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`IN THE UNITED STATES DISTRICT COURT
`OF THE EASTERN DISTRICT OF TEXAS
`TEXARKANA DIVISION
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`No. 5:14CV10-JRG-CMC
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`COLONY NATIONAL INSURANCE
`COMPANY
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`V.
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`UNITED FIRE & CASUALTY
`COMPANY
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`MEMORANDUM ORDER
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`The above-entitled and numbered civil action was heretofore referred to United States
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`Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. The Report of the Magistrate
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`Judge which contains her proposed findings of fact and recommendations for the disposition of such
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`action has been presented for consideration. Defendant United Fire & Casualty Company (“United”)
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`filed objections to the Report and Recommendation. Plaintiff Colony National Insurance Company
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`(“Colony”) filed a response to the objections. The Court conducted a de novo review of the
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`Magistrate Judge’s findings and conclusions.
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`BACKGROUND
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`This is an insurance coverage dispute. Colony seeks a declaration regarding United’s duty
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`to defend Carothers Construction, Inc. (“Carothers”) in a lawsuit styled Gordon Ray Bonner v. Joyce
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`Steel Erection, Ltd., Cause No. 11C0822.202 in the 202nd District Court of Bowie County, Texas
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`(the “underlying suit”). Carothers was the general contractor on a Red River Army Depot project
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`near Texarkana, Texas. During the construction of the project, Carothers utilized subcontractor Self
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`Concrete, LLC (“Self Concrete”) to pour and form concrete tilt wall panels and subcontractor
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`Premier Constructors, Inc. (“Premier”) to perform steel erection work at the construction site. During
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 2 of 9 PageID #: 1480
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`the course of the construction, one of Premier’s workers, Ray Bonner, was injured when one of Self
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`Concrete’s tilt walls was being hoisted into place. According to Bonner, the panel swung out in an
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`uncontrolled manner and pinned Bonner against a retaining wall. In the underlying suit, Bonner sued
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`Carothers and Self Concrete (and Joyce Steel Erection, Ltd.).
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`United insured Self Concrete. Colony insured Bonner’s employer, Premier. Carothers was
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`an additional insured on both policies. Carothers tendered its defense to both United and Colony.
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`Colony accepted the tender and provided a defense to Carothers. United declined.
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`In this case, Colony asserts breach of contract claims, including claims for subrogation and
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`contribution, against United for its refusal to defend Carothers in the underlying suit. Colony
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`requests the Court construe the Colony and United policies and declare that United is required to
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`share Carothers’ defense costs and fees equally with Colony. Colony seeks a judgment awarding
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`Colony one-half of it its costs and fees in the underlying suit and ordering United to reimburse
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`Colony for the attorney’s fees that it has incurred prosecuting this suit based on the Texas Practice
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`& Remedies Code § 38.001 and/or Texas Insurance Code §§ 541 and 542.
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`United does not dispute Carothers is an additional insured during the relevant time period.
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`However, it asserts it did not owe Carothers a defense because Bonner did not allege facts in the
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`underlying suit sufficient to impute any liability of Self Concrete to Carothers as required under the
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`United policy. United also asserts Colony has waived its right of subrogation and recovery.
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`The parties filed cross motions for summary judgment.
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`REPORT AND RECOMMENDATION
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`In her Report and Recommendation dated March 2, 2016, the Magistrate Judge recommended
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`Colony’s motion for summary judgment be granted and United’s motion for summary judgment be
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`2
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 3 of 9 PageID #: 1481
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`denied. Specifically, the Magistrate Judge concluded Self Concrete was contractually obligated to
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`provide insurance coverage to Carothers as an additional insured on its commercial general liability
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`policy with United. According to the Magistrate Judge, the allegations in the underlying suit
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`implicate Self Concrete, which triggers coverage for Carothers under the Self Concrete policy with
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`United. The Magistrate Judge further found Colony, by its policy terms, did not waive any
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`subrogation claims it has against United for Carothers’ defense costs. Thus, the Magistrate Judge
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`concluded United is responsible for one half of Carothers’ defense costs, and Colony is entitled to
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`recover $250,159.38, plus pre and post judgment interest, from United.
