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Hanover Insurance Co. v. Engineered Systems Alliance, LLC

United States District Court, D. Maryland

March 28, 2019

THE HANOVER INSURANCE COMPANY, Plaintiff,
v.
ENGINEERED SYSTEMS ALLIANCE, LLC, et al., Defendants.

          MEMORANDUM OPINION

          Paula Xinis United States District Judge.

         Pending before the Court is Plaintiff The Hanover Insurance Company (“Hanover”)'s motion for summary judgment and a related motion to seal. ECF Nos. 345, 387.[1] The motions are fully briefed by Hanover, Honeywell International, Inc. (“Honeywell”), and Engineered Systems Alliance, LLC (“ESA”), and a hearing was held on March 27, 2019. See Loc. R. 105.6. For the following reasons, the Court denies Hanover's motion for summary judgment and grants Honeywell's motion to seal.[2]

         I. Background

         In 2010, the United States General Services Administration (“GSA”) entered into a contract with Honeywell to design and build a central utility plant. ECF No. 1 ¶ 14. The central utility plant provides electricity, steam, and water to a federal facility in Maryland, in part through turbine generators. ECF No. 47 ¶ 6. The failure of the G-9 Turbine and related equipment form the basis of this action.

         Honeywell hired ESA to provide “the design, construction, installation, and other services for the infrastructure” of the plant. Id. ¶ 8. As part of the Honeywell-ESA contract for this service, ESA was required to obtain insurance. ECF No. 183-1, art. 10. Specifically, the contract required that Honeywell be a named insured on the policy and that, in case of loss or damage, the insurance company provide payment to ESA and Honeywell “as their respective interests appear.” Id. Fulfilling its contractual obligation, ESA purchased the Hanover Policy (“the Policy”) central to this opinion.

         The Policy includes both ESA and Honeywell as named insureds and references each as “you” or “your” throughout. ECF No. 1-1 at 2, 11, 25. The Policy covers “direct physical ‘loss' to Covered Property.” Id. at 11. The Policy defines “loss” as “accidental loss or damage” and “Covered Property” as “property that is owned by ‘you' or is property of others in ‘your' care, custody or control” to include “[m]aterials, supplies, fixtures, equipment” and other similar physical property. Id. at 11, 25. Covered Causes of Loss are “RISKS OF DIRECT PHYSICAL ‘LOSS' to Covered Property except those causes of ‘loss' listed in the Exclusions.” Id. at 12. The Policy explicitly excludes from coverage “consequential loss of any kind, ” “except as otherwise provided.” Id. at 20.

         The Policy also permits Hanover to “[s]ettle the ‘loss' with the owners of the property.” Id. at 40. The Policy states that “[a] receipt for payment from the owners of that property will satisfy any claim of yours.” The Policy also provides that if Hanover pays an insured under the Policy, and that insured has “rights to recover damages from another, those rights are transferred to [Hanover] to the extent of [its] payment.” Id. at 24.

         On May 12, 2014, the G-9 Turbine suffered severe damage. ECF No. 1 ¶ 28. When investigating the cause of damage, the parties also discovered damage to the turbine's inlet air cooling coils (“IAC-9 Coils”). Id. ¶ 26. Honeywell, as the owner of the G-9 Turbine, incurred the costs to refurbish the G-9 Turbine while ESA incurred the costs to replace the IAC-9 Coils. ECF No. 345 at 3-4. Honeywell contends that it suffered additional losses arising from damage to the G-9 Turbine which led to Honeywell's “failure to meet performance guarantees that have been made to GSA.” ECF No. 141 ¶ 27. Based on the damage to the IAC-9 Coils and the G-9 Turbine, ESA filed a claim with Hanover seeking coverage under the Policy. ECF No. 1 ¶ 3.

         On January 14, 2015, Hanover filed this action for declaratory relief regarding the scope of coverage under the Policy for the G-9 Turbine and IAC-9 Coils. ECF No. 1. Honeywell and ESA each filed counterclaims against Hanover, seeking declaratory judgments and alleging that Hanover breached the terms of the Policy by not paying on the claims for the covered losses. ECF Nos. 20, 47.[3] Honeywell and ESA also filed crossclaims against each other for breach of contract and indemnification. ECF Nos. 141, 183. Honeywell later amended its crossclaims to assert claims for additional defective work not at issue here. ECF No. 141.

         In March of 2018, Hanover and Honeywell settled the claims related to the G-9 Turbine and memorialized the settlement terms in a Settlement Agreement. ECF No. 346. ESA was not party to the settlement, and nothing in the Settlement Agreement expressly extinguished ESA's liability to Honeywell on the crossclaims. However, the Settlement Agreement purported to “satisfy any claim of [ESA's].” Id. § F (brackets in original) (quoting the Policy). The Settlement Agreement also stated that Honeywell and Hanover “are settling and resolving, in its entirety, the portion of the Insurance Claim regarding the G-9 Turbine only.” Id. § 2.A; see also id. § 3.A. (“The Settlement Payment to Honeywell solely relates to damages caused by or resulting from direct physical loss to the G-9 Turbine and is not related to any damage to the IAC-9 Coils.”). The settlement payment to Honeywell was less than Honeywell's estimated costs to refurbish the G-9 Turbine, and the parties agreed that payment represented “a good faith and fair compromise to avoid the costs and risks of further litigation between Hanover and Honeywell.” Id. § 2.E. After the settlement was reached, Hanover and Honeywell dismissed the claims against each other. ECF No. 328.

         Hanover also separately attempted to pay ESA for its property losses associated with the damaged IAC-9 Coils by mailing to ESA a check for $110, 000. ECF No. 345-10. ESA returned Hanover's check. ECF No. 345-11. Hanover now seeks summary judgment in its favor, contending that it has satisfied fully its obligations under the Policy and that ESA's counterclaims are moot now that the claims for both the G-9 Turbine and IAC-9 Coils have been resolved.

         II. Standard of Review

         Summary judgment is appropriate when the court, viewing the evidence in the light most favorable to the non-moving party, finds no genuine disputed issue of material fact, entitling the movant to judgment as a matter of law. See Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). “A party opposing a properly supported motion for summary judgment ‘may not rest upon the mere allegations or denials of [his] pleadings,' but rather must ‘set forth specific facts showing that there is a genuine issue for trial.'” Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (quoting former Fed.R.Civ.P. 56(e)). “A mere scintilla of proof . . . will not suffice to prevent summary judgment.” Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). Importantly, “a court should not grant summary judgment ‘unless the entire record shows a right to judgment with such clarity as to leave no room for controversy and establishes affirmatively that the adverse party cannot prevail under any circumstances.'” Campbell v. Hewitt, Coleman & Assocs., Inc., 21 F.3d 52, 55 (4th Cir. 1994) (quoting Phoenix Sav. & Loan, Inc. v. Aetna Casualty & Sur. Co., 381 F.2d 245, 249 (4th Cir. 1967)). Where the party bearing the burden of proving a claim or defense “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, ” summary judgment against that party is likewise warranted. Celotex, 477 U.S. at 322.

         III. ...


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