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Atain Specialty Insurance Co. v. Luxury Auctions Marketing, Inc.

United States District Court, W.D. North Carolina, Charlotte Division

December 18, 2017



          Max O. Cogburn Jr., United States District Judge

         THIS MATTER is before the court on plaintiff's Motion for Summary Judgment. The deadline for a response has passed, no response has been filed, and defendants are represented by counsel. For the reasons that follow, it appears that no genuine issues of fact remain and that defendants are entitled to the declaratory judgment they seek as a matter of law.

         I. Background

         In this action, plaintiff seeks a determination that they are not obligated to defend or indemnify defendants under a policy of insurance in a related civil action filed in this district. In the underlying lawsuit, defendants herein are the plaintiffs and counterclaim-defendants. Seventeen counterclaims have been asserted against them, including breach of contract claims, theft of trade secrets, trademark infringement, false advertising, and unfair and deceptive trade practices. Plaintiff contends that, under the terms of the policy of insurance it issued, they have no obligation to defend or indemnify because the claims do not amount to accidents as defined under applicable North Carolina law.

         Review of the insurance policy reveals that it covers legal obligations as a result of bodily injury or property damage. Specifically, coverage is triggered when “bodily injury” or “property damage” is caused by an “occurrence” that “occurs during the policy period.” (Doc. #16 at 6-7). The policy defines an occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. Specific exclusions to this policy include property damage to “personal property in the care, custody or control of others” and “‘bodily injury' or ‘property damage' expected or intended from the standpoint of the insured.” Id. While “accident” is not defined within the policy, North Carolina law provides the definition of “an unforeseen event, occurring without the will or design of the person whose mere act causes it; an unexpected, unusual, or undesigned occurrence; the effect of an unknown cause, or, the cause being known, an unprecedented consequence of it; a casualty.” Waste Mgmt. of the Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 694 (1986).

         II. Legal Standard

         Summary judgment is warranted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material only if it may affect the suit's outcome under governing law. Id. The movant has the “initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal citations omitted). The burden then shifts to the nonmoving party. That party “must set forth specific facts showing that there is a genuine issue for trial.” Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of allegations in pleadings to defeat a motion for summary judgment. Id. at 324. Instead, that party must present sufficient evidence from which “a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; accord Sylvia Dev. Corp. v. Calvert Cnty., Md., 48 F.3d 810, 818 (4th Cir. 1995).

         The court views evidence and any inferences from evidence in the light most favorable to the nonmoving party. Anderson, 477 U.S. at 255. “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (quoting Matsushita v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The question posed by summary judgment is whether the evidence “is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 252.

         III. Discussion

         A. North Carolina Law Controls

         First, the Court finds that North Carolina law controls. North Carolina courts interpret insurance contracts according to the law of the place where the policy is made. Roomy v. Allstate Ins. Co., 256 N.C. 318, 322 ( N.C. 1962); see also NC. Gen. Stat. § 58-3-1 (2017) (“All contracts of insurance . . . in this State shall be deemed to be made therein . . . and are subject to the laws thereof”). Under these rules, “substantive law of the state where the last act to make a binding contract occurred, usually delivery of the policy, controls the interpretation of the contract.” Fortune Ins. Co. v. Owens, 351 N.C. 424, 428 (2000). Here, the policy in question was delivered to defendants in North Carolina and, as a result, North Carolina law controls in this matter.

         B. Summary Judgment is Appropriate

         The court also finds that summary judgment is appropriate, as North Carolina courts recognize that issues concerning the coverage provided by insurance are properly determined at the summary judgment stage rather than trial. Certain Underwriters at Lloyd's London v. Hogan, 147 N.C.App. 715, 718 (2001). “An insurer's duty to defend is ordinarily measured by the facts as alleged in the pleadings.” Waste Mgmt., 315 N.C. at 691. When the pleadings state facts demonstrating that the alleged injury is covered by the policy, then the insurer has a duty to defend, whether or not the insured is ultimately liable. Id. (citing Strickland v. Hughes, 273 N.C. 481, 487 (1968). Conversely, when pleadings allege facts that indicate the event in question is not covered, and the insurer has no knowledge that the facts are otherwise, it is not bound to defend. Id.

         C. Coverage for the ...

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