Hudson Specialty Insurance Company v. Talex Enterprises, LLC et al
Filing
250
ORDER granting in part and denying in part 202 Motion for Partial Summary Judgment Hudson had a duty to defend Defendants/Counter-Claimants (Talex, Alexander, Jubilee, McComb) in the suit brought by McComb. While McComb's operative pleadings did not allege covered conduct, there was sufficient extrinsic information to put Hudson on notice that it may have a duty to defend. For the issue of indemnification, the Subject Policies' exclusion for property damage of owned, rented, or occu pied property applies. Therefore, Hudson has no duty to indemnify McComb for its expenses as a result of the JPAC collapse. The property exclusion does not apply the flower beds and street lights, which are not owned by Alexander, Talex, or Jubilee.25 Signed by District Judge David C. Bramlette, III on 09/26/2019 (sl) Modified on 9/26/2019 (lda).
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
Western Division
HUDSON SPECIALTY INSURANCE COMPANY
PLAINTIFF/
COUNTER-DEFENDANT
V.
CIV NO: 5:17-cv-00137-DCB-MTP
TALEX ENTERPRISES, LLC; JUBILEE PERFORMING
ARTS CENTER, INC.; TERRANCE L. ALEXANDER; and the
BOARD OF MAYOR AND SELECTMEN
DEFENDANTS/
OF MCCOMB, MISSISSIPPI, et al.
COUNTER-CLAIMANTS
ORDER
THIS MATTER is before the Court on Plaintiff/CounterDefendant Hudson Specialty Insurance Company (“Hudson”)’s Motion
for Partial Summary Judgment-Liability Coverage (Doc. 202), and
Defendants/Counter-Claimants Talex Enterprises, LLC (“Talex”);
Terrance L. Alexander (“Alexander”); Jubilee Performing Arts
Center, Inc. (“Jubilee”); and, the Board of Mayor and Selectmen
of McComb, Mississippi (“McComb”)’s Response in Opposition to
Motion for Partial Summary Judgment-Liability Coverage (Doc.
213). The Court having examined the motions, memoranda in
support, and the applicable statutory and case law, and being
fully advised in the premises, finds that the Motion for Partial
Summary Judgment-Liability Coverage should be GRANTED IN PART
AND DENIED IN PART.
1
BACKGROUND
This is a case arising out of an insurance dispute between
Hudson Specialty Insurance Company and Talex Enterprises, LLC,
Jubilee Performing Arts Center, Terrance L. Alexander and the
City of McComb. The dispute arises out of an incident involving
a property insured by Hudson, the JPAC Building, located at 230232 Main Street, McComb, Mississippi. Talex owns the JPAC
Building and, at the time of the incident, Jubilee operated a
performing arts school out of the building. Alexander is the
principal for both Talex and Jubilee. Faraway, LLC was the
mortgage holder for the JPAC building.
The JPAC Building is listed under two policies of insurance
issued by Hudson. Talex is the named insured under one policy
(the “Talex Policy”), which provides building property coverage.
Alexander d/b/a Jubilee is the named insured under the other
policy (the “Alexander Policy”), which provides personal
property coverage. Both policies also provide commercial general
liability coverage. Hudson paid Faraway, the mortgage holder,
$660,000.00 under the Business and Personal Property Coverage
provision of the Talex Policy. McComb is currently seeking
indemnification for the $389,320.39 it spent in response to the
JPAC collapse under the commercial general liability coverage of
the Talex and Alexander Policies.
2
On July 23, 2017, the JPAC Building collapsed. McComb
declared an emergency condition and began the process of
stabilizing the JPAC Building to prevent further injury and
property destruction. McComb retained and paid an engineering
firm to provide structural engineering services regarding the
demolition and stabilization of the JPAC Building and
surrounding properties so that a major downtown intersection
could be opened. It paid for demolition work and for debris to
be cleared away from the Subject Property and neighboring
properties. In addition to these expenses, McComb also had to
pay for additional hours worked by members of its Police, Fire,
and Public Works Departments resulting from the collapse. Aside
from expenses associated with the building itself, McComb also
paid for repairs/restoration to property and equipment separate
from the JPAC Building.
On August 11, 2017, McComb sued Talex in Chancery Court of
Pike County to recoup expenses it had incurred in stabilizing
the JPAC Building and collapse site and protecting the public
and adjacent properties from the collapse. (Doc. 44-1). Hudson
determined that it had no obligation to defend its insured in
that lawsuit. McComb and Talex filed a joint Motion to Dismiss
McComb’s state lawsuit against Talex. The Circuit Court
3
dismissed McComb’s suit without prejudice on July 10, 2018.
