Opinion
Civil Action No. 03-0457 SECTION "N" (1).
November 22, 2004
ORDER AND REASONS
Before the Court is a Motion for Summary Judgment filed by defendant United National Insurance Company ("United National"). (Rec. Doc. No. 108). For the reasons that follow, defendant's motion is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Plaintiffs filed this suit seeking damages for losses they allegedly sustained in connection with a piece of real property in Hammond, Louisiana. Plaintiff Global ADR, Inc. purchased the property, allegedly with the intent to convert the property into a law office and/or mediation center. Because the property is located in an area of Hammond that is zoned residential, the plaintiffs allegedly made several efforts prior to the purchase to obtain the "conditional use" exception necessary to use the property commercially. On September 7, 1999, the Hammond City Council passed an ordinance adopting the requested conditional use, and plaintiffs closed on the purchase on November 17, 1999. However, a group of neighbors filed a state court lawsuit on December 6, 1999 (the " Ross litigation"), challenging the City Council's procedures in adopting the ordinance. Both the trial court and the state appellate court agreed with the neighbors, finding the ordinance to be a nullity due to the City Council's procedural failure to advertise amendments to the ordinance. On February 13, 2003, less than one year after the appellate court issued its judgment, plaintiffs filed this suit, ultimately suing the (1) City of Hammond, (2) Coregis Insurance Company and United National Insurance Company (the City's insurers), (3) Louis J. Tallo (the former Mayor of Hammond), (4) Dr. Lavanna Brown, Toni Licciardi, Nicky Muscarello, Jerry Correjolles, and Osa Williams (present and former members of the City Council), (5) Ron S. Macaluso (the former City Attorney of Hammond), and (6) Lanita V. Johnson (Clerk of the City Council). Plaintiffs asserted claims pursuant to 42 U.S.C. § 1983 and the Fifth Amendment, as well as Louisiana tort law, seeking damages for losses alleged sustained as a result of the defendants' alleged failure to follow the proper procedures necessary to pass the ordinance.
On July 11, 2003, defendants filed a Motion to Dismiss plaintiffs' suit pursuant to Fed.R.Civ.P. Rule 12(b)(6). Defendants argued that plaintiffs' claims should be dismissed because their constitutional claims were unripe and their Louisiana tort claims were prescribed; the defendants argued alternatively that plaintiffs had no right of action to bring the Louisiana tort claims. On November 3, 2003, the Court issued its Order and Reasons, granting the defendants' motion in part, dismissing plaintiffs' takings claim, and denying the motion in all other respects, without prejudice to defendants' right to re-urge their ripeness, prematurity and prescriptive arguments in a motion for summary judgment.
The City of Hammond defendants filed a Motion for Summary Judgment on March 5, 2004, re-urging their earlier arguments seeking dismissal of plaintiffs' substantive due process claims on the basis on prematurity, and seeking dismissal of plaintiffs' Louisiana tort claims on the basis of prescription. The Court heard oral argument on June 9, 2004, and in open court on that date, the Court granted in part and denied in part defendants' motion. Specifically, the Court found that plaintiffs' substantive due process claims were not ripe, as there had been no showing of a final agency decision as required by the Supreme Court in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed. 2d 126 (1985). The Court further found that the circumstances did not warrant invocation of the futility exception to the requirement of a final decision. Accordingly, the Court dismissed without prejudice plaintiffs' substantive due process claims. However, the Court denied defendants' motion insofar as it sought dismissal of plaintiffs' Louisiana tort claims as prescribed. The Court found that defendants had not met their burden of proving with undisputed facts that plaintiffs' alleged damages were actual and appreciable over one year prior to the filing of the present suit. The Court also found that, even if plaintiffs' damages were more than speculative prior to the Louisiana First Circuit's decision in the Ross litigation, the Rule 56 evidence, when viewed in the light most favorable to plaintiffs, established that genuine issues of material fact exist as to whether the City of Hammond defendants, throughout the Ross litigation, lulled plaintiffs into believing that the City would remedy any deficiencies in the ordinance advertisements, thereby suspending the prescriptive period until, at the earliest time, the date of the state appellate court's decision. Plaintiffs later filed a Motion for Reconsideration, which the Court denied on July 26, 2004.
