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Starr Surplus Lines Insurance Co. v. Seibert Enterprises, LLC

United States District Court, S.D. Texas, Houston Division

July 25, 2017



          Lee'H. R enthal Chief United States District Judge

         Starr Surplus Lines Insurance Company sued its insured, Seibert Enterprises, seeking a declaratory judgment that it has no duty to defend or indemnify Seibert in an underlying lawsuit. The underlying suit alleged that Seibert, a roofing company, failed to have a working fire extinguisher at hand when it did “torch work” on a roof. The suit alleged that Seibert's torch work ignited a fire that spread because there was no working fire extinguisher. Starr Surplus contends that Seibert's failure to have the extinguisher relieves Starr Surplus of any duty to defend or indemnify.

         The parties filed cross-motions for summary judgment on whether Starr Surplus has a duty to defend and indemnify in the underlying lawsuit. (Docket Entry Nos. 22, 25). Based on a careful review of the pleadings; the motions, responses, and reply; the record; the arguments of counsel; and the relevant law, the court grants Seibert's summary judgment motion, (Docket Entry No. 25), and denies Starr Surplus's cross-motion, (Docket Entry No. 22). The reasons are explained in detail below. A status conference is set for August 2, 2017 at 10:00 a.m. to address the remaining issues in this case.

         I. Background

         Starr Surplus issued Seibert a Commercial General Liability policy. (Docket Entry No. 1 at ¶ 10). In September 2016, Valley Forge Insurance Company, as subrogee of ADB Commercial Construction, Inc. and as assignee of James Coney Island, Inc., sued Seibert in Texas state court. (Docket Entry No. 1, Ex. A). ADB Commercial Construction had contracted with James Coney Island, Inc., which owned hot-dog restaurants in Houston, to remodel the restaurant's exterior. (Id. at ¶ 9). James Coney Island and ADB Commercial Construction entered into a second contract for roof repairs. (Id.). ADB Commercial Construction in turn subcontracted some of the roof work to Seibert. (Id. at ¶ 10).

         The subcontract required Seibert to install a new base sheet to the walls, apply asphalt primer to old field membrane as needed, install flashing to cover the new modified primer, and to “torch down” the new modified membrane or modified bitumen product. (Id.). “Torching” or “torch down” operations include using a wand, an open flame, a torch, or other electric or gas-powered heated appliance on a roof. (Id.). Torching is often used to install or repair flat roofs like the one on the James Coney Island restaurant. (Id.). Valley Forge alleged that torching operations on a roof are inherently dangerous, particularly in a South Texas summer, and that the risk of fire is both high and highly foreseeable. (Id. at ¶ 11).

         Valley Forge included the following allegations in its state-court petition against Seibert:

On the morning of September 9, 2014, while performing torching operations to the roof using a propane gas torch, SEIBERT's personnel caused a fire to erupt by igniting initially the fiberglass installation along the parapet wall, which fire spread behind the wood framing and extended along the parapet wall. The fire, with the resultant smoke and water penetration, resulted in extensive damage to the JCI restaurant, including extensive damage to the electrical wiring, the HVAC system, and interior walls and ceiling tiles, which caused the restaurant to close down for several months with the resultant loss of at' least $443, 000 in business income, with restoration expenses themselves amounting to over $86, 000.00. There was also smoke and water damage to restaurant food items as well as fire and related damage, including discoloration of the brick exterior and holes at various places that were necessary to be punched by the Houston Fire Department in order to locate, confine and extinguish the fire, to the interior ceilings, exterior walls, and the roof itself.

(Id. at ¶ 12). Valley Forge also alleged that:

It was later determined that SEIBERT had not taken proper precautions in performing the torching operations and in containing the fire once it began. For example, once the fire started the fire extinguisher that the SEIBERT work crew had on the roof did not work. The crew had to frantically leave the restaurant roof and attempt to extinguish the fire with a hose. This delay in being able to contain the fire once it started facilitated the spread of the fire on the roof, into the interior walls, and elsewhere. SEIBERT did not have available a working fire extinguisher to be used by those skilled in torching operations, and neither did it have readily available a charged hose, redundant fire extinguishers, or other customary firefighting equipment that would mitigate any fire loss. SEIBERT was solely responsible for causing and in failing to contain the fire.

(Id. at ¶ 13). Valley Forge paid its insured, ADB Commercial Construction, $529, 135.15 under the policy for the losses from the fire and smoke damage to the restaurant. (Id. at ¶ 17).

         On September 8, 2016, Valley Forge Insurance sued Seibert in Texas state court, as the subrogee of ADB Commercial Construction and the assignee of James Coney Island. (Docket Entry No. 1, Ex. A). Valley Forge asserted common-law claims for negligence and negligent trespass, strict liability, breach of common-law express and implied warranties, and breach of the construction subcontract between ADB Commercial Construction and Seibert, as well as statutory violations of the DTPA. Starr Surplus filed this federal diversity jurisdiction coverage suit on November 23, 2016, seeking a declaratory judgment that it has no duty to defend or indemnify Seibert for the claims Valley Forge asserted against it in the underlying suit. (Docket Entry No. 1). Starr Surplus moved for a summary judgment that it had no duty to defend. (Docket Entry No. 22). Seibert cross-moved for a summary judgment that Starr Surplus owes Seibert a duty to defend and indemnify in the underlying suit. (Docket Entry No. 25). The court heard oral argument on the cross-motions. (Docket Entry No. 31). The parties' motions and briefs, counsels' arguments, the pleadings, and the record evidence are analyzed under the applicable legal standards.

         II. The Legal Standards

         A. Summary Judgment

         “Summary judgment is required when ‘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.'” Trent v. Wade, 776 F.3d 368, 376 (5th Cir. 2015) (quoting Fed.R.Civ.P. 56(a)). “A genuine dispute of material fact exists when the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Nola Spice Designs, LLC v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)). “The moving party ‘bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes ...

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