(Doc. 202-4) 1.
McComb, Alexander, Talex, and Jubilee entered into a
Contract of Assignment of Chose in Action (“the Assignment”)
(Doc. 67-1) on December 22, 2017. McComb, Alexander, Talex, and
Jubilee agreed to proceed under joint representation provided by
Attorney Wayne Dowdy stating that the parties will “cooperate
with the other to their mutual advantage, in all matters
pertaining to the insurance policies.” The Assignment stated
that: (1) McComb’s claim, in the amount of $389,320.39 will be
made solely under the commercial general liability coverage of
the insurance policies issued by Hudson, and from no other
coverage, and (2) that the proximate cause of the collapse was
the weight of rain that had, unknown to Talex and Alexander,
collected on the roof.
STANDARD OF REVIEW
A party is entitled to summary judgment if the movant
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” FED.
R. CIV. P. 56(a). The Court is not permitted to make credibility
determinations or weigh the evidence at the summary judgment
stage of litigation. See Deville v. Marcantel, 567 F.3d 156, 164
1
The State Court matter was transferred from Chancery Court to Circuit Court
on November 21, 2017. [ECF 213-5].
4
(5th Cir. 2009)(citing Turner v. Baylor Richardson Med. Ctr.,
476 F.3d 337, 343 (5th Cir. 2010)). All facts and inferences
must be made in “the light most favorable to the nonmoving
party.” See Sierra Club, Inc. v. Sandy Creek Energy Assoc.,
L.P., 627 F.3d 134, 138 (5th Cir. 2010)(citation omitted).
ANALYSIS
Hudson puts forth two claims; (1) that Hudson did not owe
defense obligations for McComb’s lawsuit against Talex and
Alexander, and (2) that Hudson did not/does not owe indemnity
obligations for McComb’s damages. In order to determine Hudson’s
duty to indemnify McComb the Court must first consider whether
Hudson wrongfully refused to defend the original state lawsuit
that McComb filed in Chancery Court in Pike County. Therefore,
Hudson’s liability is premised on first, its duty to defend
against McComb, and then — if there is a duty to defend — upon
its obligations, if any, to indemnify under the Subject
Policies. This court will address Hudson’s duty to defend and
then its obligation to indemnify.
I.
Hudson Owed Defense Obligations for McComb’s Lawsuit
McComb’s Operative Pleadings Alleged Non-Covered Claims
The insurer’s duty to defend depends on the policy language
and the allegations of the complaint. See Lafayette Ins. Co. v.
5
Peerboom, 813 F.Supp.2d 823, 825 (S.D. Miss. 2011). Under this
so-called “eight-corners” test, a duty to defend arises if the
complaint alleges facts that are arguably within the policy’s
coverage. See id. However, there is no duty to defend if the
complaint alleges actions that exceed the scope of the policy’s
coverage. See id. The duty to defend is “broader than the
insurer’s duty to indemnify under its policy of insurance: the
insurer has a duty to defend when there is any basis for
potential liability under the policy.” See State Farm Mut. Auto.
Ins. Co. v. LogistiCare Solutions, LLC, 751 F.3d 684, 689 (5th
Cir. 2014)(emphasis added). Insurance policy provisions are
“construed strongly against the drafter.” See Liberty Mut. Fire
Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 331 (5th Cir. 1999).
Insurance companies owe a duty to defend, so long as “some
allegation with the underlying complaint potentially triggers
coverage.” See Travelers Indem. Co. v. Forrest Cty., 195
F.Supp.3d 890, 898 (S.D. Miss. 2016).
Hudson claims that the operative pleadings in McComb’s
lawsuit never triggered defense obligations because the
pleadings alleged “non-covered omissions.” Hudson asserts that
it could only be obligated to defend to the extent that McComb’s
operative pleading sought recovery for “property damage”
allegedly resulting from an “occurrence” (accidental conduct)
that was neither expected nor intended by Talex or Alexander.
6
Hudson claims that McComb’s complaint did not allege an
occurrence because the property damage was expected or intended
by Talex or Alexander; therefore, the policies did not provide
coverage.
