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Stewart Engineering, Inc. v. Continental Casualty Co.

United States District Court, E.D. North Carolina, Western Division

March 20, 2018

STEWART ENGINEERING, INC., Plaintiff,
v.
CONTINENTAL CASUALTY COMPANY, et al., Defendants.

          ORDER

          JAMES C. DEVER III Chief United States District Judge

         OnNovember23, 2015, Stewart Engineering, Inc. ("Stewart" or "plaintiff') filed an amended complaint seeking a declaratory judgment [D.E. 8]. Stewart contends that its insurance contract with Continental Casualty Company ("Continental" or "defendant") requires Continental to indemnify Stewart up to the aggregate policy limit of $5, 000, 000. On March 7, 2017, Continental moved for summary judgment [D.E. 54]. On April 7, 2017, Stewart moved for summary judgment [D.E. 61]. Thereafter, each party responded and replied. As explained below, the court grants Continental's motion for summary judgment and denies Stewart's motion for summary judgment.

         I.

         Stewart is a North Carolina professional corporation that provides engineering, surveying, and landscape architectural services. Am. Compl. [D.E. 8] ¶¶ 4-5. Continental is an insurance company incorporated and with its principal place of business in Illinois. Id. 16; see Answer [D.E. 25] 16. Continental issued a liability insurance policy to Stewart for the policy year April 21, 2014, to April 21, 2015 (the "policy"). See [D.E. 56-3] 2 (copy of the policy). The policy includes a $3 million per claim liability limit for any claim "first made against [Stewart] and reported to [Continental] during the policy year." Id. at 2, 35. The policy also includes a $5 million aggregate claim liability limit for "all claims first made against [Stewart] and reported to [Continental] during the policy year." Id. The policy also provides that if the liability limit for any policy year is exhausted, "[Continental's] obligation for that policy year shall be deemed completely fulfilled and extinguished." Id. at 35.

         Under the terms of the policy, Continental agreed to pay:

[A]ll amounts in excess of the Deductible up to the Limit of Liability that you become legally obligated to pay as a result of[] a wrongful act, ... that results in a claim anywhere in the world, provided that on the Knowledge Date set forth in Item 4. on the Declarations none of your officers, directors, principals, partners, or insurance managers knew of any act, error, omission, or event that could reasonably be expected to become the basis of that claim.

Id. at 27. Wrongful act is defined as "an error, omission, or other act that causes liability in the performance of professional services for others by you or by any person or entity, including joint ventures, for whom you are liable." Id. at 33. The policy includes a separate provision concerning related claims. Specifically, the policy provides that "all related claims shall be considered a single claim...." Id. at 35. The policy defines "related claims" as all claims arising out of (1) "a single wrongful act, " or (2) "multiple wrongful acts that are logically or causally connected by any common fact, situation, event, transaction, advice, or decision[.]" Id. at 32. Thus, all related claims are subject to the $3 million per claim liability limit. See Id. at 32, 35.

         On January 23, 2013, the trustees of Wake Technical Community College ("Wake Tech") contracted with Pearce Brinkley Cease & Lee, P.A. ("PBCL") for architectural design services for two pedestrian bridges on Wake Tech's North Campus in Raleigh. See Am. Compl. ¶18; [D.E. 56- 5] 3-4. Wake Tech also contracted with Skanska USA Building, Inc. ("Skanska") to provide construction management services for the two pedestrian bridges. See Am. Compl. ¶ 19. On February 11, 2013, PBCL contracted with Stewart to provide structural engineering design services for the two pedestrian bridges. See id ¶ 20; p.E. 56-5] 3; Andrew S. Pordon Aff. p.E. 65-7] ¶¶ 4, 6, 9. The contract between Stewart and PBCL included deadlines for the schematic design, design development, and construction documents for the two pedestrian bridges. See [D.E. 56-5] 11.

         Around February 2013, Stewart began the design development phase for a pedestrian bridge that crossed the Neuse River buffer and connected the plaza between two parking decks to Building F ("Bridge 2"). See Am. Compl. ¶ 24; Pordon Aff. ¶10. The bridge was designed to have three long glue laminated truss spans, kingposts, tension cables, and central steel v-column platforms. See Am. Compl. ¶ 24. Stewart presented two glulam truss schematic design options to PBCL. See Pordon Aff. ¶11. PBCL selected the single kingpost glulam truss design option. See Id. ¶12.

