Hudson Specialty Insurance Company v. Talex Enterprises, LLC et al
Filing
261
ORDER granting in part and denying in part 202 Motion for Partial Summary Judgment. There is a genuine issue of material fact as to whether Hudson had a duty to defend Defendants/Counter-Claimants (Talex, Alexander, Jubilee, McComb) in the suit br ought by McComb. While McComb's operative pleadings did not allege covered conduct, there may have been sufficient extrinsic information to put Hudson on notice that it had a duty to defend. As there are genuine issues of material fact, Hudson 039;s Motion for Summary Judgment is denied. Additionally, the issue of whether the subject Policies are void ab initio has not been addressed. As to the issue of indemnification should the Court find that Hudson had a duty to defend the Subject Po licies' exclusion for property damage of owned, rented, or occupied property applies. Therefore, if Hudson had a duty to defend, it would not have a duty to indemnify McComb for its expenses as a result of the JPAC collapse. The property exclusion does not apply to the flower beds and street lights, which are not owned by Alexander, Talex, or Jubilee. Signed by District Judge David C. Bramlette, III on 01/30/2020 (sl)
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 suit was transferred
from Chancery Court to Circuit Court on November 21, 2017 [ECF
3
No. 213-5], and the Circuit Court dismissed McComb’s suit
without prejudice on July 10, 2018. [ECF No. 202-4].
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
(5th Cir. 2009)(citing Turner v. Baylor Richardson Med. Ctr.,
4
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 which was filed in the Chancery Court of Pike County,
then transferred to the Circuit Court, 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. Hudson
claims that the subject Policies should be rescinded and are
void ab initio because of material misrepresentations on the
part of Alexander. However, that issue is not currently before
the Court.
There is a Genuine Issue of Material Fact As to Whether Hudson
Owed Defense Obligations for McComb’s Lawsuit
5
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.
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
6
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.
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.
7
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
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).
8
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
“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
9
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
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 No. 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
asserted 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
10
acts are not occurrences if the injury and damage is within the
insured’s foresight.
There Is a Genuine Issue of Material Fact as to Whether 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 in the
lawsuit filed in State Court. The 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
11
“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
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 information that Hudson possessed when determining
12
its defense obligations and determine if it consisted of mere
assertions or facts.
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
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 No. 213-3]. It
should be noted that these articles are not intended to
represent the truth of the matters asserted but are merely
intended as evidence of notice that Hudson had in its
possession.
Alexander’s claims that he had no prior knowledge of the roof
being unsafe and that he had never been on the roof are
13
“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 possessed information that stated: (1) 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 information in Hudson’s claim
file and the allegations of the complaint. See Mavar Shrimp &
Oyster Co., 187 So.2d at 875. Should the relevant facts be
established from the information in the case file, they would
create an “occurrence” covered by the policies. There is a
genuine issue of material fact as to whether the statements in
the newspaper articles were accurate and constitute “true facts”
and/or notice to trigger Hudson’s duty to defend. Therefore,
there is a genuine issue of material fact as to whether Hudson
had a duty to defend. This information was known to Hudson when
it determined it had no defense obligations. As a result, the
Court holds that there is a genuine issue of material fact as to
whether the “true facts” exception applies in this case. As the
Mississippi Supreme Court wrote, “It would be the better part of
valor to defend doubtful cases of coverage and to resolve the
14
doubts when the battle with the claimant is over.” Travelers
Ins. Co. v. General Refrigeration & Appliance Co., 218 So.2d
724, 727 (Miss. 1969). Therefore, for the purpose of summary
judgment, the Court finds it inappropriate at this juncture of
the proceeding to declare that Hudson had no duty to defend.
I.
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 in order 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 May Have Waived its Right to Contest The Assignment if 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
established, if at all.” Estate of Bradley ex rel. Sample v.
Royal Surplus Lines Ins. Co., Inc., 647 F.3d 524, 531 (5th Cir.
15
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 No. 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.” [ECF No. 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
obligation….” [ECF No. 214] at 19. Precedent establishes that
“unjustifiably denying liability or breaching a duty to defend
16
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.” [ECF No. 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
breached its defense obligation to the insurer. The fact that
the insured was released from liability did not preclude the
17
insurer’s duty to indemnify if it is found that Hudson
wrongfully chose not to defend the state lawsuit.