The definition of “occurrence” has been analyzed several
times by the Mississippi Supreme Court. See EMJ Corp. v. Hudson
Specialty Ins. Co., 833 F.3d 544, 548 (5th Cir. 2016). The Court
has consistently held that there is one relevant consideration
in determining if an injury is an occurrence. Id. There is
coverage unless the “chain of events leading to the injuries
complained of were set in motion and followed a course
consciously devised and controlled by [the insured] without the
unexpected intervention of any third person or extrinsic force.”
Id. Courts should be wary about conflating an intended action
with an intended result. Id. An intentional action, taken
without the intention of causing the complained-of injury is an
occurrence and will be covered under the Policies. Id.
An act is intentional if “the actor desires to cause the
consequences of his act, or believes that the consequences are
substantially certain to result from it.” U.S. Fidelity & Guarn.
Co. v. Omnibank, 812 So.2d 196, 201 (Miss. 2002)(quoting Coleman
v. Sanford, 521 So.2d 876, 878 (Miss. 1988)). However, under
Mississippi law, an incident is not an “occurrence,” and is not
7
covered by the policy if, “whether prompted by negligence or
malice, (1) [the insured]’s acts were committed consciously and
deliberately, without the unexpected intervention of any third
force, and (2)
the likely (and actual) effect of those acts was
well within [the insured]’s foresight and anticipation.”
Acceptance Ins. Co. v. Powe Timber Co., Inc., No. 06-60216, 2007
WL 624992, *1 (5th Cir. Feb. 21, 2007)(quoting Allstate Ins. Co.
v. Moulton, 464 So.2d 507, 509 (Miss. 1985)); see also,
Lafayette Ins. Co. v. Peerboom, 813 F.Supp.2d 823, 826 (S.D.
Miss 2011)(“an insured’s intentional actions do not constitute
‘accidents,’ and the damages resulting therefrom do not amount
to ‘occurrences,’ even if the insured acts in a negligent
manner.”)(internal citations omitted). If the claim results from
intentional conduct that causes foreseeable harm, it is not
covered even if the damages or injury are greater than expected
or intended. See Peerboom, 813 F.Supp.2d at 826(citing Omnibank,
812 So.2d at 201).
Defendants/Counter-Claimants (Talex, Alexander, Jubilee,
McComb) claim that Hudson had a duty to defend because McComb
alleged Alexander and Talex acted negligently, which they argue
leaves open the possibility that the collapse was caused by an
inadvertent act. See EMJ Corp. v. Hudson Specialty Ins. Co., 833
F.3d 544, 548–49 (5th Cir. 2016)(rejecting HSIC’s attempt to
avoid its defense obligations because under Mississippi law
8
“intentional actions taken without an intent or expectation of
causing any injury are occurrences for insurance
purposes”)(emphasis added).
Defendants/Counter-Claimants (Talex, Alexander, Jubilee,
McComb) rely on Peerboom, which held that summary judgment could
not be granted to the insurer based on the policies’ definition
of “occurrence” since the complaint left open the possibility
that the property damage was caused by an accidental, i.e.,
inadvertent, act. However, in Peerboom, the insureds put forth
three possible reasons for the collapse of their home. As the
court explained, “Since the act which likely caused the
‘property damage’ is as yet undetermined, then it is likewise
not known at this point whether the ‘likely (and actual) effect
of the act was well within [Absolute’s] foresight and
anticipation.” Id. at n.5. This differs from the case at hand
because McComb did not assert multiple reasons that the building
could collapse. It puts forth one argument in its complaint: the
building collapsed because of rainwater, the Defendants/CounterClaimants (Talex, Alexander, Jubilee, McComb) had actual notice
of the accumulation of rainwater and actual notice that the
building was in threat of collapsing.
In addition, Defendants/Counter-Claimants (Talex,
Alexander, Jubilee, McComb) have ignored the whole of McComb’s
9
complaint by focusing on negligence. The pleading clearly states
that Talex had actual notice of three facts: (1) that an unsafe
amount of water was accumulating on the roof, and (2) that the
roof’s supportive structure was in danger, and (3) that the
great weight of the water threatened to cause the building to
collapse. See Underlying Compl. [ECF 44-1]. Each of its claims
against Talex were premised on those three underlying facts.
According to McComb’s Complaint, it was within the foresight of
Talex and Alexander that the collapse could happen. Because they
failed to repair or warn others, the incident was “intended or
expected.”
