Federal Insurance Company v. Indeck Power Equipment Company

Filing 152

ORDER denying 78 Cross-Motion for Summary Judgment; denying 90 Cross- Motion for Summary Judgment. Parties may file amended cross-motions for summary judgment on or before 4/17/2017. Signed by Honorable Timothy D. DeGiusti on 3/9/2017. (mb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
FEDERAL INSURANCE COMPANY,
Plaintiff,
v.
INDECK POWER EQUIPMENT
COMPANY, et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)

Case No. CIV-15-491-D

ORDER
This matter comes before the Court on the parties’ cross-motions for
summary judgment [Doc. Nos. 78, 90]. The matter is fully briefed and at issue.
Defendant Indeck Power Equipment Company (Indeck) entered into a
contract with the Altus Municipal Authority to install portions of a water treatment
system to produce drinking water for the residents of the City of Altus. A lawsuit
was subsequently filed against Indeck, Defendant Glenn Briggs and Associates,
and others in Jackson County District Court for damages stemming from the
system’s construction and maintenance (the Altus litigation). Pursuant to insurance
policies issued by Plaintiff Federal Insurance Company (Federal) to Indeck,
Federal agreed to defend Indeck subject to a reservation of rights.
Federal subsequently filed the present action, contending it had no duty to
defend or indemnify Indeck and sought to withdraw from Indeck’s defense in the

Altus litigation. In sum, Federal asserted that (1) it had no duty to defend Indeck
because the Altus plaintiffs did not seek any damages covered by the policies and
(2) Briggs did not qualify as an “insured” under any insurance policy issued by
Federal to Indeck. See Third Amend. Compl., ¶ 2 [Doc. No. 55]. Indeck filed a
counterclaim seeking a declaration that Federal owed a duty to defend and
indemnify it with respect to the Altus litigation.
The parties agreed to a bifurcated scheduling order in which they would
litigate the issue of whether Federal owed a duty to defend Indeck before
conducting any discovery on the issue of bad faith. See Joint Status Report and
Discovery Plan, ¶ 14 [Doc. No. 31]. Pursuant to the order, Federal and Indeck
submitted the present cross-motions for summary judgment addressing the duty to
defend. According to Federal, the policies at issue limit coverage to “property
damage” caused by an “occurrence,” and since the Altus litigation alleges the
water system did not work as promised under the contract and Indeck concealed
evidence that the plant did not work, there is no allegation of “property damage”
caused by an “occurrence” as those terms are defined under the applicable policies.
See Pl. Mot. for Summ. J. at 5-11. In response, Indeck asserts that there are
allegations of “property damage” in the Altus litigation in that the plaintiff there
alleges damage to the water treatment system caused by Indeck’s acts and/or
omissions. Def. Cross-Mot. for Summ. J. at 6-17. After the submission of their
2

respective summary judgment motions, the parties reached an agreement in
principle in which Federal agreed to pay Indeck’s defense fees and costs.
Moreover, the Altus litigation settled.1
At the summary judgment stage, the Court has a duty to determine whether
either party has demonstrated that there is no genuine issue of material fact and it is
entitled to summary judgment as a matter of law. Hardscrabble Ranch, L.L.C. v.
United States, 840 F.3d 1216, 1219 (10th Cir. 2016). An insurer has a duty to
defend whenever it ascertains the presence of facts that give rise to the potential of
liability under the subject policy. First Bank of Turley v. Fidelity and Deposit Ins.
Co. of Md., 1996 OK 105, ¶ 13, 928 P.2d 298, 303; State Auto Mut. Ins. Co. v.
Habitat Const. Co., 875 N.E.2d 1159, 1163 (Ill. App. Ct. 2007).2 The insurer’s
duty is determined on the basis of information gleaned from the petition, other
pleadings, from the insured, and from other sources available to the insurer at the
time the defense is demanded, rather than by the outcome of the third-party action.

1

On January 11, 2017, Indeck filed a motion asking that the Court stay its
consideration of the cross-motions for summary judgment [Doc. No. 137]. In that
motion, Indeck contended the duty to defend issue will become moot if and when
Federal pays its defense fees. Mot. to Stay at 3-4. Furthermore, in light of recent
developments during discovery, Indeck stated its intent to file a supplemental brief
in support of its motion for summary judgment and a second motion to compel
seeking full disclosure of Federal’s claims file.
2

There is a dispute over whether Oklahoma or Illinois law applies to the claims at
issue; however, the law from the two jurisdictions is consistent in this regard.
3

First Bank of Turley, 928 P.2d at 303; Millers Mut. Ins. Ass’n of Ill. v. Ainsworth
Seed Co., Inc., 552 N.E.2d 254, 255-56 (Ill. App. Ct. 1989).
In the Court’s view, the recent developments cited by the parties materially
affect the Court’s determination of whether a duty to defend existed. In light of
these new facts, the Court believes the better course, at this time, would be to deny
the parties’ respective motions, with leave to refile cross-motions for summary
judgment as to the remaining claims and the effect of Federal’s payment, if any, on
the issue of whether a duty to defend existed.
Accordingly, the parties’ cross-motions for summary judgment [Doc. Nos.
78, 90] are DENIED as set forth herein. The parties may file amended crossmotions for summary judgment on or before April 17, 2017. Responses and reply
briefs, if any, shall be filed in accordance with LCvR 7.1(g), (i). By virtue of this
Order, Indeck’s Motion to Stay Cross-Motions for Summary Judgment [Doc. No.
137] is deemed moot.
IT IS SO ORDERED this 9th day of March, 2017.

4