American Mining Insurance Company, Inc. v. Rock "N" Roll Coal Company, Inc. et al

Filing 34

MEMORANDUM OPINION AND ORDER granting plaintiff's 23 MOTION for Summary Judgment against Defendants Rock "N" Roll Coal Company, Inc. and David Cline; further directing that default judgment is entered against Myrtle D. Corporation. Signed by Judge John T. Copenhaver, Jr. on 4/25/2017. (cc: counsel of record; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
AMERICAN MINING INSURANCE COMPANY, INC.,
Plaintiff,
v.

Civil No. 16-3626

ROCK “N” ROLL COAL COMPANY, INC.,
DAVID CLINE, and
MYRTLE D. CORPORATION,
a West Virginia corporation,
Defendants.

MEMORANDUM OPINION AND ORDER

Pending is plaintiff’s Motion for Summary Judgment
Against Defendants Rock “N” Roll Coal Company, Inc. and David
Cline, filed September 8, 2016 (ECF No. 23).

I.

Facts and Procedural History

This case involves the interpretation of insurance
contracts in a declaratory judgment action brought under
diversity jurisdiction by plaintiff American Mining Insurance
Company, Inc. (“American Mining”), on April 13, 2016.

Plaintiff

provided insurance coverage to defendant Rock “N” Roll Coal
Company, Inc. (“Rock ‘N’ Roll”), in the form of six annual
commercial general liability policies issued in West Virginia
over the course of six years.

David Cline, as an executive

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officer of Rock “N” Roll, is an insured under those same
policies.

Plaintiff’s complaint (the “complaint”) alleges that

those policies (the “policies”) do not cover the claims or
counterclaims alleged in a state suit initiated by co-defendant
Myrtle D. Corporation (“Myrtle D.”) against Rock “N” Roll and
David Cline (herein, “defendants”) in the Circuit Court of
McDowell County, West Virginia.1

The complaint in this action

sets forth the relevant policy language, which is the same for
each policy in all material respects.

Compare Compl. ¶ 26 (ECF

No. 1) (hereinafter “Federal Compl.”) with Pl.’s Mot. for
Default J. Ex. 1 (ECF No. 13) (hereinafter “Policies”).

Myrtle D., as lessor, filed its state court complaint
(“State Complaint”) against its lessee, Rock “N” Roll, and David
Cline, President of Rock “N” Roll, on October 13, 2015, alleging
that Rock “N” Roll and Cline failed to make certain royalty
payments.

Shortly thereafter, Rock “N” Roll and Cline filed a

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Myrtle D., the third defendant in this case, was served in this
action with the summons and the complaint on May 17, 2016, but
it never answered the complaint or filed a notice of appearance.
Accordingly, the District Clerk entered a default against Myrtle
D. on July 14, 2016. On motion by the remaining defendants, the
court deferred entry of default judgment against Myrtle D. on
March 24, 2017, because entry of a default judgment might have
risked inconsistent judgments between the defendants or
pretermitted factual development in this case. See March 24,
2017 Mem. Op. and Order (hereinafter “March 24 Op.”).

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counterclaim against Myrtle D. alleging conspiracy, slander of
title, public disclosure of private facts, negligence, and
breach of a lease agreement.

Myrtle D. responded with its own

counterclaim (“Myrtle Counterclaim”) alleging that Rock “N” Roll
and Cline were contractually obligated to name Myrtle D. as an
additional insured in their policies and to indemnify and defend
Myrtle D. for claims arising out of Rock “N” Roll’s coal mining
operations.

The state court dismissed the State Complaint with

prejudice on June 29, 2016, on Myrtle D.’s own motion, leaving
only the Rock “N” Roll and David Cline counterclaim and the
Myrtle Counterclaim in the state court case.

The Myrtle Counterclaim alleges that Rock “N” Roll and
David Cline breached a license agreement between Myrtle D. and
Rock “N” Roll in a variety of ways.

Ans. to Countercl. and

Countercl. Against Rock “N” Roll Coal Company, Inc., and David
Cline, “Counterclaim” ¶¶ 2-3 (ECF No. 1-3) (hereinafter “Myrtle
Countercl.”).

In particular, it asserts that

[p]ursuant to the License Agreement, Defendant Rock N
Roll Coal Co., Inc. and David Cline, as the signatory
thereto on behalf of Rock N Roll Coal Co., Inc., are
contractually obligated to indemnify and save harmless
Myrtle D., its officers and employees, and their
affiliates, from and against any and all claims,
demands, suits, loss, damage, injury (including death)
to persons and property and expense . . . whatsoever
that may result from or arise of out [sic] Rock N Roll
Coal Co., Inc.’s mining operations.

