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Hudson Specialty Insurance Co. v. Talex Enterprises, LLC

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

September 26, 2019




         THIS MATTER is before the Court on Plaintiff/Counter-Defendant Hudson Specialty Insurance Company (“Hudson”)’s Motion for Partial Summary Judgment-Liability Coverage (Doc. 202), and Defendants/Counter-Claimants Talex Enterprises, LLC (“Talex”); Terrance L. Alexander (“Alexander”); Jubilee Performing Arts Center, Inc. (“Jubilee”); and, the Board of Mayor and Selectmen of McComb, Mississippi (“McComb”)’s Response in Opposition to Motion for Partial Summary Judgment-Liability Coverage (Doc. 213). The Court having examined the motions, memoranda in support, and the applicable statutory and case law, and being fully advised in the premises, finds that the Motion for Partial Summary Judgment-Liability Coverage should be GRANTED IN PART AND DENIED IN PART.


         This is a case arising out of an insurance dispute between Hudson Specialty Insurance Company and Talex Enterprises, LLC, Jubilee Performing Arts Center, Terrance L. Alexander and the City of McComb. The dispute arises out of an incident involving a property insured by Hudson, the JPAC Building, located at 230-232 Main Street, McComb, Mississippi. Talex owns the JPAC Building and, at the time of the incident, Jubilee operated a performing arts school out of the building. Alexander is the principal for both Talex and Jubilee. Faraway, LLC was the mortgage holder for the JPAC building.

         The JPAC Building is listed under two policies of insurance issued by Hudson. Talex is the named insured under one policy (the “Talex Policy”), which provides building property coverage. Alexander d/b/a Jubilee is the named insured under the other policy (the “Alexander Policy”), which provides personal property coverage. Both policies also provide commercial general liability coverage. Hudson paid Faraway, the mortgage holder, $660, 000.00 under the Business and Personal Property Coverage provision of the Talex Policy. McComb is currently seeking indemnification for the $389, 320.39 it spent in response to the JPAC collapse under the commercial general liability coverage of the Talex and Alexander Policies.

         On July 23, 2017, the JPAC Building collapsed. McComb declared an emergency condition and began the process of stabilizing the JPAC Building to prevent further injury and property destruction. McComb retained and paid an engineering firm to provide structural engineering services regarding the demolition and stabilization of the JPAC Building and surrounding properties so that a major downtown intersection could be opened. It paid for demolition work and for debris to be cleared away from the Subject Property and neighboring properties. In addition to these expenses, McComb also had to pay for additional hours worked by members of its Police, Fire, and Public Works Departments resulting from the collapse. Aside from expenses associated with the building itself, McComb also paid for repairs/restoration to property and equipment separate from the JPAC Building.

         On August 11, 2017, McComb sued Talex in Chancery Court of Pike County to recoup expenses it had incurred in stabilizing the JPAC Building and collapse site and protecting the public and adjacent properties from the collapse. (Doc. 44-1). Hudson determined that it had no obligation to defend its insured in that lawsuit. McComb and Talex filed a joint Motion to Dismiss McComb’s state lawsuit against Talex. The Circuit Court dismissed McComb’s suit without prejudice on July 10, 2018. (Doc. 202-4)[1].

         McComb, Alexander, Talex, and Jubilee entered into a Contract of Assignment of Chose in Action (“the Assignment”) (Doc. 67-1) on December 22, 2017. McComb, Alexander, Talex, and Jubilee agreed to proceed under joint representation provided by Attorney Wayne Dowdy stating that the parties will “cooperate with the other to their mutual advantage, in all matters pertaining to the insurance policies.” The Assignment stated that: (1) McComb’s claim, in the amount of $389, 320.39 will be made solely under the commercial general liability coverage of the insurance policies issued by Hudson, and from no other coverage, and (2) that the proximate cause of the collapse was the weight of rain that had, unknown to Talex and Alexander, collected on the roof.


         A party is entitled to summary judgment if the movant “shows 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). The Court is not permitted to make credibility determinations or weigh the evidence at the summary judgment stage of litigation. See Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009)(citing Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2010)). All facts and inferences must be made in “the light most favorable to the nonmoving party.” See Sierra Club, Inc. v. Sandy Creek Energy Assoc., L.P., 627 F.3d 134, 138 (5th Cir. 2010)(citation omitted).


         Hudson puts forth two claims; (1) that Hudson did not owe defense obligations for McComb’s lawsuit against Talex and Alexander, and (2) that Hudson did not/does not owe indemnity obligations for McComb’s damages. In order to determine Hudson’s duty to indemnify McComb the Court must first consider whether Hudson wrongfully refused to defend the original state lawsuit that McComb filed in Chancery Court in Pike County. Therefore, Hudson’s liability is premised on first, its duty to defend against McComb, and then - if there is a duty to defend - upon its obligations, if any, to indemnify under the Subject Policies. This court will address Hudson’s duty to defend and then its obligation to indemnify.