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`The Magistrate Judge did not make a recommendation as to whether Colony is entitled to
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`recover attorney’s fees, and if so, for what amount. Instead, the Magistrate Judge ordered Colony
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`to file a separate motion for attorney’s fees, setting forth its arguments pursuant to TEX. CIV. PRAC.
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`& REM. CODE § 38.001, et seq., as well as the current amount of attorney’s fees incurred in this suit
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`to date. On March 16, 2016, Colony filed its Motion for Award of Attorneys’ Fees (Dkt. No. 45).
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`The Court will issue a separate order on that motion once it is ripe.
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`UNITED’S OBJECTIONS
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`United filed objections to the Magistrate Judge’s Report and Recommendation, asserting in
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`a nutshell as follows: (1) the underlying allegations do not state facts potentially bringing the claim
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`against Carothers within the scope of coverage furnished by United’s additional insured
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`endorsement; (2) the additional insured coverage furnished to Carothers by United is excess to the
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`additional insured coverage furnished to Carothers by Colony; and (3) a waiver of subrogation
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`provision in Colony’s policy eliminates Colony’s right to recover from United. In response, Colony
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`asserts the Magistrate Judge did a thorough job of analyzing and rejecting each of these arguments.
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`3
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 4 of 9 PageID #: 1482
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`DE NOVO REVIEW
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`This is a duty to defend case, not an indemnity case. Under the eight corners or complaint
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`allegation rule, an insurer’s duty to defend is determined by the plaintiff’s pleadings, considered in
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`light of the policy provisions, without regard to the truth or falsity of the allegations. GuideOne Elite
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`Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006). Courts applying the
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`eight corners rule “give the allegations in the petition a liberal interpretation.” Nat’l Union Fire Ins.
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`Co. of Pittsburgh, Pa. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997). If
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`there is any doubt, there is a duty to defend. Gore Design Completions, Ltd. v. Harford Fire Ins. Co.,
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`538 F.3d 365 (5th Cir. 2008).
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`United’s first objection basically concerns the Magistrate Judge’s agreement with Colony it
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`was “entirely possible” that there is a “chance” Self Concrete’s acts may be imputed to Carothers
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`under the allegations in the underlying suit. (Report and Recommendation at 27). Stated differently,
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`the Magistrate Judge found the allegations in the underlying suit do not “clearly and unambiguously
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`fall outside the scope” of the United policy’s coverage. Id. (citing Trinity Universal Co. Ins. v.
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`Employers Mutual Casualty Co., 592 F.3d 687, 693 (5th Cir.2010)). According to United, the
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`Magistrate Judge improperly shifted the burden of proof to United contrary to the Fifth Circuit’s
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`opinion in Gilbane Bldg. Co. v. Admiral Ins. Co., 664 FF.3d 589 (5th Cir. 2011). Colony argues this
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`“weak argument confuses duty to defend issues with liability issues, and ignores the obvious
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`difference between this case and Gilbane.” (Dkt. No. 46 at 4).
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`In Gilbane, general contractor Gilbane sought defense and indemnification from Admiral
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`Insurance Company based on a commercial general liability policy Admiral had issued to Empire
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`Steel Erectors, a subcontractor. The district court found Admiral owed a duty to defend and
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`4
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 5 of 9 PageID #: 1483
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`indemnify. Gilbane, 664 F.3d at 592. The policy provided coverage to additional insureds for their
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`own or their agents’ acts or omissions, “so long as Empire Steel had previously assumed the liability
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`of the potential additional insured in a written contract.” Id. at 593. Having determined Gilbane
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`qualified as an additional insured, the Fifth Circuit considered whether the pleadings in the
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`underlying suit sufficiently alleged that Empire, or someone acting on its behalf, caused the injuries
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`of Empire’s employee Parr. Id. at 596.
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`The policy at issue in Gilbane explicitly required that the injuries “be caused, in whole or in
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`part, by” Empire. Id. at 598. As such, Admiral owed Gilbane a duty to defend only if the underlying
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`pleadings alleged that Empire, or someone acting on its behalf, proximately caused Parr’s injuries.
