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Dominion Energy, Inc. v. Zurich American Ins. Co.

United States District Court, D. Connecticut

March 15, 2016

DOMINION ENERGY, INC. et al., Plaintiffs,
v.
ZURICH AMERICAN INS. CO., Defendant.

RULING RE: PLAINTIFFS’ RENEWED MOTION FOR PARTIAL SUMMARY JUDGMENT ON ZURICH’S LIABILITY FOR “PRE-TENDER” COSTS IN LIGHT OF BOYLE V. ZURICH AMERICAN INS. CO. (DOC NO. 78)

Janet C. Hall United States District Judge

I. BACKGROUND

Pending before the court is a renewed Motion for Partial Summary Judgment filed by plaintiffs Dominion Energy, Inc., Dominion Generation Corporation, Dominion Technical Solutions, Inc., and Dominion Resources, Inc. (collectively, “Dominion”) against defendant Zurich American Insurance Company (“Zurich”). See Pls.’ Renewed Mot. for Partial Summ. J. on Zurich’s Liability for “Pre-Tender” Costs in Light of Boyle v. Zurich American Ins. Co. (“Pls.’ 2015 Mot. for Summ. J.”) (Doc. No. 78). The court has previously ruled on a number of Motions filed by the parties, which makes the issue presented by Dominion’s renewed Motion for Partial Summary Judgment exceedingly narrow. A brief recitation of the history of this case will help to clarify the scope of the issue presented in the pending Motion.

Dominion initiated this lawsuit by a Complaint filed on February 1, 2013. See Compl. (Doc. No. 1). Dominion sought principally to establish that Zurich has an ongoing duty to defend Dominion in litigation (“the Massachusetts Action”) related to an industrial accident that resulted in the deaths of three people and the alleged injury of two others, as well as to receive damages for Zurich’s alleged breach of their duty to defend. See id. at 9; see also Joint Statement of Facts (“JSF”) ¶¶ 22, 25 (Doc. No. 57). Zurich subsequently moved to transfer the case to the United States District Court for the District of Massachusetts, see Def. Zurich American. Ins. Co.’s Mot. for Transfer of Venue under 28 U.S.C. § 1404(a) (Doc. No. 24), and Dominion moved for summary judgment on the question of whether Zurich had a duty to defend Dominion in the Massachusetts Action, see Pls.’ Mot. for Partial Summ. J. on the Duty to Defend (“Pls.’ 2013 Mot. for Summ. J.”) (Doc. No. 31). On October 18, 2013, the court denied Zurich’s Motion to Transfer and granted Dominion’s first Motion for Partial Summary Judgment, concluding that Zurich had an ongoing duty to defend Dominion in the Massachusetts Action. See Ruling Re: Def.’s Mot. to Transfer (Doc. No. 24) and Pls.’ Mot. for Partial Summ. J. (Doc. No. 31) (“October 2013 Ruling”) (Doc. No. 42).

On August 1, 2014, Dominion filed a second Motion for Partial Summary Judgment on three issues: (1) Zurich’s liability for defense costs incurred prior to April 1, 2011, which is the date on which Dominion formally requested that Zurich assume the defense of the Massachusetts Action; (2) Zurich’s liability for interest on any award of costs for the Massachusetts Action incurred both prior to and after April 1, 2011; and (3) Zurich’s liability for the costs of litigating this action. See Pls.’ Mot. for Partial Summ. J. on Zurich’s Liability for: (i) “Pre-tender” Costs; (ii) Prejudgment Interest; and (iii) Fees Incurred to Establish the Existence and Extent of Zurich’s Duty to Defend (“Pls.’ 2014 Mot. for Summ. J.”) (Doc. No. 56). After full briefing and an oral argument, the court granted in part and denied in part Dominion’s second Motion for Partial Summary Judgment. See Ruling Re: Pls.’ Mot. for Partial Summ. J. on Zurich’s Liability for: (I) “Pre-tender” Costs; (II) Prejudgment Interest; and (III) Fees Incurred to Establish the Existence and Extent of Zurich’s Duty to Defend (Doc. No. 72) (“March 2015 Ruling”) (Doc. No. 72). In particular, the court granted Dominion’s Motion for Partial Summary Judgment on the second and third issues, concluding that: (1) Dominion is entitled to prejudgment interest “for any chargeable costs paid by Dominion on or before April 1, 2011, ” with interest to start accruing on April 1, 2011, and (2) Dominion is entitled to seek an award of reasonable costs associated with this action. See id. at 17, 21-22. However, the court denied without prejudice Dominion’s Motion for Partial Summary Judgment on the first issue, namely whether Zurich is liable for defense costs paid by Dominion prior to its “tender” of the defense of the Massachusetts Action to Zurich on April 1, 2011. See id. at 14. That denial was motivated by the court’s conclusion that Massachusetts law applies to this action, see id. at 6-10, and determination that a Massachusetts case “that appears closely analogous to the one at bar” was awaiting a final decision from the Massachusetts Supreme Judicial Court (“SJC”), id. at 11, 13. Because the SJC appeared poised to issue a Ruling that could wholly dispose of the issue of whether Zurich is liable to Dominion for pre-tender defense costs, the court denied summary judgment on this issue “without prejudice to the parties’ moving for summary judgment anew on a reasonable briefing schedule after the final disposition of” the case pending before the SJC. Id. at 14.

