Auto-Owners Ins. Co. v. Tabby Place Homeowners Ass'n

637 F.Supp.3d 1342

AUTO-OWNERS INSURANCE COMPANY, Plaintiff, v. TABBY PLACE HOMEOWNERS ASSOCIATION, INC., et al., Defendants.

CIVIL ACTION NO.: 4:21-cv-346

United States District Court, S.D. Georgia, Savannah Division

Signed September 28, 2022

Jessica M. Phillips, Melissa K. Kahren, Pro Hac Vice, Casey L. Smartt, Pro Hac Vice, Swift Currie McGhee & Hiers LLP, Atlanta, GA, for Plaintiff.

Colby E. Longley, McCorkle & Johnson, LLP, Savannah, GA, Marc E. Rindner, Pro Hac Vice, Parker James Lavin, Roberts Tate, LLC, Bethesda, MD, Lena Mirilovic, Pro Hac Vice, Roberts Tate, LLC, Winter Park, FL, for Defendant Tabby Place Homeowners Association, Inc.

David E. Hudson, Hull Barrett, PC, Augusta, GA, for Defendants Gayle Baker, Donald J. Brunelle, Judith A. Brunelle, Jane Fraser, Burke McCall Harrison, Vicki S. Harrison, John Lijoi, Judith C. Phillips, Robert W. Williamson, III, Renee J. Williamson.

ORDER

R. STAN BAKER, UNITED STATES DISTRICT JUDGE

Plaintiff Auto-Owners Insurance Company ("Auto-Owners") filed this action seeking a declaratory judgment that it has no duty to defend or indemnify Defendant Tabby Place Homeowners Association, Inc. (the "HOA"), its insured, in a lawsuit against the HOA currently being litigated in Glynn County Superior Court. (Doc. 1 (original Complaint), doc. 33 (Amended Complaint).) Presently before the Court is the HOA's Motion to Dismiss or Stay, in which it principally argues that the Court should abstain from issuing a declaratory judgment in this matter because of the pending action in Glynn County. (Doc. 40.) Also before this Court is Defendants Gayle Baker, Donald Brunelle, Judith Brunelle, Jane Fraser, Burke McCall Harrison, Vicki Harrison, John Lijoi, Judith Phillips, Robert Williamson, and Renee Williamson's (collectively the "Property Owners") Motion to Dismiss. (Doc. 36). Therein, the Property Owners argue that Auto-Owners' request for a declaratory judgment is unripe to the extent it is based on the duty to indemnify. (Id.) The issues have been fully briefed. (Id.; docs. 30, 39, 40, 41, 43, 48.) For the following reasons, the Court DENIES the HOA's Motion to Dismiss or Stay, (doc. 40), and DENIES the Property Owners' Motion to Dismiss, (doc. 36).

BACKGROUND

I. The Property Owners' Pending Action Against the HOA in Glynn County Superior Court

The Property Owners own real property that is adjacent to and downgradient of the Tabby Place and Captain's Cove Subdivisions (the "Subdivisions") on St. Simons Island. (Doc 33-1, p. 2; doc. 33-2, p. 4.) According to the Property Owners, the Tabby Place Subdivision ("Tabby Place") is a residential development which contains a drainage system that utilizes storm pipes and three retention ponds to collect storm water runoff. (Doc. 33-2, p. 5.) In 2019, the Property Owners filed a lawsuit (the "Underlying Action") in Glynn County Superior Court against the owners, developers, and homebuilders of the Subdivisions, alleging that the design, construction, use, and maintenance of retention ponds and other storm water maintenance systems for the Subdivisions had caused flooding and otherwise damaged their property.¹ (Doc. 33, pp. 6-7; doc. 38, p. 3; see also doc. 33-1, pp. 2-3, 4; doc. 33-2, p. 4.) In February 2021, after ownership of Tabby Place was transferred to the HOA,² the Property Owners filed a second amended complaint ("the State Complaint") adding the HOA as a defendant in the Underlying Action. (Doc. 33, pp. 5-6, 8-9; doc. 33-1, p. 3; see doc. 33-2, pp. 2, 7.) In the State Complaint, the Property Owners allege that the HOA's "water systems are designed to infiltrate storm water into the ground through retention ponds, which have caused high groundwater levels. Consequently, storm water infiltration is causing flooding of [the Property Owners'] [p]roperty after heavy rainfall." (Doc. 33-2, p. 4.) The State Complaint also alleges that the HOA has "caused and continue[s] to cause storm water to be repeatedly collected, concentrated, and infiltrated into the ground, which causes flooding of [the Property Owners'] [p]roperty." (Id. at p. 11.) This flooding allegedly has caused some of the Property Owners' on-site sewage systems to short-circuit, leading to sanitary discharges (such as fecal coliform) entering the Subdivisions' ground and surface waters. (Id.) Additionally, the Property Owners allege that "the increased volume of storm water [is] discharging sediments and pollutants onto" their property because the storm water "washes over the loose soil on . . . construction sites, along with various materials and products being stored [there]." (Id. at pp. 4, 12.) Moreover, the State Complaint alleges that the HOA has failed to maintain the retention ponds and that the flooding is exacerbated by the HOA's alleged decision to "change[ ] the permeable ground cover to impervious services without adequately containing the resulting increased storm water runoff." (Id. at p. 11.) Based on these and other allegations, the Property Owners assert the following claims against the HOA: nuisance, trespass, negligence, negligence per se, riparian rights, and unjust enrichment. (Id. at pp. 13-16.) The Property Owners also request injunctive relief and attorneys' fees and costs. (Id. at pp. 16-17.)

