Charter Sch. Solutions v. Guideone Mut. Ins. Co.

• Decision Date: 06 June 2019
• Docket Number: EP-18-CV-61-KC
• Parties: CHARTER SCHOOL SOLUTIONS, Plaintiff, v. GUIDEONE MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of Texas

407 F.Supp.3d 641

CHARTER SCHOOL SOLUTIONS, Plaintiff,

v.GUIDEONE MUTUAL INSURANCE COMPANY, Defendant.

EP-18-CV-61-KC

United States District Court, W.D. Texas, El Paso Division.

Signed June 6, 2019

Joe A. Spencer, Jr., Attorney at Law, El Paso, TX, Kevin N. Colquitt, Mazin A. Sbaiti, Sbaiti & Company PLLC, Dallas, TX, for Plaintiff.

Jenna Zwang, R. Chad Geisler, Ryan C. Bueche, Germer Beaman and Brown P.L.L.C., Austin, TX, for Defendant.

ORDER

KATHLEEN CARDONE, UNITED STATES DISTRICT JUDGE

On this day, the Court considered Defendant GuideOne Mutual Insurance Company's Motion for Full and Final Summary Judgment (the "Motion") in the above-captioned case. ECF No. 30. For the reasons set forth herein, the Motion is GRANTED in part and DENIED in part.

I. BACKGROUND

Unless otherwise noted, the following facts are not contested. This case involves an insurance coverage dispute regarding hail damage to property that Plaintiff currently owns at 9405 Betel Drive, El Paso, Texas (the "Property"). The Property was formerly owned by a church, Iglesia Puerta del Cielo ("Iglesia"). Complaint ¶ 44, ECF No. 1. Iglesia purchased a policy from Defendant to insure the Property against hail damage for between September 1, 2013, until October 23, 2016, (the "Policy"). Id. at ¶ 21; Mot. Ex. B.

In October 2015, a hail storm struck El Paso.¹ Compl. ¶ 12. The parties dispute the extent to which the Property was damaged during this hail storm. The parties agree, however, that a second hail storm struck the Property in November 2016, and that this storm caused at least some damage. See Def.'s Proposed Undisputed Facts p. 2, ECF No. 38; Pl.'s Proposed Undisputed Facts p. 2, ECF No. 43.

On December 2, 2016, Iglesia filed a voluntary petition for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Western District of Texas. Resp. Ex. 1, at 4. The bankruptcy court granted the trustee's motion to sell the Property to Plaintiff on January 31, 2017. Id. at 49–50.

On February 6, 2017, Iglesia filed a claim with Defendant for hail damage to the Property's roof (the "Claim"). Resp. Ex. 10, at 1. On February 24, 2017, the bankruptcy trustee and Plaintiff signed a formal agreement assigning to Plaintiff all claims and proceeds under the Policy. Resp. Ex. 1, at 303–07. The bankruptcy court reviewed this agreement and ordered that Plaintiff "is the rightful holder of claims under and beneficiary of proceeds from the Policy and is the proper party with which to address any claims under the Policy," and that "GuideOne Insurance is directed to address any claims under the Policy and pay proceeds resulting from any claims to [Charter School Solutions]."² Id. at 117.

Meanwhile, Defendant assigned an independent adjustor, Rose Hernandez, to evaluate the Claim. Resp. Ex. 10, at 13. Hernandez inspected the Property in February 2017 and "confirm[ed] the actual date of loss for [October 2015]." Resp. Ex. 15. Defendant subsequently assigned the Claim to Mike Ellison, who worked on Defendant's large loss team. Resp. Ex. 10, at 12. Ellison also inspected the Property and "found that the entire roof structure was damaged by hail." Id. at 11. Ellison hired an outside engineer, Jim Koontz, to evaluate the roof. Id. at 9. Koontz reported that the roof's damage resulted from the November 2016 hail storm. Id. He further opined that "the roof was not damaged in October 2015." Id.

Defendant denied the Claim on June 7, 2017, because it had "determined the damage to the roof at the [Property] did not occur during the policy period," and therefore, "no coverage existed for the hail claim presented." Resp. Ex. 16. On December 14, 2017, Plaintiff sent Defendant a letter demanding $1,824,193.62 to cover the claimed damage and its attorneys' fees. Mot. Ex. E, at 2. Defendant declined to meet this demand, explaining Iglesia was the "Named Insured" under the Policy, whose rights and duties could not be assigned to Plaintiff. Resp. Ex. 18.

