Mobile Imaging, Inc. v. Kevin Fix

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

07-1482

MOBILE IMAGING, INC.

VERSUS

KEVIN FIX AND CONNIE FIX
D/B/A ULTIMATE MEDICAL SERVICES
AND ULTIMATE MEDICAL SERVICES, INC.

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 04-3726
HONORABLE RICK BRYANT, DISTRICT JUDGE

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OSWALD A. DECUIR
JUDGE

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Court composed of Ulysses Gene Thibodeaux, Chief Judge, Oswald A. Decuir and
Glenn B. Gremillion, Judges.

AFFIRMED.

Mickey S. deLaup
Stephanie L. Cook
deLaup Schexnayder & Miranda, LLC
110 Veterans Memorial Boulevard, Suite 535
Metairie, LA 70005
(504) 828-2277
Counsel for Defendant/Appellee:
United National Insurance Company

Michael G. Durand
Douglas W. Truxillo
Onebane Law Firm
P. O. Box 3507
Lafayette, LA 70502-3507
(337) 237-2660
Counsel for Defendant/Appellee:
Gemini Insurance Company

John E. Galloway
Kimberly G. Anderson
Kevin F. Bruce
Galloway, Johnson, Tompkins, Burr & Smith
701 Poydras Street, Suite 4040
New Orleans, LA 70139
(504) 525-6802
Counsel for Defendant/Appellee:
Evanston Insurance Company

Max McCain Morris
Attorney at Law
1322 Ryan Street
Lake Charles, LA 70601
(337) 436-6188
Counsel for Plaintiff/Appellee:
Mobile Imaging, Inc.

Merrick J. (Rick) Norman Jr.
Norman Business Law Center
145 East Street
Lake Charles, LA 70601
(337) 436-7787
Counsel for Plaintiff/Appellee:
Mobile Imaging, Inc.

Richard D. Moreno
Robinson and Moreno, L.L.C.
One Lakeshore Drive, Suite 1684
Lake Charles, LA 70629
(337) 433-9535
Counsel for Defendants/Appellants:
Kevin Fix
Connie Fix
Ultimate Medical Services, Inc.

DECUIR, Judge.

Defendants/third party plaintiffs, Kevin Fix and Connie Fix, d/b/a Ultimate

Medical Services, Inc., appeal summary judgment granted in favor of Evanston

Insurance Company, Gemini Insurance Company, and United National Insurance

Company. Finding the three insurance companies had no duty to defend or indemnify

the third party plaintiffs against claims made by the original plaintiff, Mobile

Imaging, Inc., the trial court dismissed the insurers via summary judgment. For the

following reasons, we affirm.

Mobile Imaging, the plaintiff in the main demand, filed suit against Kevin and

Connie Fix and their business, Ultimate Medical Services (UMS), for redhibition and

breach of contract following the sale of a refurbished CT scanner. Mobile Imaging

purchased the scanner in order to lease it to Dequincy Memorial Hospital, along with

a maintenance and service agreement. The contract between Mobile Imaging and

UMS, dated August of 2002, specified a certain RP-type scanner, which UMS then

sought to obtain from Tommy Geske, d/b/a Sunrise Technology Solutions and Sunrise

Medical Technology, Inc. (Sunrise). Sunrise, as a subcontractor of UMS, provided

a temporary machine, a Z-type scanner, which was installed at Dequincy Memorial

Hospital on September 5, 2002. When an RP-type scanner became available, it was

purchased and installed at the hospital in January of 2003. Shortly thereafter, it began

to malfunction, and the hospital eventually ceased making payments to Mobile

Imaging pursuant to the lease agreement. In its petition against UMS, Mobile

Imaging alleged that the RP-type scanner had redhibitory defects and did not conform

to the specifications of the purchase agreement.

In a third party demand, UMS sought a defense and indemnity from its

comprehensive general liability insurers. It named as third party defendants Gemini

and United National, both of which provided CGL coverage to UMS. Gemini

provided two separate policies; the first coverage period was from September 7, 2001

through September 7, 2002, and the second pertinent period of coverage was from

September 7, 2003 through September 7, 2004. United National’s coverage period

extended from September 7, 2002 through September 7, 2003. UMS also sued

Sunrise and its CGL insurer, Evanston, which provided coverage to Sunrise in two

separate policies from February 4, 2002 through February 4, 2004, alleging

negligence, fraud, and misrepresentation.

