Sphere Drake Ins PLC v. Gainsco Ins ( 2001 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________
No. 00-41286
_______________________________
SPHERE DRAKE INSURANCE PLC,
Plaintiff-Appellee,
versus
GAINSCO COUNTY MUTUAL INSURANCE COMPANY, et al.,
Defendants
TRUCK INSURANCE EXCHANGE, FARMERS INSURANCE EXCHANGE,
Defendants-Appellants.
_________________________________________________
Appeal from the United States District Court
for the Southern District of Texas, McAllen Division
(M-99-CV-128)
_________________________________________________
August 21, 2001
Before JOLLY, SMITH, and WIENER, Circuit Judges.
PER CURIAM*:
This appeal presents the question whether the Defendants-
Appellants Truck Insurance Exchange and Farmers Insurance Exchange
(“Farmers”) have a duty to defend Upper Valley Inc. (the “insured”)
in underlying lawsuits against the insured. The district court
*
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this opinion should not be published and is not precedent except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.
determined that Farmers has a duty to defend and granted summary
judgment for Plaintiff-Appellee Sphere Drake Insurance (“Sphere
Drake”), the insured’s commercial general liability carrier. We
affirm.
I.
FACTS AND PROCEEDINGS
The insured is a defendant in two personal injury suits,
currently pending in Texas state court (the “underlying
lawsuits”).1 Sphere Drake is defending the insured in the
underlying suits pursuant to the Commercial General Liability
(“CGL”) policy that it issued to the insured.
In addition to Sphere Drake’s CGL coverage, the insured had in
force policies of business auto insurance (the “policies”) issued
by Farmers. The policies specified coverage of auto liability for
the insured’s pick-up trucks, half-ton trucks, and passenger
vehicles. The policies contain pollution exclusion clauses which
provide, in relevant part, that Farmers does not cover liability
for bodily injury arising out of the actual or alleged discharge,
dispersal, release or escape of pollutants that are being
transported, or that are contained in any property being
transported, by the covered autos. Insisting that when the
1
Javier Benavides, et al. v. Magic Valley Concrete, Inc.,
Cause No. DC-96-89 in the 229th Judicial District Court of Starr
County, Texas; Librador Amador, et. al. v. Alamo Concrete, Cause
No. 16696 in the 229th Judicial District Court of Duval County,
Texas.
2
claimants’ allegations in the underlying lawsuits and the policies’
pollution exclusion clauses are construed in pari materia they
preclude any duty to defend, Farmers refused to participate in or
contribute to the insured’s defense. Disagreeing with Farmers,
Sphere Drake brought this suit to enforce Farmers’s duty to defend
the automobile-related claims against the insured in the underlying
lawsuits.
II.
DISCUSSION
A. Standard of Review
We review a grant of summary judgment de novo, applying the
same standard as the district court.2 A motion for summary
judgment is properly granted only if there is no genuine issue as
to any material fact.3 An issue is material if its resolution
could affect the outcome of the action.4 In deciding whether a
fact issue has been created, we must view the facts and the
inferences to be drawn therefrom in the light most favorable to the
nonmoving party.5
The standard for summary judgment mirrors that for judgment as
2
Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998).
3
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986).
4
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
5
See Olabisiomotosho v. City of Houston, 185 F.3d 521, 525
(5th Cir. 1999).
3
a matter of law.6 Thus, the court must review all of the evidence
in the record, but make no credibility determinations or weigh any
evidence.7 In reviewing all the evidence, the court must disregard
all evidence favorable to the moving party that the jury is not
required to believe, and should give credence to the evidence
favoring the nonmoving party as well as that evidence supporting
the moving party that is uncontradicted and unimpeached.8
B. Farmers’s Duty to Defend
1. Generality of Allegations
On appeal, Farmers contends that (1) the specific allegations
made by the claimants against the insured by name trump the general
allegations made against all defendants, thereby precluding any
duty of Farmers to defend, and (2) the allegations in the
underlying lawsuits fall under the policies’ pollution exclusion
clauses, likewise alleviating Farmers’s duty to defend.
