Indemnification between businesses requires a contract outlining the type of indemnification and a certificate of insurance from one party to the other so the insurance company knows it is on the hook.Posted: May 30, 2016
Because no certificate of insurance was issued by the third-party insurance company, company, the contract requiring indemnification between the ski area and the manufacturer failed.
State: Massachusetts, United States District Court for the District of Massachusetts
Plaintiff: Jiminy Peak Mountain Report, LLC
Defendant: Wiegand Sports, LLC, and, Navigators Specialty Insurance, CO.
Plaintiff Claims: Indemnification
Defendant Defenses: No contract
Holding: for the Defense
Obviously, this is not your normal injured guest case. This case looks at the relationship between a resort and a manufacturer who installed a ride at the resort.
In 2006 the defendant Wiegand built an Alpine Coaster for the plaintiff ski area Jiminy Peak Mountain Resort, LLC. The construction/purchase agreement (Consulting, Purchase, Delivery, Assembly and Inspection Contract) also contained language requiring the manufacturer to defend any claims that were brought against the plaintiff for injuries after the ride was built.
The construction agreement required Jiminy Peak to pay part of the premiums for the insurance policy. However, the policy was only in the name of the defendant Wiegand, and did not list Jiminy Peak as an additional insured or co-insured.
Section 8 of the Contract, titled “Rights and Obligations of [Jiminy]” included in its final subsection, 8(j), language stating that Wiegand would purchase product liability insurance for the Coaster, but that Jiminy was required to pay a portion of the premium, the amount of which would be determined based on the purchase price of the Coaster, and Jiminy would then be listed as an additional insured.
The agreement also stated that Wiegand would defend and pay for any claim that Jiminy Peak received.
…in the event of a product liability suit against [Wiegand], [Wiegand] “shall, at its own expense, defend any suit or proceeding brought against [Jiminy] and shall fully protect and indemnify [Jiminy] against any and all losses, liability, cost, recovery, or other expense in or resulting from such . . . suit (provided, however, [Jiminy] has fully performed all ongoing maintenance obligations).
In 2012, two minors were seriously injured riding the coaster. Wiegand had a commercial liability policy with the defendant Navigators Insurance Company. However, Navigators did not issue a certificate of insurance covering Jiminy Peak. The parents of the injured minors filed suit against Jiminy Peak and Wiegand. Jiminy Peak sued Wiegand and Navigator seeking a declaratory judgment requiring Wiegand and Navigator to pay the cost of defending those suits.
A declaratory judgment is a quick request for a court to issue an order. Jiminy and Wiegand dismissed their claims against each other and just were fighting the lawsuit against them. The case between Jiminy and Navigator then is the subject of this decision.
Analysis: making sense of the law based on these facts.
Navigator argued that there was a duty to defend someone who was not a named insured. Jiminy Peak was not listed on the policy as an insured, co-insured or additional insured. Navigator also argued that it had no legal relationship with Jiminy Peak; therefore, it owed Jiminy Peak no money.
Navigators argues that as an insurer it owes a duty to defend its insured, Wiegand, but it does not owe a direct duty to defend Jiminy because Jiminy is not an additional insured under the Policy. Further, the duty Navigators has under the Policy to pay defense costs to a non-insured party pursuant to a contractual liability of its insured only requires it to make payments to the insured, and only when the insured has actually requested payment. In this case, Navigators asserts that even if Wiegand is found to owe Jiminy its defense costs, it will be up to Wiegand to determine whether it wishes to pay the amount or to make a claim to Navigators. Since Navigators owes no duty directly to Jiminy and it would be up to Wiegand to determine whether to make a claim in the event judgment is entered against it with respect to Jiminy’s defense costs…
Jiminy Peak responded by arguing the contract between it, and Wiegand was enough to force Navigator to pay. (You and I go to dinner and try to convince the waiter that your friend who is not at the table should pay for our meal.)
The court looked into the requirements for an insurance company to defend under Massachusetts law.
The court begins its analysis by considering whether Massachusetts law allows Jiminy to compel payment from Navigators based on Navigators’ obligations to its insured, Wiegand. Massachusetts law imposes on insurers a “broad duty to defend its insured against any claims that create a potential for indemnity.” This duty is broad and attaches whenever the claims in the complaint match up with the language in the policy.
