Opinion
Cause No. IP97-1807-C-T/G
May 18, 2000
ENTRY DISCUSSING PENDING MOTIONS
This matter comes before the court on four motions for summary judgment and a motion for separate trials.
On summary judgment, all facts are considered in the light most favorable to the non-movant, and all inferences are resolved in the non-movant's favor. See Simpson v. Borg-Warner Automotive, 196 F.3d 873, 876 (7th Cir. 1999); Fed.R.Civ.P. 56(c).
Tree of Life, Inc. ("Tree of Life") hired Elkins Constructors, Inc. ("Elkins") to expand an existing warehouse in Bloomington, Indiana. Elkins and Sweet Company, Inc. ("Sweet") were joint venturers on the project. Travelers Casualty Surety Company, f/k/a Aetna Casualty Surety Company ("Travelers") alleges that its subrogee, Tree of Life, sustained water damage to inventory as a result of the acts and/or omissions of Elkins' employees and/or its subcontractors. Specifically, Travelers alleges that the damage was caused when a sprinkler pipe in the Tree of Life warehouse, which had been left unprotected and unsupported, was broken by a mechanical lift that came into contact with the pipe.
I. Duty to Defend
The first three summary judgment motions deal with whether National Union Fire Insurance Co. of Pennsylvania ("National Union") and Monroe Guaranty Insurance ("Monroe Guaranty") have a duty to defend Elkins and Sweet (collectively, "Elkins/Sweet") in the main action. Elkins/Sweet alleges that National Union's policy (issued to the sprinkler subcontractor on the Tree of Life project) and Monroe's policy (issued to a company that provided temporary workers to Elkins on the Tree of Life project) provide coverage to Elkins/Sweet as "additional insureds" for the damage caused by the burst sprinkler pipe.
"An insurer's duty to defend its insureds against suit is broader than its coverage liability or duty to indemnify." Wayne Township Bd. of Sch. Comm'rs v. Indiana Ins. Co., 650 N.E.2d 1205, 1208 (Ind.Ct.App. 1995) (citation omitted). That is in part because "[u]nder Indiana law, an insurance company has a contractual duty to defend unfounded, false, or fraudulent suits based upon risks it has insured." Indiana Ins. Co. v. North Vermillion Community Sch. Corp., 665 N.E.2d 630, 635 (Ind.Ct.App. 1996) (citation omitted). In determining the duty to defend, the court focuses on the nature of the claim and not its merits. See Wayne Township Bd. of Sch. Comm'rs, 650 N.E.2d at 1208 (citation omitted). However, "[i]f the pleadings fail to disclose a claim within the coverage limits or one clearly excluded under the policy, . . . no defense will be required." Trisler v. Indiana Ins. Co., 575 N.E.2d 1021, 1023 (Ind.Ct.App. 1991) (citation omitted). In short, "the allegations of the complaint, including the facts alleged, give rise to a duty to defend whenever, if proved true, coverage would attach." Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 565 (7th Cir. 1997) (applying Indiana law).
All parties agree that Indiana law governs this issue.
Even if recovery in the underlying suit is premised upon several theories of liability, some of which are excluded from policy coverage, the insurer still is obligated to defend if even only one theory falls within the policy's coverage. See Transamerica Ins. Servs. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991).
Typically, under Indiana law, "[w]hen insurance policy language is clear and unambiguous, . . . it should be given its plain and ordinary meaning"; on the other hand, typically, "[a]mbiguous provisions in insurance policies are construed in favor of the insured." Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998) (citations omitted). But "[w]hen . . . the injured party is not the named insured, the policy is construed from a neutral stance," even if the policy language is ambiguous. Barga v. Indiana Farmers Mut. Ins. Group, Inc., 687 N.E.2d 575, 578 (Ind.Ct.App. 1997) (citing Indiana Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 260 Ind. 32, 34, 291 N.E.2d 897, 899 (1973) ("The party claiming to be an insured in this case never paid a penny's premium to the insurer. We are therefore not in a situation where we must construe the contract language any certain way and can seek out the general intent of the contract from a neutral stance.")).
The court notes that Elkins/Sweet argues that this rule does not apply to the instant case, where Elkins and Sweet were named as additional insureds in the Monroe policy and in the National Union policy's supporting documentation. Elkins/Sweet's argument appears to have merit. None of the Indiana cases relying upon the rule address "additional insured" provisions such as the ones at issue in this case; they all deal with provisions in automobile insurance policies and address factual situations that are inapposite to this case. See Indiana Lumbermens Mut. Ins. Co., 260 Ind. at 34, 291 N.E.2d at 899 (subrogation action against auto insurer for injuries by worker while carrying water heater (that had been transported to the premises by the covered vehicle) down a flight of stairs in a residence); Barga v. Indiana Farmers Mut. Ins. Group, Inc., 687 N.E.2d 575, 578 (Ind.Ct.App. 1997) (accident victim who was injured when hit by owner's insured vehicle while it was being driven by mechanic who was using it as his personal vehicle sought to recover under automobile liability policy of vehicle's owner); Harden v. Monroe Guar. Ins. Co., 626 N.E.2d 814, 817 n. 2 (Ind.Ct.App. 1993) (party injured by potential car buyer sued insurer of car lot); American Family Mutual Ins. Co. v. National Ins. Assoc., 577 N.E.2d 969, 971 (Ind.Ct.App. 1991) (mechanic was involved in automobile accident while driving insured's van). Moreover, in Rollins Burdick Hunter of Utah, Inc. v. Board of Trustees of Ball State University, 665 N.E.2d 914 (Ind.Ct.App. 1996), the court stated, albeit in a different context, that where a sports promoter named a university as an "additional insured" in its insurance contract with its insurer, the university was a "named insured." Id. at 923; see also Gelco Vehicle Leasing, Inc. v. Boston, 539 N.E.2d 979, 980 (Ind.Ct.App. 1989) (referring to an additional insured named in the policy as a "named insured"); cf. Iemma v. Adventure RV Rentals, Inc., 632 N.E.2d 1178, 1180, 1182-83 (Ind.Ct.App. 1994) (treating named insured and additional insured as "co-insureds").
However, the court need not decide this issue, since it comes to the same result in this case regardless of whether the "additional insured" provisions are construed in favor of the additional insured or from a neutral stance.
