In re Pierce Mortuary Colleges, Inc.
| Decision Date | 14 July 1997 |
| Docket Number | Bankruptcy No. 396-36759-HCA-11,396-36760-RCM-11,Adversary No. 396-3683. |
| Citation | 212 BR 549 |
| Parties | In re PIERCE MORTUARY COLLEGES, INC., Debtor. In re PROFESSIONAL TRAINING SCHOOLS, INC., Debtor. MICHIGAN MUTUAL INSURANCE CO., American Standard Lloyd's Insurance Company, Amerisure Lloyd's Insurance Co., Employer's Fire Insurance Co., and Guaranty National Insurance Co. Plaintiffs, v. Pat W. FORREST, Jerre Kauck, Grace S. Self, Virginia Henderson, Betty J. Standridge, Frederick Bjerke, Jack Muse, Roger Scarlotti, Nanette Rivers, Marion C.H. Brown, Richard Newell, Janet Shuford, Arthur Newell, Ethel M. Newell, Billie J. Degen, D.L. Norton, Nanette R. Scroggins, Richard Gambrell, Sharon Whalin, Patricia Bailey, Mike Evans, Pam Rehder, and J. Warren Casey, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Dale Wooten, Dallas, TX, for debtors.
John C. Tollefson, Knox & Tollefson, Dallas, TX, special counsel, for debtors.
Daniel C. Stewart, Winstead, Secrest & Minick, P.C., Tillery & Tillery, Ted B. Lyon & Associates, P.C., Dallas, TX, for judgment creditors.
David M. Pruessner, Fletcher & Springer, L.L.P., Dallas, TX, for Michigan Mut. Ins. Co.
John S. Morgan, Adams, Coffey & Duesler, L.L.P., Beaumont, TX, for Emploters Fire Ins. Co. a/k/a Commercial Union Ins. Co.
Sidney H. Davis, Jr., Touchstone, Bernays, Johnston, Beall & Smith, Dallas, TX, for American Standard Lloyd's Ins. Co.
Kevin J. Cook, Payne & Blanchard, David J. Shubert, Vial Hamilton, Koch & Knox, L.L.P., Dallas, TX, for Amerisure Lloyd's Ins. Co.
Judith Bagley, Patton Boggs, L.L.P., Dallas, TX, for Guaranty Nat. Ins. Co.
Amended Order Granting the Insurers' Combined Motion for Summary Judgment1
On the 29th day of April 1997, the Court considered several motions for summary judgment together with the corresponding responses and replies. The Insurers' Combined Motion for Summary Judgment ("Insurers' Combined Motion"), the Brief in Support of Insurers' Combined Motion for Summary Judgment, and the Judgment Creditors' Motion for Summary Judgment and Brief in Support ("Judgment Creditors' Motion") were filed on March 28, 1997. Each of the plaintiff insurance companies filed individual motions for summary judgment. Michigan Mutual's Motion for Summary Judgment and Memorandum in Support ("Michigan Mutual's Motion"), American Standard Lloyd's Insurance Company's Motion for Summary Judgment ("ASLIC's Motion"), Amerisure's Supplemental Motion for Summary Judgment and Supporting Brief ("Amerisure's Motion"), Employers' Fire Insurance Company, a/k/a Commercial Union Insurance Company's Motion for Summary Judgment ("Employers' Motion"), and the Supplemental Motion and Brief in Support of Summary Judgment of Guaranty National Insurance Company ("Guaranty National's Motion") were filed March 28, 1997. The Debtors filed their Joinder in the Motion for Summary Judgment of Judgment Creditors and Opposition to Motion for Summary Judgment of Insurers ("Debtors' Joinder") on April 28, 1997.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O). After consideration of the pleadings and arguments of counsel, the Court makes the following Memorandum Opinion which shall constitute findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
In this adversary proceeding the parties, Michigan Mutual Insurance Co., et al. ("the Insurers") and Pat W. Forrest, et al. ("the Judgment Creditors"), each seek a declaratory judgment from the Court on the issue of whether there is insurance coverage for the damages awarded to the Judgment Creditors against Pierce Mortuary Colleges, Inc. and Professional Training Schools, Inc. ("the Debtors" or "the Insureds") by a Texas state court.
