James Feaster v. Mid-Continent Casualty Com

Case: 15-20074 Document: 00513171984 Page: 1 Date Filed: 08/27/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 15-20074 August 27, 2015
Summary Calendar Lyle W. Cayce
Clerk
JAMES FEASTER; PAULETTE FEASTER; DAVID A. FETTNER,
Plaintiffs - Appellants
v.
MID-CONTINENT CASUALTY COMPANY,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-3220
Before REAVLEY, SMITH, and HAYNES, Circuit Judges.
PER CURIAM:*
Plaintiffs James and Paulette Feaster (“the Feasters”) appeal the district
court’s grant of summary judgment in favor of Defendant Mid-Continent
Casualty Company (“Mid-Continent”) on the Feasters’ claims for breach of
contract, breach of the duty of good faith and fair dealing, and violations of the
Texas Insurance Code and the Texas Deceptive Trade Practices Act. Because
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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the district court correctly concluded that Mid-Continent has no duty to
indemnify the Feasters under the terms of their commercial general liability
(“CGL”) policy, we AFFIRM the judgment of the district court.
I. Factual & Procedural Background
The Feasters purchased a home built and owned by Kingwood Estate
Homes, L.L.C. (“Kingwood”), on January 25, 2006. During the construction of
the property, Kingwood was insured under a CGL policy with Mid-Continent.
The policy was renewed annually and expired in April of 2009.
The Feasters started noticing structural and cosmetic damage to their
home after purchasing the property. They attributed these defects to
“foundation deflection,” a problem with the home’s foundation, and in 2012,
they filed suit against Kingwood, among others, in Texas state court for
violations of the Texas Deceptive Trade Practices Act, negligence, breach of
warranty, and fraud. Kingwood forwarded the lawsuit to Mid-Continent,
seeking to invoke the CGL’s duty to defend. Mid-Continent demurred, citing
several policy exclusions.
Kingwood did not answer the suit, and default judgment was entered
against Kingwood. The judgment found Kingwood liable for damage to the
property arising from Kingwood’s negligent supervision and construction of the
property. The court held Kingwood liable for $305,130.00 in actual and
consequential damages.
When the Feasters were unable to collect against Kingwood, they
obtained a turnover order granting them Kingwood’s interest in the Mid-
Continent CGL policy. The Feasters then sued Mid-Continent in state court
on a variety of claims stemming from Mid-Continent’s refusal to indemnify
Kingwood. Mid-Continent removed the suit to federal court. Subsequently,
the parties filed-cross motions for summary judgment. Mid-Continent argued
that the damages incurred by the Feasters were not covered due to the CGL’s
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policy exclusions and therefore Mid-Continent had no duty to indemnify. On
January 13, 2015, the district court granted Mid-Continent’s motion and
denied the Feasters’, reasoning that the “your work” exclusion applied. The
Feasters timely appealed the district court’s grant of summary judgment in
favor of Mid-Continent. 1
II. Discussion
1. Standard of Review
We review the district court’s grant of summary judgment de novo,
applying the same standard as the district court. Performance Autoplex II Ltd.
v. Mid-Continent Cas. Co., 322 F.3d 847, 853 (2003). Summary judgment is
warranted “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” FED.
R. CIV. P. 56(a). While we draw all reasonable inferences in favor of the non-
moving party, a party cannot defeat summary judgment with “conclusory
allegations, unsubstantiated assertions, or only a scintilla of evidence.” Turner
v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (citation and
internal quotation marks omitted). We may affirm summary judgment on any
legal ground raised before the district court. Performance Autoplex, 322 F.3d
at 853.
The parties agree that Texas insurance law governs this dispute. See id.
Texas courts construe insurance policies using the same rules of interpretation
applicable to contracts generally. See Nat’l Union Fire Ins. Co of Pittsburgh v.
CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). If an insurance contract
“can be given a definite and certain legal meaning, then it is not ambiguous.”
1 The Feasters incorrectly maintain that the district court granted summary judgment
on the grounds that the damages to the Feasters’ property did not occur during the CGL’s
policy period. While this initially served as the district court’s basis for granting summary
judgment, the district court vacated that opinion and later held that summary judgment was
warranted because the “your work” exclusion applies.
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Performance Autoplex, 322 F.3d at 854. If a provision is ambiguous, the policy
is interpreted in favor of the insured. Id. While “the insured carries the burden
to establish the insurer’s duty to indemnify by presenting facts sufficient to
demonstrate coverage,” the burden is on the insurer to prove that an exclusion
precludes coverage. Nat’l Union Fire Ins. Co of Pittsburgh v. Puget Plastics
Corp., 532 F.3d 398, 401, 404 (5th Cir. 2008). The duty to indemnify is invoked
“based on the ‘actual facts’ brought out in the underlying action. Thus, an
insurer’s duty to indemnify typically can be resolved only after the conclusion
of the underlying action.” VRV Dev. L.P. v. Mid-Continent Cas. Co., 630 F.3d
451, 459 (5th Cir. 2011). Because the underlying case does not always resolve
all questions relevant to the scope of coverage, we also look to the facts
developed in the evidence before the district court. See Puget Plastics Corp.,
532 F.3d at 404.
2. “Your Work” Exclusion
“A CGL policy generally protects the insured when his work damages
someone else’s property. The ‘your work’ exclusion prevents a CGL policy from
morphing into a performance bond covering an insured’s own work.” Wilshire
Ins. Co. v. RJT Const., LLC, 581 F.3d 222, 226 (5th Cir. 2009). Mid-Continent
argues, and the district court held, that the “your work” provision of the CGL
policy bars coverage for the Feasters’ damage. 2
The provision at issue here excludes coverage for: “Property damage to
your [Kingwood’s] work arising out of it or any part of it and included in the
2 The Feasters appear to argue that the “your work” provision is unconscionable.
However, they fail to cite to any authority supporting their argument. As such, we consider
this argument abandoned for being inadequately briefed. See L & A Contracting Co. v. S.
