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Hartford Fire Insurance Co. v. Lexington Insurance Co.

United States District Court, D. Nevada

August 26, 2019

Hartford Fire Insurance Company, Plaintiff,
v.
Lexington Insurance Company, Defendant.

          ORDER

          Robert C. Jones United States district Judge.

         An insurance company brought this case against another insurance company alleging that both were liable for claims against the same insured party. The Defendant claimed that it had no duty to defend forcing the Plaintiff to defend the insured and pay for the resulting settlements alone. The Defendant avers that its policy lapsed; the Court agrees and dismisses the case.

         I. FACTUAL BACKGROUND

         According to the operative complaint and its attachments, the facts are as follows. Both the Plaintiff and the Defendant are insurance companies that insured Landmark, a Nevada construction contractor and developer. Landmark became insolvent and filed for bankruptcy in 2009.

         From 2006 to 2009, the Defendant insured Landmark and its subcontractors by issuing a general liability exposure insurance policy specific to particular construction projects. This policy also provided for an “extended reporting period, ” which would “begin[] on the expiration of this policy and end[] when the applicable statute of limitations . . . expires.” (Am. Compl. Ex. 5 at 30, ECF No. 18.) However, “the extended reporting period will only apply to claims . . . [t]o which no other subsequent insurance you purchase applies.” Id.

         Landmark later purchased broad liability insurance policies for its general business exposures from the Plaintiff. These policies started in 2007 and ended in 2011. Accordingly, these policies and the Defendant's policy overlapped and covered some of the same risks.

         Beginning in 2014, a number of claims were filed against Landmark alleging defects in the construction projects that both parties had insured. The parties were provided notice of the actions, but only the Plaintiff defended against the actions and paid for settlements. The Defendant refused to participate in those cases.

         Now, the Plaintiff has filed this case with this Court for two counts. First, the Plaintiff seeks a declaratory judgment stating that the Defendant has a duty to defend these actions under its policy. Second, the Plaintiff asks that this Court grant equitable contribution such that the Plaintiff receives a pro rata share of the settlements and expenses associated with the underlying cases.

         II. FAILURE TO STATE A CLAIM STANDARD

         Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). To determine the facts, a court is constrained to consider only the pleadings and “material which is properly submitted as part of the complaint.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). If the court grants a motion to dismiss, then it should grant leave to amend unless amendment cannot cure the deficiencies of the complaint. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

         III. ANALYSIS

         The parties agree that the Defendant's coverage lapsed if its extended reporting period does not apply and that the “the extended reporting period will only apply to claims . . . [t]o which no other subsequent insurance [Landmark] purchase[d] applies.” Thus, there is only one issue before this Court-whether the Plaintiff's insurance policies limit the extended reporting period under that clause.

         The issue can be even further isolated applying Nevada law. In order for an insurance policy to restrict coverage, “it should employ language that clearly and distinctly communicates to the insured the nature of the limitation.” Griffin v. Old Republic Ins. Co., 133 P.3d 251, 253 (Nev. 2006) (quoting Vitale v. Jefferson Ins. Co., 5 P.3d 1054, 1057 (Nev. 2000)). An insurance policy is considered to be ambiguous if there are multiple reasonable interpretations of the contract. Century Sur. Co. v. Casino W., Inc., 329 P.3d 614, 616 (Nev. 2014). If an insurance policy is not ambiguous, then the courts should apply the policy's plain meaning. Id. On the other hand, Nevada courts interpret ambiguities in an insurance contract in favor of extending coverage. Id. If an insurance contract has more than one reasonable interpretation, then the contract is ambiguous. Id. Hence, if there is any reasonable interpretation of the term “subsequent insurance” that would make the Defendant liable, then the Court should deny the Defendant's motion.

         The Court holds that there is no reasonable interpretation of the contract that would make the Defendant liable. Here, although the contract does not define the term “subsequent insurance, ” the Court finds that the term's meaning is clear. As the complaint and attached documents set forth, Landmark purchased the Plaintiff's policies subsequent to the Defendant's policy; the Plaintiff's policies provided coverage for the same claims subsequent to the Defendant's coverage; and the Plaintiff's ...


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