Although the court cannot locate any reported opinions discussing the construction of "additional insured" provisions under Indiana law, the majority of courts to have considered the issue construe such provisions (which rely on language very similar to, or identical to, the language used in the additional insured provisions in the National Union and Monroe policies) broadly, encompassing coverage to extend to liability beyond merely the additional insured's vicarious liability for the actions of the named insured. See, e.g., Hartford Accident and Indem. Co. v. Gulf Ins. Co., 837 F.2d 767, 768-69, 775 (7th Cir. 1988) (holding, in part, that a complaint alleging "that the [additional insured] negligently failed to 'properly supervise' the [named insured's] work" "set forth allegations that brought the claim potentially within the risks covered by [the named insured's insurance] policy," thus triggering the duty to defend) (applying Illinois law); Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 497-500 (5th Cir. 2000) (holding that the "additional insured" provision applied even though the named insured was not negligent) (applying Texas law); Merchants Ins. Co. of New Hampshire, Inc. v. U.S. Fidelity and Guar. Co., 143 F.3d 5, 9-10 (1st Cir. 1998) (holding that an "additional insured" provision in a subcontractor's commercial general liability insurance policy is to be broadly construed, and covered the general contractor, as the additional insured, for its own negligence) (applying Massachusetts law); Pennzoil Co. v. U.S. Fidelity and Guar. Co., 50 F.3d 580, 582-83 (8th Cir. 1995) (indicating that only a "minimal causal relationship between [the named insured's] operations at [the additional insured's] well and [the] injury" need be shown for the "additional insured" provision to apply) (applying North Dakota law); McIntosh v. Scottsdale Ins. Co., 992 F.2d 251, 254 (10th Cir. 1993) ("[T]he additional insured endorsement does not limit the policy's coverage to cases where [the additional insured] is held vicariously liable for [the named insured's] negligence.") (applying Kansas law); Saavedra v. Murphy Oil U.S.A., Inc., 930 F.2d 1104, 1110 (5th Cir. 1991) (holding that if "the accident . . . sue[d] upon is directly related to [the named insured's] work, [the additional insured] clause is satisfied, and the policy extends insured status to [the additional insured].") (applying Louisiana law).
The relevant portion of the National Union policy provides: "WHO IS INSURED . . . is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured." (Renie Aff., Ex. 2.) The relevant portion of the Monroe policy provides: "WHO IS INSURED . . . is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of 'your work' for that insured by or for you." (Monroe's Designation of Evidence in Opp'n to Elkins and Sweet's Mot. for Summ. J., Ex. 1.)
In addition to moving for summary judgment as to National Union's and Monroe's duty to defend, Elkins/Sweet also moves for summary judgment as to National Union's and Monroe's duty to indemnify Elkins/Sweet for any damages Elkins/Sweet may be ordered to pay in this action. If the court finds that one or both insurer has the duty to defend, then it necessarily means there is a possibility that the insurer may also have a duty to indemnify. See Wayne Township Bd. of School Comm'rs, 650 N.E.2d at 1208. However, since "[a]n insurer's duty to defend its insureds against suit is broader than its coverage liability or duty to indemnify," id., it is possible that one or both insurer would have the duty to defend Elkins/Sweet, but have no duty to indemnify. Hence, if one or both insurer has a duty to defend, the duty to indemnify issue cannot be resolved at this time. Cf. Employers Ins. of Wausau v. Recticel Foam Corp., 716 N.E.2d 1015, 1029 (Ind.Ct.App. 1999) (affirming trial court's determination of a duty to defend, but holding that trial court's determination of issues related to the duty to indemnify was "premature").
Indeed, under Illinois law, the issue of the duty to indemnify is not ripe until the underlying litigation is terminated, and the court must dismiss any declaratory action as to the duty to indemnify filed before that time. See Travelers Ins. Companies v. Penda Corp., 974 F.2d 823, 833-34 (7th Cir. 1992). However, the court finds no similar dismissal requirement under Indiana law.
A. Cross-Motions for Summary Judgment Between Elkins/Sweet and National Union
Elkins/Sweet filed a Third-Party Complaint against National Union, alleging that National Union has a duty to defend and indemnify Elkins/Sweet in the main action. Elkins/Sweet and National Union each bring summary judgment motions on the issue of whether National Union's policy, issued to a subcontractor on the Tree of Life project, provides coverage to Elkins/Sweet as additional insureds under the facts of this case.
Policy number RM-GL-121-25-71.
1. Facts
Grinnell Fire Protection ("Grinnell") entered into a subcontract with Elkins on the Tree of Life expansion project to provide and install automatic sprinklers for fire protection. (Third-Party Compl. for Breach of Contract (against National Union) ¶ 6; Renie Aff., Ex. 1.) This subcontract required Grinnell to endorse its commercial general liability and excess liability insurance policies to add Elkins as an additional insured "with respect to the performance of [Grinnell's] operations under the contract documents." (Renie Aff., Ex. 1.) Grinnell's insurance is provided under a policy of general liability insurance issued by National Union to Tyco International Ltd. (Grinnell's parent corporation). (Renie Aff. ¶ 6, Ex. 2.) The policy contains additional insured coverage which states:
ADDITIONAL INSURED — OWNERS, LESEES OR CONTRACTORS . . .
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE
Name of Person or Organization:
ON FILE WITH COMPANY
WHO IS INSURED . . . is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.
(Renie Aff., Ex. 2.) Grinnell provided Elkins a copy of a certificate of insurance from National Union specifically naming Elkins and Sweet as additional insureds under Grinnell's general liability policy. (Third-Party Compl. for Breach of Contract (against National Union) ¶ 7, Ex. A.)
For the purpose of its summary judgment motion, National Union "assumes that Elkins and Sweet were added as additional insureds, as if named under the . . . additional insured endorsement." (Br. in Supp. of National Union's Mot. for Summ. J. at 4 n. 1.)
2. Discussion
The parties submit exhibits (such as affidavits, depositions and discovery responses) with their motions in an attempt to show that there is no genuine issue of material fact as to National Union's duty to defend Elkins/Sweet. However, under the relevant Indiana law, this court determines the duty to defend solely from the allegations of the underlying complaint. See Transamerica Ins. Servs. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991); see also Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302, 309 n. 8 (7th Cir. 1998) (noting that while the Indiana Court of Appeals has not always been consistent in its adherence to Kopko — by sometimes holding that the duty to defend may also be determined from factual submissions that go beyond the allegations of the complaint — a federal court interpreting Indiana law is nonetheless bound by the doctrine set forth by the Indiana Supreme Court in Kopko) (citing, inter alia, Fidelity Guar. Ins. Underwriters, Inc. v. Everett I. Brown Co., 25 F.3d 484, 489-90 (7th Cir. 1994)); Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 566 (7th Cir. 1997) ("While Indiana's courts may use differing language to describe the standard, we believe there is essentially only one standard — that the allegations of the complaint, including the facts alleged, give rise to a duty to defend whenever, if proved true, coverage would attach."). Therefore, in deciding whether the facts of the underlying case give rise to a duty to defend, the court will not consider the parties' evidentiary submissions, but will rely upon the allegations of Travelers' First Amended Complaint ("Amended Complaint").
