U.S. district court rules in favor of 2200 West Alabama in dispute with insurer

By David Hutton | Nov 22, 2017

HOUSTON – The Houston Division of the Southern District of Texas has granted summary judgment to the landlord of a Houston shopping center who had filed a complaint against an insurance company that had rejected a claim for liability coverage in an underlying lawsuit connected to commercial leases.

U.S. District Court Judge Kenneth M. Hoyt filed the memorandum opinion and order on Sept. 13.

The landlord and plaintiff 2200 West Alabama Inc. filed a motion for summary judgment, with Western World Insurance Co. filing a cross-motion for summary judgment.

“The court has reviewed the parties’ papers and submissions and determines that the plaintiff’s motion should be granted and the defendant’s cross-motion should be denied,” Hoyt wrote in the order.

According to the order, 2200 West Alabama had a one-year commercial general lines policy, which had an effective date of Dec. 15, 2013. It was renewed for an additional year and included liability coverage.

In 2014, 2200 West Alabama was sued in Texas state court by DuBow Partners over a commercial lease that fell apart.

After the deal imploded, tenant DuBrow Partners looked for damages against 2200 West Alabama and its prime tenant Soray LLC. The parties never reached a lease agreement and Dubrow never took possession of the space, where it had hoped to open a restaurant.

Citing the failing negotiations, Western World Insurance claimed 2200 West Alabama was not entitled to payment under the policy. It claimed the landlords blocked Dubrow’s right to take occupancy.

However, 2200 West Alabama noted that Dubrow had the right to take occupancy at the time that negotiations ended, the opinion states.

For its part, Western World Insurance denied coverage, contending that the underlying claim was not covered under the policy because Dubrow never physically moved into the property.

Citing National Union Fire Insurance Co. Of Pittsburgh, Pa. v. CBI Indus., Hoyt noted that if an insurance contract is worded such that it “'can be given a definite or certain legal meaning,' then it is unambiguous and enforceable as written."

“The court is of the opinion that the facts support the plaintiff’s claim that Dubrow’s pleadings triggered terms under the policy that gave rise to a duty to defend on the part of the defendant,” Hoyt wrote in the order. “The court interprets the language in the policy i.e. 'right of private occupancy' plainly to mean that occupancy of the premises is unnecessary to implicate the duty to defend provision of the policy."

As a result, the term “possession” refers to the tenant’s right to occupancy, the opinion states.

Moreover, Hoyt noted that the insurance company bears the burden of proving that any exclusions in the policy are applicable to the case. He added that the Texas Supreme Court has repeatedly ruled that there are no recognized exceptions to the eight-corners rule.

“The duty to defend is decided solely on what was said in the four corners of the underlying complaint and the four corners of the relevant policy; and, any exclusion is subject to proof that is absent here,” Hoyt wrote in the order. 

Hoyt also rejected Western World Insurance’s argument that a physical occupancy is required before a duty to defend arises.

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