Geiser v. Simplicity, Inc. et al
Filing
172
MEMORANDUM OPINION AND ORDER: Granting 93 Motion for Summary Judgment by James River; Denying 106 Motion for Summary Judgment by Plaintiff/3rd Party def.; Denying 108 Simplicity's Motion for Summary Judgment; Denying 114 Motion to Amend/ Correct; Denying as moot 122 Motion to Strike ; Denying as moot 126 Motion for Extension of Time to File Response/Reply ; and Granting Relief sought in 62 James River Insurance Company's Complaint for Declaratory Judgment. Signed by Senior Judge Frederick P. Stamp, Jr on 6/10/11. (soa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JEANNIE GEISER, as Administratrix
of the Estate of J.G., deceased
and JEANNIE GEISER, individually,
Plaintiff,
v.
Civil Action No. 5:10CV21
(STAMP)
SIMPLICITY, INC. a/k/a
SIMPLICITY FOR CHILDREN,
SFCA, INC. d/b/a SIMPLICITY, INC.
a/k/a SIMPLICITY FOR CHILDREN,
BLACKSTREET CAPITAL MANAGEMENT INC.
d/b/a BLACKSTREET CAPITAL PARTNERS, LLC
d/b/a SIMPLICITY, INC.
a/k/a SIMPLICITY FOR CHILDREN
and d/b/a SFCA, INC.,
WAL-MART STORES EAST, LP,
WAL-MART STORES, INC.,
GRACO CHILDREN’S PRODUCTS INC.,
NEWELL RUBBERMAID, INC. d/b/a
GRACO CHILDREN’S PRODUCTS, INC.,
and JOHN DOE(S) MANUFACTURER/DISTRIBUTOR/
WHOLESALER,
Defendants,
v.
JAMES RIVER INSURANCE COMPANY,
Intervenor and Third-Party Plaintiff,
v.
JEANNIE GEISER, as Administratrix
of the Estate of J.G., deceased
and JEANNIE GEISER, individually,
Plaintiffs and Third-Party Defendants,
and
SIMPLICITY, INC. a/k/a
SIMPLICITY FOR CHILDREN,
SFCA, INC. d/b/a SIMPLICITY, INC.
a/k/a SIMPLICITY FOR CHILDREN,
BLACKSTREET CAPITAL MANAGEMENT INC.
d/b/a BLACKSTREET CAPITAL PARTNERS, LLC
d/b/a SIMPLICITY, INC.
a/k/a SIMPLICITY FOR CHILDREN
and d/b/a SFCA, INC.,
WAL-MART STORES EAST, LP,
WAL-MART STORES, INC.,
GRACO CHILDREN’S PRODUCTS INC.,
NEWELL RUBBERMAID, INC. d/b/a
GRACO CHILDREN’S PRODUCTS, INC.,
and JOHN DOE(S) MANUFACTURER/DISTRIBUTOR/
WHOLESALER,
Defendants and Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING THIRD-PARTY PLAINTIFF JAMES RIVER
INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT;
DENYING THE PLAINTIFF/THIRD-PARTY DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT;
DENYING DEFENDANT/THIRD-PARTY DEFENDANT
SIMPLICITY, INC. a/k/a SIMPLICITY FOR CHILDREN’S
MOTION FOR SUMMARY JUDGMENT;
DENYING THIRD-PARTY DEFENDANT AND PLAINTIFF’S
MOTION TO AMEND ANSWER AND AFFIRMATIVE DEFENSES
TO JAMES RIVER INSURANCE COMPANY’S
COMPLAINT FOR DECLARATORY RELIEF;
DENYING AS MOOT THIRD-PARTY DEFENDANT/PLAINTIFF’S
MOTION TO STRIKE THIRD-PARTY PLAINTIFF
JAMES RIVER INSURANCE COMPANY’S REPLY IN FURTHER SUPPORT
OF MOTION FOR PROTECTIVE ORDER AND MOTION TO STAY;
DENYING AS MOOT THIRD-PARTY PLAINTIFF
JAMES RIVER INSURANCE COMPANY’S MOTION
FOR LEAVE TO EXTEND TIME FOR FILING;
AND GRANTING THE RELIEF SOUGHT IN
JAMES RIVER INSURANCE COMPANY’S
COMPLAINT FOR DECLARATORY RELIEF
I.
