Bits & Pieces

North Star Mut. Ins. Co. v. Rose

United States District Court,

E.D. Oklahoma.



Roddy ROSE, individually and d/b/a Rose Heat and Air, James Quigley and Mary Quigley, Defendants.


Case No. CIV–13–373–RAW.

Signed June 17, 2014.


Derek Franseen, Beeler Walsh & Walsh, Oklahoma City, OK, for Plaintiff.


Warren Gotcher, Gotcher & Beaver, McAlester, OK, for Defendants.



RONALD A. WHITE, District Judge.

*1 [1][2] Before the court is the motion of the plaintiff, North Star Mutual Insurance Company (“North Star”) for summary judgment. Plaintiff filed this action seeking a declaratory judgment FN1 that is has no duty to defend or indemnify defendant Roddy Rose (“Rose”) in a lawsuit brought in state court by the other defendants, James and Mary Quigley (“the Quigleys”). FN2 The standard for the granting of a summary judgment motion is set forth in Rule 56(a) F.R.Cv.P. The court views the evidence and draws reasonable inferences in the light most favorable to the nonmoving party.   Brecek & Young Advisors, Inc. v. Lloyds of London Syndicate 2003, 715 F.3d 1231, 1237 (10th Cir.2013).


The pertinent standards for insurance policy construction and interpretation under Oklahoma law are set forth in Canal Ins. Co. v. Montello, Inc., 2013 WL 6732658 at **3–4 (N.D.Okla.2013). This court will not reiterate those, but will review to specific standards as relevant to this analysis.


The underlying facts are largely undisputed. The Quigleys hired Rose to install an HVAC (heating, ventilation and air conditioning) unit at their home located within Pittsburg County, Oklahoma. The work was performed from January, 2008 until October, 2008. While the work was being performed on the residence, Rose and plaintiff entered into a contract for insurance coverage. The effective dates of the policy were July, 2008 through July, 2009. Beginning in late 2009, the Quigleys began experiencing heating and cooling problems, along with other deficiencies with the unit. Ultimately, the Quigleys sued Rose in the District Court of Pittsburg County [CJ–2012–307] for (1) breach of implied warranty and (2) breach of contract. North Star received notice of a property loss by Rose on January 2, 2013.FN3


[3] Under this CGL (Commercial General Liability Coverage) policy, an “occurrence” is defined as “an accident, including continuous or repeated exposures to substantially the same general harmful conditions.” (# 32–6, page 44 of 56, ¶ 13). North Star does not appear to dispute that the facts alleged in the Pittsburg County lawsuit satisfy this definition. “Faulty workmanship can constitute an occurrence that triggers coverage under a CGL policy if (1) the property damage was not caused by purposeful neglect or knowingly poor workmanship, and (2) the damage was to non-defective portions of the contractor’s or subcontractor’s work or to third-party property.” Mt. Hawley Ins. Co. v. Creek Side at Parker Homeowners Assoc., Inc., 2013 WL 104795 (D.Colo.2013) (citing Greystone Construction, Inc. v. National Fire & Marine Ins. Co., 661 F.3d 1272, 1286–87 (10th Cir.2011)).


[4] North Star does contend, however, that certain exclusions in the policy preclude coverage.FN4 Cited first is exclusion b (contractual liability), which states in pertinent part that “[t]his insurance does not apply to … ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages … [t]hat the insured would have in the absence of the contract or agreement.”


*2 North Star argues that contractual liability exclusions operate to deny liability for “property damage” resulting from breach of contract. Rose disagrees, contending that a claim such as here for breach of implied warranty does not implicate duties under the contract but rather duties implied by law. In defendant’s words: “A warranty does not involve the assumption of a liability.” (Response [# 34] at 8). There appears to be a split of authority on this issue, and Oklahoma law is not certain. Rose cites Townsend Ford, Inc. v. Auto–Owners Ins. Co., 656 So.2d 360, 364–65 (Ala.1995), in which the Supreme Court of Alabama seemingly held that breach of warranty claims do not fall within the contractual exclusion. This court notes, however, that in Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. Catherine of Siena Parish, –––F.Supp.2d ––––, 2014 WL 1653516 (S.D.Ala.2014), a district court said that Townsend Ford only dealt with express warranties and that “under binding Alabama law the breach of contract claim and the implied warranty claim are excluded from coverage under the contractual liability exclusion.” Id. at ––––, 2014 WL 1653516, at *9.FN5 Nevertheless, Rose might well have cited Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214, 222 (5th Cir.2005) (“[C]ourts have consistently interpreted the phrase ‘liability assumed by the insured under any contract’ to apply only to indemnification and hold-harmless agreements, whereby the insured agrees to ‘assume’ the tort liability of another. This phrase does not refer to the insured’s breach of its own contracts.”)(footnote omitted).


