Wausau Underwriters v. State Auto. Mut.

557 F.Supp.2d 502

WAUSAU UNDERWRITERS INSURANCE COMPANY, and Employers Insurance Company of Wausau, Plaintiffs, v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, State Auto Property and Casualty Insurance Company, Erie Insurance Company, and Schuylkill Stone, Inc., Defendants.

Civil Action No. 07-1316(JEI).

United States District Court, D. New Jersey.

June 6, 2008.

COPYRIGHT MATERIAL OMITTED

Jaffe & Asher, LLP, by Marshall T. Potashner, Esq., Krishna J. Shah, Esq., New York, NY, for Plaintiffs Wausau Underwriters Insurance Company and Employers Insurance Company of Wausau.

McKissock & Hoffman, PC, by John J. McGrath, Esq., Haddonfield, NJ, for Defendants State Automobile Mutual Insurance Company and State Auto Property and Casualty Insurance Company.

Montgomery Chapin & Fetten, by Glenn A. Montgomery, Esq., Bridgewater, NJ, for Defendant Erie Insurance Company.

Collier & Basil, PC, by Richard F. Collier, Jr., Esq., Robert J, Basil, on brief, Princeton, NJ, for Defendant Schuylkill Stone, Inc.

OPINION

IRENAS, Senior District Judge:

This is an insurance coverage dispute among Defendant Schuylkill Stone, Inc., ("Schuylkill"), the insured, and its various insurers, Plaintiffs Wausau Underwriters Insurance Company, and Employers Insurance Company of Wausau (collectively, "Wausau"); and Defendants State Automobile Mutual Insurance Company, State Auto Property and Casualty Insurance Company (collectively, "State Auto"), and Erie Insurance Company ("Erie").¹ Wausau is defending Schuylkill, under a complete reservation of rights, in a state court lawsuit involving stone fascia allegedly manufactured or distributed by Schuylkill.² Its defense of Schuylkill notwithstanding, Wausau asserts that under the relevant policies, it is not obligated to defend or indemnify Schuylkill in the Laurel Creek Litigation. Wausau further asserts that State Auto and Erie are obligated to participate in Schuylkill's defense and indemnify Schuylkill. State Auto and Erie deny that their policies cover the Laurel Creek Litigation. Schuylkill asserts that the relevant Wausau policies cover the Laurel Creek Litigation.³

Currently before the Court are: (1) Schuylkill's Motion for Judgment on the Pleadings with respect to Wausau's alleged duty to defend, and Motion for a Stay with respect to Wausau's alleged duty to indemnify (Docket # 45); (2) Wausau's Cross-Motion for Summary Judgment against Schuylkill / Motion for Summary Judgment on its claims against State Auto and Erie. (Docket # 49); (3) State Auto's Cross-Motion for Summary Judgment against Wausau (Docket # 56); and (4) Erie's Cross-Motion for Summary Judgment against Wausau (Docket # 59).

I.

The relevant facts are undisputed.

The Underlying State Court Litigation

Currently pending in the Superior Court of New Jersey is a lawsuit (the Laurel Creek Litigation) brought by The Townhomes at Laurel Creek Country Club Condominium Association, Inc. (the "Laurel Creek Plaintiffs").⁴ The Laurel Creek Plaintiffs seek compensation for many asserted defects in their property,⁵ which were allegedly caused by the defective design, construction and workmanship of the various defendants to the litigation.

Schuylkill first became involved in the Laurel Creek Litigation on December 16, 2005, when Bell Supply Company ("Bell Supply"), an original defendant to the action, filed a third-party complaint against Schuylkill. (Shah Aff. Ex. 2) The Laurel Creek Plaintiffs allege that Bell Supply "supplied the materials for the stone fascia and other materials utilized in the construction of the Laurel Creek Carriage homes in question." (Id.) Bell Supply, in its third-party complaint, seeks contribution and indemnification from Schuylkill. (Id.) The Bell Supply third-party complaint makes no allegations about Schuylkill's relationship to Bell Supply, nor any allegations about Schuylkill's involvement in the events and circumstances that gave rise to the Laurel Creek Litigation.⁶

Sometime after Bell Supply filed its third-party complaint, the Laurel Creek Plaintiffs amended their complaint to include Schuylkill as a direct defendant.⁷ The Laurel Creek Complaint makes no specific allegations as to Schuylkill, except to allege that, "[a]t all times relevant herein, Schuylkill Stone Inc., was a manufacturer and/or distributor of the materials utilized in the construction of the stone fascia of the Laurel Creek Carriage Homes in question." (Shah Aff. Ex. 2) Judgment is demanded against "Defendants" (one of which is Schuylkill) for damages arising from: (1) breach of the implied warranty of habitability; (2) breach of the implied duty of good workmanship; (3) breach of the duty to exercise reasonable care in the design and construction of the homes;⁸ and (4) "failure to properly design and/or manufacture the products listed herein which were used on the premises of Laurel Creek, and failed to adequately warn foreseeable users of the potential dangers of these products." (Id.)⁹ This last portion of the complaint seems to be referencing the list of all the alleged problems with the Laurel Creek properties. (Id.) The only item that appears to have any connection to Schuylkill is ¶ 13 m.: "the stone fascia located on the outside of all the homes is deteriorating."

