Depositors Insurance Company v. Urbina

1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — Depositors Insurance Company, No. CV-17-02972-PHX-GMS — 9 — Plaintiff, AMENDED ORDER — 10 — v. — 11 — Christina Ubrina, et al., — 12 — Defendants. — 13 — H & E Equipment Services, Inc., — 14 — Counter-Claimant, — 15 — v. — 16 — Depositors Insurance Company, — 17 — Counter-Defendant. — 18 — — 19 — Travelers Property Casualty Company of America, — 20 — 21 Intervenor. — 22 — 23 Pending before the Court are the Motion for Summary Judgment of Plaintiff 24 Depositors Insurance Company (Doc. 67) and the Cross Motion for Summary Judgment of 25 Defendant H&E Equipment Services, Inc. (Doc. 70). For the following reasons, 26 Depositors’ Motion is denied, and H&E’s Cross Motion is granted. 27 / / / 28 / / / 1 BACKGROUND 2 I. The Accident and the Underlying Lawsuit 3 The Lower Buckeye Jail needed washing and painting, so Riddle Painting was hired 4 to do the job. Riddle did not own all the equipment needed, so it leased a mobile lift from 5 H&E Equipment Services. Riddle’s project at the jail went tragically wrong. One day, as 6 two Riddle employees were driving the lift, it tipped over, killing both men. As required 7 by law, the beneficiaries of Riddle’s deceased employees received Arizona’s workers’ 8 compensation benefits. The workers’ compensation statute prevented the families from 9 suing Riddle, but the statute did not shield H&E. So the families sued H&E in Arizona 10 state court. 11 H&E requested that Riddle’s general liability insurer, Depositors Insurance 12 Company, defend H&E in the state-court action and pay any damages for which it might 13 eventually be held liable. Depositors agreed to cover half of the cost of H&E’s defense but 14 reserved its right to file a separate lawsuit to determine whether it owed H&E a duty to 15 defend or indemnify. Depositors then filed this lawsuit to resolve those questions. H&E 16 filed a counterclaim, asserting that Depositors owes it duties to defend, reimburse, and 17 indemnify, as well as a single claim of breach of contract. 18 II. The Lease Agreement and the Additional Insured Endorsements 19 The lease agreement between Riddle and H&E obligated Riddle to do certain things. 20 First, Riddle was required to maintain and inspect the lift in compliance with its owner’s 21 manual, and “inform[] all potential operators of the [lift] of said instructions, signs and 22 limitations.” (Doc. 70-1 at 27.) Next, Riddle had to purchase and maintain general liability 23 insurance, and provide coverage to H&E as an additional insured. (Id.) Lastly, Riddle was 24 required to indemnify and hold H&E harmless for all claims arising from the use, 25 operation, or condition of the lift, including all damages or injuries to property or people. 26 (Id.) 27 / / / 28 / / / 1 Riddle purchased a general liability insurance policy (“CGL policy”) from 2 Depositors. The CGL policy contained two provisions at issue in these motions: a Blanket 3 Additional Insured Endorsement and a Contractors Enhancement Plus Endorsement. Both 4 endorsements have multiple requirements and limitations on who counts as an additional 5 insured under the contract, but the first requirement for both is the same: in order to be 6 covered as an additional insured, the party seeking coverage must have signed a valid, 7 written agreement with Riddle that required Riddle to add the party as an additional 8 insured. (Doc. 70-1 at 212; 216.)1 9 The other limitations on coverage under the two endorsements differed. The 10 Blanket Endorsement limited coverage by only applying to “liability for ‘bodily injury’ or 11 ‘property damage’ caused, in whole or in part, by ‘your [i.e., Riddle’s] work’ for the 12 additional insured.” (Id. at 212.) As relevant here, the Contractor’s Endorsement limited 13 coverage by only applying “to the extent [Riddle is] held liable due to . . . [m]aintenance, 14 operation or use of equipment leased to [Riddle] by [H&E].” (Id. at 216.) 15 DISCUSSION 16 I. Legal Standards 17 A principal purpose of summary judgment is to identify factually unsupported 18 claims and dispose of them. Celotex Corp. v. Catrett, 477 U.S. 317 , 323–24 (1986). 19 Summary judgment is appropriate if the evidence, viewed in the light most favorable to the 20 nonmoving party, shows “that there is no genuine issue as to any material fact and that the 21 movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Only disputes 22 over facts that might affect the outcome of the suit will preclude the entry of summary 23 judgment, and the disputed evidence must be “such that a reasonable jury could return a 24 verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 25 (1986). 