United States District Court, D. Arizona
Amerisure Mutual Insurance Company, a Michigan company, Plaintiff,
Houston Casualty Company, a Texas company, Defendant.
G. CAMPBELL SENIOR UNITED STATES DISTRICT JUDGE
Amerisure Mutual Insurance Company (“Amerisure”)
filed a complaint against Defendant Houston Casualty Company
(“HCC”), and HCC counterclaimed. Docs. 1-1; 35.
Both parties now move for summary judgment. Docs. 63; 65. The
motions are fully briefed, and oral argument will not aid in
the Court's decision. See Fed. R. Civ. P. 78(b);
LRCiv 7.2(f). For the following reasons, the Court will grant
Amerisure's motion on HCC's duty to indemnify,
HCC's duty to defend, and the lack of Amerisure's
duty to indemnify, and deny both parties' motions on
Amerisure's duty to defend.
following facts are undisputed unless otherwise noted. On
April 14, 2014, the tenant in Unit 803 at University House,
located at 323 East Veteran's Way, Tempe, Arizona
(“the Property”), reported to building management
that his air conditioning was not working. Doc. 64-1 at
Shawn Albright, who was with the Property's building
management, arrived with Troy AuBuchon, an employee of
Spectrum Mechanical and Service Contractors
(“Spectrum”). Doc. 64-2 at 3-4. When AuBuchon
removed the wall panel to access the air conditioning unit,
he and Albright observed a pipe joint in the wall with black
tape and a hose-clamp on it. Doc. 64-2 at 5. The parties
dispute whether the pipe joint was leaking when AuBuchon
first saw it or whether it began leaking once he removed the
air conditioning unit from the wall opening. Docs. 67 at 5
¶ 23; 71 at 4; 67-6 at 21, 39-40, 44. AuBuchon cut and
bent back the unit side panel and placed sheet metal beneath
the pipe joint to collect the leaking water. Doc. 64-2 at 6.
He immediately called Spectrum management to report the leak.
Doc. 64-2 at 7.
employees Brett Van Dreel, Christopher Thornhill, and Matt
Kinard arrived and discussed with AuBuchon how to address the
leaking pipe joint. Doc. 64-2 at 7. HCC asserts, and
Amerisure disputes, that Thornhill removed the tape and clamp
from the pipe joint and then later reapplied them. Docs. 64-2
at 7-8; 67-5 at 14. The Spectrum employees decided to wait
until the next day to repair the pipe joint because no
company was available that afternoon to freeze the pipe, a
step necessary before repairs could be made because the pipe
had no cut-off valve to stop the flow of water. Docs. 64-3 at
2; 64-4 at 2. As a result, AuBuchon repaired only the air
conditioning unit. Doc. 64-2 at 8. As AuBuchon placed the
unit back in the wall opening, the pipe joint failed and a
high volume of water sprayed under high pressure into the
room and building, causing substantial damage to the Property
(“the loss”). Doc. 64-2 at 8.
the parties to this case provided insurance coverage to
Spectrum. Defendant HCC issued an Owner Controlled Insurance
Policy (“the HCC Policy”) to the Property's
developer, Core Campus Tempe 1, LLC (“Core”).
Doc. 64-5 at 10. The HCC Policy was effective from January 6,
2012 to January 6, 2014, and also provided coverage during an
“extended products-completed operations period.”
Doc. 63 at 10. Core later sold the Property to InvenTrust
Properties Corp. (“InvenTrust”), which sustained
the loss from the water damage in April 2014. Doc. 67-4 at 2.
general contractor hired Spectrum as the HVAC and plumbing
subcontractor for the Property's original construction.
Docs. 1-1 at 3; 35 at 2; 67-1 at 23-24. The HCC Policy
covered Spectrum as an “enrolled contractor”
under the Wrap-up Program Change Endorsement (“Wrap
Endorsement”) for its installation work at the Property
during construction. Doc. 35 at 3. Spectrum did all original
HVAC-related work, including installation of pipes, ductwork,
equipment, fans, and controls, and its work was warrantied
through August 1, 2014. Docs. 67-1 at 22-24. Spectrum did no
work on Unit 803's air conditioning between original
installation and April 14, 2014. Id. at 25.
Amerisure issued an insurance policy to Spectrum for the
period from January 1, 2014 to January 1, 2015 (“the
Amerisure Policy”). Doc. 64-6 at 1.
failing to resolve damage claims from the burst pipe,
InvenTrust sued Spectrum in an underlying lawsuit and
Amerisure defended under a reservation of
rights.Docs. 64-7 at 2; 67-4. Amerisure made
payments of more than $212, 814.76 in the underlying lawsuit
before learning of the HCC Policy. Docs. 67-12 at 3; 67-13.
HCC denied coverage, but later agreed to defend Spectrum
under a reservation of rights, although Amerisure asserts
that HCC never actually paid any defense costs. Docs. 64-7 at
2; 65 at 11-12; 67-17. Both HCC and Amerisure paid a portion
of Spectrum's eventual settlement with InvenTrust. Doc.
