The opinion
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION
EMCASCO INSURANCE COMPANY
and EMPLOYERS MUTUAL CASUALTY COMPANY PLAINTIFFS
V. CASE NO. 5:22-CV-5099
NWA GROUNDS SERVICES, LLC, n/k/a
BLUE RIBBON GROUNDS SERVICES, LLC;
BELLVIEW URBAN CENTER, LLC;
HOFCO DEVELOPMENT, LLC;
BONDS EXCAVATING ENTERPRISES, INC.;
SJA INVESTMENT PARTNERSHIP, LLLP;
CHAMBORD INVESTMENTS, LLC
HAITHAM K. ALLEY, TRUSTEE OF
THE HAITHAM K. ALLEY REVOCABLE TRUST #2;
and ALEX CONNER BLASS DEFENDANTS
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs EMCASCO Insurance Company and Employers
Mutual Casualty Company’s (“EMCC’) joint Motion for Summary Judgment (Doc. 53).!
For the reasons explained below, the Court finds that separate Defendant NWA Grounds
Services, LLC, n/k/a Blue Ribbon Grounds Services, LLC (“NWAGS”) and separate
Defendant Alex Conner Blass failed to comply with the notice provisions of the insurance
policies at issue in this declaratory judgment action. Since compliance was a condition
precedent to coverage under both policies, the Court finds as a matter of law that
EMCASCO and EMCC owe no duties to defend or indemnify NWAGS and Mr. Blass ina
lawsuit pending in Benton County Circuit Court, case number 04CV-21-1129. The
1 Plaintiffs filed a Brief in Support of the Motion (Doc. 54) and Statement of Facts (Doc.
55); Defendants filed a joint Response in Opposition (Doc. 59) and Amended Statement
of Facts (Doc. 62); and Plaintiffs filed a Reply (Doc. 61).
Motion for Summary Judgment (Doc. 53) is therefore GRANTED on this basis.?
I. BACKGROUND
The following facts are undisputed. NWAGS, a limited liability company, was a
developer of a 5.8-acre property in Rogers, Arkansas. At the time NWAGS was formed,
and at all times relevant to the events in this lawsuit, Mr. Blass was the sole owner and
manager of the company. In early 2019, Mr. Blass, as manager of NWAGS, sought and
received permission from the City of Rogers to perform cleanup and grading work on the
property. Mr. Blass then hired separate Defendant Bonds Excavating Enterprises, Inc.
(“Bonds”), to assist him with the work. All site work was performed either by Mr. Blass—
who ran a bulldozer and a compaction roller on the premises—or by employees of Bonds,
whom Mr. Blass directed and/or supervised on behalf of NWAGS.
A. The Encroachment
In October 2019, the Rogers area was struck by a tornado, which felled trees and
damaged construction equipment on NWAGS's property. Mr. Blass visited the site to
take inventory of the damage. Later, acting on behalf of NWAGS, Mr. Blass directed
Bonds to clean up the downed trees. In an effort to be neighborly, Mr. Blass also
directed Bonds to clean up the downed trees on the adjacent property, which was owned
by HOFCO Development, LLC (“HOFCO”). Mr. Blass did not seek permission from
HOFCO before directing Bonds to enter onto HOFCO’s land and remove trees. While
performing this work, Bonds also removed some living saplings on HOFCOQ’s property as
well as a portion of a barbed wire fence that ran along the property line.
2 The Motion’s alternative bases for summary judgment will not be addressed.
In late October and early November 2019, Mr. Blass directed Bonds to begin
excavating and grading NWAGS'’s property to prepare for a construction project. The
grading process involved what the parties refer to as “dirt work”—leveling the surface of
the land by moving dirt from higher to lower areas or bringing in extra dirt. Bonds
inadvertently graded onto HOFCO’s property. The total encroachment encompassed
slightly over an acre of land.