26 / / / — 27 — 28 1 For purposes of these motions only, Depositors does not contest the existence of a valid, written agreement between Riddle and H&E. 1 “[A] party seeking summary judgment always bears the initial responsibility of 2 informing the district court of the basis for its motion and identifying those portions of [the 3 record] which it believes demonstrate the absence of a genuine issue of material fact.” 4 Celotex, 477 U.S. at 323. If the movant meets that burden, the party opposing summary 5 judgment must then “cit[e] to particular parts of materials in the record” that establish a 6 genuine factual dispute or “show[] that the materials cited do not establish the absence . . . 7 of a genuine dispute.” Fed. R. Civ. Pro. 56(c)(1). If the opposition fails to do so, the court 8 is not required to comb through the record on its own to come up with reasons to deny a 9 motion for summary judgment. Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026 , 1029 10 (9th Cir. 2001) (citing Forsberg v. Pacific N.W. Bell Tel. Co., 840 F.2d 1409, 1418 (9th 11 Cir. 1988)). 12 II. Analysis 13 Based on the plain language of the Contractors Endorsement, Depositors owes H&E 14 both a duty to defend and a duty to indemnify in the event of an adverse judgment in the 15 underlying state court action. 16 A. The Duties to Defend and Indemnify 17 “An insurance policy imposes on the insurer the duty to defend the insured against 18 claims potentially covered by the policy and the duty to indemnify the insured for covered 19 claims.” Colorado Cas. Ins. Co. v. Safety Control Co., 230 Ariz. 560, 565 , 288 P.3d 764 , 20 769 (Ct. App. 2012) (citing United Servs. Auto. Ass’n v. Morris, 154 Ariz. 113, 117 , 741 21 P.2d 246, 250 (1987)). “The duty to defend is determined ‘at the earliest stages of the 22 litigation and generally exists regardless of whether the insured is ultimately found liable.’” 23 Nucor Corp. v. Employers Ins. Co. of Wausau, 975 F. Supp. 2d 1048, 1054 (D. Ariz. 2013), 24 judgment entered, No. CV-12-678-PHX-SMM, 2014 WL 11514490 (D. Ariz. July 25, 25 2014) (quoting Regal Homes, Inc. v. CNA Ins., 217 Ariz. 159, 164 , 171 P.3d 610, 612 (Ct. 26 App. 2007 )). The duty to defend depends not on a final determination of liability or fault 27 but upon whether “the complaint in the action brought against the insured upon its face 28 alleges facts which come within the coverage of the liability policy.” Kepner v. Western 1|| Fire Ins. Co., 109 Ariz. 329, 331 , 509 P.2d 222, 224 (1973) (en banc) (quoting 50 A.L.R. 2 || 2d 458, 464 (1956)). 3 B. The Contractors Endorsement 4 There are two primary issues regarding the Contractors Endorsement. The first 5 || issue is whether the heading of the section creates an additional limitation on coverage. || The second is whether Riddle has been “held liable” for the deaths of its employees even though it is immune from suit by their families. Examination of the endorsement and 8 || Arizona law shows that H&E qualifies as an additional insured under the endorsement. 9 Depositors first contends that the heading of the Contractors Endorsement requires || that any contract signed between Riddle and an additional insured state that Riddle’s 11 || insurance is primary and non-contributory. The text at issue appears below: — 12 — ADDITIONAL INSURED - WHEN REQUIRED 13 IN AN AGREEMENT OR CONTRACT WITH YOU PRIMARY AND NON-CONTRIBUTORY 14 The following is added to SECTION Il - WHO IS AN INSURED — 15 — 4. Any person(s) or organization(s) with whom 16 you have agreed in a valid written contract or written agreement that such person of 17 organization be added as an additional insured on your policy during the policy 18 period shown in the Declarations. . Such person of arganization is an additional 19 insured only with respect to liability for “bodily injury", “property damage" or 20 “personal and advertising injury”. The person or organization added as an 21 insured by this endorsement is an insured only to the extent you are held liable due to: 22 a. Lessors of Leased Equipment 23 Maintenance, operation or use of equipment leased to you by such person 4 or organization, This insurance does not apply to any “occurrence” which takes 5 place after the equipment lease expires. However, their status as additional 26 insured under this policy ends when their lease, contract or agreement with you 27 for such leased equipment expires. — 2 — 8 /// -51 (Doc. 70-1 at 216.) Depositors argues that H&E cannot qualify as an additional insured 2 because the lease agreement H&E executed with Riddle did not require that Riddle’s 3 insurance be primary and non-contributory. 