WOODCRAFT MANUFACTURING INC v. CHARTER OAK FIRE INSURANCE COMPANY, No. 3:2008cv00455 - Document 18 (N.D. Fla. 2009)

Court Description: ORDER - Defendant Charter Oak's 7 Motion to Dismiss and motion for summary judgment and 8 Amended Motion for Summary Judgment are GRANTED; - The Clerk is directed to enter final judgment in favor of Defendant Charter Oak, with costs taxed against Plaintiff Woodcraft Manufacturing, Inc. and CLOSE the case. Signed by District Judge M CASEY RODGERS on May 12, 2009. (cbj)
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WOODCRAFT MANUFACTURING INC v. CHARTER OAK FIRE INSURANCE COMPANY Doc. 18 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF FLORIDA PENSACOLA DIVISION WOODCRAFT MANUFACTURING, INC., Plaintiff v. CASE NO. 3:08cv455/MCR/EMT THE CHARTER OAK FIRE INSURANCE COMPANY, Defendant / ORDER In this suit Plaintiff Woodcraft Manufacturing, Inc. (“Woodcraft” or “plaintiff”) claims that Defendant Charter Oak Fire Insurance Company (“Charter Oak” or “defendant”) breached a contractual duty to defend and indemnify Woodcraft in connection with a 2005 case filed against Woodcraft in this court by Caddell Construction Company, Inc. (“Caddell”).1 In that case, Caddell sued Woodcraft to recover damages Caddell was required to pay to one of Woodcraft’s employees based on Woodcraft’s failure to maintain workers’ compensation insurance coverage while performing work as a subcontractor for Caddell. Woodcraft has filed this suit against Charter Oak to recoup the money and attorney’s fees it spent to settle Caddell’s claims in the earlier suit, which Woodcraft alleges should have been covered under a general commercial liability policy Woodcraft had with Charter Oak. Charter Oak has filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Both parties have relied on materials outside the pleadings and have explicitly drafted their motion and response in anticipation that the court would consider the issues in this case under the 1 Caddell Construction Co., Inc. v. W ood craft Manufacturing, Inc. and McMahon-Hadder Insurance, Inc., Case N o.3:05cv296 /RV /EM T (N .D. Fla. filed Au g.1, 2005 ). Dockets.Justia.com Page 2 of 10 summary judgment standard of Fed.R.Civ.P. 56. Based on the parties’ filings, the court considers Charter Oak’s motion to dismiss as one for summary judgment and grants it for the reasons set forth below. Background Caddell was the general contractor for a new federal courthouse project in Greenville, Tennessee. In July 1999, it subcontracted the architectural woodworking portion of the project to Woodcraft.2 The subcontract between Woodcraft and Caddell required Woodcraft to obtain both public liability insurance and workers’ compensation insurance for its work on the Tennessee project. Woodcraft complied with the first part of this obligation in June 2001 by obtaining a general commercial liability policy from Charter Oak.3 In an amended endorsement under that policy, Charter Oak promised to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.” The Charter Oak policy specifically excluded coverage for workers’ compensation claims. Accordingly, Woodcraft bought a second insurance policy from Bridgefield Insurance Company (“Bridgefield”)4 in the belief the new policy would provide the workers’ compensation coverage required under its subcontract with Caddell. On August 10, 2001, Gary Slone, a Woodcraft employee working on the courthouse project, suffered a stroke on the job. He eventually brought suit against Woodcraft in Tennessee state court, alleging that his employer owed him workers’ compensation benefits under Tennessee law.5 Woodcraft made a demand for coverage under its 2 W oodcraft is a Florida corporation whose principal place of business is in Gulf Breeze, Florida; Charter Oak is a Conne cticut com pan y; and the am ount in con troversy excee ds $ 75,0 00. The c ourt therefore has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332. 3 Policy no. I0660-178C2561 was issued on June 12, 2001 and covered the period from 6/1/01 to 4 Policy No. 178C2561. 6/1/02. 