Mr. Blass—and, by extension, NWAGS—had no idea the encroachment had
occurred until late November or early December 2019, when Mr. Blass retained an
architectural and engineering firm to resurvey the project site in anticipation of additional
grading and site preparation. The engineers disclosed to Mr. Blass the full extent of the
encroachment and damage to the neighboring property owned by HOFCO, and shortly
after that, Mr. Blass arranged a site meeting with HOFCO’s sole owner, Rhonda French.
The site meeting took place on December 4, 2019. During the meeting, Mr. Blass
offered multiple plans for fixing or making amends for the encroachment—all of which
were rejected by Ms. French. He even offered to buy the acre of encroached land or
trade it for a piece of land he owned or controlled, but Ms. French refused. Mr. Blass
testified in a deposition that “Ms. French was visibly upset in the meeting.” (Doc. 53-2,
p. 62). After he left the site that day, it was clear to Mr. Blass that this problem was not
just going to go away. He understood “that Mrs. French didn’t trust the work being done
by the civil team that was working on the project at that time.” /d. at p. 63.
Months passed, and still the parties failed to reach a settlement. Mr. Blass
submitted at least six possible remediation plans to the City of Rogers, but Ms. French
would agree to none of them. At this point HOFCO had identified certain water retention
and drainage issues on its property. HOFCO blamed NWAGS and Bonds for these
issues, which further complicated the remediation efforts.
In October 2020, nearly a year after the encroachment, a second site meeting took
place involving Mr. Blass (on behalf of NWAGS), an official from the City of Rogers, and
at least one representative from HOFCO. It appeared to Mr. Blass that the meeting
produced a general consensus about how to remediate HOFCO’s property.
In February 2021, Mr. Blass suggested yet another remediation plan meant to
restore pre-encroachment conditions on the property—but once again, Ms. French
rejected it.
B. The HOFCO Lawsuit
On May 19, 2021, HOFCO filed suit in Benton County Circuit Court, naming as
defendants NWAGS, Bonds, and Bellview Urban Center, LLC—a partial owner of the
property NWAGS was developing. The complaint accused all defendants of negligence,
the creation of a nuisance’ on HOFCO’s property, unjust enrichment, and trespass.
HOFCO demanded compensatory damages, punitive damages, and injunctive relief.
Mr. Blass became aware of HOFCO’s lawsuit by June 1, 2021. He directed his
attorneys to accept service of the complaint on behalf of NWAGS that day. NWAGS’s
answer to the complaint was filed on June 23, 2021.
Mr. Blass tendered claims against NWAGS's two insurance policies to EMCASCO
and EMCC on November 4, 2021. It is undisputed this is the earliest date that EMCASCO
and EMCC received notice of either the encroachment or the resulting lawsuit. Notice
was given approximately five months after Mr. Blass/NWAGS first became aware of
HOFCO’s lawsuit and twenty-three months after Mr. Blass/NWAGS’s discovered the
encroachment and met with Ms. French to discuss possible ways to remediate the
damage.
C. The Insurance Policies
EMCASCO issued a series of commercial general liability policies to NWAGS,
including policy number 5D9-58-91-19, which was in place from November 8, 2018,
through November 8, 2019, and policy number 5D9-58-91-20, which was in place from
November 8, 2019, through December 1, 2020—the time-periods relevant to this lawsuit.
Separately, Plaintiff EMCC issued a series of umbrella policies to NWAGS, including
policy number 5J9-58-91-19, which was effective from November 8, 2018, through
November 8, 2019, and policy number 5J9-58-91-20, which was effective from November
8, 2019, through December 1, 2020.
NWAGS is the named insured on all insurance policies listed above. Since
NWAGS is a limited liability company, the policies state that NWAGS’s members and
managers are also considered insureds, but only with respect to NWAGS'’s business and
the managers’ duties to the business. As stated previously, Mr. Blass was the sole
owner and manager of NWAGS from 2019 to 2021, when the events relevant to this
lawsuit occurred.
