Scottsdale Ins Co v. Texas Security ( 1999 )

Revised May 14, 1999
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
___________________________
No. 98-20034
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SCOTTSDALE INSURANCE COMPANY,
Plaintiff-Appellee,
VERSUS
TEXAS SECURITY CONCEPTS AND INVESTIGATION, et al,
Defendants,
KIMBERLEY BARNES and ROLANDA WILLIAMS,
Defendants-Appellants.
___________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
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January 7, 1999
Before DAVIS, SMITH, and WIENER, Circuit Judges.
PER CURIAM:
Scottsdale Insurance Company (“Scottsdale”) filed this
declaratory judgment action to determine whether coverage exists
under one of its liability policies. We must decide whether the
Assault and Battery Exclusion in Scottsdale’s policy violates Texas
public policy and is therefore void. We answer this question in
the negative and affirm the district court’s judgment.
I.
In the case underlying this appeal, Kimberley Barnes and
Rolanda Williams alleged that in December 1993 they were unlawfully
restrained, falsely imprisoned, assaulted, and raped in a Houston
area apartment complex. According to Barnes and Williams, Texas
Security Concepts (“Texas Security”), the company that provided
security at the apartment complex, negligently failed to provide
proper security. Texas Security was insured by a Scottsdale
liability policy. Scottsdale filed an action for declaratory
judgment seeking a determination that it provided no coverage and
thus had no duty to defend or to indemnify Texas Security for
losses related to the underlying suit.
Defendants Texas Security and Raleigh Randal Hanks, a Texas
Security employee, were served, but did not appear. The district
court granted summary judgment against these defendants. Barnes
and Williams answered Scottsdale’s complaint. Scottsdale then
filed a motion for summary judgment against Barnes and Williams.
Scottsdale denied that it had any duty to defend or to indemnify
Texas Security in the underlying lawsuit because of the liability
policy’s Assault and Battery Exclusion. Barnes and Williams
responded and filed a cross-motion for summary judgment. The
district court granted summary judgment in favor of Scottsdale.
Barnes and Williams now appeal.
Barnes and Williams make two main arguments: (1) the Assault
and Battery Exclusion is void as against Texas public policy; and
(2) some of the claims that they assert do not fall within the
Assault and Battery Exclusion.
II.
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A.
Barnes and Williams argue first that the Assault and Battery
Exclusion is void as against Texas public policy as expressed in
Texas Revised Civil Statute Art. 4413(29bb), § 40(a), which
regulates the licensing of private security agencies. This statute
requires that the licensing board verify that the security agency
applying for a license holds a general insurance policy that will
cover “all sums which the licensee becomes legally obligated to pay
as damages because of bodily injury, property damage, or personal
injury, caused by an event involving the principal, its servants,
officers, agents or employees in the conduct of any business
licensed under this Act.”
Barnes and Williams contend that the Assault and Battery
Exclusion violates this statute and is therefore void as against
Texas public policy. In response, Scottsdale contends that
statutes regulating the amount or kind of insurance that businesses
must purchase cannot operate to modify the terms of the policy that
is actually purchased. As Scottsdale puts it, “If the businessman
does not purchase the required policy, it is between him and the
regulating agency,” citing Baker v. Guaranty National Insurance
Co., 615 S.W.2d 303, 306 (Tex. Civ. App. 1981).
The Texas statute under consideration is regulatory in nature
and is addressed to the security business. When considering a
similar challenge to a similar statute, the Louisiana Supreme Court
determined, among other things, that the insurance requirement for
the licensing of private security agents was directed to the
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security agent, not to the insurance company. Hickey v. Centenary
Oyster House, 719 So. 2d 421, 424-25 (La. 1998). We agree with the
reasoning of the Louisiana court. The Texas statute is regulatory
in nature and does not affirmatively establish a public policy of
the state that would override the parties’ agreement. See Aero
Int’l, Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109
(5th Cir. 1983) (“Without an affirmative expression of an
overriding public policy by the [state] courts or legislature, we
are constrained to enforce the parties’ agreement according to its
plain meaning.”); Fidelity & Deposit Co. of Maryland v. Conner, 973
F.2d 1236, 1241 (5th Cir. 1992) (public policy exception “to be
applied cautiously and only in plain cases involving dominant
public interests”).1 Therefore, we agree with the district court
that the Assault and Battery Exclusion in Scottsdale’s policy is
not unenforceable as against public policy.
B.
In addition, Barnes and Williams argue that they asserted
“personal injury” claims for false imprisonment that are distinct
from those that fit under the Assault and Battery Exclusion. They
argue that, under Texas law, when a loss is caused by both a
covered peril and an excluded peril, the insurer is liable, citing
1
Barnes and Williams make the additional argument that
because Scottsdale certified that it had issued Texas Security an
insurance policy that satisfied the Texas private security
insurance statute, it is directly implicated by the public policy
argument. We disagree. Scottsdale’s certification expressly
stated that the certification did not expand the policy’s coverage
in any way.
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Guaranty National Insurance Co. v. North River Insurance Co., 909
F.2d 133, 137 (5th Cir. 1990). In response, Scottsdale argues that
the claims for false imprisonment and forcible restraint are so
interrelated to the rape and assault claims that they are also
excluded by the Assault and Battery Exclusion.
When an exclusion precludes coverage for injuries “arising out
of” described conduct, the exclusion is given a broad, general, and
comprehensive interpretation. A claim need only bear an incidental
relationship to the described conduct for the exclusion to apply.
American States Ins. Co. v. Bailey, 133 F.3d 363, 370 (5th Cir.
1998).
While Guaranty National does hold that when a loss is caused
by a covered act and a noncovered act the loss is covered, 909 F.2d
at 137, the two acts in that case were completely independent. The
Guaranty National court noted that under Texas law an insured is
not liable when a covered peril and a noncovered peril concurrently
cause a loss. In this case, the rape, assault, and unlawful
restraint all occurred concurrently and as part of the same
sequence of events.
Also in contrast to Guaranty National, the alleged negligence
on the part of Texas Security is the same for both the assault
claim and the false imprisonment claim. See Commercial Union Ins.
Co. v. Roberts, 7 F.3d 86, 89-90 (5th Cir. 1993) (noting importance
of whether allegations are distinct or involve the same conduct by
the defendant); Burlington Ins. Co. v. Mexican American Unity
Council, Inc., 905 S.W.2d 359, 362-63 (Tex. Ct. App. 1995) (same).
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Thus, because Barnes’s and Williams’s false imprisonment claims are
based on the same alleged negligence as the claims excluded by the
Assault and Battery Exclusion, the policy excludes the claims.
CONCLUSION
Finding no error with the district court’s summary judgment
decision, we AFFIRM.
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