There is no genuine dispute of material fact that McComb
alleged a “non-covered omission.” McComb’s complaint clearly
alleged that Talex consciously choose to not repair the roof or
warn others of the potential danger and that the collapse was
well within Talex’s foresight as Talex had been warned that
collapse was a possibility. Precedent establishes that negligent
acts are not occurrences if the injury and damage is within the
insured’s foresight.
Hudson’s Duty to Defend was Triggered by Extrinsic Facts
Hudson next argues that the Defendants/Counter-Claimants
(Talex, Alexander, Jubilee, McComb) never presented extrinsic
facts to Hudson so as to trigger any defense obligations. The
10
general rule is that an insurer’s duty to defend “hinges on the
allegations in the underlying complaint.” American States Ins.
Co. v. Natchez Steam Laundry, 131 F.3d 551, 553 (5th Cir. 1998).
However, Mississippi law provides an exception to the rule; an
insurer has a duty to defend if it has knowledge, or could
obtain knowledge through a reasonable investigation, of the
existence of facts that trigger coverage. Id. The rule states:
“Where complaint fails to state cause of action
covered by policy, but insured informs insurer that
true facts are inconsistent with complaint, or insured
learns from independent investigation that the true
facts, if established, present potential liability of
insured, insurer must defend until it appears that
facts upon which liability is predicated exclude
insurance coverage.”
Mavar Shrimp & Oyster Co. v.
Fidelity & Guaranty Co, 187 So.2d
871, 875 (Miss. 1966)(quoting Crum v. Anchor Casualty Co., 119
N.W.2d 703, 703 (1963)). Hudson relies on Natchez Steam Laundry
for its claim that it has no duty to defend as there were no
“true facts” that would trigger defense obligations. A duty to
defend exists if the insured “learns of true facts, which, if
established present potential liability of insured” and a cause
of action based on those facts would be covered by the policy.
See Acceptance Ins. Co. v. Powe Timber Co., Inc., 403 F.Supp.2d
552, 558 (S.D. Miss. 2005). The insurer must provide a defense
until it appears that “the facts upon which liability is
11
predicated fall outside the policy’s coverage.” See Isom v.
Valley Forge Ins. Co., 716 Fed.Appx. 280, 285 (5th Cir. 2017).
In Natchez Steam Laundry, the Fifth Circuit upheld the
District Court’s grant of insurer’s Motion for Summary Judgment
in a sexual harassment case. See 131 F.3d at 552. In that case,
the insured claimed that he had provided facts that should have
triggered the insurance company’s duty to defend, despite any
failure of the pleadings. To combat the complaint of sexual
harassment against him, the insured “promptly notified American
States that any touching was unintentional.” Id. at 553. The
Court noted, “Simmons’s contention that his bawdy behavior was
accidental is not a ‘fact,’ but only an assertion.” Id. As a
result, the Court held that “This argument fails for a simple
reason: Natchez and Simmons have not supplied ‘facts’ that
indicate coverage.” Id. With this framework as guidance, we must
look to the “facts” that Hudson possessed when determining its
defense obligations and evaluate whether they were mere
assertions.
Hudson’s Claim File had the following information: (1)a
July 23 newspaper article that claimed church services were held
on the day of the collapse and students and school officials had
met there earlier in the day, (2) a July 24 article that claimed
Alexander and JPAC students were in the building only hours
12
before the collapse and that contractors had recently been on
the roof to repair the air conditioner but had not reported any
issues with the roof, (3) a July 30 article that noted a local
roofer did not believe rain caused the collapse, and that the
age of the building could have been a factor, (4) an August 13
article that provided: (i) Alexander had denied McComb’s claims
that he had prior knowledge of the roof being unsafe, (ii)
Alexander had never been on the roof; and (iii) that workers in
January had not reported any problems with the roof. See August
15, 2017 E-mail and Selected Articles, [ECF 213-3].
Alexander’s claims that he had no prior knowledge of the roof
being unsafe and that he had never been on the roof are
“assertions,” i.e., a mere denial of the allegations. However,
Hudson possessed other information that rises above the mere
“assertions” at issue in Natchez Steam Laundry. The fact that
Hudson knew (1) that contractors had recently been on the roof
and had not reported any problems to Alexander, and (2) that
local contractors believed that the age of the building could
have caused the collapse, not rainwater, is enough to put Hudson
on notice that there may be facts that would trigger its duty to
defend.