On May 10, 2004, defendant Coregis filed a Motion for Summary Judgment, arguing that plaintiffs' claims against the company should be dismissed because neither of the policies issued to the City of Hammond provided coverage for the claims asserted by plaintiffs. The two policies of insurance at issue were a Public Officials and Employees Liability (POD) Policy and a Commercial General Liability (CGL) Policy, both issued to the City for the annual period commencing July 1, 1999, and ending July 1, 2000. On July 9, 2004, the Court issued its Order and Reasons, granting in part and denying in part Coregis' motion. Specifically, the Court found, with respect to the "claims made" POD policy, that no claim, as that term is defined, was made during the policy period, and further that no endorsement or exception allowed for coverage under these circumstances. In denying the motion insofar as Coregis sought dismissal of the claims against it based on the "occurrence based" CGL policy, the Court found that Coregis did not meet its burden of proving with undisputed facts that there was no occurrence, as defined by the CGL policy, during the policy period. The Court further found that genuine issues of material fact existed as to the continuing tort and as to the time when damages commenced and continued.
Following the dismissal of all federal law claims, defendants City of Hammond and Coregis filed a Motion to Dismiss or Remand for Lack of Subject Matter Jurisdiction. On July 29, 2004, the Court denied defendants' motion, concluding that the balance of the relevant factors set forth in Carnegie-Mellon University v. Cohill, 488 U.S. 343, 350-51, 108 S.Ct. 614, 619 (1988), weighed in favor of the Court's exercising its supplemental jurisdiction over the remaining state law claims.
On July 16, 2004, defendant United National filed the instant Motion for Summary Judgment, arguing that plaintiffs' claims against the company should be dismissed because the policy issued to the City of Hammond does not provide coverage for the claims asserted by plaintiffs. The policy of insurance which is the subject of defendant's motion is a Premier Public Entity Package Insurance Policy. United National first issued the policy, No. CP 0065331, to the City for the annual period commencing July 1, 2000. The policy was subsequently renewed for the annual period commencing July 1, 2002, and coverage was terminated on July 1, 2003.
The Court is unable to determine from the parties' submissions whether United National's policy issued to the City was renewed for the annual period commencing July 1, 2001, and ending July 1, 2002. See United National Mem., p. 9. See also Package Insurance Policy No. CP 0065331 (United National Exhibit "A").
II. LAW AND ANALYSIS
A. Standard for Summary Judgment :"Summary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Kee v. City of Rowlett, Texas, 247 F.3d 206, 210 (5th Cir.), (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P. 56(c))), cert. denied, 122 S. Ct. 210 (2001). "The moving party bears the burden of showing . . . that there is an absence of evidence to support the nonmoving party's case." Id. at 210. If the moving party meets this burden, "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Id. "A dispute over a material fact is genuine if the evidence is such that a jury reasonably could return a verdict for the nonmoving party." Id. (internal quotations omitted). "The substantive law determines which facts are material." Id. at 211. Factual controversies are to be resolved in favor of the non-moving party. See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
B. Louisiana Law on Interpretation of Insurance Policies
The City of Hammond defendants and Coregis do not dispute that Louisiana contract interpretation principles apply to the construction of the United National policy.
An insurance contract is an agreement between the parties and it should be interpreted by using ordinary contract principles. Mayo v. State Farm Mut. Auto. Ins. Co., 03-1801 (La. 2/25/04), 869 So.2d 96. The Louisiana Civil Code provides that the interpretation of a contract is "the determination of the common intent of the parties." La Civ. Code art. 2045; see Ledbetter v. Concord Gen. Corp., 95-0809 (La. 1/06/96), 665 So.2d 1166, 1169. The parties' intent, as reflected by the words of the policy, determines the extent of coverage under an insurance policy. Ledbetter, 665 So.2d at 1169. The intention of the parties is determined "in accordance with the general, ordinary, plain and popular meaning of the words used in the policy, unless the words have acquired technical meaning." Id.
When the words of an insurance contract are clear and explicit and lead to no absurd consequences, courts must enforce the contract as written. Succession of Fannaly v. Lafayette Ins. Co., 01-1355 (La. 1/15/02), 805 So.2d 1134, 1137. See also La. Civ. Code art. 2046 ("When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent."). However, if the insurance policy is susceptible to two or more reasonable interpretations, then it is considered ambiguous and must be liberally construed in favor of coverage to the insured and against the insurer who issued the policy. Vintage Contracting, L.L.C. v. Dixie Building Material Co., Inc., 03-422 (La.App. 5 Cir. 9/16/03), 858 So.2d 22, 26. See also La. Civ. Code art. 2056 ("In the case of doubt that cannot be otherwise resolved, a provision in a contract must be interpreted against the party who furnished its text.").