However, the broad language of the policy only applies to the companies named in the policy as an insured. Jiminy Peak was not named in any way under the policy.
The Contract also included provisions regarding both additional insureds and “insured contracts,” suggesting that Jiminy, like Navigators and Wiegand, understood that Wiegand’s promise to pay Jiminy’s defense costs would not grant Jiminy the status of an “additional insured” with respect to Navigators.
If Jiminy Peak had been named in the policy or listed as an additional insured, then coverage would have been provided under Navigator’s policy issued to Wiegand.
In the absence of a contractual relationship between Navigators and Jiminy, the court finds no legal basis for ordering Navigators to pay Jiminy’s defense costs directly. Any obligation upon Navigators to pay such costs will arise only after an insured, in this case Wiegand, makes a claim for payment and then its only obligation will be to Wiegand.
Jiminy Peak may still be indemnified by Navigator’s policy. However, to be covered Wiegand will have to make a claim under the policy and if Wiegand was negligent and did something defined under the policy as an insured, then coverage will be provided.
However, I doubt any coverage will be provided unless Jiminy Peak can prove that Wiegand was negligent in its relationship. The contract only applies to product liability or negligence claims of the insured, Wiegand.
So Now What?
Insurance policies are written so the language is clear. The insured or persons covered by the policy are listed on the first page, the declaration page, or as additional insured on the policy. The coverage provided by a policy is broader than the language usually required by state law. However, the broad coverage is only extended to the people listed in the policy.
If you name is not on a piece of paper issued by the insurance company you are not covered under the policy.
A certificate of insurance request by Jiminy Peak would have solved the problem.
However, requesting a certificate of insurance does not solve all problems, in fact it only solves very limited problems. For a simple certificate of insurance to provide protection, the named insured must have done something to create liability for the insured under the certificate of insurance.
Just requesting a certificate of insurance without an agreement outlining what is to be covered is worthless.
Every day I see situations were one company requests a certificate of insurance believing that provides coverage. It does not. To be effective a certificate of insurance should be issued based on a contract which outlines what is to be covered under the certificate of insurance. The certificate of insurance must confirm to the contract between the parties.
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Jiminy Peak Mountain Report, LLC, Plaintiff, v. Wiegand Sports, LLC, and, Navigators Specialty Insurance, CO., Defendants.
Civil Action No. 14-40115-MGM
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
2016 U.S. Dist. LEXIS 34209
March 16, 2016, Decided
March 16, 2016, Filed
CORE TERMS: insured, insurer, duty to defend, liability insurance, owe, cross-motions, liability claims, bodily injury’, declaratory, premium, state law, insurance policy, amount in controversy, threshold amount, principal place of business, wholly-owned subsidiary, disclosures, publicly, disputed, traded, judgment ordering, seriously injured, own expense, fully performed, negligence claim, indemnification, cross-claims, contractual, separately, asserting
COUNSEL: [*1] For Jiminy Peak Mountain Resort, LLC, Plaintiff: Jennifer C. Sheehan, Matthew D. Sweet, Richard J. Shea, Hamel, Marcin, Dunn, Reardon & Shea, P.C., Boston, MA.
For Navigators Specialty Insurance Company, Defendant: David A. Grossbaum, LEAD ATTORNEY, Matthew R. Watson, Hinshaw & Culbertson LLP, Boston, MA.
JUDGES: MARK G. MASTROIANNI, United States District Judge.
OPINION BY: MARK G. MASTROIANNI
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR JUDGMENT ON THE PLEADINGS
(Dkt. Nos. 40 & 42)
Plaintiff, Jiminy Peak Mountain Resort, LLC (“Jiminy”) operates a ski area in Hancock, Massachusetts. In 2005 it entered into a contract with Defendant, Wiegand Sports, LLC (“Wiegand”), to purchase a Wiegand, Alpine Coaster (the “Coaster”). The Coaster opened to the public in 2006. In August of 2012, two minors were seriously injured while riding the Coaster. The parents of the minors subsequently filed two lawsuits (together, the “Underlying Action”), each asserting claims against Jiminy and Wiegand. Jiminy subsequently filed this suit against Wiegand and Defendant, Navigators Specialty Insurance, Co. (“Navigators”), Wiegand’s insurer at the time the minors were injured, seeking a declaratory judgment [*2] ordering Wiegand and Navigators to pay the defense costs incurred by Jiminy in the Underlying Action. Before the court are cross-motions for judgment on the pleadings from Jiminy and Navigators. Jiminy and Wiegand have stipulated to the dismissal of their cross-claims, agreeing to litigate those claims in the Underlying Action, rather than in this lawsuit.
