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North River Insurance Co. v. O & G Industries, Inc.

United States District Court, D. Connecticut

December 5, 2017

NORTH RIVER INSURANCE COMPANY, Plaintiff-Counterdefendant,
O & G INDUSTRIES, INC., et al., Defendants, KEVIN DULAC, et al., Intervenors-Counterclaimants.


          Jeffrey Alker Meyer United States District Judge.

         This case concerns an insurance dispute stemming from the notorious explosion that occurred in February 2010 at the Kleen Energy power plant in Middletown, Connecticut. See Doc. #200 (describing background of this litigation). Plaintiff North River Insurance Company (North River) has filed this action against defendant Keystone Construction and Maintenance Services, Inc. (Keystone). North River primarily contends that Keystone breached the terms of its insurance policy such that North River no longer has any obligations to Keystone under the policy. The intervenors (Intervenors) in this actions are several dozen individuals who suffered losses from the explosion, and by filing of a counterclaim complaint against North River they seek the benefit of Keystone's insurance policy with North River. North River in turn has moved for summary judgment on all claims and counterclaims. For the reasons set forth below, I conclude that many genuine issues of fact remain for trial. Accordingly, I will deny North River's motion for summary judgment on all claims.


         Keystone was a subcontractor hired to install, test, and flush the above-ground piping system for the power plant. On February 7, 2010, Keystone attempted to clean pipes at the construction site by performing a “natural gas blow” procedure, which allegedly provoked an explosion that killed and injured workers and caused extensive property damage. The explosion prompted many legal actions against Keystone, and Keystone held multiple insurance policies, including a second-layer excess policy with North River. North River filed this lawsuit for declaratory relief that Keystone violated the cooperation terms of the insurance policy, thus relieving North River of any further obligations to Keystone for claims arising from the explosion.

         North River's third amended complaint alleges three counts against Keystone. Doc. #203. Count One seeks a declaratory judgment that Keystone materially breached the policy's cooperation clause. Count Two seeks a declaratory judgment that Keystone violated the policy's consent-to-settle clause by admitting liability and entering settlements without North River's consent. Count Four alleges a breach of the covenant of good faith and fair dealing.[1]

         Intervenors' amended counterclaim complaint alleges five counts against North River. Doc. #225. Counterclaim One alleges that North River breached its insurance contract with Keystone. Counterclaim Two alleges that North River acted in bad faith with respect to its duties under the insurance policy. Counterclaim Three alleges that North River was negligent in its dealings with Keystone. Count Four alleges that North River engaged in unfair practices in violation of Massachusetts law. Counterclaim Five alleges that North River engaged in unfair practices in violation of the Connecticut Unfair Trade Practices Act (CUTPA) and the Connecticut Unfair Insurance Practices Act (CUIPA).


         The principles governing the Court's review of a motion for summary judgment are well established. Summary judgment may be granted only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). I must view the facts in the light most favorable to the party who opposes the motion for summary judgment and then decide if those facts would be enough-if eventually proved at trial-to allow a reasonable jury to decide the case in favor of the opposing party. My role at summary judgment is not to judge the credibility of witnesses or to resolve close contested issues of fact but solely to decide if there are enough facts that remain in dispute to warrant a trial. See generally Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curiam); Pollard v. New York Methodist Hosp., 861 F.3d 374, 378 (2d Cir. 2017).

         Count One - Breach of Cooperation Clause

         North River's insurance contract with Keystone includes condition G.3 that states: “YOU and any other involved insured must . . . Cooperate with U.S. in the investigation, settlement or defense of the claim or suit.” Doc. #394-1 at 45-46. To void an insurance policy for a violation of a cooperation clause, an insurer must demonstrate that the insured's non-cooperation was material or substantial; a lack of prejudice to the insurance company indicates that a failure to cooperate was neither material nor substantial. See Double G.G. Leasing, LLC v. Underwriters at Lloyd's, London, 116 Conn.App. 417, 433 (2009).

         North River alleges that Keystone violated the cooperation clause by failing to provide adequate documentation and information relating to claims made against Keystone by various claimants, by colluding with the power plant's general contractor O&G Industries, Co. (O&G) to exhaust Keystone's underlying insurance coverage, by failing to provide information regarding settlements made by Keystone's underlying insurers, and by entering into settlements with O&G in which Keystone stipulated to its liability. Doc. #392 at 39-41.

         I assume without deciding for the purposes of this ruling that Keystone failed to cooperate with North River. Nonetheless, North River has failed to establish that there are no genuine issues of material fact as to whether any of the alleged breaches were material or substantial. There is substantial evidence in the record that North River had much information at its disposal indicating Keystone's liability for the explosion. Such information included documentation provided by Keystone (Docs. #401-16, 402-1, 402-2, 402-3, 402-5, 402-8), and information relating to citations issued by OSHA against Keystone (Docs. #401-6 at 13-14, 402-7). Additionally, it is undisputed that North River had a significant amount of time in which to investigate Keystone's role in the explosion if it had chosen to do so. A material issue of fact remains whether Keystone's alleged failure to provide adequate information about claims and settlements inhibited North River's ability to evaluate or potentially to defend claims against Keystone.

         Similarly, even assuming Keystone engaged in collusive conduct with O&G, it is undisputed that Keystone's underlying insurers had discretion to settle claims against Keystone without Keystone's consent. Doc. #394 at 146 (primary policy); Doc. #394-1 at 17 (first layer excess insurer follow-form policy); Doc. #401-1 at 6-7 (North River adjuster acknowledging underlying carriers' discretion to settle). Additionally, there is substantial evidence in the record that the underlying insurers engaged in independent investigation and evaluation of claims against Keystone and concluded that the claims were meritorious and covered under their policies. Doc. #401-3 (primary insurer testimony); Doc. #401-8 at 4-8 (first layer excess insurer testimony). Because there is a genuine issue of fact about whether the underlying insurers made independent decisions that resulted in the exhaustion of their policies, North River has not shown as a matter of law that Keystone's alleged collusive conduct caused it any harm.

         In addition, North River has not shown that Keystone's stipulation to liability prejudiced North River, because it has not demonstrated that absent the stipulation Keystone would not have been found liable for similar damages. Indeed, because there is ample evidence in the record indicating Keystone's responsibility, it is possible that Keystone would have been found liable for the same or higher damages than that stipulated to in the settlement. Because North River has failed to show an absence of a genuine issue of fact ...

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