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Continental Casualty Co. v. Amerisure Insurance Co.

United States Court of Appeals, Fourth Circuit

March 28, 2018


          Argued: January 23, 2018

          Appeals from the United States District Court for the Western District of North Carolina, at Charlotte. Graham C. Mullen, Senior District Judge. (3:14-cv-00529-GCM)


          Richard Leonard Pinto, PINTO, COATES, KYRE & BOWERS, PLLC, Greensboro, North Carolina, for Appellant/Cross-Appellee.

          Karen Ventrell, CNA COVERAGE LITIGATION GROUP, Washington, D.C., for Appellee/Cross-Appellant.

         ON BRIEF:

          Adam L. White, PINTO, COATES, KYRE & BOWERS, PLLC, Greensboro, North Carolina, for Appellant/Cross-Appellee.

          David J. Redding, Ty K. McTier, REDDING JONES PLLC, Charlotte, North Carolina, for Appellee/Cross-Appellant.

          Before MOTZ, TRAXLER, and KEENAN, Circuit Judges.

          BARBARA MILANO KEENAN, Circuit Judge.

         In this insurance coverage dispute, we consider whether claims in an underlying personal injury suit against two contractors were covered under policies issued by Amerisure Insurance Company (Amerisure), in which the contractors were "additional insureds." Contending that the claims were excluded from coverage, Amerisure refused to participate in the contractors' defense, and did not contribute to a final settlement of the lawsuit. Thereafter, Continental Casualty Company (Continental), which had defended the contractors under the terms of a different policy and had paid the settlement amount, filed the present suit against Amerisure asserting that Amerisure had breached its duty to defend. Continental sought a declaratory judgment requiring Amerisure to reimburse Continental for the full settlement amount plus prejudgment interest and for the fees and costs Continental incurred in defending the underlying action.

         After the parties filed cross-motions for summary judgment, the district court denied Amerisure's motion and granted Continental's motion in part, concluding that Amerisure was liable to Continental for repayment of the $1.7 million settlement plus prejudgment interest. However, the district court denied Continental's motion to hold Amerisure liable for full payment of Continental's defense costs and fees, determining that Amerisure should be required to pay only half those amounts.

         Upon our review, we affirm the district court's judgment that Amerisure improperly relied on a policy exclusion to avoid its duty to defend, and that Amerisure was liable under the terms of its policies to pay the full cost of the settlement plus pre-judgment interest. However, we vacate the court's judgment with respect to defense fees and costs, and hold that Amerisure was liable for the full amount of those fees and costs because Continental did not have an independent duty to defend in the underlying lawsuit. Accordingly, we affirm in part, and vacate in part, the district court's judgment.


         KBR Building Group, LLC (BE&K) served as the general contractor on a construction project to build a hospital for the Charlotte Mecklenburg Hospital Authority (the Hospital Authority) in Pineville, North Carolina. BE&K entered into a subcontract with SteelFab to supply and construct the steel infrastructure for the hospital. SteelFab, in turn, entered into a contract (the SteelFab-CSS subcontract) with a "second-tier" subcontractor, Carolina Steel and Stone, Inc. (CSS), to erect the steel structure.

         While working on this portion of the project, Dustin Miller, a CSS employee, tripped and fell 30 feet to the ground after his safety cable broke (the accident). Miller suffered serious injuries, including "paralysis from his chest down." At the time of the accident, CSS held both commercial general liability (CGL) and umbrella insurance policies issued by Amerisure (the Amerisure policies). As required by the SteelFab-CSS subcontract, the Amerisure policies included SteelFab and BE&K as "additional insureds."

         The Amerisure policies complied with the minimum coverage amounts required by the SteelFab-CSS subcontract, namely, a total of $2, 000, 000. The Amerisure CGL policy provided a limit of liability of $1, 000, 000 per occurrence, while the umbrella policy provided an additional $5, 000, 000 per occurrence.[1] Additionally, the SteelFab-CSS subcontract stated that "the insurance required of [CSS] must be primary and noncontributory with SteelFab's Insurance program." (emphasis added).

         In addition to its "additional insured" status under Amerisure's policies, SteelFab held its own CGL policy issued by Continental, which policy contained an "additional insured" endorsement covering BE&K. BE&K also was insured under the Hospital Authority's "rolling owner controlled insurance program" (ROCIP).[2] By enrolling in the ROCIP, BE&K also had coverage under policies issued by a separate insurance provider. Although the terms of the ROCIP required participation by all tiers of contractors, participation was not automatic, and BE&K did not enroll either SteelFab or CSS in the ROCIP. Instead, as required by an additional provision of the ROCIP, these unenrolled subcontractors maintained their own insurance coverage as previously described.

         After the accident, Miller filed the underlying personal injury action against defendants BE&K and SteelFab, alleging numerous theories of negligence and breach of contract (the Miller action). Miller alleged, in relevant part, that BE&K and SteelFab failed to provide a safe work environment, failed to ensure that their subcontractors followed certain safety measures, failed to properly inspect certain safety features, failed to control and supervise the workplace, and failed to warn subcontractors about the lack of safety measures. Miller did not name CSS as a defendant, but was paid workers' compensation benefits based on his status as a CSS employee.

         Continental agreed to defend the Miller action subject to a full reservation of rights. When Continental sought Amerisure's participation in this defense, Amerisure declined on the ground that any defense of Miller's claims was subject to a "controlled insurance program" exclusion (the CIP exclusion) contained in the Amerisure policies. Amerisure contended that this exclusion precluded coverage and excused any ...

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