RLI Ins. Co. v. Costello

Decision Date31 January 2017
Docket NumberCIVIL ACTION NO. 4:16–0940
Parties RLI INSURANCE CO., Plaintiff, v. Marie COSTELLO, Defendant.
CourtU.S. District Court — Southern District of Texas

Michael D. Feiler, Gregory Keith Winslett, Quilling, Selander, Lownds, Winslett & Moser, PC, Dallas, TX, for Plaintiff.

Brad Thomas Wyly, Wyly & Cook, L.L.P, Houston, TX, for Defendant.

MEMORANDUM AND ORDER ON MOTION FOR SUMMARY JUDGMENT

NANCY F. ATLAS, SENIOR UNITED STATES DISTRICT JUDGE

This insurance coverage case is before the Court on Plaintiff RLI Insurance Co.'s ("RLI" or "Plaintiff") Motion for Summary Judgment [Doc. # 12] ("Motion"). RLI filed suit seeking a declaratory judgment that it owes Defendant Marie Costello ("Costello") no further sums in connection with her claim under a recreational vehicle insurance policy RLI issued her. Costello filed a Response, in which she asserted several counterclaims [Doc. # 13]. RLI replied [Doc. # 14], and now moves for summary judgment on its claim. The Motion is ripe for determination. Having carefully considered the parties' briefing, all matters of record, and the applicable legal authorities, the Court grants RLI's Motion.

I. BACKGROUND

A. Factual Background

In the summer of 2015, Louis Costello, Costello's father, embarked on an extended interstate trip in Costello's 2008 Damon Tuscany recreational vehicle (the "RV").1 During the trip, thieves broke into the RV on October 30, 2015, while it was parked outside the L'Auberge Casino on Lake Charles, Louisiana.2 The thieves stole personal property valued in excess of $10,000,3 and inflicted extensive damage to the exterior and interior of the vehicle by, among other things, breaking windows, prying open locks, and slitting the RV's seats, dashboard, and ceiling.4

Approximately four days later, on or about November 3, 2015, Costello submitted a claim for vandalism and proof of loss pertaining to the theft (the "Claim") under RSI-issued recreational vehicle policy RRV 0068787–02, effective September 9, 2015 through September 9, 2016 ("Policy").5 The Policy provided various forms of coverage for the RV itself and, in an endorsement, coverage for personal effects normally used in conjunction with the RV.6 Costello subsequently authorized her father, Louis, to act as her agent for purposes of the Claim.7 On approximately December 17, 2015, Louis Costello provided RLI with a copy of the RV's Texas Department of Motor Vehicles registration renewal receipt.8 According to the receipt, the RV had been validly registered in Texas from October 1, 2014, to September 30, 2015, when the registration expired.9 On the date of the loss—October 30, 2015—the RV was not validly registered.10

RLI, through its program administrator, RIS Risk Management Services, denied coverage for the Claim in its entirety on December 17, 2015.11 RLI cited paragraph 25 in Part D of the Policy, which includes exclusions to coverage ("Exclusion 25"). Exclusion 25 excludes losses to "[the RV] if [the RV] does not have a valid motor vehicle registration at the time of the loss."12 In response, Costello, through counsel, sent RLI a demand letter dated February 19, 2016, accusing RLI of violating the Texas Deceptive Trade Practices and Consumer Protection Act ("DTPA") in various respects and presenting Costello's estimate of damages.13 By letter dated April 7, 2016, RLI informed Costello that, pursuant to an applicable Policy Endorsement, RLI would cover $5,784.87, a portion of the Claim relating to the value of certain personal property stolen from the RV.14 In the same letter, RLI reaffirmed its position that Exclusion 25 precludes coverage for damage from vandalism to the RV.15 The same day, RLI filed its Complaint in this suit for declaratory relief.

RLI seeks a declaratory judgment that there is no coverage under the Policy for the vandalism damage to the RV because the vehicle lacked a valid motor vehicle registration at the time of the loss.16 Costello, in turn, argues RLI's denial is a breach of contract and that Exclusion 25 does not bar coverage.17 Costello also asserts state and common law extra-contractual claims against RLI, but urges the Court to refrain from ruling on these claims at this juncture.18 RLI moves for summary judgment on its declaratory request.

II. LEGAL STANDARD FOR SUMMARY JUDGMENT

Rule 56 of the Federal Rules of Civil Procedure mandates the entry of summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to the party's case, and on which that party will bear the burden at trial. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc ); see also Curtis v. Anthony, 710 F.3d 587, 594 (5th Cir. 2013). Summary judgment "should be rendered 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." Federal Rule of Civil Procedure 56(a) ; see Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548 ; Curtis , 710 F.3d at 594.

