Hardesty Builders Inc v. Mid-continent Cas. Co.
| Decision Date | 13 December 2010 |
| Docket Number | CIVIL ACTION NO. C-10-142 |
| Parties | HARDESTY BUILDERS, INC., Plaintiff, v. MID-CONTINENT CASUALTY COMPANY, et al, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the Court are Plaintiff Hardesty Builder's Inc.'s Motion for Partial Summary Judgment (D.E. 35) and Defendants Mid-Continent and Oklahoma Surety Company's Motion for Summary Judgment (D.E. 36.) For the reasons stated herein, Plaintiff's Motion for Partial Summary Judgment (D.E. 35) is DENIED. Defendants' Motion for Summary Judgment (D.E. 36) is GRANTED.
The Court has diversity subject matter jurisdiction over this case pursuant to 28 U.S.C. §1332(a) because all parties are diverse and the amount in controversy exceeds $75,000.
Plaintiff Hardesty Builders, Inc. ("Hardesty") is the owner of a succession of Commercial General Liability policies (referred to collectively as "the Policy") purchased from Defendant Oklahoma Surety Company ("OSC"). Defendant Mid-Continent Casualty Company ("Mid-Continent") is the parent company of Defendant OSC. Most of Hardesty's transactions were through Mid-Continent. Intervenor Simon Herbert & McClelland, LLP is the law firm that represented Hardesty in defending and settling the claims that are the subject of this action. (D.E. 11.)
In January 2004, Hardesty entered into a construction contract with Jane and Lee Guinn to gut and remodel their home and construct several new buildings on the premises. Hardesty completed the work around October 2006. Beginning in 2007, the Guinns began to complain of various defects in the work completed.
Beginning in April or May of 2008, Hardesty, through its lawyer, Paul Simon, kept OSC periodically informed of the progress of the Guinns' claim against Hardesty. (D.E. 44 at 4; D.E. 46, Ex. J (emails with Mellinee Harwick)).
In a letter dated May 19, 2008, Mid-Continent acknowledged receipt of "Claim Number 1303521, " filed by Claimants, Dr. Lee Guinn and Jane Guinn. (D.E. 46, Ex. F at 1.) The letter states: (Id.) The letter is signed by Claude Husbands, who is listed as "Senior Claim Representative." (Id. at 7.)
Around July 21, 2008, the Guinns filed a request to initiate the Texas Residential Construction Commission's State Sponsored Inspection Process ("SIRP") pursuant to Tex. Prop. Code § 426.001 et seq. (D.E. 36, Ex. E; D.E. 35, Ex. 1.) The SIRP continued throughout 2008. (D.E. 36, Ex. I at 26-27.)
The evidence shows that during the SIRP period, Hardesty's lawyer Mr. Simons kept in contact with Mr. Husbands at Mid-Continent by email and telephone. On September 18, 2008, Mr. Simon emailed Mr. Husbands the contract between the Guinns and Hardesty. (D.E. 46, Ex. K, p. 1.) On September 22, 2008, Mr. Simon sent an email responding to Mr. Husband's requestabout Hardesty's subcontractors, and asked how long it would be before Mid-Continent would "be able to issue a letter accepting coverage." (Id. at 2.) On October 16, he stated in another email to Mr. Husbands: (Id. at 3.) However, in neither of these transactions did Mr. Simon attach the SIRP request form or any further documentation regarding the ongoing SIRP proceeding.
The final appellate ruling in the SIRP, finding the presence of construction defects in Hardesty's work for the Guinns, was issued in January 2009. (D.E. 36, Ex. I at 26-27.)
Mr. Simon continued to contact Mr. Husbands regarding coverage. In an email dated March 4, 2009, Mr. Simon wrote to Mr. Husbands:
I tried calling you before sending this email. I am again attempting to learn whether Mid-Continent has determined whether to cover, deny, or cover with or more reservation(s), [Claim Number 1303521. I believe Mid-Continent was first made aware of this claim nearly a year ago, and Hardesty has always cooperated with Mid-Continent in its request for information.
In any case, as I mentioned in my voicemail, the State sent an inspector to the house, and while its findings are generally favorable to Hardesty (e.g. no evidence of roof leaks and the doors and windows are windproof), its recommendations largely appear to go against Hardesty (though I think even the homeowners' lawyer would agree that's anything but a clear issue.)
