We previously reported on the Fifth Circuit's decision in
Crownover v. Mid-Continent Casualty Company, 757 F.3d 200 (5th Cir. 2014), and how that decision essentially gutted the holding in
Ewing. Our prior blog can be found
here. As noted, a rehearing was filed and several industry groups filed amicus briefs supporting the rehearing. The original
Crownover opinion held that while the duty to perform construction in a good and workmanlike manner was not a violation of the contractual liability exclusion, a contractual provision agreeing to repair damages caused by a failure to perform in a good and workmanlike manner did violate the exclusion. In other words, it created a false distinction. An insured could agree to perform in a good and workmanlike manner, but would lose coverage if it also contractually agreed to repair the consequences of failing to perform in a good and workmanlike manner. Huh?
The rehearing brief and amicus briefs focused on this false distinction. We are happy to report that the panel, on rehearing, got it right. The new (and vastly improved) opinion can be found
here. In the new opinion, the panel correctly noted that "[t]he key question, therefore, becomes whether the source of adjudicated liabiity—the express duty to repair—
expanded Arrow's obligations." Slip Op. at 17. This time, the panel found that
Ewing controlled over
Gilbert because "the fact that the arbitrator's award in this case was based on an express contractual duty, rather than an implied general-law duty, is inconsequential." Slip Op. at 18. Moreover, the panel expressly recognized that "there is no doubt that the general law provides a duty to repair." Slip Op. at 19. Accordingly, since "[t]he remedy for failure to fulfill the duty to repair is the same as for failure to perform work in a workmanlike manner [i.e., the cost to repair the defective work]," the contractual duty to repair clause in the construction contract did not expand the insured's liability and thus the contractual liability exclusion did not apply. The panel further pointed out that Mid-Continent could not demonstrate how the contractual duty to repair increased the insured's liability in any manner: "Mid-Continent has not shown that Arrow's duty to repair non-conforming work under the contract increased Arrow's liability; it has not been able to point to any relevant element of liabiity that was increased due to Arrow's failure to comply with the duty to repair clause." Slip Op. at 20. In other words, the insured wins and Mid-Continent loses. To reiterate, the insured wins and Mid-Continent loses. Sorry, I just like saying that.
There is much more to this opinion. Here are some honorable mentions: (i) the panel read
Gilbert narrowly and expressly noted that it involved "unusual circumstances"; (ii) the panel disagreed with Mid-Continent's contention that
Ewing applied only to the duty to defend and instead ruled that it equally applied to the duty to indemnify; and (iii) the panel expressly recognized not only the duty to perform in a good and workmanlike manner as set forth in
Ewing, but also an express duty to repair. So much more can be said about these issues. But, alas, there is a small problem today at Shidlofsky Law Firm. I have to leave for meetings and Doug has taken a few days off to get married (as if that is a valid excuse). So, for now, all you need to know is that the insured wins and Mid-Continent loses (sorry). Really, all you need to know is that the Fifth Circuit got it right and
Ewing is alive and well after suffering through a brief stint on life support.
So, stay tuned -- We've Got You
Covered. Oh, and congrats to Doug and Laura.
Sincerely,
Lee Shidlofsky (already married)
Member of Shidlofsky Law Firm
Douglas P. Skelley (almost married)
Member of Shidlofsky Law Firm