In deciding whether a genuine and material fact issue has been created, the court reviews the facts and inferences to be drawn from them in the light most favorable to the nonmoving party. Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co. , 336 F.3d 410, 412 (5th Cir. 2003). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-movant. Tamez v. Manthey , 589 F.3d 764, 769 (5th Cir. 2009) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). The non-movant's burden is not met by mere reliance on the allegations or denials in the non-movant's pleadings. See Littlefield v. Forney Indep. Sch. Dist. , 268 F.3d 275, 282 (5th Cir. 2001) ; Chambers v. Sears, Roebuck and Co. , 428 Fed.Appx. 400, 407 (5th Cir. 2011). Likewise, "conclusory allegations" or "unsubstantiated assertions" do not meet the non-movant's burden. Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co. , 530 F.3d 395, 399 (5th Cir. 2008). Instead, the nonmoving party must present specific facts which show "the existence of a genuine issue concerning every essential component of its case." Firman v. Life Ins. Co. of N. Am. , 684 F.3d 533, 538 (5th Cir. 2012) (citation and internal quotation marks omitted). In the absence of any proof, the Court will not assume that the non-movant could or would prove the necessary facts. Little , 37 F.3d at 1075 (citing Lujan v. Nat'l Wildlife Fed'n , 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) ).

III. ANALYSIS
A. General Standard for Interpretation of an Insurance Policy

The parties do not dispute that Texas law controls the interpretation of the Policy. Under Texas law, the meaning of an insurance contract is determined under the standards applicable to contracts generally. See One Beacon Ins. Co. v. Crowley Marine Servs. , 648 F.3d 258, 271 (5th Cir. 2011) ; Mid–Continent Cas. Co. v. Swift Energy Co. , 206 F.3d 487, 491 (5th Cir. 2000) ; Barnett v. Aetna Life Ins. Co. , 723 S.W.2d 663, 665 (Tex. 1987). A court's primary concern is to give effect to the intention of the parties as expressed by the policy language. Am. Nat'l Gen. Ins. Co. v. Ryan , 274 F.3d 319, 323 (5th Cir. 2001) (citing Ideal Lease Serv., Inc. v. Amoco Prod. Co. , 662 S.W.2d 951, 953 (Tex. 1983) ); cf . Greene v. Farmers Insurance Exchange , 446 S.W.3d 761, 766 (Tex. 2014). "It is well settled that insurance policies should be construed in favor of the insured; however, this rule does not apply when the term to be construed is unambiguous and susceptible of only one construction." Archon Invs., Inc. v. Great A m . Lloyds Ins. Co. , 174 S.W.3d 334, 338 (Tex. App.–Houston [1st Dist.] 2005, pet. denied) (citing Devoe v. Great Am. Ins. , 50 S.W.3d 567, 571 (Tex. App.–Austin 2001, no pet.) ). "In such a case, we give the words in the policy their plain meaning." Id.

The policy holder bears the burden to demonstrate coverage under the Policy, while the insurer bears the burden of establishing the applicability of any exclusions to coverage. See Guar. Nat'l Ins. Co. v. Vic Mfg. Co. , 143 F.3d 192, 193 (5th Cir. 1998).

Neither the Texas Supreme Court nor the Fifth Circuit has ruled definitively on the specific issue presented by this case. This Court therefore must make an "Erie guess" as to how the Texas Supreme Court would decide the issue. See Erie R.R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Hamilton v. Segue Software Inc. , 232 F.3d 473, 478 (5th Cir. 2000) ; United States v. Johnson , 160 F.3d 1061, 1063 (5th Cir. 1998).

B. Policy Terms and Issues

As the party asserting a claim for breach of the Policy contract, Costello bears the burden to demonstrate that she performed her duties under the Policy. In Texas, the essential elements of a breach of contract action are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Smith Int'l, Inc. v. Egle Grp. , 490 F.3d 380, 387 (5th Cir. 2007) (quoting Valero Mktg. & Supply Co. v. Kalama Int'l, L.L.C. , 51 S.W.3d 345, 351 (Tex. App.–Houston [1st Dist.] 2001, no pet.) ).

In pertinent part, the Policy contains the following language:

PART D—COVERAGE FOR DAMAGE TO YOUR AUTO
Insuring Agreement
A. We will pay for loss to "your covered auto" caused by:
1. Other than "collision" only if the Declarations indicate that Other Than Collision Coverage is provided for that auto.
2. "Collision" only if the Declarations indicate that Collision Coverage is provided for that auto.
B. "Collision" means the upset of "your covered auto" or its impact with another vehicle or object.
Loss caused by the following is considered other than "collision":
* *
...

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