Westfield Insurance Company v. Weaver Cooke Construction, LLC et al

Filing 55

ORDER granting in part and denying in part 43 Motion to Stay. Signed by Senior Judge W. Earl Britt on 3/1/2017. (Marsh, K)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
NO: 4:15-CV-169-BR
WESTFIELD INSURANCE COMPANY,
Plaintiff,
v.
WEAVER COOKE CONSTRUCTION, LLC, et
al.,
Defendants.

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ORDER

This matter is before the court on defendants Weaver Cooke Construction, LLC
(“Weaver Cooke”) and Penn National Insurance Company’s (“Penn National”) (collectively
“movants”) motion to stay this action “pending resolution of common issues of fact in New Bern
Riverfront Development, LLC v. Weaver Cooke Construction, LLC et al. Adversary Proceeding
No. 10-0023-8 (Bankr. E.D.N.C. Feb. 3, 2010) [‘the Underlying Action’].” (DE # 43.)
Plaintiff Westfield Insurance Company (“Westfield”) and defendants Selective Insurance
Company (“Selective”) and Zurich American Insurance Company (“Zurich”) filed responses in
opposition to the motion. (DE ## 47-49.) Movants filed a consolidated reply. (DE # 50.)
This matter is ripe for disposition.
I. BACKGROUND
In 2006, New Bern Riverfront Development, LLC (“New Bern”), as the developer, and
Weaver Cooke, as the general contractor, entered into a contract for construction of a
condominium complex in New Bern, North Carolina. Weaver Cooke, in turn, entered into
subcontracts with others for performance of work required to construct the project. In 2009,
New Bern filed suit against Weaver Cooke and others based on allegedly defective construction

of the project. New Bern declared bankruptcy, and the case--the Underlying Action--eventually
ended up in the bankruptcy court for this district, where it remains pending.
With the exception of Weaver Cooke, the parties involved in the instant action are
insurers of parties involved in the Underlying Action. Specifically, Westfield and Zurich issued
to Weaver Cooke, as a named insured, commercial general liability policies. Selective issued to
William H. Dale d/b/a DD Plumbing Company (“DD Plumbing”), a subcontractor of Weaver
Cooke, as a named insured, commercial general liability policies. Penn National issued to East
Carolina Masonry, Inc., a subcontractor of Weaver Cooke, as a named insured, commercial
general liability policies. Westfield and Zurich have been contributing to the costs of Weaver
Cooke’s defense of the Underlying Action pursuant to a reservation of rights.
In this action, Westfield, as the plaintiff, seeks a judgment declaring that its subject
policy affords Weaver Cooke no coverage for the claims asserted in the Underlying Action; it
has no further duty to defend Weaver Cooke against the claims asserted in the Underlying
Action; and, Selective and/or Penn National have the duty to defend Weaver Cooke in the
Underlying Action as an additional insured under their policies on a primary and noncontributory basis or, alternatively, on a contributory basis in equal shares with other insurers.
It also asserts a claim for equitable subrogation/contribution against Selective and Penn National
for defense costs and expenses it has incurred in the Underlying Action or, alternatively, for
those costs and expenses it has incurred in the Underlying Action beyond its pro-rata share.
Zurich has filed cross-claims against Weaver Cooke and the other insurer-defendants alleging
declaratory judgment and equitable subrogation/contribution claims similar to those Westfield
alleges.

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Weaver Cooke asserts a counterclaim and cross-claims against Westfield and Zurich,
respectively, for a declaration that each owes Weaver Cooke a defense and indemnity to the
claims in the Underlying Action. It also asserts cross-claims against Selective and Penn
National. It alleges that it is an insured or additional insured under their respective policies and
that those insurers engaged in prohibited claim settlement practices. Weaver Cooke seeks
declaratory and monetary relief.
II. DISCUSSION
Whether to stay a case is a decision made in the exercise of discretion by the
district court as part of its inherent power to control its own docket. Landis v.
North American Co., 299 U.S. 248, 254 (1936). Economy of time and effort for
the court, counsel, and litigants is taken into consideration in this decision, “which
must weigh competing interests and maintain an even balance.” Id. at 254-55. A
party seeking a stay must demonstrate a pressing need for one, id. at 255, and that
the need for a stay outweighs any possible harm to the nonmovant. Mike's Train
House v. Broadway Ltd., Civ. No. JKB-09-2657, 2011 WL 836673, at *1 (D. Md.
Mar. 3, 2011). See also In re Sacramento Mun. Utility Dist., 395 Fed. Appx. 684,
687-88 (Fed. Cir. 2010) (unpublished). Three factors should be considered in
weighing a motion to stay: “(1) the interests of judicial economy; (2) hardship and
equity to the moving party if the action is not stayed; and (3) potential prejudice
to the non-moving party.” Davis v. Biomet Orthopedics, LLC, Civ. No. JKB-123738, 2013 WL 682906 (D. Md. Feb. 22, 2013) (citations and internal quotation
marks omitted).
Sam Yang (U.S.A.), Inc. v. ENI Dist, Inc., Civil No. JKB-16-2958, 2016 WL 7188447, at *3 (D.
Md. Dec. 12, 2016); see also Williford v. Armstrong World Indus., Inc., 715 F.2d 124, 127 (4th
Cir. 1983) (“The party seeking a stay must justify it by clear and convincing circumstances
outweighing potential harm to the party against whom it is operative.”).
Movants initially request that the entirety of this insurance coverage dispute be stayed.
For support, movants rely significantly on the fact that Senior U.S. District Judge James Fox
granted a similar motion to stay in Selective Insurance Co. of America v. Dail, No. 4:14-CV-

