United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND ORDER
F. ATLAS, UNITED STATES DISTRICT JUDGE
Order [Doc. # 32] entered March 5, 2019, the Court referred
all potentially dispositive motions to United States
Magistrate Judge Dena Palermo for a Report and
Recommendation. On August 5, 2019, Magistrate Judge Palermo
issued her Report and Recommendation (“R&R”)
[Doc. # 38], addressing the Rule 12(c) Motion for Judgment on
the Pleadings [Doc. # 19] filed by Plaintiff Princeton Excess
and Surplus Lines Insurance Company
(“Princeton”), the Motion for Summary Judgment
[Doc. # 22] filed by Defendant Maxum Indemnity Company
(“Maxum”), and Maxum’s Motion for Summary
Judgment on U.S. Global Security, Inc.’s Crossclaims
[Doc. # 24]. The Magistrate Judge recommended that this Court
hold that Treasures and Brannen are additional insureds under
Maxum’s insurance policy, and that the
“Designated Operations Exclusion”
(“Exclusion”) in Maxum’s policy applies.
The Magistrate Judge recommended further that an exception to
the Exclusion applies because the allegation that the
plaintiff in the underlying state court lawsuit was taken
“outside” created a reasonable inference that he
was taken to a parking lot where security operations
occurred. The Magistrate Judge recommended also that
Princeton is entitled to contribution from Maxum for the
defense costs in the underlying state court lawsuit.
Regarding the crossclaims asserted against Maxum by U.S.
Global Security Inc. (“Global”), the Magistrate
Judge recommended a ruling that Maxum owes a duty to defend
Princeton’s insureds in the underlying state court
lawsuit, and that Maxum owes no duty to defend Global against
Princeton’s claims against it in this lawsuit. Lastly,
the Magistrate Judge recommended denying Maxum’s motion
for summary judgment on Global’s crossclaim for
indemnity as premature, citing Northfield Ins. Co. v.
Loving Home Care, Inc., 363 F.3d 523, 529 (5th Cir.
filed timely Objections [Doc. # 41] to the R&R. Maxum
objects to the Magistrate Judge’s recommendation that
Maxum owes a duty to defend Princeton’s insureds in the
underlying state court lawsuit, and to the recommendations
that flow from the duty to defend recommendation. Princeton
filed a Response [Doc. # 42], and Maxum filed a Reply [Doc. #
43]. No. other objections to the R&R were filed.
Court has reviewed the R&R, as well as Maxum’s
Objections. The Court has applied relevant legal authorities,
and has made a de novo review of those portions of
the report or specified proposed findings or recommendations
to which Maxum objected. See Fed. R. Civ. P. 72(b);
28 U.S.C. § 636(b)(1); Funeral Consumers Alliance,
Inc. v. Serv. Corp. Int’l, 695 F.3d 330, 347 (5th
Cir. 2012). The Court has not conducted a complete de
novo review of those recommendations to which no
objection was filed, but has verified that the
recommendations are legally and factually sound. See
28 U.S.C. § 636(b)(1).
Court adopts the R&R in part. The Court applies the
well-established “eight-corners” rule,
sustains Maxum’s Objections, and does not adopt the
recommended ruling that Maxum has a duty to defend in the
underlying state court lawsuit. Because this Court holds
that Maxum does not owe a duty to defend in the underlying
state court lawsuit, Princeton is not entitled to judgment on
its contribution claim, and Maxum is entitled to summary
judgment on Princeton’s claims against it. Maxum is
also entitled to summary judgment on the crossclaim by Global
asserting that Maxum owes it a duty to defend in this federal
lawsuit. The Magistrate Judge correctly concluded that
Maxum’s request for summary judgment on the crossclaim
for indemnity is premature.
Magistrate Judge accurately set forth the background of this
dispute in her R&R. See R&R [Doc. # 38], pp.
2-7. Princeton issued a Commercial General Liability
insurance policy (“Princeton Policy”) to D. Texas
Investments, Inc. The Princeton Policy provides insurance
coverage to the men’s club Treasures and its employees,
including its manager, Jason Brannen. See Princeton
Policy, Exh. 3 to Complaint [Doc. # 1]. Princeton’s
Policy provides insurance that is excess over any other
primary insurance policy available to Princeton’s
insureds covering liability for damages arising out of the
premises or operations for which they are additional insureds
through an endorsement to the other policy. See Id .
at ECF p. 58. The dispute in this case involves whether the
Princeton Policy is the primary insurance or is excess
insurance for the underlying state court lawsuit.
Houston, Inc. d/b/a Treasures entered into a Security Service
Contract (“Service Contract”) with Global for
“security guard protection services” for
Treasures and its parking lot areas. See Security
Contract, Exh. 2 to Complaint, p. 1. The Security Contract
required Global to provide security services and patrols for
the “area immediately outside the premises of the
Nightclub, such as the front door area and entry way, the
periphery of the building, the parking lot and the remote
parking lot areas.” Id. Global was not
required to provide security services inside Treasures, other
than in the door area, “unless specific assistance is
requested by managerial staff of Nightclub.”
Id. Global agreed to obtain a general liability
insurance policy with Treasures and its employees as
additional insureds. See Id . at 2.
issued a Commercial General Liability Insurance Policy for
Global, Policy Number GLP-6021221-05 (the
“Policy”). The Policy contains an Additional
Insured endorsement, which provides additional insured status
Any person or organization for whom [Global is] performing
operations when [Global] and such person or organization have
agreed in writing in a contract or agreement prior to the
date of loss that such person or organization be added as an
additional insured on [Global’s] policy.
Exh. 4 to Complaint [Doc. # 1], ECF p. 44. The parties all
agree that Princeton’s insureds – Treasures, and
its manager, Jason Brannen – qualify as additional
insureds under this endorsement to the Policy.
Policy provides coverage for “those sums that the
Insured becomes legally obligated to pay as
“damages” because of “bodily injury”
or “personal injury” to which the Policy applies.
See Policy, ECF pp. 16, 22. The Policy applies to
“bodily injury” that is caused by an occurrence
that takes place in the “coverage territory” and
during the Policy period. See Id . at ECF p. 16. The
Policy applies also to “personal injury” caused
by an offense arising out of the insured’s business,
with certain exclusions, if the offense was committed in the
“coverage territory” during the Policy period.
See Id . at ECF p. 22. The Policy defines
“personal injury” to mean an injury, other than
“bodily injury, ” arising out of certain
offenses, including false imprisonment and malicious
prosecution. See Id . at ECF p. 31.
Policy provides that Maxum has the “duty to defend the
Insured against any ‘suit’ seeking those
‘damages, ’” but has no duty to defend the
Insured against a suit seeking damages to which the Policy
does not apply. See id.
Policy contains a “Designated Operations
Exclusion” (“Exclusion”) that states:
This insurance does not apply to “bodily injury”,
“property damage”, “personal injury”
or “advertising injury” arising out of the
operations shown in the Schedule.
Any Work at or in Bars, Restaurants, Taverns or any other
Establishments Selling or Providing Alcoholic Beverages.
the Designated Operations Exclusion states also that it
“does NOT apply to Parking Lot Security at
Gentlemen’s Clubs.” Id. (emphasis in
original). This provision creates an exception