges, therefore, on three questions: 1) whether the contractual liability assumed by
Jackson & Jackson in the Master Agreement is because of “bodily injury” or “property
damage;” 2) whether the “bodily injury” or “property damage” at issue was caused by
an “occurrence;” and 3) whether the indemnification provision of the Master Agreement
10
constitutes an “insured contract.”
A.
Because of “Bodily Injury” or “Property Damage”
Mid-Continent argues that it had no duty to defend Jackson & Jackson against
the claims of Leaf River because Leaf River did not seek “damages because of ‘bodily
injury’ or ‘property damage.’” The argument has two facets. First, Mid-Continent
contends that Leaf River seeks damages “because of” Jackson & Jackson’s breach of the
indemnification provision of the Master Agreement, rather than damages “because of”
a “bodily injury.” Second, Mid-Continent argues that its duty to defend Jackson &
Jackson is determined solely by reference to the allegations of Leaf River’s Third-Party
Complaint1 in the Calhoun case and Cross-Claim [27] in the present case, and neither
pleading contains an allegation of “bodily injury” or “property damage.”
With respect to the first argument, the operative policy language – “damages
because of ‘bodily injury’ or ‘property damage’” – is ambiguous enough to encompass
both primary and secondary causes. Mid-Continent is correct that if Jackson & Jackson
had fulfilled its obligations under the indemnification provision of the Master
Agreement, Leaf River would not have filed claims against it. However, Leaf River’s
defense costs are ultimately attributable to Calhoun’s alleged bodily injury. If Calhoun
had never slipped on a metal pipe, he would not have made a premises liability claim
against Leaf River. Conversely, Leaf River would have accrued defense costs regardless
of whether Jackson & Jackson fulfilled its obligations under the Master Agreement.
1
See Third-Party Complaint, Calhoun v. Leaf River Cellulose, LLC, No. 2:10CV-118-KS-MTP (S.D. Miss. Sept. 14, 2010), ECF No. 18.
11
As for the second argument, Mid-Continent accurately notes that neither Leaf
River’s Third-Party Complaint against Jackson & Jackson in the Calhoun case nor its
Cross-Claim [27] against Jackson & Jackson in the present case include allegations of
“bodily injury” or “property damage.” Both pleadings, though, were filed within a larger
context of which Mid-Continent is, at this point, well aware. While an insurer’s duty
to defend is generally determined by reference to the allegations levied against the
insured, an insurer is not permitted to disregard independent facts of which it is made
aware that may create potential coverage. See Mulberry Square Prods., 101 F.3d at
422; Merchants Co. v. Am. Motorists Ins. Co., 794 F. Supp. 611, 617 (S.D. Miss. 1992);
Mavar Shrimp & Oyster Co. v. United States. Fid. & Guar. Co., 187 So. 2d 871, 875
(Miss. 1966). The operative question, then, is when Mid-Continent became aware that
Leaf River’s demand of indemnification from Jackson & Jackson was the result of
Calhoun’s alleged slip-and-fall. If Mid-Continent had such extrinsic knowledge, Leaf
River’s failure to allege as much in the pleadings is irrelevant.
Mid-Continent obviously knew that Leaf River’s claims against Jackson &
Jackson in this case were “because of” Calhoun’s bodily injury, as Leaf River asserted
as much in its Complaint [1], which was served on Mid-Continent on March 21, 2011
[4], well before Leaf River filed its Cross-claim [27] against Jackson & Jackson.
Accordingly, Mid-Continent knew from the start of this case that Leaf River’s claims
against Jackson & Jackson were “because of” Calhoun’s alleged bodily injury.
It is not clear, though, when Mid-Continent became aware that Leaf River’s
third-party claims against Jackson & Jackson in the Calhoun case were “because of”
12
Calhoun’s alleged bodily injury. Leaf River served Jackson & Jackson with its ThirdParty Complaint in the Calhoun case on December 3, 2010.2 The parties have not
presented the Court with sufficient evidence to choose a specific date from which MidContinent had sufficient information to assess its coverage obligations in the Calhoun
case, but it is clear that Mid-Continent had sufficient information by at least March
21, 2011, the date on which it was served with Leaf River’s Complaint in the present
case.
B.
Caused by an “Occurrence”
Second, Mid-Continent argues that it had no duty to defend Jackson & Jackson
against the claims of Leaf River because Leaf River did not seek damages “caused by
an ‘occurrence.’” This argument is basically identical to Mid-Continent’s argument
regarding “bodily injury” or “property damage.” Mid-Continent contends that Leaf
River seeks damages “because of” Jackson & Jackson’s intentional breach of the
indemnification provision of the Master Agreement, while the policy defines an
“occurrence” as “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions.”
