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Brotherhood Mutual Insurance Co. v. Ervin Cable Construction

November 27, 2006

BROTHERHOOD MUTUAL INSURANCE COMPANY, AS SUBROGEE OF RIVER VALLEY CHRISTIAN FELLOWSHIP, PLAINTIFF,
v.
ERVIN CABLE CONSTRUCTION, LLC; GARY PASCO, INDIVIDUALLY AND D/B/A PASCO CABLE COMPANY; AND STEVEN GAMMELL, INDIVIDUALLY AND D/B/A S.A. GAMMELL CONSTRUCTION, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Brotherhood Mutual Insurance Company (BMIC), as subrogee of River Valley Christian Fellowship, brought a diversity action for negligence against Ervin Cable Construction, LLC (Ervin), Gary Pasco and Pasco Cable Company (Pasco), and Steven Gammell and S.A. Gammell Construction (Gammell). BMIC alleged that defendants negligently installed cable lines in Bradley, Illinois by damaging a sewage pipe while completing the job. After the cable lines were installed, raw sewage and water from the damaged sewage pipe flooded the River Valley Christian Fellowship Church. The Church sustained over $180,000 in damage from the flooding. Pasco cross-claimed against Gammell for indemnification pursuant to their subcontract agreement, requesting payment for legal fees, expenses, and any liability that might be assessed against Pasco under the suit. BMIC settled with Gammell and dismissed its claims against Ervin and Pasco, leaving only Pasco's cross-claim against Gammell.

Both Pasco and Gammell have moved for summary judgment on the cross-claim. Pasco also moved for sanctions under Federal Rule of Civil Procedure 11 against BMIC, its attorney Abosede Odunsi, and her law firm Swanson, Martin & Bell, LLP and for sanctions against Odunsi under 28 U.S.C. § 1927. For the following reasons, the Court denies Pasco's motion for summary judgment, grants Gammell's motion for summary judgment, and denies Pasco's motion for sanctions.

Facts

In 2003, Ervin had a contract to lay cable in the Village of Bradley, near the River Valley Christian Fellowship Church. Sometime thereafter, Ervin subcontracted with Fiber Cable, LLC to perform certain work on the project. On April 1, 2003, Fiber Cable and Pasco entered into a contract in which Pasco agreed to perform certain work as a subcontractor for Fiber Cable. On April 21, 2003, Pasco and Gammell entered into a subcontract for cable construction work on the project. Gammell and his team completed the construction and cable line work in December 2003.

On June 11, 2004, raw sewage and water flooded the Church from a damaged sewer pipe nearby. The Church maintained an insurance policy with BMIC. Pursuant to the insurance policy, BMIC paid $182,370.92 to repair the facility, which included costs for emergency decontamination, plumbing, carpentry, and painting.

The Village of Bradley investigated the sewage line breach and concluded that a cable line had pushed through a sewer pipe, causing damage to the sewer line. BMIC conducted its own investigation into the source of the damage and learned that Ervin had paid the Village of Bradley $7,000 to fix the sewer line. BMIC tried to collect from Ervin for the damage to the Church. BMIC learned in its investigation that Ervin subcontracted with Pasco Cable for work on the Bradley cable project. Ervin forwarded BMIC's claim to Pasco's insurance company. BMIC also tried unsuccessfully to collect from Pasco.

On June 28, 2005, BMIC, as subrogee of the Church, filed a diversity action against Ervin and Pasco, alleging that they had been negligent in laying cable lines in Bradley. Pasco's counsel, Peter Berman, advised BMIC's attorney that although Pasco had a contract to lay cable in Bradley, he later subcontracted the project out to Gammell. In light of this new information, BMIC filed a second amended complaint in September 2005 naming Gammell as an additional defendant.

On October 7, 2005, Pasco filed an answer to BMIC's complaint, denying involvement in the Bradley cable line work. Pasco also filed a cross-claim against Gammell, requesting relief pursuant to indemnity and duty to defend clauses in their subcontract. After Pasco answered written discovery and stated under oath that he did not perform the cable line work in Bradley, his counsel asked BMIC, through its attorneys William Weiler and Abosede Odunsi of Swanson, Martin & Bell, LLP, to dismiss Pasco voluntarily from the suit. Weiler explained that he could not yet determine who was liable for the damage to the Church and could not dismiss Pasco until he received and reviewed the other defendants' discovery responses. Weiler also explained that discovery was still ongoing and key depositions still needed to be taken. In May 2006, Gammell and BMIC entered settlement negotiations while discovery was still open. In July 2006, BMIC settled the suit with Gammell and dismissed its suit against the remaining defendants, including Pasco. This left only Pasco's cross-claim against Gammell.

Discussion

1. Motions for Summary Judgment

Pasco and Gammell have both moved for summary judgment on Pasco's cross-claim for indemnification and defense costs. Summary judgment should be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The cross-claim involves legal questions of contract interpretation and thus is particularly well-suited for resolution on summary judgment. Allstate Ins. Co. v. Tozer, 392 F.3d 950, 952 (7th Cir. 2004).

Pasco seeks recovery for the attorney fees and other expenses he incurred in defending this case. In April 2003, Pasco and Gammell entered into an agreement for "subcontract work [that] includes but is not limited to . . . Underground Construction." Pasco Cross-claim, Ex. B at 2. In December 2003, Gammell and his team laid cable lines in Bradley as part of his subcontract with Pasco. Pasco contends that under indemnity and duty to defend clauses contained in the subcontract. he is entitled to recover his expenses associated with defending BMIC's subrogee action. The relevant provisions of the subcontract state:

Section 7. Indemnity. Subcontractor [Gammell] shall indemnify Contractor [Pasco] and Owner, and hold them harmless against claims, liability, litigation, loss, and expense, including attorney's fees suffered by Contractor or Owner as a result [sic] Subcontractor's performance or nonperformance of the Work required by this Agreement. Subcontractor is obligated to indemnify Contractor and Owner under this paragraph for all the events caused or partly caused by Subcontractor's negligence, wrong doing [sic], or other fault even if Contractor or Owner should also be partly at fault. This indemnity provision shall not, however, apply to the claims, liability, litigation, loss, or expenses caused solely by the state governing this Agreement. In addition, Subcontractor shall reimburse Contractor and Owner for any legal expenses incurred in enforcing the indemnity granted to them under this provision.

Section 8. Duty to Defend. Subcontractor shall defend Contractor and Owner against any claim, or any legal proceeding which may involve Subcontractor's obligations under section 7 whether such claim or legal proceeding is brought only against Contractor or Owner either separately or jointly with Subcontractor.

Id. at 2.Gammell argues that both the indemnity and duty to defend clauses are unenforceable ...


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