ALLIED WORLD ASSURANCE COMPANY (U.S.), INC. et al v. ACE AMERICAN INSURANCE COMPANY
Allied World Assurance Company (U.S.), Inc.
Southern District of Texas
Complaint:
ALLIED WORLD ASSURANCE COMPANY (U.S.), INC. et al v. ACE AMERICAN INSURANCE COMPANY complaint
ALLIED WORLD ASSURANCE COMPANY (U.S.), INC. et al v. ACE AMERICAN INSURANCE COMPANY docket
ORIGINAL COMPLAINT
Plaintiffs Allied World Assurance Company (U.S.), Inc. ("AWAC") and Allied
World National Assurance Company ("AWNAC") (together "Allied World" or
"Plaintiffs") file this Original Complaint and respectfully show the Court as follows:
I. OVERVIEW OF ACTION
1. Plaintiffs seek reimbursement of defense costs spent to defend the parties'
mutual insureds in underlying litigation, and a declaration that ACE American
Insurance Company ("ACE") owes a continuing obligation to participate in that
II. PARTIES
2. Plaintiff Allied World Assurance Company (U.S.), Inc. is a Delaware
corporation with its principal places of business in New York.
3. Plaintiff Allied World National Assurance Company is a New Hampshire
4. Defendant ACE American Insurance Company ("ACE") is a Pennsylvania
corporation with its principal place of business in Pennsylvania. ACE may be served
through its registered agent for service of process, C T Corporation System, 1999 Bryan
Street, Suite 900, Dallas, TX 75201 -3136.
III. JURISDICTION AND VENUE
5. Jurisdiction is proper in accordance with 28 U.S.C. § 1332 in that there is
complete diversity of citizenship between Plaintiffs and Defendant and the amount in
controversy exceeds $75,000.00, exclusive of interest and costs.
6. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 because a
substantial part of the events or omissions giving rise to the underlying claim occurred
in the Southern District of Texas.
IV. FACTUAL BACKGROUND
7. The Woodlands Land Development Company, L.P., The Woodlands
Corporation, and The Woodlands Operating Company, L.P. ("Woodlands Defendants")
and other entities have been sued by over 80 plaintiffs and intervenors ("Underlying
Plaintiffs") in a consolidated suit styled Bunch, et al. v. The Woodlands Land Development
Company, LP, et al., Cause No. 12-02-01950, in the District Court of Montgomery County,
Texas, 359th Judicial District ("Underlying Litigation"). As reflected their petitions, the
Underlying Plaintiffs allege that the Woodlands was established in 1974, and that they
suffered damage thereafter.
8. The Underlying Plaintiffs allege the Woodland Defendants' acts and
omissions caused economic damage, and in some instances property damage, relating
to the Underlying Plaintiffs' purchase and/or ownership of homes in the Woodlands,
which were built on property in a community allegedly planned and advertised by the
Woodlands Defendants.
9. The underlying plaintiffs allege, among other things, that the Woodlands
a. designed and developed the Woodlands, within which the underlying
plaintiffs purchased residences;
b. advertised their community as "the premier gated community in the
Woodlands";
c. engaged in a "comprehensive advertising campaign that included
seminars, a home center and other forms of advertisement that were
designed to and did reach potential buyers such as" the underlying
plaintiffs;
d. conducted this advertising campaign "through various advertising
media, including written brochures and the Internet";
e. misrepresented, among other things, that:
(1) the properties sold to the underlying plaintiffs "had the
'quality that we deserved'"; and
(2) the Woodlands was "an idyllic hometown," "a hometown for
now and in the future," "'carefully' and 'thoughtfully
planned,"' "an award winning 'master planned' community
... that had won awards for its 'responsible' development,"
and "planned 'in harmony with nature' and the
environment."
f. provided the builder a membership in an exclusive community club to
help incentivize the underlying plaintiffs to purchase the properties;
g. engaged in other actionable activities, or otherwise failed to act.
10. The Woodlands Defendants tendered their defense in the Underlying
Litigation to Allied World under the following policies:
a. Primary Policy No. 0306-0908, issued to The Howard Hughes
Corporation by Allied World National Assurance Company, with
effective dates of November 10, 2010 through November 10, 2011, and
policy limits of $1M per occurrence;
b. Primary Policy No. 0306-0908, issued to The Howard Hughes
Corporation by Allied World Assurance Company (U.S.), Inc., with
Case 4:15-cv-03205 Document 1 Filed in TXSD on 10/30/15 Page 5 of 9
c. Primary Policy No. 0306-0908, issued to The Howard Hughes
11. Allied World has participated and continues to participate in the
Woodlands Defendants' defense in the Underlying Litigation, for reasonable and
necessary, post-tender fees and defense costs, under a reservations of rights.
