Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Ohio Casualty Ins. Co. v. Lewis & Clinch, Inc.

United States District Court, N.D. New York

November 13, 2014

OHIO CASUALTY INS. CO., Plaintiff,
v.
LEWIS & CLINCH, INC. and NORTHBROOK NY, LLC, Defendants.

HURWITZ & FINE, P.C. AUDREY A. SEELEY, ESQ., Buffalo, NY, Counsel for Plaintiff.

BOND, SCHOENECK & KING, PLLC JONATHAN B. FELLOWS, ESQ., Syracuse, NY, Counsel for Defendant Lewis & Clinch.

THE CHARTWELL LAW OFFICES, LLP JOHN M. WUTZ, ESQ., Philadelphia, PA, Counsel for Defendant Northbrook NY.

DECISION & ORDER

GLENN T. SUDDABY, District Judge.

Currently before the Court, in this diversity-based declaratory judgment action filed by Ohio Casualty Insurance Company ("Ohio Casualty") against Northbrook NY, LLC ("Northbrook") and Lewis & Clinch, Inc. ("Lewis & Clinch") (collectively, "Defendants"), are motions for summary judgment by Ohio Casualty and Northbrook. (Dkt. Nos. 22, 24.) Lewis & Clinch joins in Northbrook's motion and joins in Northbrook's opposition to Ohio Casualty's motion. (Dkt. No. 25.) For the reasons set forth below, Ohio Casualty's motion is granted in part and denied in part, and Northbrook's motion is granted in part and denied in part.

I. RELEVANT BACKGROUND

A. Plaintiff's Complaint

In its Complaint, Ohio Casualty seeks a declaration that it is neither obligated to defend nor indemnify Lewis & Clinch for Northbrook's claims against it in the action, Northbrook NY LLC v. Lewis & Clinch, Inc., No. 7:09-CV-00792(GTS/TWD) ("the Underlying Action"). (Dkt. No. 1[Pl.'s Compl.].) In support, Ohio Casualty asserts the following.

In the Underlying Action, Northbrook asserted claims for negligence and breach of contract against Lewis & Clinch stemming from damage to a hydroelectric turbine unit ("Unit 2") at Northbrook's Hydroelectric Project in Glen Park, New York ("the Project") on January 9, 2008. In September 2007, Lewis & Clinch performed for Northbrook at the Project, on Unit 2, service, inspection, cleaning and/or adjustment to the wicket gates and removal, replacement, tightening and/or adjustment of every Ringfeder for each wicket gate. After an abnormal shutdown of Unit 2 during a disturbance on the National Power Grid on January 9, 2008, Unit 2 sustained damage to, among other things, its draft tube gate seals, which are also knows as tail race gates. Unit 2 was unable to generate power for approximately 54 days thereafter, resulting in an alleged loss of profits. Consequently, Northbrook commenced the Underlying Action in July 2009. In September 2012, Lewis & Clinch's motion for summary judgment in the Underlying Action was partially granted dismissing Northbrook's negligence cause of action. Therefore, Northbrook's sole remaining claim against Lewis & Clinch in the Underlying Action is for breach of contract.

Ohio Casualty issued a Commercial General Liability Policy to Lewis & Clinch, which was effective February 4, 2007 through February 4, 2008 ("the CGL Policy"). Ohio Casualty alleges that Lewis & Clinch's claims in the Underlying Action are not covered by the CGL Policy because, in the first instance, it does not allege an "occurrence" or "property damage" as defined in the insuring grant of the CGL Policy and, in the alternative, is excluded from coverage under one of several of the CGL Policy's exclusions.

Ohio Casualty issued a Commercial Umbrella Policy to Lewis & Clinch, which was effective September 27, 2007 through September 27, 2008 ("the Umbrella Policy"). Ohio Casualty alleges that Lewis & Clinch's claims in the Underlying Action are not covered by the Umbrella Policy because, in the first instance, it does not allege an "occurrence" or "property damage, " or, in addition, regarding the breach of contract claim, an "insured contract" as defined in the insuring grant of the Umbrella Policy and, in the alternative, is excluded from coverage under one of several of the Umbrella Policy's exclusions.

