Phila. Indem. Ins. Co. v. Megalomedia, Inc.

• Court: U.S. District Court — Southern District of Texas
• Writing for the Court: Alfred H. Bennett, United States District Judge
• Citation: Phila. Indem. Ins. Co. v. Megalomedia, Inc., 621 F.Supp.3d 767 (S.D. Tex. 2022)
• Docket Number: CIVIL ACTION NO. 4:20-CV-1644
• Decision Date: 16 August 2022
• Parties: PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. MEGALOMEDIA, INC., et al., Defendants.

621 F.Supp.3d 767

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. MEGALOMEDIA, INC., et al., Defendants.

CIVIL ACTION NO. 4:20-CV-1644

United States District Court, S.D. Texas, Houston Division

Signed August 16, 2022

Matthew Rigney, Stephen A. Melendi, Tollefson Bradley Ball Mitchell, LLP, Dallas, TX, for Plaintiff.

Stephen Edward McConnico, Anthony Frank Arguijo, Santosh Shankaran Aravind, Stephanie Clair Kover, Scott Douglass & McConnico LLP, Austin, TX, for Defendants Megalomedia, Inc., Megalomedia Studios, LLC, Mansfield Films, LLC.

Stephen Edward McConnico, Santosh Shankaran Aravind, Scott Douglass and McConnico LLP, Austin, TX, for Defendant Megalomedia, LLC.

ORDER

Alfred H. Bennett, United States District Judge

Before the Court is Plaintiff Philadelphia Indemnity Insurance Company's Motion for Summary Judgment (the "Motion," Doc. #68), Defendant's Response (Doc. #76), and Plaintiff's Reply (Doc. #78). Having reviewed and considered the parties' arguments and applicable legal authority, the Court grants and denies the Motion in part.

I. Background

Defendants Megalomedia, Inc., Megalomedia Studios, LLC, Mansfield Films, LLC, and DBA Holdings, LLC (collectively "Megalomedia") have filed amended counterclaims against Plaintiff Philadelphia Indemnity Insurance Company ("Philadelphia Indemnity") alleging: (1) fraudulent inducement, (2) violations of Chapter 541, Subchapter B of the Texas Insurance Code (hereinafter the "Insurance Code"), and (3) violations of the Texas Deceptive Trade Practices Act (hereinafter the "DTPA"). Doc. #50. Philadelphia Indemnity has moved for summary judgment on all of Megalomedia's counterclaims. Doc. #68.

a. Factual Background

Megalomedia is a television production studio based in Austin, Texas, and is responsible for the production of shows such as Shipping Wars, Heavy, and My 600-lb Life. Doc. #76 at 6. In 2010, Philadelphia Indemnity issued Megalomedia a series of commercial package insurance policies providing general liability, commercial property, and commercial inland marine coverage (collectively, the "Policy"). Doc. #68 at 4, 5; Doc. #76 at 6. In June of 2011, Megalomedia approached Philadelphia Indemnity and requested additional coverage for a new show in production, Cartel City. Doc. #68 at 5; Doc. #76 at 3. A few days later, Philadelphia Indemnity informed Megalomedia that it would not cover the show because it "sound[ed] more like a reality show than a documentary."¹ Doc. #76, Ex. 7 at 2 and Ex. 8 at 3. On that same date, Philadelphia Indemnity amended the Policy, adding language that reads:

EXCLUSION - DESIGNATED ONGOING OPERATIONS

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART

SCHEDULE

Description of Designated Ongoing Operation(s):

Excludes the production of, filming or distribution of pornographic materials. Excludes any/all reality shows. Excludes rental/loan of insureds equipment or equipment leased by the insured to 3rd party[.]

(hereinafter, the "Reality TV Exclusion"). Doc. #21, Ex. 11 at 139 (emphasis added). What constitutes a "reality show" is not defined in the policy. See Id.

Megalomedia contested Philadelphia Indemnity's denial of coverage, arguing that Cartel City was a documentary covered under the Policy. See Doc. #76, Ex. 8 at 2. Philadelphia Indemnity responded that its denial of coverage was justified based on lack of protection for the film crew, potential destruction of property, and potential damage of equipment. Doc. #76, Ex. 8 at 2. Philadelphia Indemnity emphasized that it was "okay with the other work that [Megalomedia was] doing, just not this particular project." Id. At the time of this representation, Philadelphia Indemnity was still providing Megalomedia coverage for its other productions, including Heavy, the precursor to My 600-lb Life. See Doc. #76, Ex. 10 at 3, 4. Each year since the inception of coverage, Megalomedia has renewed the Policy with the Reality TV Exclusion included. Doc. #68, Ex. 2 at 62, 63. And each year, Philadelphia Indemnity has approved the coverage of additional Megalomedia television productions under the Policy, excluding two: Cartel City and Fugitive Recovery. See, e.g., Doc. #76, Ex. 2 at 14; Ex. 5 at 8, 9; and Ex. 11 at 2.