The policies at issue are typical comprehensive general liability policies which

provide coverage for bodily injury and property damage resulting from an occurrence

during the policy period. The policies exclude coverage for damage to the insured’s

work product, whether in progress or completed and whether done by the insured or

its subcontractors. The pertinent terms and exclusions in the policies before us were

explained in detail by the supreme court in the recent case titled Supreme Services

and Specialty Co., Inc. v. Sonny Greer, Inc., 06-1827 (La. 5/22/07), 958 So.2d 634,

which held that property damage to the insured’s work product is excluded from CGL

coverage. The court explained:

Professors McKenzie and Johnson define both the “work product”
exclusion and the “PCOH” [products-completed operations hazard]
provision. See, § 186, pp. 512-521 and § 195, at pp. 554-562 in 15 La.
Civil Law Treatise (3d ed.2006). The “work product” exclusion reflects
the insurance company’s intent to “avoid the possibility that coverage
under a CGL policy will be used to repair and replace the insured’s
defective products and faulty workmanship.” A CGL policy is not
written to guarantee the quality of the insured’s work or product.
McMath Const. Co., Inc. v. Dupuy, 03-1413 (La.App. 1st Cir.11/17/04),
897 So.2d 677, 682, writ denied, 04-3085 (La.2/18/05), 896 So.2d 40

....

Louisiana courts have consistently held that the “work product”
exclusion eliminates coverage for the cost of repairing or replacing the
insured’s own defective work or defective product.

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Id. at 641-643 (footnote omitted). Further quoting from McKenzie and Johnson, the

Supreme Services court gave the following illustration:

McKenzie and Johnson, supra at 510, explains the PCOH
coverage as follows:

Any insured who manufactured, sold, handled, or
distributed goods or products was exposed to the products
hazard, which is the risk of liability arising out of products
after they have left the hands of the insured. The
completed operations hazard refers to the insured’s
exposure to liability arising out of completed work
performed away from his premises.

This provision can be clearly explained by this example:

Suppose an insured contracted to make and install a sign
on a commercial building. After the work was completed,
the sign fell due to defective installation, causing damage
to the sign, the building’s canopy, a parked car, and also
bodily injury to a pedestrian. The insurer covering the
products-completed operations hazard would cover all
claims except the contractor’s responsibility to repair and
replace the sign, coverage for which would be excluded
under the product and work exclusions.

McKenzie and Johnson, fn. 34, p. 521.

Id. at 644.

In the case before us, the object of the suit filed by Mobile Imaging is the

allegedly defective CT scanner provided by UMS and Sunrise, and recission of the

sale was sought. No damage to third parties or to other property was alleged. No

occurrence took place.

In this appeal, we need not consider the allegations of the third party demand

made by UMS against Sunrise, which raised issues of fraud, improper training, and

material misrepresentation. Rather, in order to determine whether an insurer may

have a duty to defend its insured against claims made against it, we look only to the

original allegations of fault made against the insured:

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The cornerstone pronouncement of the “duty to defend” rule is
found in American Home Assurance Company v. Czarniecki, 255 La.
251, 230 So.2d 253 (1969), where the Louisiana Supreme Court stated
at 259, 230 So.2d 253:

“[T]he insurer’s duty to defend suits brought against its
insured is determined by the allegations of the injured
plaintiff’s petition, with the insurer being obligated to
furnish a defense unless the petition unambiguously
excludes coverage.

Thus, if, assuming all the allegations of the petition to be
true, there would be both (1) coverage under the policy and
(2) liability to the plaintiff, the insurer must defend the
insured regardless of the outcome of the suit. Additionally,
the allegations of the petition are liberally interpreted in
determining whether they set forth grounds which bring the
claims within the scope of the insurer’s duty to defend the
suit brought against its insured.”

On the other hand, if it is clear that the allegations of plaintiff’s
petition refer only to acts or omissions that are excluded from coverage
under the terms of the policy, then the insurer owes no duty to defend.
Bourque v. Lehmann Lathe, Inc., 476 So.2d 1129 (La.App. 3rd
Cir.1985), writ denied, 479 So.2d 362 (La.1985).

Duhon v. Nitrogen Pumping & Coiled Tubing Specialists, Inc., 611 So.2d 158, 160

(La.App. 3 Cir. 1992).

In the case before us, UMS has sought to invoke coverage provisions that are

excluded under the facts alleged in the main demand against UMS, the insured. UMS

seeks a defense to claims asserted against it for defects in its own work product, not

for damages resulting from that work product. The terms of the policies before us do

not provide such a defense.

Article 966(B) of the Louisiana Code of Civil Procedure provides that a motion

for summary judgment is properly granted when the pleadings, depositions, answers

to interrogatories, and admissions on file, together with any affidavits submitted,

show that there is no genuine issue of material fact, and that the mover is entitled to

judgment as a matter of law. Specifically regarding the question of insurance

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coverage, the jurisprudence of this state consistently holds, “[a] court should only

grant the motion for summary judgment when the facts are taken into account and it

is clear that the provisions of the insurance policy do not afford coverage. Reynolds

v. Select, 93-1480 (La. 4/11/94), 634 So.2d 1180, 1183.” Supreme Servs., 958 So.2d

at 638.

After considering the evidence submitted to the trial court, we find no error in

the summary judgment dismissing the three named comprehensive general liability

insurers. Accordingly, we affirm the judgment rendered in their favor. Our decision

on the applicability of the exclusionary language in the Evanston, Gemini, and

National Union policies renders moot any discussion of other issues raised by the

parties.

Costs of this appeal are assessed to UMS.

AFFIRMED.

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