There are variations between the facts in Hudson’s claim file
and the allegations of the complaint. See Mavar Shrimp & Oyster
13
Co., 187 So.2d at 875. Should the facts be established, they
would create an “occurrence” covered by the policies. Therefore,
Hudson had a duty to defend until it appeared that the “true
facts” fell outside of the policies’ coverage. All of this
information was known to Hudson when it determined it had no
defense obligations. Therefore, Hudson’s claim that there were
no extrinsic facts to trigger defense obligations fails.
II.
Hudson Did Not/Does Not Owe Indemnity Obligations for
McComb’s Lawsuit
Hudson argues that it does not owe indemnity obligations
because of the Assignment, i.e. the contract that Talex,
Alexander, Jubilee, and McComb entered to proceed with common
interests against Hudson. Hudson argues that the Assignment
released Talex and Alexander from legal liability for McComb’s
claimed damages, that no act or omission attributable to Talex
or Alexander caused the claimed damages, and the “damage to
property” exclusion separately negates coverage for those
damages.
Hudson Waived its Right to Contest The Assignment When it
Wrongfully Failed to Defend Talex and Alexander
As the Fifth Circuit writes, “Unlike the duty to defend,
which can be determined at the beginning of a lawsuit, an
insurer’s duty to indemnify generally cannot be ascertained
until the completion of litigation, when liability is
14
established, if at all.” Estate of Bradley ex rel. Sample v.
Royal Surplus Lines Ins. Co., Inc., 647 F.3d 524, 531 (5th Cir.
2011). The duty to indemnify typically can be resolved only
after the conclusion of the underlying action because the duty
to indemnify “turns on the actual facts giving rise to liability
in the underlying suit.” Id. Summary judgment is not typically
the avenue to address indemnification issues.
The Subject Policies’ commercial general liability coverage
forms generally allow third parties to directly “recover on an
agreed settlement or on a final judgment against an insured.”
The terms of the Policies obligate Hudson to provide indemnity
for “sums that the insured becomes legally obligated to pay as
damages.” See Alexander and Talex Policies [ECF 13-2, 13-3], at
p. 24. However, in this case, McComb released Talex and
Alexander from liability for McComb’s claimed damages, i.e.,
created a scenario where there are no “sums that the insured
becomes legally obligated to pay.” Doc. 203 at 11. Therefore,
Hudson argues that, as a result of The Assignment, no indemnity
obligations “have arisen or will arise under the Policies.” Id.
at 12.
Defendants/Counter-Claimants (Talex, Alexander, Jubilee,
McComb) assert that Hudson waived its ability to contest the
“insured’s personal liability” to McComb “by breaching a defense
15
obligation….” Doc. 214 at 19. Precedent establishes that
“unjustifiably denying liability or breaching a duty to defend
will preclude an insurer from relying on policy provisions that
deny coverage.” See Jones v. S. Marine & Aviation Underwriters,
Inc., 888 F.2d 358, 361 (5th Cir. 1989). Hudson counters by
differentiating between waiving policy conditions versus
extending coverage through waiver. As Hudson asserts, it is
claiming that there is no coverage at all because of The
Assignment. As such, “the complete absence of underlying
liability is not a waivable pre-condition to coverage — it is a
dispositive deficiency in the claim for indemnity via the
Assignment.” Doc. 223 at 9–10.
Generally, under Mississippi law, “a stipulation that
removed the personal liability of the insured for any judgment…
also removed the obligation of the insurer, where the insurance
policy provided coverage only if the insured was liable.” Jones
888 F.2d at 361(citing Putman v. Ins. Co. of N. Am., 673 F.Supp.
171, 177 (N.D. Miss. 1897), aff’d, 845 F.2d 1020 (5th Cir.
1988)). In Jones, the insured entered into a settlement
agreement – without consulting with the insurer – that removed
personal liability from the insured. Under the policy, the
personal liability of the insured was a condition precedent to
coverage. Despite this, the Fifth Circuit held that the insurer
waived its right to rely on the policy provisions when it
16
breached its defense obligation to the insurer. The fact that
the insured was released from liability did not preclude the
insurer’s duty to indemnify after its decision not to defend.
Hudson argues that the terms of the Assignment abrogate
coverage because “McComb states that no act or omission
attributable to Talex or Alexander caused McComb’s claimed
damages.” See ECF 203 at 12. Upon reading the Assignment, it is
difficult to understand how Hudson came to this interpretation.