On October 9, 2015, the parties notified the court that the SJC had issued a final decision in the case of Boyle v. Zurich American Ins. Co., 36 N.E.3d 1229 (Mass. 2015). See Status Report (Doc. No. 74). The parties proposed a briefing schedule wherein both parties would simultaneously file briefs on the issue of Zurich’s liability for pre- tender defense costs on December 4, 2015, see Proposed Briefing Schedule (Doc. No. 76), which the court granted, see Order (Doc. No. 77). Both parties filed their briefs as ordered. See Pls.’ 2015 Mot. for Summ. J. (Doc. No. 78); Mem. of Zurich American Ins. Co. in Opp. to the Pls.’ Renewed Mot. for Partial Summ. J. Regarding “Pre-tender” Costs (“Def.’s Opp.”) (Doc. No. 79). Dominion subsequently sought, and was granted, leave to file a response to Zurich’s contention, raised in its brief, that the issue of Zurich’s liability for pre-tender defense costs is now moot. See Pls.’ Mot. for Leave to Respond to Def.’s Suggestion of Mootness (Doc. No. 81); Order (Doc. No. 82).

For the reasons that follow, Dominion’s renewed Motion for Partial Summary Judgment (Doc. No. 78) is GRANTED.

II. FACTS[1]

Dominion owns and runs power generation facilities, including the Salem Harbor Generating Station in Salem, Massachusetts (“the Salem Station”). JSF ¶¶ 3, 15 (Doc. No. 57). Alstom Power, Inc., (“Alstom”) performs inspections of facilities, including the Salem Station. Id. ¶ 15. Risk Enterprise Management, Limited (“REM”) is a third-party administrator of claims for Alstom. Id. ¶ 29. Zurich is an insurer. Id. ¶ 7.

On February 1, 2005, Dominion and Alstom entered into an agreement (“the Alliance Agreement”) providing, inter alia, that Alstom would obtain and maintain general commercial liability insurance coverage as to certain inspections that it would perform for Dominion, and it would name Dominion as an additional insured under said insurance. Id. ¶¶ 3-5, 14. The Alliance Agreement further provides that Alstom would “at Dominion’s sole option, defend Dominion . . . against” lawsuits. Id. ¶ 6; RA at 145 (Doc. No. 34).

Alstom’s corporate parent purchased from Zurich a commercial liability insurance policy with a coverage period of April 1, 2007 to April 1, 2008 (“the Zurich Policy”). JSF ¶¶ 7, 11 (Doc. No. 57). Although the Zurich Policy does not explicitly name Dominion as an insured, a term in the Policy provides indirectly for Dominion’s coverage because it states that entities in addition to Alstom are automatically insured if Alstom has agreed to name them as an insured with respect to services Alstom has performed for them. Id. ¶¶ 12-14. The Zurich Policy also provides, inter alia, that the insured “must see to it that we are notified as soon as practicable of an ‘occurrence’ or an offense which may result in a claim, ” and, similarly, that “you must . . . [n]otify us as soon as practicable” “[i]f a claim is made or a ‘suit’ is brought against any Insured.” Id. ¶ 28 (quoting section IV.2 of the Zurich Policy). The Zurich Policy further provides that the insured “must . . . [c]ooperate with us in the investigation or settlement of the claim or defense against the ‘suit.’” Id.

In early April 2007, during an inspection pursuant to the Alliance Agreement, Service Engineer Dennis Nygaard of Alstom inspected Boiler Number 3 at the Salem Station. Id. ¶ 21. On November 6 of the same year, a steam explosion of Boiler Number 3 caused the deaths of three individuals (“the decedents”) and allegedly injured two more. Id. ¶ 22.

On December 10, 2007, REM sent, and Zurich received, a notice that a steam explosion had occurred at a Dominion power generation facility, that Dominion was a client of Alstom, that this event “potentially could involve” the Zurich Policy, and that “we are providing provisional notice of this matter to Zurich . . . [and] respectfully request[ing] all available insurance coverage issued by Zurich to Alstom . . . including but not limited to defense and indemnity.” Id. ¶¶ 29-30; REM Notice at 1 (Doc. No. 57-1). On May 5, 2009, the decedents’ estates and others instituted the Massachusetts Action against Dominion, Alstom, Nygaard, and others. JSF ¶ 25 (Doc. No. 57). The summons in the suit was dated July 1, 2009. Id. ¶ 31. Zurich received notice of the action on July 9, 2009. Id.

On April 1, 2011, while discovery was ongoing in the Massachusetts Action, Dominion requested that Zurich provide it with a defense in the Massachusetts Action. Id. ¶ 32-33. On December 1, 2011, Zurich responded to Dominion “that it could have no defense-related obligation to Dominion under the Zurich Policy before a determination of the relative fault, if any, of Dominion and Alstom in the Massachusetts Action.” Id. ΒΆ 34. Zurich did not subsequently agree to furnish Dominion with a defense or to reimburse Dominion for any of ...


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