4 Contracts are to be read and interpreted as if by a layperson untrained in law or 5 business. See Nucor Corp. v. Employers Ins. Co. of Wausau, 231 Ariz. 411, 414 , 296 P.3d 6 74, 77 (Ct. App. 2012). A layperson reading the heading would, at the very most, be unsure 7 of its meaning, and would not understand it as a clear additional limitation on coverage. 8 The heading’s meaning in the Contractors Endorsement is structurally ambiguous. 9 First, the drafter placed it in a different section of the endorsement than the express 10 coverage limitations. Had the parties intended to include a requirement that an agreement 11 requiring coverage as an additional insured specify that such coverage be “primary and 12 non-contributory,” they likely would have added it, along with the other limitations, in the 13 body of the endorsement. 14 Further, even if the location of the phrase does not render it ambiguous, its meaning 15 is not clear, particularly to a lay reader untrained in law or business. Depositors contends 16 that it is unambiguously a limitation on coverage, requiring that any party wishing to 17 establish additional insured status must show that it signed an agreement with Riddle that 18 specifically stated that Riddle’s coverage would be primary and non-contributory. But that 19 meaning of the heading is no more obvious that the meaning advanced by H&E, which 20 contends that the phrase simply indicates that coverage provided under the endorsement to 21 additional insureds will be primary and non-contributory. 22 An examination of the endorsement suggests that the heading should not be 23 interpreted as a substantive limitation on coverage. Common sense suggests that the 24 exclusion of “primary and non-contributory” from the sections of the endorsement that set 25 forth explicit limitations on coverage means that the phrase should not be interpreted as 26 such a limitation. Cf. Herman Chanen Const. Co. v. Guy Apple Masonry Contractors, Inc., — 27 — 9 Ariz. App. 445, 447 , 453 P.2d 541, 543 (Ariz. Ct. App. 1969) (“The doctrine of Expressio 28 unius est exclusion alterius is that the expression in a contract of one or more things in a 1 class, implies the exclusion of all things not expressed, although all would have been 2 impliedly included had none been specifically expressed.”). Here, the explicit limitations 3 on coverage are included in the substantive sections below the section heading. The 4 limitations are clearly expressed. The drafters of the contract did not include “primary and 5 non-contributory” in the sections setting forth limitations. 6 Finally, the text of the heading itself does not clearly establish that “primary and 7 non-contributory” is a limitation on coverage. This is because it does not employ the same 8 clear language as the express limitations. For example, the first express limitation of the 9 endorsement states a party otherwise qualifying as an additional insured “is an additional 10 insured only with respect to liability for ‘bodily injury.”’ (Doc. 70-1 at 216.) (emphasis 11 added). Another clause also incorporates clear limiting language when it states the added 12 insured “is an insured only to the extent you are held liable.” (Id.) (emphasis added). 13 By asking this Court to give the same limiting effect to heading as the two 14 limitations, when the heading does not contain limiting language like “only when” or “to 15 the extent that,” Depositors strains the plainest reading of the document. The heading of 16 the document does not impose an additional limitation on coverage. 17 The second issue is whether Riddle has been “held liable.” The endorsement covers 18 an additional insured “only to the extent [Riddle] is held liable due to . . . [m]aintenance, 19 operation or use of equipment leased to [Riddle] by [H&E].” (Id.) The parties do not 20 dispute that liability in this case, if any, would arise from the operation or use of the boom 21 lift rented to Riddle by H&E. It is also undisputed that Riddle made payments to the 22 decedents’ families as required by Arizona’s workers’ compensation statute. The sole issue 23 is whether Riddle has been “held liable” for the accident that killed two of its employees. 24 Riddle’s payments to the families of the decedents qualify as “liability” under the 25 ordinary meaning of the term. “Liable” is defined as “bound or obligated according to law 26 or equity.” Webster’s Third New Int’l Dictionary of the English Language Unabridged 27 1302 (1981); see also Columbia River Rentals, LLC v. Phillips, No. CV-08-395-HU, 2009 28 WL 632933 , at *7 (D. Or. Jan. 14, 2009) (noting that “the primary meaning of ‘liable’ is 1 to mean a legal obligation.”), report and recommendation adopted by Columbia River 2 Rentals, LLC v. Phillips, Civil No. 08-395-HU, 2009 WL 598014 (D. Or. Mar. 6, 2009).2 3 The parties have not pointed to a narrower definition of “held liable” anywhere in the CGL 4 policy. Under the workers’ compensation statute, Riddle is “bound or obligated by law” 5 to make certain payments to the decedents’ families, and those payments therefore fall 6 comfortably within the definition of “liability.” 