5 The case was filed on Nov. 14, 2001 in the Third Dis trict Court for Greene, County Tennessee. Ca se N o. 01-cv-8 69. Case No.: 3:08cr455/MCR/EMT Page 3 of 10 workers’ compensation policy with Bridgefield. Bridgefield denied coverage, claiming Woodcraft’s policy only covered workers’ compensation claims for employees injured in Florida.6 A Tennessee state court found that Slone had suffered a 100% work-related disability and entered judgment against Woodcraft and Caddell.7 In 2005, Caddell sued Woodcraft and McMahon-Hadder Insurance, Woodcraft’s insurance agent, in this court to recover the damages it was liable for under the Tennessee judgment. In that case, Caddell raised five claims against Woodcraft: 1. Breach of contract: Caddell requested damages for the economic harms it suffered because Woodcraft failed to obtain all the insurance required by the subcontract. 2. Contractual indemnification: Caddell invoked an indemnification clause in its subcontract with Woodcraft to recoup all money it was required to pay Slone, claiming that Woodcraft’s negligence made Caddell vicariously liable. 3. Common law indemnification: Caddell sought common law indemnification for its losses, claiming that it was only secondarily liable for Slone’s damages. 4. Contribution: Caddell sought contribution for the damages owed to Slone on the theory that Caddell and Woodcraft were jointly and severally liable. 6 Mary Eders, W oodcraft’s corporate se cretary, states that W oodcraft submitted the workers’ compensation claim to Bridgefield and that it was de nied. Affidavit of Mary Eders at ¶¶ 10-11. The record does not contain the dates of W oodcraft’s demand, Bridgefield’s denial, or any written comm unication betwe en W oodcraft and Bridgefield concerning W oodcraft’s claim . 7 The state trial court found that Slone was entitled to $18 1,27 2 in disability bene fits; $15 6,79 5.65 to pay off a lien asse rted against him by the De partm ent of Veterans A ffairs (where Slone was treated for three m onths); $994.95 in litigation costs; plus unspecified future medical expenses. Motion to dismiss at ¶¶ 18-19. This court assumes W oodcraft and Caddell were held jointly and severally liable for these amounts, but the record is unclear on this point. Slone initially sued only W oodcraft, and neither W oodcraft nor Charter Oak has submitted the trial court’s final jud gm ent or the am end ed c om plaint adding Cadd ell as a defe nda nt to Slo ne’s suit. The ruling on appeal indicates that both Caddell and W oodcraft were found liable by the trial cou rt, but the re is no indicatio n of whethe r liab ility was jo int and several; presum ably it was , how ever. See Slone v. W oodcraft Mfg., Inc., No. E2005-01575-W C-R3-CV, 2006 W L 2006 (Tenn. W orkers Comp. Panel Oc t. 30, 2006). Caddell’s liability would have been premised on Tenn. Code Ann. § 50-5-113, which allows an injured employee to recover workers’ compe nsation benefits from a general contractor as the workers’ “statutory employer.” Caddell claimed in the 2005 suit in this court tha t eith er it or its insurer, St. PaulTravelers Insuranc e, had to satisfy the state cou rt judg m ent because W oodcraft did not have the workers’ compensation coverage required by the subcontract. This court record does not show when, or if, Caddell or St. Pau l-Tra velers paid S lone the dam age s as ses sed by the trial court. Case No.: 3:08cr455/MCR/EMT Page 4 of 10 5. Piercing the corporate veil: Caddell claimed that Woodcraft was merely an alter ego of its principals, Mary and Frederick Eders, and sought to pierce the corporate veil to recover any assets the Eders might have diverted away from the company to avoid judgment. Based on Caddell’s complaint, Woodcraft made a demand to Charter Oak for defense and indemnification under the provisions of the commercial liability policy Woodcraft had purchased from Charter Oak in June 2001. Charter Oak denied coverage on the ground that Caddell’s suit only raised economic claims against Woodcraft, not claims of bodily injury, which would have been covered by the policy. Woodcraft