Procedural History
The plaintiff filed this civil action in the Circuit Court of
Ohio County, West Virginia, bringing a product liability claim for
2
an alleged wrongful death of an infant arising from the manufacture
and sale of an allegedly defective crib by defendant Simplicity,
Inc.
This Court granted James River Insurance Company’s (“James
River”) motion to intervene to assert a declaratory judgment
complaint for the purposes of resolving certain questions and
disputes which have arisen regarding its obligation to indemnify
and defend with regard to damages claimed by the plaintiff.
James
River contends that it is not obligated to indemnify defendant
Simplicity, Inc. a/k/a Simplicity for Children, SFCA, Inc. d/b/a
Simplicity
pursuant
to
Inc.
two
a/k/a
Simplicity
policies
of
for
insurance
Children
issued
(“Simplicity”)
to
Simplicity.
Thereafter, James River filed a motion for summary judgment and the
plaintiff and Simplicity both filed cross motions for summary
judgment. Defendants Wal-Mart Stores East, LP and Wal-Mart Stores,
Inc. (“the Wal-Mart defendants”) filed a response in opposition to
James River’s motion for summary judgment.
Later, the plaintiff
filed a motion for leave to amend her answer and affirmative
defenses to the declaratory judgment complaint.
For the reasons
discussed below, this Court grants James River’s motion for summary
judgment and denies the plaintiff’s and Simplicity’s motions for
summary judgment.
Additionally, this Court denies the plaintiff’s
3
motion for leave to file an amended answer and affirmative defenses
to the declaratory judgment complaint.1
II.
Facts
In January 2006, the plaintiff and her husband purchased a
crib
manufactured
Clairsville, Ohio.
by
Simplicity
at
a
Wal-Mart
store
in
St.
In September 2007, Simplicity issued a recall
on certain component parts of the drop-side rail of the plaintiff’s
crib because the drop-side could detach from the crib and create a
gap and lead to entrapment.
The plaintiff then requested and
received the drop-side replacement track kit, Retrofit Kit, and
accompanying directions from Simplicity.
On January 15, 2008, the plaintiff’s minor son died in his
crib when his head and neck were wedged between the headboard and
the first rail of the stationary side of the crib. The plaintiff’s
wrongful death suit alleges that the crib was negligently designed,
built, and/or manufactured.
The
James
River
Products Exclusion.”
insurance
policies
contain
a
“Recalled
James River’s motion for summary judgment
contends that there is no coverage because of these exclusions and
1
The plaintiff filed a motion to strike James River’s reply to
James River’s motion for protective order and motion to stay
because James River did not comply with the deadlines contained in
Local Rule of Civil Procedure 7.02(b)(2). James River then filed
a motion for leave to extend time for filing.
United States
Magistrate Judge James E. Seibert granted in part and denied in
part the motion for protective order and denied the motion to stay.
Accordingly, the plaintiff’s motion to strike and James River’s
motion for leave are denied as moot.
4
it therefore has no duty to defend either the named insured or any
person or entity which may be an additional insured.
III.
Applicable Law
Under Rule 56(c) of the Federal Rules of Civil Procedure,
A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by:
(A) citing to particular parts of materials in the
record, including depositions, documents, electronically
stored
information,
affidavits
or
declarations,
stipulations . . . admissions, interrogatory answers, or
other materials; or
(B) showing that the materials cited do not
establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible
evidence to support the fact.
Fed. R. Civ. P. 56(c).
The party seeking summary judgment bears
the initial burden of showing the absence of any genuine issues of
material fact.
(1986).