The Assignment, when discussing liability, merely states that “…
the roof on the insured buildings… unexpectedly collapsed, which
collapse was proximately caused by the weight of rain that,
unknown to Assignors, had collected on the roof of the
buildings, due to unprecedented and huge amounts of rain…” ECF
67-1 at 1. None of these assertions absolve Alexander or Talex
of possible responsibility for negligently failing to repair or
maintain the roof. The Assignment asserts that the Assignors
were unaware of the collection of rainwater, but it does not
assert an absence of underlying possible liability to McComb.
The Assignment merely releases Talex and Alexander from their
personal or corporate liability by agreeing to limit any
recoupment to coverage provided by the commercial general
liability policy provisions.
17
Importantly, the Assignment states: “The parties hereto
agree and contract that the claim of the Assignee, McComb, in
the amount of $389,320.39 will be made solely under the
commercial general liability coverage of the insurance policies
issued by Hudson Specialty Insurance Company….” McComb reserved
its claims against Talex to the extent that coverage is provided
under the Subject Policies. Accordingly, there has not been a
full and complete release of Talex as claimed by Hudson.
Hudson cites Federal Ins. Co. v. Singing River Health
System for its assertion that the Court may grant summary
judgment for the indemnification claim. See 850 F.3d 187, n.6
(5th Cir. 2017). Singing River, states that
“the duty to indemnify could be resolved at the
summary judgment state when ‘the insurer has no duty
to defend and the same reasons that negate the duty to
defend likewise negate any possibility the insurer
will ever have a duty to indemnify.”
850 F.3d at n.6(emphasis added)(citing Farmers Texas County
Mutual Ins. Co. v. Griffin, 955, S.W.2d 81, 82, 84 (Tex. 1997)).
In that situation – the duty to indemnify may be non-justiciable
at the summary judgment stage. See id. However, that does not
apply in this present case.
Here, Hudson’s reasons not to defend are not the reasons it
denies its obligations to indemnify. As previously stated,
Hudson refused to defend because, under the operative pleadings,
18
McComb alleged that Talex and Alexander should have expected the
roof to collapse. Hudson argues against indemnification because
of the contractual agreement between McComb and Talex,
Alexander, and Jubilie, - which, according to Hudson, states
that Talex and Alexander did not commit an act or omission to
cause the damage – i.e., a reason opposite than put forth when
Hudson determined it had no duty to defend.
For these reasons, this Court will not grant Hudson’s
summary judgment motion regarding its obligation to indemnify.
Hudson waived its right to contest the settlement agreement
between McComb, Talex, Alexander, and Jubilee when it wrongfully
refused to defend its insureds in McComb’s state lawsuit.
Hudson’s next argument, that The Assignment waived all liability
attributable to Talex, Alexander, and Jubilee similarly fails.
Hudson cannot deny its duty to defend on the basis of Talex and
Alexander’s actions or failure to act while denying its duty to
indemnify on the basis that Alexander and Talex are not
responsible for the collapse due to their representations in The
Assignment. Therefore, Talex and Alexander’s possible underlying
liability is not waived by the Assignment. Because Hudson’s
argument for summary judgment regarding indemnification fails,
this Court must examine the Subject Policies to determine the
extent of Hudson’s obligations.
19
The Damage to Property Exclusion Separately Negates Coverage for
These Damages, but Does Not Apply to Expenses Incurred Outside
of the Subject Property
Having determined that Hudson may be required to indemnify
McComb’s claim for damages, the Court must examine the Subject
Policies to see if any indemnification exclusions apply. McComb
seeks recovery for expenses incurred in stabilizing the JPAC
collapse site and protecting the public and adjacent properties.
It also seeks recovery for the expenses for repairs/restoration
to property (Main Street flower bed) and equipment (street
light) separate from the JPAC Building.
Defendants/Counter-Claimant (Talex, Alexander, Jubilee,
McComb)’s interpretation of the Subject Policies’ “property
damage” exclusion runs counter to the Policies’ language. The
property damage exclusion is within the general commercial
liability coverage. The Policies define “property damage” as:
“(a) Physical injury to tangible property, including
all resulting loss of use of that property. All such
loss of use shall be deemed to occur at the time of
the physical injury that caused it; or (b) Loss of use
of tangible property that is not physically injured.
For the purpose of this insurance, electronic data is
not tangible property.”
20
See Alexander and Talex Policies [ECF 13-2, 13-3] at p. 28.
