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Lexington Insurance Co. v. Axis Surplus Insurance Co.

United States District Court, D. Minnesota

June 4, 2014

Lexington Insurance Company, Plaintiff,
v.
AXIS Surplus Insurance Company, Defendant.

Mark E. Cohen, Anthony R. Zelle, Zelle McDonough & Cohen LLP, Boston, Massachusetts, for Plaintiff.

Kimberly H. Petrina, Jeremy S. Macklin, Michael S. Knippen, Traub Lieberman Straus & Shrewsberry LLP, Chicago, Illinois, Daniel A. Haws, Murnane Brandt, PA, St. Paul, Minnesota, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, District Judge.

INTRODUCTION

In this action, Plaintiff Lexington Insurance Company ("Lexington") seeks contribution from Defendant AXIS Surplus Insurance Company ("AXIS") for amounts Lexington paid on behalf of their mutual insured, Fagen Inc. ("Fagen"), to settle an underlying lawsuit against Fagen. AXIS now moves to dismiss Count II of Lexington's Complaint, seeking equitable contribution; for the reasons set forth below, its Motion will be denied.

BACKGROUND

Fagen's Insurance Policies

Fagen is a full-service industrial contractor. It is insured under four policies relevant to the instant action.

First, Fagen has a general liability policy from Zurich American Insurance Company ("Zurich/Fagen Policy") with a $1, 000, 000 per-occurrence liability limit. (Compl. ¶ 7.)

Second, it is an "additional insured" under its subcontractor Kiewit's general liability policy from Zurich ("Zurich/Kiewit Policy"), which is a fronting policy[1] with a $5, 000, 000 per-occurrence liability limit. (Id. ¶ 9.)

Third, it has a professional liability policy from Lexington ("Lexington Policy") with a $10, 000, 000 per-claim liability limit. (Id. ¶ 15.) This policy covers only Fagen's negligence in the provision of architectural, engineering, and other professional services. It does not cover Fagen's negligent "workmanship, assembly, construction, erection, fabrication, installation or remediation." (Id. ¶ 16.) The policy also provides that it "shall apply as excess insurance over any other valid insurance, whether collectible or not, be it primary, excess or contributing." (Id. ¶ 17.)

Fourth, Fagen has an excess general liability policy from AXIS ("AXIS Policy"), with a $10, 000, 000 per-occurrence liability limit. (Id. ¶ 8.) This policy does not cover property damage that arises out of the rendering or failure to render professional services, including architectural and engineering services, by Fagen or on Fagen's behalf. (Id. ¶ 13.) The policy provides AXIS will pay "those sums in excess of the retained limit' which the insured becomes legally obligated to pay as damages to which this insurance applies because of bodily injury', property damage', or personal and advertising injury'." (Id. ¶ 10.) The "retained limit" is the limit of any insurance policy listed in the "Schedule of Underlying Insurance." (Id.) This Schedule includes the Zurich/Fagen Policy, but not the Lexington Policy. (Id. ¶¶ 11-12.) The policy also has an "other insurance" clause, providing: "This insurance is excess over, and shall not contribute with, any other insurance, whether primary, excess, contingent or on any other basis. This condition will not apply to insurance specifically written as excess over this policy." (Id. ¶ 14.)

The Underlying Action

In 2009, Illinois River Energy, LLC ("IRE") filed suit against Fagen, alleging Fagen had negligently designed and built IRE's ethanol plant. Specifically, IRE alleged that Fagen's design for IRE's concrete corn-storage silos used too little rebar and that in construction, Fagen used even less rebar than the design called for. IRE alleged these design and construction flaws caused the walls of the silos to crack, among other structural problems, forcing IRE to shut down the plant for for several weeks and suffer multi-million dollar damage. (Id. ¶¶ 24-25.) Fagen tendered the action to Lexington, Zurich, and AXIS. (Id. ¶ 26.) Lexington and Zurich agreed to defend Fagen. (Id. ¶¶ 27-28.) Zurich agreed to defend Fagen under both the Zurich/Fagen Policy and the Zurich/Kiewit Policy. Lexington agreed to defend Fagen under a reservation of rights including its right to decline indemnification ...


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