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Liberty Mutual Fire Insurance Co. v. Bizzack Construction, LLC

United States District Court, W.D. Virginia, Abingdon Division

April 27, 2017

LIBERTY MUTUAL FIRE INSURANCE COMPANY, ET AL., Plaintiffs,
v.
BIZZACK CONSTRUCTION, LLC, ET AL., Defendants.

          By: James P. Jones United States District Judge E. Ford Stephens, Christian & Barton LLP, Richmond, Virginia, and Douglas W. Langdon and J. Kendrick Wells, IV, Frost Brown Todd LLC, Louisville, Kentucky, for Plaintiffs and Counter-Defendants

          Guy M. Harbert, III, and Daniel R. Sullivan, Gentry, Locke, Rakes & Moore LLP, Roanoke, Virginia, for Defendants and Counterclaimants Bizzack Construction, LLC, Bizzack, Inc., and Brett Cool.

          OPINION AND ORDER

          James P. Jones United States District Judge

         In this diversity action seeking interpretation of the terms of commercial liability insurance policies, Liberty Mutual Fire Insurance Company and Liberty Insurance Corporation (collectively, “Liberty Mutual”) seek a declaration that they have neither a duty to defend nor a duty to indemnify Bizzack Construction, LLC, Bizzack, Inc., and Brett Cool (collectively, “Bizzack”) in lawsuits seeking damages resulting from certain highway construction. Bizzack, in turn, seeks a declaration that Liberty Mutual does have a duty to defend and indemnify Bizzack in the underlying actions.

         The parties have filed cross-motions for summary judgment. I conclude, applying Kentucky law, that Bizzack's Motion for Partial Summary Judgment solely related to the duty to defend must be granted and that Liberty Mutual's Motion for Summary Judgment must be denied.

         I. Factual Summary and Procedural History.

         The basic facts, taken from Liberty Mutual's Complaint, Bizzack's Counterclaim, and the summary judgment record, are as follows.

         Sometime prior to November 2012, the Virginia Department of Transportation (“VDOT”) contracted with Bizzack to perform work in connection with a road-widening project on U.S. Route 460 in Grundy, Virginia (the “460 Bypass Project”). In November 2012, VDOT began notifying coal owners that it had been “necessary to remove certain coal” from their land “[d]uring the construction of Route 460.” Black Letter 14, Ex. C, ECF No. 1-4. Certain of these coal owners thereafter filed four separate civil actions against Bizzack in the Circuit Court of Buchanan County, Virginia, seeking compensation for lost coal. Bizzack removed all four actions to this court. I remanded three of the actions seeking damages to the state court, Town of Grundy Indus. Dev. Auth. v. Bizzack Constr., LLC, Nos. 1:14CV00031, 1:14CV00032, 1:14CV00034, 2014 WL 4104792 (W.D. Va. Aug. 19, 2014), where they were voluntarily nonsuited pursuant to Va. Code Ann. § 8.01-380.[1]

         In March and April 2015, the plaintiffs in these nonsuited actions filed three new, but essentially identical civil actions against Bizzack in the state court, where they remain pending.[2] The present action arises from these underlying Coal Removal Suits. The underlying plaintiffs allege that Bizzack illegally removed and sold their coal and “damaged the remaining coal in place on the [property].” Underlying Compl. 5-6, Ex. C, ECF No. 1-4.[3] They raise state law claims for trespass, conversion, assumpsit, gross negligence, conspiracy, and fraud. Id. at 6-13; see also Compl. ¶ 50, ECF No. 1.

         At the time the underlying Coal Removal Suits were filed, Bizzack was insured by Liberty Mutual under commercial liability policies (the “CGL Policies”) and commercial liability umbrella policies (the “Umbrella Policies”) (collectively, the “Policies”). See Compl. ¶¶ 15-40, ECF No. 1; Pls.' Mem. Supp. Summ. J. 2-3, ECF No. 34; id., Exs. 1-4, ECF Nos. 34-1 to 34-4.[4] Under the Policies, Liberty Mutual has a duty to defend and indemnify Bizzack in any suit seeking damages for “property damage” caused by an “occurrence, ” subject to certain exclusions. Compl. ¶¶ 18, 24, ECF No. 1.

