Amerisure Ins. Co. v. Thermacor Process, Inc.

• Decision Date: 19 March 2021
• Docket Number: Civil Action No. 4:20-cv-01089-P
• Parties: AMERISURE INSURANCE COMPANY, Plaintiff, v. THERMACOR PROCESS, INC. F/K/A THERMACOR PROCESS, L.P., Defendant.
• Court: U.S. District Court — Northern District of Texas

AMERISURE INSURANCE COMPANY, Plaintiff, v. THERMACOR PROCESS, INC.F/K/A THERMACOR PROCESS, L.P., Defendant.

Civil Action No. 4:20-cv-01089-P

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION

March 19, 2021

MEMORANDUM OPINION & ORDER

There is currently pending a lawsuit in California state court ("California Suit"). In the California Suit, Thermacor Process, Inc. f/k/a Thermacor Process, L.P. ("Thermacor") has been sued for damages arising out of the allegedly defective installation of Thermacor's pipe system and the fact that the pipe system itself is allegedly defective. Orig. Compl. at ¶ 4.2, ECF No. 1. Amerisure Insurance Company ("Amerisure") is Thermacor's liability insurance provider pursuant to a commercial general liability insurance policy ("Policy") issued by Amerisure to Thermacor. Id. at ¶ 4.1.

While the California Suit remains pending, Amerisure filed the instant Original Complaint and Request for Declaratory Judgment ("Orig. Compl."), seeking a declaratory judgment from this Court that under the Policy, Amerisure has no duty to defend Thermacor in the California Suit, that Amerisure has no duty to indemnify Thermacor for any damages arising out of the California Suit, and that the Policy does not cover tear-out costs. Orig. Compl. at 7-11; ECF No. 1. Thermacor answered and, inter alia, asserted a declaratory judgment counterclaim, seeking a declaratory judgment from the Court that Amerisure has a continuing duty to provide a complete (rather than pro rata defense) in the California Suit, that Amerisure has forfeited its right to control the defense or use certain confidential materials in the California Suit, that Thermacor is entitled to independent counsel in defending the California Suit, and that Amerisure is not entitled to reimbursement from Thermacor for any defense fees and costs paid by Amerisure in defending the California Suit. See ECF No. 27 at ¶ 8.

Now before the Court are motions to dismiss from both sides. ECF Nos. 14, 18. For the reasons stated below, the Court finds that Thermacor's Motion to Dismiss should be DENIED and Amerisure's Motion to Dismiss should be DENIED.

BACKGROUND¹

A. The California Suit

This declaratory judgment action follows a lawsuit filed on February 6, 2019 in California state court against Thermacor and other defendants, arising out of an allegedfailed steam pipe system. Orig. Compl. at ¶¶ 4.1-4.2, Ex. A at ¶ 16; ECF No. 1. The Regents of the University of California ("Regents")—the plaintiff in the California Suit—alleges that Thermacor supplied a pipe system as part of a network of steam pipelines and condensate return lines that are used primarily to heat various buildings on the University of California, Davis ("UC Davis") campus. Id. According to its complaint, Regents contracted with various parties to install various lines in a series of projects running from 2009 to 2013. Orig. Compl., Ex. A at ¶ 19. Regents alleges that Thermacor was aware of and involved with contracts with the installing parties to provide its pipe system. Id. at ¶ 20. Regents believes Thermacor was involved with providing installation instruction as well as supervision of critical periods of installation of the pipes at UC Davis. Id. at 21.

Regents asserts that within the last two years, it has become aware that the pipe system is "plagued by the complete destruction of the installation." Id. at 22. And while Regents believes contractors' errors during the installation occurred, Regents also contends that Thermacor's pipe system is inherently defective. Id. Due to these problems, Regents claims Thermacor's pipe system is failing and will need to be replaced in only a few years and that Regents has incurred significant damages for investigation and temporary repairs, as well as future costs to remove and replace the damaged pipes. Id. at ¶¶ 23-24. Regents brings claims against Thermacor for negligence, breach of certain warranties, and products liability. Id. at ¶¶ 25-32, 41-55.

B. The Policy

Thermacor paid a premium of $31,095 to Amerisure, and Amerisure issued Thermacor a commercial general liability insurance and commercial property coverageinsurance policy, effective from August 11, 2011 to August 11, 2012. Orig. Compl. at ¶ 4.1, Ex. B; Amend. CC at ¶ 1, ECF No. 27. Amerisure contends that the claims against Thermacor in the California Suit are not covered by the Policy. The relevant provision of the Policy that Amerisure asserts are as follows:

SECTION I - COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. 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.

. . . .

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";

(2) The "bodily injury" or "property damage" occurs during the policy period.

. . . .

2. Exclusions

This insurance does not apply to:

. . . .j. "Property damage" to:

. . . .

(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or

(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. This exclusion does not apply to liability assumed under a sidetrack agreement or to "property damage" included in the "products-completed operations hazard".

. . . .

k. Damage to Your Product

"Property damage" to "your product" arising out of it or any part of it.

l. Damage to Your Work

"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard".

m. Damage to Impaired Property Or Property Not Physically Injured

"Property damage" to "impaired property" or property that has not been physically injured, arising out of :

(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work", or

(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.. . . .

SECTION V - DEFINITIONS

. . . .

8. "Impaired property" means tangible property, other than "your product" or "your work", that cannot be used or is less useful because:

a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous; or

b. You have failed to fulfill the terms of a contract or agreement; if such property can be restored to use by the repair, replacement, adjustment or removal of "your product" or "your work" or your fulfilling the terms of the contract or agreement.

. . . .

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

. . . .

17. "Property damage" means:

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.

. . . .

21. "Your product":

a. Means:

(1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(a) You;

(b) Others trading under your name; or

(c) A person or organization whose business or assets you have acquired; and

(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product"; and

(2) The providing of or failure to provide warnings or instructions.

Orig. Compl. at ¶ 4.1, Ex. B.

C. Procedural History

On September 22, 2020, Amerisure filed this suit against Thermacor, requesting a declaratory judgment from the Court that with respect to the California Suit, Amerisure has no duty to defend and no duty to indemnify under the Policy. Orig. Compl. at ¶ 6.1. Amerisure expressly pleads that it does not seek to recover damages or attorney's fees in connection with this suit. Id. at ¶¶ 5.7-5.8. In spite of these contentions, Amerisure alleges that it has nevertheless agreed to defend Thermacor in the California Suit, subject to a reservation of rights and this suit seeking in a declaration that it has no duty to defend or indemnify Thermacor. Id. at ¶ 4.3. Amerisure further asserts that it will provide such a defense in the California Suit "until its obligation to defend Thermacor is adjudicated[.]" Id. at ¶ 4.4.

Thermacor responded by filing an answer and asserting its own declaratory judgment counterclaim. ECF No. 15. Thermacor asserts that it properly notified Amerisure of the California Suit and requested defense coverage, and while Amerisure has provided a defense, Thermacor complains that Amerisure failed to provide a complete defense. Amend. CC. at ¶ 3, ECF No. 27. Thermacor further complains that Amerisure sent a reservation-of-rights letter on June 13, 2019, unilaterally asserting that it reserved its right to seek reimbursement for defenses costs. Id. at ¶ 4. Thermacor alleges that not only has Amerisure failed to provide a complete defense in the California suit, but it has "attempted to communicate with [Regents] in an attempt to include [it] in this coverage lawsuit." Id. at ¶ 5. And these actions were taken after Amerisure had "embedd[ed] itself in in Thermacor's...