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American Economy Insurance v. Camera Mart

September 15, 2006


The opinion of the court was delivered by: Garnett Thomas Eisele United States District Judge


The following partial summary judgment motions are pending in this declaratory judgment action: (1) Defendant Camera Mart's Motion for Partial Summary Judgment; (2) Custom Audio's Motion for Partial Summary Judgment, and (3) Boyle Realty Company's Motion for Partial Summary Judgment. Response Briefs to all the motions (and Reply Briefs for two motions) have been filed. The Court, after reviewing the entire record in this case, concludes that all three partial summary judgment motions should be denied.


The Fire

On August 23, 2004, a fire occurred on the business premises of Camera Mart, Inc. ("Camera Mart") Firefighters called to the scene found Mike Dolan, an officer and part-owner of Camera Mart, badly burned. Mr. Dolan was transported to the Arkansas Children's Hospital Burn Unit, where he later died of his injuries. The fire damaged Camera Mart and several neighboring businesses, including Separate Defendants Custom Audio, Inc., C&P Carpets, Computer Doctor and Max Cleaners.


At the time of the fire, Camera Mart was insured under a policy of insurance issued by Plaintiff American Economy Insurance. A secondary or excess policy was issued by Plaintiff American States Insurance Company. The basic policy names as an additional insured Boyle Realty Company, from whom Camera Mart leased the premises on which its business was located. Plaintiff American States Insurance Company issued umbrella or excess coverage to American Economy's policy. Copies of both policies are attached as Exhibits 1 and 2 to Plaintiffs' Complaint.

The Claims in this Lawsuit

On February 8, 2005, Plaintiffs American Economy Insurance and American States Insurance Company (hereinafter, collectively "American") filed a Complaint for Declaratory Judgment. Therein, Plaintiffs seek a declaration that there is no coverage, and thus no payment obligation, under either policy of insurance. Defendant Camera Mart, Inc., filed a Counterclaim contending that it is entitled to recover the policy limits for its losses in connection with the August 23rd fire and resulting loss of its business.

Custom Audio, a business near Camera Mart, contends that it sustained smoke damage due to smoke migration from the fire. Custom Audio has filed a Counterclaim wherein it contends that there is coverage for its losses under the policies of insurance issued by Plaintiffs. Custom Audio also claims indemnity for its losses from Separate Defendant Camera Mart, Inc. and the Estate of Kenneth Michael Paul Dolan.

Camera Mart leased from Separate Defendant Boyle Realty the property located at 10014, Rodney Parham, Little Rock, Arkansas, 72207. Pursuant to the lease agreement, Camera Mart was required to obtain liability and property damage insurance on the leased premises and to name Boyle Realty as an additional insured under the policy. Camera Mart did so. Boyle Realty is named as an additional insured under the primary policy issued by Plaintiff American.

Boyle Realty has filed a Counterclaim contending that the Policy provides coverage for direct physical loss or damage to the property. Boyle Realty further contends that it is entitled to recover under the Policy as an additional insured because it has no responsibility for causing the fire.

American's Denial of Coverage

Camera Mart made demand that American defend it against claims of the other Defendants. American, after conducting an investigation, determined that Mike Dolan intentionally set the fire. Based on that conclusion, American denied coverage for the fire loss to Camera Mart and apparently, also declined to provide a defense.*fn1 American also denied the property damage claim filed by Boyle Realty.

Pending Motions

Three motions for partial summary judgment are pending. Camera Mart contends in its motion that the Court should find as a matter of law that there is coverage under the American policy. Separate Defendant Custom Audio has also filed a motion for partial summary judgment contending that American owes a duty to defend and indemnify Camera Mart for the liability claims asserted against it by Custom Audio. Separate Defendant Boyle Realty Company has also filed a Motion for Partial Summary Judgment, contending that it is entitled to recover under the Policy's first-party or property damage coverage.


Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2554-55, 91 L.Ed.2d 265 (1986). In deciding a motion for summary judgment, the Court must view all facts and inferences from those facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986). The party moving for summary judgment must establish both the absence of a genuine issue of material fact and an entitlement to judgment as a matter of law. Fed.R.Civ.P. 56(c); Matsushita Elec. Indus. Co., 475 U.S. at 586-90, 106 S.Ct. 1348.

"Under Arkansas law, construction of an unambiguous insurance policy is a question of law for the court." Arkansas Power and Light Company v. Hartford Steam Boiler Inspection and Insurance Co., 257 F.3d 853 (8th Cir. 2001); see also State Automobile Ins. Co. v. Lawrence, 358 F.3d 982 (8th Cir. 2004).


1. Key Policy Provisions

The Court quotes the following key provisions from the primary CGL policy*fn2 (Policy Number 02-BP-190193-1) issued by American (hereinafter referred to as "the Policy"):


Throughout this Coverage Form the words "you" and "your" refer to the Named Insured shown in the Declarations.


A. Coverage

We will pay for direct physical loss of or damage to Coverage Property at the premises described in the Declarations cause by or ...

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