The determination of whether a contract is clear or ambiguous is a question of law. Mayo, supra. An insurer seeking to avoid coverage through summary judgment must prove that some exclusion applies to preclude coverage. Smith v. Reliance Ins. Co. of Ill., 01-888 (La.App. 5 Cir. 1/15/02), 807 So.2d 1010, 1014. Exclusions must be narrowly construed, and any ambiguity should be construed in favor of coverage. Great American Ins. Co. v. Gaspard, 608 So.2d 981, 984 (La. 1992)
In the matter now before the Court, defendant United National submits that it is entitled to summary judgment, dismissing it from this action, as certain terms, conditions and exclusions of the Package Insurance Policy issued to the City, particularly those found in Section IV — the Public Officials Errors and Omissions section of coverage ("Errors and Omissions" coverage), preclude coverage for the claims asserted by plaintiffs herein. Coregis and the City have filed a joint opposition memorandum, seeking a denial of the motion as (1) genuine issues of material fact exist which preclude granting summary judgment in favor of United National, and (2) United National's own policy language, specifically that found within Section II, Comprehensive General Liability ("CGL") Coverage, and/or Section IV, Errors and Omissions Coverage, affords coverage for the claims asserted against the City during the United National policy periods. In reply, United National reasserts the arguments made in its original memorandum and further contends that the CGL section does not provide coverage for the claims asserted by plaintiffs herein.
While none of the parties have addressed the issue of coverage under any of the five other sections of coverage in the Package Insurance Policy, the Court has reviewed the entire policy and concludes that those five sections do not, as a matter of law, provide coverage for the claims asserted by plaintiffs herein. Accordingly, the only issues before the Court are (1) whether certain terms, conditions and/or exclusions applicable to the entire policy preclude coverage for plaintiffs' claims against the City; (2) whether certain terms, conditions and/or exclusions preclude coverage for plaintiffs' claims against the City under Section IV of the Package Insurance Policy, "Errors and Omissions" coverage; and (3) whether certain terms, conditions and/or exclusions preclude coverage for plaintiffs' claims against the City under Section II of the Package Insurance Policy, CGL coverage.
The Package Insurance Policy has seven separate sections of coverage: (1) Property; (2) Comprehensive General Liability; (3) Automobile Liability; (4) Public Officials Errors and Omissions; (5) Excess Workers' Compensation and Employers' Liability for a Qualified Self-Insurer; (6) Employee Benefits Liability; and (7) Crime. See Policy, pp. 1 — 2.
C. Whether General Terms, Conditions and/or Exclusions of the Package Policy Preclude Coverage
Applicable to both Section II, CGL coverage, and Section IV, Errors and Omissions Coverage, is General Condition Number 13 (the "Other Insurance" condition), which states that
If the ASSURED has other insurance against loss or damage covered under this policy, the Company is liable, under the terms of this policy, only as excess of coverage provided by such other insurance. . . .See Policy, p. 11. United National argues that this condition precludes coverage for the claims asserted by plaintiffs herein because Coregis Insurance Company issued coverage to the City of Hammond during the time of the alleged wrongful acts.
United National's argument is without merit. For this "Other Insurance" General Condition to be implicated herein, the Court would first have to make a finding that other insurance exists which provides coverage against the loss or damages allegedly covered by the United National policy. As the City of Hammond and Coregis correctly point out in their opposition, there has been no finding by this Court or any other body that Coregis does in fact provide coverage for the claims asserted by plaintiffs herein. Rather, in denying Coregis' motion for summary judgment relative to the CGL policy it had issued to the City, the Court specifically found that the Coregis CGL policy might provide coverage for any damages which were allegedly suffered by plaintiffs prior to the expiration of the Coregis CGL policy. See generally Order and Reasons, dated July 9, 2004 (Rec. Doc. No. 94).
Given that issues of fact exist over whether the Coregis policy provides coverage, an issue of fact also exists as to whether the "Other Insurance" condition is even triggered. Accordingly, the Court finds that United National is not entitled to summary judgment as a matter of law with respect to the "Other Insurance" condition.
Furthermore, the City and Coregis raise another issue which possibly underscores United National's position that its policy does not afford coverage for plaintiffs' claims. Specifically, the City and Coregis argue that the United National "Other Insurance" condition is identical to that provided by the Coregis policy. According to the City and Coregis, under such circumstances, the Court should deem such clauses to be mutually repugnant, resulting in the two insurers sharing pro rata in the damages which they may simultaneously insure. See Opp'n Mem., pp. 3-4 (citing Lamastus Assoc. v. Gulf Ins. Co., 260 So.2d 83 (La.App. 4 Cir. 1972); Penton v. Hotho, 601 So.2d 762 (La.App. 1 Cir. 1992).
The CGL policy issued to the City by Coregis does in fact contain an "Other Insurance" condition in the section entitled "Common Policy Conditions. See Coregis CGL Policy, p. 26 of 31 (Ex. B to Coregis Mtn. For Summ. J.) (Rec. Doc. No. 48). The Coregis "Other Insurance" condition provides, in relevant part, that "[i]f an insured has other insurance against loss covered by this insurance, we will only be liable for the loss in excess of the other coverage." See id.
