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Deviney Construction Co. Inc. v. ACE Utility Boring & Trenching, LLC

United States District Court, S.D. Mississippi, Northern Division

June 30, 2014

DEVINEY CONSTRUCTION COMPANY, INC., Plaintiff,
v.
ACE UTILITY BORING & TRENCHING, LLC, and PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY d/b/a PENN NATIONAL INSURANCE COMPANY Defendants, ACE UTILITY BORING & TRENCHING, LLC, and J.M. DRILLING, LLC, Plaintiffs,
v.
DEVINEY CONSTRUCTION, COMPANY, INC. Defendant,

ORDER

DANIEL P. JORDAN, III, District Judge.

These consolidated cases are before the Court on a number of dispositive motions. In the lead, declaratory-judgment case, Defendants Pennsylvania National Mutual Casualty Insurance Company ("Penn National") [67] and Ace Utility Boring & Trenching, LLC ("Ace") [69] have moved for summary judgment, and Plaintiff Deviney Construction Company, Inc. ("Deviney") has moved for partial summary judgment [71].[1] For the reasons that follow, Deviney's motion is granted as to its claims against Penn National but denied without prejudice as to the claims against Ace; Penn National's motion is denied, though the denial is without prejudice as to the duty to indemnify; and Ace's motion is granted as to the duty to indemnify but otherwise denied without prejudice.

I. Facts and Procedural History

In 2007, AT&T contracted with Deviney to install a telephone cable along Holland Avenue in Philadelphia, Mississippi. Deviney engaged Ace to make pavement borings where the telephone cable would be installed, and on September 14, 2007, Ace and Deviney entered into an Independent Contractor Agreement ("ICA") to that end. At all relevant times, Ace was insured under a commercial general-liability policy issued by Penn National.

On the morning of September 15, 2007, while making pavement borings, an Ace employee allegedly bored into a natural-gas pipeline owned by Centerpoint Energy. Before the gas line was repaired, a building on Holland Avenue exploded as a result of the gas leak, causing some minor injuries and a significant amount of property damage.

Following the explosion, a number of lawsuits were filed against Ace, Deviney, and/or Centerpoint. Deviney selected a lawyer from its general-liability carrier's list of approved lawyers to defend it in the underlying lawsuits. Believing it was entitled under the ICA to a defense and indemnification from Ace and its insurer, Deviney, through its retained counsel, made demand upon Penn National and Ace for defense and indemnification. Penn National responded and agreed to accept the tender of defense under a reservation of rights, provided Deviney "waive any conflict in order to allow [Ace's lawyer in the underlying lawsuits] to defend Deviney... as well." Pl.'s Mot. [71] Ex. 8.

Aggrieved by Ace's and Penn National's responses to its demands, Deviney filed this lawsuit on July 28, 2011. The Second Amended Complaint [24] asserts breach-of-contract claims against Ace and Penn and seeks a declaratory judgment "that Penn and/or Ace had and has a duty to defend and indemnify Deviney in connection with the lawsuits identified herein." 2d Am. Compl. [24] ΒΆ 19. At the close of discovery, Defendants moved for summary judgment and Plaintiff moved for partial summary judgment. The Court has personal and subject-matter jurisdiction and is prepared to rule.

II. Standard

Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure when evidence reveals no genuine dispute regarding any material fact and that the moving party is entitled to judgment as a matter of law. The rule "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 Corp. v. Catrett, 477 U.S. 317, 322 (1986).

The party moving for summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323. The nonmoving party must then "go beyond the pleadings" and "designate specific facts showing that there is a genuine issue for trial.'" Id. at 324 (citation omitted). Conclusory allegations, speculation, unsubstantiated assertions, and legalistic arguments are not an adequate substitute for specific facts showing a genuine issue for trial. TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993).

III. Analysis

Defendants have moved for summary judgment on all of Deviney's claims against them, and Deviney has moved for partial summary judgment on its claim that Defendants have a duty to defend it in the underlying lawsuits. Deviney asserts that (1) certain provisions in the ICA between it and Ace obligated Ace to defend and indemnify Deviney and (2) coverage for Deviney exists under certain provisions of Ace's Penn National policy. In general terms, the questions before the Court are whether Deviney qualifies as an Automatic Additional Insured under the Penn National policy and/or whether Ace agreed to assume Deviney's liability in an "insured contract" as defined by the policy. Deviney also asserts that Ace separately breached the ICA. Defendants assert that Deviney waived any entitlement to defense or indemnity. The Court will address the issues in turn.

A. Automatic Additional Insured

The Penn National policy issued to Ace contains an Automatic Additional Insured endorsement, which expands the policy's definition of "insured" to include

Any person(s) or organization(s) (referred to below as additional insured) with whom you are required in a written contract or agreement to name as an additional insured, but only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or in part, by:
(1) Your acts or omissions; or
(2) The acts or omissions of those acting on your behalf;
in the performance of your ongoing operations for the additional insured(s) at the location or project described in the contract or agreement.

Penn National Mot. [67] Ex. B, at 23. Deviney asserts that it qualifies under this definition because Ace agreed to name Deviney as an additional insured on the Penn National policy in the ICA.

Paragraph 22 of the ICA pertains to insurance and requires Ace to maintain several types of coverage:

Independent Contractor shall provide and maintain, at its own expense, the following minimum types and amounts of insurance, with insuring companies and in such ...

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