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Pennsylvania National Mutual Casualty Insurance Co. v. Portrait Homes-South Carolina, LLC

United States District Court, W.D. North Carolina, Charlotte Division

September 17, 2019




         This insurance coverage matter is before the Court on Plaintiff Pennsylvania National Casualty Insurance Company’s (“Penn National”) and Defendants Portrait Homes- South Carolina, LLC; Portrait Homes-Oak Bluff, LLC; and Pasquinelli Homebuilding, LLC’s (collectively, “Portrait”) cross motions for summary judgment. (Doc. Nos. 13, 14). Penn National seeks a declaratory judgment that it is not obligated to provide coverage to Portrait under insurance policies issued by Penn National to one of Portrait’s subcontractors, Jose Castillo d/b/a JJA Framing Company and JJA Construction, Inc. (“JJA”), for construction defect claims asserted in connection with the construction of a townhome project in Charleston, South Carolina. In turn, Portrait urges the Court to find that Penn National is obligated to provide coverage to Portrait as an “additional insured” under the same policies.

         For the reasons discussed more fully below, the Court will GRANT Penn National’s motion for summary judgment and DENY Portrait’s cross motion for summary judgment. While the parties have raised numerous issues, there is one issue that mandates the result being ordered by the Court. Regardless of the scope of the insurance coverage potentially available to Portrait under the Penn National policies, Portrait can only recover under those policies if it still owes or has paid defense or indemnity costs that have not yet been reimbursed, i.e., it has suffered some loss or has some continuing obligation for which it can pursue an insurance claim. However, Portrait’s primary insurance carrier fully paid Portrait’s defense costs and the agreed settlement payment in the underlying construction defect litigation. Therefore, Portrait does not have any monetary loss that could be paid under the Penn National policies without Portrait receiving a double recovery, which it is not entitled to obtain as a matter of law.

         Portrait urges the Court to find that Portrait (or more accurately its assignee the Oak Bluff HOA (“HOA”) which is in practical effect the party seeking the recovery from Penn National) will not receive a double recovery. The HOA, who was the plaintiff in the underlying lawsuit, argues that it has not been made whole because its settlements with Portrait and the subcontractors do not cover all the losses and expenses that resulted from the construction defects. In sum, the HOA argues that if Penn National had been at the settlement tables as it should have been, then the settlements would have been higher. However, the HOA acknowledges that it “stands in the shoes” of Portrait and thus cannot obtain any recovery beyond the amount that Portrait would itself be entitled to receive from Penn National. So, while the Court recognizes that the HOA may well have a shortfall with respect to the construction defect damages it suffered, Portrait has already been paid all of its defense and indemnity costs so Portrait cannot maintain a claim against Penn National as an additional insured under the JJA policies. Accordingly, Penn National is entitled to summary judgment in this action.


         Summary judgment must be granted “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.” Fed.R.Civ.P. 56. A factual dispute is considered genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact is material if it might affect the outcome of the suit under the governing law.” Vannoy v. Federal Reserve Bank of Richmond, 827 F.3d 296, 300 (4th Cir. 2016) (quoting Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013)).

         The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact through citations to the pleadings, depositions, answers to interrogatories, admissions or affidavits in the record. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003). “The burden on the moving party may be discharged by ‘showing’ ... an absence of evidence to support the nonmoving party's case.” Celotex, 477 U.S. at 325. Once this initial burden is met, the burden shifts to the nonmoving party. The nonmoving party “must set forth specific facts showing that there is a genuine issue for trial, ” Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of allegations in his pleadings to defeat a motion for summary judgment. Id. at 324.

         When ruling on a summary judgment motion, a court must view the evidence and any inferences from the evidence in the light most favorable to the nonmoving party. Tolan v. Cotton, 572 U.S. 650, 657 (2014); see also Anderson, 477 U.S. at 255. “Summary judgment cannot be granted merely because the court believes that the movant will prevail if the action is tried on the merits.” Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568-69 (4th Cir. 2015) (quoting 10A Charles Alan Wright & Arthur R. Miller et al., Federal Practice & Procedure § 2728 (3d ed.1998)). “The court therefore cannot weigh the evidence or make credibility determinations.” Id. at 569 (citing Mercantile Peninsula Bank v. French (In re French), 499 F.3d 345, 352 (4th Cir. 2007)).

         However, “[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (internal citations omitted). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson, 477 U.S. at 248. Also, the mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. Id. If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Id. at 249-50.

         In the end, the question posed by a summary judgment motion is whether the evidence as applied to the governing legal rules “is so one-sided that one party must prevail as a matter of law.” Id. at 252.


         a. The Underlying Litigation

         In 2013, Portrait was sued in the Underlying Litigation, [1] in which it was alleged that Portrait was the developer and general contractor of the townhome community known as Oak Bluff in Charleston, South Carolina. Portrait allegedly performed development, construction, repairs, and modifications on the Oak Bluff project between 2002 and 2005.

         Several of Portrait’s subcontractors and material suppliers on the Oak Bluff project were also named as defendants in the Underlying Litigation, including JJA Construction, Inc. d/b/a JJA Framing and Jose Castillo d/b/a JJA Framing. The subcontractors performed all types of work on the Oak Bluff project, including framing, roofing, vinyl siding, masonry, windows and doors, plumbing, painting, etc. With respect ...

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