Donahue v. Republic National Distributing Company, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

JOSHUA DONAHUE ET AL. CIVIL ACTION

VERSUS NO: 16-13948

REPUBLIC NATIONAL DISTRIBUTING SECTION: “H”

COMPANY, LLC ET AL.

ORDER AND REASONS

Before the Court is Cross Defendant Makar Installations, Inc. (“Makar”)

and Third-Party Defendant Cincinnati Insurance Company’s (“CIC”) Motion

for Summary Judgment (Doc. 394). For the following reasons, Makar and CIC’s

Motion for Summary Judgment is DENIED IN PART and GRANTED IN

PART.

BACKGROUND

This action arises out of injuries suffered by Plaintiff Joshua Donahue

(“Donahue”) while working in Defendant Republic National Distributing

Company, LLC’s (“Republic”) warehouse. In 2015, Republic contracted with

W&H Systems, Inc. (“W&H”) for the construction of a new conveyer system at

its liquor distribution warehouse. As part of this project, W&H contracted with

Steele Solutions, Inc. (“Steele”) to design and install a new mezzanine in the

warehouse. Steele, in turn, subcontracted with Makar for the installation of

the Steele-designed mezzanine. W&H was responsible for installing the

conveyer system that would run through the new mezzanine. W&H

subcontracted with Defendant Darana Hybrid, Inc. (“Darana”) to perform

electrical work on the conveyer system. Darana had a contract with Defendant

American ManPower Services, Inc. (“AMPS”) whereby AMPS provided

laborers to Darana to complete the electrical installation. Donahue was

employed by AMPS for this project.

Makar began construction of the Steele-designed mezzanine on May 4,

2015 and completed the installation on May 15, 2015. After Makar completed

construction of the Mezzanine and departed Republic’s warehouse, Donahue,

an employee of American ManPower Services, Inc. (“AMPS”), began working

on the electrical installation for the conveyor system. On July 29, 2015,

Donahue was struck in the head by a rotating fan that hung above the old and

new mezzanines. Donahue and his wife, Angela Bolton, (“Plaintiffs”), brought

suit against Republic and the many contractors and subcontractors on the

project.

On August 21, 2018, Plaintiffs filed their Fourth Supplemental and

Amended Complaint, which included multiple counts of negligence against

Steele, Makar, and five additional defendants for flaws in the design,

construction, and installation of the mezzanine and for failure to guard against

the fan’s hazardous condition. In Steele’s Answer to Plaintiff’s Fourth

Supplemental and Amended Complaint, Steele included a crossclaim against

Makar, alleging that the parties’ subcontract obligated Makar to defend and

indemnify Steele against liability arising out of incidents at the Republic

warehouse.1 Steele also asserted a third-party complaint against CIC,

demanding defense and indemnity as an additional insured in accordance with

the Makar-Steele subcontract.2

1 Doc. 210 at 17.

2 Doc. 210 at 19–21.

On January 17, 2020, Steele entered into a settlement with Plaintiffs,

and Plaintiffs claims against it were dismissed.3 Later that same day, after

finding that Makar did not have a duty to prevent against Donahue’s injury,

this Court entered an Order granting Makar’s Motion for Summary Judgment

and dismissing Makar with prejudice.4 Now that both Steele and Makar are

dismissed from Plaintiffs’ original suit, Makar and CIC move for summary

judgment and ask that this Court to find that Makar and CIC have no

contractual obligation to defend and indemnify Steele, to dismiss Steele’s

claims against them with prejudice, and to award costs in favor of Makar and

CIC.

LEGAL STANDARD

“The 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.”5 “As to materiality . . . [o]nly disputes over

facts that might affect the outcome of the suit under the governing law will

properly preclude the entry of summary judgment.”6 Nevertheless, a dispute

about a material fact is “genuine” such that summary judgment is

inappropriate “if the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.”7

In determining whether the movant is entitled to summary judgment,

the Court views facts in the light most favorable to the non-movant and draws

all reasonable inferences in his favor.8 “If the moving party meets the initial

3 See Docs. 377, 379.

4 The Court entered its Order dismissing Makar on January 17, 2020. See Doc. 378. The Court

subsequently issued its reasons for judgment on January 27, 2020. See Doc. 382.

