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Atain Specialty Insurance Co. v. Siegen 7 Developments, L.L.C.

United States District Court, M.D. Louisiana

September 6, 2019

ATAIN SPECIALTY INSURANCE COMPANY
v.
SIEGEN 7 DEVELOPMENTS, L.L.C. and ANDREA WARREN

          RULING AND ORDER

          BRIAN A. JACKSON DISTRICT JUDGE UNITED STATES DISTRICT COURT.

         Before the Court is the Motion for Summary Judgment, (Doc. 17), filed by Plaintiff, Atain Specialty Insurance Company ("Plaintiff or "Atain"). Defendant, Siegen 7 Developments, L.L.C. ("Defendant" or "Siegen 7"), filed a Memorandum in Opposition. (Doc. 27). Defendant, Andrea Warren ("Defendant" or "Warren"), also filed a Memorandum in Opposition. (Doc. 35). Plaintiff filed a Memorandum in Reply. (Doc. 30). Defendant and Counter-Claimant, Andrea Warren, also filed a Motion for Summary Judgment. (Doc. 22). Plaintiff filed a Memorandum in Opposition. (Doc. 36). For the reasons stated herein, Plaintiffs Motion for Summary Judgment, (Doc. 17), is GRANTED IN PART and DENIED IN PART, and Defendant and Counter-Claimant Warren's Motion for Summary Judgment, (Doc. 22), is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         Atain's claims arise out of an arbitration award issued in favor of Warren, homeowner, adverse to Siegen 7, home builder. Atain issued policies of insurance to Siegen 7, the terms and conditions of which may or may not provide coverage to Siegen 7 for the amounts owed to Warren. Plaintiff seeks a judicial declaration that: (1) it has no obligation to indemnify Siegen 7 for the amounts awarded to Warren; and (2) it is not liable to Warren for damages awarded to her arising out of her claims against Siegen 7. (Doc. 6).

         The facts relevant to the motions before the Court are undisputed. Siegen 7 constructed a home in East Baton Rouge Parish pursuant to a contract with Warren. (Doc. 6 at ¶ 7). Warren contends that all work on the home was performed through subcontractors retained by Siegen 7 and that the plans and specifications were provided to each of the subcontractors. (Doc. 35 at pp. 1-2 (citing Doc. 23, Affidavit of Thomas A. Guerin, at ¶ 13)). The residence was "substantially completed" by July or early-August, 2016, at which time Warren took occupancy of the residence. (Doc. 6 at ¶ 9).

         In August 2016, the residence sustained damages due to flooding. (Doc. 6 at ¶ 10). Due to these damages, Warren filed a Demand for Arbitration against Siegen 7, alleging that "[Siegen 7] failed to follow architect plans, specifications, and drawings regarding initial site work for drainage, and confirm elevation of fill at location of slab prior to pouring of slab". (Doc. 6 at ¶ 15; Doc. 17-7 at p. 2). Siegen 7 notified its insurer, Atain, of the allegations, and Atain provided a defense to Siegen 7 subject to a reservation of rights to deny policy coverage with respect to the arbitration award. (Doc. 17-8). Warren claimed that Siegen 7 improperly constructed the residence, (Doc. 6 at ¶ 11), that it failed to place the proper amount of grade fill material on the property, that it failed to achieve the minimum finish slab elevation required by the contract, (id), that the flood waters in August 2016 would not have damaged the residence or Warren's personal property if the house been properly constructed, (Doc. 6 at ¶ 12), that Siegen 7's preparation of the lot for drainage and slope was improperly performed and defective, (Doc. 6 at ¶ 13), that Siegen failed to provide position storm water drainage and prepare a drainage plan for the house and lot, that it failed to otherwise comply with the International Building Code ("IBC") regarding drainage and slope as required by the contract, (id.), and that as a result of this deficient work the backyard on the property was swampy and wet, thereby inhibiting its use and enjoyment, (Doc. 6 at ¶ 14).

         Warren's claims against Siegen 7 were litigated in arbitration on June 26-27, 2018, (Doc. 6 at ¶ 16). The arbitration award was issued July 25, 2018, (id.), and was confirmed by the 19th Judicial District Court for the Parish of East Baton Rouge on December 10, 2018. (Doc. 17-10). The arbitration award was based on the finding that Siegen 7 failed to achieve the minimum finish slab elevation. Warren was awarded a total of $128, 061.54 in damages to the residence and personal property therein. The award also reflects the finding that Siegen 7 failed to provide position storm water drainage and failed to prepare a drainage plan for the house and lot. Warren was also awarded a total of $17, 975.00 for backyard improvements, $42, 983.53 for attorneys' fees, and $2, 675.00 for the costs of arbitration. (Doc. 6 at ¶¶ 17-19; Doc. 17-9), Siegen 7 argues that the award does not specify who or what entity performed the work, with the exception of the issue of drainage, which the arbitration award found was a responsibility shared by Warren and Siegen 7, and it did not specify if Siegen7's fault was due to its subcontractors or not. (Doc. 27 at p. 2).

