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The Cincinnati Insurance Co. v. All Plumbing, Inc. Service, Parts, Installation

United States District Court, District Circuit

October 18, 2013

THE CINCINNATI INSURANCE COMPANY, Plaintiff,
v.
ALL PLUMBING, INC. SERVICE, PARTS INSTALLATION, et al., Defendants.

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, UNITED STATES DISTRICT JUDGE

Plaintiff The Cincinnati Insurance Company filed suit against Defendants All Plumbing, Inc. Service, Parts, Installation (“All Plumbing”), Mr. Kabir Shafik (“Shafik”), [1] and FDS Restaurant, Inc., seeking a declaratory judgment that the Plaintiff owes no duty to defend or indemnify All Plumbing and Shafik in connection with a class action lawsuit filed by FDS Restaurants (“FDS”) against All Plumbing and Shafik in the Superior Court for the District of Columbia (“Superior Court”). Presently before the Court are the Defendant’s and the Plaintiff’s Cross-Motions for Summary Judgment. Upon consideration of the pleadings, [2] the relevant legal authorities, and the record as a whole, the Court finds that Cincinnati Insurance failed to properly reserve its rights upon assuming the defense of All Plumbing and Shafik and is thus now precluded from disclaiming coverage of any judgment in FDS’ action against All Plumbing and Shafik. Accordingly, the Defendant’s motion is GRANTED and the Plaintiff’s motion is DENIED.

I. BACKGROUND

A. Procedural Background

The parties have stipulated to the facts related to the issue the Court is deciding. See Joint Stipulation of Facts (“Stip.”), ECF No. [27].

Cincinnati Insurance issued a commercial insurance policy to All Plumbing effective from March 3, 2006, to March 3, 2007, providing general liability coverage up to $1 million for each occurrence and $2 million in aggregate. Stip., ¶ 3. In September 2010, Love the Beer, Inc., (“Love”) filed a putative class action against All Plumbing and Shafik in Superior Court alleging that on or about September 22, 2006, All Plumbing and Shafik sent unsolicited faxes to Love the Beer and others in violation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. Id. at ¶ 6; see Stip., Ex. B (Love the Beer Compl.).

The Love the Beer action was served on All Plumbing and Shafik on November 5, 2010. Stip. ¶ 7. Cincinnati Insurance alleges that All Plumbing and Shafik never notified Cincinnati Insurance of the Love the Beer action, but that counsel for Love contacted Cincinnati Insurance on November 15, 2011, and asked Cincinnati Insurance to defend the action. Stip. ¶ 12. By letter dated November 18, 2011, Cincinnati Insurance notified counsel for Love that coverage for the Love the Beer action may be barred under the policy, asserting that All Plumbing and Shafik failed to comply with certain of the Duties in the Event of a Claim or Suit conditions of the Policy. Stip. ¶ 14. On December 2, 2011, Cincinnati Insurance informed All Plumbing and Shafik that it was assuming the defense of the Love the Beer action pursuant to a full and complete reservation of rights. Stip. ¶ 15; see Stip., Ex. J (Reservation of Rights letter).

On December 2, 2011, FDS Restaurant filed a second putative class action against All Plumbing and Shafik in Superior Court based on the same allegation of unsolicited faxes as at issue in the Love the Beer action. Stip. ¶ 16; see Stip., Ex. K (FDS Restaurant Compl.). A few weeks later, Cincinnati Insurance received a copy of the FDS complaint from FDS’ counsel – the same counsel as in the Love the Beer action. Stip. ¶ 17. Cincinnati Insurance subsequently chose and retained counsel to defend All Plumbing and Shafik in the FDS action. Stip. ¶ 23.

On December 22, 2011, Love, in the Love the Beer action, moved for leave to file an amended complaint to eliminate the class action allegations from the Love the Beer action, limiting the claims to those of the named plaintiff. Stip. ¶ 18. The Superior Court granted Love’s motion. Stip. ¶ 19. The Superior Court docket indicates the action was never certified as a class action, and was voluntarily dismissed by the plaintiff in advance of trial. Love the Beer, Inc. v. All Plumbing Inc. Serv., Parts, Installation, No. 2010 CA 006880 (D.C. Sup. Ct. dismissed June 11, 2012).