5 FED. R. CIV. P. 56.

6 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

7 Id. at 248.

8 Coleman v. Hous. Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).

burden of showing that there is no genuine issue of material fact, the burden

shifts to the non-moving party to produce evidence or designate specific facts

showing the existence of a genuine issue for trial.”9 Summary judgment is

appropriate if the non-movant “fails to make a showing sufficient to establish

the existence of an element essential to that party’s case.”10

“In response to a properly supported motion for summary judgment, the

nonmovant must identify specific evidence in the record and articulate the

manner in which that evidence supports that party’s claim, and such evidence

must be sufficient to sustain a finding in favor of the nonmovant on all issues

as to which the nonmovant would bear the burden of proof at trial.”11 The Court

does “not . . . in the absence of any proof, assume that the nonmoving party

could or would prove the necessary facts.”12 Additionally, “[t]he mere argued

existence of a factual dispute will not defeat an otherwise properly supported

motion.”13

LAW AND ANALYSIS

Before determining what obligations Makar and CIC have to Steele

under the CIC insurance policy and the Steele-Makar subcontracts, the Court

must determine what law applies. In diversity cases, federal courts are bound

by the conflict-of-law rules of the state in which they are sitting.14 Accordingly,

a federal district court sitting in Louisiana is bound to apply Louisiana choice-

9 Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).

10 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

11 Johnson v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th Cir.

2004) (internal citations omitted).

12 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 393–94 (5th Cir. 2000) (quoting Little v. Liquid

Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).

13 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).

14 Kozan v. Comstock, 270 F.2d 839 (5th Cir. 1959).

of-law rules.15 Louisiana Civil Code article 3537 specifically addresses which

law applies to issues of conventional obligations. Article 3537 states:

Except as otherwise provided in this Title, an issue of conventional

obligations is governed by the law of the state whose policies would

be most seriously impaired if its law were not applied to that issue.

That state is determined by evaluating the strength and

pertinence of the relevant policies of the involved states in the light

of: (1) the pertinent contacts of each state to the parties and the

transaction, including the place of negotiation, formation, and

performance of the contract, the location of the object of the

contract, and the place of domicile, habitual residence, or business

of the parties; (2) the nature, type, and purpose of the contract; and

(3) the policies referred to in Article 3515, as well as the policies of

facilitating the orderly planning of transactions, of promoting

multistate commercial intercourse, and of protecting one party

from undue imposition by the other.

Steele argues that Wisconsin law should govern as Steele is a Wisconsin

corporation and Wisconsin would receive the benefit of an indemnity agreement

in Steele’s favor. Makar and CIC contend that Louisiana law governs but also

argue that Illinois law, not Wisconsin law, would be the next best alternative.

As neither party fully briefed the choice-of-law issue, and as the facts

surrounding the formation of the subcontracts are deeply contested, an in-depth

choice-of-law analysis at this stage is improper.

This Court can, however, still address Makar and CIC’s arguments that

do not require a conflict of laws analysis.16 This Court will therefore address the

applicability of the Steele-Makar subcontracts and the effect of Steele’s late

production of the 2008 subcontract. Further, as the laws of Illinois, Wisconsin,

15 Crase v. Astroworld, Inc., 941 F.2d 265 (5th Cir. 1991).

16 See R.R. Mgmt. Co. v. CFS Louisiana Midstream Co., 428 F.3d 214, 222 (5th Cir. 2005)

(“Where there are no differences between the relevant substantive laws of the respective

states, there is no conflict, and a court need not undertake a choice of law analysis.”).

and Louisiana do not conflict on the issues of general contractual interpretation

and an insurer’s duty to defend and indemnify,17 and because the parties agree

that Louisiana law should govern interpretation of the insurance contract, this

Court will also define CIC’s obligations to Steele under the CIC policy.

A. Validity of the Subcontract Agreements

The Parties dispute the relevance of two documents, both of which are

titled “Subcontract Terms and Conditions” and purport to delineate the

obligations of both Steele and Makar as contractor and subcontractor.

1. The 2016 Subcontract

Makar and CIC first request that this Court find that an unsigned

Subcontract Terms and Conditions, dated January 1, 2016, fails to “provide a

contractual duty in the movants to defend and indemnify Steele for its own

negligence.”18 Steele does not dispute that the unsigned, post-dated contract

fails to govern the parties’ obligations in the current matter. Steele explains

that it initially had trouble locating the proper subcontract and only produced

the 2016 subcontract to evidence the contents of the missing document.19

Having since identified the proper subcontract, Steele does not contest that the

2016 document is now irrelevant. This Court therefore has no trouble finding

the 2016 Subcontract Terms and Conditions inapplicable to the current issue.