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Myrtle Countercl., “Counterclaim” ¶6.

It further alleges a

breach of contract claim, to wit, that Rock “N” Roll and David
Cline “have breached their contractual obligations by failing to
indemnify, save harmless, defend, and pay all attorney’s fees
and legal expenses to which Myrtle D. has been and continues to
be exposed by [Rock ‘N’ Roll and Cline’s] Counterclaim.”
“Counterclaim” ¶ 13.

Id.,

Plaintiff American Mining endeavors to

obtain a declaration that such a breach is not covered under its
insurance policies.

See Pl.’s Mem. in Supp. of Summ. J. 11 (ECF

No. 24) (hereinafter “Mot. for Summ. J.”)

Plaintiff filed this federal declaratory judgment
action seeking a declaration that its insurance policies do not
cover the claims and counterclaims in the underlying state case.
The complaint consists of six counts, of which Counts I and II
are relevant here.

These counts effectively presage the same

arguments raised in American Mining’s motion for summary
judgment currently under consideration.

Count I alleges that

Myrtle D.’s claims of breach of contract in the Myrtle
Counterclaim and all counts of the State Complaint are not
covered by the policy language because such breaches were not
“accidents” and therefore not “occurrences” as defined by the
policies.

Federal Compl. ¶¶ 29-32.

Count II alleges that the

policies’ “Contractual Liability” exclusion excludes the Myrtle

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Counterclaim and Count I of the now dismissed State Complaint
from coverage.

Id. ¶ 36.

Plaintiff’s policies provide commercial general
liability coverage to Rock “N” Roll.

In pertinent part, the

policies’ express terms cover only “damages because of ‘bodily
injury’ or ‘property damage,’” and only if the bodily injury or
property damage “is caused by an ‘occurrence’ that takes place
in the ‘coverage territory.’”

See, e.g., Policies 9, 177.

An

“occurrence” is defined in the policies as “an accident,
including continuous or repeated exposure to substantially the
same general harmful conditions.”

Policies 20.

As to David

Cline, plaintiff correctly notes that Cline, as an executive
officer of Rock “N” Roll, is an insured under the terms of the
policies.

See Policies 15; Mot. for Summ. J. 8.

Specifically,

each of the policies states that “[y]our ‘executive officers’
and directors are insureds, but only with respect to their
duties as your officers and directors.”
183.

See, e.g., Policies 15,

Consequently, plaintiff’s arguments against coverage apply

equally to both Rock “N” Roll and Cline.
Plaintiff moved for summary judgment on September 9,
2016.

In its memorandum, plaintiff posits that none of the

claims by Myrtle D. against the defendants in the underlying
Myrtle Counterclaim fall within the ambit of plaintiff’s

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policies.

In particular, plaintiff contends that the claims of

the Myrtle Counterclaim sound in breach of contract and,
consequently, that those claims both fail to come within the
policies’ coverage for “occurrences” and are excluded by the
policies’ “Contractual Liability” exclusion.

Rock “N” Roll and

David Cline respond that their claims in the state case are not
premised solely on breach of contract.

II.

Discussion

A party is entitled to summary judgment “if the
pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law.”

Fed. R. Civ. P. 56(c).

Material facts are

those necessary to establish the elements of a party’s cause of
action.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).
A genuine issue of material fact exists if, in viewing
the record and all reasonable inferences drawn therefrom in a
light most favorable to the non-moving party, a reasonable factfinder could return a verdict for the non-movant.

Id.

The

moving party has the burden of showing - “that is, pointing out
to the district court - that there is an absence of evidence to

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support the nonmoving party’s case.”
477 U.S. 317, 325 (1986).

Celotex Corp. v. Catrett,

If the movant satisfies this burden,

then the non-movant must set forth specific facts as would be
admissible in evidence that demonstrate the existence of a
genuine issue of fact for trial.

Fed. R. Civ. P. 56(c); id. at

322-23.
A party is entitled to summary judgment if the record
as a whole could not lead a rational trier of fact to find in
favor of the non-movant.
(4th Cir. 1991).

Williams v. Griffin, 952 F.2d 820, 823

Conversely, summary judgment is inappropriate

if the evidence is sufficient for a reasonable fact-finder to
return a verdict in favor of the non-moving party.
477 U.S. at 248.

Anderson,

A court must neither resolve disputed facts

nor weigh the evidence, Russell v. Microdyne Corp., 65 F.3d
1229, 1239 (4th Cir. 1995), nor make determinations of
credibility, Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir.
1986).

