The Landing Council of Co-Owners v. Federal Insurance Company
Filing
29
MEMORANDUM OPINION AND ORDER DENYING 23 MOTION for Summary Judgment and Brief in Support, GRANTING 22 MOTION for Partial Summary Judgment On Defendant's Duty to Defend. Additionally, Federal's objection to the Council's pleadings (Dkt. 25 at 15) is DENIED, and its motion to strike the Jenkins affidavit (Dkt. 25 at 16) is DENIED AS MOOT. (Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
THE LANDING COUNCIL OF CO-OWNERS,
Plaintiff,
v.
FEDERAL INSURANCE COMPANY,
Defendant.
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March 23, 2017
David J. Bradley, Clerk
CIVIL ACTION H-15-1902
MEMORANDUM OPINION & ORDER
Pending before the court is a motion for partial summary judgment filed by plaintiff The
Landing Council of Co-Owners (the “Council”) (Dkt. 22) and a motion for summary judgment filed
by defendant Federal Insurance Company (“Federal”) (Dkt. 23). Federal also files an objection and
a motion to strike the Council’s summary judgment evidence (Dkt. 25 at 15–16). Having considered
the motions, objection, related filings, and applicable law, the court is of the opinion that the
Council’s motion for partial summary judgment (Dkt. 22) should be GRANTED, and Federal’s
motion for summary judgment (Dkt. 23) should be DENIED. Additionally, Federal’s objection
(Dkt. 25 at 15) should be DENIED, and Federal’s motion to strike (Dkt. 25 at 16) should be
DENIED AS MOOT.
I. BACKGROUND
This is an insurance coverage dispute on the defendant’s duty to defend the insured plaintiff.
The Council is a homeowners’ association that managed and maintained a condominium
development called “The Landing” in El Lago, Texas. Dkt. 13. Federal issued a ForeFront Portfolio
for Not-for-Profit Organizations insurance policy (policy number 8208-8151) (the “Policy”) to the
Council for the policy period between July 27, 2009, and July 27, 2010. Dkt. 22, Ex. 3, App. 6.1
The Policy included directors and officers liability and entity liability coverage with a maximum
aggregate limit of liability of $1,000,000. Id. In addition, Federal issued a Chubb Commercial
Excess and Umbrella Insurance Policy (policy number 7957-94-92) to provide coverage for claims
in excess of the Policy’s $1,000,000 limit. Dkt. 13.
On September 9, 2008, The Landing was damaged during Hurricane Ike. Dkts. 22, 23.
Over the next two years, several condominium owners filed lawsuits against the Council in state
court (the “Underlying Lawsuits”), three of which were the subject of an earlier duty to defend
lawsuit. See Landing Council of Co-Owners v. Fed. Ins. Co., No. H-CV-12-2760, 2013 WL
4787954 (S.D. Tex. Sept. 9, 2013) (Miller, J.) (the “First Coverage Lawsuit”).
In the First Coverage Lawsuit, the Council alleged that Federal wrongfully denied coverage
for the Council’s defense of the Underlying Lawsuits. Id. Federal moved for summary judgment,
arguing that the property damage exclusion in the Policy precluded coverage for all of the
Underlying Lawsuits. Id. The court held that Federal had a duty to defend in one of the three
Underlying Lawsuits filed against the Council, the Bull Capital Lawsuit.2 Id. The court found that
the property damage exclusion did not apply to the claims of breach of fiduciary duty and failure to
make assessments for common expenses, because these claims appeared to have arisen
independently of the hurricane property damage. Landing Council, 2013 WL 4787954, at *7–8.
1
For the purposes of the parties’ cross-motions for summary judgment, the parties stipulate
to documents in an appendix which can be found in Dkt. 22, Exs. 3–10. The court will cite to these
documents as they are numbered in the appendix.
2
Cause No. 2010-58056, Bull Capital Company, et al. v. The Landing Council of CoOwners, et al. in the 190th Judicial District Court of Harris County, Texas.