17 See Water Well Sols. Serv. Grp., Inc. v. Consol. Ins. Co., 2016 WI 54, 369 Wis. 2d 607, 881

N.W.2d 285 (explaining Wisconsin law governing insurance policy interpretation and the

duty to defend); see Illinois State Bar Ass’n Mut. Ins. Co. v. Canulli, 2020 IL App (1st)

190142, ¶ 21, 150 N.E.3d 140, 145, reh'g denied (May 13, 2020) (explaining Illinois law

governing insurance policy interpretation and the duty to defend).

18 Doc. 394-1 at 1.

19 See Doc. 406 at 5.

2. The 2008 Subcontract

The second agreement, and the agreement that will control this Court’s

analysis, is a “Subcontract Terms and Conditions” dated August 14, 2008, and

signed by Michael Thelen, President of Steele Solutions, and Gil Makaryk, Vice

President of Makar (hereinafter “the Subcontract”). In relevant part, the

Subcontract requires the subcontractor to indemnify, defend, and hold

harmless Steele Solutions from:

(i) All claims, damages, losses, and expenses including, but not

limited to, attorneys’ fees, arising out of or resulting from

Subcontractor’s performance of its work under this

Agreement and each Schedule of Work by, Subcontractor, its

sub-subcontractors and suppliers, anyone directly or

indirectly employed by them or anyone for whose acts they

may be liable, regardless of whether or not such claim,

damage, loss or expense is caused in part by a party

indemnified hereunder.

(ii) All claims, damages, losses and expenses including, but not

limited to, fines, penalties and attorneys’ fees, arising out of

or resulting from Subcontractor’s failure to comply with any

applicable laws, ordinances, rules, regulations or orders in

connection with each Schedule of Work including, without

limitation, the Occupational Safety and Health Act of 1970.20

The Subcontract Terms and Conditions also obligates the subcontractor to

obtain insurance, including:

b) General Liability. Comprehensive general liability insurance

providing limits for bodily injury with personal injury, including

coverage for its employees, of $1,000,000.00 for each occurrence

and $2,000,000.00 in the aggregate; and property damage coverage

of $1,000,000.00 for each occurrence and $2,000,000.00 in the

aggregate. The policy must include Steele Solutions, the owner of

the Project and others, if requested by Steele Solutions, as

additional insureds and must provide premises-operations,

elevators, independent contractors, and broad form property

damage, contractual liability, products and completed operations

20 Doc. 394-5 at 4.

coverages (which shall be maintained in force for a period of two

years after substantial completion of the project for such longer

period of time as is described in the General Contract). In addition,

Subcontractor shall maintain an umbrella liability policy in the

amount of $5,000,000.00 providing the same coverages and with

the same additional insureds as the basic policy.21

As evidence that the Subcontract governs the current matter, Steele

looks to a document titled “Schedule of Work” that outlines Makar’s work for

Steele at the Republic facility from May 4, 2015 to May 15, 2015.22 Critically,

the Schedule of Work states:

Subject to the terms and conditions as provided herein and in the

Subcontract Terms and Conditions (the ‘Agreement’) between

Steele Solutions, Inc. (‘Contractor’) and Makar Installations, Inc.

(‘Subcontractor’), Subcontractor agrees to furnish the labor,

material, skill and equipment in accordance with the terms and

conditions of the Agreement and this Schedule of Work.23

Steele argues that “the Agreement” referenced in the Schedule of Work refers

to the Subcontract. As such, Steele argues that Makar agreed to defend and

indemnify Steele for liability arising out of Donahue’s injury and to list Steele

as an additional insured on its policy with CIC.

Although the parties spend a significant portion of their briefings

contesting the authenticity of the Subcontract, the issue of the Subcontract’s

validity is preserved for trial. Makar and CIC preface their discussion of the

Subcontract by conceding that “serious questions of fact exist” surrounding the

authenticity and applicability of the Subcontract.24 Acknowledging that the

issue of the Subcontract’s validity is inappropriate for summary judgment,

Makar and CIC assume the “authenticity, admissibility and legal effect of the

21 Id. at 5 (emphasis added).

22 See Doc. 394-8.

23 Id.

24 Doc. 394-1 at 5 n.27.

2008 document” for the limited purpose of their Motion for Summary

Judgment.25 This Court therefore declines to rule on the issue at this time and

will assume that the Subcontract controls the rights of the parties for the

purposes of Makar and CIC’s Motion for Summary Judgment.