         Around April 2013, PBCL merged with Clark Nexsen, Inc. ("Clark Nexsen"), and Wake Tech reassigned PBCL's contract to Clark Nexsen. See Am. Compl. ¶¶ 21-22. Similarly, PBCL reassigned the Stewart contract to Clark Nexsen. See id f 23. Around September 2013, Clark Nexsen notified Stewart that Wake Tech had requested a design for the second pedestrian bridge ("Bridge 1"). See Pordon Aff. ¶ 13. Bridge 1 was designed to connect Building F to Building L. See id. Although the design process for Bridge 2 occurred before the design process for Bridge 1, both bridges had the same engineer of record and project manager. See First Set of Interrogs. [D.E. 56-4] ¶¶ 20-21; [D.E. 65] 8; Pordon Aff. ¶ 14.

         In October 2014, construction for both bridges began. See Am. Compl. ¶ 26. On November 13, 2014, Bridge 1 collapsed while workers were pouring the concrete slab for the bridge. See Id. ¶ 27. In the early morning on November 14, 2014, Bridge 2 also collapsed. See Id. ¶ 28. Four workers were injured and one worker was killed from the Bridge 1 collapse. See id ¶ 27. There were no injuries from the Bridge 2 collapse. See id ¶ 28.

         On February 6, 2015, Stewart sent a memorandum to the Occupational Safety and Health Administration ("OSHA") and stated "through our own investigation, [we concluded] that the precipitating failure in each instance was at the notched end of a glulam truss and that, regretfully, the failures resulted from a design feature, namely that the notched ends of the glulam trusses were not mechanically reinforced." [D.E. 56-10] 2. On July 24, 2015, Stewart issued a memorandum to the North Carolina Board of Examiners for Engineers and Surveyors in which Stewart admitted that "[b]oth bridges collapsed because of the absence of mechanical reinforcement of notched glulam truss ends." [D.E. 56-8] 8. Stewart also admitted that "[t]he lack of mechanical reinforcement resulted from a miscommunication between Stewart Engineering's Project Manager and its Project Engineer." Id. at 4. OSHA investigated and concluded that "[t]he cause of the failures of bridges Nos. 1 and 2 was the structural design flaw in that the glulam girders were severely notched at each end to facilitate end connections, " and that the consultants and contractors failed in their professional responsibility to share their knowledge with the structural engineer concerning the presence of the notches. [D.E. 56-7] 29.

         Due to the Bridge 1 and Bridge 2 collapses, numerous individuals and entities brought claims against Stewart ("Bridge Claims"). The five individuals who were working on Bridge 1 when it collapsed asserted claims against Stewart for bodily injury, and in the case of the deceased worker, a claim for wrongful death. See Am. Compl. ¶¶ 40-51. Clark Nexsen, Wake Tech, and Zurich American Insurance Company ("Zurich") also brought claims against Stewart. See Id. ¶¶ 52-70. Clark Nexsen asserted direct and indemnification claims for damages incurred in connection with the Bridge 1 and Bridge 2 collapses. See Am. Compl. ¶¶ 62-63. Wake Tech asserted a claim against Stewart for indemnification from claims by third parties in connection with the Bridge 1 and Bridge 2 collapses. See Id. ¶ 67. Zurich asserted a subrogation claim based on Skanska's claim for property damage and clean-up costs resulting from the Bridge 1 and Bridge 2 collapses. See Id. ¶¶ 52-55.

         Continental moves for summary judgment and asks the court to declare that (1) the Bridge claims constitute "related claims" subject to the policy's $3 million claim liability limit, and (2) Continental has no further obligations concerning the Bridge Claims once it has paid the $3 million claim liability limit. See Def. Mot. Summ. J. [D.E. 54]. Stewart moves for partial summary judgment and asks the court to declare that (1) the Bridge 1 and Bridge 2 claims are not "related claims" for purposes of detennining whether Continental has a duty to defend Stewart, and (2) ...


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