The parties do not dispute that both EMCASCO’s and EMCC’s insurance policies
contain certain conditions precedent to coverage. These conditions appear in all policies
under the heading, “Duties In The Event Of Occurrence, Offense, Claim Or Suit.” See
Doc. 2-2, p. 14; Doc. 2-3, p. 19; Doc. 2-4, p. 36; Doc. 2-5, p. 37. Under all policies, the
insured “must see to it that [EMCASCO/EMCC] [is] notified as soon as practicable of an
‘occurrence’ or an offense” “which may result in aclaim.” /d. An “occurrence” is defined
as “an accident, including continuous or repeated exposure to substantially the same
general harmful conditions.” (Doc. 2-2, p. 18; Doc. 2-3, p. 23; Doc. 2-4, p. 21; Doc. 2-5,
p. 22). If an “occurrence” later escalates to a lawsuit, the policies require the insured to
“see to it that [EMCASCO/EMCC] receive[s] written notice of the claim or ‘suit’ as soon
as practicable” and “[i]Jmmediately send [EMCASCO/EMCC] copies of any demands,
notices, summonses or legal papers received in connection with the claim or ‘suit.’” (Doc.
2-2, p. 14; Doc. 2-3, p. 19; Doc. 2-4, p. 17; Doc. 2-5, p. 18).
NWAGS and Mr. Blass contend there is a genuine issue of material fact as to
whether NWAGS provided notice to EMCASCO and EMCC “as soon as practicable’—
either after the encroachment onto HOFCOQ’s land in December 2019 or after Mr. Blass
was served with HOFCO’s lawsuit against NWAGS in June 2021. The policies require
such notice both after an “occurrence” “which may result in a claim” and once a suit is
filed. Though Mr. Blass admits that NWAGS is liable for encroaching onto HOFCO’s
property, he claims he had no reason to believe the encroachment constituted an
“occurrence” that could result in a “claim” or “suit,” per the policy language. He believed,
instead, that the dispute with HOFCO would never result in a claim and would be resolved
to the parties’ satisfaction without resorting to insurance coverage, since NWAGS and
HOFCO “engaged in numerous meetings attempting to resolve the situation and
exchanged various proposed remediation plans to restore the property.” (Doc. 59, p.
21).
Mr. Blass offers no explanation as to why he waited five months to send copies of
the lawsuit papers to EMCASCO and EMCC—except that he continued to believe,
throughout that time, that the lawsuit would be settled quickly and not “fully go into trial.”
(Doc. 53-2, p. 82). He and NWAGS argue that reasonable jurors could disagree about
whether NWAGS ‘“{i]Jmmediately sen[t] [EMCASCO/EMCC] copies of any demands,
notices, summonses or legal papers received in connection with the claim or ‘suit.’”” (Doc.
2-2, p. 14; Doc. 2-3, p. 19; Doc. 2-4, p. 17; Doc. 2-5, p. 18). Mr. Blass also maintains
that even if notice was untimely as to NWAGS, he should still be covered by the policies
in his capacity as manager of NWAGS.__It appears HOFCO filed an amended complaint
in state court on July 1, 2022, naming Mr. Blass as a defendant for the first time. Mr. Blass
notified EMCASCO and EMCC of this development on July 5, a few days after the
amended complaint was filed.
Hl. LEGAL STANDARD
Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary
judgment 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.” The Court must review the facts
in the light most favorable to the opposing party and give that party the benefit of any
inferences that logically can be drawn from those facts. Canada v. Union Elec. Co., 135
F.3d 1211, 1212-13 (8th Cir. 1997). The moving party bears the burden of proving the
absence of a genuine dispute of material fact and that it is entitled to judgment as a matter
of law. See Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986); Nat’) Bank of Commerce of El Dorado v. Dow Chem. Co.,
165 F.3d 602 (8th Cir. 1999). Once the moving party has met its burden, the non-moving
party must “come forward with ‘specific facts showing that there is a genuine issue for
trial.” Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. P. 56(c)).