eventually paid Caddell $50,000 to settle all claims and incurred an additional $43,766.57 in attorney’s fees.8 On October 6, 2008, Woodcraft filed this suit against Charter Oak, alleging that Charter Oak breached its contractual duties (1) to defend Woodcraft in Caddell’s lawsuit, thereby costing Woodcraft $43,466.57 in attorney’s fees, and (2) to indemnify Woodcraft for the $50,000 it paid to settle Caddell’s claims. Standard of Review A motion to dismiss under Fed.R.Civ.P. 12(b)(6) that relies on matters outside the pleadings must be treated as one for summary judgment. Fed.R.Civ.P. 12(d). Ordinarily, the parties are entitled to ten days notice of the court's intention to convert a Rule 12 motion to dismiss into a motion for summary judgment under Rule 56. However, when a party relies on an affidavit as part of its response, and where the parties have clearly anticipated that the motion will be considered under the summary judgment standard, a court is not required to give notice of the conversion. Stewart v. Booker T. Washington Ins., 232 F.3d 844, 853 (11th Cir. 2000). A motion for summary judgment should be granted when "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); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). 8 A factual dispute is "genuine" if the evidence is such that a The case was dismissed on April 10, 2007. Case No.: 3:08cr455/MCR/EMT Page 5 of 10 reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A fact is "material" if it could affect the outcome of a suit under the governing law. Id. The court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th Cir. 1992) (citation omitted). The moving party has the initial burden of showing the absence of a genuine issue as to any material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). Once the movant satisfies its burden of showing the absence of a genuine issue of material fact, the burden shifts to the nonmovant to produce specific facts showing there is a genuine issue for trial. Matsushita Elec. Indus. Co., 475 U.S. at 587 (emphasis omitted). A general denial unaccompanied by any evidentiary support is not sufficient. Fed.R.Civ.P. 56(e)(2). Instead, the nonmoving party must "demonstrate that there is indeed a material issue of fact that precludes summary judgment." Clark v. Coats & Clark, Inc., 929 F.2d 604,608 (11th Cir. 1991). Discussion Because Woodcraft’s defense and indemnification claims are so intertwined in this case, the court considers them together. So doing, however, the court notes that an insurance company’s duty to defend an insured is broader than its obligation to indemnify. Lime Tree Village Cmty. Club Ass’n, Inc. v. State Farm Gen. Ins. Co., 980 F.2d 1402, 1405 (11th Cir. 1993); Smith v. General Acc. Ins. of America, 641 So.2d 123, 124 (Fla. 4th DCA 1994). Whereas the duty to defend depends solely on the allegations in the complaint such that any alleged fact that brings an injury within the policy’s coverage triggers the duty to defend an insured regardless of the merits of the lawsuit, Smith, 641 So.2d at 124, an Case No.: 3:08cr455/MCR/EMT Page 6 of 10 insurer’s duty to indemnify depends on the underlying facts of a case. Hagen v. Aetna Cas. and Sur. Co., 675 So.2d 963, 965 (Fla. 5th DCA 1996). Charter Oak maintains it had no duty to defend Woodcraft against Caddell’s claims or indemnify Woodcraft for the money it paid to settle Caddell’s suit because its liability policy with Woodcraft only obligated it to defend Woodcraft against allegations of bodily injuries, and Caddell’s lawsuit sought economic, not bodily, damages. Woodcraft argues in response that Caddell’s complaint did, in fact, seek damages for bodily injuries by demanding “any and all damages which are assessed against Caddell for Mr. Slone’s alleged injuries arising from August 2001.” (Caddell Amended Complaint ¶ 36). The court disagrees. None of Caddell’s claims against Woodcraft in the earlier suit were based on bodily injury. Although Slone’s physical injury formed the background for Caddell’s lawsuit, Caddell did not sue Woodcraft because