65 at 12.
now sues HCC to recover 50% of the expenses it incurred
defending Spectrum and settling the underlying lawsuit. Docs.
1-1; 67 at 10. HCC counterclaims, seeking to recover
money paid under its policy. Doc. 35.
seeking summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Summary judgment is
appropriate if the evidence, viewed in the light most
favorable to the nonmoving party, shows “that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). Summary judgment is also appropriate against a party
who “fails to make a showing sufficient to establish
the existence of an element essential to that party's
case, and on which that party will bear the burden of proof
at trial.” Celotex, 477 U.S. at 322. Only
disputes over facts that might affect the outcome of the suit
will preclude summary judgment, and the disputed evidence
must be “such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Count 1 seeks a declaration that it had no duty to defend or
indemnify Spectrum in the underlying lawsuit. Doc. 1-1 at 13.
Count 2 seeks a declaration that HCC had a duty to defend and
indemnify Spectrum under the HCC Policy and Wrap Endorsement.
Id. at 13-14. Counts 3 and 4 seek equitable
indemnity and subrogation, and equitable contribution,
respectively. Id. at 14-15. HCC's counterclaims
seek equitable subrogation and contribution. Doc. 35 at 7-8.
The parties cross-move for summary judgment on all claims.
Docs. 63; 66.
Duty to Defend.
concedes that it had a duty to defend Spectrum and agrees to
pay 50% of defense expenses. Docs. 67 at 10 ¶ 64; 71 at
11 ¶ 64. The Court will enter judgment on Count 2 in
favor of Amerisure with respect to HCC's duty to defend
Spectrum, but the percentage of defense expenses owed by HCC
depends on whether Amerisure also had a duty to defend
makes no distinct arguments regarding its own duty to defend,
and HCC does not address Amerisure's duty to defend
separately from its duty to indemnify. And yet the duties to
defend and indemnify are not the same. See Stillwater
Ins. v. Dunn, No. CV-14-01829-PHX-DGC, 2015 WL 1778349,
at *3 (D. Ariz. Apr. 20, 2015). “The scope of the duty
to defend under an insurance policy can be broader than the
scope of the duty to indemnify.” Lennar Corp. v.
Auto-Owners Ins. Co., 151 P.3d 538, 543 (Ariz.Ct.App.
2007). Because the parties fail to address Amerisure's
duty to defend, the Court will deny their motions for summary
judgment with respect to this duty.
Duty to Indemnify.
argues that there was no “occurrence” under its
Policy, Spectrum's faulty repair work on April 14, 2014
was the proximate cause of the loss, and only the Amerisure
Policy covers the loss. Doc. 63. Amerisure responds that the
HCC Policy covers the loss because there was an
“occurrence” under the HCC Policy and the loss
falls within the “products-completed operations
hazard” and extended coverage period; Spectrum's
defective original work and installation are the proximate
causes of the loss; the HCC Policy applies even if repairs on
April 14, 2014 caused the loss; and an exclusion in the
Amerisure Policy precludes coverage. Doc. 66.
Undisputed and Disputed Facts.
asserts that the pipe rupture on April 14, 2014 was caused by
the negligence of Spectrum employees on that date. Doc. 63 at
4, 10. HCC identifies little or no facts to support this
assertion. In contrast, Amerisure cites substantial evidence
that the pipe rupture was caused by Spectrum's negligence
at the time of original installation.
example, Christopher Thornhill testified to the following. On
April 14, 2014, he was Spectrum's piping superintendent,
overseeing piping installation, repair, soldering, and
support. Doc. 67-5 at 5-7. Before the pipe burst, Thornhill
had visited the Property three to four times to address
issues with unsupported piping in other units. Inadequately
supported piping was a building-wide problem at the Property,
and Spectrum was in the process of adding additional
supports. Id. at 8. In about twenty years of
experience, Thornhill had seen tens of thousands of pipe
joints. Id. After inspecting the burst pipe from
Unit 803, Thornhill found that it was soldered incorrectly.
With a 3/4-inch copper pipe - the size and type of the pipe
that burst - proper soldering should continue the full length
of the fitting. Thornhill found during his inspection that
the solder in the joint did not continue all the way down the
pipe, covering “maybe a 16th of the joint, ” and
the joint had no solder at the top. Id. at 14-16.
Thornhill repeatedly testified that based on his observations
of the Property's piping and repairs leading up to the
loss, the pipe joint in Unit 803 was inadequately supported
and soldered. Doc. 67-5 at 16-19.
Spectrum employees who saw the pipe joint testified
similarly. AuBuchon stated that “there was not nearly
enough solder pushed into the joint.” Doc. 67-6 at
60-61. Van Dreel testified that the joint “was not slid
back into the coupling far enough . . . the pipe was not back