In order for there to be a genuine issue of material fact, the non-moving party must
produce evidence “such that a reasonable jury could return a verdict for the nonmoving
party.” Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
lll. © DISCUSSION
In their Motion for Summary Judgment, EMCASCO and EMCC argue they are
entitled to a declaratory judgment that they have neither a duty to defend nor a duty to
indemnify NWAGS and Mr. Blass in the underlying state court action. The duty to defend
and the duty to indemnify “are distinct, independent obligations.” S. Farm Bureau Cas.
Ins. Co. v. Watkins, 2011 Ark. App. 388, 7 (2011). Insurers have a duty to defend an
insured when claims are brought against the insured and the allegations show “a
possibility that the injury or damage [may] fall within the policy coverage.” Kolbek v. Truck
Ins. Exch., 2014 Ark. 108, 6 (2014). “Unlike an insurer's duty to defend, . . . the duty to
indemnify turns on the actual facts and circumstances giving rise to liability in the
underlying suit, and parties may introduce evidence during coverage litigation to establish
or refute the duty to indemnify.” 43 Am. Jur. 2d Insurance § 676 (2022) (collecting cases).
Insurance contracts routinely require insureds to notify their insurers once a lawsuit
is filed and/or once a dispute arises that could potentially blossom into a full-fledged
lawsuit.
The notice requirement is designed to enable the insurer to investigate the
accident or claim in a timely manner, to assess whether it should settle or
litigate the claim, and, if litigation is determined to be the best course of
action, to prepare an adequate defense on behalf of the
insured. Frequently, insurance policies will require notice be given to the
insurer “immediately” or “promptly,” or “as soon as
practicable.” Occasionally, a specific time limit within which notice must be
given is stated in the insurance contract. Ultimately, regardless of the time
limit, courts have, by the great weight of authority, interpreted these
provisions to mean reasonable notice under the circumstances, which is
usually a question of fact.
The duty to give notice arises when, under the circumstances, the insured
has reason to know of the possibility of an impending claim, regardless of
whether the insured believes that he or she is liable, or that the claim is
valid. A “claim,” for purposes of a notice requirement under liability
insurance policies, is a demand by a third party against an insured for
money damages or other relief owed.
Policies will often require that the insured give notice within a specified or
reasonable time after an “occurrence.” Thus, whether the insured has a duty
to give notice will often depend on the interpretation of the term
“occurrence,” an often quoted definition of which being that “the accident is
sufficiently serious to lead a person of ordinary intelligence and prudence
to believe that it might give rise to a claim for damages.”
1 Samuel Williston, A Treatise on the Law of Contracts § 49.88 (4th ed. 1990).
Arkansas law provides that “[i]f an insurance policy treats the giving of notice of a
lawsuit as a condition precedent to recovery, ‘the insured must strictly comply with the
notice requirement, or risk forfeiting the right to recover from the insurance
company.” Am. Railcar Indus., Inc. v. Hartford Ins. Co. of the Midwest, 847 F.3d 970, 973
(8th Cir. 2017) (quoting Fireman’s Fund Ins. Co. v. Care Mgmt., Inc., 2010 Ark. 110, 5-6
(2010)). In other words, an insured must comply with contractual conditions precedent
before the insurer has any contractual duties to defend or indemnify.
The notice provisions in EMCASCO’s and EMCC’s policies are conditions
precedent to recovery. No party disputes this. Furthermore, no reasonable juror could
conclude that NWAGS strictly complied with these notice requirements.
An “occurrence” is clearly defined in the policies as an “accident” or “harmful
condition” that may result ina claim. (Doc. 2-2, p. 18; Doc. 2-3, p. 23; Doc. 2-4, p. 21;
Doc. 2-5, p. 22). Mr. Blass admitted under oath during his deposition the following
relevant facts: (1) he, in carrying out his duties as manager of NWAGS, personally
directed Bonds to enter HOFCO’s land without permission and remove trees and a portion
of fencing; (2) he personally directed Bonds to perform “grading” on NWAGS's land; (3)
Bonds accidentally entered onto HOFCO’s property without permission and “graded”
more than an acre of land by moving dirt and bringing in extra dirt; (4) Mr. Blass met with
HOFCO’s sole owner on December 4, 2019, and offered multiple pathways to settlement,
all of which were rejected; (5) NWAGS bore responsibility for the accident; and (6) Mr.