12. Allied World has made payments of the Woodlands Defendants' defense
costs in the Underlying Litigation.
13. Upon information and belief, in February 2012, the Woodlands
Defendants tendered their defense in the Underlying Litigation to ACE.
14. Upon information and belief, ACE issued policies to the Woodlands
Defendants, effective 2006 or earlier through November 9, 2010, which provide liability
coverage ("the ACE Policies"). As reflected in the underlying pleadings, damages may
have occurred during the ACE policy periods, such that ACE owes a duty to defend the
15. On December 5, 2012, ACE denied a defense to the Woodlands
Defendants in the Underlying Litigation.
16. Upon information and belief, ACE owes a defense to the Woodlands
Defendants in the Underlying Litigation and has wrongfully refused to participate in
that defense.
V. CAUSES OF ACTION
COUNT I - DECLARATORY JUDGMENT:
ACE OWES THE WOODLAND DEFENDANTS A DEFENSE
17. Plaintiffs adopt and incorporate paragraphs 1 to 16 above.
18. Plaintiffs seek a declaratory judgment pursuant to Federal Rule of Civil
Procedure 57 and 28 U.S.C. § 2201 to resolve disputed questions of insurance coverage
regarding the ACE Policies.
19. Plaintiffs are interested parties under the Declaratory Judgment Act.
20. An actual controversy exists between Plaintiffs and ACE concerning
ACE's obligations under the ACE Policies, including obligations owed to the
Woodlands Defendants for defense costs, which have been paid by Plaintiffs.
21. ACE owes a duty to defend the Woodlands Defendants in the Underlying
Litigation.
Defendants in the Underlying Litigation based on the following exclusion:
1) "Residential Construction" means any and all:
a) Architectural, engineering or design work of any kind, or
b) Planning, feasibility studies or environmental impact studies or
other analysis;
c) Construction, construction operations or construction
management or supervision;
d) "your work" or any part of "your work" arising out of any of
the above including in the "products-completed operations
hazard", including any work performed on your behalf by a
subcontractor.
which has been or is a part of the development or construction of
any single or multi-family dwelling, including any:
i. Single family home; or
ii. Multi-unit buildings such as condominiums or cooperatives.;
iii. Any other building which is used as a dwelling of any kind,
or any part thereof, except for apartments.
2) The following exclusion is added to Section I - Coverages,
Coverage A Bodily Injury and Property Damage Liability as
respects the Products/Completed Operations only:
This insurance does not apply to "bodily injury" or "property
damage" included in the products/completed operations hazard,
arising from "Residential Construction", regardless of whether
such "Residential Construction":
a) Is or was conducted by you or on your behalf; or
b) Is or was conducted for yourself or for others; or
c) Took place before, during or after the time that this policy
became effective; or
d) Whether such "bodily injury" or "property damage" manifested
itself before, during or after the time that this policy became
23. This exclusion does not apply, for at least the following reasons:
a. The Underlying Litigation petitions allege that the Woodlands
Defendants engaged in acts and omissions concerning the
development of the community, not "dwellings."
b. The Underlying Litigation petitions allege that the Woodlands
Defendants engaged in misrepresentations and failures to make
representations which were not a part of the "development and
construction" of the Underlying Plaintiffs' properties, but were rather
a part of the sale and advertisement of such properties.
24. Accordingly, Plaintiffs seek a judicial declaration that, based on one or
more of the petitions filed in the Underlying Lawsuit, ACE owes a defense to the
Woodlands Defendants, including the amount or proportion of defense costs owed.
COUNT II - BREACH OF CONTRACT:
ALLIED WORLD IS ENTITLED TO RECOVER DEFENSE COSTS FROM ACE
25. Plaintiffs repeat and re-allege Paragraphs 1 through 25 as if fully set forth
herein.
26. Allied World is subrogated through the Woodlands Defendants for
defense costs paid by Allied World in relation to the Underlying Lawsuit.
27. There is a defense triggered under the ACE Policies by one or more of the
petitions filed in the Underlying Lawsuit.
28. ACE breached its policy with the Woodlands Defendants by failing to
participate in the defense of the Woodlands Defendants in the Underlying Lawsuit.
29. Allied World, as subrogated through the Woodlands Defendants, seeks
reimbursement of ACE's share of defense costs paid, pre- and post-judgment interest,
court costs, and attorney fees.
VI. PRAYER
For these reasons. Plaintiffs demand judgment against ACE for declaratory relief
as set forth above; for recovery of defense costs, pre- and post-judgment interest, court
costs, and attorney fees; and for such other and further relief to which they are justly
entitled.