Am. Southern Ins. Co. v. Buckley

• Decision Date: 28 September 2010
• Docket Number: Civil Action No. 1:09–CV–723.
• Citation: 748 F.Supp.2d 610
• Parties: AMERICAN SOUTHERN INSURANCE COMPANY, Plaintiff,v.Michael BUCKLEY, d/b/a Buckley & Sons Plumbing, Shiloh Enterprises, Inc., Cleveland Imaging and Surgical Hospital, L.L.C., Colony Insurance Group, John Doe Insurance Compan(ies) 1–10, Defendants.
• Court: U.S. District Court — Eastern District of Texas

748 F.Supp.2d 610

AMERICAN SOUTHERN INSURANCE COMPANY, Plaintiff,

v.Michael BUCKLEY, d/b/a Buckley & Sons Plumbing, Shiloh Enterprises, Inc., Cleveland Imaging and Surgical Hospital, L.L.C., Colony Insurance Group, John Doe Insurance Compan(ies) 1–10, Defendants.

Civil Action No. 1:09–CV–723.

United States District Court, E.D. Texas, Beaumont Division.

Sept. 28, 2010.

Catherine Love Hanna, Hanna & Plaut, Austin, TX, Constance Boaz Woods, Atlanta, GA, for Plaintiff.Chad Wayne Etheridge, Law Offices of Etheridge & Ougrah LLP, Houston, TX, John Charles Tollefson, Lori J. Murphy, Tollefson Bradley Ball & Mitchell, Dallas, TX, for Defendants.

MEMORANDUM ORDER ADOPTING REPORT AND RECOMMENDATION ON MOTIONS TO STRIKE AND MOTION TO DISMISS

RON CLARK, District Judge.

The Court referred this matter to United States Magistrate Judge Keith F. Giblin at Beaumont, Texas, for hearing and submission of a recommended disposition on case-dispositive motions pursuant to 28 U.S.C. § 636(b)(1)(B) and the Local Rules for the United States District Court for the Eastern District of Texas. The plaintiff American Southern Insurance Company (“ASIC”) filed several motions which are pending before the Court.

On September 1, 2010, Judge Giblin issued his Report and Recommendation on Motion to Dismiss and Motions to Strike [doc. # 40]. Judge Giblin recommended that the Court deny ASIC's Rule 12 motion to dismiss and motion to strike Defendant Colony's answer, counterclaim and cross-claim in part, and grant it in part. He also recommended that the Court deny ASIC's Rule 12 motion to strike defendant Michael Buckley d/b/a Buckley & Sons Plumbing's Answer and Counterclaim.

To date, no party has filed objections to the magistrate judge's proposed findings and recommendation. Accordingly, having reviewed the record and Judge Giblin's report, the Court agrees with the magistrate judge's findings and recommended disposition. The Court ORDERS that the Report and Recommendation [doc. # 40] is ADOPTED. Judge Giblin's findings and conclusions of law are incorporated in support of this order.

The Court further ORDERS that ASIC's Rule 12 motion to dismiss and motion to strike Defendant Colony's answer, counterclaim and cross-claim [doc. # 13] is GRANTED in part, and DENIED in part. The motion is denied on the Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction; denied on the Rule 12(b)(6) motion to dismiss Colony's breach of contract claim against ASIC; granted with regard to the Rule 12(b)(6) motion to dismiss Colony's statutory claim under the Texas Insurance Code, and denied with regard to the Rule 12(f) motion to strike. It is further ORDERED that ASIC's motion to strike defendant Michael Buckley d/b/a Buckley & Sons Plumbing's Answer and Counterclaim filed against ASIC [doc. # 22] is DENIED.

REPORT AND RECOMMENDATION ON MOTION TO DISMISS AND MOTIONS TO STRIKE

KEITH F. GIBLIN, United States Magistrate Judge.

The District Court referred this proceeding to the undersigned United States Magistrate Judge, at Beaumont, Texas, for determination of non-dispositive pretrial matters and the entry of findings of fact and recommended disposition on case-dispositive matters pursuant to 28 U.S.C. § 636 and the Local Rules for the Assignment of Duties to United States Magistrate Judges. Pending before the Court for purposes of this report are Defendant American Southern Insurance Company (ASIC)'s motion pursuant to Rule 12 to strike defendant Michael Buckley d/b/a Buckley & Sons Plumbing's (“Buckley”) answer and counterclaim filed against ASIC (doc. # 22) and ASIC's Rule 12 motion to dismiss and motion to strike Defendant Colony's answer, counterclaim and cross-claim (doc. # 12).

BackgroundA. ASIC's Claims

On July 29, 2009, the plaintiff, ASIC, filed its complaint for declaratory judgment against defendants Buckley, Shiloh Enterprises, Inc., Cleveland Imaging and Surgical Hospital, L.L.C., Colony, and John Doe Insurance Compan(ies) (1–10). See Complaint (doc. # 1). ASIC states that diversity of citizenship is the basis for federal jurisdiction pursuant to 28 U.S.C. § 1332(a). Id. at ¶ 8.