In this action, Jiminy seeks an order requiring Navigators to pay Jiminy’s past and future defense costs in the Underlying Action based on the terms of the contract between Jiminy and Wiegand and the insurance policy Navigators issued to Wiegand. The relief is requested pursuant to state law. Federal courts have jurisdiction over suits brought pursuant to state law where there is complete diversity of citizenship between the adversaries and the amount in controversy exceeds a threshold amount of $75,000. 28 U.S.C. § 1332; Arbaugh v. Y&H Corp., 546 U.S. 500, 513, 126 S. Ct. 1235, 163 L. Ed. 2d 1097 (2006). Based on the content of the complaint and the corporate disclosures filed by the parties (Dkt. Nos. 20, 21, 55), the court finds that (1) Jiminy is a Massachusetts limited liability company, owned by two other Massachusetts limited liability companies, which in turn are owned by members who reside in Massachusetts [*3] and (2) Navigators is incorporated in Delaware, has its principal place of business in Connecticut, and is a wholly-owned subsidiary of the publicly traded Navigators Group, Inc., less than ten percent (10%) of which is owned by any other single publicly traded corporation.1 Plaintiff asserts the amount in controversy exceeds the statutory threshold amount. In the absence of any challenge from Defendant, the court finds it has jurisdiction in this case pursuant to 28 U.S.C. § 1332.
1 Though Jiminy is no longer pursuing its claim against Wiegand, the court notes that Wiegand, as a wholly-owned subsidiary of a German entity with its principal place of business in Salt Lake City, Utah, is also diverse with respect to Jiminy. (Compl. ¶ 7, Dkt. No. 1, Corp. Disclosure, ¶ 1, Dkt. No. 19.)
III. Standard of Review
“‘A motion for judgment on the pleadings [under Rule 12(c)] is treated much like a Rule 12(b)(6) motion to dismiss,’ with the court viewing ‘the facts contained in the pleadings in the light most favorable to the nonmovant and draw[ing] all reasonable inferences therefrom.'” In re Loestrin 24 Fe Antitrust Litig., No. 14-2071, 2016 U.S. App. LEXIS 3049, 2016 WL 698077, at *8 (1st Cir. Feb. 22, 2016) (quoting Pérez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008)). Where, as here, the court is presented with cross-motions for judgment on the pleadings, the court’s role is [*4] “to determine whether either of the parties deserves judgment as a matter of law on facts that are not disputed.” Curran v. Cousins, 509 F.3d 36, 44 (1st Cir. 2007) (internal citations omitted)). As in the case of a motion under Rule 12(b)(6), the court is permitted to consider documents central to the plaintiff’s claims where the authenticity of the documents is not disputed and the complaint adequately references the documents. Id. (citing Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).
In December of 2005, Jiminy and Wiegand entered into a “Consulting, Purchase, Delivery, Assembly and Inspection Contract” (the “Contract”). (Compl. ¶ 9, Dkt. No. 1.) Pursuant to this contract, Jiminy agreed to purchase the Coaster and Wiegand agreed to deliver, assemble, and inspect it. (Id.) Section 8 of the Contract, titled “Rights and Obligations of [Jiminy]” included in its final subsection, 8(j), language stating that Wiegand would purchase product liability insurance for the Coaster, but that Jiminy was required to pay a portion of the premium, the amount of which would be determined based on the purchase price of the Coaster, and Jiminy would then be listed as an additional insured. (Compl. Ex. A, Contract, § 8(j), Dkt. No. 1-1.) (Id.) The Contract did not set forth the term during which Wiegand’s product [*5] liability insurance policy would apply, but did provide that Jiminy would have the option to continue as an additional insured during subsequent periods, provided it continued to pay the “same premium ratio.” Id. The same section also provided that Jiminy would separately maintain a personal injury insurance policy “at its own expense at all times so long as [it] operates [the Coaster].” (Id.) The Complaint does not assert that Jiminy continued to pay premiums to remain an additional insured under Wiegand’s product liability insurance policy.