By letter dated February 16, 2012, Cincinnati Insurance informed counsel for FDS that coverage may be barred under the Policy due to the “terms, provisions, conditions and exclusions of the Policy, including the insured’s failure to comply with the conditions requiring the prompt reporting of offenses, claims and suits.” Stip. ¶ 21; see Stip., Ex. P. Cincinnati Insurance did not send a separate letter or oral communication to All Plumbing and Shafik that the defense of the FDS action that was being provided by Cincinnati Insurance was pursuant to a reservation of rights. Stip. ¶ 22.

All Plumbing and Shafik removed the action to this court on March 9, 2012. FDS Restaurant, Inc. v. All Plumbing, Inc., Serv., Parts, Installation, No. 12-394 (D.D.C. removed Mar. 9, 2012). Before this court, defense counsel for All Plumbing and Shafik filed an answer to FDS’ complaint, see Defendant’s Answer, FDS Restaurant, Inc. v. All Plumbing, Inc., Service Parts, Installation et al, No. 12-394 (D.D.C. March 19, 2012); an opposition to FDS’ Motion for Class Certification, see Defendant’s Opposition to Plaintiff’s Amended Motion for Class Certification, FDS Restaurant, Inc. v. All Plumbing, Inc., Service Parts, Installation et al, No. 12-394 (D.D.C. March 19, 2012); an opposition to FDS’ Motion to Remand the case to Superior Court, see Defendant’s Opposition to Plaintiff’s Motion to Remand to State Court, FDS Restaurant, Inc. v. All Plumbing, Inc., Service Parts, Installation et al, No. 12-394 (D.D.C. April 16, 2012); and agreed to stay the case pending resolution of FDS’ Motion to Remand, see FDS Restaurant, Inc. v. All Plumbing, Inc., Service Parts, Installation et al, No. 12-394, Minute Order (D.D.C. April 4, 2012). Judge Rosemary M. Collyer remanded the case to Superior Court on September 14, 2012. FDS Restaurant, Inc. v. All Plumbing, Inc., Service, Parts, Installation, No. 12-394, Op. & Order (D.D.C. Sept. 14, 2012). The case was reopened by Superior Court in December 2012. FDS’ Motion for Class Certification is now pending in Superior Court. Amended Motion for Class Certification, FDS Restaurant v. All Plumbing Inc. Serv., Parts, Installation, No. 2011 CA 009575 (D.C. Sup. Ct. Mar. 1, 2012). Cincinnati Insurance filed this action on May 21, 2012, seeking a declaratory judgment that it has no duty to defend All Plumbing and Shafik in the FDS Superior Court action. On May 9, 2013, the FDS action was stayed in Superior Court pending resolution of the present declaratory judgment action. FDS Restaurant v. All Plumbing Inc. Serv., Parts, Installation, No. 2011 CA 009575, (D.C. Sup. Ct. May 9, 2013).

B. Motions for Summary Judgment

The parties have filed Cross-Motions for Summary Judgment. Cincinnati Insurance requests the Court grant summary judgment in its favor because FDS’ TCPA claims against All Plumbing and Shafik are not covered by the Policy and because All Plumbing and Shafik “substantially and materially breached their contractual obligation to timely notify Cincinnati of the dispute.” See generally Pl.’s Mot. for Summ. J., ECF No. [29]. FDS argues that summary judgment should be awarded in its favor because the plain language of the Policy obligates Cincinnati Insurance to provide coverage for FDS’ claims and because any delay in All Plumbing and Shafik notifying Cincinnati Insurance of the FDS action was not substantial or material. See generally Def.’s Mot. for Summ. J., ECF No. [31]. FDS also contends that, in any event, Cincinnati Insurance has waived any defense that coverage is barred under the Policy by assuming control of All Plumbing and Shafik’s defense without a proper reservation of rights. Id. at 32. The question of whether Cincinnati ...


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