On February 19, 2018, Plaintiff filed this lawsuit, which asserts five causes of action against Defendant: breach of contract, breach of the duty of good faith and fair dealing, violations of chapters 541 and 542 of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code § 17.41 et seq. Compl. ¶¶ 43–140. Defendant has filed the instant Motion, arguing it is entitled to summary judgment as a matter of law on each of Plaintiff's claims. See generally Mot.

II. DISCUSSION

A. Standard

A court must enter summary judgment "if the 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(a) ; see Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Weaver v. CCA Indus., Inc. , 529 F.3d 335, 339 (5th Cir. 2008). "A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law." Sossamon v. Lone Star St. of Tex. , 560 F.3d 316, 326 (5th Cir. 2009) (quoting Hamilton v. Segue Software, Inc. , 232 F.3d 473, 477 (5th Cir. 2000) (per curiam)). A dispute about a material fact is genuine only "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Ellison v. Software Spectrum, Inc. , 85 F.3d 187, 189 (5th Cir. 1996).

"[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex , 477 U.S. at 323, 106 S.Ct. 2548 ; Wallace v. Tex. Tech. Univ. , 80 F.3d 1042, 1046–47 (5th Cir. 1996). To show the existence of a genuine dispute, the nonmoving party must support its position with citations to "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials[,]" or show "that the materials cited [by the movant] do not establish the absence ... of a genuine dispute, or that [the moving party] cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c).

The court resolves factual controversies in favor of the nonmoving party; however, factual controversies require more than "conclusory allegations," "unsubstantiated assertions," or "a ‘scintilla’ of evidence." Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Further, when reviewing the evidence, the court must draw all reasonable inferences in favor of the nonmoving party and may not make credibility determinations or weigh evidence. Man Roland, Inc. v. Kreitz Motor Express, Inc. , 438 F.3d 476, 478–79 (5th Cir. 2006) (citing Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) ). Thus, the ultimate inquiry in a summary judgment motion is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson , 477 U.S. at 251–52, 106 S.Ct. 2505.

B. Non-Assignment Clause

Defendant first argues that Plaintiff lacks standing to bring this lawsuit because Iglesia, not Plaintiff, is the "Named Insured" under the Policy. Mot. 15.

The Policy contains a non-assignment clause, which provides that Iglesia's "rights and duties ... may not be transferred without [GuideOne's] written consent except in the case of death of an individual Named Insured." Mot. Ex. F, at 7. And, because Defendant never consented to Iglesia transferring the Policy to Plaintiff during its bankruptcy proceedings, Defendant contends that Plaintiff may not sue under the Policy. Mot. 15. Plaintiff disagrees, arguing the Bankruptcy Code authorizes the trustee to assign the debtor's executory contracts, irrespective of any non-assignment clause. Resp. 15–16 (citing 11 U.S.C. § 365(f) ). In response, Defendant suggests the Policy was no longer an executory contract when Iglesia filed for bankruptcy and, therefore, the Policy could not be assigned to Plaintiff.³ Reply 9–10.

The Bankruptcy Code permits the bankruptcy trustee to assign an executory contract of the debtor to a third party, notwithstanding a provision in the contract that "prohibits, restricts, or conditions the assignment of such contract." 11 U.S.C. § 365(f)(1) ; see Matter of Provider Meds, LLC , 907 F.3d 845, 851 (5th Cir. 2018). While the Bankruptcy Code does not define an "executory contract," the Fifth Circuit has explained that a contract is executory if "performance remains due to some extent on both sides and if at the time of the bankruptcy filing, the failure of either party to complete performance would constitute a material breach of the contract, thereby excusing the performance of the other party." Provider Meds , 907 F.3d at 851 (internal quotation marks omitted); see also In re Am. Magnesium Co. , 488 F.2d 147, 152 (5th Cir. 1974) ("An executory contract is one in which a party binds himself to do or not do a particular thing, whereas an executed contract is one in which the object of the agreement is already performed."). State law determines whether a remaining contractual obligation is material and whether the failure to perform constitutes a material breach. In re Texscan Corp. , 976 F.2d 1269, 1272 (9th Cir. 1992).

For purposes of the Bankruptcy Code, an insurance policy is a contract. In re Fort Worth Osteopathic Hosp., Inc. , 387 B.R. 706, 713 n.14 (Bankr. N.D. Tex. 2008) ; see also Nat'l Union Fire Ins. Co. v. Crocker , 246 S.W.3d 603, 606 (Tex. 2008) ("Insurance policies are written contracts."). However, courts are split about whether an insurance policy that expired or terminated before the debtor filed for bankruptcy can qualify as an executory contract...