Farmers’s position does not comport neatly with applicable
case law or with a common-sense reading of the claimants’
allegations. First, Farmers’s position requires reading “general
allegation” to mean an allegation lodged against all defendants
generically and “specific allegation” to mean one that targets only
6
Celotex Corp., 477 U.S. at 323.
7
Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133,
150 (2000).
8
Id. at 151.
4
one particular defendant. As these terms are employed in the case
law, however, “general” and “specific” refer to the degree of
detail in the substance of the allegation, not to the identity of
the party or parties targeted by the allegation.9 Buying into
Farmers’s reading would contravene the accepted convention of
collectively referring to multiple defendants as “defendants” for
the purpose of common allegations.
The claimants’ allegations categorized by Farmers as “general”
are located in the sections of the complaints entitled “Facts
Common to all Causes of Action” and “Negligence.” Most reasonably
construed, this suggests that the claimants are alleging facts
against all defendants as a convenient shorthand in lieu of
redundantly re-alleging the same facts against each defendant by
name. Even if the proposition relied on by Farmers might make
sense in a case comprising a single plaintiff, a single defendant,
and a single subject matter, it does not comport with the situation
in the underlying lawsuits, which comprise multiple plaintiffs,
multiple defendants, and a large variety of claims.
Moreover, the allegations against all defendants and the
9
Cf. Monsanto v. Milam, 494 S.W.2d 534 (Tex. 1973) (specific
pleading of facts giving rise to negligence controlled over general
allegation of negligence); Chuck Wagon Feeding Co., Inc. v. Davis,
768 S.W.2d 360 (Tex. App. – El Paso 1989) (holding that specific
allegations control where plaintiff generally alleged breach of
contract, but then proceeded to specifically allege the exact terms
of the breached contracts).
5
allegations against the insured by name are not limiting or
mutually exclusive of each other. Read most reasonably, the
allegations against all defendants include the insured and are
complementary to the allegations against the insured individually,
by name. As such, Farmers’s duty to defend is not precluded by the
form of the claimants’ allegations.
2. The Texas “Eight Corners” Rule
Farmers’s second argument on appeal is equally unpersuasive.
Texas law commands courts to apply the so-called “Eight corners
rule” when testing suits by insureds seeking to enforce insurers’
duties to defend or indemnify.10 Under this rule of construction,
only allegations within the four corners of the complaint and terms
within the four corners of the insurance policy itself can be
considered by a court. In interpreting insurance policies under
Texas law, our well-established canon specifies that “[w]hen
courts apply the eight-corners rule, they must liberally interpret
the allegations in the pleadings, resolving doubts in favor of the
insured.”11 In juxtaposition to liberal interpretation of pleadings
10
Guaranty Nat. Ins. Co. v. Azrock Industries, Inc., 211 F.3d
239, 243 (5th Cir. 2000); Nat. Union Fire Ins. Co. v. Merchants
Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997).
11
Guaranty Nat. Ins. Co.v. Azrock Indus., Inc., 211 F.3d 239,
243 (5th Cir. 2000); see also Clarendon America Ins. Co. v. Bay,
Inc., 10 F. Supp. 2d 736, 740 (S.D. Tex. 1998) (“Courts must
liberally construe the allegations of the pleadings, and any doubt
concerning coverage is resolved in favor of the insured.”) (citing
Nautilus Ins. Co. v. Zamora, 114 F.3d 536, 538 (5th Cir. 1997)).