B. The Timing of the Subcontract’s Production

Although Makar and CIC stipulate to the authenticity and admissibility

of the Subcontract for the purposes of this Motion, they simultaneously argue

that this Court should not look to the Subcontract in evaluating the rights of

the parties. Makar and CIC contend that Steele is bound by the 30(b)(6)

corporate deposition testimony of Steele’s representative, David Douglas, who

testified that he did not know of the whereabouts of the Subcontract and had

conducted an exhaustive search for its location.26 Makar and CIC thus argue

that Steele’s production of the Subcontract after the deposition of David

Douglas constitutes “sandbagging”27 and that this Court should consequently

ignore the Subcontract. Makar and CIC further argue that Steele’s submission

of the affidavit of its CEO, Michael Thelen, who asserts the validity of the

Subcontract, is improper as it contradicts Douglas’s deposition.28 This Court

disagrees.

Neither Steele’s production of the Subcontract nor Michael Thelen’s

affidavit contradict David Douglas’s testimony. Douglas testified that he

believed the Subcontract existed as he had seen the contract before, but that

25 Id. at 5.

26 See Doc. 402-1.

27 Sandbagging refers to the practice of “deliberately avoid[ing] making the proper objection

or request” to later claim post-trial error. United States v. Sisto, 534 F.2d 616, 624 n.9 (5th

Cir. 1976).

28 See Doc. 396-2.

he was unable to locate it at the time of the deposition.29 In fact, when Makar’s

counsel asked Douglas whether Steele had produced everything in its

possession relating to the Republic project, Steele’s counsel interjected and

asserted that more documents were expected.30 As Douglas consistently

testified that the Subcontract existed, this Court fails to find Douglas’s

testimony inconsistent with either the Subcontract’s production or Michael

Thelen’s affidavit.

Further, this Court does not find that Steele’s production of the

Subcontract constitutes “sandbagging.” Makar looks to QBE Insurance

Corporation v. Jorda Enterprises, Inc., for the proposition that “a corporation

is bound at trial by a lack of knowledge response at a 30(b)(6) deposition.”31 In

QBE, the court precluded the corporation from testifying on certain subjects at

trial,

Because the discovery deadline ha[d] expired, because QBE did not

fulfill its obligation to properly prepare its own designee, because

QBE waited until the corporate representative deposition began to

give notice of its designee's partial inadequacy and because its

designee could have (but did not) review substantially more

material in order to be a more-responsive witness.

Unlike in QBE, Steele produced the Subcontract less than twenty-four hours

after the corporate deposition, the production happened well before the

discovery deadline, there is no evidence that Steele’s corporate designee

purposefully failed to produce the contract at the deposition, and neither

Makar nor CIC have demonstrated prejudice from the late production. This

Court therefore fails to see why Steele should be estopped from relying on the

29 See Doc. 402-1.

30 See id at 5.

31 277 F.R.D. 676, 681 (S.D. Fla. 2012).

Subcontract.32

C. CIC’s Duty to Defend and Indemnify

Steele argues that the Subcontract and Schedule of Work obligated

Makar to name Steele as an additional insured on its policy with CIC. As

evidence that it was so named, Steele points to a Certificate of Liability

Insurance, dated August 8, 2014, that lists Makar as an insured and Steele as

an additional insured with CIC.33 Although CIC disputes that the Certificate

of Liability evidences actual coverage, Steele and Makar both agree that if

Steele is an additional insured, Steele’s coverage is controlled by the

“Automatic Additional Insured” endorsement to the August 8, 2014 to August

8, 2015 CIC policy (“Additional Insured Endorsement”).34

The Additional Insured Endorsement defines an additional insured as

including those who the insured is “required to add as an additional insured

on this Coverage Part under: (1) A written contract or agreement . . . but only

with respect to liability arising out of ‘your work’ performed for that additional

insured by you or on your behalf.”35 The endorsement further limits coverage

to the limits “specified in the written agreement or in the Declarations of this

Coverage Part, whichever are less.”36

CIC first contends that Steele is not an additional insured under CIC’s

policy because Steele failed to produce proof of the required “written

agreement” at the time it made its third-party demand. CIC also argues that,

32 The Court also reminds CIC and Makar that they have already admitted that the issue of

“whether Steele should be estopped from relying on the Subcontract” is a genuine issue of

material fact. Doc. 394-1 at 5 n.27.