         I. Hudson Owed Defense Obligations for McComb’s Lawsuit

         McComb’s Operative Pleadings Alleged Non-Covered Claims

         The insurer’s duty to defend depends on the policy language and the allegations of the complaint. See Lafayette Ins. Co. v. Peerboom, 813 F.Supp.2d 823, 825 (S.D.Miss. 2011). Under this so-called “eight-corners” test, a duty to defend arises if the complaint alleges facts that are arguably within the policy’s coverage. See id. However, there is no duty to defend if the complaint alleges actions that exceed the scope of the policy’s coverage. See id. The duty to defend is “broader than the insurer’s duty to indemnify under its policy of insurance: the insurer has a duty to defend when there is any basis for potential liability under the policy.” See State Farm Mut. Auto. Ins. Co. v. LogistiCare Solutions, LLC, 751 F.3d 684, 689 (5th Cir. 2014)(emphasis added). Insurance policy provisions are “construed strongly against the drafter.” See Liberty Mut. Fire Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 331 (5th Cir. 1999). Insurance companies owe a duty to defend, so long as “some allegation with the underlying complaint potentially triggers coverage.” See Travelers Indem. Co. v. Forrest Cty., 195 F.Supp.3d 890, 898 (S.D.Miss. 2016).

         Hudson claims that the operative pleadings in McComb’s lawsuit never triggered defense obligations because the pleadings alleged “non-covered omissions.” Hudson asserts that it could only be obligated to defend to the extent that McComb’s operative pleading sought recovery for “property damage” allegedly resulting from an “occurrence” (accidental conduct) that was neither expected nor intended by Talex or Alexander. Hudson claims that McComb’s complaint did not allege an occurrence because the property damage was expected or intended by Talex or Alexander; therefore, the policies did not provide coverage.

         The definition of “occurrence” has been analyzed several times by the Mississippi Supreme Court. See EMJ Corp. v. Hudson Specialty Ins. Co., 833 F.3d 544, 548 (5th Cir. 2016). The Court has consistently held that there is one relevant consideration in determining if an injury is an occurrence. Id. There is coverage unless the “chain of events leading to the injuries complained of were set in motion and followed a course consciously devised and controlled by [the insured] without the unexpected intervention of any third person or extrinsic force.” Id. Courts should be wary about conflating an intended action with an intended result. Id. An intentional action, taken without the intention of causing the complained-of injury is an occurrence and will be covered under the Policies. Id.

         An act is intentional if “the actor desires to cause the consequences of his act, or believes that the consequences are substantially certain to result from it.” U.S. Fidelity & Guarn. Co. v. Omnibank, 812 So.2d 196, 201 (Miss. 2002)(quoting Coleman v. Sanford, 521 So.2d 876, 878 (Miss. 1988)). However, under Mississippi law, an incident is not an “occurrence, ” and is not covered by the policy if, “whether prompted by negligence or malice, (1) [the insured]’s acts were committed consciously and deliberately, without the unexpected intervention of any third force, and (2) the likely (and actual) effect of those acts was well within [the insured]’s foresight and anticipation.” Acceptance Ins. Co. v. Powe Timber Co., Inc., No. 06-60216, 2007 WL 624992, *1 (5th Cir. Feb. 21, 2007)(quoting Allstate Ins. Co. v. Moulton, 464 So.2d 507, 509 (Miss. 1985)); see also, Lafayette Ins. Co. v. Peerboom, 813 F.Supp.2d 823, 826 (S.D. Miss 2011)(“an insured’s intentional actions do not constitute ‘accidents, ’ and the damages resulting therefrom do not amount to ‘occurrences, ’ even if the insured acts in a negligent manner.”)(internal citations omitted). If the claim results from intentional conduct that causes foreseeable harm, it is not covered even if the damages or injury are greater than expected or intended. See Peerboom, 813 F.Supp.2d at 826(citing Omnibank, 812 So.2d at 201).

         Defendants/Counter-Claimants (Talex, Alexander, Jubilee, McComb) claim that Hudson had a duty to defend because McComb alleged Alexander and Talex acted negligently, which they argue leaves open the possibility that the collapse was caused by an inadvertent act. See EMJ Corp. v. Hudson Specialty Ins. Co., 833 F.3d 544, 548–49 (5th Cir. 2016)(rejecting HSIC’s attempt to avoid its defense obligations because under Mississippi law “intentional actions ...

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