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
“The burden then shifts to the nonmoving party to come
forward with facts sufficient to create a triable issue of fact.”
Temkin v. Frederick County Comm’rs, 945 F.2d 716, 718 (4th Cir.
1991), cert. denied, 502 U.S. 1095 (1992) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). However, as the
United States Supreme Court noted in Anderson, “Rule 56(e) itself
provides that a party opposing a properly supported motion for
summary judgment may not rest upon the mere allegations or denials
of his pleading, but . . . must set forth specific facts showing
that there is a genuine issue for trial.”
Id. at 256.
“The
inquiry performed is the threshold inquiry of determining whether
5
there is the need for a trial -- whether, in other words, there are
any genuine factual issues that properly can be resolved only by a
finder of fact because they may reasonably be resolved in favor of
either party.”
Id. at 250; see also Charbonnages de France v.
Smith, 597 F.2d 406, 414 (4th Cir. 1979) (Summary judgment “should
be granted only in those cases where it is perfectly clear that no
issue of fact is involved and inquiry into the facts is not
desirable to clarify the application of the law.” (citing Stevens
v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir. 1950))).
In Celotex, the Court stated that “the plain language of Rule
56(c) mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a
showing
sufficient
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, 477 U.S. at 322.
Summary
judgment is not appropriate until after the non-moving party has
had sufficient opportunity for discovery.
See Oksanen v. Page
Mem’l Hosp., 912 F.2d 73, 78 (4th Cir. 1990), cert. denied, 502
U.S. 1074 (1992). In reviewing the supported underlying facts, all
inferences must be viewed in the light most favorable to the party
opposing the motion.
See Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
6
IV.
A.
Discussion
Choice of Law
A federal court sitting in diversity applies the choice-of-law
rules of the state in which it sits.
Klaxon Co. v. Stentor Elec.
Mfg. Co., 313 U.S. 487, 496 (1941).
Accordingly, this Court will
apply West Virginia’s choice-of-law rules.
In West Virginia,
“questions of policy coverage as opposed to liability are governed
by conflicts of law principles applicable to contracts.”
Howe, 625 S.E.2d 716, 721 (W. Va. 2005).
which
a
contract
is
made
and
to
Howe v.
“The law of the state in
be
performed
governs
the
construction of a contract when it is involved in litigation in the
courts of this State.” Syl. Pt. 1 Michigan Nat. Bank v. Mattingly,
212 S.E.2d 754 (W. Va. 1975).
However, in an insurance contract,
where the insurance policy is made in one state and is performed in
another, “the law of the state of the formation of the contract
shall
govern,
unless
another
state
has
a
more
significant
relationship to the transaction and the parties, or the law of the
other state is contrary to the public policy of this state.”
Syl.
Liberty Mut. Ins. Co. v. Triangle Indus. Inc., 390 S.E.2d 562 (W.
Va. 1990).
Because the insurance contract in this case was formed
in Pennsylvania, this Court will apply the substantive law of
Pennsylvania.2
2
This Court notes that it would reach the same result applying
either West Virginia or Virginia law.
7
B.
Summary Judgment
In its motion for summary judgment, James River argues that
the language in the insurance policy sold to Simplicity is plain
and unambiguous and that the policy clearly excludes coverage for
liability in the matters contained in the relevant claims brought
against the defendants by the plaintiff in the wrongful death
action.
In Pennsylvania, “the duty to defend and pay the costs of
defense is broader than the duty to indemnify.”
J.H. France
Refractories v. Allstate Ins. Co., 626 A.2d 502, 510 (Pa. 1993).
The duty of an insurer to defend is triggered “by the factual
averments contained in the complaint itself.” Kvaerner Metals Div.
of Kvaerner U.S., Inc., v. Comm. Union Ins. Co., 908 A.2d 888, 896
(Pa. 2006).
This Court looks “to the language of the policies
themselves to determine in which instances they will provide
coverage,
and
then
examine
[Geiser’s]
complaint
to
determine
whether the allegations set forth therein constitute the type of
instances that will trigger coverage.”