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`Id. The Fifth Circuit reversed the district court, finding Admiral had no duty to defend additional
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`insured Gilbane because the “allegations in the pleadings [did] not implicate” the fault of the insured
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`Empire. Id. at 599.
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`According to the Fifth Circuit, in performing its eight-corners review, “a court may not read
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`facts into the pleadings, look outside the pleadings, or speculate as to factual scenarios that might
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`trigger coverage or create ambiguity.” Id. at 596-97. In concluding the district court had imagined
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`factual scenarios that could give rise to coverage,1 the Fifth Circuit noted the district court had
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`essentially shifted the burden of proof to the party disputing coverage to show that the pleadings did
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`not support a covered claim. Id. at 599. The Fifth Circuit held the district court should only have
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`1 In deciding that Admiral had a duty to defend, the district court characterized the petition
`as stating “the injuries occurred when Parr was walking down the ladder with muddy boots,” which
`it considered sufficient to implicate Parr’s contributory negligence. Gilbane, 664 F.3d at 598.
`According to the Fifth Circuit, the petition did not allege that Parr climbed down the ladder with
`“muddy boots.” Rather, it alleged that Gilbane’s negligence caused the work area to become
`“slippery and hazardous,” causing Parr’s injuries. Id.
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`5
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 6 of 9 PageID #: 1484
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`considered whether the facts pleaded affirmatively implicated Parr’s or Empire’s negligence. Id. The
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`Fifth Circuit concluded the petition did not affirmatively allege any facts suggesting that Parr’s or
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`Empire’s negligence caused his injuries; thus, Admiral had no duty to defend. Id.
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`Here, the Magistrate Judge did not improperly shift the burden of proof to United to establish
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`the allegations did not support a covered claim. Rather, she properly referenced the potentiality
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`standard used in Zurich Am. Ins. v. Nokia, Inc., 268 S.W.3d 487, 490 (Tex.2008) to “characterize
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`the description of claims in the petition, determining whether they potentially were covered.”
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`Gilbane, 664 F.3d at 599. United argues the Magistrate Judge assumed facts not stated within the
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`pleadings, namely facts regarding “Carothers’ exercised control over the operative details of Self
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`Concrete’s work sufficient to impute liability.” (Dkt. No. 43 at 8-9). According to United, Texas law
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`requires that a general contractor of an independent contractor can only become liable for an
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`independent contractor’s actions if the general contractor “controls the detail or methods of the
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`independent contractor’s work to such an extent that the contractor cannot perform the work as it
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`chooses.” See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 791-92 (Tex.2006).
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`United’s policy required it to provide a defense to its additional insured, Carothers, for “[Self
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`Concrete’s] liability which may be imputed to [Carothers] directly arising out of [Self Concrete’s]
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`ongoing operations.” AR 0040. The facts affirmatively alleged in the underlying suit are as follows.
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`Carothers hired Self Concrete to form, pour, and prepare the concrete tilt panels for the project, and
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`Carothers maintained control over the work site and provided the plans for the tilt panel forming to
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`Self Concrete. AR 0250-51. Self Concrete had a duty to follow Carothers’ plans in connection with
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`the tilt panels, including a duty to inspect and make sure the panels worked to the contractor’s
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`specifications and were properly prepared. AR 0251. Bonner further alleged Carothers owed him a
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`6
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 7 of 9 PageID #: 1485
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`duty to ensure he had a safe place to work, and Carothers breached that duty by failing to ensure
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`subcontractor compliance with applicable plans and regulations. AR 0293.
