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American Mining Insurance Co., Inc. v. Rock "N" Roll Coal Co., Inc.

United States District Court, S.D. West Virginia, Charleston

April 25, 2017

ROCK “N” ROLL COAL COMPANY, INC., DAVID CLINE, and MYRTLE D. CORPORATION, a West Virginia corporation, Defendants.



         Pending is plaintiff's Motion for Summary Judgment Against Defendants Rock “N” Roll Coal Company, Inc. and David Cline, filed September 8, 2016 (ECF No. 23).

         I. Facts and Procedural History

         This case involves the interpretation of insurance contracts in a declaratory judgment action brought under diversity jurisdiction by plaintiff American Mining Insurance Company, Inc. (“American Mining”), on April 13, 2016. Plaintiff provided insurance coverage to defendant Rock “N” Roll Coal Company, Inc. (“Rock ‘N' Roll”), in the form of six annual commercial general liability policies issued in West Virginia over the course of six years. David Cline, as an executive officer of Rock “N” Roll, is an insured under those same policies. Plaintiff's complaint (the “complaint”) alleges that those policies (the “policies”) do not cover the claims or counterclaims alleged in a state suit initiated by co-defendant Myrtle D. Corporation (“Myrtle D.”) against Rock “N” Roll and David Cline (herein, “defendants”) in the Circuit Court of McDowell County, West Virginia.[1] The complaint in this action sets forth the relevant policy language, which is the same for each policy in all material respects. Compare Compl. ¶ 26 (ECF No. 1) (hereinafter “Federal Compl.”) with Pl.'s Mot. for Default J. Ex. 1 (ECF No. 13) (hereinafter “Policies”).

         Myrtle D., as lessor, filed its state court complaint (“State Complaint”) against its lessee, Rock “N” Roll, and David Cline, President of Rock “N” Roll, on October 13, 2015, alleging that Rock “N” Roll and Cline failed to make certain royalty payments. Shortly thereafter, Rock “N” Roll and Cline filed a counterclaim against Myrtle D. alleging conspiracy, slander of title, public disclosure of private facts, negligence, and breach of a lease agreement. Myrtle D. responded with its own counterclaim (“Myrtle Counterclaim”) alleging that Rock “N” Roll and Cline were contractually obligated to name Myrtle D. as an additional insured in their policies and to indemnify and defend Myrtle D. for claims arising out of Rock “N” Roll's coal mining operations. The state court dismissed the State Complaint with prejudice on June 29, 2016, on Myrtle D.'s own motion, leaving only the Rock “N” Roll and David Cline counterclaim and the Myrtle Counterclaim in the state court case.

         The Myrtle Counterclaim alleges that Rock “N” Roll and David Cline breached a license agreement between Myrtle D. and Rock “N” Roll in a variety of ways. Ans. to Countercl. and Countercl. Against Rock “N” Roll Coal Company, Inc., and David Cline, “Counterclaim” ¶¶ 2-3 (ECF No. 1-3) (hereinafter “Myrtle Countercl.”). In particular, it asserts that

[p]ursuant to the License Agreement, Defendant Rock N Roll Coal Co., Inc. and David Cline, as the signatory thereto on behalf of Rock N Roll Coal Co., Inc., are contractually obligated to indemnify and save harmless Myrtle D., its officers and employees, and their affiliates, from and against any and all claims, demands, suits, loss, damage, injury (including death) to persons and property and expense . . . whatsoever that may result from or arise of out [sic] Rock N Roll Coal Co., Inc.'s mining operations.

         Myrtle Countercl., “Counterclaim” ¶6. It further alleges a breach of contract claim, to wit, that Rock “N” Roll and David Cline “have breached their contractual obligations by failing to indemnify, save harmless, defend, and pay all attorney's fees and legal expenses to which Myrtle D. has been and continues to be exposed by [Rock ‘N' Roll and Cline's] Counterclaim.” Id., “Counterclaim” ¶ 13. Plaintiff American Mining endeavors to obtain a declaration that such a breach is not covered under its insurance policies. See Pl.'s Mem. in Supp. of Summ. J. 11 (ECF No. 24) (hereinafter “Mot. for Summ. J.”)

         Plaintiff filed this federal declaratory judgment action seeking a declaration that its insurance policies do not cover the claims and counterclaims in the underlying state case. The complaint consists of six counts, of which Counts I and II are relevant here. These counts effectively presage the same arguments raised in American Mining's motion for summary judgment currently under consideration. Count I alleges that Myrtle D.'s claims of breach of contract in the Myrtle Counterclaim and all counts of the State Complaint are not covered by the policy language because such breaches were not “accidents” and therefore not “occurrences” as defined by the policies. Federal Compl. ¶¶ 29-32. Count II alleges that the policies' “Contractual Liability” exclusion excludes the Myrtle Counterclaim and Count I of the now dismissed State Complaint from coverage. Id. ¶ 36.

         Plaintiff's policies provide commercial general liability coverage to Rock “N” Roll. In pertinent part, the policies' express terms cover only “damages because of ‘bodily injury' or ‘property damage, '” and only if the bodily injury or property damage “is caused by an ‘occurrence' that takes place in the ‘coverage territory.'” See, e.g., Policies 9, 177. An “occurrence” is defined in the policies as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Policies 20. As to David Cline, plaintiff correctly notes that Cline, as an executive officer of Rock “N” Roll, is an insured under the terms of the policies. See Policies 15; Mot. for Summ. J. 8. Specifically, each of the policies states that “[y]our ‘executive officers' and directors are insureds, but only with respect to their duties as your officers and directors.” See, e.g., Policies 15, 183. Consequently, plaintiff's arguments against coverage apply equally to both Rock “N” Roll and Cline.

         Plaintiff moved for summary judgment on September 9, 2016. In its memorandum, plaintiff posits that none of the claims by Myrtle D. against the defendants in the underlying Myrtle Counterclaim fall within the ambit of plaintiff's policies. In particular, plaintiff contends that the claims of the Myrtle Counterclaim sound in breach of contract and, consequently, that those claims both fail to come within the policies' coverage for “occurrences” and are excluded by the policies' “Contractual Liability” exclusion. Rock “N” Roll and David Cline respond that their claims in the state case are not premised solely on breach of contract.

         II. Discussion

         A party is entitled to summary judgment “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). Material facts are those necessary to establish the elements of a party's cause of action. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         A genuine issue of material fact exists if, in viewing the record and all reasonable inferences drawn therefrom in a light most favorable to the non-moving party, a reasonable fact-finder could return a verdict for the non-movant. Id. The moving party has the burden of showing - “that is, pointing out to the district court - that there is an absence of evidence to support the nonmoving party's case.” Celotex Corp. v. Catrett,477 U.S. 317, 325 (1986). If the movant satisfies this burden, then the non-movant must set forth specific facts ...

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