Tower Ins. Co. of N.Y. v. All Am. Rigging Co.

• Decision Date: 09 July 2014
• Docket Number: CIVIL ACTION NO. H-13-339
• Parties: TOWER INSURANCE COMPANY OF NEW YORK, Plaintiff, v. ALL AMERICAN RIGGING CO., INC. Defendant.
• Court: U.S. District Court — Southern District of Texas

TOWER INSURANCE COMPANY OF NEW YORK, Plaintiff, v. ALL AMERICAN RIGGING CO., INC. Defendant.

CIVIL ACTION NO. H-13-339

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

SIGNED: July 9, 2014

MEMORANDUM OPINION

Pending before the court¹ are Plaintiff's motion for Summary Judgment (Doc 30) and Defendant's motion for Partial Summary Judgment (Doc 31). The court has considered the motions, the responses, all other relevant filings, and the applicable law. For the reasons set forth below, the court DENIES Plaintiff's motion and GRANTS IN PART, DENIES IN PART Defendant's motion.

I. Case Background

Plaintiff Tower Insurance Company of New York filed this action pursuant to 28 U.S.C. §§ 2201 and 2202, seeking a declaration that it has no duty to defend or indemnify its insured, Defendant All American Rigging Co., Inc., in a negligence action.

Plaintiff issued an inland marine policy to Defendant, effective from May 31, 2009, through May 31, 2010.² This policyinitially did not cover liability arising out of damage to property stored at Defendant's warehouses.³ The policy was later amended to provide such coverage, effective May 12, 2010.⁴ The policy, including the warehouse legal liability coverage, was renewed in 2010, effective May 31, 2010, through May 31, 2011.⁵

Edward Dysarz ("Dysarz") filed a negligence suit against Defendant in the 61^st Judicial District of Harris County on January 9, 2013.⁶ Dysarz alleged that, for an unspecified period of time, he stored a pump at a warehouse owned by Defendant.⁷ In late 2010, Dysarz discovered that the pump "had been lost, stolen or destroyed-or in some manner discarded."⁸

Plaintiff filed this lawsuit on February 11, 2013.⁹ On August 2, 2013, Defendant brought a counterclaim against Plaintiff for breach of contract.¹⁰ On April 30, 2014, Plaintiff filed a motion for summary judgment, and Defendant filed a motion for partialsummary judgment.¹¹ Defendant responded to Plaintiff's motion on May 9, 2014.¹² Plaintiff responded to Defendant's motion on May 21, 2014, and filed a reply in support of its motion on May 27, 2014.¹³

II. Legal Standard

Summary judgment is warranted when the evidence reveals that no genuine dispute exists regarding any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Brown v. City of Houston, Tex., 337 F.3d 539, 540-41 (5^th Cir. 2003). A material fact is a fact that is identified by applicable substantive law as critical to the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ameristar Jet Charter, Inc. v. Signal Composites, Inc., 271 F.3d 624, 626 (5^th Cir. 2001). To be genuine, the dispute regarding a material fact must be supported by evidence such that a reasonable jury could resolve the issue in favor of either party. Anderson, 477 U.S. at 250; TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5^th Cir. 2002).

The movant must inform the court of the basis for the summary judgment motion and must point to relevant excerpts from pleadings,depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of genuine factual issues. Celotex Corp., 477 U.S. at 323; Topalian v. Ehrman, 954 F.2d 1125, 1131 (5^th Cir. 1992). If the moving party can show an absence of record evidence in support of one or more elements of the case for which the nonmoving party bears the burden, the movant will be entitled to summary judgment. Celotex Corp., 477 U.S. at 322. In response to a showing of lack of evidence, the party opposing summary judgment must go beyond the pleadings and proffer evidence that establishes each of the challenged elements of the case, demonstrating that genuine issues of material fact do exist that must be resolved at trial. Id. at 324.

When considering the evidence, "[d]oubts are to be resolved in favor of the nonmoving party, and any reasonable inferences are to be drawn in favor of that party." Evans v. City of Houston, 246 F.3d 344, 348 (5^th Cir. 2001); see also Boston Old Colony Ins. Co. v. Tiner Assocs. Inc., 288 F.3d 222, 227 (5^th Cir. 2002). The court should not "weigh evidence, assess credibility, or determine the most reasonable inference to be drawn from the evidence." Honore v. Douglas, 833 F.2d 565, 567 (5^th Cir. 1987).

