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Peerless Insurance Co. v. Ordway Electric and MacHine, Inc.

United States District Court, D. Vermont

January 26, 2015



CHRISTINA REISS, Chief District Judge.

Pending before the court is a motion to intervene filed by Acadia Insurance Company ("Acadia"), seeking either mandatory or permissive intervention in this declaratory judgment action (Doc. 2). Plaintiff Peerless Insurance Company ("Peerless") opposes intervention, arguing Acadia has no non-speculative interest in the insurance policy Peerless issued to Defendant Ordway Electric and Machine, Inc. ("Ordway"), which is at issue in this lawsuit. Peerless seeks a declaration regarding its coverage and defense obligations under the policy with regard to Acadia's tort and contract claims against Ordway in a separate subrogation action. Ordway takes no position on the motion.

Peerless is represented by Richard J. Windish, Esq. Ordway is represented by Gary D. McQuesten, Esq. Acadia is represented by Susan J. Flynn, Esq. and Thomas J. Underwood, Jr., Esq.

I. Factual and Procedural Background.

During the relevant time period, Acadia insured Houle Brothers Granite Company, Inc. ("Houle Brothers"), a manufacturing business in Barre, Vermont, pursuant to a policy that provided coverage for, inter alia, losses to structures on Houle Brothers' property (the "Houle Brothers Policy").

Prior to December 2012, Houle Brothers contracted with Ordway, an electrical company in Graniteville, Vermont, to perform electrical work, including installation of a 240-volt outlet, for a structure on its property. On December 20, 2012, a fire within this structure resulted in extensive damage, allegedly causing Houle Brothers property and income losses of $1, 044, 092.74. Under the terms of the Houle Brothers Policy, Acadia covered these losses.

On June 3, 2014, Acadia sued Ordway (the "Subrogation Action"), asserting claims for negligence (Count One), breach of the implied warranties of habitability and good workmanship (Count Two), and breach of contract (Count Three). Acadia alleges that Ordway had a duty to exercise reasonable care while performing electrical work on the Houle Brothers' property and during the design, construction, installation, testing, maintenance, and repair of the electrical outlet it installed to ensure that it was reasonably safe for its intended use. The lawsuit alleges that the December 20, 2012 fire resulted from an electrical failure proximately caused by Ordway's negligent acts and omissions.

In the Subrogation Action, Acadia further alleges that Ordway breached its contract with Houle Brothers by installing, constructing, maintaining, repairing, servicing, inspecting, and testing the electrical outlet in the structure in a negligent and unreasonable manner. Acadia asserts that Ordway breached the implied warranties of habitability and good workmanship by failing to perform its work in installing the electrical outlet in a good and workman-like manner and by causing the December 20, 2012 fire that rendered the structure uninhabitable. Acadia claims that it is "legally, equitably and contractually subrogated to the rights of its insured to the extent of its payments" and that it is entitled to recover the $1, 044, 092.74 it paid to Houle Brothers under the terms of the Houle Brothers Policy. (Case No. 5:14-cv-115; Doc. 1 at 3, ¶ 12.)

During the relevant time period, Peerless insured Ordway pursuant to a policy issued from January 14, 2012 to January 14, 2013 (the "Ordway Policy"). On September 8, 2014, Peerless filed the pending action seeking a declaratory judgment that the Ordway Policy "does not provide coverage to Ordway... for any of the matters or damages alleged" in the Subrogation Action. (Case No. 2:14-cv-190; Doc. 1 at 3, ¶ 1.) Peerless further asserts that it has no duty to defend or indemnify Ordway "under the policy in connection with the allegations" in the Subrogation Action. Id. at 3, ¶ 12.

On October 8, 2014, Acadia moved to intervene in this action. (Case No. 2:14-cv-190; Doc. 2.) In opposing intervention, Peerless argued, inter alio, that intervention will destroy this court's subject matter jurisdiction because the parties will no longer be of diverse citizenship.[1] On December 15, 2014, the court ordered the parties "to brief whether Acadia's intervention as of right or permissively as a defendant would render the court without diversity, and therefore subject matter jurisdiction." (Case No. 2:14-cv-190; Doc. 26.) Peerless responded to the court's inquiry. (Case No. 2:14-cv-190; Doc. 27.) Acadia did not file a response.

II. Conclusions of Law and Analysis.

A. Whether Intervention As Of Right Is Warranted.

Acadia seeks to intervene on the grounds that its "ability to collect any damages" in the Subrogation Action is "dependent" on resolution of "the existence of insurance coverage for the claim against Ordway." (Case No. 2:14-cv-190; Doc. 2 at 1-2 & Doc. 7.) Peerless opposes the motion to intervene, arguing that Acadia's interest is contingent upon its success in the Subrogation Action and therefore Acadia is not entitled to intervene as of right and should be denied permissive ...

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