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1325 North Van Buren5/17/2005
iana has no duty to defend and indemnify T-3 against 1325's claims because they are not covered or are excluded by the policy. The trial court determined that the second and tenth causes of action--a negligence claim and coverage claim--were "sufficiently [pled] so as to trigger Indiana's duty to defend[,]" and that neither the doctrine of economic loss nor any of the exclusions bar coverage under the policy.
Thereafter, Indiana again filed for summary judgment, alleging that pretrial discovery revealed that "the pertinent exclusions in the Indiana policy act to bar coverage for all damages[,]" and, moreover, "the economic loss doctrine mandates that the damages claimed can only be recovered under a contract theory[,]" and as such, the negligence claims must be dismissed. T-3 also filed a motion for partial summary judgment contending that, absent damages for personal injury or property damage to property beyond the subject matter of the contract between 1325 and T-3, 1325's tort claims for negligence and negligent misrepresentation are barred under the economic loss doctrine. T-3 also insisted that it could not be held vicariously liable for the tortious conduct of the independent subcontractors. The trial court granted both T-3's motion for partial summary judgment and Indiana's motion for summary judgment, concluding that the economic loss doctrine applied:
The purpose [of the economic loss doctrine], as we know, is to maintain the fundamental distinction between tort law and contract law, to protect commercial parties' freedom to allocate economic risk by contract, and to encourage the parties best situated to assess the risk of economic loss, the commercial purchaser to assume and allocate or insure against the risk.
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Now, the Court has reviewed all the law that has been provided, and I'm particularly persuaded by the reasons of Bay Breeze Condo Association, 651 Northwest 2d 738, and several cases that follow this, that the integrated system rule, which holds that once a party becomes integrated into a completed project or system, the entire project or system ceases to be other property for the purpose of the economic loss doctrine applies here.
And also Wausau Paper Mills, at 789 Federal Supplement 968, states that the economic loss doctrine precludes tort recovery for economic loss where there is contractual relationship between two sophisticated parties, regardless of whether the contract is for products or service. ...
And based on the reasoning of these cases and the arguments put forth by counsel, the Court agrees with T-3 that there is a bar to tort claims under this - under the claims - under the particular circumstances and facts of this case, and that the economic loss doctrine would apply, and that the motion of Indiana Insurance under the economic loss doctrine would also be granted.
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I'm not going to get into the areas of contract exclusions, because I believe those issues are moot.
Accordingly, all of the tort claims alleged by 1325 against T-3 were dismissed. As such, the only claim that remained was for breach of contract.
Soon thereafter, Westport filed a motion for declaratory relief contending that " he Westport policy insures for legal liability imposed as a result of tort and negligence claims - there is no coverage for breach of contract[,]" and "since the only remaining claim is for breach of contract, Westport is entitled to declaratory relief that it has no duty to defend or indemnify for the sole remaining claim." Westport insisted that the policy provided professional liability insurance to T-3 for losses relating to legal liability incur
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