Mt. Hawley Insurance Company v. Buckeye Real Estate Investments LLC

Background

Mt. Hawley Insurance Company insured Buckeye Real Estate Investments LLC under a Commercial General Liability Policy covering August 9, 2019, through August 9, 2020. The policy included a $1 million per-occurrence limit for bodily-injury liability. Buckeye leased premises in Boca Raton, Florida, to Hobby Lobby Stores, Inc.

Barbara Bush sued Buckeye and Hobby Lobby in Florida state court. She alleged that she was injured on March 19, 2020, when she tripped on a dangerously high curb in front of the Hobby Lobby store. Hobby Lobby filed cross-claims against Buckeye for contractual and common-law indemnification.

The policy included a Tenants and Contractors—Conditions of Coverage endorsement. The endorsement excluded coverage for injuries arising directly or indirectly from a tenant’s use or maintenance of leased premises unless specified conditions were satisfied. The policy also contained a service-of-suit endorsement requiring litigation by an insured against Mt. Hawley to be brought in New York and providing that New York law governed policy disputes.

Procedural History

Mt. Hawley filed this declaratory-judgment action and later amended its complaint to plead diversity jurisdiction. Buckeye did not appear through counsel at court conferences or otherwise defend the action. The Clerk entered a certificate of default, and Mt. Hawley moved under Federal Rule of Civil Procedure 55(b)(2) for a default judgment.

The court explained that a default judgment requires more than a defendant’s failure to appear. The well-pleaded factual allegations are accepted as true, but the court must still determine whether those allegations establish legal liability. The court also found that Mt. Hawley had properly served Buckeye under Florida Statutes section 48.062. Mt. Hawley had attempted service on Buckeye’s registered agent and authorized representative and then served the Florida Department of State after those efforts were unsuccessful despite due diligence.

Declaratory Judgment

The court exercised its discretion to hear the declaratory-judgment action because no losses had yet accrued and a declaration would clarify the parties’ rights concerning Mt. Hawley’s duty to defend and indemnify Buckeye. The court noted that the declaration could also benefit Bush by clarifying who would be financially responsible if she prevailed in the underlying case.

Insurance Coverage Ruling

Applying New York law, the court distinguished the duty to defend from the duty to indemnify. An insurer generally must defend when the underlying allegations create a reasonable possibility of coverage. The duty to indemnify arises when the insured is found liable for a claim within the policy’s coverage. The court stated that if there is no duty to defend, there can be no duty to indemnify.

The court treated the endorsement’s requirements as clear and unambiguous conditions precedent to coverage—requirements that had to be satisfied before Mt. Hawley’s duties arose. Based on the complaint’s well-pleaded allegations, Buckeye failed to satisfy four conditions:

The court concluded that these failures meant Mt. Hawley had no duty to defend Buckeye in the Bush action and, consequently, no duty to indemnify Buckeye for the March 19, 2020 accident or the related lawsuit.

Disposition

Judge Lewis J. Liman granted Mt. Hawley’s motion for default judgment. The court ordered, adjudged, and declared that Mt. Hawley had no duty to defend or indemnify Buckeye in connection with the accident and the related Florida state-court action. The Clerk was directed to close the motion.