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Hudson Specialty Insurance Co. v. Talex Enterprises, LLC

United States District Court, S.D. Mississippi, Western Division

June 25, 2018




         Hudson Specialty Insurance Company (“Hudson”) moves the Court to dismiss, in part, the amended counterclaim of Talex Enterprises, LLC, Terrance L. Alexander d/b/a Jubilee Performing Arts Center, and the Board of Mayor and Selectmen of McComb, Mississippi. For the reasons that follow, Hudson's motion is DENIED.


         This insurance-coverage dispute asks the Court to decide Hudson's duties to its insureds___Talex Enterprises, LLC and Terrance Alexander___under policies providing commercial general liability and commercial property coverage for a McComb, Mississippi building.

         The building collapsed in July 2017, damaging public utilities and disrupting traffic.[1] One month after the collapse, the City sued the building's owner___Talex ___in Pike County Chancery Court.

         In its first state-court complaint, the City alleged that the building collapsed because too much water gathered on its roof. Doc. 1-4, ¶11. The City also alleged that Talex “had actual notice that an unsafe amount of water was accumulating on the roof of the building, ” yet “failed to warn adjoining property owners of a dangerous condition of which [Talex] was aware.” Doc. 1-4, ¶¶11, 29.

         The City amended its state-court complaint one month later. Doc. 1-5. The City's amended complaint, like its original, alleged that Talex and Alexander knew that too much water had gathered on the building's roof. Doc. 1-5, ¶9. They acquired that knowledge from two sources: first, from an unknown person[2] Alexander asked to clear the roof's drain, who told Alexander that the drain was clogged; second, from a contractor who refused to repair the roof on the ground that it “was so damaged that [the contractor] would not allow his employees to be exposed to such danger.” Doc. 1-5, ¶¶15, 17.

         The City sought leave to file a second amended state-court complaint, but the parties dispute whether the Court can consider it. The Court declines to review that complaint at this point but notes its separate concerns that (1) the City presented to the state court an “affidavit” containing statements made on information and belief, and (2) the City takes a position in this Court that shows that its mayor's representations to the state court were either blithely made or false.

         After the City sued it, Talex requested a defense from, and initiated a property coverage claim with, Hudson under policies HBD10027329 and HBD10019191 (the “Policies”).[3] Hudson denied coverage and sued, asking this Court to declare its coverage obligations and rescind the Policies.

         The Policies contain commercial general liability (CGL) and property coverage forms. The CGL forms provide coverage for suits seeking damages caused by an “occurrence, ” which the Policies define as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” CGL Forms, pp.1 of 16 and 14 of 16. CGL coverage is excluded for property damage “expected or intended from the standpoint of the insured.” CGL Forms, pp.2 of 16.

         The property forms cover “direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." Property Coverage Forms, p.1 of 16. But the forms are “void” if the insured commits fraud or “intentionally conceal[s] or misrepresent[s]” facts material to the policy. Property Coverage Forms, p.1 of 2.

         Before it answered Hudson's amended complaint, the City executed a “Contract of Assignment of Chose in Action” with Talex and Alexander. Doc. 67-1. Through that assignment, Talex and Alexander purport to convey to the City their “right” to $389, 320.39 that they say is “due” under the Policies' liability coverage forms. Doc. 67-1, ¶6. The City, Talex, and Alexander also agreed that the City (as assignee) could make a claim “solely under the commercial general liability coverage” of the Policies. Doc. 67-1, ¶6.

         Armed with the assignment, the City, Talex, and Alexander counterclaimed against Hudson. Doc. 37. That counterclaim attempted to allege claims against Hudson for breaching the Policies and ill-defined fiduciary duties. Doc. 37, ¶¶f-y. But that counterclaim was unintelligible: It failed to identify which claims were being brought on behalf of which defendants under which insurance policies. The Court therefore granted the City, Talex, and Alexander leave to amend. Doc. 70.[4]

         Counterclaimants timely amended. Doc. 72. In the amended counterclaim, they allege that the Policies cover the building's “unexpected” collapse, and that “Hudson has failed and refused, and continues to fail and refuse, to meet its obligations under the policies.” Doc. 72, ¶l. This “failure, ” Counterclaimants continue, is “a case of actual controversy within the jurisdiction of this Court.” Doc. 72, ¶m. The only relief Counterclaimants seek is a declaratory judgment “affirm[ing]” the ...

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