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Mount Vernon Fire Insurance Co. v. Liem Construction, Inc.

United States District Court, M.D. Tennessee, Nashville Division

April 26, 2017

MOUNT VERNON FIRE INSURANCE COMPANY, Plaintiff,
v.
LIEM CONSTRUCTION, INC., R.F. JONES CONSTRUCTION, LLC, and ASHLER OAKS, LLC d/b/a ROUNDTREE APARTMENTS, Defendants.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE.

         Plaintiff Mount Vernon Fire Insurance Company (“MVFIC”) has filed a Motion for Summary Judgment. (Doc. No. 36.) Defendant Ashler Oaks, LLC d/b/a Roundtree Apartments (“Ashler Oaks”) has filed a Response (Doc. No. 46), and MVFIC has filed a Reply (Doc. No. 48). For the reasons discussed below, MVFIC's motion will be GRANTED as to Ashler Oaks. The other Defendants in this matter, R.F. Jones Construction, LLC, (“Jones”) and Liem Construction, Inc., (“Liem”) have failed to file responsive proceedings and are currently subject to Entries of Default. (Doc. No. 22; Doc. No. 23.) MVFIC will be ORDERED to file a Rule 55(b)(2) motion for entry of default judgment as to the those Defendants within fourteen days of the issuance of the Order accompanying this Opinion.

         I. BACKGROUND

         Ashler Oaks is a limited liability company with an interest in a piece of Nashville real property known as “Roundtree Apartments” (“Roundtree”). (Doc. No. 47 at ¶ 2.) Jones entered into a contract with Ashler Oaks in May of 2014 (“Prime Contract”), pursuant to which Jones was to perform certain improvements, including roof repairs, to Roundtree buildings. (Id. at ¶ 4.) Jones, in turn, allegedly entered into a subcontract with Liem to perform some or all of the work under the Prime Contract. (Doc. No. 1 at ¶ 3.4.)

         MVFIC is a Pennsylvania-based insurer from whom Liem purchased a commercial general liability policy (“Policy”). (Doc. No. 1 at ¶¶ 1.1, 3.2; Doc. No. 18 at ¶¶ 1, 6.) MVFIC contends that it originally issued the policy pursuant to a Commercial General Liability Application (“Application”) dated October 30, 2013, and submitted on behalf of a company identified as “LIEM CONSTRUCTION, INC.” (Doc. No. 1-1.) The Application's first section asks, “Has applicant ever operated under any other name or names?” A box answering “No” is marked. (Id. at 1.)

         The Application's third section includes a table identifying two “classifications”: “Carpentry - interior” and “Painting - interior - building or structures.” (Id. at 3.) Later in the Application, the applicant is asked “Has the applicant ever or will the applicant retain any work in any classifications other than those listed above?” and the box next to “No” is marked. (Id.) Under that question, the Application includes a grid from which the applicant can select a number of additional classifications, including “Roofing.” The applicant is instructed to “place an ‘X' next to each classification representing any work you have done in the past or will perform in the [future].” No “X” is placed next to “Roofing.” (Id.)

         Above the Application's signature lines is an “Applicant's Warranty Statement” in which the applicants warrants the veracity of the information in the Application and “acknowledge[s] and agree[s] that a breach of this WARRANTY STATEMENT is grounds for [MVFIC] to declare void any policy or policies issued in reliance thereon and/or deny any claim(s) for coverage thereunder.” (Id. at 4.) Although the signature on behalf of the applicant is illegible to the Court, MVFIC asserts that it belongs to Liem president Luis Espinoza. (Doc. No. 1 at ¶ 4.9.)

         The Policy itself includes a “Classification Limitation Endorsement” providing that “[c]overage under this contract is strictly limited to the classification(s) and code(s) listed on the policy Declarations page. No coverage is provided for any classification(s) and code(s) not specifically listed on the Declarations page of this policy.” (Doc. No. 1-2 at 32.) On a page with the header “COMMERCIAL GENERAL LIABILITY COVERAGE PART DECLARATIONS, ” the policy includes the same two classifications included on the Application-“Carpentry - interior” and “Painting - interior - building or structures.” (Id. at 3.)

         On February 19, 2015, Ashler Oaks filed suit against Jones and Liem in Davidson County Chancery Court, alleging that, when Liem was performing roof work, it, at Jones's direction, removed a necessary protective membrane without taking appropriate steps to prevent water infiltration, resulting in property damage to Roundtree buildings (“Underlying Action”). (Doc. No. 1-5 at ¶¶ 8-14.) Ashler Oaks' complaint in the Underlying Action includes a claim for negligence against Liem. (Id. at ¶¶ 46-51.) Jones has filed cross claims against Liem in the Underlying Action for breach of contract, negligence, and contribution. (Doc. No. 47 at ¶ 31.)

         On March 29, 2016, MVFIC filed this declaratory judgment action, seeking a declaration that it has no duty to indemnify or defend any party in the Underlying Action. (Doc. No. 1 at ¶ 8.4.) Liem and Jones have filed no responsive pleadings in this matter and default was entered against them on June 21, 2016, and July 7, 2016. (Doc. No. 22: Doc. No. 23.) On January 25, 2017, MVFIC filed its Motion seeking summary judgment. (Doc. No. 36.)

         II. ANALYSIS

         A. Standard of Review

         Summary judgment is appropriate where there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Pennington v. State Farm Mut. Auto. Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009). The party bringing the summary judgment motion has the initial burden of informing the Court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003). In deciding a motion for summary judgment, the Court must review all the evidence, facts and inferences in the light most favorable to the nonmoving party. Van Gorder v. Grand Trunk W. R.R., Inc., 509 F.3d 265, 268 (6th Cir. 2007). The Court does not weigh the evidence, judge the credibility of witnesses, or determine the truth of the matter. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The Court determines whether sufficient evidence has been presented to make the material issue of fact a proper jury question. Id. The mere existence of a scintilla of evidence in support of the nonmoving party's position will be insufficient to survive summary judgment; rather, there must be evidence on which the jury could reasonably find for the nonmoving party. Rodgers, 344 F.3d at 595.

         B.Reliance on Materials from the ...


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