         Atain argues on summary judgment that the policies it issued to Siegen 7 are commercial general liability policies that are not intended to guarantee the quality of Siegen 7's work. (Doc. 19-1 at p. 4). Under the terms, definitions, and exclusions of the Atain policies, Atain argues that the policies do not provide coverage for the majority of the damages awarded to Warren because the damages were not caused by an "occurrence" and/or are excluded from coverage as "property damage" to "your product". Atain also argues that the backyard improvements are excluded from coverage pursuant to the "Damage to Impaired Property" exclusion. Finally, Atain argues that the attorney fees award is excluded from coverage because they are punitive or exemplary damages. (Doc. 19-1 at p. 6).

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 56, "The [C]ourt shall grant 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 determining whether the movant is entitled to summary judgment, the Court views the facts in the light most favorable to the non-movant and draws all reasonable inferences in the non-movant's favor. Coleman v. Houston Independent School Dist., 113 F.3d 528, 533 (5th Cir. 1997).

         After a proper motion for summary judgment is made, the non-movant must set forth specific facts showing there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). At this stage, the Court does not evaluate the credibility of witnesses, weigh the evidence, or resolve factual disputes. Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991), cert, denied, 502 U.S. 1059 (1992). However, if the evidence in the record is such that a reasonable jury, drawing all inferences in favor of the non-moving party, could arrive at a verdict in that party's favor, the motion for summary judgment must be denied. Int'l Shortstop, Inc., 939 F.2d at 1263.

         On the other hand, the non-movant's burden is not satisfied by some metaphysical doubt as to the material facts, or by conclusory allegations, unsubstantiated assertions, or a mere scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). Summary judgment is appropriate if the non-movant "fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). In other words, summary judgment will be appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law." Sherman v. Hallbauer, 455 F.2d 1236, 1241 (5th Cir. 1972).

         III. DISCUSSION

         Louisiana law provides that "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 Civil Code." Williams v. Employers Mut. Cos. Co., No. CIV. A. 13-499, 2014 WL 2197067, at *2 (M.D. La. May 27, 2014). The Court's role in interpreting contracts is to determine the common intent of the parties. Starr Surplus Lines Insurance Company v. Banner Property Management Co., No. CIV.A. 18-5635, 2018 WL 6448840, at *5 (E.D. La. Dec. 10, 2018)(citing La. Civ. Code art. 2045). "In doing so, Civil Code article 2047 requires that words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning." Id. (citing Henry v. South Louisiana Sugars Cooperative, No. 2006-2764 (La. 5/22/07), 957 So.2d 1275, 1277 (citing Cadwallader v. Allstate Ins. Co., No. 2002-1637 (La. 6/27/03), 848 So.2d 577, 580)). An insurance policy "constitutes the law between the insured and the insurer, and the agreement governs the nature of their relationship." Peterson v. Schimek, 98-1712 (La. 3/2/99), 729 So.2d 1024, 1028. "Absent a conflict with statutory provisions or public policy, insurers, like other individuals, are entitled to limit their liability and to impose and to enforce reasonable conditions upon the policy obligations they contractually assume." Louisiana Ins. Guar. Ass'n v. Interstate Fire and Cas. Co., 93-0911 (La. 1/14/94), 630 So.2d 759, 763. Furthermore, "when the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La. Civ. Code art. 2046 (1987). Ambiguous policy provisions are generally construed against the insurer and in favor of coverage. Cadwallader, 848 So.2d at 580.

         Atain argues that it issued Policy Nos. CIP260439 and CIP298173 (the "policies") to Siegen 7, (Doc. 19-1 at p. 3), and that the policies "do not provide coverage for the majority of the damages awarded to Warren." (Doc. 19-1 at p. 6).

         A. The Policy Language

         The commercial general liability ("CGL") policies at issue provide coverage for "sums that the insured becomes legally obligated to pay as damages" due to property damage to which the insurance applies. The insurance applies to property damage if it is caused by an "occurrence". (Doc. 17-6 at p. 78 and 183). The insurance excludes from coverage certain damages, as follows:

         This insurance does not apply to:

k. Damage to Your Product[1]
'Property damage'[2] to 'your product' arising out of it or any part of it.
l. Damage to Your Work[3]
'Property damage' to 'your work' arising out of it or any part of it and included in the 'pro ducts-completed operations hazard.'[4]
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a sub-contractor.
m. Damage to Impaired Property or Property not Physically Injured
'Property damage' to 'impaired property' or property that has not been physically ...

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