2
Following the court’s ruling in the First Coverage Lawsuit, the parties settled. Dkt. 13. But
they agreed that “nothing in the settlement constituted a release or waiver of [the Council’s] right
to seek defense or coverage for any new pleadings filed in the Rafferty suit . . . or Federal’s right to
deny coverage or raise coverage defenses to such pleading.” See App. at 1. By the terms of the
settlement, the Council could still raise a claim that Federal has a duty to defend based on pleadings
filed in the remaining Underlying Lawsuits, including pleadings filed after the Second Amended
Petition in the Rafferty lawsuit3 and the counterclaims against the Council in the Lloyds lawsuit.4
Id. The state court later consolidated the Lloyds lawsuit with the Rafferty lawsuit. See App. 237–38.
On May 2, 2013, the plaintiffs in the Rafferty lawsuit filed their Third Amended Original
Petition. See App. 120–68. On May 22, 2013, the Rafferty plaintiffs filed their Fourth Amended
Original Petition. See App. 169–218. Subsequently, the Rafferty plaintiffs filed their First and
Second Supplements to their Fourth Amended Original Petition. See App. 219–236. On December
24, 2014, the Rafferty plaintiffs filed their Fifth Amended Original Petition, which contains
substantially the same allegations as the Third, Fourth, and Supplemental Petitions and thus was not
included in the parties’ stipulated appendix. See Dkt. 13 at 8. The plaintiffs asserted the following
causes of action against the Council: breach of fiduciary duty, negligence, gross negligence, tortious
interference with contract, slander of title, damage to title, breach of contract, and conspiracy.
See App. 206 (Fourth Amended Original Petition).
3
Cause No. 2010-56653, David Rafferty, et al. v. The Landing Council of Co-Owners, et al.
in the 127th Judicial District Court of Harris County, Texas.
4
Cause No. 2010-27626, The Landing Council of Co-Owners, et al. v. Lloyds of London, et
al. in the 234th Judicial District Court of Harris County. The Lloyds lawsuit was not discussed in the
First Coverage Lawsuit.
3
The Council moves for partial summary judgment and seeks declaratory judgment on
Federal’s duty to defend the remaining Underlying Lawsuits (the now-consolidated Rafferty and
Lloyds lawsuits). Dkt. 22; see App. 237–38. The Council alleges that Federal failed to defend the
Underlying Lawsuits or reimburse the Council for the cost of defense. Dkt. 13. Federal also moves
for summary judgment for a declaration that it has no duty to defend. Dkt. 23. Federal argues that
the Policy’s property damage exclusion applies to all of the Rafferty claims against Council, even
after the Rafferty plaintiffs filed amended pleadings and filed supplements. Id. Furthermore, Federal
raises an objection to the Council’s evidence used in its motion for partial summary judgment and
moves to strike an affidavit. Dkt. 25 at 15–16.
The court will first consider the objection and motion to strike evidence and will then address
the cross-motions for summary judgment.
II. LEGAL STANDARDS
A.
Motion for Summary Judgment
A court shall grant summary judgment when a “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(c). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for
the non-moving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The
moving party bears the initial burden of demonstrating the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986). If the party meets its
burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue
for trial. Fed. R. Civ. P. 56(e). The court must view the evidence in the light most favorable to the
non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org.
v. City of Dall., Tex., 529 F.3d 519, 524 (5th Cir. 2008).
4
On cross-motions for summary judgment, [the court] review[s] each party’s motion
independently, viewing the evidence and inferences in the light most favorable to the nonmoving
party.’” Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299, 304 (5th Cir. 2010) (quoting Ford
Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 498 (5th Cir. 2001)).
B.
Duty to Defend
Under Texas law, courts follow the “eight corners” rule to determine whether an insurer has
a duty to defend. Federated Mut. Ins. Co. v. Grapevine Excavation Inc., 197 F.3d 720, 723 (5th Cir.
1999). “Under this rule, courts compare the words of the insurance policy with the allegations of
the plaintiff’s complaint to determine whether any claim asserted in the pleading is potentially within
the policy’s coverage.” Id. “The duty to defend analysis is not influenced by facts ascertained before
the suit, developed in the process of litigation, or by the ultimate outcome of the suit.” Primrose
Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546, 552 (5th Cir. 2004). Rather, it is determined by
examining the eight corners of the pleadings and the policy. Zurich Am. Ins. Co. v. Nokia, Inc., 268
S.W.3d 487, 491 (Tex. 2008). All doubts with regard to the duty to defend are resolved in favor of
the duty. Id. Courts applying the eight corners rule “give the allegations in the petition a liberal
interpretation.” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchants Fast Motor Lines, Inc.,
939 S.W.2d 139, 141 (Tex. 1997). Courts must not, however, “read facts into the pleadings, . . . look
outside the pleadings, or imagine factual scenarios which might trigger coverage.” Id. at 142.
