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Exel Direct Inc. v. Nautilus Insurance Co.

United States District Court, S.D. Ohio, Eastern Division

March 30, 2018

EXEL DIRECT, INC., Plaintiff,
v.
NAUTILUS INSURANCE COMPANY, Defendant.

          Jolson Magistrate Judge.

          OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT

          ALGENON L. MARBLEY UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on the Motion for Summary Judgment (ECF No. 41) of Defendant Nautilus Insurance Company. For the reasons set forth below, the Court GRANTS the Motion.

         I. BACKGROUND

         A. Factual Background

         Sears, Roebuck and Co. hired Plaintiff Exel Direct, Inc., to install home appliances such as dryers for its customers, Exel Direct, in turn, hired independent contractors to perform the installations. From 2004 to 2008, both Exel Direct and its independent contractors were insured by a policy issued by Nautilus Insurance Company. (ECF No. 1 at 3).

         On July 5, 2006, Exel oversaw the delivery of a Sears dryer to Ingrid Gauer and arranged for an independent contractor to install the dryer. (ECF No. 1 at 4). Exel's expert later concluded that the independent contract's installation was flawed: the contractor made a modification to the exhaust duct during installation that resulted in "reduced functionality" and resulted in susceptibility to "exaggerated accumulations of lint in the cabinet, a first fuel for dryer fires." (ECF No. 41-6 at 3). On April 30, 2014, the dryer caught fire and burned down the Gauer home as well as neighboring properties, one owned by Chris and Mary Jean Lem and one owned by Juan Lago. (ECF No. 1 at 4).

         State Farm General Insurance Company insured the Gauer home, the Lem home, and the Lago home. (ECF No. 41 at 2-3). In two separate subrogation suits in the Santa Barbara Superior Court, State Farm sued Exel Direct seeking recovery for the fire damage. (Id.).

         Exel Direct then sought liability coverage for these suits from Nautilus. Nautilus hired Vela Insurance Services to investigate and adjust the claim. Vela concluded that the "damages did not occur until after the Nautilus policy had expired" and that Nautilus therefore had no defense or indemnity obligation to Exel. (ECF No. 1 at 5; 44-8 at 6).

         B. Language of the Policy

         The commercial general liability insurance policy that Nautilus provided to Exel Direct provides in relevant part as follows.

         The named insureds include: "Exel Direct, Inc." and "Independent Contractors of Exel Direct, Inc."

         The Insuring Agreement provides:

1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

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