Id. at 896-97.
James River has shown there are no genuine issues of material
fact. The burden then shifts to the third-party defendants to show
that there are triable issues of fact.
have failed to meet this burden.
The third-party defendants
With no issues of fact in
dispute, coverage issues in an insurance contract are questions of
8
law.
Kvaerner Metals, 908 A.2d at 897.
This Court now turns to
the provisions of the policy.
James
River
points
to
the
following
endorsement
to
the
Commercial General Liability Coverage policy sold to Simplicity to
release James River from a duty to defend or indemnify:
RECALLED PRODUCTS EXCLUSION
This endorsement modifies insurance provided under the
following:
COMMERCIAL GENERAL LIABILITY COVERAGE
This insurance does not apply to any “bodily injury”,
“property damage” or personal and advertising injury”
arising out of:
Any product manufactured, sold, handled, or distributed
by any inured listed below:
Any and all products recalled prior to 12/15/2007
This exclusion applies regardless of whether the “bodily
injury”, “property damage” or “personal and advertising
injury” occurred before or after the recall.
The James River General Commercial Liability Policy defines
“product” as:
(1) Any goods or products, other than real property,
manufactured, sold, handled, distributed or disposed of
by:
(a) You;
(b) Others trading under your name; or
(c) A person or organization whose business
or assets you have acquired.
(2) Containers (other than vehicles), materials, parts
or equipment furnished in connection with such goods or
products.
This Court finds that the crib manufactured by Simplicity is
a “product” under the insurance policy in this case as “parts” of
9
the crib were subject to Simplicity’s “voluntary recall.”
The
plaintiff, Simplicity, and the Wal-Mart defendants contend that the
word “recalled” in the exclusion is an ambiguous term.
“When the language of the policy is clear and unambiguous,
[this Court] must give effect to that language.”
Id.
As the
Supreme Court of Pennsylvania has stated, “Words of common usage in
an insurance policy are construed according to their natural,
plain, and ordinary sense.”
Id.
Furthermore, policy language
“must not be tortured to create ambiguities where none exist.”
Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005).
The Recalled Products Exclusion language in the James River policy
is plain, simple, and easy to understand.
Simplicity and the Wal-
Mart defendants argue that consumers were not told return the cribs
that were the subject of the “voluntary recall” or to discontinue
the use of the cribs, but were advised concerning the safety issue
relating to the drop-side rail so that they could inspect their
cribs and obtain a repair kit.
The plaintiff argues that it is
possible to construe the term “recall” to mean only the return of
the entire Simplicity crib.
This Court is not persuaded by these arguments concerning
ambiguity.
As mentioned above, parties may not torture policy
language to create ambiguity, which, it would appear, Simplicity,
the Wal-Mart defendants, and the plaintiff are attempting to do.
The plaintiffs attached several documents to their response which
10
discuss the recall.
First, the United States Consumer Product
Safety Commission announced a “voluntary recall with Simplicity
Inc.,” of one million cribs because the “drop-side can detach from
the crib, which can create a dangerous gap and lead to the
entrapment and suffocation of infants.”
The press release stated
that the government was aware of two deaths.
The plaintiff also
attaches two pages from Simplicity’s website, both copyrighted in
2007, which provide “Recall Information.”
This page states that
one million cribs were recalled and that the old hardware could
lead to entrapment and suffocation of infants.
The plaintiff also
attaches a copy of the Retrofit Instructions for Cribs she received
from Simplicity.
Those instructions state that “[t]his retrofit
kit is designed to work with all crib models included in the crib
drop-side recall.” Pennsylvania case law instructs a court to give
ordinary and natural meaning to words in insurance policies. Here,
Simplicity issued recall notices stating that the crib was capable
of entrapping a child’s head and causing that child to suffocate.
The “recalls” or “notices” by Simplicity informed owners of these
cribs that a kit was needed to replace defective hardware.