Separately at Section 12, titled “Indemnification,” the Contract provided that:
in the event of a product liability suit against [Wiegand], [Wiegand] “shall, at its own expense, defend any suit or proceeding brought against [Jiminy] and shall fully protect and indemnify [Jiminy] against any and all losses, liability, cost, recovery, or other expense in or resulting from such . . . suit (provided, however, [Jiminy] has fully performed all ongoing maintenance obligations).
(Id. at § 12(A)(1).)
The following paragraph then provided that Jiminy would
protect, indemnify, defend and hold [Wiegand] harmless from and against any and all losses of [Wiegand] arising out of or sustained, [*6] in each case, directly or indirectly, from . . . any default by [Jiminy] . . . including without limitation, from defective/bad maintenance and/or operation of the Alpine Coaster caused by [Jiminy’s] gross negligence or willful misconduct.
(Id. at § 12(A)(2).)
Under Section 18, the Contract is to be interpreted in accordance with Massachusetts law.
(Id. at § 18.)
The Coaster was installed and became operational in 2006. In August of 2012, two minors were seriously injured while riding the Coaster. At the time of the accident, Wiegand had a general commercial liability insurance policy with Navigators (“Policy”). (Policy, Ex. C, Dkt. No. 1-3.) The Policy Period ran from March 1, 2012 through March 1, 2013. Id. Pursuant to Section I(1)(a), the Policy provided that Navigators would “pay those sums that [Wiegand] becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which [the Policy] applies.” (Id. at Section I(1)(a).) The obligation established under Section I(1)(a) is further defined in Section I(2)(b) as excluding certain types of damages, including those assumed in a contract, unless assumed in an “insured contract.” (Id. at Section I(2)(b).) In the case of an “insured contract,” “reasonable [*7] attorney fees and necessary litigation expenses incurred by or for a party other than an insured [was] deemed to be damages because of ‘bodily injury’ . . . , provided . . . that the party’s defense [had] also been assumed in the same ‘insured contract'” and the damages arise in a suit to which the Policy applied. (Id.) An “insured contract” is defined in the Policy as including “[t]hat part of any other contract or agreement pertaining to [Wiegand’s] business . . . under which [Wiegand] assume[d] the tort liability of another party to pay for ‘bodily injury’ . . . to a third person or organization.” (Id. at Section V(9)(f)). “Tort liabililty” is, in turn, defined as “a liability that would be imposed by law in the absence of any contract or agreement.” (Id.)
The parents of the minors injured on the Coaster in August of 2012 subsequently filed the Underlying Action against Jiminy and Wiegand.2 (Compl., Ex. B, Compls. in Underlying Action, Dkt. No. 1-2.) The six-count complaints3 both include a negligence claim against Jiminy (Count I), a negligence claim against Wiegand (Count II), products liability claims against Wiegand (Counts III and IV), breach of implied warranty of merchantability claim against [*8] Wiegand (Count V), and a loss of consortium claim against Wiegand and Jiminy (Count VI). (Id.) After the Underlying Action was filed, Jiminy filed this action against Wiegand and Navigators, seeking a declaratory judgment ordering Wiegand and Navigators to pay the defense costs incurred by Jiminy in connection with the Underlying Action. (Compl., Dkt. No. 1.) As mentioned above, Jiminy and Wiegand agreed to the dismissal of Jiminy’s claim seeking declaratory judgment from Wiegand in this action and instead are litigating the issues in the Underlying Action.
2 These suits were initially filed in the Eastern District of New York, but have since been transferred to this court where they are proceeding as a consolidated case – 13-cv-30108-MGM. The claims brought on behalf of the minors have already been settled. The only remaining claims in those cases are the cross-claims between Jiminy and Wiegand.
3 In both complaints, the claims are actually labeled 1-5 and 7.
Both Jiminy and Navigators have moved for judgment on the pleadings. Navigators argues that as an insurer it owes a duty to defend its insured, Wiegand, but it does not owe a direct duty to defend Jiminy because Jiminy [*9] is not an additional insured under the Policy.4 Further, the duty Navigators has under the Policy to pay defense costs to a non-insured party pursuant to a contractual liability of its insured only requires it to make payments to the insured, and only when the insured has actually requested payment. In this case, Navigators asserts that even if Wiegand is found to owe Jiminy its defense costs, it will be up to Wiegand to determine whether it wishes to pay the amount or to make a claim to Navigators. Since Navigators owes no duty directly to Jiminy and it would be up to Wiegand to determine whether to make a claim in the event judgment is entered against it with respect to Jiminy’s defense costs, Navigators argues judgment on the pleadings should enter in its favor.