Inferences that are “drawn from the underlying facts . .

. must be viewed in the light most favorable to the party
opposing the motion.”

United States v. Diebold, Inc., 369 U.S.

654, 655 (1962).
Where, as here, jurisdiction lies in federal diversity
of parties, a court must apply the rules of the forum state when
interpreting contracts.

Mulvey Const., Inc. v. Bituminous Cas.

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Corp., 571 F. App'x 150, 154 (4th Cir. 2014).

West Virginia law

holds that the law of the state where an insurance contract was
formed governs disputes over that contract.

Joy Techs., Inc. v.

Liberty Mut. Ins. Co., 187 W. Va. 742, 745, 421 S.E.2d 493, 496
(1992).

Plaintiff’s federal complaint proffers that these

policies were formed in West Virginia, and defendants do not
contest this point.

Federal Compl. ¶¶ 5-6.

See also Policies

1.
West Virginia law is clear on the favored approach to
the interpretation of insurance contracts.

The Supreme Court of

Appeals of West Virginia has held that where facts surrounding
an insurance contract are not in dispute, “determination of the
proper coverage [under that contract] . . . is a question of
law.”

Tennant v. Smallwood, 211 W. Va. 703, 706, 568 S.E.2d 10,

13 (2002) (citations and quotations marks omitted).

Further,

“[w]here the provisions of an insurance policy contract are
clear and unambiguous they are not subject to judicial
construction or interpretation, but full effect will be given to
the plain meaning intended.”

Keffer v. Prudential Ins. Co. of

Am., 153 W. Va. 813, 813, 172 S.E.2d 714, 714 (1970).
Conversely, a provision is only ambiguous when it is “reasonably
susceptible of two different meanings or of such doubtful
meaning that reasonable minds might be uncertain or disagree as

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to its meaning.”

Glen Falls Ins. Co. v. Smith, 217 W. Va. 213,

221, 617 S.E.2d 760, 768 (2005) (emphasis removed).

Finally, an

insurer’s duty to a defendant is generally broader than its
obligation to provide coverage, but the duty to defend arises
only when the applicable policy is “reasonably susceptible of an
interpretation that the claim may be covered by [the policy’s]
terms.”

Horace Mann Ins. Co. v. Leeber, 180 W. Va. 375, 378,

376 S.E.2d 581, 584 (1988).
As a threshold matter, the court notes that the state
court dismissed the State Complaint with prejudice on June 29,
2016, on Myrtle D.’s own motion.
18-1).

See Dismissal Order (ECF No.

Under Article III, Section 2, of the Constitution,

federal courts may only adjudicate “actual controversies . . .
extant at all stages of review.”

Genesis Healthcare Corp. v.

Symczyk, 133 S. Ct. 1523, 1528 (2013) (quotations marks
omitted).

“Even in order to pursue declaratory and injunctive

claims,” plaintiff must establish that it has a “specific live
grievance” at each stage of review.

Lewis v. Cont’l Bank Corp.,

494 U.S. 472, 479 (1990) (quotations marks omitted).

With the

dismissal of the State Complaint, plaintiff no longer has a live
grievance regarding that pleading for which the court can grant
relief.

Consequently, plaintiff’s request for declaratory

relief regarding Myrtle D.’s claims in its State Complaint is

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moot.
Furthermore, the policy language in this case is clear
and unambiguous, and it does not require plaintiff to defend or
indemnify Rock “N” Roll and Cline for the claims that Myrtle D.
has raised against them in its counterclaim in the underlying
state action.

As plaintiff aptly contends, Myrtle D.’s claims

do not fall within the meaning of an insured “occurrence.”

The

policies’ express terms cover only “damages because of ‘bodily
injury’ or ‘property damage,’” and only if the bodily injury or
property damage “is caused by an ‘occurrence’ that takes place
in the ‘coverage territory.’”

See, e.g., Policies 9, 177.

An

“occurrence” is defined in the policies as “an accident,
including continuous or repeated exposure to substantially the
same general harmful conditions.”

See, e.g., Policies 20.

Plaintiff contends that the claims in the Myrtle Counterclaim
are breaches of contract that do not fall within the meaning of
an occurrence.
West Virginia law instructs that “an insurer has a
duty to defend an action against its insured only if the claim
stated in the underlying complaint could, without amendment,
impose liability for risks the policy covers.”

State Auto. Mut.