However, the policies include a property damage exclusion that
negates indemnity obligations for “property damage” to:
“Property you own, rent, or occupy, including any
costs or expenses incurred by you, or any other
person, organization or entity, for repair,
replacement, enhancement, restoration or maintenance
of such property for any reason, including prevention
of injury to a person or damage to another’s
property.”
See 2017 Alexander and Talex Policies [ECF 13-2, 13-3], at p.
17. The Policies’ plain language clearly states that Hudson does
not provide coverage for property damage for buildings that the
insureds own. This property damage exclusion is common to
liability policies. The intent of such an exclusion is to
prevent the insured from using a general liability policy as
property insurance. See Porter v. Clarendon Nat. Ins. Co., 925
N.E.2d 58, 62 (Mass. App. Ct. 2010).
Defendants/Counter-Claimants (Talex, Alexander, Jubilee,
McComb) point to a number of state and federal cases that
support their narrow interpretation of the policies. See, e.g.,
Anderson Dev. Co. v. Travelers Indem. Co., 49 F.3d 1128, 1134
(6th Cir. 1995) (concluding that the owned-property exclusion
21
did not bar coverage for damages caused by “a government mandate
to conduct [an] environmental clean-up”); Patz v. St. Paul Fire
& Marine Ins. Co., 15 F.3d 699, 705 (7th Cir. 1994) (“The fact
that the clean up occurred on [the insured's] land is
irrelevant”). Defendants/Counter-Claimants (Talex, Alexander,
Jubilee, McComb) also erroneously rely on Allstate Ins. Co. v.
Dana Corp., 759 N.E.2d 1049 (Ind. 2001) which found that the
owned property exclusion did not apply to liability for
environmental clean-up costs because there were ambiguities
among the subject policies and “where there is ambiguity,
insurance policies are to be construed strictly against the
insurer.”
None of those cases involve policies with a similarly
broadened property damage exclusion at issue. Here, the ownedproperty exclusion is broader because it excludes “repair,
replacement, enhancement, restoration or maintenance of such
property for any reason.” See Taos Ski Valley, Inc. v. Nova
Casualty Co., 705 Fed.Appx. 749, 754 (10th Cir. 2017)(emphasis
added). In this case, the policies clearly exclude repairs and
22
restoration of owned property. Therefore, to be covered, the
liability does not apply to property that the insured party
owns, rents, or occupies.
Defendants/Counter-Claimants (Talex, Alexander, Jubilee,
McComb) argue that McComb’s expenses “cannot be construed as
efforts to repair, replace, enhance, restore, or maintain the
Subject Property,” because the JPAC Building was “partially
demolished at the direction of professionals retained by
McComb.” However, Defendants/Counter-Claimants (Talex,
Alexander, Jubilee, McComb) ignore a significant portion of the
Subject Policies that state, “for any reason, including
prevention of injury to a person or damage to another’s
property.” McComb’s efforts and ensuing expenses were to prevent
injury to the citizens of McComb and any damage to adjoining or
neighboring properties. As such, its actions and expenses
incurred fall well within the broad gamut of the “property
damage” exclusion.
While all expenses regarding the JPAC building are excluded
under the subject policies, the expenses to repair the flower
23
beds on Main Street and the street lights are not excluded.
Those expenses did not result from damage to the property
“owned, rented, or occupied” by Alexander or Talex. Therefore,
the owned property exclusion does not apply and Hudson must
indemnify for damages to the flower beds and for repairs to the
street lights.
CONCLUSION
Hudson had a duty to defend Defendants/Counter-Claimants
(Talex, Alexander, Jubilee, McComb) in the suit brought by
McComb. While McComb’s operative pleadings did not allege
covered conduct, there was sufficient extrinsic information to
put Hudson on notice that it may have a duty to defend.
For the issue of indemnification, the Subject Policies’
exclusion for property damage of owned, rented, or occupied
property applies. Therefore, Hudson has no duty to indemnify
McComb for its expenses as a result of the JPAC collapse. The
property exclusion does not apply the flower beds and street
lights, which are not owned by Alexander, Talex, or Jubilee.
24
Accordingly, the Court GRANTS IN PART and DENIES IN PART
the Plaintiff/Counter-Defendant’s Motion for Partial Summary
Judgment.
SO ORDERED this the 26th day of September, 2019.
____/s/ David Bramlett_________
UNITED STATES DISTRICT JUDGE
25
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?