ASIC specifically asserts a dispute with respect to insurance coverage. As for the factual background, ASIC states that on October 12, 2004, Buckley entered into a contract with Shiloh Enterprises, Inc., (“Shiloh”) to perform the plumbing work on construction at Cleveland Imaging and Surgical Hospital, L.L.C. (“Cleveland Imagining.”). See generally Complaint, at ¶¶ 15–25. Buckley's work at Cleveland continued into and was not completed until 2006. In the course of litigation in state court, specifically CPR Services & Supplies, Inc., d/b/a MDN Enterprises v. Cleveland Imaging and Surgical Hospital, L.L.C., (“CPR Services v. Cleveland Imaging” ), case number CV–73362, pending in Liberty County District Court, Cleveland Imaging filed a cross-claim against Buckley and Shiloh on October 29, 2008. Cleveland Imaging's cross-claim in that case alleges that Buckley and Shiloh caused property damage during construction which has caused water damage, leaks and damage to equipment and property. The pleadings filed in that matter contain as exhibits copies of invoices between CPR and Buckley for supplies and materials presumably used by Buckley at Cleveland. Those invoices are dated from November 2005 into 2006. Cleveland Imaging's cross-claim seeks damages for the costs and expenses to fully and completely repair any problems or defects in the work performed.

ASIC further states in its complaint that upon information and belief, Colony issued a commercial general liability policy (“CGL”) to Buckley beginning July 20, 2005. ASIC also states that upon information and belief, Colony is currently defending Buckley in the underlying litigation, CPR Services v. Cleveland Imaging, in Liberty County. On May 7, 2009, Colony tendered the matter of CPR Services v. Cleveland Imaging to ASIC and requested it to participate in the defense of Buckley in that case.

According to ASIC's complaint, it issued a CGL, policy number GL79555 to Buckley effective April 28, 2004, through April 28, 2005. Id. at ¶ 10. It then issued a CGL, policy number GL79555A, to Buckley, effective April 28, 2005, through April 28, 2006. Id. at ¶ 13. ASIC states that policy number GL79555A was cancelled effective July 20, 2005, at the request of Buckley. Id. at ¶ 14. Based on these ASIC policies, ASIC claims that it is entitled to a declaration that neither Policy GL79555 nor Policy GL79555A provides coverage for this claim because the alleged property damage at issue did not occur during the ASIC policy periods because, according to ASIC, Cleveland Imaging's water damages and/or leaks did not occur on or before July 20, 2005. This constitutes Count I of its complaint, seeking a declaration of no coverage based on the policy periods.

Counts II, III, and IV seek a declaration of no coverage under the ASIC policies based on various exclusions to policy numbers GL79555 and GL79555A. See Complaint, at ¶¶ 32–46. ASIC contends that there is no coverage under the ASIC policies under the property damage exclusions, the damage to your work exclusion, and the mold exclusions. Id. ASIC accordingly requests a declaratory judgment from this Court setting forth its rights and obligations under the ASIC policies in connection with Buckley's work at issue in the CPR Services v. Cleveland Imaging litigation. ASIC specifically contends that there is no coverage for Buckley's work which is the subject of that litigation, and requests that this Court declare that ASIC is not obligated to expend any sums on behalf of Buckley with regard to Cleveland Imaging's cross-claim in that case. Id. at ¶ 48. ASIC requests that this Court accordingly enter judgment concluding that the damages at issue did not occur during the relevant ASIC policy periods; that the specific exclusions discussed above apply, thus eliminating coverage; and that ASIC is not obligated to defend, indemnify or expend any sums on behalf of Buckley arising out of the CPR Services v. Cleveland Imaging case. Id.

B. Colony's Responses to ASIC's Claims

On September 28, 2009, Colony filed its answer to ASIC's complaint for declaratory judgment, as well as its counterclaim against ASIC and its cross-claim against co-defendants (doc. # 8). In its answer, as an affirmative defense, Colony states that its policy of insurance issued to Buckley provides no coverage for the loss referenced in ASIC's complaint. See Colony's Answer, at p. 1. In support, Colony similarly argues that the damages at issue did not occur within the effective dates of coverage under Colony's policy; that the damage at issue does not constitute an occurrence for purposes of coverage under the Colony policy; and that coverage is also barred by the “work product,” “business risk” and mold exclusions of the Colony policy. Id. at 2–7.

Colony also asserts a counterclaim against ASIC, and a cross-claim against its co-defendants, including Buckley, seeking a declaration from the Court that it has no duty to defend or indemnify Buckley in the CPR Services v. Cleveland Imaging case. Id. at 10–11. Colony further requests, in the alternative, that the Court issue a declaration that both it and ASIC owe the duty to defendant and indemnify Buckley. Id. at 11. Colony further asserts a breach of contract claim against ASIC, arguing that ASIC is in breach of its contract with Buckley. Id. In support Colony avers that it is contractually, legally and equitably subrogated to the rights of Buckley because it has expended reasonable and necessary attorney's fees defending Buckley pursuant to a reservation of rights in the underlying state court litigation. Id. It asserts that it is accordingly entitled to judgment against ASIC for the fees, costs and expenses incurred in defending Buckley. Id. at 11–12.

Colony also claims that it is entitled to recover its fees from ASIC under the Texas Civil Practice...