In 2012, Megalomedia requested Philadelphia Indemnity add another production to the Policy, My 600-lb Life.² Doc. #76, Ex. 16 at 13, 14. In its application, Megalomedia described My 600-lb Life as a "Reality Based TV Show," and described its overall production as a "Reality TV & Documentaries." Id. Philadelphia Indemnity subsequently reviewed and approved coverage for My 600-lb Life based on this description. Doc. #7619. In 2020, former participants of My 600-lb Life filed various tort claims against Megalomedia, which were consolidated into one lawsuit in Harris County District Court (the "Bonner Lawsuit"). Doc. #76 at 11; Doc. #21 at 8. Megalomedia sought defense and indemnification from Philadelphia Indemnity for the Bonner Lawsuit. Doc. #76 at 11; Doc. #68 at 8. Philadelphia Indemnity refused, arguing that My 600-lb Life was not covered under the Policy by reason of the Reality TV Exclusion. Doc. #68 at 7; Doc. #76 at 12.

b. Procedural Background

On May 11, 2020, Philadelphia Indemnity filed this lawsuit seeking a declaratory judgment that it had no duty to defend or indemnify Megalomedia against the claims asserted in the Bonner lawsuit. Doc. #1 at 1. After Philadelphia Indemnity moved for summary judgment, Judge Vanessa D. Gilmore granted the motion on May 28, 2021 and rendered final judgment on June 1, 2021. Doc. #21; Doc. #32; and Doc. #33. Later that month, Judge Gilmore vacated the June 1st final judgment upon Megalomedia's motion. Doc. #35; Doc. #37. On July 14, 2021, Megalomedia filed its Amended Counterclaim against Philadelphia Indemnity. Doc. #50. Due to Judge Gilmore's retirement, the case was reassigned to Judge Alfred H. Bennett on December 9, 2021. Doc. #63.

Philadelphia Indemnity now moves for summary judgment as to Megalomedia's amended counterclaims, arguing that: (1) the statute of limitations has expired on Megalomedia's claims, (2) Megalomedia cannot satisfy an essential element of its claims of fraudulent inducement, Insurance Code, and DTPA because Megalomedia has not provided evidence of a false misrepresentation, and (3) Megalomedia's attempt to recover damages under the Insurance Code and DTPA should be dismissed since Megalomedia has not pled a Stowers claim and because there is no evidence in the record suggesting independent injury. Doc. #68.

II. Legal Standard

Summary judgment is proper if the movant demonstrates 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 genuine dispute as to a material fact exists if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Rogers v. Bromac Title Services, L.L.C., 755 F.3d 347, 350 (5th Cir. 2014). If the movant does not bear the burden of proof at trial and shows the absence of evidence in the record, "the burden shifts to the nonmovant to show that the motion should not be granted. To do so, the nonmovant must identify specific evidence in the record and articulate the precise manner in which that evidence supports his or her claim." Carr v. Air Line Pilots Ass'n, Int'l, 866 F.3d 597, 601 (5th Cir. 2017). "The evidence and all inferences must be viewed in the light most favorable to the non-movant." Rose v. Select Portfolio Servicing, Inc., 945 F.3d 226, 228-29 (5th Cir. 2019). However, "[u]nsubstantiated assertions" and "conclusory allegations are not competent summary judgment evidence and are insufficient to overcome a summary judgment motion." Hugh Symons Grp., PLC v. Motorola, Inc., 292 F.3d 466, 468 (5th Cir. 2002).

III. Analysis

a. Statute of Limitations

First, Philadelphia Indemnity argues that all of Megalomedia's counterclaims fail as a matter of law because the statute of limitations has expired. Doc. #68 at 10-18. The statute of limitations on fraud, including fraudulent inducement, is four years. TEX. CIV. PRAC. REM. CODE § 16.004(a)(4). DTPA and Insurance Code claims have two-year limitation periods. TEX. INS. CODE § 541.162; TEX. BUS. & COMM. CODE § 17.565. Under Texas law, the discovery rule provides a "very limited exception to the statute of limitations." Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). The discovery rule exception defers accrual of the statutory limitation period "until such time as the claimant discovers, or in exercising reasonable diligence should have discovered, facts that indicate he has been injured." Id. at 455; Colonial Penn Ins. Co. v. Market Planners Ins. Agency Inc., 157 F.3d 1032, 1034 (5th Cir. 1998); Khoei v. Stonebridge Life Ins. Co., No. H-13-2181, 2014 WL 585399, at *4 (S.D. Tex. Feb. 14, 2014). The discovery rule applies where the claimant's injury was "inherently undiscoverable, i.e., where the plaintiff did not and could not know of the injury." Colonial Penn Ins. Co., 157 F.3d at 1034. Along with the discovery rule, Texas employs the doctrine of fraudulent concealment. Id. at 1035. Fraudulent concealment defers the limitations period "until the claimant discovers or with reasonable diligence should have discovered the fraud." Computer Assocs., 918 S.W.2d at 455; Colonial Penn Ins. Co. 157 F.3d at 1035. There are two possible discoveries that may start the limitations period in fraudulent concealment cases: (1) when the claimant actually deduces that he has a cause of action, or (2) as soon as the claimant knows the facts that, upon further examination, would prove to underlie a cause of action. Borderlon v. Peck, 661 S.W.2d 907 (Tex. 1983); see also, e.g., Nichols v. Smith, 507 S.W.2d 518, 519 (Tex. 1974).

Here, Megalomedia did not and could not have discovered any of the alleged violations in 2011, as Philadelphia Indemnity argues, because...