The insured has the burden of showing that a claim is potentially within the coverage of the
policy. Federated Mut. Ins. Co., 197 F.3d at 723. However, “if the insurer relies on the policy’s
exclusions, it bears the burden of proving that one or more of those exclusions apply. . . . Once the
insurer proves that an exclusion applies, the burden shifts back to the insured to show that the claim
falls within an exception to the exclusion.” Id. Courts “must adopt the construction of an
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exclusionary clause urged by the insured as long as that construction is not itself unreasonable, even
if the construction urged by the insurer appears to be more reasonable or a more accurate reflection
of the parties’ intent.” Barnett v. Aetna Life Ins. Co., 723 S.W.2d 623, 666 (Tex. 1987). However,
the “rules favoring the insured . . . are applicable only when there is an ambiguity in the policy; if
the exclusions in question are susceptible to only one reasonable construction, these rules do not
apply.” Canutillo Indep. Sch. Dist. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 99 F.3d 695, 701
(5th Cir. 1996).
In Texas, an “insurer’s duty to defend and duty to indemnify are distinct and separate duties.”
Farmers Tex. Cty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997). An “insurer may have
a duty to defend but, eventually, no duty to indemnify.” Id. Here, the parties stipulate that the sole
issue in their motions for summary judgment is whether there is a duty to defend. See Dkt. 22 at 6;
Dkt. 23 at 8.
III. ANALYSIS
Both parties seek declaratory judgment as to whether Federal has a duty to defend the
Council in the remaining Underlying Lawsuits. Dkts. 22, 23. The parties stipulated in their
settlement of the First Coverage Lawsuit that the Council reserved the right to seek defense on
coverage based on new pleadings filed after Rafferty’s Second Amended Petition. Dkts. 13, 22, 23.
This would include any claims pleaded in the Third and Fourth Amended Petitions and the First and
Second Supplements to the Fourth Amended Petition. See App. 120–236.
A.
Objection and Motion to Strike
1.
Objection to Claims Not Pled in the Complaint
Federal argues that the Council raised several allegations from the Underlying Lawsuits for
the first time in its motion for partial summary judgment and did not plead them in the complaint.
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Dkt. 25 at 15. Federal contends that only two allegations from the Underlying Lawsuits were listed
in the complaint and in the Council’s motion—that the Council did not have authority to market or
sell the common elements and real estate; and that the condominium governing regime has not been
terminated in accordance with The Landing Declaration and Bylaws. Id.; compare Dkt. 13 (Pl.’s
Compl.), with Dkt. 22 (Pl.’s Mot.). Federal contends that all the other allegations listed in the
Council’s motion were raised for the first time. Id. The Council counters that the allegations from
the Underlying Lawsuits are merely evidence and thus are not required to be specifically pled in a
complaint. Dkt. 28 (citing Fed. R. Civ. P. 8(a)). The Council also refutes Federal’s argument and
counters that it is not offering new theories of recovery against Federal in its motion, but is providing
the court with examples of additional claims from the Underlying Lawsuit that should be covered
by the Policy. Id.
When evaluating the duty to defend under the eight corners rule, the court compares the four
corners of the underlying lawsuit to the four corners of the insurance policy to determine whether
any claims alleged in the petition are potentially within the policy coverage. Willbros RPI, Inc. v.
Continental Cas. Co., 601 F.3d 306, 309–10 (5th Cir. 2010); Guar. Nat. Ins. Co. v. Vic Mfg. Co.,
143 F.3d 192, 193 (5th Cir. 1998).
Even when an insured-plaintiff provides the court with scant information on which
allegations from the underlying lawsuits establish a duty to defend, courts applying the eight corners
rule will look solely to the factual allegations in the underlying lawsuits.
See Hartford Cas. Ins.
Co. v. DP Eng’g, L.L.C., 827 F.3d 423, 428 (5th Cir. 2016). The Fifth Circuit in Hartford noted that
the insured failed to direct the court to specific allegations from the underlying lawsuits that
established the insurer’s duty to defend. Id. The insured instead listed all the allegations from the
underlying petitions and broadly stated that “[o]ne, some or all of the above” allegations are covered
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by the policy. Id. The Fifth Circuit analyzed seventeen allegations from five underlying lawsuits
and affirmed the district court’s finding of no duty to defend because an exclusion applied. Id.