Having reviewed the parties' submissions, the Court finds that the parties have not adequately addressed the latter argument raised by the City and Coregis in their Opposition. The Court therefore encourages the parties to brief this issue of conflicting "other insurance" clauses, citing the proper authorities applicable thereto, according to a schedule to be determined by the Court in a separate Minute Entry.
D. Whether the Applicable Terms, Conditions or Exclusions Preclude Coverage under Section IV, Public Errors and Omissions Coverage
Under this section of coverage, United National has agreed "to indemnify the ASSURED for all sums which the ASSURED is legally liable by reason of a WRONGFUL ACT." See Policy, p. 36. Coverage under this section is provided on a "claims made" basis, meaning that "[t]his coverage applies only if a CLAIM for damages . . . is `first made' against the ASSURED during the PERIOD OF INSURANCE or during the Extending Reporting Period of this coverage, if any." See Policy, pp. 4, 36.
A "wrongful act" is defined by the policy as "any actual or alleged error or misstatement, omission, act or neglect or breach of duty due to misfeasance, malfeasance, and non-feasance, including any EMPLOYMENT PRACTICE VIOLATION, Discrimination, and Violation of Civil Rights by the ASSURED." See Policy, p. 18. This section also contains a number of exclusions to coverage, including
(g) Any CLAIM for which an ASSURED is entitled to indemnity under any policy or policies the term of which has expired prior to the inception date of this policy, or for which an ASSURED would be entitled to indemnity except for the exhaustion of the limit of such prior insurance;
(h) Any CLAIM arising out of all pending and prior litigation or hearing as well as future CLAIMS arising out of any pending and prior litigation or hearing. If this policy is a renewal of a policy issued by the Company, this exclusion shall only apply with respect to a pending and prior litigation or hearing prior to the effective date of the first policy issued and continuously renewed by the Company.See Policy, p. 38 (Exclusions "G" and "H").
1. "Wrongful Acts"
United National's first argument against coverage is based on the insuring agreement itself. Specifically, United National contends that the allegations against the City are not supported by evidence sufficient to establish "wrongful acts." United National's argument focuses on plaintiffs' allegations that the City of Hammond defendants "lulled" plaintiffs into believing that the City would remedy deficiencies in the ordinance at issue. United National has attached in support of this argument the deposition testimony of Tom Waterman, Nicky Muscarello, and Christopher Moody, as well as certain correspondence from Moody to Waterman. See United National Exs. B, C, D and E. United National argues that a thorough review of the evidence makes it abundantly obvious that the City of Hammond had indicated and expressed its concerns regarding the transferability issue and problems with the conditional use ordinance well before the Ross appellate decision.
United National's argument, however, disregards the clear language of the section's broad definition of a wrongful act ("any actual or alleged error or misstatement, omission, act or neglect or breach of duty due to misfeasance, malfeasance, and non-feasance"). See Policy, p. 18 (emphasis added). In the case at bar, plaintiffs have alleged errors, misstatements, omissions, neglect and/or breaches of duty in their Complaints, i.e., gross negligence in the form of tortious misrepresentations and interference with business interests. See, e.g., Compl., Counts IV and VI. Plaintiffs have further alleged that such gross negligence resulted from the City defendants' misfeasance, malfeasance and/or non-feasance. See, e.g., First Supplemental and Amending Compl., Count II, ¶ 9 (alleging that the City of Hammond defendants are liable to plaintiffs based upon defendants' failure to perform their non-discretionary duties in a manner consistent with proper application of federal, state, and local statutes, guidelines and ordinances. . . ."). Contrary to United National's argument, the Court finds that plaintiffs' allegations and claims of damages clearly fall into the policy's definition of "wrongful act." Moreover, in light of the extensive motion practice already having occurred in this action, United National's arguments with regard to whether the City's actions constituted wrongful acts implicate genuine issues of material fact which cannot be resolved on summary judgment.
The Package Insurance Policy does not define the terms "misfeasance," "malfeasance," and "non-feasance." Accordingly, the Court has looked to the ordinary meanings of those terms, as set forth in Black's Law Dictionary:
(i) misfeasance is defined as "[t]he improper performance of some act which a man may lawfully do . . .";
(ii) malfeasance is defined as "[e]vil doing; ill conduct. The commission of some act which is wholly wrongful and unlawful; the doing of an act which person ought not to do at all or the unjust performance of some act which the party had no right or which he had contracted not to do . . ."; and
(iii) non-feasance is defined as a "[n]onperformance of some act which ought to be performed, omission to perform a required duty at all, or total neglect of duty."Black's Law Dictionary 902, 862 and 950 (5th ed. 1979). CITE. See also Ledbetter, 665 So.2d at 1169 (stating that the intention of the parties is determined "in accordance with the general, ordinary, plain and popular meaning of the words used in the policy . . ."). Clearly, the alleged negligent acts and omissions fall into the policy terms "misfeasance," "malfeasance," and/or "non-feasance."
