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Praetorian Insurance Co. v. Site Inspection

May 3, 2010

PRAETORIAN INSURANCE COMPANY F/K/A INSURANCE CORPORATION OF HANOVER, APPELLANT,
v.
SITE INSPECTION, LLC, APPELLEE.



Appeal from the United States District Court for the Western District of Missouri.

The opinion of the court was delivered by: Shepherd, Circuit Judge

Submitted: January 14, 2010

Before GRUENDER and SHEPHERD, Circuit Judges, and LANGE,*fn1 District Judge.

Praetorian Insurance Company ("Praetorian") appeals the district court's*fn2 grant of summary judgment and award of attorney's fees in favor of Site Inspection, LLC ("Site"). We affirm.

I.

Praetorian provides property insurance to hotels nationwide. Jerry Mayo, Praetorian's property insurance underwriter, has final underwriting authority for all of the policies issued under Praetorian's "American E&S-KIS Hospitality Program" (the "program"). Under the program, Mayo reviews property applications and issues "initial binders" upon approval of an application. (Appellant's Br. 5.) Policies are then issued by Praetorian, "conditioned on a satisfactory loss control inspection of the insured property." (Id.) Klein Insurance Services, Inc. ("Klein"), a producer and wholesale broker, acts as Praetorian's agent, and retains inspection companies to inspect the properties. The inspection companies issue inspection reports, which include recommendations on how the property could reduce potential risk factors. Praetorian then sends these recommendations to the property owner and if the property owner adequately complies with the recommendations, Praetorian issues a final policy insuring the property.

In 2003, Praetorian issued a conditional policy under the program, covering Vantage Investments, Inc.'s ("Vantage") Best Western hotel at 5701 Longview Road in Kansas City, Missouri. For $245.00, Klein retained Site to inspect the Best Western property.*fn3 During an initial meeting regarding Site's inspection of the Best Western property, Site showed Klein its default inspection report template.*fn4 Located at the bottom was a disclaimer of liability provision (the "provision") which Site included on all 70 inspection reports Site completed for Klein. The provision stated:

This report contains information for underwriting analysis only and should be used for no other purpose. While this report was completed as accurately as possible, Site Inspection[], LLC does not assume any legal liability arising from any inaccuracies found to be contained within this report. Furthermore, the requesting company, their representatives and reinsures hold Site Inspection[], LLC harmless from any claims or liabilities arising out of any decisions or actions made based on information developed in this report.

(Appellant's Br. 7.) Klein negotiated several revisions to the report template but never requested removal of the provision. In fact, during the revision process, a Klein employee wrote "ok" next to the provision.

Site inspected the Best Western and using the final inspection report template as negotiated, Site issued its report-each page of which contained the provision at the bottom. The report included several recommendations for reducing risks at the Best Western. At Klein's request, Site removed several of the recommendations in the report. On January 5, 2004, Site submitted a new report containing a total of ten recommendations for the Best Western and Vantage was provided an opportunity to comply with the ten recommendations in order to maintain Praetorian's insurance coverage. On March 16, 2004, Regional Reporting, Inc. performed a "recommendation check" and confirmed that Vantage had complied with all of Site's recommendations. Pursuant to this finding, Praetorian continued their coverage of Vantage's Best Western hotel.*fn5

On August 10, 2004, a fire occurred at the Best Western. Praetorian retained Poole Consulting Services, Inc. ("Poole") and paid them approximately $3,784 to investigate the Best Western's fire protection systems. Poole assigned the job to Brian Olsen, a fire protection specialist. During his investigation, Olsen inspected the property and reported several inadequacies with the hotel's fire protection systems. However, Olsen acknowledged that he had no way of knowing if these inadequacies existed when Site had performed the inspection prior to the fire.

Based on Olsen's findings, Praetorian refused Vantage's claim for the damage to the Best Western, but eventually paid Vantage $3.25 million pursuant to a settlement agreement.*fn6 During a deposition in the Vantage litigation, Mayo stated that he thought Site's inspection of the Best Western had been satisfactory. Praetorian then brought this lawsuit against Site, seeking reimbursement for the $3.25 million paid to Vantage and alleging that it would not have issued the policy to Vantage if Site had correctly informed Praetorian of the various inadequacies*fn7 in the hotel's fire protection systems. Outside of the pleadings, Site demanded indemnification from Praetorian "for any and all attorney fees and expenses" incurred in its defense or any potential prosecution of a counterclaim. When Praetorian did not comply with the indemnification request, Site counterclaimed, alleging common law contractual indemnity and breach of contract for Praetorian's breach of the provision in Site's inspection report.

On July 17, 2008, Site sent Praetorian Requests for Admissions which included requests for Praetorian to admit that it had never refused to issue a policy, nor cancelled a policy, due to the fire protection inadequacies Praetorian had alleged in its complaint. When Praetorian failed to respond, the district court ordered Praetorian's response by September 3, 2008. Praetorian responded and objected to many of the requests, and Site moved to determine the sufficiency of Praetorian's responses pursuant to Federal Rule of Civil Procedure 36.*fn8 On December 17, 2008, the district court found that all of Praetorian's responses were insufficient and argumentative, and deemed all requests admitted.*fn9

Site filed a motion for summary judgment on Praetorian's claims and its own counterclaims. Praetorian filed a motion for partial summary judgment on its own claims. In support of its motion, Praetorian submitted an affidavit from Mayo which reflected that he would ...


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