National Union cites to Monroe Guaranty Insurance Co. v. Monroe, 677 N.E.2d 620, 624 (Ind.Ct.App. 1997), for the proposition that factual submissions beyond the allegations of the complaint may be examined in determining an insurance company's duty to defend. However, the Seventh Circuit in Huntzinger expressly rejected Monroe in holding "that '[t]he duty to defend is determined solely by the nature of the complaint,' as opposed to the facts of the underlying suit." 143 F.3d at 309 n. 8 (quoting Kopko, 570 N.E.2d at 1285). The Seventh Circuit stated:
In Fidelity Guar. Ins. Underwriters, Inc. v. Everett I. Brown Co., 25 F.3d 484, 489-90 (7th Cir. 1994), we opined that the Indiana Supreme Court's holding in Kopko (i.e., that '[t]he duty to defend is determined solely by the nature of the complaint,' as opposed to the facts of the underlying suit) 'appears to be a dramatic departure from prior cases decided by the Indiana Court of Appeals,' and went on to note that Trisler v. Indiana Ins. Co., 575 N.E.2d 1021 (Ind.Ct.App. 1991), an Indiana Court of Appeals opinion issued after Kopko, was inconsistent with Kopko. Notwithstanding the inconsistency, we explained that this Court was 'bound to rely on the [ Kopko] decision of the Indiana Supreme Court.' Everett, 25 F.3d at 490. While the Indiana Court of Appeals has not been as consistent in its adherence to Kopko since our decision in Everett, see Indiana Farmers Mut. Ins. Co. v. Ellison, 679 N.E.2d 1378, 1382 (Ind.Ct.App. 1997) ('The duty to defend is determined from the allegations of the complaint and from the facts known or ascertainable by the insurer after an investigation has been made.'); Wayne Township Bd. of Sch. Comm'rs v. Indiana Ins. Co., 650 N.E.2d 1205, 1208 (Ind.Ct.App. 1995) (citation omitted) ('The insurer may go beyond the face of the complaint and refuse to defend based upon the factual underpinnings of the claims against its insured.'); see also Monroe Guar. Ins. Co. v. Monroe, 677 N.E.2d 620, 624 (Ind.Ct.App. 1997) (citations omitted) (noting 'most recent cases ignore or do not discuss Kopko'), it is not within our province as a reviewing federal appellate court to make federal law, much less state law. We, therefore, continue to be bound by the doctrine set forth in Kopko.Id.
Travelers' Amended Complaint alleges the following:
12. While performing part of its responsibilities in the Project which included without limitation the demolish on [sic] of an existing wall and the hanging of a visqueene dust barrier, Elkins employees, and/or its subcontractor, removed supports from the sprinkler pipes.
13. Elkins owed a duty to Tree of Life to exercise reasonable care in performing, managing, and overseeing, all aspects of said construction work so as not to create an unreasonable risk of harm to the property and business of Tree of Life.
14. Elkins breached its duty to Tree of Life, including without limitation by:
a. failing to properly protect or support the sprinkler pipes in the warehouse;b. failing to replace the sprinkler pipe supports;
c. failing to use precautions so as not to damage the sprinkler pipes;
d. failing to properly train employees and/or subcontractors;
e. failing to adequately supervise, schedule, coordinate and/or inform employees and/or subcontractors;
f. failing to properly verify that the sprinkler pipes were protected or supported while construction was being performed in close proximity thereto;
g. failing to exercise reasonable care in the use and/or supervision of a forklift in proximity to the sprinkler pipes;
h. failing to prevent the forklift from coming into contact with the sprinkler pipes;
i. otherwise failing to adequately manage, oversee and supervise the construction work being performed so as to properly protect or support the sprinkler pipes from damage.
15. As a direct, foreseeable and proximate cause of said breach of duty of reasonable care, a Spirit of America employee(s), an Elkins employee(s), and/or one of their subcontractors, negligently caused a break in the sprinkler pipes, resulting in the flooding of the warehouse, causing extensive damages to the products contained therein.
(Pl.'s First Am. Compl., Count I)
Similar allegations are made against Sweet in Count III of the Amended Complaint.
Elkins/Sweet argues that at least one of the theories of liability in the Amended Complaint (in the words of the additional insured provision of National Union's policy) "aris[es] out of [Grinnell's] ongoing operations performed for [Elkins/Sweet]." (Renie Aff., Ex. 2.) And, assuming that Grinnell is the unnamed "subcontractor" referenced in the Amended Complaint, then Elkins/Sweet is correct. Among other things, the Amended Complaint alleges that "[w]hile . . . demolishi[ng] . . . an existing wall and . . . hanging . . . a visqueene dust barrier, Elkins['] . . . subcontractor removed supports from the sprinkler pipes," and, "one of [Elkins'] subcontractors negligently caused a break in the sprinkler pipes." (Pl.'s First Am. Compl., Count I ¶¶ 12, 15.) The Amended Complaint seeks to hold Elkins/Sweet liable for the unnamed subcontractor's actions because Elkins/Sweet allegedly failed to properly train and supervise the subcontractor(s). ( Id., Count I, Count III.) If Grinnell is this unnamed subcontractor, then these allegations clearly allege that Grinnell's ongoing work for Elkins (as the general contractor on the project) caused the accident. See Hartford Accident and Indem. Co. v. Gulf Ins. Co., 837 F.2d 767, 768-69, 775 (7th Cir. 1988) (holding, in part, that a complaint alleging "that the [additional insured] negligently failed to 'properly supervise' the [named insured's] work" "set forth allegations that brought the claim potentially within the risks covered by [the named insured's insurance] policy," thus triggering the duty to defend) (applying Illinois law). It is irrelevant at this stage that the Amended Complaint also alleges alternative versions of the facts and alternative theories of liability; "the duty to defend is broader than the duty to indemnify." City of Jasper, Ind. v. Employers Ins. of Wausau, 987 F.2d 453, 456 (7th Cir. 1993) (citing Kopko, 570 N.E.2d at 1285) (applying Indiana law).
National Union correctly notes that, in different contexts, Indiana courts have defined the phrase "arising out of" (a phrase used in National Union's "additional insured" provision) to mean the "efficient and predominating cause." Barga v. Indiana Farmers Mut. Ins. Group, Inc., 687 N.E.2d 575, 578 (Ind.Ct.App. 1997) (citing Indiana Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 260 Ind. 32, 34, 291 N.E.2d 897, 899 (1973). However, under any reasonable definition of "arising out of", the allegations of the Amended Complaint allege that Grinnell's ongoing work for Elkins caused the accident.