Concrete Servs., Inc., 17 F.3d 106, 113 (5th Cir. 1994) (citation omitted); FED. R. APP. P.
28(a)(8)(a). The Feasters likewise argue that the policy is a “farce” because Mid-Continent
did not exercise ordinary care, presumably in rejecting the Feasters’ claim for
indemnification. Because we conclude that the “your work” exclusion applies, we reject this
argument.
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products-completed operations hazard.” The policy defines “your work,” in
part, as “[w]ork or operations performed by you or on your behalf.” Or, as the
Texas Supreme Court interpreted it, the “your work” provision “generally
excludes coverage for ‘property damage’ to the insured’s completed work.” 3
On appeal, the Feasters argue that the “your work” exclusion is
inapplicable because there was no damage to Kingwood’s work. They maintain
that heaving soil—due to Kingwood’s inadequate preparation of the lot—
eventually caused problems with the property’s foundation, which in turn
caused cosmetic and structural damage. The Feasters argue that the house
itself, and not the soil, was Kingwood’s work. 4
In Wilshire Ins. Co., we assessed whether a “your work” exclusion
applied when an insured was hired by a homeowner to repair the foundation
of a house. 581 F.3d at 226. While we concluded that the “your work” exclusion
“precludes coverage for the cost of repairing [the insured’s] own work, the
foundation,” we clarified that the exclusion did “not exclude coverage for
damage to other property resulting from the defective work,” such as walls and
ceilings. Id.
Unlike in Wilshire, Kingwood was contracted to build the entire house,
not merely repair the foundation. The Texas Supreme Court has held that in
the context of the “your work” exception, a “homebuilder’s work extend[s] to
the entire house.” Id. at 226 (interpreting Lamar Homes, Inc. v. Mid-Continent
Cas. Co., 242 S.W.3d 1, 11 (Tex. 2007)). The underlying state court documents,
3 To the extent the Feasters argue the “you work” provision is ambiguous, we disagree.
The policy’s language is clear, and the Feasters’ “[m]ere disagreement over the interpretation
of [the] provision does not make the provision ambiguous or create a question of fact.”
Performance Autoplex, 322 F.3d at 854 (citing D.E.W., Inc. v. Local 93, Laborers’ Int’l Union
of N. Am., 957 F.2d 196, 199 (5th Cir.1992) (interpreting Texas law)).
4This argument is somewhat illogical as Kingwood could be liable only if it did
something wrong. If forces outside its control caused the harm, there would be no liability.
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coupled with the Feasters’ own statements and expert’s report, make clear that
constructing the foundation, which includes preparation of the soil, was part
of Kingwood’s responsibilities in constructing the house. See Stoner v.
Thompson, 578 S.W.2d 679, 684 (Tex. 1979) (“A default judgment admits facts
which are properly alleged.”). For instance, in the Feasters’ state court suit
against Kingwood for damage to their property, the Feasters explicitly argued
that “foundation deflection of a substantial and unacceptable degree” was due
to Kingwood’s negligent construction and supervision of subcontractors, and
the Feasters obtained a judgment to that effect. Moreover, the Feasters
concede on appeal that preparation of the soil was Kingwood’s responsibility.
They note that the “highly plastic soil . . . expanded [due to] an excess of water
resulting from poor lot preparation by Kingwood and its subcontractors.” The
Feasters’ expert also stated that the inadequacies with the soil were due to
Kingwood’s failure to abide by “the engineers [sic] plans and specifications”
when constructing the foundation. See Am. Home Assurance Co. v. Cat Tech
L.L.C., 660 F.3d 216, 222 (5th Cir. 2011) (citing with approval Eulich v. Home
Indemnity Co., 503 S.W.2d 846, 849 (Tex. Civ. App.—Dallas 1974) (noting that
“[l]iability for damage to the building resulting from [the failure to] comply
with specifications is exactly the type of liability which the [exclusion] was
evidently intended to exclude”)). As such, there is no dispute that the
preparation of the soil, the foundation, and the house itself constituted
Kingwood’s work. The Feasters do not appear to contest whether the
“products-completed operations hazard” requirement is satisfied. 5
5Even if the Feasters produced evidence that the property damage arose prior to the
Feasters’ purchase of the property, this fact dispute would not be material. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.”). As the district court noted, the CGL policy includes a separate provision
excluding coverage for “[p]roperty damage to . . . [p]roperty you own.” Kingwood owned the
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Accordingly, we conclude that the district court did not err in applying
the “your work” exception in this case, and we AFFIRM the judgment of the
district court.
property prior to the Feasters’ purchase of the property. Thus, damage that occurred during
construction would not be covered under this exemption.
7