33 See Doc. 394-9.

34 See Doc. 394-4.

35 See id. at 65.

36 Id. at 66.

even if Steele is an additional insured, the policy exclusions and Makar’s

dismissal from the lawsuit preclude coverage for Plaintiffs’ claims against

Steele.

1. Steele’s Status as an Additional Insured

Under Louisiana law, “[a]n insurance policy is a conventional obligation

that constitutes the law between the insured and insurer, and the agreement

governs the nature of their relationship.”37 Insurance policies, therefore,

“should be construed . . . using the general rules for the interpretation of

contracts” under Louisiana law.38 “The role of the judiciary in interpreting

insurance contracts is to ascertain the common intent of the parties to the

contract.”39 “When the words of an insurance contract are clear and explicit

and lead to no absurd consequences, courts must enforce the contract as

written and may make no further interpretation in search of the parties’

intent.”40

Here, the CIC policy is clear and leads to no absurd consequences. The

CIC policy defines an additional insured as including those who Makar is

required to add as an additional insured under a written contract or

agreement. The Subcontract, a written agreement, clearly obligates Makar to

include Steele as an additional insured on its Comprehensive General Liability

policy. This Court therefore has no difficulty finding that Steele is an

additional insured on the CIC policy.

CIC argues, however, that Steele is not an additional insured because

the “written contract” upon which Steele’s additional insured status is

premised was not produced at the time Steele tendered its defense to CIC. CIC

37 Peterson v. Schimek, 729 So. 2d 1024, 1028 (La. 1999) (citing LA. CIV. CODE art. 1983).

38 Carbon v. Allstate Ins. Co., 719 So. 2d 437, 439 (La. 1998).

39 Id. (citing LA. CIV. CODE art. 2045).

40 Peterson, 729 So. 2d at 1028.

contends that because Steele was unable to locate the Subcontract when Steele

filed its third-party demand, and because Makar has “consistently denied that

there was a written, signed, contract, and had none among its records,” CIC

“had no basis to conclude that Steele was an additional insured.”41 CIC

therefore argues that Steele’s claim for defense and indemnity was legally

insufficient “at the time of tender” and cannot be retroactively revived.42 This

Court disagrees.

First, it is important to note that CIC cites no law in support of this

proposition, and this Court is not aware of any.43 The duty to defend is not

dependent on the insured’s proof of coverage at the outset of litigation. Rather,

as discussed more fully below, the duty to defend is triggered when the

plaintiff’s complaint shows the possibility of coverage, even if the alleged

insured is later proven to be an uncovered party.44

A poignant example of this principal is illustrated in Vaughn v.

Franklin.45 In Vaughn, the insurer argued that it had no duty to defend two

parties who would only qualify as additional insureds if they had contracted

with the policyholder to have their fields sprayed with fertilizer.46 Throughout

the litigation, the alleged insureds held the position that they had never made

41 Doc. 394 at 9.

42 See Doc. 402 at 6–7.

43 CIC’s repeated emphasis of the phrase “at the time of the tender of defense” leads this court

to believe that CIC is referring to Louisiana case law concerning waiver. In Louisiana, an

insurer can deny coverage on the basis that it did not receive timely notice of an occurrence

or potential claims if it proves it can show actual prejudice. See Peavey Co. v. M/V ANPA,

971 F.2d 1168, 1172 (5th Cir. 1992); see also Anco Insulations, Inc. v. Nat’l Union Fire Ins.

Co. of Pittsburgh, Pa., 787 F.3d 276, 283 (5th Cir. 2015) (finding that the insured breached

the duty to “tender claims timely” when timely notice of suit was an express condition

precedent to coverage). Here, however, Steele gave timely notice to CIC of the pending

lawsuit by way of a third-party demand.

44 Vaughn v. Franklin, 785 So. 2d 79, 84–85 (La. App. 1 Cir. 2001), writ denied, 798 So. 2d

969 (La. 2001).