But should the court assume that the unnamed subcontractor in the Amended Complaint is Grinnell? It is undisputed that Grinnell was one of Elkins' subcontractors on the Tree of Life project. However, it is unclear whether Grinnell was the subcontractor that Travelers had in mind when it drafted its Amended Complaint. This broad wording of the Amended Complaint means that any one of Elkins' subcontractors on the Tree of Life project could fall within the allegations of the Amended Complaint. But since "an insurer has a duty to defend its insured against suits alleging facts that might fall within the coverage," Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 566 (7th Cir. 1997) (emphasis added) (applying Indiana law), and since it is clear that the Amended Complaint alleges facts that "might" fall within the coverage of National Union's policy, then National Union has a duty to defend Elkins/Sweet. See id. ("Typically, an insurer has a duty to defend its insured against suits alleging facts that might fall within the coverage. While the insurer does not have an unconditional duty to defend, the insurer's duty is expansive, since the duty to defend is considerably broader than the duty to indemnify.") (citing Seymour Mfg. Co., Inc. v. Commercial Union Ins. Co., 665 N.E.2d 891, 892 (Ind. 1996)). As to National Union's duty to defend Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is GRANTED and National Union's Motion for Summary Judgment is DENIED. As discussed above, because the court has found a duty to defend, it is too early to decide the issue of National Union's duty to indemnify Elkins/Sweet; therefore, as to National Union's duty to indemnify Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is DENIED and National Union's Motion for Summary Judgment is DENIED.
National Union states that, "[a]lthough the complaint makes reference to a subcontractor, the only subcontractor identified in the complaint is Spirit of America." (Reply Br. in Supp. of National Union's Mot. for Summ. J. at 4.) To the extent that this statement is an argument that Spirit of America is meant to be the unnamed subcontractor in the Amended Complaint, the court rejects the argument. The Amended Complaint alleges that "[a]s a direct, foreseeable and proximate cause of said breach of duty of reasonable care, a Spirit of America employee(s), an Elkins employee(s), and/or one of their subcontractors, negligently caused a break in the sprinkler pipes, resulting in the flooding of the warehouse, causing extensive damages to the products contained therein. (Pl.'s First Am. Compl. ¶ 15.) It is clear from this allegation that the unnamed subcontractor is not Spirit of America, but is a different Elkins subcontractor, and/or a subcontractor of Spirit of America.
This result illustrates the problems (at least from an insurer's point-of-view) that can arise when the doctrine of liberal notice pleading mixes with the doctrine that the insurer's duty to defend is determined solely by the allegations of the complaint. If the court could examine evidentiary submissions, then it would be clear whether there is an issue of fact as to whether Grinnell is the unnamed subcontractor. But with only the Amended Complaint as a guide, numerous parties (who likely would be shown by evidentiary submissions to be uninvolved in the matters charged in the Amended Complaint) may be implicated by broad and/or ambiguous allegations. However, as stated above, the court is bound by the doctrine set forth in Kopko. See Huntzinger, 143 F.3d at 309 n. 8 ("[I]t is not within our province as a reviewing federal appellate court to make federal law, much less state law. We, therefore, continue to be bound by the doctrine set forth in Kopko."). Moreover, "[u]nder Indiana law, an insurance company has a contractual duty to defend unfounded, false, or fraudulent suits based upon risks it has insured." Indiana Ins. Co. v. North Vermillion Community Sch. Corp., 665 N.E.2d 630, 635 (Ind.Ct.App. 1996) (citation omitted).
B. Elkins/Sweet's Motion for Summary Judgment on Third-Party Claim Against Monroe
Elkins/Sweet filed a Third-Party Complaint against Monroe, alleging that Monroe has a duty to defend and indemnify Elkins/Sweet in the main action. Elkins/Sweet now brings a Motion for Summary Judgment on the issue of whether Monroe's policy, issued to Spirit of America Corp. d/b/a Midwest Personnel Resources ("Spirit"), provides coverage to Elkins/Sweet as additional insureds under the facts of this case.
Policy number MG212165-M-95. (Monroe's Designation of Evidence in Opp'n to Elkins and Sweet's Mot. for Summ. J., Ex. 1.)
1. Facts
According to Travelers' Amended Complaint, "Elkins hired Spirit of America employees to work as temporary employees and/or subcontractors on the construction work at Tree of Life." (Pl.'s First Am. Compl., Count II ¶ 13.) Travelers alleges that Elkins/Sweet should be held liable for, among other things, "a Spirit of America employee(s) . . . negligently caus[ing] a break in the sprinkler pipes, resulting in the flooding of the warehouse, causing extensive damages to the products contained therein." ( Id., Count I ¶ 15, Count III ¶ 16.) Travelers also sued Spirit directly for the alleged acts of its employee(s).
As part of Spirit's agreement with Elkins to provide laborers for the Tree of Life project, Spirit provided Elkins with a copy of a certificate of insurance indicating that "RE: Tree of Life Project", Elkins/Sweet "are included as Additional Insureds under the General Liability Policy." (Third-Party Compl. for Breach of Contract (against Monroe) ¶ 8, Ex. B.) The policy's "additional insured" coverage states:
ADDITIONAL INSURED — OWNERS, LESEES OR CONTRACTORS . . .
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE
Name of Person or Organization:
Elkins Construction [sic] and Sweet Company
. . . .
WHO IS INSURED . . . is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of 'your work' for that insured by or for you.
(Monroe's Designation of Evidence in Opp'n to Elkins and Sweet's Mot. for Summ. J., Ex. 1.) The policy also provides:
'Your work' means:
a. Work or operations performed by you or on your behalf; and
b. Materials, parts or equipment furnished in connection with such work or operations.
'Your work' includes:
a. Warranties or representations made at the time with respect to the fitness, quality, durability, performance or use of 'your work'; and
b. The providing of or failure to provide warnings or instructions.
( Id.)
2. Discussion
Once again, the parties submit exhibits (such as affidavits, depositions and discovery responses) with their submissions. As discussed above, under relevant Indiana law, this court determines the duty to defend solely from the allegations of the underlying complaint. See Transamerica Ins. Servs. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991); see also Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302, 309 n. 8 (7th Cir. 1998) (citations omitted); Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 566 (7th Cir. 1997) (citations omitted).
Travelers' Amended Complaint clearly alleges (among other things) that, as "temporary employees and/or subcontractors on the construction work at Tree of Life," a Spirit employee(s) "negligently caused a break in the sprinkler pipes," thereby causing the alleged harm. (Pl.'s First Am. Compl., Count I ¶ 15, Count II ¶ 13, Count III ¶ 16.) In part, the Amended Complaint seeks to hold Elkins/Sweet liable for failing to properly train and supervise the Spirit employee(s). ( Id., Count I, Count III.) These allegations would seem to trigger the coverage of the additional insured provision in the Monroe policy, i.e., "with respect to liability arising out of '[Spirit's] work' for [Elkins/Sweet] by . . . [Spirit]." (Monroe's Designation of Evidence in Opp'n to Elkins and Sweet's Mot. for Summ. J., Ex. 1.)