2. Exclusion G
Excluded from Errors and Omissions Coverage are "[a]ny claim for which an ASSURED is entitled to indemnity under any policy or policies the term of which has expired prior to the inception date of this policy, or for which an ASSURED would be entitled to indemnity except for the exhaustion of the limit of such prior insurance." See Policy, p. 38. As it did with the "Other Insurance" condition, United National likewise argues that the claims asserted by plaintiffs herein are excluded from coverage because the City of Hammond is entitled to indemnity under the CGL policy issued by Coregis, said policy having expired prior to the inception of the United National policy. However, for the same reasons for which this Court finds summary judgment to be inappropriate with respect to the "Other Insurance" clause, the Court denies summary judgment with respect to Exclusion G.
The Coregis CGL policy expired on July 1, 2000, and the United National Package Insurance Policy became effective on the same date, July 1, 2000.
3. Exclusion H
Exclusion H is a "pending and prior litigation" exclusion. It excludes from coverage any claim "arising out of all pending and prior litigation . . . as well as future CLAIMS arising out of any pending and prior litigation. . . . ." See Policy, p. 38. United National urges this Court to find that coverage of the claims asserted in the instant litigation is precluded because such claims arise out of pending and prior litigation, to wit: the Ross litigation.
The Ross suit was filed on December 6, 1999, a date prior to the inception of the first United National policy period.
In Comerica Bank v. Lexington Insurance Company, 3 F.3d 939 (6th Cir. 1993), a case relied upon by United National, the Sixth Circuit was presented with a prior and pending litigation exclusion that is nearly identical to the one found in the United National Errors and Omissions coverage. In affirming summary judgment granted in favor of the insurer, the Court found the following policy language to be clear and subject to only one interpretation, that of the defendant insurer —
. . . it is understood and agreed that this policy excludes all claims arising from all pending and/or prior litigation as well as all future claims arising out of said pending and/or prior litigations.3 F.3d at 942, 943. In Comerica, the plaintiff was a bank which, in 1984, purchased a Trust Department Errors and Omissions Policy issued by Lexington Insurance Company. 3 F.3d at 940. The policy covered claims made against the bank from January 1, 1984 until January 1, 1987. Id. Prior to that time, in 1976, the bank had been named the executor of an estate. Id. From 1977 to 1981, a number of suits were instituted against the bank, as executor of the estate, based upon acts taken by the bank in relation to the sale of stock owned by the estate. Id. at 940-41. Subsequently, in 1986, the estate's beneficiaries filed a surcharge action against the bank and sought to remove the bank as executor of the estate due to alleged mishandling of the estate. Id. at 941. As required by the insurance policy, the bank notified Lexington of the surcharge action; however, Lexington refused to defend or indemnify the bank, taking the position that certain exclusions barred coverage. Id. The bank later settled the surcharge action with the estate's beneficiaries, and soon thereafter sued Lexington, seeking damages in the amount it had paid the beneficiaries pursuant to the settlement agreement, along with other costs. Id. Upon motion of Lexington, the district court granted summary judgment, finding that the beneficiaries' surcharge action was a future claim arising out of pending and prior litigation — the suits instituted between 1977 and 1981 against the bank as executor of the estate — and that coverage was therefore excluded. Id. at 942-43.
In arguing that the action before this Court arises out of the Ross litigation, United National states that the present action specifically references the Ross litigation which challenged the Hammond City Council's procedures in enacting the Conditional Ordinance. United National also contends that the Global ADR plaintiffs' allegations of the City of Hammond defendants' shifting of positions arose from the Louisiana First Circuit's decision in the Ross litigation. In further support of its argument, United National relies upon certain deposition testimony of plaintiff Alan Levith marking the decline of his business at the time the Ross litigation was filed —
Q. And in December of 1999 was when your business started going downhill?
A. It started going downhill when the Ross litigation was filed.
Deposition of Alan Levith, p. 59 (United National Ex. F). United National also relies upon Levith's testimony identifying the time of the Ross appellate court decision as the time when the City "flipped" its position —
A. . . . [A]fter the First Circuit's decision, the attitude changed. It wasn't, come on, Alan and Global, we are going to win this, which their attorney felt we were going to do. I felt we were going to win. My attorney felt we were going to win. It changed. It flipped. It was no longer we're a team and we're going to win this. After the First Circuit's decision, it was here are the Ross' conditions and we are going to adopt those you know. . . . It was impossible. It was an impossible situation after the First Circuit.
