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MTI, Inc. v. Employers Insurance Company of Wausau

United States District Court, W.D. Oklahoma

August 25, 2017

MTI, INC., formerly Midwest Towers, Inc., Plaintiff,
v.
EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant.

          ORDER

          DAVID L. RUSSELL UNITED STATES DISTRICT JUDGE

         Defendant has filed a Motion for Summary Judgment (Doc. No. 17) and Plaintiff has responded in opposition thereto (Doc. No. 24). Defendant also filed a Reply in support of its position. (Doc. No. 17). Having considered the parties' submissions, the Court finds as follows.

         Summary judgment is appropriate “when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Where, as here, the moving party has the burden of proof, a more stringent summary judgment standard applies. Thus, if the moving party bears the burden of proof, to obtain summary judgment, it cannot force the nonmoving party to come forward with “specific facts showing there [is] a genuine issue for trial” merely by pointing to parts of the record that it believes illustrate the absence of a genuine issue of material fact. Mudrick v. Cross Services, Inc., 200 Fed.Appx. 338, 340 (5th Cir.2006) (citing Celotex v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Rather, it must establish, as a matter of law, all essential elements of the issue before the nonmoving party can be obligated to bring forward any specific facts alleged to rebut the movant's case. Id.. In performing the summary judgment analysis, the factual record and any reasonable inferences therefrom are construed in the light most favorable to the non-moving party. Id.

         In May 2011, MTI completed an annual inspection of a cooling tower operated by Western Farmers Electrical Cooperative. As a result of its inspection, MTI submitted a bid to Western Farmers to perform certain maintenance on the Cooling Tower, to undertake repairs identified as necessary during the inspection. The April 28, 2011 Scope of Work stated:

Unit I Tower Anchors Throughout the entire basin, install new 304 SS anchor castings. Included will be 304SS anchor bolts and Hilti anchor adhesive.
Unit I Louvers On four (4) cells, remove existing louvers and install a (3) row louver system.New louvers will consist of 12oz. 4.2” corrugated FRP panels supported on 2”x4” Douglas Fir supports. Included will be new polypropylene support arms. Also included will be all necessary 304 stainless steel hardware.

         The cooling tower's original construction was a wooden frame with bolted connections including vertical columns and diagonal braces; it measured 50 feet wide, by 150 feet long by 70 feet tall. The tower was anchored to a concrete foundation of a sump pit by 64 anchor bolts.

         On May 23, 2011, as part of its work on the cooling tower, Plaintiff MTI removed the sixty-four anchor bolts from the base, breaking them to pieces to extricate them from the concrete. At that time MTI did not have access to the gun necessary to insert the epoxy adhesive identified in the Scope of Work into the concrete, which was intended to hold the replacement bolts in place. As a result, no new bolts were installed on May 23, 2011. On May 24, 2011, still lacking access to the tools, MTI continued work without replacing the bolts. On May 25, 2011, MTI personnel arrived at the facility and discovered the tower leaning, having been damaged by high winds overnight. MTI employees used forklifts to brace the tower to prevent a total collapse of the structure. Plaintiff admits that the wind caused damage to the cooling tower because it had removed the bolts and no temporary bracing was used to ensure stability of the structure. Farmers Electric concluded the damage to the cooling tower was so extensive that replacing the unit was the better course than attempting repair.[1] MTI paid Farmers Electric $350, 000 to settle the Cooperative's claims against MTI. MTI seeks to recoup this amount from Defendant Wausau pursuant to a policy of insurance in place on the date of the accident.

         Defendant seeks summary judgment on Plaintiff's sole claim, breach of contract, asserting that under exclusion j(5), j(6), or both, there is no coverage. Plaintiff contends Defendant has not met its burden of establishing that either exclusion applies, and therefore, it is not entitled to summary judgment. Plaintiff further contends the Court should find the exclusions ambiguous and construe them against Defendant, the insurer.

         This is a diversity case requiring the Court to construe disputed terms of an insurance policy as required by state law. See Zurich American Ins. Co. v. O'Hara Reg'l Ctr. for Rehabilitation, 529 F.3d 916, 920 (10th Cir. 2008). The parties do not dispute that Oklahoma substantive law governs the interpretation of the Policy. Under Oklahoma law, an insurance contract should be construed according to the terms set out within the four corners of the document. First American Kickapoo Operations, L.L.C. v. Multimedia Games, Inc., 412 F.3d 1166, 1173 (10th Cir. 2005). “The construction of a policy should be natural and reasonable, viewed in the light of common sense. The result should not be absurd.” Redcorn v. State Farm Fire & Casualty Co., 55 P.3d 1017, 1019 (Okla.2002) (citation omitted). If the terms of the contract are “unambiguous, clear and consistent, they are to be accepted in their ordinary sense and enforced to carry out the expressed intention of the parties.” Roads West, Inc. v. Austin, 91 P.3d 81, 88 (Okla.Civ.App. 2004). The Court should not create an ambiguity in a policy by “using a forced or strained construction, by taking a provision out of context, or by narrowly focusing on a provision.” Wynn v. Avemco Ins. Co., 963 P.2d 572, 575 (Okla. 1998). A policy term will be considered ambiguous only if it is susceptible to more than one reasonable interpretation. Max True Plastering Co. v. U.S. Fidelity & Guar. Co., 912 P.2d 861, 869 (Okla. 1996). Additionally, “[a]n insurance contract is considered a contract of adhesion in Oklahoma, and is construed in favor of the insured when ambiguity remains after applying the rules of construction.” Mansur v. PFL Life Ins. Co., 589 F.3d 1315, 1319 (10th Cir.2009) (citing Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla.1991)). “The interpretation of an insurance contract and whether it is ambiguous is a matter of law for the Court to determine and resolve accordingly.” Dodson, 812 P.2d at 376. Finally, a basic tenet of insurance law provides that the insured has the burden of showing a covered loss, while the insurer has the burden of showing that a loss falls within an exclusionary clause of the policy.” See McGee v. Equicor-Equitable HCA Corp., 953 F.2d 1192, 1205 (10th Cir. 1992); Pitman v. Blue Cross & Blue Shield of Okla., 217 F.3d 1291, 1298 (10th Cir. 2000); Fehring v. Universal Fidelity Life Ins. Co., 721 P.2d 796, 799 (Okla.1986) (holding that insurer failed to sustain burden of proving loss came within scope of exclusionary clause).

         Defendant's motion is premised on the applicability of two exclusions contained in the Policy. In footnote 3 at pages 15-16 of its brief in support of the motion, Defendant makes a half-hearted attempt at challenging the existence of coverage by arguing that Plaintiff has not established an “occurrence” as required to give rise to coverage because MTI's negligence caused the loss. The Court will not consider this argument, limiting its consideration to the issue of whether, assuming an occurrence and coverage under the Policy, Wausau has met its burden of establishing no genuine issues of material fact and the applicability of an exclusion under either provision j(5) or j(6) of the Policy.[2]

         The Policy at issue herein provides that insurer will “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies.” Policy, Section (I)(A)(1)(a). The Policy applies only if the “property damage” is “caused by an ‘occurrence' that takes place in the ‘coverage territory.'” Id., Section I, (b)(1). The Policy contains certain exclusions, including the following:

This insurance does not apply to: . . .
j. Damage to Property “Property ...

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