6
is another maxim which dictates that “[p]olicy exclusions are
strictly construed against the insurer.”12 These complementary
rules of interpretation must here be applied in the context of
Farmers’s inability to escape its duty to defend simply by showing
that a few allegations are defeated by the pollution exclusion or
that some of the insured’s vehicles may not have been covered by
it.13
The pollution exclusion clauses, in relevant part, exclude
from coverage:
“Bodily injury or property damage arising out of the actual,
alleged or threatened discharge, dispersal, release or escape
of pollutants:
(1) That are, or that are contained in any property
that is:
A. Being transported or towed by, or handled for
movement into, onto or from, the covered auto;
B. Otherwise in the course of transit; or
C. Being stored, disposed of, treated or
processed in or upon the covered auto.”
True enough, some of the claimants’ allegations are eliminated from
Farmers’s responsibility by the pollution exclusions; yet several
remain susceptible of an interpretation that places them outside
the purview of the pollution exclusion, thereby obligating Farmers
to defend the insured from these. For example, the claimants
12
Clarendon, 10 F. Supp. 2d at 741 (citing Nautilus Ins. Co.,
114 F.3d at 538).
13
Enserch Corp. v. Shand Morahan & Co., Inc., 952 F.2d 1485,
1492 (5th Cir. 1992)(“If any allegation in the complaint is even
potentially covered by the policy then the insurer has a duty to
defend its insured.”).
7
allege:
“Operation of the normally illegally tarped
vehicles carrying sand, gravel and cement, off
paved surfaces and onto areas where the sand,
gravel and caliche has settled serves to cause
more particulates and toxic substances to
enter the lungs of the Plaintiffs herein....”
“Defendants employ or permit drivers of
vehicles to come into the facility, and the
drivers do not use the permanent roads or
portions of the facility with a cohesive hard
surface. As a result, the vehicles scatter
toxic and non-toxic substances, which would
then contact Plaintiffs.”
“Operation of vehicles off paved surfaces and
onto areas where the dry cement has settled
causes more particulates and toxic substances
to contact plaintiffs.”
These allegations are subject to the reasonable interpretation that
some of the pollutants allegedly causing injury were not being
transported by the insured’s vehicles, but rather were already
lying on the surface of unpaved roads and trails by virtue of prior
escapement from other haulers and were thereafter stirred up by
passing vehicles, including some belonging to the insured, of a
type covered by the policies.
3. Extrinsic Evidence
Farmers also argues that the claimants’ Exposure Event Forms
(“Event Forms”), purportedly incorporated into the claimants’
complaints, as well as an internal Farmers Group Commercial Lines
Manual (“Policy Manual”), preclude its duty to defend. These
contentions too are unavailing.
8
The Policy Manual is clearly outside of the “eight corners”
rule and, as extrinsic evidence, could only be offered if it fits
the limited exceptions to the rule. Moreover, even if we could
properly review it, the Policy Manual only defines the type of
vehicles Farmers intended to cover; it does not clarify whether the
covered vehicles are the ones referenced in the claimants’
allegations. Similarly, the Event Forms, assuming they are
eligible for our consideration, do not preclude coverage. First,
the Event Forms are voluminous and may only be considered if their
incorporation by reference in the claimants’ complaints is
sufficient to bring them within the eight corners rule. Second,
even assuming, arguendo, that the Event Forms can properly be
considered under that rule, we have already concluded that a duty
to defend arises when the complaints’ “general” allegations are
potentially covered by the policies. Hence, Farmers’s argument
that the allegations in the Event Forms do not come within its
policies’ purview, is fruitless.14
III.
CONCLUSION
Liberally construing the pleadings and strictly construing the
14
Moreover, the Event Form allegations were incorporated
against all defendants individually by name. They were not
“specifically” directed at the insured at issue, and so Farmers
cannot even seek refuge in its “general vs. specific” argument
advanced above.
9
pollution exclusion, we conclude that Farmers has a duty to
participate in defending the insured in the underlying lawsuits.
In so doing, we neither express nor imply an opinion on the
viability of the claimants’ causes of action against the insured or
on Farmers’s duty to indemnify the insured if it should be cast in
judgment. For the foregoing reasons, therefore, the district
court’s grant of summary judgment in favor of Sphere Drake is
AFFIRMED.
10