Levith Dep., pp. 92-93.
In opposition, the City and Coregis do not argue that United National's interpretation of the exclusion is an unreasonable one or that the language used in the "pending and prior litigation" exclusion is ambiguous. Instead, the City and Coregis argue that the "pending and prior litigation" exclusion is not triggered here because the exclusion applies to any "claim" and the Ross litigation, which sought injunctive relief or a mandamus, did not constitute a "claim" as that term is defined by the United National policy. A review of the "pending and prior litigation" exclusion, however, reveals that the City and Coregis have completely misread the exclusion at issue. Indeed, for the Court to agree with the City and Coregis that Exclusion H is inapplicable because the Ross litigation does not constitute a "claim," the Court would have to read the exclusion as applying to "all claims arising out of all prior and pending claims." However, that is not what the policy states; rather, the policy clearly states that any claim "arising out of all pending and prior litigation . . . as well as future CLAIMS arising out of any pending and priorlitigation. . . . ." are excluded from Errors and Omissions coverage. See Policy, p. 38 (emphasis added).
A "claim" is defined under the Errors and Omissions coverage as follows:
CLAIM means all notices or SUITS demanding payment of money based on, or arising out of the same WRONGFUL ACT or a series of related WRONGFUL ACTS by one or more ASSUREDS.See Policy, p. 38.
In the case at bar, it is clear that the instant action seeking monetary damages against the City of Hammond defendants is a claim, as that term is defined by Section IV, and that the claim arose directly from the litigation instituted by the Ross plaintiffs against the City and Global ADR in December of 1999. The Package Insurance Policy was purchased by the City in July of 2000, and under the "pending and prior litigation" exclusion to the Errors and Omissions coverage, the claims of the Global ADR plaintiffs arising from prior litigation instituted in 1999 are excluded from coverage. The policy language used in the "pending and prior litigation" exclusion is not ambiguous, and the exclusion is not subject to more than one interpretation. Accordingly, the Court finds that United National is entitled to summary judgment as a matter of law, dismissing any claims which plaintiffs may have against it based upon the Errors and Omission section of coverage within the Package Insurance Policy.
E. Whether the Applicable Terms, Conditions or Exclusions Preclude Coverage under Section II — Comprehensive General Liability (CGL) Coverage
Under Section II, United National is obligated, "subject to the policy limitations, terms and conditions, to indemnify the ASSURED for all sums which the ASSURED is legally obligated to pay by reason of liability imposed upon the ASSURED by law . . . for damage . . . on account of PERSONAL INJURY or BODILY INJURY . . . and/or PROPERTY DAMAGE . . . arising out of any OCCURRENCE from any cause . . . happening during the PERIOD OF INSURANCE." See Policy, p. 30. Coverage is therefore extended to include damages arising out of any occurrence happening during any of the annual policy periods between July 1, 2000, and July 1, 2003.
As stated earlier, the Court is unable to determine whether the United National Policy was effective during the July 1, 2001 through July 1, 2002 annual period. See note 1. Accordingly, if the parties present the Court with evidence that the Policy was in effect during the aforementioned period, coverage therefore would be extended to include damages arising out of any occurrence happening during any of the annual policy periods between July 1, 2000, and July 1, 2003. On the other hand, if the United National Policy was not in effect during that time period, coverage would only be extended to include damages arising out of any occurrence happening during the policy period commencing July 1, 2000 and ending July 1, 2001, and during the policy period commencing July 1, 2002 and ending July 1, 2003.
United National asserts that there is no coverage under the CGL section of coverage because there was no "occurrence," as that term is defined by the policy The initial issue to be addressed therefore is whether there was an "occurrence" as defined by the Section II. The pertinent policy language is as follows: an "occurrence" is "an accident or a happening or event or a continuous exposure to conditions which result in BODILY INJURY, PROPERTY DAMAGE, or PERSONAL INJURY during the PERIOD OF INSURANCE." See Policy, p. 32. The policy does not provide any definitions for the terms "accident," "happening," "event," or "conditions."
United National argues that the actions which form the basis of plaintiffs' claims do not constitute an "accident," "happening," "event," or "continuous exposure to conditions," citing Serigne v. Widley, 612 So.2d 155 (La.App. 5 Cir. 1992); Houston Petroleum Company v. Highlands Insurance Company, 830 S.W.2d 153 (Ct.App. of Texas, Houston (1st Dist.) 1990); and Bayou Fleet, Inc. v. Alexander, 1998 WL 623909 (E.D.La. Sept. 11, 1998) (Mentz, J.). United National's reliance on these three decisions, however, is misplaced.