[5][6][7] In Oklahoma, by contrast, the district court in Boggs v. Great Northern Ins. Co., 659 F.Supp.2d 1199 (N.D.Okla.2009) referred to “[t]he basic assumption that general liability policies do not cover damages for breach of contract”. Id. at 1210. “The phrases ‘legally obligated to pay’ and ‘liability imposed by law’ refer only to tort claims and not contract claims.” Id. (quoting VBF, Inc. v. Chubb Group of Ins. Companies, 263 F.3d 1226, 1231 (10th Cir.2001)). This court does not find the reading of the exclusion urged by North Star to necessarily be a natural one.FN6 As the Supreme Court of Wisconsin stated in Am. Fam. Mut. Ins. v. Am. Girl, Inc., 268 Wis.2d 16, 673 N.W.2d 65 (2004), “[t]he term ‘assumption’ must be interpreted to add something to the phrase ‘assumption of liability in a contract or agreement.’ Reading the phrase to apply to all liabilities sounding in contract renders the term ‘assumption’ superfluous.” Id. at 80–81. FN7 Still, the court in Boggs cited Tenth Circuit authority, which is of course binding on this court as well. The court adopts the discussion in Boggs and rules in favor of the plaintiff as to the contractual liability exclusion.FN8


In the interest of thoroughness, the court will address plaintiff’s remaining arguments. Next, North Star relies upon exclusion m, which is an “impaired property” exclusion. Such a provision “precludes coverage for property damage to property, other than the insured’s work or product, which is not physically damaged and which damage is caused by the insured’s faulty work or product.” 9A Couch on Insurance, § 129:21 (3d ed.)(footnote omitted). An example might be where the alleged faulty workmanship involved a boat engine, and the insured is sued for loss of use of the boat itself. “[T]he exclusion does not apply where there is physical damage to the other property into which the insured’s work or product has been incorporated or if the insured’s work cannot be repaired or replaced without causing physical injury to the other property.” (emphasis added)(footnote omitted).


*3 [8][9] Here, North Star concedes that “there is a potential for damage to property surrounding the HVAC installation due to removing sub-flooring to reach the ducts in order to rectify the situation….” (Motion at 8). Thus, under the second half of the treatise sentence quoted above, the court finds that exclusion m does not apply. Secondarily, North Star argues that exclusion n would preclude coverage for such a claim. The language provides exclusion for “[d]amages claimed … [involving the insured’s product, work or impaired property] … If such product, work or property is withdrawn or recalled from the market….” As the language makes obvious, “[e]xclusion n protects insurance companies against liability for the costs of recalls.”   Harleysville Worcester Ins. Co. v. Paramount Concrete, Inc., –––F.Supp.2d ––––, ––––, 2014 WL 1305070, *13 (D.Conn.2014). Replacing a single HVAC unit is not a “recall.” Plaintiff’s arguments as to exclusion m and exclusion n are both rejected.


The foregoing addresses the exclusions which plaintiff raises in its motion. In defendants’ response, however, another exclusion is discussed and is further addressed in plaintiff’s reply. Therefore, the court will address it. The policy states that coverage is not provided for “property damage” to “(6) That particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” A further provision, however, sets forth an exception to the exclusion. It states that “Paragraph (6) of this exclusion does not apply to ‘property damage’ included in the ‘products-completed operations hazard.’ ” (# 32–6 at pages 34–35 of 56). Rose notes that yet another provision under exclusion l states that coverage is not provided for “ ‘property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’ ” Id. at page 35 out of 56. Finally, the term “products-completed operations hazard” is defined (in pertinent part) as property damage occurring away from premises the insured owns or rents, and arising out the insured’s product or work, except “[w]ork that has not yet been completed or abandoned.” Id. at page 44 out of 56, ¶ 16.