         In this action, the plaintiff Liberty Mutual seeks a declaration that under the Policies it has neither a duty to defend nor a duty to indemnify Bizzack in the underlying Coal Removal Suits. Bizzack has filed a Counterclaim seeking a contrary declaration that Liberty Mutual does have both a duty to defend and a duty to indemnify Bizzack.[5]

         The parties have now filed cross-motions for summary judgment, which have been fully briefed and orally argued. Liberty Mutual seeks summary judgment on the grounds that there is no coverage under the Policies based upon the allegations of the Coal Removal Suits because (1) there was no defined “occurrence”; (2) there was no defined “property damage”; (3) the so-called “j(5)” exclusion from coverage applies; and (4) the “expected or intended injury” exclusion applies. Pls.' Mem. Supp. Summ. J. 15-28, ECF No. 34; Pls.' Mem. Opp. Defs.' Summ. J. 4-17, ECF No. 38. Bizzack seeks partial summary judgment solely as to the question of Liberty Mutual's duty to defend. Bizzack also argues that summary judgment is premature as to Liberty Mutual's duty to indemnify on the ground that this question cannot be resolved until certain operative facts have been determined through the resolution of the Coal Removal Suits. Defs.' Mem. Supp. Summ. J. 2, ECF No. 37.

         For the reasons stated below, I will deny Liberty Mutual's Motion for Summary Judgment and will grant Bizzack's Motion for Partial Summary Judgment as to Liberty Mutual's duty to defend.

         II. Applicable Law.

         Federal Rule of Civil Procedure 56(a) requires a court to grant a motion for summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In ruling on cross-motions for summary judgment, the court must, “[w]ith respect to each side's motion . . . view the facts and all justifiable inferences arising therefrom in the light most favorable to the nonmoving party.” Kolbe v. Hogan, 849 F.3d 114, 130 (4th Cir. 2017).[6] The party seeking summary judgment bears “the burden of showing the absence of a genuine issue as to any material fact.” Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970). However, the party opposing summary judgment must nevertheless “properly address [the movant]'s assertion of fact” in order to proceed to trial. Fed.R.Civ.P. 56(e).

         Because this is a diversity case, Virginia substantive law, including Virginia choice-of-law rules, applies. Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (“A federal court hearing a diversity claim must apply the choice-of-law rules of the state in which it sits.”). In Virginia, “the law of the place where an insurance contract is written and delivered controls issues as to its coverage.” Buchanan v. Doe, 431 S.E.2d 289, 291 (Va. 1993). It is undisputed that the Policies were delivered to Bizzack in Kentucky. The parties accordingly agree that Kentucky substantive law controls this case. Hr'g Tr. 3:2-4, Apr. 6, 2017, ECF No. 44.

         In Kentucky, “the construction and legal effect of an insurance contract is a matter of law for the court.” Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky. 2007). Where a policy is ambiguous, it must be “liberally construed so as to resolve all doubts in favor of the insured.” Id. (citing Wolford v. Wolford, 662 S.W.2d 835, 838 (Ky. 1984)). By contrast, “[w]here not ambiguous, the ordinary meaning of the words . . . is to be followed.” Id. (quoting James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279 (Ky. 1991)). In addition, because the purpose of commercial general liability insurance is to “provide broad comprehensive insurance . . . all risks not expressly excluded . . . are covered, including those not contemplated by either party.” Id. “The insurer has a duty to defend if there is any allegation which potentially, possibly or might come within the coverage of the policy.” Brown Found., 814 S.W.2d at 279. “[O]nly an unequivocal, conspicuous and plain and clear manifestation of the company's intent to exclude coverage will defeat this expectation.” Bituminous Cas. Corp., 240 S.W.3d at 638.

         III. Discussion.

         The parties raise four issues regarding Bizzack's coverage under the Policies, all of which are potentially ...


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