Slone was injured and did not seek damages for Slone’s injury. Instead, Caddell sued Woodcraft because it was forced to pay the workers’ compensation benefits Woodcraft as the subcontractor had been contractually obligated to cover with insurance but failed to obtain. Caddell’s specific claims were nothing more than different theories for recovering the money the Tennessee court ordered it and Woodcraft to pay to Slone. Economic loss, not physical injury, was the gravamen of each of the claims. This case is, for all practical purposes, identical to American States Ins. Co. v. Pioneer Electric Co., et al., 85 F.Supp.2d 1337 (S.D. Fla. 2000), where an insurance company obtained a declaratory judgment relieving it of the duty to defend and indemnify a subcontractor whose workers’ compensation coverage had lapsed before one of its employees was injured in the scope of his employment. Similar to this case, the general contractor was held liable on the employee’s workers’ compensation claim, and the contractor subsequently sought reimbursement of its payments from the subcontractor. The court found that the claims were essentially economic in nature, did not fall within the policy’s provisions for “bodily injury,” and did not require the insurance company to defend or indemnify the subcontractor. Id. at 1343. Consistent with American States, this court finds that Caddell’s earlier claims against Woodcraft were economic in nature, outside the Case No.: 3:08cr455/MCR/EMT Page 7 of 10 scope of the general liability policy, and thus Charter Oak was not obligated to defend or indemnify Woodcraft in the earlier litigation.9 Woodcraft also argues that Charter Oak was obligated to defend and indemnify it in Caddell’s 2005 suit because none of the exclusions in the policy between Woodcraft and Charter Oak applied to Slone’s injuries. As stated earlier, the policy required Charter Oak to pay for a “bodily injury” covered by the policy and to defend Woodcraft in any suit related to the injury. The policy, however, also contained several exclusions to coverage. The most important of these was the “employer’s liability” exclusion of Section 1(A)(2)(e) of the policy, which provided that coverage did not apply to any bodily injury of a Woodcraft 9 The court is not persuaded by W oodcraft’s attempt to distinguish its situation from American States on public policy grounds. The subcontractor in American States intentio nally viola ted its duty to m aintain workers’ compensation insurance by allowing the policy to lapse after being warned about failing to make tim ely premium payments. W oodcraft argues that because it actually attempted, albeit unsucces sfully, to obtain the prope r insuranc e, American States does not a pply. The re is no sugges tion in either American States or in any authority offered by W oodcraft that a subcontractor’s good faith effort relieves it of its contractual obligation to provide proper workers’ compensation or excuses its failure to do so; indeed, intent is irrelevant here. W ood craft also argu es that American States is contrary to U.S. Fire Ins. Co. v. J.S.U.B., 979 So.2 d 87 1 (Fla. 200 7), wh ich W ood craft suggests elim inated the distinc tion betwe en econom ic and “bo dily inju ry” damages in American States. The court is again unpersuaded. In J.S.U .B., a subco ntractor’s failure to use prop er so il com pac tion ca use d da m age to a home’s foundation and drywall. The general contractor repaired the hom e’s structural damage and sought coverage for the repair expenses under its general comm ercial liability policy, claiming that the structural damage caused by the subcontractor’s work was “property damage” covered under the policy. The Florida Supreme Court agreed, holding that the expenses the general contractor incurred to repair the home’s physical structure fell within the policy’s “property damage” clause and were therefore covered . W oodcraft arg ues by analogy betw een “p roperty dam age” and “b odily inju ry” that, just as the general contractor’s economic losses for repairing the home were