[10] Rose argues that the two provisions, seemingly both providing and negating an exception for the “products-completed operations hazard” renders the policy ambiguous. “When an insurance contract is susceptible of two meanings … words of inclusion are liberally construed in favor of the insured and words of exclusion strictly construed against the insurer.” Phillips v. Estate of Greenfield, 859 P.2d 1101, 1104 (Okla.1993). This argument appears to have been rejected in Auto–Owners Ins. Co. v. Potter, 105 Fed.Appx. 484 (4th Cir.2004), in which the court noted that “[p]aragraph j excludes from coverage various types of property damage[;] however, it also details situations in which the exclusion does not apply, including products-completed operations.” The court continued: “[f]urthermore, other policy exclusions apply only to products—completed operations coverage, demonstrating that such coverage is subject to more, not fewer exclusions than the general coverage.” Id. at 492. In any event, the incident involved here would not fit within the “products-completed operations hazard” as interpreted by the Tenth Circuit in Advantage Homebuilding, LLC v. Maryland Cas. Co., 470 F.3d 1003, 1012 (10th Cir.2006) (coverage for shoddy work excluded). Thus, even if the provisions are ambiguous, it is not a pertinent ambiguity.


*4 [11][12][13] Finally, Rose seeks to invoke the doctrine of reasonable expectations. Oklahoma applies this doctrine “ ‘to the construction of ambiguous insurance contracts or to contracts containing exclusions which are masked by technical or obscure language or which are hidden in policy provisions.’ ” Tomlinson v. Combined Underwriters Life Ins. Co., 708 F.Supp.2d 1284, 1291 (N.D.Okla.2010) (quoting Max True Plastering Co. v. U.S. Fidelity and Guar. Co., 912 P.2d 861, 863 (Okla.1996)). “ ‘Under this doctrine, if the insurer or its agent creates a reasonable expectation of coverage in the insured which is not supported by policy language, the expectation will prevail over the language of the policy.’ ” Id. “In other words, ‘when construing an ambiguity or uncertainty in an insurance policy, the meaning of the language is not what the drafter intended it to mean, but what a reasonable person in the position of the insured would have understood it to mean.’ ” Id. (quoting Spears v. Shelter Mut. Ins. Co., 73 P.3d 865, 868 (Okla.2003)). The court is not persuaded the doctrine is applicable to the case at bar. As discussed, some of the policy provisions are not pellucid, but Tenth Circuit authority has resolved the issues pertinent to this case.FN9


It is the order of the court that the plaintiff’s motion for summary judgment (# 32) is GRANTED.


FN1. The Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., is not an independent grant of jurisdiction. See Devon Energy Production Co., L.P. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1202 (10th Cir.2012). Here, the court exercises jurisdiction pursuant to 28 U.S.C. § 1332 (diversity jurisdiction) and thus Oklahoma law applies to the interpretation of the policy. See Houston Gen. Ins. Co. v. Am. Fence Co., Inc., 115 F.3d 805, 806 (10th Cir.1997). Additionally, the court has discretion whether to hear claims for declaratory judgment. See Mid–Continent Cas. Co. v. Village at Deer Creek Homeowners Ass’n, Inc., 685 F.3d 977, 980 (10th Cir.2012). In deciding whether to hear this action, the court considered the five factors listed in State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir.1994).


FN2. The response to the present motion is only on behalf of defendant Rose. The Quigleys were served but have not entered an appearance in the case. Counsel for Rose initially entered an appearance for all defendants (# 10), but later withdrew the appearance for the Quigleys. See ## 16, 21 & 22.


FN3. Rose does not admit the allegations in the state court lawsuit, but it is undisputed that the allegations have been made.


FN4. “A basic rule of insurance law provides that the … insurer has the burden of showing that a loss falls within an exclusionary clause of the policy.” Pitman v. Blue Cross & Blue Shield of Okla., 217 F.3d 1291, 1298 (10th Cir.2000).


FN5. See also Employers Mut. Cas. Co. v. Donnelly, 154 Idaho 499, 300 P.3d 31 (2013) (damages awarded to homeowners in underlying dispute concerning construction contract, based on breach of implied warranty of workmanship, sounded in contract, rather than tort and therefore coverage excluded under this type of policy provision).


FN6. “The construction of an insurance policy should be a natural and reasonable one, fairly constructed to effectuate its purposes, and viewed in light of common sense so as not to bring about an absurd result.”   Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla.1991).


FN7. “A contract shall not be interpreted in a manner that leaves words without meaning and renders language superfluous.” Canal Ins. Co. v. Montello, Inc., 2013 WL 6732658, *3 (N.D.Okla.2013) (citing Bituminous Casualty Corp. v. Cowen Constr., Inc., 55 P.3d 1030, 1033 n. 15 (Okla.2002)).


