AIX Specialty Insurance Company v. BBL Investments, Inc et al

Filing 26

ORDER denying 9 AIX's MOTION to Dismiss without prejudice. (Signed by Judge Kenneth M. Hoyt) Parties notified.(chorace)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
AIX SPECIALTY INSURANCE COMPANY,
Plaintiff,
VS.
BBL INVESTMENTS, INC, et al,
Defendants.

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CIVIL ACTION NO. 4:14-CV-2645

ORDER
In this insurance coverage dispute, AIX Specialty Insurance Company (“AIX”) sues its
insureds asserting the right to rescind two insurance policies.

Allegedly, defendant BBL

Investments, Inc. made a material misrepresentation in the application for insurance it completed on
behalf of all of the defendant-insureds. AIX also sues Randy Moreno, a third-party claimant with an
interest in the policies. Moreno is the plaintiff in a state court tort lawsuit against RAS Apartments,
LLC, one of AIX’s insureds and a defendant in the pending federal action. AIX acknowledges that it
named Moreno as a defendant “[t]o ensure that [he] would be bound by any judgments entered by
this Court.” Moreno answered AIX’s complaint and filed counterclaims for conditional/anticipatory
breach of contract and declaratory relief regarding AIX’s duty to indemnify.
On December 8, 2014, AIX filed a motion to dismiss Moreno’s counterclaims (ECF No. 9).
It contends that Moreno, although a potential third-party beneficiary of the subject policies, lacks
standing to bring counterclaims against it. Moreno’s rights under the policies have not vested, AIX
argues, since a judgment against its insured has not yet been entered in the underlying tort action.
Accordingly, it urges the Court to dismiss his counterclaims under Fed. R. Civ. P. 12(b)(1).
Alternatively, AIX contends that Moreno has failed to state a claim under Fed. R. Civ. P. 12(b)(6).
In its view, Moreno’s counterclaims amount to a direct action against AIX, the filing of which

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violates Texas law prohibiting suits by an injured third party against a tortfeasor’s insurer until there
has been a finding that the tortfeasor is liable.
Contrary to AIX’s position, the Court has subject matter jurisdiction over Moreno’s
counterclaims because AIX is the party that brought him into the pending action. See, e.g., Looney
Ricks Kiss Architects, Inc. v. State Farm Fire & Cas. Co., 677 F.3d 250, 257 n.5 (5th Cir. 2012)
(applying Dairyland Ins. Co. v. Makover, 654 F.2d 1120, 1123 (5th Cir. 1981), where court held that
injured third parties, brought into declaratory judgment suit by plaintiff-insurer, had standing to
appeal district court judgment denying coverage); Commerce & Indus. Ins. Co. v. Alexander, Civ.
No. H-11-3939, 2012 WL 3046011, at *2-3 (S.D. Tex. July 25, 2012) (Werlein, J.). In so doing, it
conferred on Moreno standing to bring counterclaims against it.
Naming Moreno as a defendant has the additional effect of undercutting AIX’s “no direct
action” argument. The “no direct action” rule is relevant when an injured third party brings suit, not
when the insurer or the insured defendant seeks declaratory relief. In re Essex Ins. Co., 450 S.W.3d
524, 527 (Tex. 2014) (distinguishing cases that fail to implicate “no direct action” rule “because in
each of these cases, it was the insurer or the insured defendant, not the plaintiff, who sought
declaratory relief, or the insured defendant’s liability to the plaintiff had in fact been determined
before the declaratory judgment suit was filed”). Unlike the plaintiffs in Aviles v. Aguirre, 292
S.W.3d 648, 649 (Tex. 2009) (per curiam), and State Farm Cnty Mut. Ins. Co. v. Ollis, 768 S.W.2d
722, 723 (Tex. 1989) (per curiam), Moreno did not file suit against AIX. AIX misguidedly relies on
these cases to challenge jurisdiction over Moreno’s counterclaims.
To the extent that AIX seeks a dismissal on the ground that Moreno’s counterclaims are
nonjusticiable, the argument is rejected. At this stage, it cannot be said that, because of the pendency
of the liability suit, Moreno’s indemnity claim is nonjusticiable.

“[T]he duty to indemnify is

justiciable before the insured’s liability is determined in the liability lawsuit when the insurer has no
duty to defend and the same reasons that negate the duty to defend likewise negate any possibility the

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insurer will ever have a duty to indemnify.” Farmers Texas Cnty Mut. Ins. Co. v. Griffin, 955
S.W.2d 81, 84 (1997) (emphasis in original). A determination has not yet been made as to whether
AIX has a duty to defend its insureds. Accordingly, a judgment dismissing Moreno’s declaratory
request is premature. Cf. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 536 (2004)
(during pendency of underlying suit against the insured, duty to indemnify “became nonjusticiable”
when district court ruled, on summary judgment, that insurer had duty to defend). Contra Alexander,
2012 WL 3046011, at *4 (denying motion to dismiss injured third party’s counterclaim for
declaratory judgment on duty to defend but dismissing, without prejudice, counterclaim for
declaratory judgment on duty to indemnify).
Dismissing Moreno’s anticipatory breach of contract counterclaim as nonjusticiable would
likewise be premature at this juncture. “A party claiming anticipatory breach of a contract must
establish the following three elements: (1) a party to a contract has absolutely repudiated the
obligation; (2) without just excuse; and (3) the other party is damaged as a result.” Berg v. Wilson,
353 S.W.3d 166, 174 n.11 (Tex. App.—Texarkana 2011, pet. denied). Among other things, proving
the second element turns on the Court’s judgment declaring the rights of the parties.
For these reasons, AIX’s motion to dismiss is DENIED without prejudice.
It is so ORDERED.
SIGNED on this 18th day of August, 2015.

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Kenneth M. Hoyt
United States District Judge

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