Capitol Environmental Services, Inc. v. North River Insurance
2011 U.S. Dist. LEXIS 27454
| E.D. Va. | 2011Background
- Capitol Environmental Services, Inc. holds a Virginia general liability policy issued by North River Insurance Co.
- Earth Tech, Inc. sued Capitol in Florida for breach of contract and related claims; Earth Tech sought indemnity under Capitol’s subcontract with Capitol’s contractor, FCI.
- Earth Tech’s third-party indemnity claim asserted Capitol breached the indemnity clause in the subcontract.
- Earth Tech’s damages for breaches of insurance procurement were awarded in Florida; the contractual indemnity claim was later deemed moot and not separately decided.
- Florida appellate court later affirmed the mootness dismissal, and a settlement between Earth Tech and Capitol concluded the underlying dispute; no indemnity liability remained.
- The court later held Virginia law governs interpretation of the policy, and Florida mootness law (Rule 1.420(b)) affects res judicata consequences.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether North River must indemnify Capitol for a covered claim dismissed as moot | Capitol | North River | No indemnification; mootness bars recovery |
| Whether the Florida mootness dismissal bars subsequent indemnity claim under res judicata | Capitol | North River | Yes; dismissal on mootness is res judicata for the indemnity issue |
| Whether the settlement affects indemnification liability | Capitol | North River | Settlement cannot create indemnity liability where the covered claim is extinguished by mootness |
| Choice of law governing the policy and indemnity issues | Capitol | North River | Virginia law applies to interpretation of the policy; Florida law governs mootness and res judicata aspects of the underlying actions |
Key Cases Cited
- Perdue Farms, Inc. v. Travelers Cas. & Sur. Co. of Am., 448 F.3d 252 (4th Cir. 2006) (duty to indemnify triggered when liability is incurred)
- Allie v. Lonata, 503 So. 2d 1237 (Fla. 1987) (Rule 1.420(b) dismissal on statute of limitations grounds is adjudication on the merits for res judicata)
- Hassenteufel v. Howard Johnson, Inc., 52 So. 2d 810 (Fla. 1951) (adjudication on the merits subject to res judicata)
- Merkle v. Jacoby, 912 So. 2d 593 (Fla. Dist. Ct. App. 2d Dist. 2005) (mootness policies are non-jurisdictional; policy exceptions apply)
- Okoro v. Bohman, 164 F.3d 1059 (7th Cir. 1999) (even non-merits judgments can have preclusion on the issued ground)