recoverable as “property damage” in J.S.U.B., W oodcraft’s paym ents to Ca ddell to settle the 2005 lawsuit should likewise be considered economic losses covered under the “bodily injury” provision of the liability policy W oodcraft had with Charter Oak. The court disagrees. In J.S.U .B., the court determ ined that allegations of physical injury to a completed project which stem from a subcontractor’s faulty or de fective wo rk c an c ons titute “pro perty damage” under a general contractor’s gen eral com m ercial liability policy. Id. at 890-91. At the same time, howeve r, the court also recognized that allegations of faulty workmanship alone, i.e. without physical injury to the prope rty, would not qualify for c overage . Id. Although an important decision in Florida insurance law, J.S.U.B. has no app lication to the facts of this case and no bearing on the decision in American States. Indeed, W oodcraft’s analogy is misplaced. In J.S.U.B., the gen eral c ontractor’s claim was based on the hom e’s structural damage, which allegedly stemm ed directly from the subcontracto r’s fau lty perform ance; in this case, however, as noted, Caddell’s claim against W oodcraft was based on W oodcraft’s failu re to m aintain wo rker’s compensation insurance, which ap pare ntly was the result of a m istak e on W ood craft’s part. W hereas the claim in J.S.U.B. was directly related to the subcontractor’s faulty work, in that the faulty work resulted in physical injury to the property, Caddell’s claim ag ainst W oodcraft was merely incidentally related to Slone’s bodily injury. Moreover, as stressed by the court in J.S.U.B., every comm ercial ge ne ral liability policy must be con strue d with th e po licy’s specific ex clusions in m ind. Id. at 877. As noted, W oodcraft’s policy with C harte r Oak spe cifically excluded w ork er’s com pen sation claim s like S lone’s. Case No.: 3:08cr455/MCR/EMT Page 8 of 10 employee injured in the scope of his job duties. Although this exclusion would ordinarily apply to Slone, who was injured on the job while performing his duties, Woodcraft argues that a crucial saving clause brought Slone’s injury back within the policy’s coverage. According to the saving clause, the “employer’s liability” exclusion “does not apply to liability assumed by [Woodcraft] under an ‘insured contract.’” An “insured contract” is defined under Section V(8)(f) of the policy as any agreement relating to Woodcraft’s business “under which you assume the tort liability of another party to pay for ‘bodily injury’ . . . to a third person or organization.” Woodcraft argues that its subcontract with Caddell was an “insured contract” based on Article XII(a) of the subcontract, under which Woodcraft agreed “to indemnify and hold harmless . . . [Caddell] . . . from and against all claims, damages, losses and expenses . . . arising out of or resulting from the performance of [Woodcraft’s] work . . . provided that any such claim . . . is attributable to bodily injury.” Woodcraft argues that under this provision it assumed Caddell’s liability to pay for Slone’s injury. According to Woodcraft, its agreement with Caddell constitutes an insured contract and, thus, is exempt from the “employer’s liability” exclusion of the commercial liability policy between Woodcraft and Charter Oak. As a result, Woodcraft maintains Charter Oak was required to defend and indemnify it in Caddell’s lawsuit. The court rejects Woodcraft’s tortured reading of both Section V(8)(f) of the liability policy and Article XII(a) of the subcontract. First, as noted above, Section V(8)(f) of the policy between Woodcraft and Charter Oak defined an “insured contract” as one in which Woodcraft agreed to “assume the tort liability of another party to pay for ‘bodily injury’... to a third person . . . .” (emphasis added). 