As stated above, the phrase “because of” is sufficiently vague to encompass both
primary and secondary causes. While Jackson & Jackson’s breach of the
indemnification provision was intentional, Buddie Calhoun’s slip-and-fall was an
accident, and Mid-Continent has been aware for some time now that Leaf River’s
2
See Affidavit of Service for Third-Party Complaint, Calhoun v. Leaf River
Cellulose, LLC, No. 2:10-CV-118-KS-MTP (S.D. Miss. Dec. 8, 2010), ECF No. 31.
13
claims against Jackson & Jackson ultimately stem from Calhoun’s accident.
C.
“Insured Contract”
Finally, Mid-Continent argues that it had no duty to defend Jackson & Jackson
against the claims of Leaf River because the Master Agreement is not an “insured
contract,” as defined by the policy. Jackson & Jackson is obligated to pay Leaf River’s
damages because of the indemnification provision of the Master Agreement. Therefore,
unless the indemnification provision is an “insured contract,” Mid-Continent has no
obligation to defend Jackson & Jackson against Leaf River’s claims, pursuant to the
“Contractual Liability” exclusion. An “insured contract” is:
That part of any other contract or agreement pertaining to your business
. . . under which you assume the tort liability of another party to pay for
“bodily injury” or “property damage” to a third person or organization,
provided the “bodily injury” or “property damage” is caused, in whole or
in part, by you or by those acting on your behalf..
Mid-Continent argues that the indemnification provision only constitutes an
“insured contract” if Calhoun’s “bodily injury” was “caused, in whole or in part, by”
Jackson & Jackson. Mid-Continent further argues that the Court must look only to
Leaf River’s claims against Jackson & Jackson to make this determination – in the
same manner the Court determines whether a duty to defend exists. See Lipscomb, 75
So. 3d at 559 (court compares the policy to the complaint to determine whether the
insurer has a duty to defend). Leaf River did not allege – in either its Third-Party
Complaint against Jackson & Jackson in the Calhoun case or its Cross-Claim [27]
against Jackson & Jackson in the present case – that Calhoun’s injury was caused by
Jackson & Jackson. Therefore, Mid-Continent argues that the indemnification
14
provision is not an “insured contract,” and that it had no duty to defend Jackson &
Jackson from Leaf River’s claims.
In the Court’s opinion, the policy’s definition of an “insured contract” is not as
clear as Mid-Continent argues. The operative phrase – “provided the ‘bodily injury’ or
‘property damage’ is caused, in whole or in part, by you or by those acting on your
behalf” – has two possible meanings. First, it could mean that an insured contract is
one in which Jackson & Jackson agrees to indemnify another party for bodily injury
to a third party caused by Jackson & Jackson. Alternatively, it could mean that an
insured contract is one in which Jackson & Jackson agrees to indemnify another party
for bodily injury to a third party, but only if the particular bodily injury at issue in the
case was caused by Jackson & Jackson. In other words, the phrase is ambiguous
because it could either describe the terms of the indemnity agreement or the particular
injury at issue in any case to which the policy is applied. Accordingly, it must be
interpreted in favor of Jackson & Jackson, the non-drafting party. Corban, 20 So. 3d
at 609.
An “insured contract,” therefore, is one in which Jackson & Jackson “assume[s]
the tort liability of another party to pay for ‘bodily injury’ or ‘property damage’ to a
third person . . . caused, in whole or in part, by” Jackson & Jackson. In the Master
Agreement, Jackson & Jackson agreed to indemnify Leaf River for all claims and
liabilities arising from Jackson & Jackson’s work that were not caused by Leaf River’s
negligence – a broad provision which encompasses liabilities “caused, in whole or in
part, by” Jackson & Jackson. Accordingly, the indemnification provision of the Master
15
Agreement is an “insured contract” as defined by the policy, and the policy’s
contractual liability exclusion is inapplicable.3
D.
Mid-Continent Must Defend Jackson & Jackson
For all the reasons stated above, the Court finds that Mid-Continent had and
has a duty to defend Jackson & Jackson against Leaf River’s claims in both the
Calhoun case and the present case. Mid-Continent has had a duty to defend Jackson
& Jackson in the present case since Leaf River first filed its Cross-Claim [27] against
Jackson & Jackson on September 15, 2011. Mid-Continent’s duty to defend Jackson &
Jackson in the Calhoun case accrued by at least March 8, 2011 – the date on which
Leaf River initiated the present case – but the Court has insufficient information to
determine a specific date.