45 Id.

46 Id. at 85.

such a contract with the policyholder.47 The Louisiana First Circuit Court of

Appeal held nonetheless that the insurer was arbitrary in its breach of the duty

to defend.48 In so holding, the court found, in part, that “[t]he fallacy of St.

Paul’s entire argument, however, is that the duty to defend arose when it had

knowledge that (1) it issued a policy of insurance that covered property growers

who contracted with the named insured and (2) the [alleged insured] had been

sued” on that basis.49 Vaughn clearly refutes CIC’s position that evidence of

non-coverage at the outset of litigation disqualifies a party as an additional

insured.50

Although the facts available to CIC prior to the Subcontract’s production

may evidence CIC’s reasonableness in the event that Steele seeks penalties for

CIC’s failure to timely tender defense,51 they do not affect the validity of CIC’s

obligation. Again, this Court denounces the notion that a temporarily

misplaced contract completely relieves the insurer of its contractual

responsibility.

2. The Policy Exclusions

Steele opposes CIC’s reliance on certain policy exclusions to limit CIC’s

duty to defend and indemnify Steele. Specifically, CIC relies on the provisions

excluding bodily injury arising out of the:

(1) Rendering of, or failure to render, any professional architectural,

engineering or surveying services, including:

47 Id. at 85–86.

48 Id.

49 Id. at 87.

50 See also Am. Home Assur. Co. v. Czarniecki, 230 So. 2d 253 (1969) (finding that the insurer

had a duty to defend the driver even though the court ultimately found that driver was not

a covered party).

51 The trial court can award penalties and attorney’s fees if it finds that the insurer was

arbitrary and capricious in its breach of the duty to defend. See e.g., Cunard Line Co. v.

Datrex, Inc., 26 So. 3d. 886, 895 (La. App. 3 Cir. 2009), writ denied, 29 So. 3d 1264 (La.

2010).

(a) The preparing, approving or failing to prepare or approve maps,

shop drawings, opinions, reports, surveys, field orders, change

orders or drawings and specifications; and

(b) Supervisory, inspection, architectural or engineering activities;

(2) Sole negligence or willful misconduct of, or for defects in design

furnished by the additional insured or its employees.52

Steele does not dispute the applicability of the policy exclusions but rather

argues that the policy exclusions constitute an affirmative defense that CIC

waived when it failed to include them in its Answer.

Federal Rule of Civil Procedure 8(c) “requires defendants to plead

affirmative defenses with enough specificity or factual particularity to give the

plaintiff fair notice of the defense that is being advanced.”53 Courts sitting in

diversity must look to substantive state law to determine what constitutes an

affirmative defense.54 With only minor exceptions, Louisiana law defines a

policy exclusion as an affirmative defense that must be specifically plead or

waived.55 However, failure to plead an affirmative defense under Rule 8(c),

unlike under Louisiana law, does not automatically result in waiver.56 Rather,

Rule 8(c) allows the federal trial court discretion “to determine whether the

party against whom the unpleaded affirmative defense has been raised has

suffered prejudice or unfair surprise.”57

Although the Court finds that CIC did indeed fail to properly assert the

exclusions as an affirmative defense in its Answer to Steele’s Third-Party

Demand, the Court also finds that Steele was not unfairly prejudiced by CIC’s

failure to do so. In CIC’s Answer, CIC adopted “all answers and defenses

52 Id.

53 Aunt Sally’s Praline Shop, Inc. v. United Fire & Cas. Co., 418 F. App’x 327, 330 (5th Cir.

2011).

54 Id; LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394, 398 (5th Cir. 2014).

55 Aunt Sally’s Praline Shop, Inc., 418 F. App’x at 330.

56 Id.

57 Id.

contained in Makar Installations, Inc.’s Answer to Plaintiff’s Fourth

Supplemental and Amended Complaint as if set forth herein in extenso.”58 In

Makar’s Answer, Makar’s Fifteenth Defense stated: “Pursuant to Makar’s

subcontract with Steel[e] Solutions, Inc., Steele Solutions provided all design,

plans and materials for construction of the portion of the mezzanine

constructed by Makar and therefore any alleged defect in design or materials

lies solely with Steele Solutions, Inc.”59 Steele does not contest that it was

responsible for the design of the platform, and Steele litigated the extent to

which the design of the platform contributed to Donahue’s injuries at oral

argument and in its briefings.60 Steele therefore cannot claim prejudice or

surprise when CIC alleges that Steele’s activities at the Republic facility fall

within policy exclusions for engineering and design.