Finally, Ohio Casualty alleges that Lewis & Clinch's claim for profits in the Underlying Action does not allege an "occurrence" or "property damage" within the insuring grant of the CGL Policy or the Umbrella Policy.

B. Parties' Arguments on Ohio Casualty's Motion

1. Ohio Casualty's Memorandum of Law in Chief

Generally, in its memorandum of law in chief, Ohio Casualty asserts five arguments: (1) the parties have entered into a stipulation of facts in this case and therefore, there should be no genuine issue of fact precluding summary judgment; (2) New York law applies to this dispute; (3) to the extent Lewis & Clinch seek indemnity for the Underlying Action for the breach of contract claim for damages to Unit 2's Ringfeders and wicket gates, those claims do not fall within the Policies' insuring grant; (4)[1] Ohio Casualty is not obligated to indemnify Lewis & Clinch for lost profits as they are not "property damage" within the Policies' insuring grant; and (5) exclusions under the Policies bar coverage for indemnification of Lewis & Clinch for damage to the Ringfeders and wicket gates. (Dkt. No. 23 [Ohio Casualty's Mem. of Law in Chief].)

2. Northbrook's Opposition Memorandum of Law

Generally, in its opposition memorandum of law, Northbrook asserts seven arguments: (1) Northbrook's motion for summary judgment should be granted regarding three Policy exclusions that were briefed by Northbrook in support of its motion but were not addressed by Ohio Casualty in support of its motion for summary judgment; (2) Ohio Casualty is correct that New York law governs this dispute; (3) because it is uncontested that Lewis & Clinch caused physical injury to tangible property belonging to Northbrook, Ohio Casualty's arguments that its Policies are not sureties or that faulty work is not an occurrence have no application to this case; (4) the Policies cover Lewis & Clinch's liability for lost profits in the Underlying Action; (5) the "damage to your product" exclusion in inapplicable to the claims in the Underlying Action; (6) the "damage to your work" exclusion in inapplicable to the claims in the Underlying Action; and (7) the "damage to impaired property" exclusion is inapplicable to the claims in the Underlying Action. (Dkt. No. 28-1 [Northbrook's Opp'n Mem. of Law].)

3. Ohio Casualty's Reply Memorandum of Law

Generally, in its reply memorandum of law, Ohio Casualty asserts three arguments: (1) the CGL Policy and Umbrella Policy do not insure damage to Unit 2's Ringfeders and wicket gates; (2) Ohio Casualty is not obligated to indemnify Lewis & Clinch for lost profits as they are not "property damage" within the Policies' insuring grant; and (3) Ohio Casualty need only demonstrate that one exclusion under the Policies bars coverage for damage to the Ringfeders and wicket gates. (Dkt. No. 29-1 [Ohio Casualty's Reply Mem. of Law].)

C. Parties' Arguments on Northbrook's Motion

1. Northbrook's Memorandum of Law in Chief

Generally, in its memorandum of law in chief, Northbrook asserts two arguments: (1) the physical damage to the draft tube gate seals and the resulting loss of use of the Unit 2 generator caused by Lewis & Clinch's faulty work constitutes an occurrence under the Policies and (2) Ohio Casualty has the burden of demonstrating the application of an exclusion. (Dkt. No. 24-4 [Northbrook's Mem. of Law in Chief].)

2. Ohio Casualty's Opposition Memorandum of Law

Generally, in its opposition memorandum of law, Ohio Casualty asserts five arguments: (1) New York law applies to this insurance coverage dispute; (2) Northbrook has not demonstrated that the Umbrella Policy affords insurance coverage in the Underlying Action; (3) Northbrook has not established that the breach of contract claim seeking recovery for damage to Unit 2's Ringfeders and wicket gates is within the Policies' insuring grant; (4) Ohio Casualty is not obligated to indemnify Lewis & Clinch for lost profits as they are not "property damage" within the Policies' insuring grant; and (5) exclusions under the Policies bar coverage for indemnification of Lewis & Clinch for damage to the Ringfeders and wicket gates. (Dkt. No. 27-1 [Ohio Casualty's Opp'n Mem. of Law].)