VI. MID-CONTINENT’S DUTY TO INDEMNIFY JACKSON & JACKSON
Next, the Court will address Mid-Continent’s duty to indemnify Jackson &
Jackson for the damages awarded to Leaf River pursuant to the indemnification
provision of the Master Agreement. This issue was addressed in the following motions:
Mid-Continent’s Cross-Motion for Partial Summary Judgment [62], and Jackson &
Jackson’s Motion for Partial Summary Judgment [109]. The parties’ arguments with
respect to this issue are essentially identical to their arguments on Mid-Continent’s
3
Mid-Continent cites Red Ball Motor Freight, Inc. v. Emp’rs Mut. Liab. Ins.
Co., 189 F.2d 374, 378 (5th Cir. 1951), for the proposition that the phrase “caused,
in whole or in part” triggers a requirement of proximate causation. That point is
undisputed. The issue is whether the phrase “caused, in whole or in part” refers to
the liability assumed under the indemnity agreement or to the actual injury at
issue in the case to which the policy is applied.
16
duty to defend Jackson & Jackson.
The policy provides that Great American will “pay those sums that the insured
becomes legally obligated to pay as damages because of ‘bodily injury’” caused by an
“occurrence.” However, the policy excludes from coverage any “bodily injury” for which
Jackson & Jackson “is obligated to pay damages by reason of the assumption of
liability in a contract.” The exclusion does not apply, though, if the contract is an
“insured contract” – one in which Jackson & Jackson “assume[s] the tort liability of
another party to pay for ‘bodily injury’ or ‘property damage’ to a third person or
organization . . . caused, in whole or in part, by” Jackson & Jackson. For the purposes
of liability assumed in an “insured contract,” “reasonable attorney fees and necessary
litigation expenses incurred by or for a party other than the insured are deemed to be
damages because of ‘bodily injury.’”
As the Court held above, the indemnification provision of the Master Agreement
constitutes an “insured contract,” Leaf River’s damages are “because of ‘bodily injury,’”
and the bodily injury at issue was caused by an “occurrence.” Therefore, just as MidContinent has a duty to defend Jackson & Jackson from Leaf River’s claims, it has a
duty to indemnify Jackson & Jackson for the damages awarded to Leaf River.
VII. MID-CONTINENT’S DUTY TO DEFEND/INDEMNIFY LEAF RIVER
The Court will now address Mid-Continent’s duty to defend and indemnify Leaf
River against the claims of Buddie Calhoun. This issue was addressed in the following
motions: Jackson & Jackson’s Motion for Partial Summary Judgment [87], MidContinent’s Motion for Partial Summary Judgment [107], and Mid-Continent’s Motion
17
for Partial Summary Judgment [108].
Section I of the policy provides that Mid-Continent will pay “sums that the
insured becomes legally obligated to pay as damages because of ‘bodily injury’ or
‘property damage’ to which th[e] insurance applies.” It also provides that MidContinent will “have the right and duty to defend the insured against any ‘suit’ seeking
those damages.” The insurance applies to “bodily injury” and “property damage” caused
by an “occurrence” during the policy period. An endorsement to the policy provides that
Leaf River shall be included as an “insured,” “but only with respect to liability directly
attributable to [Jackson & Jackson’s] performance of ‘[its] work’ for [Leaf River].” The
endorsement only applies, though, if Jackson & Jackson “agreed by written ‘insured
contract’ to designate [Leaf River] as an additional insured . . . .”
Therefore, if Leaf River is an “insured,” Mid-Continent’s obligations to it are
generally coequal with its obligations to Jackson & Jackson. However, Leaf River will
only be considered an “insured” if 1) the liability for which it seeks coverage was
“directly attributable” to Jackson & Jackson’s performance of its work under the
Master Agreement, and 2) Jackson & Jackson agreed in an “insured contract” to
designate Leaf River as an additional insured.
A.
“Directly Attributable To”
Mid-Continent first argues that Calhoun’s claims did not expose Leaf River to
liability that is “directly attributable to” Jackson & Jackson’s performance under the
Master Agreement. Calhoun alleged that he was injured by Leaf River’s negligence
18
while acting within the scope of his employment with Jackson & Jackson.4 The key
issue here is how one construes the phrase “directly attributable to.” Mid-Continent
essentially argues that the phrase means “directly caused by,” and that Leaf River is
not an additional insured because Buddie Calhoun did not allege that Jackson &
Jackson caused his injuries by its performance under the Master Agreement. Leaf
River disagrees, arguing that “directly attributable to” simply means that Calhoun’s
injuries must arise from or be incident to Jackson & Jackson’s work under the Master
Agreement.
The Court finds that the phrase is ambiguous, and it must be interpreted in
favor of Leaf River, the non-drafting party. Corban, 20 So. 3d at 609. In Mississippi,
courts apply “the ordinary and popular meaning to any undefined terms” in insurance
policies. Id. According to Calhoun’s allegations, Leaf River’s liability is “directly
attributable to” Jackson & Jackson’s work under the Master Agreement insofar as
Calhoun was injured while performing Jackson & Jackson’s work under the Master
Agreement.
