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Hanover Insurance Co. v. Superior Labor Services, Inc.

United States District Court, E.D. Louisiana

February 21, 2018

HANOVER INSURANCE COMPANY, Plaintiff
v.
SUPERIOR LABOR SERVICES, INC., ET AL., Defendants

         Applies to: 14-1933, 16-2490

         SECTION: “E” (2)

          ORDER AND REASONS

          SUSIE MORGAN UNITED STATES DISTRICT JUDGE

         Before the Court is Lexington Insurance Company's (“Lexington”) motion for summary judgment against Allied Shipyard, Inc. (“Allied”).[1] Allied has filed an opposition, [2] and Lexington has filed a reply.[3] For the reasons that follow, the Court DENIES the motion.

         BACKGROUND

         On January 23, 2017, Lexington filed two motions for partial summary judgment regarding its duty to defend Allied against the claims made in the underlying St. Pierre and Adams lawsuits as an additional insured under the 2000-2001 Lexington Policy and the 2008-2009 Lexington Policy, both issued to Masse Contracting, Inc. (“Masse”).[4] On July 12, 2017, the Court granted the motions.[5] With respect to the 2000-2001 Lexington Policy, the Court found Lexington does not owe Allied any defense or indemnity in the underlying state lawsuits.[6] With respect to the 2008-2009 Lexington Policy, the Court found that, although Allied qualified as an additional insured under that policy, [7]Lexington, as Allied's excess insurer, owes no duty to defend Allied until Allied has exhausted its available primary insurance.[8]

         On July 12, 2017, the Court also granted State National Insurance Company's (“State National”) motion for summary judgment on the issue of its duty to defend Allied as an additional insured under State National's policies issued to Masse (the “Masse Policies”).[9] In its motion for summary judgment, State National argued Allied could not sustain its burden of proof in establishing additional insured status, pointing to the Masse Policies' “Additional Insured Endorsement, ” which requires a claimant to show, among other things, that Masse was obligated to include the claimant as an additional insured for the work performed by Masse pursuant to: (1) a “written contract”; (2) in effect during the policy period; and (3) executed prior to the “occurrence” of the “bodily injury” or “property damage.”[10] State National argued the 1995 Master Work Contract between Masse and Allied, under which Allied claimed it should be afforded additional insured status, does not qualify as a “written contract” requiring Masse to name Allied as an additional insured because the 1995 Master Work Contract does not constitute a complete and enforceable agreement for Masse to perform work for Allied.[11]

         In opposition to State National's motion for summary judgment, Allied argued the 1995 Master Work Contract was sufficient evidence on its own to demonstrate its status as an additional insured under the Masse Policies, contending that, because “Allied did offer Masse work at the shipyard and Masse accepted, . . . the obligation in the Master Work Contract was fulfilled, becoming ‘valid and enforceable.'”[12] Allied did not attach any evidence of purchase orders or other agreements, written or oral, to establish that work was actually completed by Masse during State National's policy periods.

         Looking to the Masse Policies' terms, the Court held the 1995 Master Work Contract between Masse and Allied, do[es] not provide for any specific work or services to be performed, but refer[s] in general terms of a need by one party for labor, services or materials, and the desire on the part of the other to furnish the same. Specific services are later called for under the master services agreement by work orders, purchase orders or simply invoices.[13]

         The Court concluded the 1995 Master Work Contract-standing alone-is not a binding contract between Masse and Allied.[14] Rather, the Master Work Contract only “sets forth [Masse and Allied's] agreement to abide by certain terms should they enter into contractual relations in the future.”[15]

         Because Allied failed to present summary-judgment evidence of purchase orders or other agreements to create a genuine factual dispute with respect to whether the “[a]s [r]equired by written contract” requirement in the Additional Insured Endorsement section of the Masse Policies was satisfied, the Court granted summary judgment in favor of State National.[16] Notably, Lexington did not raise this issue in its first motion for summary judgment with respect to the 2008-2009 Lexington Policy.[17]

         On August 9, 2017, Allied sought reconsideration of the Court's order granting State National's motions for summary judgment.[18] In an effort to convince the Court to reconsider its granting of State National's motions, Allied attached checks from Allied to Masse and Superior, which Allied contended commemorate payment for work performed under the 1995, 2006, and 2007 Master Work Contracts.[19] The Court denied the motion to reconsider, however, noting that the checks were not attached to Allied's opposition to State National's motions for summary judgment, and Allied did not even attempt to argue that the checks were “newly discovered” and previously unavailable, such that the Court could consider them on the motion for reconsideration.[20] The Court denied Allied's motion for reconsideration, but left open the issue of whether evidence of an oral work order could transform a “blanket” Master Service Agreement into a complete and enforceable contract, thereby satisfying the Masse Policies' “written contract” requirement under the “Additional Insured Endorsement.”[21]

