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Koons v. XL Insurance America, Inc.

United States District Court, Third Circuit

September 19, 2013

STEPHEN P. KOONS
v.
XL INSURANCE AMERICA, INC. et al.

MEMORANDUM

William H. Yohn Jr., Judge

This action arises out of the tragic death of Jeremy P. Andre, an employee of Ches-Mont Disposal, LLC, [1] while operating a garbage disposal truck. Following his death, Andre’s estate brought an action (the “Andre Estate Action”) in state court against Stephen P. Koons, for negligence, wrongful death, and survival. Koons, in turn, filed this suit against Greenwich Insurance Company (“Greenwich”), seeking a declaratory judgment as to Greenwich’s duty to defend and indemnify Koons in the Andre Estate Action, as well as claims for beach of contract and bad faith. Before me are cross motions for summary judgment by Koons and Greenwich. For the following reasons, the plaintiff’s motion for summary judgment will be denied, while the defendant’s motion for summary judgment will be granted.

I.FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Factual Background[2]

In 1999, Koons purchased Miller Concrete, a company that sold septic tanks, and operated it as a sole proprietorship, continuing to use the fictitious name, Miller Concrete. (Pl.’s Mot. Summ. J. ¶ 32(a); Def.’s Resp. to Pl.’s Mot. Summ. J. (“Def.’s Resp.”) ¶ 32(a).) Shortly thereafter, Koons purchased a garbage hauling company called Kronmueller Disposal, Inc. (“KDI”). (Pl.’s Mot. Summ. J. ¶ 32(c); Def.’s Resp. ¶ 32(c).) By 2001, Koons had changed the name of his garbage hauling company from KDI to No Fun Allowed, Inc. (“NFA”); for professional reasons, however, NFA operated under the fictitious name “Ches-Mont Disposal.” (Pl.’s Mot. Summ. J. ¶ 32(d)-(e); Def.’s Resp. ¶ 32(d)-(e).)

On October 22, 2001, Koons, d/b/a Miller Concrete, purchased a Mack garbage disposal truck (“the Truck”)—the Truck involved in Andre’s death—from McNeilus Truck & Manufacturing Co. (Pl.’s Ans. to Second Mot. of Def. for Summ. J. (“Pl.’s Resp.”) ¶ 34; Def.’s Mot. Summ. J. ¶ 34.) The invoice for the Truck states that it was sold to “Koons d/b/a Miller Concrete, ” and lists “Chesmont Disposal” as the final user. (Pl.’s Resp. ¶ 34; Def.’s Mot. Summ. J. ¶ 34.) On November 12, 2001, Koons entered into an equipment lease for the Truck with NFA. (Pl.’s Resp. ¶ 35; Def.’s Mot. Summ. J. ¶ 35.) The lease agreement lists Koons as the lessor and “NFA d/b/a Ches-Mont Disposal” as the lessee. (Pl.’s Resp. ¶ 35; Def.’s Mot. Summ. J. ¶ 35.) The lease agreement further states that NFA, d/b/a Ches-Mont Disposal, agreed to lease the Truck from Koons for a period of thirty-six months, at a rate of $2, 657.41 per month. (Pl.’s Resp. ¶ 35; Def.’s Mot. Summ. J., Ex. 10.) At the end of the lease period, NFA, d/b/a Ches-Mont Disposal, was to pay Koons a sum of $58, 842.37, at which time the title to the Truck would be signed over by the lessor to the lessee. (Pl.’s Resp. ¶ 35; Def.’s Mot. Summ. J., Ex. 10.) Nevertheless, in November 2004, although the lease had terminated, Ches-Mont Disposal continued to make sole use of the Truck, and Koons continued to be listed as the Truck’s registered owner with the Commonwealth of Pennsylvania. (Pl.’s Resp. ¶¶ 36-37; Def.’s Mot. Summ. J. ¶¶ 36-37.) Additionally, throughout the lease period NFA did not make any payments to Koons for use of the Truck. (Pl.’s Mot. Summ. J. ¶ 24(g); Def.’s Resp. ¶ 24.)

Sometime in 2004 or 2005, NFA officially changed its name to Ches-Mont Disposal, Inc., wherein Koons remained the sole owner and president. (Pl.’s Resp. ¶ 27; Def.’s Mot. Summ. J. ¶ 27.) Shortly thereafter, Ches-Mont Disposal, Inc. underwent a corporate restructuring, going from an S-corporation to a limited liability company called Ches-Mont Disposal, LLC. (Pl.’s Resp. ¶¶ 27-28; Def.’s Mot. Summ. J. ¶¶ 27-28.) Then, in 2006, Koons, along with partners Patrick Kelly and Richard Godschall, established Ches-Mont Holdings, LLC (“Ches-Mont Holdings”), a holding company that became the sole member of Ches-Mont Disposal, LLC. (Pl.’s Resp. ¶ 29; Def.’s Mot. Summ. J. ¶ 29.) Koons remained the president of Ches-Mont Disposal, LLC, and retained a 35% ownership in Ches-Mont Holdings. (Pl.’s Resp. ¶¶ 30, 31, 33; Def.’s Mot. Summ. J. ¶¶ 30, 31, 33.) Following the corporate restructuring, Ches-Mont Disposal, LLC continued to make sole use of the Truck, while Koons, d/b/a/ Miller Concrete, continued to be listed as the Truck’s owner. (Pl.’s Mot. Summ. J. ¶ 24(l); Def.’s Resp. ¶ 24.)