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103-F (E.D.N.C.). In that case, Weaver Cooke, Selective and DD Plumbing are the parties, and
their dispute concerns whether the policies Selective issued to DD Plumbing provide coverage
for the claims asserted against DD Plumbing in the Underlying Action. Judge Fox concluded,
“Because one of the issues being litigated in the Underlying Action is whether worked performed
by DD Plumbing caused damage to other property, it would be duplicative and contrary to the
fair and efficient administration of justice to also litigate the issue in this case.” Selective Ins.
Co. of Am. v. Dail, No. 4:14-CV-103-F, DE # 33, at 5 (E.D.N.C. Sept. 11, 2015). Movants urge
the court to stay this action for the same reason, i.e., factual issues necessary to determine
coverage in this action overlap with factual issues to be determined in the Underlying Action.
Selective opposes a stay of the entire case. It contends that discovery and investigation
should proceed to enable it to learn information concerning the claims against it as well as
information related to other subcontractors and insurers who might also share responsibility for
defense costs.
Westfield also opposes a stay. First, it argues that resolution of the issue of the insurers’
duty to defend Weaver Cooke in the Underlying Action does not depend on the determination of
any factual issues in the Underlying Action. Rather, the court need only compare the operative
complaints in the Underlying Action with the language of the relevant insurance policy to
determine whether the insurer has a duty to defend. According to Westfield, this information is
readily obtainable without awaiting resolution of the Underlying Action. Second, while
acknowledging resolution of an insurer’s duty to indemnify “must normally await the findings of
fact at the trial of the underlying action,” (Mem., DE # 48, at 12), Westfield contends that the
court can decide the issue now based on admissions Weaver Cooke has made in the Underlying

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Action.
The remaining party, Zurich, likewise opposes a complete stay. Its argument focuses on
the ability of the court to resolve the duty to defend issue, along with the issue of whether
Weaver Cooke is an additional insured under certain policies, without relying on any factual
determinations from the Underlying Action. Accordingly, it urges the court to deny a stay
outright or, alternatively, limit the stay to determination of the insurers’ indemnity obliations.
In response to the insurers’ opposition, movants indicate that they are amenable to a more
narrow stay than they originally requested. Specifically, they consent to exclusion from the stay
of issues related to the duty to defend and the handling of Weaver Cooke’s claim by Selective
and Penn National. However, they vigorously argue for the necessity of a stay relative to
indemnity issues.
In weighing the relevant factors, the court concludes that a stay--at least as to part of this
action--is warranted. As all parties agree, the insurers’ duty to defend does not depend on any
facts to be litigated in the Underlying Action. See Harleysville Mut. Ins. Co. v. Hartford Cas.
Ins. Co., 90 F. Supp. 3d 526, 539 (E.D.N.C. 2015) (“‘In determining whether an insurer has a
duty to defend, the facts as alleged in the [underlying] complaint are to be taken as true and
compared to the language of the insurance policy.’” (alteration in original) (citation omitted)).
Subsumed within the duty to defend issue is whether Weaver Cooke is covered under some of
the policies as an additional insured, and thus that issue too can be resolved without reliance on
facts in dispute in the Underlying Action. Similarly, Selective’s and Penn National’s handling
of Weaver Cooke’s claim, which is a subject of Weaver Cooke’s cross-claims against those
insurers, is not dependent on factual issues in the Underlying Action. Thus, unlike the apparent

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circumstances in the Selective case, some portion of this action certainly can proceed without
awaiting the resolution of any factual issues in the Underlying Action.
On the other hand, the resolution of the insurers’ duty to indemnify depends on facts to
be determined in the Underlying Action. Based on the limited information before the court, the
court is hesitant to resolve the issue of Westfield’s duty to indemnify at this time. It is in the
interest of judicial economy to await resolution of the relevant factual issues in the bankruptcy
court before making a determination of all the insurers’ indemnity obligations. Allowing part of
the action to proceed and staying the remainder strikes a fair balance between avoiding
duplication of efforts (and possible contradictory findings) and alleviating some prejudice to the
non-movants resulting from the delay of this litigation.
III. CONCLUSION
For the foregoing reasons, the motion to stay is GRANTED IN PART and DENIED IN
PART. This action shall proceed as to the issues of the insurers’ duty to defend Weaver Cooke
(including coverage as an additional insured) and Selective’s and Penn National’s handling of
Weaver Cooke’s claim. The issue of the insurers’ duty to indemnify and the trial are STAYED
pending resolution of the factual issues in the Underlying Action and further order of this court.
As contemplated by the initial scheduling order entered 11 May 2016, this matter is REFERRED
to U.S. Magistrate Judge James E. Gates for entry of an order setting a schedule for discovery

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and other relevant events.
This 1 March 2017.

__________________________________
W. Earl Britt
Senior U.S. District Judge

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