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United States District Court for the Northern District of Texas, Dallas Division
November 5, 2021, Decided; November 5, 2021, Filed
Civil Action No. 3:20-CV-1888-D
MEMORANDUM OPINION AND ORDER
In this insurance coverage dispute, the court must decide whether plaintiff RLI Insurance Company ("RLI") has a duty under an insurance policy to defend three defendants in this case in an underlying state-court lawsuit: PowerFX, LLC v. PowerCare and Service Solutions., Inc. and Interstate Battery System International, Inc., No. C2018-1426B (207th Jud. Dist. Ct., Comal Cnty. Tex.) (the "Underlying Lawsuit"). The answer [*2] to this question turns on whether a provision in the insurance policy excludes coverage. For the reasons explained, the court concludes that the insurer has a duty to defend. It therefore grants partial summary judgment in favor of defendants Interstate Battery System International, Inc. ("Interstate Battery System"), Interstate Batteries, Inc. ("Interstate Batteries"), and PowerCare and Service Solutions, Inc. ("PowerCare") (collectively, "Defendants," unless the context indicates otherwise), and denies RLI's motion for partial summary judgment.1
RLI (the insurer) sues Defendants (the three defendants who are insureds) seeking a declaratory judgment that it does not owe a duty under the insurance policy at issue (the "Policy") to defend them in the Underlying Lawsuit.2 RLI issued the Policy to Interstate Battery System.3 The Policy is a financial products policy and covers the period May 1, 2018 to May 1, 2019. The Policy provides, inter alia, that RLI will insure Interstate Battery System (and its subsidiaries PowerCare and Interstate Batteries) for certain litigation expenses: "The Insurer will pay on behalf of the Entity, Loss which the Entity is legally obligated to pay [*3] as a result of a Claim first being made during the Policy Period, or during the Discovery Period (if purchased), against the Entity for Wrongful Acts."4 ECF No. 44-1, App. at 019 (emphasis omitted).5 It also provides that RLI "shall have the right and duty to defend any Claim covered by this coverage section." Id. at 030 (emphasis omitted).
But this coverage obligation is subject to exclusions. The most pertinent one—on which the parties primarily focus—excludes coverage for claims arising from an obligation in or breach of contract:
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2021 U.S. Dist. LEXIS 214305 *; 2021 WL 5164937
RLI INSURANCE COMPANY, Plaintiff, vs. INTERSTATE BATTERY SYSTEM INTERNATIONAL, INC., INTERSTATE BATTERIES, INC., POWERCARE AND SERVICE SOLUTIONS, INC., and POWERFX, LLC, Defendants.
Battery, misrepresentations, insured, coverage, allegations, breach of contract, underlying lawsuit, duty to defend, damages, fraudulent, causal, cases, fraudulent inducement, summary judgment, pre-contract, incidental, lease, obligations, doubts, fraud claim, contracts, pleadings, promised, Entity, lessor, negligent misrepresentation, tort claim, contractual, induced, parties
Civil Procedure, Judgments, Summary Judgment, Partial Summary Judgment, Insurance Law, Obligations of Parties, Insurers, Allegations in Complaints, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Business Insurance, Commercial General Liability Insurance, Property Insurance, Obligations, Policy Interpretation, Ambiguous Terms, Coverage Favored, Exclusions, Burdens of Proof, Claim, Contract & Practice Issues, Claims Made Policies, Exclusions, Procedure, Evidence & Trial, Evidentiary Considerations, Absence of Essential Element, Burdens of Proof, Nonmovant Persuasion & Proof, Entitlement as Matter of Law, Genuine Disputes, Entitlement as Matter of Law, Evidence, Inferences & Presumptions, Inferences, Torts, Fraud & Misrepresentation, Negligent Misrepresentation, Elements, Remedies, Damages, Compensatory Damages, Contracts Law, Measurement of Damages, Foreseeable Damages, Benefit of the Bargain, Lost Profits, Types of Damages, Consequential Damages