(“Undertaking our own more focused analysis, we look at the facts alleged in the [underlying
lawsuits].”).
Like the plaintiff in Hartford, the Council included some, but not all, of the factual
allegations from the Underlying Lawsuits in its complaint, and stated that “[t]he amended and
supplemental pleadings filed in the Rafferty lawsuit since the Second Amended Original Petition all
state one or more claims that are covered and not excluded under the Policy.” Dkt. 13 at 9.
Following the eight corners rule, the court will examine the factual allegations listed in the
Underlying Lawsuits against the insurance policy—not the allegations from the federal complaint.
Hartford, 827 F.3d at 426; Willbros, 601 F.3d at 309. Because the court’s duty to defend analysis
relies on allegations from the Underlying Lawsuits, the court is persuaded that the Council has pled
enough in its complaint to incorporate all of the allegations from the Underlying Lawsuits. Dkt. 13
at 7 (“The Third Amended Petition in the Rafferty suit substantially changed and added to the factual
allegations, causes of action, and relief sought in that case. For example, the plaintiffs added the
following allegations . . .”) (emphasis added). Therefore, Federal’s objection to the Council’s
pleading is DENIED.
2.
Motion to Strike Affidavit
Federal moves to strike the affidavit of Charles Thomas Jenkins (Dkt. 22, Ex. A) which was
attached to the Council’s motion for partial summary judgment. Dkt. 25 at 16 (Def.’s Resp. to Pl.’s
Mot.). Federal argues that the affidavit does not identify how Jenkins has personal knowledge of the
facts and fails to define which cases comprise the Underlying Lawsuits. The Council argues that
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Federal has already stipulated to the existence of the Underlying Lawsuits and the named defendants
when Federal admitted to this in its answer. Dkt. 18 (Def.’s Answer).
In keeping with the eight corners rule, the court need not decide Federal’s motion to strike
because the court does not consider extrinsic evidence in its duty to defend analysis. See Northfield
Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 535 (5th Cir. 2004) (affirming district court’s
strict application of the eight corners rule and refusing to read extrinsic facts into the pleadings). A
narrow exception to the eight corners rule applies “when it is initially impossible to discern whether
coverage is potentially implicated and when the extrinsic evidence goes solely to a fundamental issue
of coverage which does not overlap with the merits of or engage the truth or falsity of any facts
alleged in the underlying case.” Id. at 531; W. Heritage Ins. Co. v. River Entm’t, 998 F.2d 311, 313
(5th Cir. 1993) (“[W]hen the petition does not contain sufficient facts to enable the court to
determine if coverage exists, it is proper to look to extrinsic evidence in order to adequately address
the issue.”).
But see Allstate Cty. Mut. Ins. Co. v. Wootton, 494 S.W.3d 825, 833 (Tex.
App.—Houston [14th Dist.] 2016), reh’g overruled (June 9, 2016) (“Despite various requests over
the years to recognize exceptions to the eight-corners rule, the Supreme Court of Texas has never
done so.”); Tri–Coastal Contractors, Inc. v. Hartford Underwriters Ins. Co., 981 S.W.2d 861,
863–64 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (applying the strict eight corners
approach to reverse the trial court’s use of extrinsic evidence).
Here, the Fourth Amended Original Petition and its supplements contain factual allegations
of the claims against Federal. See App. 169–236, 259–91. These factual allegations unambiguously
state at least one claim facially within the Policy’s coverage (for example, that the Council marketed
the sale of the real estate without the authority to do so). See Northfield, 363 F.3d at 533. Thus, the
exception to the eight corners rule does not apply.
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The court does not consider extrinsic evidence in its duty to defend analysis and an affidavit
attached to a motion for summary judgment (as in this case) is considered extrinsic evidence.
Therefore, Federal’s motion to strike the Jenkins affidavit is DENIED AS MOOT.
B.