The Insurance Policies at Issue

All three insurance companies (Plaintiff Wausau, Defendant State Auto, and Defendant Erie) agree that their Commercial General Liability ("CGL") policies have the same provisions and exclusions, but differ with respect to policy periods.

In 2003, Environmental Materials, LLC ("Environmental Materials"), purchased CGL insurance from Plaintiff Employers Insurance Company of Wausau, with a policy period of April 1, 2003, to April 1, 2004. (Shah Aff. Ex. 7) Schuylkill was named an additional insured under the policy. (Id.) The following year, 2004, Environmental Materials purchased another CGL policy from Plaintiff Wausau Underwriters Insurance Company, with a policy period of April 1, 2004, to April 1, 2005. (Shah Aff. Ex. 8) Schuylkill was named an additional insured under that policy as well. (Id.) The Wausau policies' relevant terms, quoted and discussed infra, are identical to each other.

In 1999, 2000, and 2001, State Auto issued CGL policies to Schuylkill with policy periods of May 10, 1999, to May 10, 2000; May 10, 2000, to May 10, 2001; and May 10, 2001, to May 10, 2002, respectively. (Shah Aff. Ex. 10-12)¹⁰ The State Auto policies' relevant terms, quoted and discussed infra, are identical to each other and are, in all substantive respects, identical to the Wausau policies' terms.¹¹

In 1993, Erie issued CGL insurance to Schuylkill, with an inception date of May 10, 1993, and a cancellation date of May 10, 1999. (Shah Aff. Ex. 19) The Erie policy's relevant terms, quoted and discussed infra, are identical to the Wausau policies' terms and State Auto policies' terms.

The Initiation of this Federal Suit

Sometime after Bell Supply filed its third-party complaint against Schuylkill, Wausau began defending Schuylkill under a complete reservation of rights. At the same time, Wausau wrote to State Auto and Erie, tendering the defense to them. (Shah Ex. 13) Neither company accepted the tender of defense. Both companies responded that their policies did not cover the Laurel Creek Litigation because there was no "occurrence" (as defined in the policies) that would trigger coverage, and because the alleged loss occurred outside the policy periods. (Shah Ex. 14, 21)

A few months later, Wausau filed the present suit, asserting three claims against State Auto and Erie, and asserting two claims against Schuylkill. Against State Auto and Erie, Wausau seeks: (1) a declaratory judgment that State Auto and Erie are required to participate in the defense of, and to indemnify Schuylkill in the Laurel Creek Litigation (Count 1 of the Complaint); (2) damages for State Auto's and Erie's proportionate share of Laurel Creek Litigation defense costs (Count 2); and (3) attorneys fees and costs arising out of this coverage litigation, pursuant to N.J. Ct. R. 4:42-9(a)(6) (Count 3). Against Schuylkill, Wausau seeks: (1) a declaratory judgment that Wausau is not obligated to defend or indemnify Schuylkill in the Laurel Creek Litigation (Count 4); (2) damages resulting from Wausau's alleged unjust enrichment of Schuylkill by providing Schuylkill with a defense in the Laurel Creek Litigation, when Wausau was allegedly under no duty to do so (Count 5).

All three insurance companies move for summary judgment. Schuylkill moves for partial judgment on the pleadings and to stay a portion of this litigation pending the outcome of the Laurel Creek Litigation. For the reasons set forth below, the Court will grant Schuylkill's Motion to Stay, stay the issue of Schuylkill's indemnification as between the various insurers, and deny all remaining motions to the extent not stayed.

II.

"Under Rule 56(c), summary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)).

In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the nonmoving party. Pollock v. Am. Tel. & Tel Long Lines, 794 F.2d 860, 864 (3d Cir.1986). "`With respect to an issue on which the nonmoving party bears the burden of proof, the burden on the moving party may be discharged by `showing'— that is, pointing out to the district court— that there is an absence of evidence to support the nonmoving party's case.'" Conoshenti v. Pub. Serv. Elec. & Gas, 364 F.3d 135, 145-46 (3d Cir.2004) (quoting Celotex, 477 U.S. at 325, 106 S.Ct. 2548). The role of the Court is not "to weigh the evidence and...