Essex Insurance Co v. Redtail Products Inc ( 2000 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-11056
Summary Calendar
ESSEX INSURANCE COMPANY
Plaintiff - Counter Defendant - Appellee,
versus
REDTAIL PRODUCTS INC.
Defendant - Counter Claimant - Appellant.
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Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:97-CV-2120-D
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April 12, 2000
Before JOLLY, JONES, and BENAVIDES, Circuit Judges.
PER CURIAM:*
This case arises from a dispute over insurance coverage.
Redtail Products Inc. [Redtail] appeals from a judgment
dismissing its counterclaims and granting a declaratory judgment
that Essex Insurance Company [Essex] had no duty to defend or
indemnify Redtail in an advertising injury case and that Essex
lawfully canceled Redtail’s commercial general liability policy.
We affirm.
Redtail sells motor oils and other lubricants and uses the
marks of certain engine manufacturers in its labeling and
*
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this opinion should not be published and is not precedent except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.
promotional materials to inform customers that they can use
Redtail products for those engines. On September 27, 1996,
Outboard Marine Corporation [OMC] sent Redtail a letter alleging
that Redtail’s use of OMC’s marks violated its trademark rights.
Redtail contacted Corbin Shouse [Shouse], an insurance agent.
Upon being informed that its existing policy did not cover
advertising injury, Redtail instructed Shouse to acquire a policy
that would. Shouse submitted an application on Redtail’s behalf
which represented that there were no known claims or occurrences
that may give rise to claims in the five years previous to the
application. Essex issued a general liability policy to Redtail.
On June 2, 1997, OMC filed suit against Redtail. After Essex
received a copy of the September 27, 1996 OMC letter, Essex
notified Redtail and certain other interested parties that the
policy was being canceled “due to misrepresentation.”
Essex filed a declaratory action, seeking a judgment that it
had no duty under the policy to defend or indemnify Redtail, that
the policy was void ab initio, and that Essex had lawfully
canceled the policy. Redtail counterclaimed for a number of
causes of action, including misrepresentation, breach of
contract, and defamation. On cross motions for partial summary
judgment, the district court ruled that Essex had no duty to
defend or indemnify Redtail in the OMC suit. After a bench
trial, the district court issued judgment in favor of Essex on
all claims except its contention that the policy was void ab
initio and dismissed Redtail’s counterclaims with prejudice.
We review the district court’s partial summary judgment de
novo, Amburgey v. Corhart Refractories Corp., 936 F.2d 805, 809
(5th Cir. 1991), factual findings in its final judgment for clear
error and its conclusions of law de novo. See American Home Assur.
Co. v. Unitramp Ltd., 146 F.3d 311, 313 (5th Cir. 1998).
The district court’s grant of partial summary judgment was
proper. The court could consider the September 27, 1996 OMC letter
under John Deere Ins. Co. v. Truckin’ U.S.A., 122 F.3d 270, 272 95th
Cir. 1997) because the facts alleged in the underlying OMC complaint
were insufficient to determine coverage under the policy. The policy
specifically excluded coverage for advertising injury occurring
outside of the policy period and for injury arising out of a
publication of material that first occurred before the beginning of
the policy period. OMC’s complaint letter of September 27, 1996
demonstrates that the alleged trademark violations would be excluded
under those terms. In addition, under the fortuity doctrine, Redtail
could not receive coverage for a loss or damage which was known to
have begun at the time the policy was purchased. See Two Pesos, Inc.
v. Gulf Ins. Co., 901 S.W.2d 495, 501 (Tex. App. 1995, no writ).
The district court’s final judgment dismissing Redtail’s
counterclaims and granting judgment for Essex was likewise proper.
Essential to several of Redtail’s counterclaims was its contention
that Shouse acted as an agent for Essex during the procurement of the
policy. The district court found, however, that Shouse was acting as
Redtail’s agent during the application period. See McKillip v.
Employers Fire Ins. Co., 932 S.W.2d 268, 270 (Tex. App. 1996, no
writ). The district court therefore correctly dismissed Redtail’s
fraud-related counterclaims because they rested on Shouse’s behavior
during the application period, which could not be attributed to
Essex.
The district court’s conclusion that Essex complied with the
contract terms and applicable law in canceling the policy is also
correct. Redtail’s defamation counterclaims were properly dismissed
because the allegedly defamatory statements were true as established
by evidence in the record and truth is a defense to such claims. See
Randall’s Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex.
1995). Finally, the district court correctly concluded that Redtail
failed to establish tortious interference with a prospective contract
because it did not show that Essex acted with malice. See Garner v.
Corpus Christi Nat’l Bank, 944 S.W.2d 469, 477 (Tex. App. 1997, writ
denied).
For the reasons stated in the district court’s partial
summary judgment memorandum opinion and order of November 12,
1998 and memorandum opinion of August 17, 1999, we affirm.