However, Monroe argues that it has no duty to defend Elkins/Sweet because: (1) Spirit was not a subcontractor of Elkins/Sweet, but rather, the employees Spirit leased to Elkins/Sweet were Elkins' employees; and, (2) Spirit did not perform work for Elkins, rather, Spirit lent employees to Elkins in order for Elkins to perform Elkins' own work. The court rejects Monroe's arguments because the Amended Complaint alleges that the employee(s) was a "Spirit employee(s)" who was a "subcontractor". (Pl.'s First Am. Compl., Count I ¶ 15, Count II ¶ 13, Count III ¶ 16.) As discussed above, the duty to defend is determined from the allegations of the underlying complaint, and not from factual materials which contradict the allegations of the underlying complaint. Monroe may take issue with the accuracy of the allegations in Travelers' Amended Complaint, but "[u]nder Indiana law, an insurance company has a contractual duty to defend unfounded, false, or fraudulent suits based upon risks it has insured." Indiana Ins. Co. v. North Vermillion Community Sch. Corp., 665 N.E.2d 630, 635 (Ind.Ct.App. 1996) (citation omitted).
Monroe's arguments fail on another ground. According to Monroe, Spirit's leasing arrangement with Elkins transformed Spirit's employees into Elkins' employees, and those employees were performing Elkins' (rather than Spirit's) work on the Tree of Life project. Therefore, according to Monroe, because Spirit performed no work for Elkins/Sweet, the "additional insured" coverage does not apply. (Monroe's Designation of Evidence in Opp'n to Elkins and Sweet's Mot. for Summ. J., Ex. 1 (providing that "WHO IS INSURED . . . is amended to include [Elkins/Sweet], but only with respect to liability arising out of '[Spirit's] work' for [Elkins/Sweet] by or for [Spirit].") The problem with this argument is that if it is accepted, the coverage provided by the "additional insured" provision would be illusory. In other words, there would be no circumstance under which Spirit could be deemed to have done the "work" if, under the leasing arrangement with Elkins, Spirit's employees became Elkins employees, doing Elkins' work, while working on the Tree of Life project. Therefore, under Monroe's interpretation, no act by any of Spirit's leased employees on the Tree of Life job site, no matter how negligent, would entitle Elkins/Sweet to coverage under the Monroe policy.
The court accepts Monroe's assumptions for the purposes of argument. However, the court notes that it would not be inclined to accept these assumptions if it reached the issue. Monroe relies exclusively on worker's compensation cases in arguing that a leased employee should be construed to be the employee of the leasing service's client, rather than of the leasing service. Monroe's cited cases restrict themselves to the worker's compensation arena, which constitutes a specialized area of statutory law that is not immediately transferable to other practice areas.
"It is the public policy of this State to allow an insured to recover his reasonable expectation when an insurer has provided illusory coverage." Western Reserve Mut. Cas. Co. v. Holland, 666 N.E.2d 966 (Ind.Ct.App. 1996); see also Meridian Mut. Ins. Co. v. Richie, 544 N.E.2d 488, 490 (Ind. 1989). Indeed, "[e]ven where clauses are unambiguous when read within the policy as a whole, but in effect provide only illusory coverage, the policy will be enforced to satisfy the reasonable expectations of the insured." Great Lakes Chem. Corp. v. International Surplus Lines Ins. Co., 638 N.E.2d 847, 850 (Ind.Ct.App. 1994) (citing Davidson v. Cincinnati Ins. Co., 572 N.E.2d 502 (Ind.Ct.App. 1991)); see also Webster v. Pekin Ins. Co., 713 N.E.2d 932 (Ind.Ct.App. 1999) (same); Cincinnati Ins. Co. v. Amerisure Ins. Co., 644 N.E.2d 136, 140 (Ind.Ct.App. 1994) (same).
Even if the court were to accept Monroe's evidence and arguments, it would enforce the additional insured provision to provide coverage to satisfy the reasonable expectations of Elkins/Sweet and Spirit. The reasonable expectations of Elkins/Sweet and Spirit can be found in Spirit's "Proposal for Elkins Construction", wherein Spirit states that its employee leasing rate covers "liability insurance." (Third-Party Compl. for Breach of Contract (against Monroe), Ex. A.) The "Proposal" continues: "[Spirit] carries insurance coverage on all of our temporary personnel for your protection. In addition to Worker's Compensation, we carry a complete package of liability insurance." ( Id.) Monroe presents no evidence indicating that the parties' reasonable expectations were any different than what Spirit stated in its "Proposal". Therefore, even if the court were to accept Monroe's evidence and arguments, it would enforce the additional insured provision to provide coverage in this instance, because that would prevent the coverage from being illusory and would operate to satisfy the reasonable expectations of Elkins/Sweet and Spirit.
The court finds that Monroe has a duty to defend Elkins/Sweet in the underlying action. As to Monroe's duty to defend Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is GRANTED. As discussed above, because the court has found a duty to defend, it is too early to decide the issue of Monroe's duty to indemnify Elkins/Sweet; therefore, as to Monroe's duty to indemnify Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is DENIED.
II. Travelers' Motion for Partial Summary Judgment
Travelers moves for partial summary judgment against Elkins only, pursuant to the terms of the contract between Tree of Life and Elkins. The contract provides, in pertinent part:
3.3.2 The Contractor [i.e., Elkins] shall be responsible to the Owner [i.e., Tree of Life] for acts and omissions of the Contractor's employees, Subcontractors and their agents and employees, and other persons performing portions of the Work under a contract with the Contractor. . . .
3.18 INDEMNIFICATION
3.18.1 To the fullest extent permitted by applicable law, Contractor shall and does agree to indemnify, protect, defend and hold harmless the Owner . . . from all claims, damages, losses, liens, causes of action, suits, judgments, and expenses, including attorneys' fees, of any nature, kind or description, of any person or entity, directly or indirectly arising out of, caused by, or resulting from (in whole or in part), (1) the Work performed hereunder, or any part thereof, (2) the Contract Documents, or (3) any act or omission of Contractor, any Subcontractor, anyone directly or indirectly employed by them, or anyone that they exercise control over . . . except that Contractor's indemnification obligations exclude such loss which is the direct result of the Indemnitee's negligence. . . .
(Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1.) Other provisions state that Elkins "shall provide all necessary protection to prevent damage, injury or loss to . . . property at the site or adjacent thereto" and "shall promptly remedy damage and loss . . . to [property at the site or adjacent thereto] caused in whole or in part by [Elkins], a Subcontractor, . . . or anyone directly or indirectly employed by any of them. . . ." ( Id., 10.2.1, 10.2.3, 10.2.5; see also id., 3.3.1, 3.19.) The purpose of these provisions, among other things, is to protect Tree of Life in the event a subcontractor (with whom Tree of Life has no contractual relationship) damages Tree of Life's property. See Manhattan Real Estate Partners, I.L.P. v. Harry S. Peterson Co., Inc., No. 90-CIV-3015, 1992 WL 15130, at *2 (S.D.N.Y., Jan. 17, 1992) (holding that pursuant to an indemnification clause [which was very similar to the one in the Elkins-Tree of Life contract], plaintiff was entitled to summary judgment on its claim that the general contractor pay plaintiff for the damage to plaintiff's building caused by a subcontractor: "The purpose of an indemnification provision is to protect [plaintiff, the building owner] in exactly this type of situation and to allow [plaintiff] to seek recourse against the party with whom it has a relationship — [the general contractor] — rather than an unknown subcontractor."); Point East Condominium Owners' Ass'n v. Cedar House Assocs. Co., 663 N.E.2d 343, 353-54 (Ohio App. 1995) ("These provisions [which were very similar to provisions in the Elkins-Tree of Life contract] bound [the general contractor] to exercise sole responsibility for the means, methods, techniques and procedures of construction, including those attendant to the installation of the fire sprinkler system. . . . Giving these provisions their plain meaning and import, [the general contractor] cannot deny responsibility to plaintiff for any negligent workmanship performed by [the sprinkler subcontractor].").
The following is a summary of the evidence submitted by Travelers in support of its summary judgment motion. On November 9, 1995, Elkins was performing construction work at the Tree of Life facility pursuant to the contract between Elkins and Tree of Life. At the direction of Elkins' project superintendent, Robert McCrory, Spirit employees were hanging a plastic barrier to act as a dust partition. (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. E (McCrory Dep.) at 43, 47-49; Ex. F (Carrico Dep.) at 39, Ex. I at 1.) In order to hang the barrier, the Spirit employees used a mechanical lift to reach elevated metal bar joists. (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. E (McCrory Dep.) at 44, 57.) According to Mr. McCrory, "two men in the [mechanical] 'man box' bump[ed] a 1-inch sprinkler line." ( Id. at 87.) After the accident, Mr. McCrory called the Elkins' "home office and told them that we broke a sprinkler pipe and that there was damage to the owner's product." ( Id. at 83.) Mr. McCrory defined the "we" used in the previous sentence to be "[m]y direct personnel, whether they're labor or not. Whether — temporary labor or not. If they're under my direct supervision, I consider them my direct personnel." ( Id. at 85.)
Travelers argues in its motion that the evidence establishes that the damage to the Tree of Life property was caused by the temporary employees acting at the direction of Mr. McCrory, Elkins' project superintendent. It further argues that pursuant to the contract between Elkins and Tree of Life (which provides that Elkins is responsible for the acts of its employees and other persons performing the work of the contract), Elkins is liable for the damage caused by the temporary employees. Based upon this argument, Travelers moves for summary judgment against Elkins as to Count IV of its Amended Complaint (which alleges breach of contract).
Elkins responds first by arguing that summary judgment on Travelers' contract Count (i.e., Count IV) is improper because that Count "sounds wholly in tort." Elkins claims that the contract Count "is a negligence claim in disguise," and therefore Travelers is not entitled to summary judgment until it shows that no issue of fact remains on each element of a negligence claim. (Elkins Mem. in Opp'n to Pl.'s Mot. for Partial Summ. J. at 4.) Elkins relies upon Strayer v. Covington Creek Condominium Association, 678 N.E.2d 1286 (Ind.Ct.App. 1997), which holds that the plaintiff could not avoid the rule of Indiana law that a member of an unincorporated association cannot sue that association for negligence simply by styling his slip-and-fall negligence claim against his association into a "negligent breach of contract claim." See id. at 1288. The court stated that "[i]t is true that the Association's duty to maintain the sidewalks was created by the Contract, but this alone does not make [plaintiff]'s claim sound in contract." Id. The court went on to hold that plaintiff's contract with the association did not grant him a right to sue on the contract, and therefore, his only recourse was in tort. See id. at 1288-89.
By contrast to Strayer, in this case, Tree of Life's contract with Elkins gives Travelers (as subrogee of Tree of Life) a basis to sue of the contract. (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1 at 3.18.1 ("To the fullest extent permitted by applicable law, Contractor shall and does agree to indemnify . . . the Owner . . . from all . . . losses . . . directly or indirectly arising out of . . . the Work performed hereunder, or any part thereof, . . . or . . . any act or omission of Contractor, any Subcontractor, anyone directly or indirectly employed by them, or anyone that they exercise control over. . . .").) Indeed, Indiana law provides that "[p]roceedings on indemnity agreements are governed by contract law." Bethlehem Steel Corp. v. Sercon Corp., 654 N.E.2d 1163, 1167 (Ind.Ct.App. 1995) (citing Zebrowski Assoc. v. City of Indianapolis, 457 N.E.2d 259, 261 (Ind.Ct.App. 1983)). Therefore, the court finds that Count IV properly states a contract claim.
Moreover, the portion of Strayer cited by Elkins relies upon the rule that "[i]n Indiana, a plaintiff has the option of suing in tort or in contract for the negligent performance of a contractual duty." Strayer, 678 N.E.2d at 1288. As authority, Strayer cites Orkin Exterminating Co., Inc. v. Walters, 466 N.E.2d 55, 58 (Ind.Ct.App. 1984), abrogated in unrelated part by Mitchell v. Mitchell, 695 N.E.2d 920 (Ind. 1998), which states:
Indiana law recognizes that Walters had an option of suing in tort or in contract for the negligent performance of a contractual duty. Walters' suit based in tort does not change the fact that Orkin's duty to Walters is based on the contract. Moreover, bringing a suit in tort does not allow Walters to avoid the limitation of liability clause in the contract.466 N.E.2d at 58 (citations omitted). Similarly, in Troxell v. American States Ins. Co., 596 N.E.2d 921 (Ind.Ct.App. 1992), the court recognized that while "there is a line of cases which state[s] that an action may be brought in contract or tort for the negligent performance of a contractual duty," a "contractual limitation is applicable even if the [plaintiff's] complaint does allege a cognizable negligence action against [defendant]." Id. at 925. The import of Strayer, Orkin, and Troxell is that phrasing a claim as contractual or tortious will not permit a party to avoid an applicable contractual provision (as in Orkin and Troxell) or an applicable specialized tort rule (as in Strayer).