FN8. The Boggs court was addressing GCL policies in general rather than the contractual liability provision, but this court sees no argument that the exclusionary provision somehow expands coverage.


FN9. In a subsidiary argument, Rose argues for coverage under the “Commercial Inland Marine” policy between the parties. Plaintiff asserts this is a separate policy with a limit of $500, which appears to be correct. (See # 32–6, page 2 of 56). Rose has not demonstrated that this policy provides coverage regarding the HVAC installation, for the reasons stated in plaintiff’s reply. (# 39 at 1–2).


Webster v. USA Truck, Inc.

United States Court of Appeals,

Tenth Circuit.

Eric Brown, Plaintiff–Appellant,


Diana WEBSTER, Plaintiff,


USA TRUCK, INC.; Jimmy Watkins, Defendants–Appellees.


No. 13–6250.

June 17, 2014.


Eric Brown, Kansas City, MO, pro se.


Victor A. Bergman, David C. Degreeff, Shamberg, Johnson & Bergman, Kansas City, MO, Reid Robison, McAfee & Taft, Tulsa, OK, Curtis J. Thomas, McAfee & Taft, Oklahoma City, OK, for Plaintiff.


Frank Jason Goodnight, Curtis John Roberts, Jeremy K. Ward, Feldman, Franden, Woodard & Farris, Tulsa, OK, for Defendant–Appellee.


Before LUCERO and McKAY, Circuit Judges, and BRORBY, Senior Circuit Judge.



CARLOS F. LUCERO, Circuit Judge.

*1 Plaintiff Eric Brown, appearing in this court pro se, appeals from the district court’s order awarding him $58,172.82 in personal injury damages. We have jurisdiction under 28 U.S.C. § 1291 and affirm.



Brown and his long-time companion, Diana Webster, operated a trucking business called Crosswinds Trucking Company with their 2005 Freightliner Tractor. On August 28, 2009, defendant Jimmy Watkins backed his tractor-trailer into the front driver’s side of Brown’s parked tractor-trailer three times at low speed while attempting to park at a rest area in Oklahoma. At the time of the accident, Brown was asleep in the sleeping compartment at the rear of his truck’s cab. He was awakened by the first impact and was injured by the repeated impacts.


In July 2011, through counsel, Brown filed the underlying negligence suit in state court against Watkins and Watkins’ employer, USA Truck, Inc. Defendants removed the case to federal court. In August 2011, an amended complaint added Webster as a plaintiff, but she was dismissed without prejudice by stipulation of the parties in May 2012. Both defendants admitted that Watkins was acting in the scope of his employment at the time of the accident, and Watkins admitted that he was at fault. The only dispute was the amount of damages to be awarded to Brown for his personal injuries caused by the accident. Brown, who was forty-one years old at the time of the accident, claimed that he became totally disabled as a result of his injuries. Defendants disputed Brown’s contentions that his asserted injuries resulted from the August 28, 2009, accident and that his asserted medical expenses were necessary.


At the parties’ request, the issue of damages was tried without a jury. After a five-day bench trial, the court entered a forty-seven page “Findings of Fact, Conclusions of Law, and Judgment,” which the court subsequently amended. Brown was awarded a total of $58,172 .82 in damages and $16,500 in costs.


Brown filed his notice of appeal pro se, and the court granted his attorneys’ motion for leave to withdraw from the case. The court denied Brown’s two subsequent, basically identical post judgment filings, which the court construed as a single motion to alter or amend the judgment. Brown attached to each of these filings documents from the Social Security Administration indicating that on January 31, 2013, it had determined that he became disabled on August 28, 2009, the date of the accident caused by Watkins. The district court concluded that this evidence was available long before the April 2013 trial and did not justify relief from the judgment.



