United States District Court, W.D. North Carolina, Charlotte Division
MITSUI SUMITOMO INSURANCE COMPANY OF AMERICA, and SCHAEFER SYSTEMS INTERNATIONAL, INC. Plaintiffs,
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Defendant.
J. Conrad, Jr., United States District Judge
MATTER comes before the Court on the motion of Defendant
Travelers Property Casualty of America
(“Travelers”) for summary judgment, (Doc. No.
36), the cross-motion of Plaintiffs Mitsui Sumitomo Insurance
Company of America (“Mitsui”) and Schaefer
Systems International, Inc. (“Schaefer”)
(collectively with Mitsui, “Plaintiffs”) for
summary judgment, (Doc. No. 46), and related pleadings. The
issues have been fully briefed and are ripe for adjudication
following oral argument.
civil case arises out of Travelers' duty to defend
Schaefer against a property damage claim raised by Nephron
Pharmaceuticals (“Nephron”) against Schaefer and
its subcontractor Wiginton Corporation
(“Wiginton”) for alleged faulty sprinkler
installation in a warehouse.
hired Schaefer, a construction company based in Charlotte,
North Carolina, to build warehouse in Orlando, Florida. (Doc.
No. 1: Compl. at 2). On July 20, 2011, Schaefer subcontracted
the design and installation of the fire sprinkler system to
Wiginton. (Id. at 3). The contract between Schaefer
and Wiginton required the subcontractor to maintain insurance
protecting Schaefer as an “additional insured”
from claims based on faulty work by Wiginton. (Id.;
Doc. No. 13-1: Compl. Ex. A). Wiginton obtained such
insurance from Travelers and provided proof to Schaefer of
the coverage. (Doc. No. 13-2, -5: Compl. Ex. B, E). Schaefer
maintained its own insurance with Mitsui. (Doc. No. 13-4:
Compl. Ex. D).
30, 2012, a pallet struck a sprinkler head causing water
damage to Nephron's property in the warehouse. (Doc. No.
1: Compl. at 4). On July 18, 2012, Nephron CEO Lou Kennedy
emailed Schaefer Executive Fritz Schaefer stating the claim
based on Wiginton's sprinkler installation, advising that
Nephron's and Wiginton's insurance adjustors were
involved, and requesting contact with Schaefer's
insurance adjuster. (Doc. No. 61-2: Second Doerr Decl. Ex.
A). Kennedy also refused to make further payments on the
building's construction until the damage claim was
resolved. (Id.). Later that same day, Schaefer's
insurance agent Dee Bumgardner with Wells Fargo Insurance
Services followed up a phone conversation with an email to
Travelers Senior Technical Specialist Danny Williams stating
Travelers was working with Wiginton on the water damage claim
at Nephron and concluding with reference to Wiginton's
contractually required indemnification of Schaefer and
Schaefer's “additional insured status” with
Travelers. (Doc. No. 13-6: Compl. Ex. F). Bumgardner
included Mitsui Claim Counsel David Bass in the
communication, and Bass began working with Williams to set up
an on-site investigation of the damage. (Id.).
September 7, 2012, Bass sent an email message to Williams
reading, in pertinent part:
At your convenience, can you confirm that Travelers is
extending defense/indemnity to Schaefer under the additional
insurance coverage required under the contract.
No. 13-7: Compl. Ex. G). On September 11, 2012, Williams
responded to Bass:
Right now there are no formal allegations outlining this
claim. Until we have has them or suit is filed, [Travelers]
will not have enough information to make a decision as to our
contractual obligations to [Schaefer].”
September 24, 2012, Kennedy sent a letter to Schaefer
executives Arnold Heuzen and Christoph Schenck and to Alan
Wiginton requesting a meeting to resolve the damage claim
prior to filing a lawsuit as required by construction
contract between Nephron and Schaefer. (Doc. No. 51-1: Doerr
Decl. Ex. G). That mediation took place on February 23, 2013,
attended by counsel retained by Travelers on behalf of
Wiginton, along with attorneys representing Schaefer. When
mediation did not resolve the claim, Nephron filed suit
against Schaefer and Wiginton in Florida state court on March
13, 2013. (Doc. No. 13-3: Compl. Ex. C). In addition to
alleging the sprinkler had been installed too low, Nephron
claimed Schaefer illegally entered into the warehouse
construction contract as an unlicensed contractor, seeking
recovery on the property loss (in excess of $1, 800, 000),
plus treble damages, as well as disgorgement for all payments
under the construction contract ($9, 091, 514.88).
(Id. at 13). Nephron also alleged the lien Schaefer
placed on the property when Nephron suspended construction
payments was fraudulent, seeking compensatory and punitive
damages. (Id. at 28).
a mediation in the state court litigation on June 19, 2014,
Schaefer attorney Sean McDonough and Heuzen hand-delivered a
letter to Travelers Major Claim Specialist Gregory Kasbarian.
(Doc. No. 13-8: Compl. Exh. H). Schaefer wrote “to
renew a tender” and “formally re-tender its
defense and indemnity of [Nephron's lawsuit] to
Travelers” pursuant to the additional insured provision
in Wiginton's construction contract. (Id. at 1).
The letter recited:
Travelers previously received notice, originated by Schaefer,
of the incident that forms the basis of the [Nephron]
lawsuit. In addition, an email was sent to Travelers on
September 7, 2012, seeking to confirm additional insured
coverage for Schaefer. Travelers' response was that it
had no obligation to provide additional insured coverage
until suit was filed. As you know, that condition was
(Id.). The letter noted the possibility of a
settlement that would be funded by a combination of funds
from Travelers and Mitsui, as well as adjustments to the
construction contract. (Id. at 2).
16, 2014, Kasbarian responded by email and letter to
McDonough stating Wiginton did not owe indemnity for
Schaefer's alleged negligent acts and tendered the
defense to Mitsui based on the contract between Schaefer and
Wiginton. (Doc. No. 13-9, -10: Compl. Ex. I, J). On July 19,
2014, McDonough and Bass replied to Kasbarian by letter
refuting the basis for denial of coverage and correcting the
scrivener's error in the contract between Schaefer and
Wiginton about which entity was providing indemnification to
the other. (Doc. No. 13-11: Compl. Ex. K). The letter ...