Unlike the cases where the Fifth Circuit has found prejudice, CIC is not

asserting the application of the policy exclusions for the first time at, or near,

trial.61 Rather, like in Williams v. Allstate Indemnity Company, CIC asserted

its reliance on the policy exclusions in a motion for summary judgment where

Steele had two opportunities to refute CIC’s arguments.62 Further, as the

additional insured endorsement is only two pages long and is clearly the

portion of the policy that controls the scope of Steele’s coverage, it “could not

be hidden away only to be pulled out later in a surprising or prejudicial

58 See Doc. 231 at 2 (emphasis omitted).

59 Doc. 216 at 9.

60 See Doc. 324, 372.

61 See, e.g., Aunt Sally’s Praline Shop, Inc.. 418 F. App’x at 330–31.

62 See Williams v. Allstate Indem. Co., No. CIV.A. 07-6796, 2009 WL 723526, at *4 (E.D. La.

Mar. 19, 2009) (“[A]n affirmative defense is not waived if the plaintiff was not prejudiced

in its ability to respond. It is notable that in the more than a month since this motion was

filed, the plaintiff has wholly failed to attack the validity of the exclusion in either of its

two responsive pleadings.”) (internal citations and quotations excluded).

manner.”63 This Court therefore finds that CIC did not waive its right to assert

the policy exclusions as limiting its duty to defend and indemnify Steele.

3. CIC’s Duty to Defend

An insurer’s duty to defend its insured is broader than its duty to provide

coverage.64 Whether an insurer has a duty to defend is determined by

application of the “eight corners rule,” whereby the court compares the four

corners of plaintiff’s most recently amended complaint to the four corners of

the insurance policy.65 If a liberal reading of the plaintiff’s allegations do not

unambiguously exclude the possibility of coverage under the insurance policy,

then the insured has a duty to defend.66 Thus, even if several of the plaintiff’s

claims are excluded from coverage under the policy, the duty to defend persists

so long as there is at least one claim that is not unambiguously excluded.67

Looking first to the Additional Insured Endorsement, the CIC policy the

policy limits additional insured coverage to “liability arising out of ‘[Makar’s]

work’ performed for [Steele] by [Makar] or on [Makar’s] behalf.”68 The

endorsement also contains the policy exclusions for engineering and design

services, as more fully explained above. In Plaintiffs’ Fourth Supplemental and

Amended Complaint, Plaintiffs allege that Steele and Makar, along with five

other defendants, are jointly liable for seventeen counts of negligence.69 Of

these seventeen counts, only one count possibly falls within the policy

63 Levy Gardens Partners 2007, L.P. v. Commonwealth Land Title Ins. Co., 706 F.3d 622, 633

(5th Cir. 2013).

64 Suire v. Lafayette City-Parish Consol. Gov., 907 So.2d 37, 51 (La. 2005).

65 Maldonado v. Kiewit Louisiana Co., 146 So. 3d 210, 218–19 (La. App. 1 Cir. 2014).

66 Id.

67 Id.

68 See Doc. 394-4 at 65.

69 Doc. 203 at 11.

exclusions.70 Additionally, as the complaint holds Makar and Steele jointly

liable for all counts of negligence, the complaint does not exclude the possibility

that Steele could be held liable for Makar’s work. As there are sixteen counts

of negligence against Steele that are not unambiguously excluded from the

policy, it is clear that CIC had a duty to defend Steele at the time Plaintiffs

filed their Fourth Supplemental and Amended Complaint.71

The duty to defend continues until “an event occurs which shows that

coverage is unambiguously excluded.”72 The Additional Insured Endorsement

specifically limits coverage to liability arising out Makar’s work. When this

Court granted Makar’s Motion for Summary Judgment and dismissed Makar

with prejudice, it became clear that any liability owing to Steele could not arise,

in whole or in part, out of Makar’s work.73 “In the absence of an express and

unequivocal statement that a party is to be indemnified for that party’s own

negligence, the contract of indemnification will not be construed to create such

an obligation.”74 To read the insurance policy as continuing to cover Steele after

Makar’s dismissal would be to read the policy as indemnifying Steele for its

own negligence.75 As the Additional Insured Endorsement explicitly excludes

coverage for claims arising from Steele’s “sole negligence,” such a finding is

70 See Doc. 203 at 11 (“i) Designing, constructing, and/or installing scaffolding and/or a

mezzanine level that cause workers such as Donahue to come in dangerous proximity to

the rotating blades of an unguarded fixed overhead industrial fan”).