Blass also bore responsibility for the accident in his capacity as sole owner and manager
of the company. Given these undisputed facts, there is no genuine, material dispute that
the encroachment qualified as an “occurrence” for which NWAGS was required to provide
notice “as soon as practicable.”
Mr. Blass and NWAGS believe a jury could find that notice was provided in
compliance with the policies’ terms. The Courtdisagrees. According to the undisputed
timeline of events, NWAGS, by and through Mr. Blass, knew of an “occurrence” on
December 4, 2019. By that date, NWAGS—through Mr. Blass—knew that an “accident”
caused by NWAGS’s agent had resulted in serious damage to a neighbor's property. Mr.
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Blass’s unsuccessful attempts at settlement lasted eighteen months and culminated in
HOFCO filing a lawsuit against NWAGS to force a resolution.
An action that is “practicable” is “reasonably capable of being accomplished.”
Black’s Law Dictionary 1361 (10th ed. 2014). Mr. Blass does not contend he was
incapable of providing notice to EMCASCO and EMCC for nearly two years. He simply
decided not to do so, and that decision has now cost his company insurance coverage.
Even if, for the sake of argument, the Court were persuaded that before-suit notice
was a question of fact, after-suit notice was clearly not provided in compliance with the
policies. Mr. Blass cannot explain why it was impracticable for NWAGS to provide notice
of suit in June 2021—let alone for the next five months. Moreover, in view of that
significant delay, no reasonable juror could find that Mr. Blass “[i]Jmmediately sen[t]
[EMCASCO/EMCC] copies of any demands, notices, summonses or legal papers
received in connection with the claim or ‘suit.’”” (Doc. 2-2, p. 14; Doc. 2-3, p. 19; Doc. 2-4,
p. 17; Doc. 2-5, p. 18).
Therefore, as a matter of law, the Court finds that NWAGS, by and through its
owner and manager Mr. Blass, failed to satisfy the notice-related conditions precedent to
coverage under the insurance policies. As for Mr. Blass’s argument that he, personally,
is deserving of coverage because he promptly forwarded to the insurers a copy of
HOFCO’s amended complaint, filed in July 2022, that named him as a separate
defendant, the Court again disagrees. HOFCO sued Mr. Blass in his capacity as
agent/owner/manager of NWAGS, not in his personal capacity. See Doc. 26-1, J] 18—
23. Under the policies, he would only be entitled to coverage “with respect to [his] duties
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as [a] manager[]’ and not in his personal capacity. See Doc. 2-2, p. 12; Doc. 2-3, p. 17;
Doc. 2-4, p. 15; Doc. 2-5, p. 16. When NWAGS learned about the encroachment, it did
so by and through Mr. Blass; when NWAGS made offers to HOFCO’s owner to remediate
the damage, Mr. Blass conveyed those offers; when NWAGS decided not to inform its
insurers for nearly two years about the encroachment, it was really Mr. Blass’s decision
as manager of NWAGS; and when notice of suit was finally given—too late to comply with
the policies’ conditions—it was Mr. Blass who made that call. Accordingly, EMCASCO
and EMCC owe no duty to defend or indemnify NWAGS and Mr. Blass.
IV. CONCLUSION
IT IS ORDERED that Plaintiffs EMCASCO Insurance Company and Employers
Mutual Casualty Company’s Motion for Summary Judgment (Doc. 53) is GRANTED.
The Court will enter a separate judgment declaring that Plaintiffs owe no duties to defend
or indemnify NWAGS and Mr. Blass in connection with the claims alleged in HOFCO’s
lawsuit.
IT IS SO ORDERED on this say of May, 202
he
UNITED STATES DISTRICT JUDGE
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