3. Northbrook's Reply Memorandum of Law

Generally, in its reply memorandum of law, Northbrook asserts three arguments: (1) Ohio Casualty's argument that there is no occurrence fails for several reasons; (2) the Policies indemnify Lewis & Clinch for lost profits because (a) Ohio Casualty's argument to the contrary would render the Policies ambiguous, (b) the Court of Appeals for the Second Circuit has held that the CGL Policy covers lost profits, and (c) CGL Policies unequivocally cover lost profits under New York Law; and (3) the "impaired property" exclusion does not apply. (Dkt. No. 30-1 [Northbrook's Reply Mem. of Law].)

D. Undisputed Material Facts

The parties have stipulated to certain facts for the purpose of this litigation. ( See Dkt. No. 20 [Stipulation].) In support of its motion for summary judgment, Northbrook has also submitted a Statement of Material Facts. It is the position of Ohio Casualty that (1) the parties' Stipulation precluded the filing of Local Rule 7.1 Statements of Undisputed Material Facts, and (2) in any event, Northbrook's Statement does not comply with Local Rule 7.1 because it fails to set forth citations to the record where the facts are established. Moreover, Ohio Casualty objects to the admission of the report of Lee H. Sheldon, P.E., which is attached to Northbrook's Statement of Material Facts as Exhibit A, on the grounds that it is hearsay pursuant to Fed.R.Evid. 801.

Local Rule 7.1 states that "[a]ny motion for summary judgment shall contain a Statement of Material Facts." N.D.N.Y. L.R. 7.1(3) (emphasis added). In addition, the Rule requires that each fact listed in the Statement "shall set forth a specific citation to the record where the fact is established." Id. Finally, the Rule provides that "[f]ailure of the moving party to submit an accurate and complete Statement of Material Facts shall result in a denial of the motion." Id. (emphasis in original).

Here, to be sure, the Stipulation makes no reference to the parties' desire that it serve to be the exclusive list of undisputed material facts such that it eliminates the necessity for the filing of Rule 7.1 Statements. Given that Northbrook's Statement of Material Facts does not contain citations to the record as required by Rule 7.1[2] and that Ohio Casualty has failed to file a Rule 7.1. Statement, instead highlighting certain of the stipulated facts by attorney affidavit, the Court will consider only the undisputed facts in the Stipulation as well as the provisions of the Policies when deciding the current motions for summary judgment.

The following material facts are included in the Stipulation.

On January 9, 2008, disturbances on the National Power Grid power lines tripped all three of the Project's hydro turbine units off line ("the incident"). Although Units 1 and 3 shut down normally, several wicket gates for Unit 2 failed to close, which allowed water to continue to flow through the turbine. The continuous flow of water during the shutdown allowed the Unit 2 turbine to continue rotating, and cause the turbine's speed to dangerously increase. An overspeed protection device within Unit 2 sensed the increasing turbine speed, which signaled the draft tube gate to close in an effort to stop the water and prevent a potentially catastrophic overspeed condition. The operation of the overspeed device triggering the closing of the draft tube gates, ultimately shut down Unit 2.

Following the incident, while Units 1 and 3 restarted without issue, Unit 2 failed to restart. Unit 2 could not restart until it was dewatered; however this required the repair of the draft tube gate seals. These draft tube gate seals were damaged when the draft tube gates for Unit 2 were forced closed against the excessively high volume and velocity of water flowing through the open wicket gates during the incident. After new draft tube gate seals were fabricated and installed, Unit 2 was repaired and returned to service on March 3, 2008.

Approximately four months prior to the incident, in September 2007, Lewis & Clinch performed mechanical services on Unit 2, including inspecting, cleaning, and adjusting the wicket gates, and removing, replacing, tightening, and readjusting every Ringfeder for each wicket gate. The damaged draft tube gate seals were outside the scope of work performed by Lewis & Clinch in September 2007. The damaged seals are not components of the Unit 2 turbine, the wicket gate, the Ringfeders or the control mechanism for the Ringfeders and wicket gate. Nor are the damaged seals attached to or contiguous with the Unit 2 wicket gate, Ringfeders or wicket gate control mechanism on which Lewis & Clinch performed its September 2007 work.

Northbrook intends to prove at trial that, as a result of the incident, damages to Unit 2 amounted to $135, 959.00, $99, 900.00 of which is attributed to the replacement cost of the draft tube gate seals. In addition, Northbrook intends to prove that, as a ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.