Coregis Insurance Co v. Guillory

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 6, 2008
No. 07-30844 Charles R. Fulbruge III
Clerk
COREGIS INSURANCE CO
Plaintiff-Appellant
v.
SCHOOL BOARD OF ALLEN PARISH; TANYA GUILLORY; JODY
BENOIT; JOHN DOE, ON BEHALF OF JANE DOE
Defendants-Appellees
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 2:06-CV-353
Before JONES, Chief Judge, and WIENER and CLEMENT, Circuit Judges.
PER CURIAM:*
Plaintiff insurer challenges the district court’s dismissal of its duty-to
indemnify claim under the Declaratory Judgment Act. We vacate the dismissal
and remand to the district court for reconsideration.
BACKGROUND
On August 31, 2005, John Doe filed a petition individually and on behalf
of his minor daughter, Jane Doe, in a Louisiana state court. The petition alleges,
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
No. 07-30844
inter alia, that Tanya Guillory and Jody Benoit, both employees of Allen Parish
School Board (“APSB”), served alcohol to and committed sexual battery upon
Jane Doe, who was a minor at the time of the incident.1 The petition named
Guillory, Benoit, and APSB as defendants.
In March 2006, Coregis Insurance Company (“Coregis”) filed this action
in federal court2 seeking a declaration that the general liability policy it issued
to APSB provides no coverage for the acts complained of in the state court
lawsuit, and that no defense is owed to any of the defendants in that suit.
Coregis then moved for summary judgment on the basis that the policy’s
exclusion of liability for damages that arise out of “criminal acts” precluded
defense or indemnity. John Doe filed a motion to dismiss, arguing the case was
not ripe because the Louisiana state court action had not yet determined
whether APSB was liable.
The district court denied Coregis’s motion and dismissed its claims with
prejudice. It concluded that the policy clearly indicated that Coregis was
required to defend against John Doe’s claims unless, according to the policy, “the
‘Insured’ has been convicted of or pleads no contest or nolo contendere to a felony
arising out of such conduct,” meaning “criminal acts.” Because Coregis produced
no evidence that Guillory or Benoit pleaded to or were found guilty of any
“criminal acts,” Coregis’s duty-to-defend claim was dismissed.
1
The state lawsuit alleges that Jane Doe was 17 years of age or younger on the date
of the filing of the petition, which was August 31, 2005. That indicates Jane Doe was 14 years
old or younger when the alleged injury occurred on April 27, 2002. It is undisputed that
Guillory and Benoit were over the age of 18 at the time of the alleged injury.
2
The complaint named Guillory, Benoit, APSB, and John Doe as defendants.
2
No. 07-30844
The district court also concluded that because the policy does not define
“criminal acts,” whether a criminal act occurred was a disputed issue of material
fact precluding summary judgment. And when Coregis failed to produce
evidence that Guillory and Benoit were charged with or convicted of criminal
acts, the district court dismissed Coregis’s duty-to-indemnify claim.3 Coregis
now appeals only the dismissal of its duty-to-indemnify claim.
DISCUSSION
Coregis argues that the term “criminal acts” in the policy is unambiguous
and, because Guillory and Benoit clearly committed criminal acts, the policy
exclusion must be applied. APSB argues that the district court properly
concluded that the term “criminal acts” was ambiguous. John Doe filed a brief
arguing that the case was not ripe for review because the underlying state court
action had not proceeded to discovery.
We review a district court’s grant of summary judgment de novo. Morris
v. Equifax Info. Servs., LLC, 457 F.3d 460, 464 (5th Cir. 2006). Summary
judgment is appropriate when “there is no genuine issue as to any material fact
and . . . the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
56(c). The district court’s interpretation of an insurance contract is a question
of law also subject to de novo review. Canutillo Indep. Sch. Dist. v. Nat’l Union
Fire Ins. Co., 99 F.3d 695, 700 (5th Cir. 1996).
The policy states:
This insurance does not apply to liability for “damages” which are
in whole or in part caused by or arising out of: . . .
3
The court declined to reach the issue whether the “criminal acts” exclusion was void
under Louisiana public policy, as argued by APSB.
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6. Fraud, dishonesty, criminal acts or omissions, or unlawful profit
or advantage. [Coregis] will, however, defend the “Insured” against
such claims, unless, the “Insured” has been convicted of or pleads no
contest or nolo contendere to a felony arising out of such conduct.
