Fujitec Am., Inc. v. Axis Surplus Ins. Co.

458 F.Supp.3d 736

FUJITEC AMERICA, INC., et al., Plaintiffs,

v.AXIS SURPLUS INSURANCE COMPANY, Defendant.

Case No. 1:18-cv-635

United States District Court, S.D. Ohio, Western Division.

Signed May 1, 2020

Filed May 4, 2020

Paul David Eklund, Collins, Roche, Utley & Garner, LLC, Cleveland, OH, for Plaintiffs.

Clifford C. Masch, Reminger & Reminger, Cleveland, OH, for Defendant.

ORDER

Karen L. Litkovitz, United States Magistrate Judge

I. Introduction

Plaintiffs Fujitec America, Inc. (Fujitec) and Travelers Property Casualty Company of America (Travelers) originally filed this action in the Warren County, Ohio Court of Common Pleas. (Doc. 1, Exh. 2). Defendant AXIS Surplus Insurance Company (AXIS) removed the action to this Court based on its diversity jurisdiction under 28 U.S.C. § 1332(a)(1). (Doc. 1). Plaintiffs originally brought claims against AXIS for declaratory judgment and breach of contract. The claims arose out of AXIS's alleged refusal to defend a state court action alleging personal injury claims for commercial general liability (CGL) insurance, which exceeded Travelers’ claimed coverage limit; AXIS's alleged refusal to pay "post-exhaustion" judgments and settlements¹ ; and AXIS's alleged refusal to reimburse Fujitec and/or Travelers for all costs and expenses they have incurred in the defense of post-exhaustion claims and/or post-exhaustion judgments that exceed the claimed limit of Travelers’ coverage. This matter is before the Court on (1) plaintiffs’ motion for summary judgment (Doc. 25), defendant AXIS's opposing memorandum (Doc. 33), and plaintiffs’ reply (Doc. 34); and (2) defendant AXIS's cross-motion for summary judgment (Doc. 29), plaintiffs’ opposing memorandum (Doc. 32), and AXIS's reply (Doc. 35).

II. Undisputed facts

1. The underlying claim

Plaintiff Travelers is an insurance company authorized to do business in the State of Ohio. (Doc. 4, ¶¶ 1, 2). Plaintiff Fujitec, which is headquartered in Mason, Ohio, manufactures, installs, and services elevators and moving walkways in the United States. (Doc. 25, Darryl Mitchell Affidavit, Exh. 2, ¶ 3). Fujitec New York is a division of Fujitec. (Id. , Exh. 2, ¶ 4). On or about November 8, 2008, Fujitec New York entered into a Master Service Agreement (MSA) with "FNYP as agent for FC Eighth Avenue, LLC" to maintain and repair the elevators identified in Exhibit B to the MSA. (Id. , Exh. 3). These included Elevator P14 in "The New York Times Building" (NYT Building) located at 620 8th Avenue, New York, New York. (Id. ). The MSA identifies Fujitec as a "contractor." (Id. ). Fujitec's obligations under the MSA were to "furnish maintenance service" on "Equipment" governed by the MSA, which included Elevator P14. (Id. , § 1; see Id. , Exh. B). Fujitec was contractually obligated to "maintain elevator Equipment" described in the contract and use "all reasonable care to see that Equipment is maintained in proper operating condition"; to "regularly examine, maintain, lubricate, adjust, clean as required, and, if in [Fujitec's] reasonable judgment the conditions warrant it, repair or replace all elevator components, unless specifically excluded elsewhere"; and to "maintain the existing performance of Equipment." (Id. , § 2, Exh. C). The MSA listed the specific items for which Fujitec had "[m]aintenance, repair and replacement" responsibility. Id.

In 2012, Robert E. Shannon, Jr., an engineer employed by a tenant in the NYT Building, filed a lawsuit against Fujitec and other parties arising out of an incident that occurred on December 30, 2011 (Shannon action). Shannon claims that after he entered Elevator P14 on that date, the elevator fell almost 30 floors before coming to a hard stop. (Doc. 27, Shannon 8/27/12 depo. at 9-10, 46-51). According to plaintiffs, Shannon claims that he suffered multiple serious injuries. (Id. , citing Shannon 8/27/12 depo. at 46-51). A post-incident inspection of Elevator P14 disclosed that one of the elevator's hoist cables had broken. (Doc. 28, Sean Kennedy depo. at 78-79).