7 This conclusion is bolstered by various sections of the workers’ compensation 8 statute, which refer to payments made under it as “liability.” See, e.g., Ariz. Rev. Stat. § 9 23-907(D) (“The commission may spend monies from the special fund that relate to a claim 10 under this section and shall include as part of an employer’s liability under this section 11 those expenditures . . . .”) (emphasis added); id. § 23-1022(D) (“The primary employer 12 shall be solely liable for the payment of workers’ compensation benefits”) (emphasis 13 added); id. § 23-901.02 (“Where compensation is payable for an occupational disease the 14 only employer liable shall be the employer in whose employment the employee was last 15 injuriously exposed to the hazards of such disease.”) (emphasis added). 16 And the provision of the workers’ compensation statute that precludes suits for 17 money damages against employers also supports the conclusion that “liable” means simply 18 a legal obligation to pay: “Employers who comply [with the statute’s requirements] shall 19 not be liable for damages at common law or by statute, except as provided in this section.” 20 Id. § 23-906. By shielding employers from a specific type of liability—liability for money 21 damages at common law or by statute—and by explicitly stating that employers may be 22 liable as set forth elsewhere in the act, the statute itself assumes that “liable” could include 23 payments made under it. 24 Depositors’ cited authorities do not compel a contrary conclusion. While Cundiff v. 25 State Farm correctly states that “[u]nlike liability insurance, workers’ compensation does — 26 — 2 While it is true that the court in Columbia River ultimately concluded that the 27 quarry owner could not be legally obligated in the underlying case to pay himself damages, the court’s statement of the ordinary meaning of “liable” was correct, and Depositors points 28 to nothing in the CGL policy that would limit the scope of “held liable” to only a contrary judgment in the underlying action. 1 not provide coverage based on fault,” that does not mean that workers’ compensation 2 payments do not qualify as a form of liability. See 217 Ariz. 358, 361 , 174 P.3d 270 , 273 3 (2008) (en banc). And while it is true that Arizona’s workers’ compensation system was 4 designed to dispense with litigation between employer and employee and to place on 5 industry the burden of compensating workplace injuries, see Pressley v. Industrial 6 Comm’n, 73 Ariz. 22, 28 , 236 P.2d 1011, 1015 (1951), that also does not mean that 7 workers’ compensation payments do not qualify as liability. Fault and liability are distinct. 8 That Arizona’s workers’ compensation system is a no-fault system is beside the point— 9 when an employer, even a faultless one, makes payments which it is obligated by law to 10 make, the employer is “held liable” under the ordinary meaning of the term. And that is 11 the meaning that matters when interpreting insurance. See Nucor Corp., 231 Ariz. at 414 . 12 CONCLUSION 13 In sum, H&E has established that it qualifies as an additional insured under the 14 Contractors Endorsement. The heading of the section imposes no substantive limitation 15 on coverage, and it is undisputed that Riddle has been held liable by making statutorily 16 required payments to the decedents’ families. Those payments arose out of the use or 17 operation of equipment leased by Riddle from H&E. Depositors has a duty to defend H&E 18 in the underlying litigation and—should H&E prove at trial in this case the existence of a 19 valid contract between it and Riddle, a prerequisite to coverage that the parties do not 20 contest in these motions—to indemnify it for any money judgments assessed against it. 21 The Court does not address the parties’ arguments regarding the Blanket 22 Endorsement. Further, while H&E’s counterclaim included a breach of contract claim, 23 H&E did not move for summary judgment on that claim and the Court expresses no opinion 24 on it. 25 IT IS THEREFORE ORDERED that the Motion for Summary Judgment of 26 Plaintiff Depositors Insurance Company (Doc. 67) is DENIED. 27 /// 28 /// 1 IT IS FURTHER ORDERED that the Cross Motion for Summary Judgment of 2|| Defendant H&E Equipment Services, Inc. (Doc. 70) is GRANTED. 3 Dated this 16th day of August, 2019. Wars ) 5 A Whacrsay Fotos 6 Chief United States District Judge — 7 — — 8 — — 9 — — 10 — — 11 — — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — -10-