Cross-Motions for Summary Judgment
The central issue is whether any of the factual allegations from the amended petitions in the
Underlying Lawsuits trigger a duty to defend under the Policy. Dkts. 22, 23. The court will consider
the four corners of the Underlying Lawsuits and the four corners of the Policy. In its motion for
partial summary judgment, the Council argues that at least one of the claims in the Underlying
Lawsuits is covered under the Policy and is outside of the Policy’s exclusions, triggering Federal’s
duty to defend. Dkt. 22. In response and in its cross-motion for summary judgment, Federal argues
that the Policy’s property damage exclusion applies to all of the claims. Dkts. 23, 25. That is,
Federal argues that but for the property damage from the hurricane, there would have been “no
wrongful demolition of the condos, no debate about whether to repair or reconstruct The Landing
complex in light of the property damage, and no vacant real estate to sell.” Dkt. 23 at 19.
The Policy’s property damage exclusion excludes coverage for any claims that are “based
upon, aris[e] from, or [are] in consequence of any . . . damage to or destruction of any tangible
property.” See App. 37. Under Texas law, the phrase “‘arise out of’ means that there is simply a
‘causal connection or relation,’ . . . which is interpreted to mean that there is but for causation,
though not necessarily direct or proximate causation.” Utica Nat’l Ins. Co. of Tex. v. Am. Indemn.
Co., 141 S.W.3d 198, 203 (Tex. 2004) (citations omitted). “In cases involving separate and
independent causation, the covered event and the excluded event each independently cause the
plaintiff’s injury, and the insurer must provide coverage despite the exclusion.” Willbros, 601 F.3d
at 311. “In cases involving concurrent causation, the excluded and covered events combine to cause
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the plaintiff’s injuries,” and, “[b]ecause the two causes cannot be separated, the exclusion is
triggered.” Id.
Each party has a different interpretation of the Policy’s property damage exclusion. The
Council urges the court to analyze “whether the claim could have arisen independent of the excluded
event or cause” and argues that the alleged claims in the Rafferty suit arose due to an intervening
cause that “could have arisen without any tangible property damage . . . .” Dkt. 22 at 16. On the
other hand, Federal argues that the “based upon, arising from, or in consequence of” language in the
property damage exclusion should be interpreted broadly. Dkt. 23 at 13. Federal argues that the
court need only find a minimal causal connection to property damage for the exclusion to apply. Id.
The court has previously applied the Council’s interpretation of the policy when it analyzed
whether Federal had a duty to defend the First Coverage Lawsuit. See Landing Council, 2013 WL
4787954, at *7. There, the court evaluated whether “there was an independent cause giving rise to
and thus a duty to defend” each cause of action and whether the property damage exclusion applied
to any claims in the Underlying Lawsuits. Id. (holding there was a duty to defend the Bull Capital
underlying suit with regard to the fiduciary duty issue because the Council’s failure to “collect
assessments after the hurricane due to an undisclosed interest in selling The Landing . . . could have
arisen independent of the hurricane”). Applying the same interpretation of the Policy to the instant
case, the court will consider whether there was an independent cause giving rise to and thus a duty
to defend the Underlying Lawsuits.
The court’s finding of a duty to defend on one claim will trigger the duty to defend on all
claims in the underlying lawsuit. Federated Mut. Ins. Co., 197 F.3d at 723. Plaintiffs in the Rafferty
lawsuit asserted several claims against the Council: that the Council wrongfully demolished the
condominium units; improperly distributed insurance proceeds to recipients not entitled to the
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proceeds; improperly demanded a release of liability as a condition of receiving insurance proceeds;
improperly tabulated votes that purportedly terminated the condominium regime; improperly
conducted an “advisory vote” against the Declaration rules; improperly called the votes that
condominium owners cast as “advisory”; and marketed the sale of real estate upon which The
Landing once stood when the Council did not possess such authority. See App. 169–236. The
interveners in the Lloyds lawsuit alleged that the Council unlawfully spent more than $2 million of
the $6 million dollars of insurance proceeds it received, failed to hold the proceeds in trust, failed
to collect assessments, and failed to disclose to the condominium owners details of a purported offer
to purchase the Landing should demolition occur. See App. 259–90.
When the allegations in the Underlying Lawsuits and the Policy are examined together, the
court concludes that at least some of the factual allegations the Rafferty plaintiffs alleged against the
Council are excluded from the property damage exclusion. Compare App. 169–236, 274–91
(Underlying Lawsuits), with App. 37 (Policy’s property damage exclusion); see Willbros, 601 F.3d
at 310 (“Although the allegations include conduct that arguably qualifies as professional service
under the terms of the exclusion . . . they also contain conduct that clearly does not fit within the
exclusion.”). The court finds at least two claims do not fall within the Policy’s property damage
exclusion.
