United States District Court, Eastern District of Kentucky, Southern Division, Pikeville
MEMORANDUM OPINION AND ORDER
Amul R. Thaper, United States District Judge
In another turn in this ongoing maze of litigation, American Towers LLC seeks insurance coverage from Nationwide Mutual Insurance Company for damages arising from a failed construction project. The insurance policy is the same policy governing the dispute between Nationwide and the contractor for the project, BPI, Inc. BPI is also the named insured on the policy. American Towers, while not a named insured, is an additional insured on the policy.
The parties disagree about whether Kentucky or West Virginia law governs their dispute. The answer comes from the Court’s previous opinion finding that West Virginia law controls the interpretation of the same insurance policy in the fight between BPI and Nationwide. To ensure a consistent and uniform interpretation of the same insurance policy, West Virginia law also controls the claims between American Towers and Nationwide.
The Court’s prior opinions fully set forth the details of this case. See R. 162; R. 163. For purposes of this issue, the Court provides a brief summary: American Towers, a Delaware limited liability company with Boston offices, hired BPI, a West Virginia corporation, as the general contractor for a construction project in Prestonsburg, Kentucky. See R. 162 at 1–2; R. 9 ¶¶ 1, 2. The project required BPI to build a cell tower, a tower compound, and an access road. See R. 162 at 1–2. Under the contract between BPI and American Towers, BPI agreed to maintain insurance, which it procured through Nationwide, an Ohio non-profit company. R. 167-1 ¶¶ 11.1.1–11.1.3; R. 27-2. That insurance policy listed American Towers as an additional insured. R. 27-2 at 63.
Less than one year after BPI and its subcontractors constructed the access road, the road collapsed, allegedly because of the faulty workmanship of BPI and its subcontractors. See R. 162 at 2. American Towers sued BPI and Nationwide, claiming that BPI breached the contract and Nationwide was responsible to American Towers as an additional insured. See R. 9 ¶¶ 71–91. Nationwide responded by seeking a declaration that it had no obligation to insure BPI. R. 27 at 15. After discovery, American Towers and Nationwide filed cross-motions for summary judgment. R. 136; R. 140.
Before deciding a motion for summary judgment, the Court must first determine what law applies. State law controls the interpretation of the insurance policy because the Court’s jurisdiction derives from the parties’ diversity of citizenship. Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995). Here, American Towers and Nationwide disagree on which state’s law governs. To resolve the dispute, the Court applies Kentucky’s choice-of-law rules. Sec. Ins. Co. of Hartford v. Kevin Tucker & Assocs., Inc., 64 F.3d 1001, 1005 (6th Cir. 1995) (“In a diversity action, the district court is obligated to apply the choice of law rules of the state in which it sits.”). Kentucky’s rules lead to the conclusion that West Virginia law must govern the dispute between American Towers and Nationwide.
I. West Virginia Law Controls the Dispute
A choice-of-law analysis is necessary only if the laws of the states actually conflict. See Asher v. Unarco Material Handling, Inc., 737 F.Supp.2d 662, 667 (E.D. Ky. 2010). The insurance dispute involves several different arguments, some of which may turn out differently under Kentucky and West Virginia law. First, the policy reimburses for damage caused only by an “occurrence.” R. 27-2 at 20. Kentucky and West Virginia courts may interpret “occurrence” as used in an insurance policy differently, compare Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 69, 73 (Ky. 2010), with Cherrington v. Erie Ins. Prop. & Cas. Co., 745 S.E.2d 508, 521 (W.Va. 2013), though the authoritative resolution of that issue depends on a decision from the Supreme Court of Appeals of West Virginia on Cherrington’s retroactivity, see R. 163 at 7.
Second, the states differ in when an insurer may rely on exclusionary provisions in the policy. Nationwide seeks to invoke various exclusionary provisions to avoid liability. See R. 136-1 at 20. Under West Virginia law, an insurer “must bring such [exclusionary] provisions to the attention of the insured” to take advantage of an exclusion. Am. States Ins. Co. v. Surbaugh, 745 S.E.2d 179, 184 (W.Va. 2013) (internal quotation marks omitted); see also Luikart v. Valley Brook Concrete & Supply, Inc., 613 S.E.2d 896, 901 (W.Va. 2005) (“[T]he insurer may avoid liability by proving that the insured read and understood the language in question, or that the insured indicated his understanding through words or conduct.” (internal quotation marks omitted)). In Kentucky, an insurer may rely on exclusions in a policy, but the burden is on the insured to “insist on a copy of the policy.” Ann Taylor, Inc. v. Heritage Ins. Servs., Inc., 259 S.W.3d 494, 498 (Ky. Ct. App. 2008) (internal quotation marks omitted). While Ann Taylor did not involve an additional insured, the court held that a certificate of insurance, akin to a brief summary of the policy, “should not be relied upon by a claimant for the full terms of the policy.” Id. at 501. Here, American Towers states that it “relied on” certificates of insurance, which did not explicitly state the relevant exclusions. R. 152 at 13. Because the certificates did not include exclusions and Nationwide allegedly did not provide American Towers with a copy of the policy, American Towers contends that Nationwide cannot rely on those exclusions. See R. 140 at 18. The resolution of that issue is impacted by which state’s law applies. Accordingly, the Court must look to Kentucky choice-of-law rules.
Under Kentucky law, the Court looks to the “most significant relationship” test in its choice-of-law analysis in a contract case. State Farm Mut. Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 878 (Ky. 2013) (quoting Restatement (Second) of Conflict of Laws § 188(1) (1971) (the “Restatement”)). In determining the most significant relationship, there are two relevant provisions of the Restatement: § 188 and § 6. Section 188(1) explains that the most significant relationship is determined “under the principles stated in § 6.”
The § 6 principles include: the needs of the interstate and international systems; the forum’s relevant policies; the relevant policies of other interested states, including their interests in the resolution of the issue at hand; the protection of justified expectations; the policies underlying the area of law; certainty, predictability and uniformity of the result; and ease in determination of the law. Restatement § 6(2). In applying § 6(2), § 188 directs courts to take into account the following factors: the location of the contracting and negotiation; the location of contract performance; the location of the contract’s subject matter; and the parties’ domiciles, residences, places of incorporation, and places of business. Restatement § 188; Hodgkiss-Warrick, 413 S.W.3d at 878–79.
Given the multitude of factors, it is not surprising that they “need not be given equal weight, ” but rather are “relatively elastic, and in some cases equivocal.” Int’l Ins. Co. v. Stonewall Ins. Co., 86 F.3d 601, 606 (6th Cir. 1996). The Sixth Circuit has “stress[ed] the fact-driven nature of a choice of law question.” Mill’s Pride, Inc. v. Cont’l Ins. Co., 300 F.3d 701, 707 (6th Cir. 2002). In International Insurance, for example, the Sixth Circuit held that “the most significant factor, ” based on that case’s facts, was “section 6(2)(d), the protection of justified expectations.” 86 F.3d at 606. Under the ...