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Royal Hospitality Corp. v. Underwriters At Lloyd's

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

August 20, 2019

ROYAL HOSPITALITY CORP. Plaintiff.
v.
UNDERWRITERS AT LLOYD'S, et al. Defendants.

          MEMORANDUM AND RECOMMENDATION

          ANDREW M. EDISON, UNITED STATES MAGISTRATE JUDGE

         Pending before me[1] are Defendant Hallmark Specialty Insurance Company's Motion for Judgment on the Pleadings, or in the alternative, Motion for Summary Judgment (Dkt. 54) and Defendant AXIS Corporate Capital UK Limited, Successor in Interest to Novae Group PLC's Motion for Judgment on the Pleadings, or in the alternative, Motion for Summary Judgment (Dkt. 59). The motions were referred to me by United States District Judge George C. Hanks, Jr. See Dkt. 67. After careful consideration of the motions, responsive briefing, and applicable law, I recommend that the motions be granted.

         BACKGROUND

         The following account of the facts is taken from Plaintiffs Original Complaint and, for purposes of the pending motions, assumed to be true. Royal Hospitality Corp. ("Royal Hospitality") operates 54 Church's Chicken Restaurants in Texas (the "Properties"). To protect the Properties, Royal Hospitality purchased several commercial insurance policies. Royal Hospitality retained its primary level of coverage through a commercial property policy issued by Underwriters at Lloyd's, London. Excess coverage policies were provided by, among others, Hallmark Specialty Insurance Company ("Hallmark") and AXIS Corporate Capital UK Limited, Successor in Interest to Novae Group PLC ("AXIS") (collectively, the "Excess Carriers").

         In August 2017, Hurricane Harvey hit the Texas coast, causing significant damage to the Properties. Royal Hospitality subsequently filed a claim with the primary insurer and Excess Carriers requesting payment for its damages. Those damages included the cost of repairs to the Properties and business interruption and business personal property losses incurred as a result of the hurricane. An adjuster hired to inspect the Properties informed Royal Hospitality that no payment would be made under the primary insurance policy because the covered damages fell below the deductible. Royal Hospitality strongly disputes that determination.

         In April 2018, Royal Hospitality filed its Original Complaint, asserting causes of action against the primary insurer and Excess Carriers for breach of contract, violations of Texas Insurance Code § 542 (Prompt Payment), and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act for unfair settlement practices and misrepresentations.

         The Excess Carriers have moved to dismiss the lawsuit, arguing that all the causes of action fail because the Excess Carriers owe no duty to pay, adjust, or settle Royal Hospitality's claim until the limits of the primary policy have been exhausted.

         RULE 12(c) MOTION TO DISMISS STANDARD

"A motion brought pursuant to [Federal Rule of Civil Procedure] 12(c) is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) (internal quotation marks and citation omitted). The standard for judgment on the pleadings under Rule 12(c) is the same as the standard for a motion to dismiss for failure to state a claim under Rule 12(b)(6). See Gentilello v. Rege, 627 F.3d 540, 543-44 (5th Cir. 2010).

         Federal Rule of Civil Procedure 12(b)(6) allows parties to seek dismissal of a lawsuit for failure to state a claim upon which relief may be granted. A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint against the legal standard set forth in Rule 8, requiring "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. Civ. P. 8(a)(2). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp., v. Twombly, 550 U.S. 544, 570 (2007)). "Determining whether a complaint states a plausible claim for relief [is] ... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679 (citation omitted).

         ANALYSIS

         A. Breach of Contract Claim

         Royal Hospitality alleges that the Excess Carriers breached the terms of the insurance policies at issue by wrongfully denying and/or underpaying its claim. In response, the Excess Carriers argue that the breach of contract claim must be dismissed because they owe no contractual obligation to make any payment until the primary insurance policy limits are exhausted.

         Importantly, Royal Hospitality readily admits that it has yet to receive payment from any insurance carrier for the property damages it suffered from Hurricane Harvey. See Dkt. 1 at 7 ("To date, [Royal Hospitality] has not been paid anything for the damages to its Properties"). This admission is critical because the insurance policies at issue do not place any obligations on the Excess Carriers until the limits of the primary policy have been fully paid. The excess coverage policies state, in relevant part, that the excess insurers liability "attaches only after . . . [t]he Company(ies) providing Underlying Insurance has paid the full amount of their respective liability." Dkt. 54-3 at 10; Dkt. 59-3 at 12. Given this plain and unambiguous contractual language, Royal ...


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