First, United National urges this Court to limit its consideration here to whether the conduct alleged constitutes an accident. Indeed, in affirming the trial court's finding that the collapse of a marina was a covered "occurrence," the Serigne Court equated the term "occurrence" with the term "accident." Serigne v. Widley, 612 So. 2d at 156-57. Having reviewed the policy language at issue in Serigne, this Court agrees with the Louisiana Fifth Circuit's decision to focus its inquiry on whether an accident, as defined by Black's Law Dictionary, had taken place because an "occurrence" under that CGL policy was defined to mean "an accident, including continuous or repeated exposure to substantially the same general conditions." 612 So. 2d at 156. However, having compared that policy language with the United National policy language, the Court disagrees with United National's contention that its policy language is "extremely similar" to that at issue before the Serigne Court. See United National Reply Mem., p. 3. Indeed, the Court finds that the United National definition of an "occurrence" is substantially broader than that at issue in Serigne, as the United National policy does not limit an "occurrence" to an "accident." Instead, Section II defines an "occurrence" using the disjunctive "or" to mean "an accident or a happeningor event or a continuous exposure to conditions. . . ." See Policy, p. 32 (emphasis added). The analysis employed by the Court in Serigne cannot be employed in the instant matter, given the obvious differences in the policy language.
It is important to note that, in Serigne, the appellate court found the definition of "occurrence" to be "broad," and further that the trial court earlier found that the policy was "at best overly confusing, absolutely ambiguous." Serigne, 612 So.2d at 157.
Also misplaced is United National's reliance on Judge Mentz's holding in Bayou Fleet, Inc. v. Alexander, 1998 WL 623909 (E.D.La. Sept. 11, 1998). There, Bayou Fleet's claims arose out of an alleged conspiracy by certain members of a parish council to destroy Bayou Fleet's business. Bayou Fleet, Inc., 1998 WL 623909, at *1. The issue before the Court was whether two policies issued to the parish council, including a CGL policy, provided coverage for Bayou Fleet's allegations. Id. In granting the insurer's motion for summary judgment, the Court looked to the policy's definition of an "occurrence," which the Court found was expressly limited to unintentional acts of the insured. Id. The Court concluded that the allegations unambiguously fell outside the policy definition of an occurrence, as all of Bayou Fleet's alleged causes of action rested solely upon intentional conduct. Id. Similarly, if the losses claimed in the instant action were for damages and injuries caused solely by intentional acts, those claims would be excluded from coverage. See generally Policy, Section II, Exclusion B, p. 30 ("THIS SECTION DOES NOT INSURE AGAINST . . . BODILY INJURY, PROPERTY DAMAGE, or PERSONAL INJURY which the ASSURED intended or expected. . . .). However, the Complaint in the present action differs from that which was the subject of the Bayou Fleet action, as the Global ADR plaintiffs have specifically alleged gross negligence, including tortious misrepresentation and interference with business interests. See, e.g., Compl., Counts IV and VI (Rec. Doc. No. 1). Furthermore, United National has not offered any evidence suggesting in any way that the City intended or expected the damages alleged by plaintiffs herein.
The third case relied upon by United National, Houston Petroleum Company v. Highlands Insurance Company, 830 S.W.2d 153 (Ct.App. of Texas, Houston (1st Dist.) 1990), is likewise inapplicable to the matter at hand. United National is correct that the Houston Petroleum Court held "that exposure to `fraudulent promises, false representations, and untrue statements' [as alleged by plaintiffs in an underlying suit] [do] not, as a matter of law, fall within the plain meaning of the definition of `occurrence.'" Houston Petroleum Co., 830 S.W.2d at 156. The Court reasoned that "[t]o hold otherwise would require [the Court] to unnaturally extend the definition of the term `conditions,' and consequently the definition of `bodily injury.'" Id. That holding, however, is not as easily applied to the matter at hand. In Houston Petroleum, the question before the Court was whether certain allegations in an underlying suit against the insured fell within the bodily injury provision of the policy in question, which covered ". . . bodily injury . . . caused by an occurrence. . . ." 830 S.W.2d at 155. The policy defined the term "occurrence" to mean "an accident, including continuous or repeated exposure to conditions, which result in bodily injury or property damages neither expected nor intended from the standpoint of the insured." Id. In determining whether the alleged bodily injury — emotional distress — was caused by an occurrence, the Court stated that the insured must show that the alleged fraudulent promises, false representations and untrue statements constituted a "condition" and that "continuous or repeated exposure" to the condition resulted in some bodily injury to the plaintiff in the underlying suit. 830 S.W.2d at 156.