II. The HOA's Insurance Policies with Auto-Owners

In April 2019, Auto-Owners issued two insurance policies to the HOA: (1) a Commercial General Liability Policy (the "CGL Policy") and (2) a Commercial Umbrella Policy (the "Umbrella Policy," and collectively with the CGL Policy, "the Policies").³ (Doc. 33, pp. 10, 24; doc. 33-4, p. 2; doc. 33-7, p. 2.) The CGL Policy provides that Auto-Owners "will pay those sums that [the HOA] becomes legally obligated to pay as damages because of . . . 'property damage' to which this insurance applies," as well as "personal and advertising injury to which this insurance applies." (Doc. 33, pp. 12, 19; see also doc. 33-6, pp. 26, 30.) However, the CGL policy only covers "property damage" that "occurs during the policy period and was not, prior to the policy period, known to have occurred by" the insured. (See doc. 33-6, p. 26.) The Umbrella Policy provides that Auto-Owners "will pay those sums included in ultimate net loss that the insured becomes legally obligated to pay as damages because of . . . property damage . . . to which this insurance applies caused by an incident." (Doc. 33, pp. 25-26; doc. 33-8, pp. 19-20 (emphasis removed).) Like the CGL Policy, the Umbrella Policy will not cover "property damage" caused by an "incident" if the insured knew of its occurrence prior to the policy term. (Doc. 33, pp. 26-27; doc. 33-8, p. 20.) Additionally, the Policies contain various coverage exclusions. (Doc. 33, pp. 14-19, 21-23, 29-36; see doc. 33-6, pp. 27-32; doc. 33-8, pp. 21-28.) For example, the CGL Policy excludes coverage for "expected or intended injury," "contractual liability," "pollution," and damage to certain types of "property." (Doc. 33, pp. 14-19, 21-23, 29-36; see doc. 33-6, pp. 27-29.) Concerning "pollution," the CGL policy excludes coverage for " 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants.' " (Doc. 33, pp. 16; see doc. 33-6, p. 27.)

III. Auto-Owners' Reservation of Rights

Auto-Owners first received notice of the Underlying Action on March 1, 2021. (Doc. 33, p. 9; doc. 38, p. 4; see doc. 33-3, p. 2.) On March 17, 2021, Auto-Owners sent the HOA a Reservation of Rights which advised the HOA that "Auto-Owners will provide the HOA with a defense subject to a reservation of rights." (Doc. 33-3, p. 2.) The Reservation of Rights states that Auto-Owners

expressly reserves all of its rights under the [P]olicies and does not waive any of its rights or defenses under the [P]olicies or under applicable law. Moreover, Auto-Owners reserves its right to later disclaim coverage and any duty to defend and/or indemnify the HOA for all or part of any judgment or settlement that might be obtained against the HOA in the [U]nderlying [Action].

(Id.) Furthermore, Auto-Owners reiterated that it would provide the HOA a defense in the Underlying Action "pending a resolution of the coverage issues presented in this claim." (Id. at p. 21.)

IV. Procedural History

On December 12, 2021, Auto-Owners brought this action under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that it has no duty to defend or indemnify the HOA for the claims asserted against it in the Underlying Action. (Doc. 1 (original Complaint), doc. 33 (Amended Complaint).) Specifically, Auto-Owners asserts twenty-one "Claims for Relief," asking the Court to declare, inter alia, that various exclusions in the Policies preclude coverage for the damages claimed by the Property Owners in the Underlying Action. (Doc. 33, pp. 37-86.) For example, Auto-Owners' Fourth Claim for Relief states, in relevant part: "[Property Owners] . . . allege that the stormwater is 'discharging sediments and pollutants onto [their] property[.]' . . . To the extent that the alleged irritants and contaminants described in the Underlying [Action] qualify as 'pollutants,' the [CGL Policy's] pollution exclusion . . . applies to any such damages arising therefrom." (Id. at pp. 47-48 (quoting doc. 33-2, p. 12).)

On February 24, 2022, Property Owners filed a Motion to Dismiss and an Answer to Auto-Owners' Amended Complaint.⁴ (Docs. 36, 38.) The Property Owners argue that the "Amended Complaint seeking a declaration that [Auto-Owners] has no duty to indemnify is premature and should be dismissed." (Doc. 36, p. 2.) Auto-Owners did not file a formal Response to the Property Owners' Motion to Dismiss the Amended Complaint, although it addressed the Property Owners' arguments in briefing on a separate motion.⁵ (See doc. 30.) On March 4, 2022, the HOA filed a "Motion to Dismiss or Stay." (Doc. 40.) Therein, the HOA argues that the Court should abstain from issuing a judgment declaring whether the damages...