4 In its filings and at oral argument, Jiminy was clear that it was not claiming to be an additional insured under the Policy.
For its part, Jiminy begins its argument with the Contract, asserting first that the language in the Contract at § 12(A)(1) clearly establishes that Wiegand has a duty to pay Jiminy’s defense costs regardless of any potential factual disputes between Jiminy and Wiegand, provided (1) the defense costs are incurred [*10] in litigation in which there is a product liability claim against Wiegand and (2) Jiminy is also a defendant named in the action.5 As the Underlying Action includes product liability claims against Wiegand, as well as other claims against Jiminy, Jiminy asserts the two requirements are met. Jiminy then turns to the Policy, arguing that the Contract is an “insured contract” for purposes of the Policy. Finally, Jiminy argues that since the Policy provides coverage for liability assumed by Wiegand in an “insured contract,” Navigator, as an insurer, is required under Massachusetts law, to pay for Jiminy’s defense, without regard to the resolution of the dispute between Wiegand and Jiminy.
5 Initially, in its memorandum in support of its motion for judgment on the pleadings, Jiminy argued that it would also be necessary to establish that there were no disputes as to whether Jiminy had “fully performed all ongoing maintenance obligations.” (Compl., Ex. B, Contract §12(A)(1).) Subsequently, in its opposition to Navigators’ motion for judgment on the pleadings, Jiminy instead argued that the requirement regarding maintenance obligations applied only to indemnification claims.
Navigators has not contested, [*11] at least relative to the purpose of the motions currently before the court, that the Contract between Jiminy and Wiegand is an “insured contract” for purposes of the Policy. Also, Navigators does not dispute or that the Underlying Action is the type of litigation covered under the Policy. The court begins its analysis by considering whether Massachusetts law allows Jiminy to compel payment from Navigators based on Navigators’ obligations to its insured, Wiegand. Massachusetts law imposes on insurers a “broad duty to defend its insured against any claims that create a potential for indemnity.” Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 667 N.E.2d 1149, 1151 (Mass. 1996). This duty is broad and attaches whenever the claims in the complaint match up with the language in the policy. See Liberty Mut. Ins. Co. v. SCA Services, Inc., 412 Mass. 330, 588 N.E.2d 1346, 1347 (Mass. 1992). However, the cases cited by the parties all involve cases in which the court discussed the duty in the context of the insured.
Jiminy has not cited any cases in which a court imposed on an insurer a duty to defend a third-party beneficiary of a policy. Instead, Jiminy argues the language of the Policy providing coverage for defense costs of a third-party pursuant to an “insured contract” shows the parties’ intention that Navigators would pay such costs and, therefore, such language [*12] should be construed to impose upon Navigators a duty to make payment directly to Jiminy. The court disagrees. As demonstrated by the provisions in the Policy that allow for the designation of an additional insured, Navigators and Wiegand knew how to extend Navigators’ duties as an insurer to other parties. Damages, including defense costs, associated with “insured contracts” were handled differently, indicating that Navigators and Wiegand did not, in fact, intend that in a case like this one Navigators would have any direct obligations to Jiminy based on the Contract. The Contract also included provisions regarding both additional insureds and “insured contracts,” suggesting that Jiminy, like Navigators and Wiegand, understood that Wiegand’s promise to pay Jiminy’s defense costs would not grant Jiminy the status of an “additional insured” with respect to Navigators.
In the absence of a contractual relationship between Navigators and Jiminy, the court finds no legal basis for ordering Navigators to pay Jiminy’s defense costs directly. Any obligation upon Navigators to pay such costs will arise only after an insured, in this case Wiegand, makes a claim for payment and then its only obligation [*13] will be to Wiegand. Judgment on the pleadings in favor of Navigators is, therefore, appropriate.
For the Foregoing reasons, Plaintiff’s Motion for Judgment on the Pleadings is hereby DENIED and Defendant’s Motion for Judgment on the Pleadings is hereby ALLOWED.
It is So Ordered.
/s/ Mark G. Mastroianni
MARK G. MASTROIANNI
United States District Judge