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 No. 203] at 12. Upon reading the Assignment,
it is difficult to understand Hudson’s reasoning. 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
No. 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.
Importantly, the Assignment states: “The parties hereto
agree and contract that the claim of the Assignee, McComb, in
18
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 also raises the issue of McComb’s supplemental
responses to Hudson’s interrogatories. Interrogatory number
sixteen asked McComb to:
“identify every action or omission attributable to
Talex Enterprises, LLC, Terrance Alexander, and/or
Jubilee Performing Arts Center, Inc. which caused or
contributed to the damages that the Board of Mayor and
Selectmen of McComb, Mississippi claimed in Cause No.
17-090-PCS (previously pending in the Circuit Court of
Pike County, Mississippi)” [ECF No. 200-9] at p. 12.
McComb answered the interrogatory saying:
“[t]here are no acts or omissions attributable to
Terrance Alexander and/or Jubilee Performing Arts
Center, Inc. which caused or contributed to the
damages claimed in the referenced State Court case.
The answering Plaintiffs would show that they had and
reported to the Plaintiff a claim for small amounts of
water leakage. The funds received after adjustment of
the claim by Cunningham Lindsey Adjusters (Mickey
Carney) were utilized in full to make required
improvements.” Id.
This interrogatory was conducted well after McComb, Alexander,
Jubilee, and Talex entered into the Assignment, i.e., settlement
agreement. Interrogatory responses are not binding judicial
admissions, but they may be used as evidence for assessing
19
summary judgment. See Bradley v. Allstate Ins. Co., 620 F.3d
509, n.21 (5th Cir. 2010). “[I]f the pleadings, the discovery
and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law,” then summary
judgment is appropriate. See id. at n.21. In this case, McComb’s
interrogatory response does not foreclose a factual inquiry as
to the issue of Hudson’s indemnification obligations. Hudson
argues that it had no duty to defend the underlying lawsuit
because there is no occurrence under the policy inasmuch as
Alexander and Talex expected or reasonably anticipated the
possible collapse of the building, but then when discussing
indemnification, argues that there is no act or omission
attributable to Alexander and Talex which caused or contributed
to the damages.
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.”
20
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,
McComb alleged that Talex and Alexander should have anticipated
the roof to collapse. Hudson argues against indemnification
because of the supplemental interrogatories and contractual
agreement between McComb and Talex, Alexander, and Jubilie, which, according to Hudson, state that Talex and Alexander did
not commit an act or omission to cause the damage – i.e., a
reason contrary to that put forth when Hudson determined it had
no duty to defend.
For these reasons, this Court denies Hudson’s summary
judgment motion regarding its obligation to indemnify. There is
a genuine issue of material fact as to whether Hudson waived its
right to contest the settlement agreement between McComb, Talex,
Alexander, and Jubilee if 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,
21
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 and/or the
interrogatories. 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 will next examine the Subject Policies to
determine the extent of Hudson’s possible obligations.
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.
22
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.”
See Alexander and Talex Policies [ECF No. 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 No. 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
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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
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.”
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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
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
25
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
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 then it becomes
a fact issue as to whether Hudson must indemnify for damages to
the flower beds and for repairs to the street lights.
CONCLUSION
There is a genuine issue of material fact as to whether
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,
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there may have been sufficient extrinsic information to put
Hudson on notice that it had a duty to defend. As there are
genuine issues of material fact, Hudson’s Motion for Summary
Judgment is denied. Additionally, the issue of whether the
subject Policies are void ab initio has not been addressed.
As to the issue of indemnification – should the Court find
that Hudson had a duty to defend — the Subject Policies’
exclusion for property damage of owned, rented, or occupied
property applies. Therefore, if Hudson had a duty to defend, it
would not have a duty to indemnify McComb for its expenses as a
result of the JPAC collapse. The property exclusion does not
apply to the flower beds and street lights, which are not owned
by Alexander, Talex, or Jubilee.
Accordingly, the Court GRANTS IN PART and DENIES IN PART
the Plaintiff/Counter-Defendant’s Motion for Partial Summary
Judgment.
SO ORDERED this the 30th day of January, 2020.
__/s/ David Bramlette________
UNITED STATES DISTRICT JUDGE
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