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`Alternatively, Bonner alleged Carothers, as the controlling employer, had general supervisory
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`authority over the work site, including the power to correct or require others onsite to correct safety
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`hazards that existed there. Bonner alleged Carothers breached its duty to exercise reasonable care
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`to detect any unsafe conditions and was negligent in failing to perform its work as a reasonable and
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`prudent prime contractor. AR 0293-94. Bonner specifically alleged Self Concrete was required by
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`contract with Carothers to clean the job site area and that it breached that duty. AR 0294. He alleged
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`Self Concrete was negligent in failing to remove its form work and materials prior to the lift in
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`question, and that Carothers was negligent in failing to have in place proper policies and procedures
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`for cleaning and inspecting the job site and following safety guidelines. AR 0258-59.
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`The Magistrate Judge did not improperly read facts into the pleadings or imagine factual
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`scenarios which might trigger coverage. She found the allegations in Bonner’s underlying suit, when
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`liberally interpreted and taken as true, allege the requisite degree of control. The Court agrees with
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`the Magistrate Judge.
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`In Indian Harbor Ins. v. Valley Forge Ins. Group, 535 F.3d 359 (5th Cir.2008), El Naggar
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`had hired a general contractor (Traxel) to construct a building on his property. Id. at 361. Traxel
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`hired American Steel to erect a prefabricated steel building at the site. Id. American Steel hired
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`Arrow Trucking to deliver the steel for the building to the job site, and the general contractor
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`separately hired Coastal to construct the concrete slab for the building. Id. El Naggar sued Traxel,
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`American Steel, Arrow Trucking, and Coastal, contending the concrete slab was defective and
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`caused significant damage to the building. Id.
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`7
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 8 of 9 PageID #: 1486
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`Indian Harbor insured Coastal under a general liability policy. Id. at 362. It provided Coastal
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`a defense and also shared in the defense of Traxel, which Indian Harbor considered an additional
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`insured under its policy covering Coastal. Id. Valley Forge insured American Steel and Liberty
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`Mutual insured Arrow Trucking- both under business automobile insurance policies which provided
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`“any party that is liable for the conduct of the named insured is also covered as an insured, but only
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`to the extent of that liability.” Id. Indian Harbor sued the other two insurance companies asserting
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`Traxel and Coastal were owed a duty to defend under the policies issued to American Steel and
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`Arrow Trucking “because El Naggar’s complaint included facts sufficient to support a claim that
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`Coastal and Traxel were vicariously liable for the conduct of American Steel and Arrow Trucking.”
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`Id.
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`El Naggar alleged that Traxel was “to have supervised, scheduled, and organized all
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`contractors and subcontractors” and was contractually obligated “to supervise the delivery of
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`American/Vulcan’s steel to the site” but failed to do so by “permitting heavy material to be brought
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`upon an uncured concrete slab.” Id. at 364. The Fifth Circuit held the alleged conduct was typical
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`of the activities and functions of a general contractor and did not “rise to the degree of control that
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`would cause subcontractors to be agents of a general contractor for purposes of tort liability.” Id.
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`Importantly, none of the allegations indicated that Traxel instructed American Steel or Arrow
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`Trucking as to the method is was to utilize in erecting the steel structure. Id. at 365.
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`In Bonner’s Third Amended Original Petition relied upon by United, Bonner alleges
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`Carothers maintained control over the worksite and provided the plans for the tilt-up panel forming
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`to Self Concrete. AR 0250-51. This allegation indicates that Carothers provided the plan or method
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`Self Concrete was to utilize in forming the tilt panels, thus indicating a degree of control sufficient
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`8
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`Case 5:14-cv-00010-JRG-CMC Document 49 Filed 03/31/16 Page 9 of 9 PageID #: 1487
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`to support imputed liability. The Court finds United’s first objection without merit.
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`United’s remaining objections rehash the arguments raised before the Magistrate Judge.
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`United’s objections are without merit. The Court is of the opinion that the findings and conclusions
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`of the Magistrate Judge are correct. Therefore, the Court hereby adopts the Report of the United
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`States Magistrate Judge as the findings and conclusions of this Court. Accordingly, it is hereby
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`ORDERED that Colony’s Motion for Summary Judgment (Dkt. No. 36) is GRANTED. It
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`is further
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`ORDERED that Defendant United Fire & Casualty Company’s Motion for Summary
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`Judgment (Dkt. No. 37) is DENIED.
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`9