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Essex Insurance Co. v. Morton Construction, LLC

United States District Court, E.D. Kentucky, Southern Division London

February 7, 2014




This matter is before the Court on the Plaintiff's Motion for Summary Judgment. [R. 24.] The Plaintiff, Essex Insurance Company, has argued that the commercial liability insurance policy that it issued to Defendant Morton Construction, LLC does not require it to defend or indemnify the Defendant in the underlying state court action. For the reasons discussed below, the Plaintiff's Motion is GRANTED.



Plaintiff Essex Insurance Company ("Essex") issued a commercial general liability insurance policy, Policy No. 3DE7627, with effective dates of November 24, 2010, through November 24, 2011, to Defendant Morton Construction, LLC ("Morton"). [R. 24 at 1, 3.] The claim at issue arises out of an incident occurring on August 11, 2011, in Letcher County, Kentucky on the premises of Whitaker Bank. Whitaker Bank had contracted with Morton to perform certain renovations on the bank building, and Morton then subcontracted with Johnson Masonry to remove brick from the side of the building. [ Id. at 2; R. 25 at 1.] James Johnson, Jr. who was the owner of Johnson Masonry, was injured while performing the work on Whitaker Bank. Johnson then brought suit against both Whitaker Bank and Morton Construction in Letcher Circuit Court, alleging negligence on the part of Whitaker Bank and also on the part of Morton Construction who was acting as the Bank's retained agent. [R. 24 at 2.] The parties do not dispute that at the time Johnson was injured he was working as a subcontractor for Morton. [ Id. at 3, Ex. 2 at 1-2.] Johnson's complaint further alleged that he was entitled to damages for medical expenses, pain and suffering, loss of earning capacity, parental loss of consortium, and punitive damages.

Essex has undertaken Morton's defense in the state court action subject to a reservation of rights. [ Id. at 3.] Morton, however, also insists that its insurance policy requires Essex to indemnify it against any judgment that may be awarded to Johnson in the state court action. In response, Essex has filed suit in this Court, pursuant to the Court's diversity jurisdiction, seeking a declaratory judgment that it is not required to either defend or indemnify Morton under the policy. According to Essex, the endorsements in the insurance policy contain various exclusions to coverage, including exclusions for injuries sustained by subcontractors, certain damages sustained by independent contractors, and punitive damages. [R. 24 at 3-4.] Morton, however, contends that the language of the insurance policy creates an ambiguity concerning coverage, and that because of the alleged inconsistencies and unexplained ambiguities in the policy, any doubt as to whether or not there is coverage should be resolved in Morton's favor. [R. 25 at 2-3.]


Summary judgment is appropriate when there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). Summary judgment is improper, however, if genuine factual issues exist that "may reasonably be resolved in favor of either party, " and therefore must be submitted to a jury. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In applying the summary judgment standard, the Court must review the facts and draw all reasonable inferences in favor of the non-moving party. Logan v. Denny's, Inc., 259 F.3d 558, 566 (6th Cir. 2001) (citing Liberty Lobby, 477 U.S. at 255).

The moving party has the initial burden of demonstrating the basis for its motion and identifying those parts of the record that establish the absence of a genuine issue of material fact. Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002). The movant may satisfy its burden by showing "that there is an absence of evidence to support the non-moving party's case." Celotex Corp., 477 U.S. at 325. Once the movant has satisfied this burden, the nonmoving party must go beyond the pleadings and come forward with specific facts to demonstrate that a genuine issue exists. Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002) (citing Celotex Corp., 477 U.S. at 324). Yet even when construing the evidence in the light most favorable to the non-moving party, the non-moving party still "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushitu Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Rather, the Federal Rules of Civil Procedure require the non-moving party to present "specific facts showing that there is a genuine issue for trial." Id. (citing Fed.R.Civ.P. 56(e)).


For purposes of jurisdiction, Essex is a citizen of Delaware, Morton is a citizen of Kentucky, and the amount in controversy is over $75, 000. Thus, this Court has diversity jurisdiction pursuant to 28 U.S.C. §1332, and must apply the laws of the state of Kentucky concerning insurance policies to determine the scope of Morton's coverage. See Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 563 (6th Cir. 2008). In doing so, this Court must follow the decisions of the highest court of Kentucky and may consider the appellate courts' decisions as persuasive. Id. In Kentucky, "the interpretation of insurance contracts is a matter of law for the Court" to decide, and is appropriately determined through summary judgment when there are no other factual issues in dispute. West Am. Ins. Co. v. Prewitt, 401 F.Supp.2d 781, 783 (E.D. Ky. 2005), aff'd, 208 F.Appx. 393 (6th Cir. 2006).

Under Kentucky law, "[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy, and as amplified, extended, or modified by any rider, indorsement, or application attached to and made a part of the policy." Ky. Rev. Stat. § 304.14-360. When interpreting an insurance contract, the policy "must be construed without disregarding or inserting words or clauses, and seeming contradictions should be harmonized if reasonably possible.'" Kemper Nat. Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 875-76 (Ky. 2002) (quoting Am. Jur. 2d, Insurance, § 275).

Kentucky courts have long recognized that for public policy reasons, insurance contracts "should be liberally construed and any doubts resolved in favor of the insured." Dowell v. Safe Auto Ins. Co., 208 S.W.3d 872, 878 (Ky. 2006). Courts should seek to interpret the policy according to the intent of the parties at the time they entered into the contract. Nationwide Mut. Ins. Co. v. Nolan, 10 S.W.3d 129, 132 (Ky. 1999). Where ambiguities in the policy exist, they are to be construed in favor of the insured and so as to effectuate coverage. Wolford v. Wolford, 662 S.W.2d 835, 838 (Ky. 1984); see also St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223, 227 (Ky. 1994) (stating that when provisions in an insurance policy conflict, "the contract shall be resolved to afford maximum coverage"); James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279 (Ky. 1991) ("Kentucky has consistently recognized that an ambiguous policy is to be construed to effectuate the purpose of indemnity.").

Despite a policy inclination of favoring the insured, however, "[t]he rule of strict construction against an insurance company certainly does not mean that every doubt must be resolved against it and does not interfere with the rule that the policy must receive a reasonable interpretation consistent with... the plain meaning and/or language of the contract.'" Scottsdale, 546 F.3d at 564 (quoting St. Paul, 870 S.W.2d at 226). "Insurance policies, like statutes, must receive a sensible construction." Id. (quoting Simpsonville Wrecker Serv. Inc. v. Empire Fire & Marine Ins. Co., 793 S.W.2d 825, 829 (Ky. App. 1989)). Indeed, Kentucky courts have recognized that "a liberal interpretation [of an insurance policy] is not synonymous with a strained one." K.M.R. v. Foremost Ins. Group, 171 S.W.3d 751, 753 (Ky. App. 2005). Thus, "courts should not rewrite an insurance contract to enlarge the ...

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