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Great American Insurance Co. v. Tom's Marine & Salvage, LLC

United States District Court, E.D. Louisiana

June 13, 2018

GREAT AMERICAN INSURANCE CO.
v.
TOM'S MARINE & SALVAGE, LLC, ET AL.

         SECTION: "A" (4)

          ORDER AND REASONS

          JAY C. ZAINEY UNITED STATES DISTRICT JUDGE

         The following motion is before the Court: Motion for Summary Judgment (Rec. Doc. 13) filed by Plaintiff, Great American Insurance Co. Defendant Tom's Marine & Salvage, LLC opposes the motion. The motion, submitted on May 30, 2018, is before the Court on the briefs without oral argument.

         Great American Insurance filed this declaratory judgment action seeking a judgment declaring that it has no duty under its policy to defendant Tom's Marine in connection with a lawsuit styled Bismark Mairena-Rivera v. Tom's Marine & Salvage, LLC, Civil Action 17-5823, formerly pending before Judge Engelhardt and now pending before Judge Vance (hereinafter “the Underlying Lawsuit”). The Underlying Lawsuit involves a Fair Labor Standards Act (“FLSA”) collective action for unpaid overtime wages.

         Great American issued a commercial liability policy (hereinafter “the Policy”) to Tom's Marine. The policy includes Coverage A - Bodily Injury and Property Damage Liability; Coverage B - Personal and Advertising Injury Liability; Coverage C - Medical Payments. (Rec. Doc. 13-3 Exh. B-1 at 20). The issue before the Court is whether the Coverage A for property damage liability applies such that Great American would have a duty to defend and cover the FLSA claims asserted in the Underlying Lawsuit. Great American argues that the claims in the Underlying Lawsuit are for economic loss only, do not pertain to tangible property, and are not covered by the Policy.

         Under Louisiana law, a liability insurer's duty to defend and the scope of its coverage are separate and distinct issues. Mossy Motors, Inc. v. Cameras Am., 898 So.2d 602, 606 (La.App. 4th Cir. 2005) (citing Dennis v. Finish Line, Inc., 636 So.2d 944, 946 (La.App. 1st Cir. 1994)). The obligation of a liability insurer to defend suits against its insured is generally broader than its obligation to provide coverage for damages claims. Id. (citing Steptore v. Masco Constr. Co., 643 So.2d 1213, 1218 (La. 1994)). The issue of whether a liability insurer has the duty to defend a civil action against its insured is determined by application of the “eight-corners rule, ” under which an insurer must look to the “four corners” of the plaintiff's petition and the “four corners” of its policy to determine whether it owes that duty. Id. (citing Vaughn v. Franklin, 785 So.2d 79, 84 (La.App. 1st Cir. 2001)). Under this analysis, the factual allegations of the plaintiff's petition must be liberally interpreted to determine whether they set forth grounds which raise even the possibility of liability under the policy. Id. In other words, the test is not whether the allegations unambiguously assert coverage, but rather whether they do not unambiguously exclude coverage. Id. Similarly, even though a plaintiff's petition may allege numerous claims for which coverage is excluded under an insurer's policy, a duty to defend may nonetheless exist if there is at least a single allegation in the petition under which coverage is not unambiguously excluded. Id. (citing Emp. Ins. Rep., Inc. v. Emp. Reinsur. Corp., 653 So.2d 27, 29 (La.App. 1st Cir. 1995)).

         Thus, assuming all the allegations of the petition to be true, if there would be both coverage under the policy and liability to the plaintiff, the insurer must defend the lawsuit regardless of its outcome. Mossy Motors, 898 So.2d at 607 (citing Yount v. Maisano, 627 So.2d 148 (La. 1993); Matheny v. Ludwig, 742 So.2d 1029 (La.App. 2ndCir. 1999)). The duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Id.

         The crux of the Underlying Lawsuit is that Tom's Marine required Bismark Mairena-Rivera, and others similarly situated, to work more than forty hours a week without receiving overtime pay, all in violation of federal law. (Rec. Doc. 13-2 Exh. A).

         The Policy defines property damage as:

A. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
B. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

(Rec. Doc. 13-3 Exh. B-1 at 51).

         “Occurrence” means “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 50.

         Tom's Marine does not indicate which aspect of the property damage portion of the policy, Paragraphs A or B, might apply. Assuming for the sake of argument that Mairena-Rivera's unpaid wages constitute “tangible” property, Paragraph A requires physical injury, and Paragraph B requires an “occurrence, ” which is an ...


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