Onebeacon Ins. Co. v. Don's Bldg. Supply, Inc.

• Decision Date: 23 May 2006
• Docket Number: Civil Action No. 3:05-CV-0731-B.
• Citation: 516 F.Supp.2d 615
• Parties: ONEBEACON INSURANCE COMPANY as Assignee of Potomac Insurance Company of Illinois, Plaintiff, v. DON'S BUILDING SUPPLY, INC., Defendant.
• Court: U.S. District Court — Northern District of Texas

516 F.Supp.2d 615

ONEBEACON INSURANCE COMPANY as Assignee of Potomac Insurance Company of Illinois, Plaintiff, v. DON'S BUILDING SUPPLY, INC., Defendant.

Civil Action No. 3:05-CV-0731-B.

United States District Court, N.D. Texas, Dallas Division.

May 23, 2006.

Order Denying Rehearing June 9, 2006.

Timothy Eric Headley, Michelle Macarthur Castro, Cozen O'Connor, Philip Lamb, Quilling Selander Cummiskey & Lownds, Dallas, TX, for Plaintiff.

Thomas B. Alleman, Winstead Sechrest & Minick, Dallas, TX, for Defendant.

MEMORANDUM ORDER

JANE J. BOYLE, District Judge.

In this action Plaintiff OneBeacon Insurance Company ("OneBeacon") seeks a declaration from this Court that it has no duty to defend or indemnify its insured, Don's Building Supply, Inc. ("DBS"), in a number of lawsuits various homeowners have filed against DBS (and others) in courts throughout northern Texas arising out of, among other things, DBS's distribution and sale of allegedly defective Exterior Insulation and Finish systems ("EIFs").¹ The parties have filed cross motions for summary judgment concerning OneBeacon's duty to defend. For the reasons that follow, the Court concludes that OneBeacon has no duty to defend DBS in connection with the underlying lawsuits, and it accordingly GRANTS OneBeacon's Motion for Summary Judgment (doc. 32) and DENIES Defendant's Motion for Summary Judgment on Liability Issues (doc. 35).

I. Factual and Procedural Background

DBS is a distributor of construction supplies and materials. (Joint App. to Pl.'s & Def.'s Mots. Summ. J. ["Joint App."] at 1, 65). Potomac Insurance Company of Illinois originally issued three commercial general liability ("CGL") policies of insurance (collectively, the "Potomac. Policies" or the "Policies") to DBS consecutively covering the period from December 1, 1993 to December 1, 1996. (Joint App. at 1-62). Potomac later assigned the Policies to OneBeacon. From 2003 to 2005, various homeowners respectively filed some 26 lawsuits (collectively, the "Underlying Actions") against DBS and other construction supply distributors, manufacturers, and contractors.² The plaintiff's in these lawsuits essentially make the same allegations: that the defendants manufactured, distributed, sold and installed EIFs in their homes knowing full well that the product was defectively designed and that it would fail to provide weather-tight cladding as intended; that the defendants knew that any wooden structures adjacent to the EIFs would be vulnerable to wood rot and other damage because of the defective design of the EIFS; and that as a result of defendants' conduct, plaintiffs' homes have suffered extensive damage, resulting in the diminution of their value and the need to retrofit or replace the EIFs. (See generally Joint App. at 63-920).³ The underlying petitions variously assert claims of negligence, gross negligence, fraudulent nondisclosure, fraudulent misrepresentation, and violations of the Texas Deceptive Trade Practices Act ("DTPA").

DBS made demand upon OneBeacon to defend it in the Underlying Actions or otherwise indemnify it from any liabilities resulting therefrom. While OneBeacon initially provided a defense to DBS, it has since denied that it owes any further obligation under the Policies with respect to the Underlying Actions. OneBeacon makes three arguments in support of its view that it does not owe DBS a duty to defend: first, that the pleadings in the Underlying Actions fail to allege that property damage occurred during the coverage term of the Potomac Policies; second that the damage alleged in the Underlying Actions was not caused by an "occurrence" as defined by the Policies; and third, that a policy exclusion applies which precludes coverage. Because the resolution of OneBeacon's first ground for summary judgment is dispositive of OneBeacon's obligations under the Policies, the Court focuses its attention on that ground.