In this case, even if Count IV of the Amended Complaint was stylized as a claim in tort (which it is not), Elkins could not escape the applicable contractual provisions referenced in Count IV — i.e., that Elkins agreed to be responsible to Tree of Life for acts and omissions of all of the workers on the project, and agreed to indemnify Tree of Life for all damages and losses caused by any act or omission of any worker on the project. (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1, 3.3.1, 3.3.2, 3.18.1, 3.19, 10.2.5.) Regardless of whether Count IV is a claim "in tort or in contract for the negligent performance of a contractual duty," Strayer, 678 N.E.2d at 1288, for the purposes of Count IV, Elkins' duty to Tree of Life clearly is based on the contract. See Orkin Exterminating Co., 466 N.E.2d at 58 ("Walters' suit based in tort does not change the fact that Orkin's duty to Walters is based on the contract."). And, as recited above, that duty was a very broad one: to be responsible to Tree of Life for acts and omissions of all of the workers on the project, and to indemnify Tree of Life for all damages and losses caused by any act or omission of any worker on the project. (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1, 3.3.1, 3.3.2, 3.18.1, 3.19, 10.2.5; Pl.'s First Am. Compl., Count IV ¶ 14.)
Notably, Elkins does not argue that the contract provisions at issue (or any other contract provisions) do not apply to this case or are unconscionable, unenforceable, or otherwise void. Cf. Fort Wayne Cablevision v. Indiana Mich. Elec. Co., 443 N.E.2d 863, 868 (Ind.Ct.App. 1983) ("[Indiana's] policy of disfavor is directed at indemnification duties which the indemnitor did not knowingly assume. It does not invalidate such clauses simply because they might provide broad protection for the indemnitee. In the present case [the parties] signed a contract containing an indemnity clause phrased in very broad terms. We believe those terms sufficiently identified the scope of Cablevision's duty so that Cablevision should have been aware of the burden it was accepting. The trial court was correct in concluding that the indemnification clause . . . was sufficiently clear and unequivocal to be enforceable against Cablevision.").
Elkins' purpose in arguing that Count IV is really a tort claim in disguise, seems to be to then argue that "negligence principles . . . are generally not proper subjects for summary judgment." (Elkins Mem. in Opp'n to Pl.'s Mot. for Partial Summ. J. at 3 (citing New York, C. St. L.R. Co. v. Boulden, 63 F.2d 917 (7th Cir. 1933).) However, when Elkins' duty to Tree of Life is defined as broadly as it is in the applicable contract provisions, then summary judgment appears to be much more appropriate. The duty that Elkins assumed in the contract is much broader than traditional negligence principles. According to the contract, so long as a worker on the project causes the damages at issue, then Elkins is obligated to indemnify Tree of Life for its losses — without regard to whether that worker acted according to a 'reasonable person' standard-of-care.
Count IV does allege that Elkins "contracted to" and "failed to properly . . . supervise, direct and/or . . . other wise perform in a workmanlike manner, using the skill, judgment, caution and care as required by the contract," (Pl.'s First Am. Compl., Count IV ¶ 14(a), (e), 16(a), (d)) — allegations which sound like they are employing a negligence standard. However, Count IV also alleges, in the alternative, that Elkins "contracted to" and "failed to . . . remedy damages caused by the acts or omissions of employees, subcontractors, and/or their agents or employees," ( id., Count IV ¶¶ 14(c), 16(c)). These alternative allegations clearly reference Elkins' contractual indemnification duties, which (as discussed above) do not employ a traditional negligence standard, but are more akin to strict liability. Travelers moves for summary judgment as to Count IV on these alternative allegations.
Elkins next argues that there is an issue of fact as to causation. Pursuant to the contract, Elkins is only obligated to pay for damages and losses caused by any act or omission of any worker on the project. In support of its motion, Travelers produced evidence that temporary employees from Spirit, working under the supervision of Mr. McCrory (Elkins' project superintendent), caused the sprinkler pipe to break, which led to the flooding and the damage to Tree of Life's food products.
Elkins responds by pointing to the deposition testimony of a Spirit employee, Douglas Carrico, who was on the ground at the time of the accident, operating the mechanical lift and basket that held two other Spirit employees who were hanging the plastic dust barrier. He testified that he could not see the sprinkler pipe either before or immediately after it burst (Carrico Dep. at 55), and indeed, he testified that while the basket was extended upward, the basket creates a blind spot for him of about eight feet wide and five or six feet deep. ( Id. at 25.) He testified that the lift could not have hit the pipe as the basket was descending, instead, "if it would have happened [i.e., the lift hitting the pipe], it would have happened on the way up." ( Id. at 56.) He also said that if he hit something as the lift was rising, he would not be able to feel it. ( Id. at 55.) However, he indicated that he felt the spray of water as he was moving the lift down, rather than up. ( Id. at 63.) He did not affirmatively state that he knew why the pipe broke and he did not even affirmatively deny that he hit the pipe with the lift; he stated that "as far as [he] kn[e]w," he kept the lift six-to-twelve inches away from the pipe, but then said, "I ha[ve] no idea what happened." ( Id. at 59-60, 63.)
Mr. Carrico testified that after the pipe burst and the water flow was stopped, he asked the two men who had been in the lift if they knew what had happened, and they told him that they did not think that they had bumped the pipe, but that they may have hit the pipe with a piece of plastic. (Carrico Dep. at 57-58.) Travelers objects to the testimony of what the two men said to Mr. Carrico on the grounds that it is inadmissible hearsay. Elkins laid no foundation for establishing how this testimony fits within a hearsay exception or exemption, and therefore, the court will not consider the evidence in deciding this motion. See Fed.R.Evid. 801.
Mr. Carrico also testified that he thought the sprinkler pipes were not properly hung or supported. ( Id. at 56, 60, 63-64.) Elkins cites this testimony as evidence that Grinnell (the subcontractor responsible for installing the sprinkler system) and/or Indiana Erectors (the subcontractor who, in preparation for demolishing a wall, removed the "girts", which supported the sprinkler pipes) caused or contributed to the accident. Elkins also cites to the testimony of Mr. McCrory for the same propositions. (McCrory Dep. at 63-65.)
This evidence, Elkins contends, shows that there is an issue of fact as to "whether the temporary [i.e., Spirit] employees caused the accident, and whether Elkins is responsible for the actions of the temporary employees." (Elkins Mem. in Opp'n to Pl.'s Mot. for Partial Summ. J. at 6.)
In reply to Elkins' evidence, Travelers submits the deposition testimony of Eric Fate, a Spirit employee who was one of the two men in the lift basket at the time the pipe burst. Mr. Fate testified that while he was hanging the plastic dust barrier, he encountered "a piece of pipe that was protruding out of the sprinkler system that was in the way . . . of the lift . . . [and] was in the way of the area that [he] was trying to connect the [plastic] to." (Fate Dep. at 16.) He testified that "the pipe appeared to be flexible," so the workers "press[ed] the carriage [of the lift] against the pipe and it was flexible and it moved . . . three . . . [to] six inches upward." ( Id. at 17.) He stated that as the workers bent the pipe upward in an effort to reach the beam on which they were trying to hang the plastic, initially nothing happened, but then the pipe burst. ( Id. at 18.)