Ins. Co. v. Alpha Eng’g Servs., Inc., 208 W. Va. 713, 716, 542
S.E.2d 876, 879 (2000) (noting also that “[i]f the causes of

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action alleged in the plaintiff’s complaint are entirely foreign
to the risks covered by the insurance policy, then the insurance
company is relieved of its duties under the policy”).
Importantly, the West Virginia Supreme Court of Appeals has
expressly found that a breach of contract – even one that causes
“bodily injury” or “property damage” – “is not an event that
occurs by chance or arises from unknown causes, and, therefore,
is not an ‘occurrence.’”

State Bancorp, Inc. v. U.S. Fid. &

Guar. Ins. Co., 199 W. Va. 99, 105, 483 S.E.2d 228, 234 (1997).
See also State ex rel. Nationwide Mut. Ins. Co. v. Wilson, 236
W. Va. 228, 235, 778 S.E.2d 677, 684 (2015) (“[T]o the extent
that the amended complaint alleged that actions [of the
underlying defendant] were intentional misconduct or purely
breach of contract, his actions are not ‘occurrences’ as defined
by Nationwide’s CGL policy and do not trigger coverage.”).

In

fact, the definition of “occurrence” in the policy at issue in
Bancorp mirrors the definition here verbatim.

See 199 W. Va. at

104, 483 S.E.2d at 232.
Only the Myrtle Counterclaim remains at issue in
plaintiff’s federal complaint for declaratory judgment.2

The

Myrtle Counterclaim alleges, in essence, that Rock “N” Roll and

2

Myrtle D. has defaulted on plaintiff’s claim in this action
that it has no duty to indemnify or defend Myrtle D. as to the
counterclaim against Myrtle D.

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David Cline “have breached their contractual obligations by
failing to indemnify, save harmless, defend, and pay all
attorney’s fees and legal expenses to which Myrtle D. has been
and continues to be exposed.”
¶ 13.

Myrtle Countercl., “Counterclaim”

Rock “N” Roll and David Cline appear to concede that the

claims in the Myrtle Counterclaim fall outside the meaning of an
“occurrence”.

See Resp. 5-7.

They provide no response to

American Mining’s contention that the Myrtle Counterclaim is
therefore not covered by the policies.

Id.

Neither do they

dispute the facts surrounding the formation or meaning of the
contract.

Undoubtedly, interpreting a breach of contract to

fall within the meaning of an “occurrence” would contravene
otherwise perspicuous West Virginia law.
105, 483 S.E.2d at 234.

Bancorp, 199 W. Va. at

Because the claims in the Myrtle

Counterclaim unambiguously allege only breach of contract
claims, no coverage is available to Rock “N” Roll and David
Cline under the policies for those claims.3
Consequently, the court finds that there is no genuine
issue of material fact with respect to any of Myrtle D.’s claims
against Rock “N” Roll and David Cline in the state court case.

3

Because West Virginia law is clear regarding the meaning of
“occurrences,” the court does not need to reach the plaintiff’s
alternative argument that the breach of contract claims are
excluded by the “Contractual Liability” exclusion. Cf. Mot. for
Summ. J. 12.

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Plaintiff American Mining is entitled to summary judgment and a
declaration that plaintiff is not required to defend or
indemnify any of the claims by Myrtle D. against Rock “N” Roll
and David Cline in the state litigation.

Furthermore, on March 24, 2017, this court deferred
entry of default judgment against Myrtle D. in order to mitigate
the risk of inconsistent judgments and underdeveloped factual
premises while the other two defendants remained in this
litigation.

See March 24 Op.

Now that the court has found in

favor of plaintiff with respect to those two defendants, no
further reason to delay default judgment against Myrtle D.
remains.

Accordingly, the court will also enter default

judgment against the remaining defendant, Myrtle D. Corporation.

III.

Conclusion

For the foregoing reasons, it is ORDERED that
plaintiff’s Motion for Summary Judgment Against Defendants Rock
“N” Roll Coal Company, Inc. and David Cline be, and it hereby
is, granted.
It is FURTHER ORDERED that default judgment be, and it
hereby is, entered against Myrtle D. Corporation.

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directed to appear.
02/29/2016

Entry of scheduling order.

03/08/2016

Last day to serve F.R. Civ. P 26(a)(1) disclosures.

The Clerk is requested to transmit this order to all
The Clerk is requested to transmit this Order and
Notice of record and of unrepresented parties.
counsel to all counselany record and to any unrepresented
parties.
DATED: January 2017
ENTER: April 25,5, 2016
John T. Copenhaver, Jr.
United States District Judge

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