Hartford Fire Ins. Co. v. Gandy Dancer, LLC

• Decision Date: 30 August 2013
• Docket Number: No. CIV 10–0137 JB/RHS.,CIV 10–0137 JB/RHS.
• Citation: 981 F.Supp.2d 981
• Parties: The HARTFORD FIRE INSURANCE COMPANY, Plaintiff v. GANDY DANCER, LLC; BNSF Railway Company; and Roy D. Mercer, LLC, Defendants, and BNSF Railway Company; Counter–Plaintiff v. The Hartford Fire Insurance Company, Counter–Defendant.
• Court: U.S. District Court — District of New Mexico

981 F.Supp.2d 981

The HARTFORD FIRE INSURANCE COMPANY, Plaintiff

v.GANDY DANCER, LLC; BNSF Railway Company; and Roy D. Mercer, LLC, Defendants,andBNSF Railway Company; Counter–Plaintiff

v.The Hartford Fire Insurance Company, Counter–Defendant.

No. CIV 10–0137 JB/RHS.

United States District Court, D. New Mexico.

Aug. 30, 2013.

Todd A. Schwarz, Tom Bunting, Miller Stratvert, P.A., Albuquerque, NM, Attorneys for the plaintiff and Counter–DefendantThe Hartford Fire Insurance Company.

Robert P. Warburton, Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A., Albuquerque, NM, Attorneys for DefendantGandy Dancer LLC.

Tim L. Fields, Earl E. DeBrine, Jr., Paul T. Halajian, Nathan T. Nieman, Modrall, Sperling, Roehl, Harris & Sisk, P.A. Albuquerque, NM, Attorneys for DefendantBNSF Railway Company.

Charles T. DuMars, Tanya L. Scott, Law & Resource Planning Associates Albuquerque, NM, Attorneys for DefendantRoy D. Mercer, LLC.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on The Hartford Fire Insurance Company's Motion for Summary Judgment Regarding Personal and Advertising Injury Coverage and Memorandum in Support, filed September 27, 2012(Doc. 83)(“2nd MSJ”).The Court held a hearing on January 7, 2013.The primary issue is whether the “Personal and Advertising Injury” provision of the insurance policies that Plaintiff and Counterdefendant The Hartford Fire Insurance Company issued to DefendantGandy Dancer, LLC is ambiguous, or covers DefendantRoy D. Mercer LLC's allegations of trespass and nuisance in the underlying state court action.The Court determines that the terms “premises,”“person,” and “occupy” are ambiguous, and the Court must construe these terms against The Hartford as the drafter of the policies.The Court will construe the 2nd MSJ as a motion to reconsider its previous holding that the term “owner, landlord or lessor” does not exclude coverage for DefendantBNSF Railway Company and Gandy Dancer, and the Court will reconsider its previous holding in the Memorandum Opinion and Order, filed March 28, 2012 (Doc. 74), 864 F.Supp.2d 1157(D.N.M.2012)(“March 28 MOO”) in part.The Court will not reconsider whether BNSF Railway has an ownership interest in the property at issue within the term of the policies, because The Hartford fails to notify the Court of a change in the facts or controlling law which counsel it to reconsider its holding that BNSF Railway has an ownership interest.On the other hand, the Court reconsiders whether Mercer LLC's allegations of trespass and nuisance allege a wrongful eviction, entry, or invasion of right of private occupancy committed by or on behalf of BNSF Railway, and the Court concludes that the policies do not cover Mercer LLC's trespass claim.The Court also concludes that Mercer LLC's allegations of nuisance are potentially within policies' scope of coverage for a personal and advertising injury, and the Court does not change its previous holding that the allegations of nuisance trigger The Hartford's duty to defend.Accordingly, the 2nd MSJ is granted in part and denied in part.

FACTUAL BACKGROUND

This case involves the construction of a water diversion system in 2006, over which litigation is taking place in state court.The Hartford seeks a declaratory judgment that the facts alleged in the underlying state litigation do not give rise to insurance coverage under the policies it issued.Many of the material facts are undisputed.

The Hartford issued a policy of business liability to DefendantGandy Dancer, LLC titled “Policy Number21 UUN QZ5048,” with effective dates from August 8, 2005, through August 8, 2006.2nd MSJ ¶ 1, at 2(citing Commercial General Liability Coverage Form, filed September 27, 2012(Doc. 83)(“05–06 Gandy Dancer Policy”))(setting forth this fact).¹The Hartfordalso asserts that it issued a business liability insurance policy to Gandy Dancer titled “Policy Number21 UUN QZ5048,” with policy dates of August 8, 2006, through August 8, 2007.2nd MSJ ¶ 2, at 2(citing Commercial General Liability Coverage Form, filed September 27, 2012(Doc. 83)(“06–07 Gandy Dancer Policy”))(setting forth this fact).²The Policies provide for Personal and Advertising Injury Liability for enumerated offenses defined in the Policies.See2nd MSJ ¶ 3, at 2(citing 05–06 Gandy Dancer Policyat 15; 06–07 Gandy Dancer Policyat 19(collectively, “the Gandy Dancer Policies”))(setting forth this fact);BNSF Railway Company's Response Brief in Opposition to the Hartford Fire Insurance Company's Motion for Summary Judgment Regarding Personal and Advertising Injury Coverage¶ 3 at 5, filedOctober 22, 2012(Doc. 87)(“BNSF Response”).The Gandy Dancer Policies define a “Personal and Advertising Injury” as:

injury, including consequential “bodily injury” arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right to private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

d. Oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral, written or electronic publication of material that violates a person's right of privacy;

f. Copying, in your “advertisement”, a person's or organization's “advertising idea” or style of “advertisement”;

g. Infringement of copyright, slogan, or title of any literary or artistic work, in your “advertisement”; or

h. Discrimination or humiliation that results in injury to the feelings or reputation of a natural person.