10 Workers’ compensation payments, however, lie 10 The insurance policy between Woodcraft and Charter Oak m ust be construed under Florida law. Boardman Petr oleum, Inc. v. Federated Mut. Ins. Co., 135 F.3d 750, 752 (11th Cir. 1998) (“Federal courts sitting in diversity apply the forum state’s choice-of-rules.”). Under Florida law, the law of the jurisdiction whe re the con tract w as e xec uted governs the righ ts and liabilities of the pa rties. State Farm Mut. Auto. Ins. Co. v. Roach, 945 So.2d 116 0,1163 (Fla. 2006). As in most states, the workers’ compensation system in Florida provides the exclusive re m edy for injuries arising out of an e m ployee ’s scope of em ploym ent. Fla. Stat. §440.015 (1997). Although there is an exception for intentional acts against employees not applicable in this case, the trade off built into the workers’ compensation scheme is that it shields participating employers from tort suits b y em ployee s injured in th e sc ope of their em ploym ent. Turner v. PCR, 754 So.2d 683,686 (Fla. Case No.: 3:08cr455/MCR/EMT Page 9 of 10 outside the tort system as a matter of law.11 Turner, 754 So.2d at 686. When Woodcraft and Charter Oak agreed in Section V(8)(f) of the commercial liability policy that Woodcraft’s assumption of “tort liabilities” in another contract would be exempted from the “employer’s liability” exclusion, they could not have been agreeing to include Woodcraft’s obligation to indemnify a third party for payment of workers’ compensation benefits to one of Woodcraft’s employees because such benefits are not the result of tort liabilities. Moreover, accepting Woodcraft’s argument, the employer’s liability exclusion would essentially be read out of the liability policy, and Charter Oak would be liable for all workers’ compensation claims made by Woodcraft’s employees despite the exclusion of such claims in Section I(A)(2)(d) of the liability policy. Insurance contracts should be read as a whole in an effort to give meaning to all provisions, including the policy’s exclusions. The Doctors Co. v. Health Management Assoc., Inc., 943 So.2d 807, 809 (Fla. 2d DCA 2006); J.S.U.B., 979 So.2d at 877.12 Conclusion Charter Oak had no obligation to defend or indemnify Woodcraft in Caddell’s 2005 suit, and Charter Oak’s motion to dismiss is GRANTED. Accordingly, it hereby ORDERED: 1. Defendant Charter Oak’s motion to dismiss and motion for summary judgment (doc. 7) and amended motion for summary judgment (doc. 8) are GRANTED; 200 0); see also FCCI Ins. Co. v. Home, 890 So.2d 114 1, 1143 (Fla. 5th DC A 2004 ). 11 The laws of both Con necticut, where Cha rter Oak is located, and T ennes see, where Slone’s injury occurred also preclude tort claims when workers’ com pen sation laws app ly. Se e D ow ling v. S lotn ic, 244 Conn. 781, 799 (1998) (holding that employers covered by the workers’ compensation statute are imm une from tort suits abs ent a sho wing of inten t to harm ); Valencia v. Freeland and Lemm Const. Co., 108 S.W .2d 238, 242 (T enn. 2003) (sa m e). 12 Several courts h ave re cently construed virtually identica l “insured contracts” with the sam e tort provisions and concluded that they do not provide exceptio ns to liability exclusions when the insured party is seeking payments that are in reality indem nifications fo r tort da m age s. See, e.g., Certain London Market Ins. Companies v. Penn. Mutual Casualty Ins. Co., 106 F. App’x 88 4, 886 (5th Cir. 20 04); see also American Employers’ Ins. Co. v. DynMcDermott Petroleum Operations Co., No. 07-03524, 2009 W L 814124 (S.D. Tex. March 25, 2009) (finding that an identical insured contract prohibits recovery for workers’ compensation ben efits bec aus e su ch b ene fits are not base d on tort claim s); QBE Ins . Corp. v . Ind ustrial Co rrosion C ontrol, Inc., No. 1:07-cv-3 5, 2008 W L 18 684 31 (S .D. M iss. Apr. 24, 2008) (sam e); Forest Oil Corp. v . Ace Indemn ity Ins. Co., No. 0 4-04 35, 2004 W L 23 475 61 (E .D. La . Oc t. 15, 20 04 (s am e). Case No.: 3:08cr455/MCR/EMT Page 10 of 10 2. The Clerk is directed to enter final judgment in favor of Defendant Charter Oak, with costs taxed against Plaintiff Woodcraft Manufacturing, Inc. and CLOSE the case. DONE AND ORDERED on this 12th day of May, 2009. s/ M. Casey Rodgers M. CASEY RODGERS UNITED STATES DISTRICT JUDGE Case No.: 3:08cr455/MCR/EMT