Hudson Specialty Insurance Company v. Talex Enterprises, LLC et al
Filing
95
ORDER denying 74 Hudson Specialty Insurance Company's motion to dismiss. If Counterclaimants desire a speedy hearing under Federal Rule of Civil Procedure 57, Counterclaimants shall file a motion requesting a speedy hearing and a supporting brief explaining why the Court should prioritize this case over others on its docket. Signed by Honorable David C. Bramlette, III on June 25, 2018. (JBR)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
HUDSON SPECIALTY INSURANCE COMPANY
V.
PLAINTIFF
CAUSE NO. 5:17-CV-137-DCB-MTP
TALEX ENTERPRISES, LLC,
JUBILEE PERFORMING ARTS CENTER, INC.,
TERRANCE L. ALEXANDER, and the
BOARD OF MAYOR AND SELECTMEN
OF MCCOMB, MISSISSIPPI, et al.
DEFENDANTS
ORDER AND OPINION
Hudson Specialty Insurance Company (“Hudson”) moves the Court
to dismiss, in part, the amended counterclaim of Talex Enterprises,
LLC, Terrance L. Alexander d/b/a Jubilee Performing Arts Center,
and the Board of Mayor and Selectmen of McComb, Mississippi. For
the reasons that follow, Hudson’s motion is DENIED.
Background
This insurance-coverage dispute asks the Court to decide
Hudson’s duties to its insureds —— Talex Enterprises, LLC and
Terrance Alexander —— under policies providing commercial general
liability
and
commercial
Mississippi building.
property
coverage
for
a
McComb,
The
building
collapsed
in
July
2017,
damaging
public
utilities and disrupting traffic.1 One month after the collapse,
the City sued the building’s owner —— Talex —— in Pike County
Chancery Court.
In its first state-court complaint, the City alleged that the
building collapsed because too much water gathered on its roof.
Doc. 1-4, ¶11. The City also alleged that Talex “had actual notice
that an unsafe amount of water was accumulating on the roof of the
building,” yet “failed to warn adjoining property owners of a
dangerous condition of which [Talex] was aware.” Doc. 1-4, ¶¶11,
29.
The City amended its state-court complaint one month later.
Doc. 1-5. The City’s amended complaint, like its original, alleged
that Talex and Alexander knew that too much water had gathered on
the building’s roof. Doc. 1-5, ¶9. They acquired that knowledge
from two sources: first, from an unknown person2 Alexander asked
to clear the roof’s drain, who told Alexander that the drain was
clogged; second, from a contractor who refused to repair the roof
on the ground that it “was so damaged that [the contractor] would
not allow his employees to be exposed to such danger.” Doc. 1-5,
¶¶15, 17.
1
The City says the collapse cost it $389,320.29. Doc. 67-1.
2 The City alleged that Alexander directed a student attending the JPAC
school to clear the roof’s drain. The student’s name was not given.
2
The City sought leave to file a second amended state-court
complaint, but the parties dispute whether the Court can consider
it. The Court declines to review that complaint at this point but
notes its separate concerns that (1) the City presented to the
state
court
an
“affidavit”
containing
statements
made
on
information and belief, and (2) the City takes a position in this
Court that shows that its mayor’s representations to the state
court were either blithely made or false.
After the City sued it, Talex requested a defense from, and
initiated a property coverage claim with, Hudson under policies
HBD10027329
and
HBD10019191
(the
“Policies”).3
Hudson
denied
coverage and sued, asking this Court to declare its coverage
obligations and rescind the Policies.
The Policies contain commercial general liability (CGL) and
property coverage forms. The CGL forms provide coverage for suits
seeking damages caused by an “occurrence,” which the Policies
define as “an accident, including continuous or repeated exposure
to substantially the same general harmful conditions.” CGL Forms,
pp.1 of 16 and 14 of 16. CGL coverage is excluded for property
damage “expected or intended from the standpoint of the insured.”
CGL Forms, pp.2 of 16.
When it is necessary to distinguish one policy from the other, the Court
refers to HBD10027329 as the “Talex Policy” and HBD10019191 as the “Alexander
Policy.”
3
3
The property forms cover “direct physical loss of or damage
to Covered Property at the premises described in the Declarations
caused by or resulting from any Covered Cause of Loss." Property
Coverage Forms, p.1 of 16. But the forms are “void” if the insured
commits fraud or “intentionally conceal[s] or misrepresent[s]”
facts material to the policy. Property Coverage Forms, p.1 of 2.
Before
it
answered
Hudson’s
amended
complaint,
the
City
executed a “Contract of Assignment of Chose in Action” with Talex
and Alexander. Doc. 67-1. Through that assignment, Talex and
Alexander
purport
to
convey
to
the
City
their
“right”
to
$389,320.39 that they say is “due” under the Policies’ liability
coverage forms. Doc. 67-1, ¶6. The City, Talex, and Alexander also
agreed that the City (as assignee) could make a claim “solely under
the commercial general liability coverage” of the Policies. Doc.
67-1, ¶6.
Armed with the assignment, the City, Talex, and Alexander
counterclaimed
attempted
to
against
allege
Hudson.
claims
Doc.
against
37.