(Emphasis added.) We are asked to determine whether Guillory’s and Benoit’s
conduct, as pleaded by John Doe, amounted to “criminal acts” as that term is
defined in the policy. As noted above, the district court concluded this was a
disputed issue of material fact. But the district court later dismissed Coregis’s
duty-to-indemnify claim when Coregis produced no evidence that Guillory and
Benoit were either charged with or convicted of “criminal acts.” Essentially, the
district court granted summary judgment for APSB by concluding the policy’s
“criminal acts” exclusion is triggered only when the insured is actually charged
or convicted of a “criminal act.”
Here, the district court simply assumed that “criminal acts” required the
presence of a charge or conviction, but provided no analysis as to why that is the
case. Although the issue whether the “criminal acts” exclusion requires an
actual charge or conviction appears at first glance a fairly straightforward
analysis, courts across the nation have struggled to apply these exclusions. See
generally COUCH ON INSURANCE § 101:25; see also Littlefield v. Acadia Ins. Co.,
392 F.3d 1, 8 n.9 (1st Cir. 2004) (concluding “criminal acts” exclusion was
unambiguous, but noting the possibility that the exclusion may be ambiguous
in numerous other factual contexts). Louisiana appears to be no exception. See,
e.g., Hooper v. State Farm Mut. Auto. Ins. Co., 782 So. 2d 1029, 1033 (La. Ct.
App. 2001) (“criminal acts” exclusion “clear and unambiguous”); Young v. Brown,
658 So. 2d 750, 754 (La. Ct. App. 1995) (“criminal acts” exclusion ambiguous and
void against public policy in some contexts); see also Gills v. Brown, 672 So. 2d
4
 No. 07-30844
1093, 1097–98 (La. Ct. App. 1996) (discussing Young and “criminal acts”
exclusion), vacated by Gills v. Brown, 675 So. 2d 274 (La. 1996).
In light of the difficulty courts have had interpreting “criminal acts”
exclusions, as well as the fact-specific nature of the inquiry, further factual
development at the state level is essential before a court decides whether Coregis
must indemnify APSB, and this will prevent the federal court from rendering an
unnecessary advisory opinion. The latter concern is compelling here because the
parties have failed to provide any legal support for their interpretation of the
relevant policy exclusion.
In Northfield Insurance Co. v. Loving Home Care, Inc., 363 F.3d 523,
536–37 (5th Cir. 2004), we concluded, in a similar declaratory judgment action,
that the district court properly ruled that the duty-to-indemnify issue was not
ripe when the underlying state court lawsuit had not been completed. In such
a circumstance, Texas law requires that after the district court concludes that
the insurer has a duty to defend, the indemnity issue is nonjusticiable pending
resolution of the liability suit.4 Louisiana appears to apply the same rule as
Texas.5
4
Generally, Texas law considers the duty-to-indemnify question justiciable only after
the underlying suit is concluded, unless “the same reasons that negate the duty to defend
likewise negate any possibility the insurer will ever have a duty to indemnify.” Farmers Tex.
County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997) (emphasis omitted).
5
See Quinlan v. Liberty Bank & Trust Co., 575 So. 2d 336, 348–49 (La. 1990)
(concluding duty to indemnify in a liability insurance contract arises when liability attaches);
Mossy Motors, Inc. v. Cameras Am., 898 So. 2d 602, 607 (La. Ct. App. 2005) (stating that duty
to indemnify issue was premature and nonjusticiable when liability had not yet been
established in underlying litigation); see also Nat’l Union Fire Ins. Co. v. St. Bernard Parish
Gov’t, 2004 WL 877379, at *2 (E.D. La. Apr. 21, 2004) (concluding that duty to indemnify issue
in declaratory judgment action was not ripe under Louisiana law when liability had not been
established in underlying state court lawsuit).
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No. 07-30844
Based on the reasoning of Loving Home Care, the district court erred by
addressing the merits of Coregis’s duty to indemnify. Lacking any facts in the
summary judgment record, neither we nor the district court can discern whether
criminal acts were actually perpetrated, nor can the federal courts properly
interpret and apply on a vacant record the complicated body of case law relating
to these exclusions. Consequently, we must vacate the district court’s dismissal.
On remand, the district court should consider staying Coregis’s suit or
dismissing it without prejudice until the underlying state court action is
resolved. See Loving Home Care, 363 F.3d at 536–37 (noting that under the
Declaratory Judgment Act, district courts have discretion to refuse to rule on the
duty to indemnify pending completion of the underlying litigation).
For these reasons, the judgment of the district court is VACATED and the
case is REMANDED.
6