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General Casualty Company of Wisconsin v. Nelson Engineering Consulting, LLC

United States District Court, D. South Dakota, Southern Division

February 13, 2015

GENERAL CASUALTY COMPANY OF WISCONSIN, Plaintiff,
v.
NELSON ENGINEERING CONSULTING, LLC, Defendant

For General Casualty Company of Wisconsin, Plaintiff: Michael C. Loos, LEAD ATTORNEY, Clayborne, Loos & Sabers, Rapid City, SD; William A. Celebrezze, LEAD ATTORNEY, PRO HAC VICE, Aafedt, Forde, Gray, Monson & Hager, P.A., Minneapolis, MN.

For Nelson Engineering Consulting, LLC, Defendant: Nichole J. Mohning, LEAD ATTORNEY, Robert D. Trzynka, Cutler Law Firm, LLP, Sioux Falls, SD.

Page 1169

ORDER DENYING MOTION FOR SUMMARY JUDGMENT

KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE.

Plaintiff, General Casualty Company of Wisconsin, brought this action pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a), seeking a declaration that it has no duty to defend or indemnify its insured, defendant Nelson Engineering Consulting, LLC (Nelson Engineering).[1] General Casualty

Page 1170

moves for summary judgment. Nelson Engineering resists that motion. For the following reasons, the court denies the motion.

BACKGROUND

The facts, viewed in the light most favorable to the nonmoving party, Nelson Engineering, are as follows:

In 2007, South Dakota Oilseed Processors, LLC (SDOP), entered into a contract with Nelson Engineering Construction, LLC (Nelson Construction). According to the contract, Nelson Construction would serve as the general contractor on a construction project to build a seed oil processing facility in St. Lawrence, South Dakota. Docket 1-1 at 28-43. SDOP alleges that either Nelson Construction or Nelson Engineering subsequently retained E& I Specialists, Inc., as the subcontractor responsible for performing all necessary electrical work on the project. Id. at 3. The contract with E& I was signed by Paul Zweifel on behalf of Nelson Construction. Id. at 45-48. That contract references a proposal submitted by E& I to Paul Zweifel at Nelson Engineering. Id. at 45 (agreement between E& I and Nelson Construction stating that E& I would " [p]rovide material and labor for the above grade electrical piping and wiring proposed in E& I proposal number MSDOP070308-3 Rev 2" ); Id. at 50 (E& I proposal MSDOP070308-3 submitted to Paul Zweifel at Nelson Engineering).

SDOP alleges that Nelson Construction and/or Nelson Engineering oversaw the construction of the facility, which was completed in December 2008. Id. at 4. Production began in January 2009. Id. Thereafter, SDOP alleges it experienced ongoing problems with the electrical service, including numerous shorts. Id. On August 20, 2009, an arcing event occurred and caused damage to the facility. Id. As a result, SDOP alleges production was interrupted, it lost revenue, and it was forced to begin bankruptcy proceedings. Id. at 4-5.

E& I filed suit against SDOP in circuit court in Hand County, South Dakota. Id. at 2. SDOP filed an answer, counterclaim, and crossclaim. Id. In that pleading, SDOP also brought six third-party claims against Nelson Engineering alleging breach of contract, breach of express and implied warranty, negligence, negligent misrepresentation, intentional misrepresentation, and fraud. Id. at 13-18. Each claim is premised on the contention that Nelson Engineering, and not Nelson Construction, was the true party to the general contractor agreement. The progress of this underlying action is unclear from the parties' submissions to this court. General Casualty has provided Nelson Engineering with a defense to the crossclaims, under a reservation of rights, in the underlying action.

General Casualty issued a commercial general liability policy to Nelson Engineering, which was in effect from April 25, 2009, to April 25, 2010. That policy contained a number of exclusions, including exclusions for expected or intended injury and professional services. The policy also limited coverage to " occurrences" as defined in the policy. On July 10, 2013, General Casualty filed this declaratory judgment action requesting that the court declare that General Casualty's policy issued to Nelson Engineering does not provide coverage in the underlying action and that General Casualty is not obligated to defend or indemnify Nelson Engineering in that action. Docket 1 at 9-10. General

Page 1171

Casualty now moves for summary judgment.[2] Docket 21.

LEGAL STANDARD

Summary judgment is appropriate if the movant " 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). The moving party can meet this burden by presenting evidence that there is no dispute of material fact or that the nonmoving party has not presented evidence to support an element of his case on which he bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). " The nonmoving party may not 'rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.'" Mosley v. City of Northwoods, Mo., 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)).

Summary judgment is precluded if there is a dispute in facts that could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). For purposes of a summary judgment motion, the court views the facts and the inferences drawn from such facts " in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Construction of " provisions in an insurance policy that does not require an inquiry into the parties' intentions or the consideration of outside and conflicting evidence properly may be resolved by summary judgment." 10B Charles Alan Wright et al., Federal Practice and Procedure § 2730.1 (3d ed.) [hereinafter Wright and Miller]; see also Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386, 1392 (8th Cir. 1996) (" Where the facts upon which liability is claimed or denied under an insurance policy are undisputed and the existence or amount of liability depends solely upon a construction of the policy, the question presented is one of law . . . ." ). Nonetheless, " [s]ummary judgment frequently is denied in [actions involving insurance agreements] because issues of fact are present concerning whether the injury or activity involved is within the scope of ...


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