However, the nonmoving party must show more than "some metaphysical doubt as to the material facts." Meinecke v. H & R Block of Houston, 66 F.3d 77, 81 (5^th Cir. 1995). Conclusory allegations, unsubstantiated assertions, improbable inferences,unsupported speculation, or only a scintilla of evidence will not carry this burden. Brown, 337 F.3d at 541; Ramsey v. Henderson, 286 F.3d 264, 269 (5^th Cir. 2002). The court must grant summary judgment if, after an adequate period of discovery, the nonmovant fails "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322.

III. Principles of Insurance Law

As this declaratory action is in federal court under diversity jurisdiction, state law governs substantive matters. See Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). The parties have both cited to Texas law as controlling authority, and the court assumes that Texas law applies to the present dispute.

A. Burden of Proof and Contract Interpretation

In general, the insured bears the initial burden of establishing that coverage is potentially provided by the applicable insurance policy, while it is the insurer's burden to prove the applicability of an exclusion permitting it to deny coverage. Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 350 (5^th Cir. 2005) (applying Texas law); see also Tex. Ins. Code Ann. § 554.002. If the insurer is successful, the burden shifts back to the insured to prove that an exception to the exclusion applies. Guar. Nat'l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5^th Cir.1998) (applying Texas law).

Insurance policies are subject to the rules of contract interpretation. Guar. Nat'l Ins. Co. v. Azrock Indus., Inc., 211 F.3d 239, 243 (5^th Cir. 2000) (applying Texas law); Progressive County Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 551 (Tex. 2003). "Terms in contracts are given their plain, ordinary, and generally accepted meaning unless the contract itself shows that particular definitions are used to replace that meaning." Bituminous Cas. Corp. v. Maxey, 110 S.W.3d 203, 208-09 (Tex. App.-Houston [1^st Dist.] 2003, pet. denied).

B. Duty to Defend

"Under Texas law, an insurer may have two responsibilities relating to coverage-the duty to defend and the duty to indemnify." Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 594 (5^th Cir. 2001) (citing D.R. Horton-Tex., Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009)). Whereas the "duty to indemnify protects insureds 'from payment of damages they may be found legally obligated to pay,'" the duty to defend "'protects the same parties against the expense of any suit seeking damages' covered by the policy." Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650, 655 n.28 (Tex. 2009) (quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 25 (Tex. 1965)).

An insurer's duty to defend requires it to "defend its insured if a plaintiff's factual allegations potentially support a coveredclaim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured." Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 490-91 (Tex. 2008) (citing GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 310 (Tex. 2006)). Accordingly, "[t]wo documents determine an insurer's duty to defend-the insurance policy and the third-party plaintiff's pleadings in the underlying litigation, which the court must review 'without regard to the truth or falsity of those allegations.'" Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299, 309 (5^th Cir. 2010) (quoting GuideOne, 611 F.3d at 309). This is known as the eight-corners rule. Id.

In determining an insurer's duty to defend, the court's only job is to compare the four corners of the pleading with the four corners of the insurance policy. Reyna, 401 F.3d at 350. "Facts outside the pleadings, even those easily ascertained, are ordinarily not material to the determination . . . ." Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 600 (5^th Cir. 2006) (applying Texas law).

The court interprets the allegations liberally and resolves all doubts regarding the duty to defend in favor of the insured. Nat'l Union Fire Ins. Co. Of Pittsburgh v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). However, the court may not "read facts into the pleadings," "look outside the pleadings, or imagine factual scenarios [that] might triggercoverage." Pine Oak Builders, Inc., 279 S.W.3d at 655 (quoting Merchs. Fast Motor Lines, 939 S.W.2d at 142). Although the burden is typically "on the insured to show that a claim against him is potentially within the scope of coverage under the policies," when "the insurer relies on the policy's exclusions, it bears the burden of proving that one or more of those exclusions apply." Federated Mut. Ins. Co. v. Grapevine Excavation, Inc., 197 F.3d 720, 723 (5th Cir. 1999). When assessing the insurer's proffered exclusion, "'[t]he court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent.'" Utica Nat'l Ins. Co., 141 S.W.3d 198, 202 (Tex. 2004) (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991)).

C. Duty to Indemnify

Under Texas law, an insurer's duty to indemnify is narrower than its duty to defend. St. Paul Ins. Co. v....