II. Summary Judgment Legal Standard

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Only disputes about material facts will preclude the granting of summary judgment. Id.

The burden is on the summary judgment movant to prove that no genuine issue of material fact exists. Latimer v. Smithkline & French Lab., 919 F.2d 301, 303 (5th Cir.1990). If the non-movant bears the burden of proof at trial, the summary judgment movant need not support its motion with evidence negating the non-movant's case. Rather, the movant may satisfy its burden by pointing to the absence of evidence to support the nonmovant's case. Id.; Little, 37 F.3d at 1075.

Once the movant has met its burden, the non-movant must show that summary judgement is not appropriate. Little, 37 F.3d at 1075 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "This burden is not satisfied with `some metaphysical doubt as to material facts,' ... by `conclusory allegations,' .. by `unsubstantiated assertions,' or by only a `scintilla' of evidence." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). The non-moving party must "come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. 1348 (emphasis in original) (quoting FED.R.CIV.P. 56(e)). To determine whether a genuine issue exists for trial, the court must view all of the evidence in the light most favorable to the nonmovant, and the evidence must be sufficient such that a reasonable jury could return a verdict for the non-movant. Munoz v. Orr, 200 F.3d 291, 302 (5th Cir. 2000); Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Given that the parties do not dispute the basic facts as they pertain to the pending motions for summary judgment, this case is particularly amenable to summary disposition. See Jim Johnson Homes, Inc. v. Mid-Continent Cas. Co., 244 F.Supp.2d 706, 713 (N.D.Tex.2003). The motions present pure questions of law and are now ripe for determination.

III. Analysis

A. Duty to Defend Legal Standards

The parties agree that Texas law controls the interpretation of the Policies. Cleere Drilling Co. v. Dominion Exploration & Prod., Inc., 351 F.3d 642, 646 (5th Cir.2003). In Texas, the duty to defend and the duty to indemnify are distinct duties. Farmers Texas County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997). The duty to defend is broader than the duty to indemnify. Am. States Ins. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir. 1998) (citing Gulf Chem. & Metallurgical Corp. v. Assoc. Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir.1993)). Thus, "[l]ogic and common sense dictate that if there is no duty to defend, then there must be no duty to indemnify." Id. (citing W. Heritage Ins. Co. v. River Entm't, 998 F.2d 311, 315 (5th Cir.1993)). For this reason, the Court will first examine whether OneBeacon has a duty to defend DBS in the Underlying Actions.

In determining whether an insurer has a duty to defend, the Court looks to the "eight corners" formed by the allegations of the underlying pleadings and the language of the insurance policy. Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997). An insured is only entitled to a defense from its insurer if the factual allegations in the most recent pleadings allege facts that are within the scope of coverage. King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002). If any claim alleged by the underlying pleadings is potentially within the policy coverage, the insurer is obligated to defend. CU Lloyd's of Texas v. Hatfield 126 S.W.3d 679, 682 (Tex.App.-Houston [14th Dist.] 2004, pet. denied). The factual allegations in the underlying pleadings are afforded a liberal interpretation and must be taken as true. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 528 (5th Cir.2004); Nat'l Union Fire Ins. Co. v. Merch. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997). A party claiming coverage under an insurance policy bears the burden of showing that a claim against it is potentially within the scope of coverage while the insurer must prove the applicability of a policy exclusion. Guar. Nat'l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir. 1998).

B. The Relevant Policy Provisions

The CGL policies at issue in this case obligate OneBeacon to defend any suit brought against DBS to recover for "property damage" but only if the property damage: (1) is caused by an "occurrence"; and (2) occurs during the policy period. (Joint App. at 3). An "occurrence" is defined to mean an "accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Joint App. 13). "Property damage" is defined as:

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 shall be deemed to occur at the time of the "occurrence" that caused it.

(Joint App. at 14). The Policies are clear that the property damage must occur during the policy coverage term. The critical question, then, forming the crux of the parties' disagreement, is whether the underlying pleadings allege that "property damage" occurred to the underlying claimants' homes during the December 1993-December 1996 period covered by the Policies. The Court must therefore determine 1) at what point the applicable law says that property damage is triggered under a...