Because Brown appears in this court pro se, we construe his pleadings liberally. See Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972) (per curiam). We “have tried to discern the kernel of the issues [Brown] wishes to present on appeal.” de Silva v. Pitts, 481 F.3d 1279, 1283 n. 4 (10th Cir.2007).FN1


Brown argues that: (1) his former counsel improperly omitted evidence that the Social Security Administration determined in January 2013 that Brown became disabled from working on August 28, 2009; (2) his former counsel improperly agreed to the dismissal of Webster and her claim for business damages, and improperly failed to include a claim for business damages in his suit, in violation of professional standards; (3) his former counsel improperly submitted Crosswinds’ tax returns for 2007–2010 to an economic expert, allowing the expert to understate Crosswinds’ future earnings capacity if Brown had not been injured; (4) his former counsel improperly failed to allow him to view videos or have written transcripts of depositions that were not viewed in the courtroom, depriving him of the opportunity to point out discrepancies in those video depositions to his counsel; (5) his former counsel improperly failed to use the evidence that USA Truck paid to replace a part on his Freightliner that could not have been broken in a low-speed collision, in order to prove that Watkins’ truck did not hit his truck at a low speed and that he was thrown violently when his truck was struck; (6) the district court erred in finding his neck and right shoulder injuries had resolved because evidence that he was referred to pain management and physical therapy did not prove that the injuries healed; and (7) his damages award could not be offset by insurance proceeds or Social Security disability benefits.


*2 [1] Brown’s first five arguments do not challenge the district court’s findings and conclusions based on the evidence adduced at trial, but rather the alleged improper conduct by his former counsel. “The general rule in civil cases is that the ineffective assistance of counsel is not a basis for appeal.” Nelson v. Boeing Co., 446 F.3d 1118, 1119 (10th Cir.2006). “If a client’s chosen counsel performs below professionally acceptable standards, with adverse effects on the client’s case, the client’s remedy is not reversal, but rather a legal malpractice lawsuit against the deficient attorney.” Id. As a result, Brown’s first five issues are improperly raised in this appeal.


Brown next challenges the district court’s finding that his neck and right shoulder pain resolved by early March 2010 on the grounds that “he reported essentially no pain or minimal pain” at that time, and “any shoulder and right arm pain currently experienced by Brown were not caused by the August 28 accident.” We conclude that Brown failed to provide the necessary materials for our review of this issue.


“In an appeal from a bench trial, we review the district court’s factual findings for clear error and its legal conclusions de novo.” Keys Youth Servs., Inc. v. City of Olathe, 248 F.3d 1267, 1274 (10th Cir.2001). We will reverse a finding of fact only “if it is without factual support in the record” or if, “after reviewing all the evidence,” we are “left with a definite and firm conviction that a mistake has been made.” Manning v. United States, 146 F.3d 808, 812 (10th Cir.1998) (quotation omitted). “On appeal, we view the evidence in the light most favorable to the district court’s ruling and must uphold any district court finding that is permissible in light of the evidence.” Exxon Corp. v. Gann, 21 F.3d 1002, 1005 (10th Cir.1994) (citation omitted). “This court further gives due regard to the district court’s opportunity to judge the credibility of witnesses.” Manning, 146 F.3d at 813 (citing Fed.R.Civ.P. 52(a)).


[2] Brown failed to file the relevant trial transcript or exhibits for our review. The burden was on Brown, as the appellant, to “provide all portions of the transcript necessary to give the court a complete and accurate record of the proceedings related to the issues on appeal.” 10th Cir. R. 10.1(A)(1). When an appellant contests the sufficiency of the evidence, “the entire relevant trial transcript must be provided.” Id. Because Brown failed to provide the relevant materials for his challenge to the sufficiency of the evidence supporting the district court’s finding about his neck and right shoulder pain, his challenge necessarily fails. Cf. United States v. Brody, 705 F.3d 1277, 1280 (10th Cir.2013) (“An appellant’s failure to file a trial transcript precludes review of a conviction for sufficiency of the evidence. By failing to file a copy of the trial transcript as part of the record on appeal, the appellant waives any claims concerning the sufficiency of the evidence at trial.” (quotation omitted)).


*3 Finally, Brown argues that his damages award could not be offset by insurance proceeds or Social Security disability benefits. He points to no evidence that his damages award was offset by any such proceeds, however, and our review of the district court’s “Findings of Fact, Conclusions of Law, and Judgment,” reflects that no offset was made. Brown’s argument is therefore without merit.





FN* After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R.App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R.App. P. 32.1 and 10th Cir. R. 32.1.


FN1. Defendants ask us to dismiss the appeal due to Brown’s failure to follow certain procedural rules in the preparation of his brief and supporting materials. Although “a pro se litigant … must follow the same rules of procedure that govern other litigants,” Green v. Dorrell, 969 F.2d 915, 917 (10th Cir.1992), we do not need to resolve this appeal on procedural grounds.


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