On April 18, 2008, Jeremy Andre—while employed by Ches-Mont Disposal, LLC—died in an accident that involved the Truck. (Pl.’s Resp. ¶ 8; Def.’s Mot. Summ. J. ¶ 8.) As of the date of the incident, Ches-Mont Disposal, LLC continued to have exclusive use of the truck. ((Pl.’s Mot. Summ. J. ¶ 24(l); Pl.’s Resp. ¶ 9); (Def.’s Mot. Summ. J. ¶ 9; Def.’s Resp ¶ 24).) Additionally, as of October 6, 2009, Koons, d/b/a Miller Concrete, was still listed as the owner of the truck with the Pennsylvania Department of Transportation, and NFA, d/b/a Chesmont Disposal, was still listed as the lessee.[3] (Def.’s Resp. ¶¶ 32(p), 84.) On July 28, 2010, Koons sold the Truck to “Chesmont Disposal, LLC” for $5, 000.[4] (Def.’s Resp. ¶¶ 32(p), 85.)

B. Procedural History

Following Andre’s death, his estate filed suit against Koons, along with several other defendants not relevant to these proceedings, in state court. The estate sued Koons for negligence, wrongful death, and survival in his role as owner and lessor of the Truck (Stephen P. Koons d/b/a Miller Concrete). This suit is based on the claim that Koons, as lessor of the Truck, breached his duty of care to third-persons, such as Andre, by failing to maintain the truck in a safe and operable condition. (Def.’s Mot. Summ. J., Ex. 5, ¶¶ 127-152.) He was not sued for his role as president or director of Ches-Mont Disposal, LLC or for his relationship to Ches-Mont Holdings. Similarly, Andre’s estate did not sue Ches-Mont Disposal, LLC or Ches-Mont Holdings.

After learning of the Andre Estate Action, Koons contacted XL Insurance America, Inc. (“XL Insurance”) and Greenwich, with whom Ches-Mont Disposal, LLC held insurance policies, seeking defense and indemnification. Both insurance companies refused to defend or indemnify Koons in the state court proceedings. Hence, Koons filed suit in federal court seeking a declaratory judgment as to the duties of XL Insurance and Greenwich to defend and indemnify him in the Andre Estate Action. Specifically with respect to Greenwich, Koons demanded coverage under Coverage B of the Greenwich insurance policy, titled “Umbrella Occurrence Based Liability Coverage Over Self-Insured Retention” (the “Greenwich Excess/Umbrella Policy”). Koons also alleged claims for breach of contract and bad faith against both XL Insurance and Greenwich.

After discovery, the parties submitted cross motions for summary judgment. I granted summary judgment in favor of XL Insurance[5] and Greenwich and denied summary judgment for Koons. With respect to the Greenwich policy, I concluded that there was no evidence in the record that Koons qualified as an “insured” under the terms of the policy. Specifically, I found that Koons had not pointed to anything in the record that would create a genuine dispute of material fact that, in purchasing the Truck, he was “acting within the scope of [his] duties” as a partner, joint venture member, executive officer, employee, director, or stockholder of Ches-Mont Disposal, LLC—the named insured under the policy—in order for coverage to extend to him. Because I found nothing in the record to support Koons’s theory of coverage, I concluded he was not covered under the Greenwich policy, and entered summary judgment in favor of Greenwich.

Koons appealed that decision to the Third Circuit. Upon review, the Third Circuit held that “viewing the record and reasonable inferences therefrom in the light most favorable to Koons, ” there was “sufficient evidence to allow a reasonable jury to infer Koons purchased the Truck in his capacity as the owner of Ches-Mont LLC’s predecessor.” Koons v. XL Insurance America, Inc., No. 12-3237, 2013 WL 1189262, at *4-5 (3d Cir. Mar. 25, 2013). As a result, the Third Circuit reversed the grant of summary judgment in favor of Greenwich, and remanded the case for further proceedings consistent with its ruling. Upon remand, both Greenwich and Koons have again submitted motions for summary judgment.

II. STANDARD OF REVIEW

Summary judgment is appropriate when “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). “Material facts are those that could affect the outcome of the proceeding, and a dispute about a material fact is genuine if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party.” Roth v. Norfalco LLC, 651 F.3d 367, 373 (3d Cir. 2011) (internal quotation marks omitted). To establish that there is, or is not, a genuine dispute as to any material fact, a party may rely on “depositions, documents, electronically stored information, affidavits or declarations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials, ” or by “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(A)-(B). In sum, “[w]here the record taken as a whole could ...


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