In further finding that the complaint against the insured did not allege a property damage claim under the plain language of the insurance contract, the Court in Houston Petroleum notably did not base its conclusion on the lack of an "occurrence" (which was defined in the same way for property damage as bodily injury). 830 S.W.2d at 156. Rather, the Court found that the suit alleged only economic loss, and because the plain meaning of the insurance contract phrase "the loss of use of tangible property" did not include economic loss, i.e., the loss of initial investments, subscription funds, and profits alleged by plaintiffs in the underlying suit. 830 S.W.2d at 156.
While there appears to be some similarity in the nature of the claims asserted against the insured in the Houston Petroleum case and in the instant matter, Houston Petroleum, a Texas state court decision, is neither binding on this Court nor is it persuasive authority, as at least one Louisiana court has specifically found that claims of negligent misrepresentations may constitute occurrences for purposes of a CGL policy of insurance. See Gaylord Chem. Corp. v. ProPump, Inc., 98-CA-2367 (La.App. 1 Cir. 2/18/2000), 753 So.2d 349.
In the suit underlying the Houston Petroleum coverage action, the plaintiffs essentially alleged that they incurred obligations and suffered economic loss, including loss of capital contributions in a limited partnership venture conducted by the insured, due to the insured's wrongful conduct. 830 S.W.2d at 155.
In Gaylord, an action brought by a purchaser of an industrial pump against the seller, its CGL insurer, and the manufacturer to recover for losses resulting from negligent misrepresentations about the pump, the Louisiana First Circuit specifically held that
the occurrence of an unforeseen and unexpected loss, whether the result of a defective product or an insured's negligent communication of misleading, incomplete, or incorrect information during the policy period, constitutes an "accident" and thus, and "occurrence," as that term is defined in the policy at issue in this case.753 So.2d at 354. At issue in Gaylord was whether the alleged property damage was caused by an "occurrence," which the policy defined to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." 753 So.2d at 353. The appellate court concluded that the seller's insurer did not meet its burden of proof on its motion for summary judgment, alleging that its policy did not cover any of the claimed losses, and accordingly reversed the lower court's grant of summary judgment in favor of the insurer. Id. at 357. See also Colomb v. United States Fidelity Guar. Co., 539 So.2d 940 (La.App. 4 Cir. 1989) (holding that claims of negligent misrepresentation may constitute an "occurrence" for the purpose of triggering the duty to defend); Cincinnati Ins. Co. v. Meramen Valley Bank, 259 F.Supp.2d 922, 928 (E.D. Missouri 2003) (applying Missouri law to conclude that, when an insurance policy defines "occurrence" to mean an "accident," injury caused by negligent misrepresentations of the insured are covered, while injury caused by fraudulent misrepresentations of the insured generally would not be covered).
In light of the Louisiana First Circuit's decision in Gaylord, supra, the Court concludes that damages and injuries caused by the alleged gross negligence, either in the form of tortious misrepresentations or interference, may constitute "occurrences," as that term is defined by United National in the CGL section of coverage. United National therefore is not entitled to summary judgment dismissing plaintiffs' claims based upon the insuring agreement of Section II of the Package Insurance Policy issued to the City of Hammond.
While United National contends that coverage does not exist under the CGL section, United National advanced two additional arguments in the event that the Court found that CGL coverage was triggered. First, United National submits that the definition of "occurrence" relates all injuries to the first period during which the Coregis policy was in effect. Citing Society of the Roman Catholic Church of the Diocese of Lafayette and Lake Charles, Inc., 26 F.3d 1359 (5th Cir. 1994), United National argues that the date of the "occurrence" determines coverage; that coverage extends to all resulting damages — present and future; and that all injuries should be related to the initial "occurrence," prior to the inception of the United National policy. Alternatively, if the Court does not find that the definition of "occurrence" relates all injuries to a time pre-dating the United National policy, United National asks the court to find that multiple "occurrences" are triggered in the instant case, requiring the insured's payment of multiple deductibles.
Having reviewed the parties submissions, the Court finds that the parties have not adequately addressed the two alternative arguments raised by United National in its Reply Memorandum. The Court therefore encourages the parties to brief these two issues, citing the proper authorities applicable thereto, according to a schedule to be determined by the Court in a separate Minute Entry.
III. CONCLUSION
Accordingly, for all of the foregoing reasons, IT IS ORDERED that
1. Defendant's Motion for Summary Judgment is GRANTED IN PART, in that all claims against United National Insurance Company for coverage under Section IV, Public Officials Errors and Omissions Coverage, of the Premier Public Entity Package Insurance Policy No. CP 0065331, are dismissed; and
2. Defendant's Motion for Summary Judgment is DENIED IN PART, in that United National Insurance Company is not entitled to a dismissal of plaintiffs' claims against United National based on Section II, Comprehensive General Liability Coverage, of the Premier Public Entity Package Insurance Policy No. CP 0065331.