It
strains the definition of recall for the parties to contend that
for a recall to be an “actual” recall, a party must return the
entire product, whether it be a crib, a vehicle, or any other
defective product capable of causing death or serious injury,
11
directly to the manufacturer, rather than obtaining replacement
parts.3
This Court also finds Simplicity and the Wal-Mart defendants’
contention that the death in this civil action was unrelated to the
recall unpersuasive as to the issue of liability coverage.
The
exclusion in the James River policy states that “any and all
products recalled” are excluded.
As mentioned above, the policy
language defines “product” to include a “part” of the product.
Thus, the hardware that Simplicity recalled, as a part of the crib,
is a “product” as defined under the policy.
Accordingly, the crib
is a recalled product and there is no coverage.
The “Combined Policy Exclusions” endorsement contains a “Duty
to Defend Exclusion” that states, “Where there is no coverage under
this policy, there is no duty to defend.” Because this Court finds
that there is no coverage under the policy, there is no duty for
James River to defend Simplicity.
Under Pennsylvania law, a duty
to
there
indemnify
exists
only
where
is
a
duty
to
defend.
Accordingly, James River has no duty to indemnify Simplicity.
Moreover, this Court finds that there is no duty for James River to
defend or indemnify the Wal-Mart defendants.
3
The language of the
This Court notes that the plaintiff argues in a different
section of her cross motion for summary judgment that the freedom
to contract is more compelling and outweighs the public policies
that motivates our product liability laws.
In support of this
argument, she underscores the magnitude of this recall when she
states that the “recalled products” were “known to have cause[d]
injury and death.”
12
“Additional
Insureds
-
Vendors”
endorsement
reads,
“Where
no
coverage shall apply herein for the Named Insured, no coverage or
defense shall be afforded to the Additional Insured.”
The
plaintiff
also
argues
that
the
Recalled
Productions
Exclusion endorsement is a unilateral modification of Simplicity’s
agreement with Wal-Mart and should be deemed void as against public
policy
and/or
unconscionable.
James
River
argues
that
plaintiff does not have standing to raise this argument.
the
This
Court assumes, without deciding, that the plaintiff has standing to
present this argument. The plaintiff first states that James River
made unilateral modifications to the insurance policy with respect
to its product liability coverage, which amounted to a contractual
disclaimer and/or limitation of remedy.
The plaintiff cites to
product liability cases in West Virginia in which a manufacturer
made contractual disclaimers. The cases cited by the plaintiff are
not applicable to the present motions, which involves an insurance
endorsement, agreed upon between an insured and an insurer.
Next, the plaintiff argues that Simplicity and James River
contravened
the
public
policy
by
disclaiming
a
contractual
obligation to Wal-Mart and limiting the remedies available to WalMart and to the public.
is unconscionable.
She further contends that the endorsement
She asserts that freedom of contract does not
outweigh product liability laws.
This Court agrees with James
River that the plaintiff appears to misunderstand James River’s
13
role in this case.
It is not a manufacturer and it is not a link
in the distribution chain of the crib.
This Court finds that it is
not against public policy for insurance companies to include such
an exclusion in general commercial liability policies, nor did
Simplicity and James River include an unconscionable endorsement in
the policy.
See 17 Samuel Williston & Richard A. Lord, A Treatise
on
of
the
Law
Contracts
§
49:114
(4th
ed.)
(“These
product
liability exclusions are intended to eliminate the possibility that
the insured will either cut corners or take unreasonable risks in
the performance of its operations and then shift the loss onto the
insurer.”).
In addition, the plaintiff believes that the West Virginia
Commercial Code makes James River’s actions unconscionable.
The
plaintiff cites West Virginia Code § 46-2-719(3), which states in
part that “Limitation of consequential damages for injury to the
person in the case of consumer goods is prima facie unconscionable
but limitation of damages where the los is commercial is not.”
However, West Virginia Code § 46-2 applies to transactions in
goods.