         On July 21, 2017, the Court ordered that:

any party may file a motion for summary judgment with respect to Allied's status as an additional insured, but only if the insurance policy at issue contains an additional insured endorsement requiring the existence of a complete, enforceable written contract between the named insured and the additional insured and there exists no evidence of purchase orders or other agreements necessary to make an enforceable contract.[22]

         Pursuant to the Court's July 21, 2017 order, Lexington now seeks summary judgment on the issue of whether Allied can sustain its burden of proof in establishing insured status under the 2008-2009 Lexington Policy.

         LAW AND ANALYSIS

         The 2008-2009 Lexington Policy, just as the Masse Policies at issue in State National's motion for summary judgment, requires additional insureds be established “by written contract.”[23] Lexington now argues Allied cannot sustain its burden of proof in establishing additional insured status, pointing to the 2008-2009 Lexington Policy's “Additional Insured Endorsement, ” which requires a claimant to show, among other things, that Masse was obligated to include the claimant as an additional insured for the work performed by Masse pursuant to a “written contract.”[24]

         Allied points to the 1995 and 2007 Master Work Contracts between Masse and Allied as proof of its insured status. The Master Work Contracts provide Allied and Masse “desire to make an agreement whereby [Masse] would furnish labor, services, equipment, and/or materials . . . to [Allied's] customers.”[25] The Master Work Contracts further provide “If at any time during the term hereof, [Allied] desires work to be performed for a particular job or project, [Allied] shall advise [Masse] of the particulars of the work and the location thereof . . . Nothing herein shall require that [Allied] use [Masse's] services, and [Masse] shall not be required to work for [Allied] hereunder.”[26]

         As the Court previously explained, the 1995 and 2007 Master Work Contracts- standing alone-are not binding contracts between Masse and Allied.[27] Rather, the Master Work Contracts at issue in this case are “blanket” agreements, as each contemplates future work orders.[28] As a result, to demonstrate the 1995 and 2007 Master Work Contracts constitute complete and enforceable written agreements, Allied must present evidence of purchase orders or other agreements to establish that work was actually completed during the 2008-2009 Lexington Policy period.[29]

         Unlike its opposition to State National's motion for summary judgment, Allied now offers: (1) checks issued by Allied to Masse for work done during the 2008-2009 policy period;[30] (2) testimony from Gavin Callias, who states “[t]he work performed and services provided to Allied by Masse were pursuant to the Master Work Contracts entered into between Allied and Masse on June 30, 1995 . . . and on August 10, 2007”;[31] and (3) deposition testimony from Antony Boudreaux, who, in response to the question of whether “the first document that is generated in terms of the work Masse[] performs under the Master Service Agreement would be the invoice once the work is performed, ” answered “That's correct.”[32]

         Having provided the evidence described above, Allied stands in a different posture in this case than it did against State National. Thus, the Court now addresses the issue left open in its previous ruling on Allied's motion for reconsideration: whether the work orders or other agreements necessary to transform the 1995 and 2007 Master Service Agreements into complete, binding “written” agreements may be made orally.[33]

         As this action requires the interpretation of insurance policies issued in Louisiana, Louisiana's substantive law controls.[34] Under Louisiana law, an insurance policy “is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code.”[35] The Louisiana Civil Code states “Interpretation of a contract is the determination of the common intent of the parties, ”[36] and an insurance contract “shall be construed according to the entirety of its terms and conditions.”[37]

         Whether contract language is clear or ambiguous is a question of law.[38] The words of a contract “are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning.”[39] When a contract's language is “clear and explicit and lead[s] to no absurd consequences, no further interpretation may be made in search of the parties' intent.”[40] If the wording of the policy is unambiguous, then the contract “must be enforced as written.”[41] A contract is ambiguous, however, “when it is uncertain as to the parties' intentions and susceptible to more than one reasonable meaning under the circumstances and after applying established rules of construction.”[42]

         Looking to the terms of the 1995 and 2007 Master Service Agreements, whether oral work orders are sufficient to create a valid ...


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