Hudson
That
for
counterclaim
breaching
the
Policies and ill-defined fiduciary duties. Doc. 37, ¶¶f-y. But
that counterclaim was unintelligible: It failed to identify which
claims were being brought on behalf of which defendants under which
4
insurance policies. The Court therefore granted the City, Talex,
and Alexander leave to amend. Doc. 70.4
Counterclaimants timely amended. Doc. 72. In the amended
counterclaim, they allege that the Policies cover the building’s
“unexpected” collapse, and that “Hudson has failed and refused,
and continues to fail and refuse, to meet its obligations under
the
policies.”
Doc.
72,
¶l.
This
“failure,”
Counterclaimants
continue, is “a case of actual controversy within the jurisdiction
of this Court.” Doc. 72, ¶m. The only relief Counterclaimants seek
is
a
declaratory
judgment
“affirm[ing]”
the
validity
of
the
Policies and “find[ing] that the Policies were in full force and
effect on the date of the insured loss.” Doc. 72, p.11.5
Hudson moves to dismiss parts of the amended counterclaim,
raising insurance-coverage issues that go beyond the pleadings and
are better resolved on summary judgment. Doc. 74. Counterclaimants
oppose, faulting Hudson for “delving into the merits” yet urging
The Court also expressed concern about ethical issues that could arise
if the City had not settled its state-court suit against Hudson’s insureds.
Doc. 70, p.3. The Court will treat Counterclaimants’ failure to address that
issue in the amended counterclaim as an affirmative representation that the
state-court suit has settled.
4
5
The amended counterclaim alleges that the building “unexpectedly
collapsed” due to “[b]uilding decay that was hidden from view,” Doc. 72, ¶¶fg, while the City of McComb’s state-court complaints repeatedly allege that the
collapse was caused by Talex and Alexander’s failure to address drainage issues
that they knew about.
5
the Court to analyze coverage under the “true facts” exception.6
Doc. 85. Neither side explores the Declaratory Judgment Act.7
I
To overcome Hudson’s motion, Counterclaimants must plead a
plausible claim for relief. Romero v. City of Grapevine, Tex., 888
F.3d 170, 176 (5th Cir. 2018) (citing Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)). A claim is plausible if it contains factual
content that allows the Court to reasonably infer that Hudson is
liable for the misconduct alleged. Edionwe v. Bailey, 860 F.3d
287, 291 (5th Cir. 2017) (citing Iqbal, 556 U.S. at 678).
The Court accepts well-pleaded facts as true and views them
in the light most favorable to Counterclaimants. In re ATP Oil &
Gas Corp., 888 F.3d 122, 125-26 (5th Cir. 2018). But the Court
discredits
“conclusory
allegations,
unwarranted
factual
inferences, or legal conclusions.” Singh v. RadioShack Corp., 882
F.3d 137, 144 (5th Cir. 2018) (internal citation and quotation
marks omitted). The Court, for example, discredits the amended
counterclaim’s conclusory allegation that “Hudson has failed and
Counterclaimants say that the City’s state-court complaints triggered a
duty to defend. The Court is unpersuaded. In the Court’s tentative view, the
“true facts” exception is the only way that Hudson’s duty to defend arose.
6
Although the amended counterclaim requests a Federal Rule of Civil
Procedure 57 speedy hearing, it supports that request with vague reasons that
could apply to any case. Doc. 72, ¶p.
7
6
refused, and continues to fail and refuse, to meet its obligations
under its policies.” Doc. 72, ¶l.
In ruling on Hudson’s motion, the Court relies on the amended
counterclaim, its attachments, and documents incorporated into it
by reference. Wolcott v. Sebelius, 635 F.3d 757, 763 (5th Cir.
2011).
II
The Declaratory Judgment Act (the “Act”) empowers the Court
to declare the rights of any interested party in a case of actual
controversy within its jurisdiction. 28 U.S.C. § 2201(a). Under
the Act, declaratory relief is not granted as of right; it is left
to the Court’s discretion. Wilton v. Seven Falls Co., 515 U.S.
277, 286 (1996); Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th
Cir. 1991).
To plead a claim under the Act, a plaintiff must allege a
substantial controversy between parties of adverse legal interests
that is “of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” MedImmune, Inc. v. Genetech,
Inc.,
549
U.S.
118,
127
(2007)
(citation
omitted).
Counterclaimants have so alleged here.
The amended counterclaim alleges facts showing an actual,
present dispute between Hudson and Counterclaimants over CGL and
commercial property coverage under the Policies. See Misczak v.
7
Chase Home Finance, L.L.C., 444 F. App’x 35, 36 (5th Cir. 2011)
(per curiam). Nothing more is required at this Rule 12 stage.
Accordingly,
IT
IS
ORDERED
that
Hudson
Specialty
Insurance
Company’s
motion [Doc. 74] to dismiss the amended counterclaim of Talex
Enterprises, LLC, Terrance L. Alexander d/b/a Jubilee Performing
Arts Center, and the Board of Mayor and Selectmen of McComb,
Mississippi is DENIED.
FURTHER ORDERED that if Counterclaimants desire a speedy
hearing under Federal Rule of Civil Procedure 57, Counterclaimants
shall file a motion requesting a speedy hearing and a supporting
brief explaining why the Court should prioritize this case over
others on its docket.
SO ORDERED, this the 25th day of June, 2018.
/s/ David Bramlette_________
UNITED STATES DISTRICT JUDGE
8
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