The Debtors owned and operated mortician training schools. The students learned, among other things, to embalm human remains. The Judgment Creditors each took deceased family members or loved ones to various funeral homes with instructions that the bodies not be embalmed. The Judgment Creditors alleged and a jury found that the Debtors wrongfully obtained the bodies and allowed them to be used for instructional purposes in the Debtors' clinical embalming program without the knowledge or consent of the Judgment Creditors. All of the bodies were embalmed between November 17, 1986 and May 4, 1989.
When the Judgment Creditors became aware of these facts, sometime in late 1990 or early 1991, they filed a lawsuit against the Debtors in Texas state court alleging that the Debtors engaged in intentional, grossly negligent and reckless conduct ("the State Court Lawsuit"). The Judgment Creditors further alleged breach of contract and deceptive trade practices. The case was tried by Judge John Marshall in the 14th Judicial District Court of Dallas County.
The jury made the following relevant findings:
The state court adopted the jury's verdict in its judgment, signed January 15, 1996, against the Debtors.
The Debtors were insured at different times by all of the plaintiffs in this adversary proceeding. American Standard Lloyd's Insurance Company ("ASLIC") and Guaranty National Insurance Company ("Guaranty National") insured the Debtors from July 15, 1986 to July 15, 1990. Amerisure Lloyd's Insurance Company ("Amerisure") and Michigan Mutual Insurance Company ("Michigan Mutual") insured the Debtors from July 15, 1990 to July 15, 1992. Amerisure was the only insurer the Court is aware of after July 15, 1992.
The Insurers filed two declaratory judgment lawsuits in Texas state court. One suit, styled American Standard Lloyd's Insurance Company v. Pierce Mortuary Colleges, Inc., et al.3 ("First Declaratory Judgment Action"), was filed July 15, 1992 and sought a declaration that the events which were the basis of the Judgment Creditors' lawsuit were not covered by the Insurers' policies. The other suit, styled Michigan Mutual Insurance Company, et al. v. Pat W. Forrest, et al. ("Second Declaratory Judgment Action"), was filed October 10, 1996 against the Judgment Creditors and sought a declaration that there was no coverage for the judgment and damages awarded. Both declaratory judgment actions were originally filed in Texas state court.
On September 20, 1996, Judge Marshall, who also presided over the State Court Lawsuit, rendered a partial summary judgment for the Insurers in the First Declaratory Judgment Action finding that there was no insurance coverage. The state court's Order Granting Summary Judgment did not state the reasons for the decision on coverage and, reportedly, did not dispose of all issues in that law suit.
On September 20, 1996, both Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code. On December 19, 1996, the First Declaratory Judgment Action was removed to this Court. On December 20, 1996, the Second Declaratory Judgment Action was also removed. Motions to Remand were heard, and the Court remanded the First Declaratory Judgment Action, but denied remand of the Second Declaratory Judgment Action.
The Parties have each filed motions for summary judgment raising various issues of insurance coverage law. The Parties stipulate to all facts relied upon for the purposes of these findings.
The Insurers and the Judgment Creditors have each moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, which is made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7056. Under Rule 56, summary judgment is proper if the matters presented to the Court show that there is no genuine issue of material fact and the movant is entitled to a judgment as a matter of law.4 In making its determination, the Court must draw inferences from the underlying facts in a light most favorable to the non-movant.5 The initial burden of proof that there are no genuine issues of material fact is on the movants, but once the movants have met their initial burden, the non-movant must set forth specific facts showing that there is a genuine issue for trial.6
There are no genuine issues of material fact. The Court must decide which party, if any, is entitled to summary judgment as a matter of law upon these facts. The Court has before it the following issues of law: 1) whether the state court summary judgment in the First Declaratory Judgment Action has preclusive effect in this Court in the Second Declaratory Judgment Action; 2) whether the Debtors' acts were "occurrences" as defined by Texas law and by the insurance policies; 3) what effect, if any, do the jury's findings of both negligence and intent have upon coverage; 4) whether the Judgment Creditors suffered bodily injury or property damage of the type covered by the insurance policies; and 5) whether the injuries were sustained during the policy periods. For the reasons detailed below, first, the Court concludes that the ...
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