Fujitec provided monthly maintenance on Elevator P14 in the NYT Building. (Doc. 26, Michael Day depo. at 8² ; Doc. 25, Exh. 5, Anthony Carlo Affidavit, ¶ 2). Under the MSA, repairs to the elevators are performed as needed and are recorded on tickets if made in response to a call. (Doc. 26, Day depo. at 8). Fujitec's responsibilities under the MSA included maintenance, inspection of the cables, and replacement of the cables when necessary. (Doc. 28, Kennedy depo. at 67, 78). Cables are inspected when elevator maintenance is performed (Id. at 67) and are occasionally replaced because of excessive wear or broken strands (Doc. 26, Day depo. at 22). Day, a Fujitec elevator mechanic assigned to the NYT Building at the time of the Shannon accident, inspected the cable involved in the Elevator P14 accident prior to December 30, 2011. (Doc. 26, Day depo. at 3, 11, 16). Fujitec's records show that no repairs were performed on Elevator P14 from June 30, 2011 to December 29, 2011. (Doc. 25, Carlos Aff., Exh. 5, ¶ 3). Sean Kennedy, a Fujitec maintenance technician who was covering for Day at the NYT Building on the day of the Shannon incident and for the prior four days, did not perform any maintenance on Elevator P14 and did not inspect the elevator prior to the incident. (Doc. 28, Kennedy depo. at 19-20, 24-25). Elevator P14 was not undergoing maintenance or repair and was in use as a regular passenger elevator when it fell on December 30, 2011. (Doc. 25, Exh. 5, Carlos Aff., ¶ 4).

2. The Travelers Policy

Travelers issued to Fujitec at its Mason, Ohio address a primary insurance policy, No. TC2J-GLSA-134D4544-TIL-11 (Travelers Policy). (Doc. 4, Exh. A). The policy period was March 31, 2011 to March 31, 2012. The Travelers Policy provided CGL coverage. (Id. , ¶ 4). The "[CGL] Coverage Form" of the Travelers Policy lists three types of coverage under "Section I-Coverages." (Id. , Exh. A at 15). The first is "Coverage A Bodily Injury and Property Damage Liability." (Id. ). The Travelers Policy states that coverage will be provided for bodily injury and property damage as follows:

1. Insuring Agreement

a. We [Travelers] will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply. We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result. But:

(1) The amount we will pay for damages is limited as described in Section III-Limits of Insurance; and

(2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

....

b. This insurance applies to ‘bodily injury’ and ‘property damage’ only if:

(1) The ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage territory’;

(2) The ‘bodily injury’ or ‘property damage’ occurs during the policy period; ....

Id.

Under the Travelers Policy, "[CGL] Coverage is Subject to a General Aggregate Limit." (Id. , Exh. A at 13). The "General Aggregate Limit (Other than Products-Completed Operations)" is $15 million. (Id. ). The "Products-Completed Operations Aggregate Limit" is $2 million. (Id. ). The "Each Occurrence Limit" is $1 million. (Id. ).

The "Insuring Agreement" provides under "Section I-Coverages" that Travelers will cover damages for "bodily injury" that is caused by an "occurrence" in the "coverage territory." (Id. at 15, § 1(a)). Travelers has the right and duty to defend against a suit seeking damages for bodily injury, but the right and duty to defend end when Travelers has "used up the applicable limits of insurance in the payment of judgments or settlements" or medical expenses under the applicable "Coverages." Id. "Section III-Limits of Insurance," as referenced in § 1(a)(1) of the "Insuring Agreement," provides at ¶ 3: "The Products-Completed Operations Aggregate Limit [$2 million] is the most [Travelers] will pay under Coverage A for damages because of ‘bodily injury’ and ‘property damage’ included in the ‘products-completed operations hazard.’ " (Id. , Exh. A at 24). "Section V-Definitions" at ¶ 16 defines "[p]roducts-completed operations hazard" as follows:

a. Includes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent arising out of ‘your product’ or ‘your work’ except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, ‘your work’ will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

(Id. at 28-29). Paragraph 22 defines "[y]our work" as used in ¶ 16(a)(2) to:

a. Mean[ ]:

(1) Work or operations performed by [Fujitec] or on your behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of ‘your work,’ and

(2) The providing of or failure to provide warnings or instructions.

(Id. at 29-30).

Thus, under the Travelers Policy, a claim for bodily injury falls within the...