Nautilus Insurance v. Nevco Waterproofing

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS October 11, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-20700
Summary Calendar
NAUTILUS INSURANCE CO.,
Plaintiff-Counter Claimant-Appellant,
versus
NEVCO WATERPROOFING,
Defendant-Third Party Plaintiff-
Counter Defendant-Appellee,
versus
LEICHT GENERAL AGENCY,
Third Party Defendant-Appellee,
versus
CONCIERGE CARE NURSING CENTERS, INC.;
HOUSTON CONCIERGE CARE, LP,
Counter Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
(Docket No. 4:04-CV-2986)
_________________________________________________________
Before REAVLEY, BARKSDALE, and STEWART, Circuit Judges.
PER CURIAM:*
This case involves an insurance company’s declaratory judgment action
against an insured. In the underlying case, Concierge Care Nursing Centers, Inc.
(“Concierge”), brought tort claims against a contractor and several sub-contractors,
including appellee Nevco Waterproofing, Inc. (“Nevco”). Concierge had
discovered mold that made their recently-constructed nursing home uninhabitable.
Appellant Nautilus Insurance Company (“Nautilus”) brought a declaratory judgment
action against sub-contractor Nevco, asking the court to find that Nautilus was not
required to defend Nevco because the mold was discovered after the expiration of
Nevco’s insurance policy. The underlying action by Concierge against Nevco and
all other defendants has been dismissed, because Concierge settled with a major
contractor. However, the settlement assigned Concierge the contractor’s rights to
pursue indemnity and contribution claims against sub-contractors, including Nevco.
We vacate the judgment of the district court and remand with directions to dismiss
the case as moot. See United States v. Munsingwear, 340 U.S. 36, 39, 71 S. Ct.
104, 106 (1950).
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth in
5TH CIR. R. 47.5.4.
Under the Declaratory Judgment Act, 28 U.S.C. §§ 2201–2202 (1998), the
question of whether a case is moot depends upon “whether the facts alleged, under
all the circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant the
issue of a declaratory judgment.” Connell v. Shoemaker, 555 F.2d 483, 486 (5th
Cir. 1977) (citation omitted). Here, the underlying case has been dismissed,
rendering the issue of Nautilus’s responsibilities moot. Nonetheless, Nautilus cites
Excess Underwriters at Lloyd’s, London, v. Frank’s Casing Crew & Rental Tools,
Inc., ___S.W. 3d___, 2005 WL 1252321 (Tex. May 27, 2005) (reh’g granted), for
the proposition that Nevco may owe Nautilus reimbursement for the costs of
defending the suit, thus arguing that a live case or controversy remains for this court
to decide.
In Frank’s Casing, the Texas Supreme Court held that Texas law allows
insurers who disputes coverage to recoup settlement payments if it is later
determined that claims against the insured were not covered. Id. at *3. Specifically,
insurers may recover payment if (1) “an insured has demanded that an insurer
accept a settlement offer that is within policy limits,” or (2) “when an insured
expressly agrees that the settlement offer should be accepted.” Id. However, the
supreme court did not address the question of whether insurers could ever recover
the costs of defending an insured whose policy was later determined not to cover the
case at issue, without a settlement. Because the case at hand did not involve a
settlement, Frank’s Casing does not apply. Thus, contrary to Nautilus’s claim,
Frank’s Casing will not defeat a dismissal on grounds of mootness.
Nautilus argues in the alternative that this case falls under an exception to the
mootness doctrine, because it is “capable of repetition, yet evading review.”
Weinstein v. Bradford, 423 U.S. 147, 149, 96 S. Ct. 347, 349 (1975). This
exception is “limited to the situation where two elements combined: (1) the
challenged action was in its duration too short to be fully litigated prior to its
cessation or expiration, and (2) there was a reasonable expectation that the same
complaining party would be subjected to the same action again.” Id. at 149, 349. In
this case, Nautilus contends that the same issue of coverage will resurface again,
because Concierge still has the right to sue Nevco. However, the possibility that
Concierge might sue Nevco in the future is not of “sufficient immediacy and reality”
to warrant a declaratory judgment. See Connell v. Shoemaker, 555 F.2d 483, 486
(5th Cir. 1977) (citation omitted). Concierge has not sued Nevco since the
settlement, and it is not necessarily likely that Concierge will sue Nevco again. Nor,
if Concierge does bring suit, will the issue be likely to evade review, for the court
may issue a declaratory judgment at that time. However, we need not now rule on
the validity of a defense in a hypothetical future suit. See Coffman v. Breeze Corp.,
323 U.S. 316, 323, 65 S. Ct. 298, 302 (1945). Currently, there is no live
controversy to decide, and the case will be dismissed on mootness grounds.
VACATED and REMANDED with instructions to dismiss as moot.