2nd MSJ ¶ 3, at 2–3(citing 05–06 Policyat 5; 06–07 Policyat 5)(setting forth this fact).³Gandy Dancer is the named insuredon the Gandy Dancer Policies, and The Hartford has assumed, at least for the purpose of The Hartford Fire Insurance Company's Motion for Summary Judgment Declaring that the Terms of the Policy Issued to Gandy Dancer do not Provide Coverage for Roy D. Mercer LLC's Claims Against BNSF and Gandy Dancer, filed June 10, 2011(Doc. 37), that BNSF Railway qualifies as an additional insured.SeeMarch 28 MOO, 864 F.Supp.2d at 1162.

The underlying action in this case is BNSF Railway's complaint against Mercer LLC, pending in the Seventh Judicial District Court, County of Socorro, for the State of New Mexico.See2nd MSJ ¶ 4, at 3(setting forth this fact);BNSF Railway Company's Response Brief in Opposition to the Hartford Fire Insurance Company's Motion for Summary Judgment Regarding Personal and Advertising Injury Coverage¶ 4 at 5, filedOctober 22, 2012(Doc. 87)(“BNSF Response”)(not disputing this fact);Defendant Gandy Dancer's Response in Opposition to The Hartford Fire Insurance Company's Motion for Summary Judgment Regarding Personal and Advertising Injury Coverage¶ 3, at 4, filedOctober 22, 2012(Doc. 88)(“Gandy Dancer Response”)(not disputing this fact).BNSF Railway Company owns an easement on the property belonging to Mercer, LLC in Socorro, granting BNSF Railway the right to “use the natural material as it may desire for the construction of ditches, dikes, spoil banks, and other necessary facilities and structures to protect the railroad from floodwaters of the nearby Brown Arroyo.”2nd MSJ ¶ 4, at 3–4(citingVerified Complaint for Injunctive Relief, Declaratory Judgment, Negligence and Nuisance¶ 8, at 2filed instate courtJune 3, 2008, filed in federal courtJune 10, 2011(Doc. 37–1)(“BNSF Complaint”)(setting forth this fact));Gandy Dancer Response¶ 3, at 4(not disputing this fact).⁴BNSF's Easement, executed September 23, 1936 by the Rio Grande Conservancy District, filed October 22, 2012(Doc. 87–4), also gives it the right of

ingress and egress upon the above described tracts or parcels of land for the purpose of excavating, constructing and maintaining said ditch, dykes and spoil banks and shall be held harmless on account of any damages sustained to the land or crops hereafter grown thereon on account of said improvements.

Easementat 2.SeeBNSF Response¶ 6, at 6(setting forth this fact);The Hartford Fire Insurance Company's Reply in Favor of its Motion for Summary Judgment Regarding Personal and Advertising Injury Coverageat 2, filedNovember 9, 2012(Doc. 93)(“Reply”)(not disputing this fact).BNSF Railway has continually “maintained and rehabilitated a system of levees and a water diversion system on the Mercer Property.”BNSF Response¶ 7, at 7(citing Stone Aff.)(setting forth this fact);StoneAff. ¶ 19, at 7(“BNSF's records reflect that the railroad has consistently performed work to protect the railroad tracks from damaging floodwaters from Matanza Arroyo since at least 1924.”⁵);Replyat 2(not disputing this fact).

When Mike Mechenbier, the Director and sole member of Mercer LLC acquired the Mercer Property, the property contained a berm.⁶BNSF Response¶ 2, at 9(citingMechenbierAff. ¶ 4, at 2)(setting forth this fact);Michael Mechenbier's Response to Plaintiff/CounterDefendant The Hartford Fire Insurance Company's First Requests for Admissions to Michael Mechenbier¶ 3 at 2, filedSeptember 27, 2012(Doc. 83)(“Mercer Admissions”)(setting forth this fact);Reply¶ 2, at 2.At times, the berm has been substantially larger than at the time Mechenbier purchased the Mercer Property.SeeBNSF Response¶ 2, at 9(citingMechenbierAff. ¶ 4, at 2(stating that, when Mechenbier acquired the Mercer Property, a berm between one-and-a-half and two feet high was on the land);StoneAff. ¶¶ 9–15, at 4–6)(setting forth this fact).⁷

Mercer LLC intended to use the property for agricultural purposes, such as grazing cattle.See2nd MSJ ¶ 7, at 4(citingMercer Admissions¶¶ 3–5, at 2(“Mercer admits that as of August 2006, the Mercer property was intended for agricultural uses,...