Only issues of fact that are material can defeat summary judgment. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 247-48 (1986) ("By its very terms, this standard [set forth in Rule 56(c)] provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.") (emphasis in original). A "material" fact is a "potentially outcome determinative" fact. Jenkins v. Heintz, 124 F.3d 824, 828 (7th Cir. 1997) (citing Wallace v. SMC Pneumatics, Inc., 103 F.3d 1394, 1396 (7th Cir. 1997)); see also Anderson, 477 U.S. at 248 ("Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted."). A dispute as to whether the accident was caused by Spirit employees (using the lift), Grinnell employees (installing the sprinkler pipes), or Indiana Erector employees (removing the supports for the sprinkler pipes) is not material to Count IV of the Amended Complaint. Under the contract between Elkins and Tree of Life, Elkins had the duty to indemnify Tree of Life for any damage caused by "any act or omission of [Elkins], any Subcontractor, anyone directly or indirectly employed by them, or anyone that they exercise control over." (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1, 3.18.1.) It is undisputed that Spirit employees, Grinnell employees, and Indiana Erector employees fit within this broad group defined by the contract.
Neither party submits evidence indicating that anyone other than Elkins employees, Spirit employees, Grinnell employees, and/or Indiana Erector employees caused the damage at issue. Elkins does state in its brief that "Elkins has alleged that [Tree of Life's] own failure to protect its product during construction caused or contributed to the loss." (Elkins Mem. in Opp'n to Pl.'s Mot. for Partial Summ. J. at 5 (citing Elkins' Answer to the Complaint and Elkins' Statement of Preliminary Contentions).) However, Elkins points to no evidence in support of its allegation, and therefore, this bare allegation is insufficient to prevent summary judgment.
If Elkins would have provided factual support for this allegation, then the dispute would indeed be material. The contract between Elkins and Tree of Life provides that "[Elkins'] indemnification obligations exclude such loss which is the direct result of the [Tree of Life's] negligence." (Pl.'s Exs. in Supp. of Mot. for Summ. J., Ex. B-1, 3.18.1.) Although Elkins' allegation that Tree of Life's failure to protect its product during construction caused or contributed to the loss is not necessarily inconsistent with the evidence presented showing that the sprinkler pipe break (and subsequent flooding) was caused by some combination of the actions of the employees of Elkins and its subcontractors, evidence is still required for this allegation to be sufficient to stave off summary judgment. The court does not find (and Elkins does not even argue — and thus has waived) that Travelers was required to submit affirmative evidence showing that Tree of Life protected its product as part of its prima facie case in moving for summary judgment. Instead, the argument that Tree of Life caused the damage appears to be an affirmative defense to the indemnification claim. Cf. Bethlehem Steel Corp. v. Sercon Corp., 654 N.E.2d 1163, 1167 (Ind.Ct.App. 1995) ("The indemnitee must prove all material elements of its cause of action by a preponderance of the evidence. The indemnitor must prove any affirmative defenses.").
Finally, the court notes that the parties argue about whether certain statements made by Elkins in its contentions and case management plan constitute binding admissions. The court does not address these arguments because Travelers submitted sufficient evidence (other than the statement of contentions and case management plan — to the extent that these could be considered "evidence" at all) to show that no issue of fact exists as to whether Elkins or the subcontractors caused the damage at issue. Although Travelers did cite to these court filings in its summary judgment brief, Travelers also cited to the evidence summarized above. Therefore, Elkins was put on notice that it would need to come forward with evidence of its own in order to prevent summary judgment (and, as recounted above, Elkins did produce some evidence, albeit immaterial evidence).
Travelers' purpose in citing both Elkins' court filings and substantive evidence appears to be an attempt to support its argument that "[t]he record reflects, and . . . Elkins has admitted, that the damage to the property of Tree of Life was caused by temporary employees working for and under contract with Elkins." (Br. in Supp. of Pl.'s Mot. for Partial Summ. J. at 8 (emphasis in original).)
In conclusion, Travelers' Motion for Partial Summary Judgment as to Count IV will be GRANTED. The issue of damages as to Count IV remains to be decided. Also, Travelers' claims in the other four Counts of its Amended Complaint remain pending.
III. Motion for Separate Trials
National Union moves for separate trials pursuant to Federal Rule of Civil Procedure 42(b) (which provides, "[t]he court, . . . to avoid prejudice . . ., may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims, or issues"). National Union argues that allowing the liability insurance issues to be tried with the main case between Travelers and Elkins/Sweet could influence the jury's decisions, because they would have the knowledge that there is, or may be, liability insurance to cover any judgment rendered against Elkins/Sweet. The motion is unopposed, although Monroe argues that if the motion is granted, the court's order should also separate the main action and the third-party claims against Monroe "for the reason that the allegations [by] Elkins and Sweet [against National Union and Monroe] . . . essentially present the same issue." (Resp. of Monroe Guaranty to National Union's Mot. for Separate Trials at 2.)
The court agrees with National Union's argument (as well as Monroe's), and finds that a jury could be prejudiced by the knowledge that some Defendants may be covered by liability insurance. Cf. Fed.R.Evid. 411, Advisory Committee Notes (indicating that there is "the feeling that knowledge of the presence or absence of liability insurance would induce juries to decide cases on improper grounds.").
Therefore, National Union's Motion for Separate Trials is GRANTED. The third-party claims by Elkins/Sweet against National Union and Monroe will be tried separate from the main action.
IV. Conclusion
As to National Union's duty to defend Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is GRANTED and National Union's Motion for Summary Judgment is DENIED. It is too early to decide the issue of National Union's duty to indemnify Elkins/Sweet; therefore, as to National Union's duty to indemnify Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is DENIED and National Union's Motion for Summary Judgment is DENIED.
As to Monroe's duty to defend Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is GRANTED. It is too early to decide the issue of Monroe's duty to indemnify Elkins/Sweet; therefore, as to Monroe's duty to indemnify Elkins/Sweet, Elkins/Sweet's Motion for Summary Judgment is DENIED.
Travelers' Motion for Partial Summary Judgment as to Count IV will be GRANTED. The issue of damages remains to be decided.
National Union's Motion for Separate Trials is GRANTED. The third-party claims by Elkins/Sweet against National Union and Monroe will be tried separate from the main action. The court will schedule this separate trial at later date.
No final judgment will be issued at this time.
ALL OF WHICH IS ORDERED this 18th day of May 2000.