515 F.3d 414 (5th Cir. 2008), 06-61084, Nationwide Mut. Ins. Co. v. Lake Caroline, Inc.
|Citation:||515 F.3d 414|
|Party Name:||NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. LAKE CAROLINE, INC., Defendant-Appellant.|
|Case Date:||January 23, 2008|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
[Copyrighted Material Omitted]
John Donelson Brady (argued), Mitchell, McNutt & Sams, Columbus, MS, for Plaintiff-Appellee.
Glenn Gates Taylor (argued), Copeland, Cook, Taylor & Bush, Ridgeland, MS, for Defendant-Appellant.
Appeal from the United States District Court for the Southern District of Mississippi.
Before KING, BARKSDALE and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
This insurance case primarily involves the issue of whether the instant insurance policy provides coverage for a slander of title claim. The district court concluded that the policy did not provide such coverage and that the insurer had no duty to defend the insured against any such claim. For the reasons stated herein, we affirm.
I. BACKGROUND FACTS
During the 1980's, Lake Caroline, Inc. ("LCI") constructed the Lake Caroline subdivision located in Madison County, Mississippi (the subdivision is hereinafter referred to as "Lake Caroline"). On August 7, 1989, the Madison County Board of Supervisors (the "Board") re-zoned Lake Carolina from "A-1 Agricultural" to "P-1 Planned Unit Development." Accordingly, on December 4, 1989, LCI executed a "Declaration of Covenants, Conditions, and Restrictions for Lake Caroline." LCI also created the Lake Caroline Planned Unit Development ("LCI PUD").
A&F Properties, LLC ("AFP") was interested in constructing and operating a golf course in Lake Caroline. On September 27, 1995, LCI and AFP entered into a "Contract for the Sale and Purchase of Real Properly" (the "Contract") under which LCI agreed to give AFP 154 acres of Lake Caroline (hereinafter referred to as the "Golf Course Lands") in consideration for AFP building and maintaining a golf course for a period of not less than ten years, i.e., until December 31, 2006. The Contract and warranty deed provided that the Golf Course Lands would be subject to zoning ordinances and other governmental regulations. AFP constructed and began operating the golf course in 1996.
On February 25, 1998, the Board adopted the 1998 Master Plan for the LCI PUD. The 1998 Master Plan was, according to LCI, the first plan adopted for the LCI PUD and reflected the then-existing conditions of Lake Caroline, including the existence of the golf course.
In 2003, AFP became disillusioned with running the golf course and instead wanted to residentially develop the Golf Course Lands. AFP twice petitioned the Board -- in November 2003 and April 2004 -- to re-zone the Golf Course Lands to allow for residential development. Both attempts were opposed by LCI, the Lake Caroline Owners' Association, and hundreds of individual homeowners. The Board tabled the November 2003 petition as premature because AFP was contractually obligated to operate the golf course until December 31, 2006. The Board's denial of the April 2004 petition on the same grounds was affirmed on appeal by the Circuit Court of Madison County and then the Mississippi Supreme Court. See A&F Props., LLC v. Madison County Bd. of Supervisors, 933 So.2d 296 (Miss. 2006).
On December 9, 2004, AFP filed suit in state court against LCI alleging breach of
contract, breach of warranty deed, and slander of title claims. According to the AFP complaint, the Board had initially approved a master plan for Lake Caroline in 1989. However, the Board lost the only physical copy of the 1989 Master Plan, prompting it to adopt a new master plan in 1998. AFP alleges that it knew nothing of the 1998 Master Plan because LCI withheld the fact that it was presenting a new plan to the Board. AFP further alleges that LCI withheld from the Board that AFP was free to make other use of its property after the Contract term expired. AFP also claims that LCI repeatedly misrepresented to the Board that LCI was the only developer within the LCI PUD, implying that AFP was not a developer and did not have rights to develop the subject property. AFP characterizes LCI's conduct as intentional and/or malicious.
LCI owns an insurance policy (the "Policy") issued by Nationwide Mutual Insurance Company ("Nationwide"). On November 17, 2005, Nationwide filed suit in federal court seeking a declaratory judgment that the allegations in the AFP complaint do not trigger its duty to defend under the Policy. The relevant provisions policy are as follows:
Coverage A governs "property damage" and provides, in pertinent part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.
"Property damage" is defined to include:
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. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
However, coverage is limited to property damage "caused by an 'occurrence' that takes place in the 'coverage territory.' " An "occurrence" is defined in the Policy to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Finally, the Policy contains an "expected or intentional conduct" exclusion. Thus, coverage does not apply to property damage that is "expected or intended from the standpoint of the insured."
Coverage B governs "personal and advertising injury" and provides, in pertinent part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or "suit" that may result.
"Personal and advertising injury" is defined in the Policy to include "[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or
organization's goods, products or services." However, the Policy also contains a "knowledge of falsity" exclusion. Thus, coverage does not apply to any " '[p]ersonal and advertising injury' arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity."
On September 28, 2006, the district court entered judgment in favor of Nationwide on the ground that the AFP complaint alleges only intentional conduct thereby triggering the "expected or intentional conduct" exclusion under Coverage A and the "knowledge of falsity" exclusion under Coverage B. Thus, according to the district court, Nationwide has no duty to defend LCI against the AFP complaint because the allegations in that complaint do not...
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