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Depositors Insurance Co. v. NEU Construction Services Inc.

United States District Court, E.D. Missouri, Eastern Division

March 29, 2018




         This matter is before the Court on Plaintiff Depositors Insurance Company's (“Depositors”) Motion for Summary Judgment. (Doc. 29.) Defendant NEU Construction Services, Inc. (“NEU”) and Defendants Joe Adams and Deanna Daughhtee (the “Property Owners”) filed individual responses. (Docs. 37, 39.) Depositors filed replies. (Docs. 43, 46.)

         I. Background

         Depositors is an Iowa company that sells insurance, including commercial general liability (“CGL”) policies. (Doc. 1 at ¶¶ 1, 7.) NEU is a Missouri company that provides construction services, including home remodeling services. (See id. at ¶ 2; Doc. 17 at ¶ 5.) Depositors sold NEU a CGL policy that was in effect from August 21, 2011, to August 21, 2012 (“the Policy”). (Doc. 1-1 at 8.)[1]

         Property Owners hired NEU to oversee the construction of a second-story veranda for their Richmond Heights, Missouri, home. (Doc. 1-5.) During construction, NEU's subcontractor installed an “EPDM Waterproof Membrane” on top of the concrete slab that supported the floor of the veranda. (Id. at 5-6.) In March 2011, the floor of the veranda began leaking into the first story of the home. (Id. at 6-7.) Repairs were attempted in the fall of 2012, but leaks continued. (Id. at 7.) Ultimately, NEU failed to stop the leaks, and the Property Owners suffered substantial property damage. (Id.)

         In April 2013, NEU notified Depositors of the damage. (Doc. 17 at ¶ 5.) On May 28, 2013, Depositors wrote to NEU, informing it that the loss may not be covered under The Policy and reserving its rights “under [The Policy] and applicable law.” (Doc. 1-2.) On June 6, 2013, Depositors wrote to Property Owners, informing them that it would not cover any damage attributable to NEU's or its subcontractors' workmanship, absent negligence. (Doc. 29-2.) Then, on August 26, 2014, Depositors wrote again to NEU, informing it that the loss was not covered under The Policy. (Doc. 1-3.) The letter directed NEU to immediately contact Depositors “[i]n the event that you receive any communication concerning [the Property Owners'] loss.” (Id.)

         In the meantime, on February 7, 2014, Property Owners instituted an arbitration action for breach of contract against NEU, seeking $485, 219.43 in compensatory damages caused by the substandard installation of the EPDM membrane. (Doc. 1-4.) Property Owners alleged that the installation amounted to a breach of contract. (Id.) On March 24, 2015, the arbitrator awarded Property Owners $436, 551.48 plus interest. (Doc. 1-5.) Although the arbitrator found that the damage was caused by a failure of the EPDM membrane, rather than some defect in its installation, he concluded that the failure was a breach of the contract between Property Owners and NEU. (Id.) The arbitration award was confirmed in the Circuit Court of St. Louis County and judgment was entered on August 18, 2015. (Doc. 1-7.)

         Depositors alleges that it first learned of the arbitration award in January 2016, after the time to appeal had passed. (Doc. 31 at ¶ 11.) NEU disputes this allegation, asserting that there is no record evidence to support it (Doc. 37 at ¶ 4), however, NEU provides no evidence to the contrary. On February 28, 2017, Depositors filed suit, seeking a declaratory judgment that it was not liable to NEU for the arbitration award because NEU's breach of contract is not covered by The Policy and because NEU failed to notify Depositors of the arbitration demand as required by The Policy. (Doc. 1.) NEU answered, alleging that Depositors' May 28, 2013, June 6, 2013, and August 26, 2014, letters stating that Depositors would not cover the damage absolved NEU from the notice requirement and advancing three counterclaims alleging that Depositors is liable for the arbitration award. (Doc. 17.) Thereafter, Depositors filed this Motion for Summary Judgment.

         II. Legal Standard

         “Summary judgment is proper where the evidence, when viewed in a light most favorable to the non-moving party, indicates that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law.” Davison v. City of Minneapolis, Minn., 490 F.3d 648, 654 (8th Cir. 2007); see Fed. R. Civ. P. 56(c). Summary judgment is not appropriate if there are factual disputes that may affect the outcome of the case under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue of material fact is genuine if the evidence would allow a reasonable jury to return a verdict for the non-moving party. Id. “The basic inquiry is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Diesel Machinery, Inc. v. B.R. Lee Industries, Inc., 418 F.3d 820, 832 (8th Cir. 2005) (internal quotation marks and citation omitted). The moving party has the initial burden of demonstrating the absence of a genuine issue of material fact. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir. 1988). If the movant does so, the burden then shifts to the non-moving party, who must set forth affirmative evidence and specific facts showing a genuine dispute on that issue. Anderson, 477 U.S. at 249.

         In determining whether summary judgment is appropriate in a particular case, the Court reviews the facts in a light most favorable to the party opposing the motion and gives that party the benefit of any inferences that logically can be drawn from those facts. The Court is required to resolve all conflicts of evidence in favor of the nonmoving party. Osborn v. E.F. Hutton & Co., Inc., 853 F.2d 616, 619 (8th Cir. 1988). In considering a motion for summary judgment, the Court may not make credibility determinations, weigh the evidence, or draw inferences from the facts. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011).

         III. Discussion

         a. The arbitration award against NEU was not a covered “Occurrence.”

         Depositors argues that it is clear under Missouri law that it is not liable to NEU. The Policy, like nearly all GCL policies, insured NEU against property damage caused by an “occurrence.” (Doc. 1-1 [hereinafter “Policy”] at § I.1.b.) The Policy defines “Occurrence” as an “accident, including continuous or repeated exposure to substantially the same harmful conditions.” (Id. at § V.13.) Depositors notes that the arbitration award was for NEU's breach of contract, noting that the arbitrator cited violations of specific sections of the contract and that Property Owners' only claim was for breach of contract. (Doc. 30 at 4.) Depositors cites SecuraIns. v. Horizon Plumbing, ...

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