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Hudson Specialty Insurance Co. v. Talex Enterprises, LLC

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

July 26, 2018

HUDSON SPECIALTY INSURANCE COMPANYPLAINTIFF
v.
TALEX ENTERPRISES, LLC, JUBILEE PERFORMING ARTS CENTER, INC., TERRANCE L. ALEXANDER, and the BOARD OF MAYOR AND SELECTMEN OF MCCOMB, MISSISSIPPI, et al. DEFENDANTS

          ORDER AND OPINION

          DAVID BRAMLETTE UNITED STATES DISTRICT JUDGE.

         Hudson Specialty Insurance Company moves the Court to dismiss, in part, the amended counterclaim of Faraway, LLC. For the reasons that follow, Hudson's motion is GRANTED.

         Background

         This dispute arises from the collapse of a McComb, Mississippi building owned by Talex Enterprises, LLC, subject to a mortgage in favor of Faraway, and insured under Hudson policy HBD 10027329.[1]

         After the building collapsed, Talex submitted to Hudson a proof of loss under the Policy, claiming its $660, 000 limit. Doc. 80-2. Hudson then sued for declaratory relief and rescission of the policies; Faraway counterclaimed against it.

         Faraway's amended counterclaim seeks an equitable lien and damages for breach of contract, tortious breach of contract, and gross negligence. It relies on the Policy's “union” mortgage clause and theorizes that Hudson should have paid Faraway the balance on its mortgage -- $621, 111 -- when Talex submitted its proof of loss. Faraway's theory assumes three things.

         First, the “union” mortgage clause in the Policy creates a separate policy of insurance between it and Hudson. Second, Faraway's right to payment of the balance of its mortgage under the Policy is not affected by Talex's or Alexander's misconduct. Third, Faraway's right to payment -- as mortgageholder -- was triggered when Talex submitted its proof of loss.

         Hudson attacks the third assumption and moves the Court to dismiss, without prejudice, Faraway's claims for breach of contract, tortious breach of contract, and gross negligence. Faraway opposes. It counters that its interest in the Policy withstands any misconduct by Hudson's insureds. But it offers no authority to support its theory equating Talex's submission of a proof of loss with its own initiation of a separate mortgageholder claim under the Policy's “union” mortgage clause.

         I

         To overcome Hudson's motion, Faraway must plead a plausible claim for relief. Romero v. City of Grapevine, Tex., 888 F.3d 170, 176 (5th Cir. 2018) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim is plausible if it is pleaded with factual content that allows the Court to reasonably infer that Hudson is liable for the misconduct alleged. Edionwe v. Bailey, 860 F.3d 287, 291 (5th Cir. 2017) (citing Iqbal, 556 U.S. at 678). But no matter the factual content, a claim is not plausible if it rests on a legal theory that is not cognizable. Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010) (per curiam).

         In ruling on Hudson's motion, the Court accepts the amended counterclaim's well-pleaded facts as true and views them in the light most favorable to Faraway. Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 513 (5th Cir. 2018).

         II

         Under Mississippi law, certain insurance policies must include a “union” mortgage clause. Miss. Code Ann. § 83-13-9. A “union” mortgage clause creates a separate insurance contract between the mortgageholder and the insurer. Lumbermens Mut. Cas. Co. v. Thomas, 555 So.2d 67, 69 (Miss. 1989). That way, a mortgageholder's right to recover under an insurance policy is not negated by the conduct of the mortgagor. See IDs Property Cas. Ins. Co. v. Meeks, F. App'x 513, 516 (5th Cir. July 31, 2012) (per curiam).

         Here, the “union” mortgage clause in the Policy creates a separate insurance contract between Hudson and Faraway.[2] Doc. 13-3, p.62. That much is undisputed. What is disputed is when Hudson's obligations under the Policy's “union” mortgage clause were triggered. Hudson says ...


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