W. Va. Code § 46-2-102.
In this declaratory judgment
action, this Court is examining an insurance contract, not the sale
of goods.
Accordingly, the plaintiff’s unconscionability argument
based on the West Virginia Commercial Code is inapplicable.
Finally, the plaintiff asks this Court to continue this matter
pursuant to Rule 56(d) so that the plaintiff can conduct discovery
14
on whether James River and/or Simplicity intended to materially
misrepresent or commit fraud when it provided a Certificate of
Liability Insurance on January 15, 2008 to Wal-Mart.
This Court
denies the plaintiff’s request.
C.
Motion to Amend Answer and Affirmative Defenses
One day before the plaintiff filed her reply to James River’s
motion for summary judgment, the plaintiff filed a motion to amend
her answer and affirmative defenses to James River’s complaint for
declaratory relief pursuant to Rule 15(a) and (c)(2) in order “to
clarify Third-Party Defendant’s answer to allegation 16 to state
that the Plaintiff admits that the drop-side failures result from
both the hardware and crib design, which allow consumers to
unintentionally install the drop-side upside down.”
The plaintiff
therefore wants to deny that the entire crib was recalled and
states that “only certain component parts were recalled.”
Rule 15(a)(2) applies to parties seeking to amend their
pleadings.
This Rule states that “a party may amend its pleading
only with the opposing party’s written consent or the court’s
leave.
The
requires.”
district
court
should
freely
give
Fed. R. Civ. P. 15(a)(2).
court
broad
discretion
leave
when
justice
so
Rule 15(a) grants the
concerning
motions
to
amend
pleadings, and leave should be granted absent some reason “such as
undue delay, bad faith, or dilatory motive on the part of the
movant,
repeated
failure
to
cure
15
deficiencies
by
amendments
previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment or futility of the amendment.” Foman
v. Davis, 371 U.S. 178, 182 (1962); see also Ward Elec. Serv. v.
First Commercial Bank, 819 F.2d 496, 497 (4th Cir. 1987); Gladhill
v. Gen. Motors Corp., 743 F.2d 1049, 1052 (4th Cir. 1984).
James River filed a response in opposition to the plaintiff’s
motion to amend.
In that response, James River argues that the
amendment is futile because it is still entitled to summary
judgment despite the amendment. This Court agrees. The plaintiff,
in her proposed amended answer, states that “certain component
parts were recalled.” As discussed above, “product,” as defined in
the James River policy,” includes “parts.”
The Recalled Products
Exclusion applies regardless of whether this Court grants the
plaintiff leave to amend her answer.
Because such amendment would
be futile, this Court must deny the plaintiff’s motion for leave to
file an amended answer and affirmative defenses.
V.
Conclusion
For the reasons stated above, third-party plaintiff James
River Insurance Company’s motion for summary judgment (Document No.
93) is GRANTED and plaintiff/third-party defendant’s motion for
summary judgment (Document No. 106) and defendant/third-party
defendant Simplicity, Inc., a/k/a Simplicity for Children’s motion
for summary judgment (Document No. 108) are DENIED.
The third-
party defendant/plaintiff’s motion to amend answer and affirmative
16
defenses
to
James
River
Insurance
Company’s
Declaratory Relief (Document NO. 114) is DENIED.
Complaint
for
Finally, the
third-party defendants/plaintiff’s motion to strike third-party
plaintiff James River Insurance Company’s reply in further support
of motion for protective order and motion to stay (Document No.
122) and third-party plaintiff James River Insurance Company’s
motion for leave to extend time for filing (Document No. 126) are
DENIED AS MOOT.
Accordingly, this Court GRANTS the relief sought in the
complaint for declaratory judgment.
(a)
Specifically:
Under the James River policies, there is no coverage
for Simplicity and/or its vendors in this matter.
(b)
James River may terminate the defense being provided
to Simplicity by the law firm of Jackson & Kelly, as no
coverage exists in this matter.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
June 10, 2011
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
17
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