71 See Mossy Motors v. Cameras America, 898 So. 2d 602, 607 (La. App. 4 Cir. 2005) (“The

duty to defend arises whenever the pleadings against the insured disclose even a possibility

of liability under the policy.”).

72 Maldonado, 146 So.3d at 221.

73 See id; see also Moore v. Home Depot USA, Inc., 352 F. Supp. 3d 640, 648 (M.D. La. 2018)

(interpreting a similar policy provision as allowing for additional insured coverage as long

as the liability is caused at least in part by the insured party).

74 Boykin v. PPG Indus., Inc., 987 So. 2d 838, 843 (La. App. 3 Cir. 2008).

75 See Williams v. Univ. of Louisiana Lafayette, 297 So. 3d 1045, 1051 (La. App. 3 Cir. 2020)

(finding that summary judgment in favor of the named insured negated the additional

insured’s possibility of coverage).

clearly contrary to the plain language of the contract. Further, Makar’s

dismissal makes it clear that any liability Steele would have borne at trial

would have arisen out of Steele’s design of the mezzanine and would thus fall

squarely within the policy exclusions.76 It was on January 17, 2020, therefore,

when this Court dismissed Makar, that Steele’s coverage under the policy was

unambiguously excluded, and CIC’s duty to defend Steele was terminated.

4. CIC’s Duty to Indemnify

Under Louisiana law, an indemnitee “must show actual liability to

recover.”77 When the claim is based on a written contract, like an insurance

policy, the indemnitee need only show potential liability.78 For Steele to be

reimbursed for the settlement amount with Plaintiffs, Steele would have to

prove that it would have been potentially liable for acts covered by the policy.79

As discussed above, Makar’s dismissal precluded the possibility of Steele’s

coverage under the policy. “When uncontroverted facts preclude the possibility

of a duty to indemnify, the duty to defend ceases and the duty to indemnify is

negated.”80 This Court therefore finds that CIC has no duty to indemnify Steele

for the settlement expenses paid to Plaintiffs.

D. Makar’s Duty to Defend and Indemnify

Louisiana law and Wisconsin law differ in their treatment of indemnity

agreements. Louisiana law treats indemnity agreements as a “specialized form

76See Doc. 382 (“The undisputed facts demonstrate that: the mezzanine was designed by

Steele.”); see also Doc. 198 at 16 (asserting that Steele was never at the Republic warehouse

before, during, or after Makar installed the mezzanine).

77 Chevron Oronite Co., L.L.C. v. Jacobs Field Servs. N. Am., Inc., 951 F.3d 219, 226 (5th Cir.

2020) (internal quotations omitted).

78 Id. (quoting Vaughn, 785 So. 2d at 87).

79 See Vaughn, 784 So. 2d at 88.

80 Maldonado, 146 So. 3d at 219.

of contract which is distinguishable from a liability policy.”8! In Louisiana,

therefore, an indemnitor’s duty to defend and indemnify does not arise until

the indemnitee sustains loss.82 To the contrary, Wisconsin law treats an

indemnitor’s duty to defend similarly to that of an insurer, where the

indemnitor’s duty to defend arises upon the indemnitee’s “tender of a claim

against it for acts or omissions that were arguably within the purview of the

[agreement].”8? As there is a material conflict as to the law that should govern

Makar’s obligations under the indemnity agreement, the Court declines to rule

on the issue at this time.

CONCLUSION

For the foregoing reasons, Makar and CIC’s Motion for Summary

Judgment is DENIED IN PART and GRANTED IN PART.

New Orleans, Louisiana this 24th day of September, 2020.

g TRICHE MILAZZO

UNITED STATES DISTRICT JUDGE

81 Suire, 907 So.2d at 51.

82 Td.

83 Fabco Equip., Inc. v. Kreilkamp Trucking, Inc., 2013 WI App 141, 352 Wis. 2d 106, 115,

841 N.W.2d 542, 547 (quoting Estate of Kriefall v. Sizzler USA Franchise, Inc., 2012 WI

70, 342 Wis.2d 29, 4 60, 816, N.W.2d 853).

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