In any case, I need to [sic] know, not just whether Mid-Continent will cover this claim but also whether Mid-Continent will deny coverage that otherwise might exist based on Hardesty's requirement, under the law, to make a settlement offer to the other side. Please let me know as soon as possible. If you call me today or tomorrow, please call me on my home number...If you call me Friday or later, please call me at the office[.]
Mr. Simon claims that two days later, on March 6, 2009, he received a phone call from Mr. Husbands. Mr. Simon contends that during this phone conversation Mr. Husbands informedhim that Mid-Continent was going to deny coverage and that a letter denying coverage would follow. (D.E. 36, Ex. I (Simon Depo.) at 33-35, 39.)1
On May 15, 2009, the Guinns filed a lawsuit against Hardesty for negligence and violations of the Texas Deceptive Trade Practices Act ("TDCA") in the 156th Judicial District Court, Aransas County, Texas. (D.E. 46, Ex. B.)
Beginning on June 1, 2009, Hardesty and the Guinns conducted a mediation to attempt to resolve their differences. Hardesty ultimately reached a settlement with the Guinns. (D.E. 46, p. 4; D.E. 44, p. 4.)
However, Mid-Continent did not attend the mediation and did not approve of the settlement agreement. (D.E. 36, Ex. I, p. 36.) Rather, the evidence shows Mid-Continent did not even become aware of the lawsuit filed by the Guinns until June 12, 2009, when Mr. Simon sent Mr. Husbands an email stating: (D.E. 46, Ex. K, p. 6.) That same day, Mr. Simon sent Mr. Husbands an email containing a copy of the Guinns' lawsuit. (Id. at 7.)
On July 16, 2009, Mid-Continent sent a letter acknowledging receipt of the Guinns' "Original Petition filed May 15, 2009 in the 156th Judicial District Court, Aransas County, Texas." The letter states: "Since the filed Plaintiffs' Original Petition may involve issues of coverage, we will review the Petition further and advise you of the position of the Company as soon as that review is completed." (D.E. 46, Ex. H, p. 2.)
On July 31, 2009, Mid-Continent sent a letter to Mr. Simon stating that, based on its review of the Guinns' Original Petition, there was no duty to defend or indemnify Hardesty forthe Guinns' claim because: (1) damage to the property are to the insured's work (2) damages sought may not qualify as "Property Damage" caused by an "Occurrence" and (3) some of the damages may have manifested subsequent to OSC's last policy coverage date of 1/22/07. "Therefore, we will not participate in or otherwise contribute towards any settlement, indemnification and/or defense for the claim presented by Lee and Jane Guinn." The letter is signed by Claude Husbands. (D.E. 35, Ex. 7; D.E. 46, Ex. I.)
In their complaint, filed with this Court on November 5, 2009, Plaintiff asserts three claims against Defendants: (1) breach of contract based on failure to defend or indemnify Hardesty against the Guinns' claim; (2) engaging in unfair settlement practices under Tex. Ins. Code § 541.060(2)(A) by failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of Hardesty's claim for defense costs; and (3) engaging in deceptive trade practices under the DTPA by violating Chapter 541.
Plaintiff originally filed suit in state court in the 36th Judicial District Court of Aransas County, Texas, on September 28, 2009. Defendants removed the action based on diversity jurisdiction to the Houston Division for the Southern District of Texas.2 Simon Herbert & McClelland ("SHM"), Mr. Simon's law firm, filed a motion to intervene on April 30, 2010. (D.E. 11.) On May 18, 2010, Judge Atlas transferred the case to this Court pursuant to 28 U.S.C. § 1441(a).
Plaintiffs now move for partial summary judgment on their claim for breach of contract based on Defendants' duty to defend. (D.E. 35.) Defendants have responded. (D.E. 44.)
Defendants also move for summary judgment on all Plaintiff's claims. (D.E. 36.) Plaintiffs have responded. (D.E. 44.) Defendants filed a reply to the response. (D.E. 53.)3
Under Federal Rule of Civil Procedure 56, summary judgment is appropriate if the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). The substantive law identifies which facts are material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ellison v. Software Spectrum, Inc., 85 F.3d 187, 189 (5th Cir. 1996). 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, 477 U.S. at 248; Judwin Props., Inc., v. U.S. Fire Ins. Co., 973 F.2d 432, 435 (5th Cir. 1992).
On summary judgment, "[t]he moving party has the burden of proving there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law." Rivera v. Houston Indep. Sch. Dist., 349 F.3d 244, 246 (5th Cir. 2003); see also Celotex Corp. v....
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