1. Authority to market or sell the common elements and land
The plaintiffs in the Rafferty suit alleged that the Council “does not possess the authority to
market, much less sell, the real estate.” See App. 231–36 (Second Supplement to Fourth Amended
Petition). The plaintiffs also alleged that a vote was taken and there was no unanimous agreement
among the condominium owners to sell the property. Id.
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The court finds that the Policy’s property damage exclusion does not apply to whether the
Council had authority to market and sell the land. Id.; Dkts. 22, 23. The Council’s decisionmaking
authority does not “arise out of” tangible property damage, nor did any hurricane property damage
cause the Council to make decisions outside of its range of authority. The court agrees with the
Council’s argument that the “Board could have sought to sell the land regardless of any property
damage that occurred . . . [and] the covered claim (that the Board does not have authority to market
or sell the property) and the excluded event (the tangible property damage) each independently
caused the plaintiffs’ alleged injuries.” Dkt. 22 at 17 (emphasis in original). The court is
unpersuaded by Federal’s argument that the Policy’s property damage exclusion applies to litigation
concerning whether the Council had authority to market the sale of the real estate. Dkt. 23.
When conduct to which the exclusion does not apply provides a separate but for cause of the
injury, the insurer must provide coverage. See Willbros, 601 F.3d at 311. Thus, there was a duty to
defend the claim that the Council improperly marketed the sale of the common elements and land.
As to this issue, the Council’s motion for summary judgment is GRANTED, and Federal’s motion
for summary judgment is DENIED.
2. Termination of condominium regime
Though a finding of a duty to defend for one claim triggers the insurer’s duty to defend for
all claims, the court will examine whether a second basis establishes a duty to defend out of an
abundance of caution. The plaintiffs in the Rafferty lawsuit seek a declaration that the condominium
regime has not been properly terminated pursuant to its rules. Dkt. 22 at 17; Dkt. 23 at 15. The
plaintiffs alleged that at a special meeting, homeowners voted to “determine the scope of the
damages and whether or not to reconstruct” the condominium complex. See App. at 188. The
plaintiffs claimed that this vote did not constitute a vote to terminate the condominium governing
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regime because there was a lack of notice about the meeting, and the ballot language did not include
termination. Id. Furthermore, the plaintiffs alleged the vote was improperly conducted because the
votes cast did not reach the 67% threshold of votes required by Section 81.110 of the Texas Property
Code to terminate The Landing. Id.
The Council argues that the improper tallying of votes is an action that falls outside of the
Policy’s exclusion, because the tallying of votes and the resulting termination of the condominium
governing regime did not require or involve property damage. Dkts. 13, 22. Federal, on the other
hand, argues that but for the property damage, the “Council would not have been voting to terminate
the condo,” and thus the exclusion applies and precludes coverage. Dkt. 23 at 16.
The factual allegations show that the Council’s actions—tabulating votes and incorrectly
determining that the requisite number of votes had been received to terminate the condominium
regime—could have arisen separately and independently from any property damage. The court
concludes that the mere tallying up of votes does not “arise from” property damage and thus the
Policy’s property damage exclusion does not apply. Thus, with regard to the claim against the
Council for incorrectly tabulating votes and wrongly terminating the condominium regime, Federal
has a duty to defend. Accordingly, the Council’s motion for partial summary judgment (Dkt. 22) is
GRANTED, and Federal’s motion for summary judgment (Dkt. 23) is DENIED.
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IV. CONCLUSION
The Council’s motion for partial summary judgment for a declaration that Federal has a duty
to defend the Council in the Underlying Lawsuits (Dkt. 22) is GRANTED. Federal’s motion for
summary judgment (Dkt. 23) is DENIED. Additionally, Federal’s objection to the Council’s
pleadings (Dkt. 25 at 15) is DENIED, and its motion to strike the Jenkins affidavit (Dkt. 25 at 16)
is DENIED AS MOOT.
Signed at Houston, Texas on March 23, 2017.
___________________________________
Gray H. Miller
United States District Judge
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