United States District Court, E.D. Virginia, Alexandria Division
KATHRYN T. HOLLIS, et al., Plaintiffs,
LEXINGTON INSURANCE COMPANY, et al., Defendants.
JAMES C. CACHERIS JUDGE
This matter is before the Court for declaratory judgment regarding an insurer’s obligations under a “per occurrence” commercial general liability insurance policy. Plaintiffs suffered injuries in a fireworks accident and hope the insurer will satisfy the judgment they might receive in state court for those injuries. To that end, Plaintiffs motioned for summary judgment seeking a declaration that their injuries arise from multiple “occurrences” within the meaning of the insurance policy. The insurer cross-motioned for summary judgment for a declaration that the Plaintiffs’ injuries arise from a single occurrence, for which it has exhausted its indemnification obligation. An excess insurer also cross-motioned for summary judgment seeking a declaration that its indemnification obligation is limited to $4 million, regardless of the number of occurrences. For the reasons described below, the Court holds that the Plaintiffs’ alleged injuries arise from a single occurrence. Therefore, the Court will deny Plaintiffs’ motion for summary judgment, will grant the insurer’s cross-motion for summary judgment, and will deny the excess insurer’s cross-motion for summary judgment.
The injuries alleged in this case occurred at a fireworks show in Vienna, Virginia on the Fourth of July in 2007 (“fireworks incident” or “the accident”). (SOF ¶ 1.) During the show, a twenty-five shot “barrage cake” firework exploded unexpectedly, causing a three-inch mortal shell to launch directly into the crowd. (SOF ¶¶ 3, 5.) The powerful shell detonated inches from Plaintiff Kathryn Hollis and her two sons Alexander and M.H. (SOF ¶ 5.) The explosion caused Kathryn and M.H. to suffer severe burns and brain injuries and burned Alexander. (SOF ¶¶ 6-8.)
After the accident, Kathryn filed a lawsuit in the Fairfax County Circuit Court against the various parties involved in the fireworks show, including the company hired to perform the show and its president and employee, several Chinese fireworks manufacturers, Vienna municipal employees, and firefighters. (Kathryn Compl. [Dkt. 1-3].) Prior to trial, Kathryn settled her claim against the employee of the company hired to perform the fireworks show. (Kathryn Judg. [Dkt. 1-4].) A jury ultimately awarded Kathryn a verdict of $4, 750, 000 after finding that the fireworks company, Schaefer Pyrotechnics, Inc. (“Schaefer”), and its president were negligent. (Id. ¶ 5.)
Kathryn’s older son, Alexander, filed a lawsuit for his injuries and received a jury verdict of $45, 000 against Schaefer and its president for their negligence. (SOF ¶¶ 19-20; Alexander Compl. [Dkt. 1-5]; Alexander Judg. [Dkt. 1-6].)
In December 2013, Kathryn and her husband filed a substantively identical lawsuit (“Underlying Complaint”) on behalf of their infant son, M.H (collectively “Plaintiffs”).(SOF ¶ 21; Underlying Compl. [Dkt. 1-7].) Like the prior two lawsuits, the Underlying Complaint alleges that Schaefer, its president, and its employee Jacqueline Gass (the “Insured”) were negligent or grossly negligent during the several months between the time they sought to acquire fireworks from China and the time the shell exploded in the Vienna crowd. Specifically, the Underlying Complaint alleges that the Insured breached their duties to: properly hire, supervise, and train employees handling fireworks; follow all appropriate laws and regulations pertaining to the purchase, care, transportation, display, and ignition of fireworks; establish appropriate safety “set backs”; warn spectators of known dangers; purchase only the highest quality fireworks; ensure the fireworks were safe; take appropriate measures to protect spectators from fireworks failures; properly inspect fireworks; properly test fireworks; ignite fireworks only under safe weather conditions; follow appropriate safety precautions; use ordinary care; heed warnings from fire professionals; and adjust for complications at prior shows at the Vienna location and other shows. (Underlying Compl. ¶¶ 114, 120-128.) The Underlying Complaint also alleges that Schaefer and its president were liable for strict liability, public nuisance, breach of express/implied warranty, and negligent design. The state court stayed Plaintiffs’ tort lawsuit pending this Court’s determination of insurance coverage. (SOF ¶ 23.)
At the time of the fireworks incident, Defendant Lexington Insurance Company (“Lexington”) insured Schaefer through a per-occurrence commercial general liability policy (“Primary Policy”). (SOF ¶ 28; Primary Policy [Dkt. 1-1].) The Primary Policy covers bodily injury and property damage caused by an “occurrence.” (SOF ¶ 33; Primary Policy at 5.) An occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (SOF ¶ 34; Primary Policy at 22.) The policy covers up to $1 million per occurrence and $2 million in aggregate. (SOF ¶¶ 28, 35.) Lexington’s duty to defend and to indemnify terminate when it has “used up the applicable limit of insurance in the payment” of judgments or settlements for bodily injury claims. (Primary Policy at 5.) At the time of this lawsuit, Lexington has paid $1 million under the Primary Policy to satisfy judgments for bodily injuries arising from the fireworks incident. (SOF ¶ 37; Compl. ¶¶ 15, 16.)
Defendant Axis Surplus Insurance Company (“Axis”) also insured Schaefer at the time of the firework incident. (SOF ¶ 28; Axis Policy [Dkt. 1-2].) Axis issued an “Excess Policy” covering claims that exceed the coverage provided by Lexington’s Primary Policy. (Axis Mem. [Dkt. 39] ¶ 11; Axis Policy at 23.) The Excess Policy is limited to $4 million per occurrence and in the aggregate. (Axis Mem. ¶ 10; Axis Policy at 1, 23.) Axis has paid under this policy to satisfy the judgments Kathryn and Alexander received, but it is not known exactly how much Axis has paid. (Compl. ¶¶ 15, 16.)
Plaintiffs filed suit seeking declaratory judgment as to whether the Underlying Complaint alleges a single occurrence or multiple occurrences under the Primary Policy. (Compl. at 11.) Plaintiff motioned for summary judgment, arguing that the Underlying Complaint alleges nineteen occurrences. Lexington cross-motioned for summary judgment arguing that the Underlying Complaint alleges only a single occurrence. Axis cross-motioned for summary judgment seeking a declaration that its indemnification obligation is limited to $4 million, regardless of the number of occurrences alleged. The parties briefed these motions and orally argued at a hearing on April 7, 2016. Accordingly, these motions are ripe for disposition.
II. Standard of Review
Summary judgment is appropriate only if the record shows that “there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A genuine issue of material fact exists if the evidence, when viewed “in the light most favorable to the non-moving party, ” Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir. 1990), “is such that a reasonable jury could return a verdict for the nonmoving party, ” Anderson, 477 U.S. at 248.
On cross motions for summary judgment, the court must review each motion separately on its own merits. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003). “When considering each individual motion, the court must take care to resolve all factual disputes and any competing, rational inferences in the light most favorable to the party opposing that motion.” Id. (internal quotations and citation omitted).
Summary judgment is especially appropriate in this case because the construction of insurance contracts is a legal question well suited for resolution by the courts. Clark v. Metro. Life Ins. Co., 369 F.Supp.2d 770, 774 (E.D. Va. 2005); see also Donegal Mut. Ins. Co. v. Baumhammers, 595 Pa. 147, 155, 938 A.2d 286, 290 (2007) (noting ...