The Court’s decision here is primarily driven by the simple manner in which
Mid-Continent could have eliminated all ambiguity. If it truly intended to include Leaf
River as an insured only with respect to liability caused by Jackson & Jackson during
the performance of its work under the insured contract, it could have simply said so.
Rather, it chose to include Leaf River as an insured with respect to liability directly
4
See State Court Record, Calhoun v. Leaf River Cellulose, LLC, No. 2:10-CV118-KS-MTP (S.D. Miss. May 18, 2010), ECF No. 2.
19
attributable to Jackson & Jackson’s performance under the contract. The allegations
of Calhoun’s complaint clearly demonstrate an injury directly attributable to his work
for Jackson & Jackson, according to the ordinary and popular meaning given to the
words, and Mid-Continent has not presented any binding authority to the contrary.5
B.
“Insured Contract”
The additional insured endorsement only applies if Jackson & Jackson “agreed
by written ‘insured contract’ to designate” Leaf River as an additional insured. Jackson
& Jackson agreed in the Master Agreement to maintain a liability insurance policy
that protects Leaf River from all claims arising from Jackson & Jackson’s work under
the Master Agreement, but Mid-Continent argues that the Master Agreement is not
an “insured contract.” The Court has already addressed this issue.
C.
Mid-Continent Must Defend/Indemnify Leaf River
In summary, an endorsement to the policy provides that Leaf River shall be
included as an “insured,” “but only with respect to liability directly attributable to
5
Mid-Continent cites Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d
487 (5th Cir. 2000). In that case, the Fifth Circuit addressed the phrase “arising out
of,” rather than “directly attributable to.” Id. at 498-500. Mid-Continent represents
that it changed the policy wording from “arising out of” to “directly attributable to”
in response to the Swift decision. Nothing in Swift leads the Court to believe,
though, that the Fifth Circuit – when applying Mississippi law – would interpret
the additional insured endorsement in the manner that Mid-Continent suggests.
Mid-Continent also cites Mid-Continent Cas. Co. v. Const. Servs. &
Consultants, Inc., No. 06-CV-80922, 2008 WL 896221 (S.D. Fla. Mar. 31, 2008), a
case in which the United States District Court for the Southern District of Florida
addressed the same policy language at issue in the present case and agreed with
Mid-Continent’s position. The Court respectfully disagrees with the Southern
District of Florida’s analysis of the operative policy language. In any case, the
decision is not binding authority on this Court.
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[Jackson & Jackson’s] performance of ‘[its] work’ for [Leaf River].” The endorsement
only applies if Jackson & Jackson “agreed by written ‘insured contract’ to designate
[Leaf River] as an additional insured . . . .” Calhoun’s injury was directly attributable
to his work for Jackson & Jackson under the Master Agreement, and Jackson &
Jackson agreed in the Master Agreement – an “insured contract” – to designate Leaf
River as an additional insured. Therefore, Leaf River is an additional insured.
The policy provides that Mid-Continent will pay “sums that the insured becomes
legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to
which th[e] insurance applies.” It also provides that Mid-Continent will “have the right
and duty to defend the insured against any ‘suit’ seeking those damages.” Accordingly,
the policy requires Mid-Continent to both defend and indemnify Leaf River against
Calhoun’s claims.
VIII. CONCLUSION
For the reasons stated above, the Court finds that the policy requires MidContinent to both defend and indemnify Jackson & Jackson against the claims of Leaf
River. The Court also finds that Mid-Continent must defend and indemnify Leaf River
against the claims of Buddie Calhoun. Accordingly:
•
The Court grants the Motion for Partial Summary Judgment [40]
filed by Jackson & Jackson as to Mid-Continent’s duty to defend it
against Leaf River’s claims.
•
The Court denies the Cross-Motion for Partial Summary
Judgment [62] filed by Mid-Continent as to Jackson & Jackson’s
claims against it.
•
The Court grants the Motion for Partial Summary Judgment [109]
21
filed by Jackson & Jackson as to Mid-Continent’s duty to
indemnify it for the damages awarded to Leaf River in this matter.
•
The Court grants the Motion for Partial Summary Judgment [87]
filed by Jackson & Jackson as to Mid-Continent’s duty to defend
Leaf River in the Calhoun case.
•
The Court denies the Cross-Motion for Partial Summary
Judgment [107] filed by Mid-Continent as to its duty to defend
Leaf River in the Calhoun case.
•
The Court denies the Motion for Partial Summary Judgment [108]
filed by Mid-Continent as to Leaf River’s claims against it.
SO ORDERED AND ADJUDGED this 25th day of May, 2012.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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