Ooida Risk Retention Group, Inc. v. Williams, 08-10381.

• Decision Date: 12 August 2009
• Docket Number: No. 08-10381.,08-10381.
• Citation: 579 F.3d 469
• Parties: OOIDA RISK RETENTION GROUP, INC., Plaintiff-Appellant, v. Derrick Shamoyne WILLIAMS, Defendant, v. Edith Knighton, as next friend of B.L.W. a minor child; Terra Moses-White, as next friend of B.L.W. a minor child; N'Gai Browning, as next friend of T.M. Jr., a minor child, Intervenors-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

579 F.3d 469

OOIDA RISK RETENTION GROUP, INC., Plaintiff-Appellant, v. Derrick Shamoyne WILLIAMS, Defendant, v. Edith Knighton, as next friend of B.L.W. a minor child; Terra Moses-White, as next friend of B.L.W. a minor child; N'Gai Browning, as next friend of T.M. Jr., a minor child, Intervenors-Appellees.

No. 08-10381.

United States Court of Appeals, Fifth Circuit.

August 12, 2009.

Thomas W. Fee, Rebecca Elizabeth Bell, Timothy Russell George, Fee, Smith, Sharp & Vitullo, Dallas, TX, Plaintiff-Appellant.

Julia Fields Pendery, Dallas, TX, for Intervenors-Appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before REAVLEY, BARKSDALE and GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This appeal arises out of litigation pertaining to a single-vehicle accident that killed Tony Moses ("Moses"). Moses was the sole proprietor of Slim Shady Express and a commercial motor carrier. At the time of the accident that killed Moses, Moses' tractor-trailer was being driven by Derrick Shamoyne Williams. Ooida Risk Retention Group, Inc., Moses' insurer, brought an action in federal district court to obtain a declaration that it owed no duty to defend or indemnify Williams in any underlying negligence suit against Williams. Moses' family ("Intervenors") intervened in the federal action, and the district court granted summary judgment to Intervenors. Ooida contends on appeal that the district court erred in finding that no exclusion applied to deny coverage under Moses' insurance policy. Because we find that Moses and Williams are statutory "employees" under the Motor Carrier Safety Act, and that the "Fellow Employee" exclusion thus applies to deny coverage, we reverse the district court and render summary judgment in favor of Ooida.

I

Ooida issued a standard Commercial Motor Carrier Policy (the "Policy") to Slim Shady Express, a federally regulated interstate motor carrier under the Motor Carrier Safety Act. The Policy provided $1 million in liability coverage for tractor-trailer rigs owned and operated by Moses.

At the time of the accident, Williams was driving the tractor-trailer rig on an interstate in Florida. Williams lost control of the rig, causing it to overturn and roll down an embankment. Moses, who was occupying the rig's sleeper berth, was crushed and killed. Moses' family members filed a negligence suit in state court against Williams. Ooida provided a defense to Williams under a reservation of rights.

Ooida subsequently filed a declaratory judgment action in federal district court, seeking a judicial declaration that it owed no duty under the Policy to defend or indemnify Williams in the underlying negligence suit. Moses' family successfully intervened, and the parties filed cross motions for summary judgment. The district court denied Ooida's motion and granted Intervenors' motion for summary judgment, holding that Ooida had a duty to defend Williams in the underlying suit. The court found that Williams was an "insured" under the Policy, and that the "Employee Indemnification" and "Fellow Employee" exclusions contained in the Policy did not operate to preclude coverage, as the court could not determine whether Williams was an "employee" of Moses. The district court also found that the "occupant hazard endorsement" was void because it conflicted with Texas's statutory requirements for minimum liability insurance. The court concluded that the Ooida's liability was the full policy limit of $1,000,000. Ooida timely appealed.

II

We review the grant of a motion for summary judgment de novo, applying the same standards as the district court. Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 212 (5th Cir.2009). The insurer's duty to defend is a question of law that is also reviewed de novo. Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 599 (5th Cir.2006). Summary judgment is proper when, viewing the evidence in light most favorable to the non-moving party, the record reflects that no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c).

As the parties agree, Texas law governs this insurance dispute. In Texas, the insurer's duty to defend is governed by the "eight corners rule," which holds that the duty to defend is determined solely from the terms of the policy and the pleadings of the third-party claimant. JHP Dev., Inc., 557 F.3d at 212 (citing GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex.2006)). Only these two documents are ordinarily relevant to the duty-to-defend inquiry. Graham, 473 F.3d at 599-600. "[A] plaintiff's factual allegations that potentially support a covered claim are all that is needed" to invoke the duty to defend; the duty to defend does not rely on the truth or falsity of the allegations. JHP Dev., Inc., 557 F.3d at 212 (citing GuideOne, 197 S.W.3d at 310). If the underlying pleading alleges facts that may fall within the scope of coverage, the insurer has a duty to defend; if, on the other hand, the pleading only alleges facts excluded by the policy, there is no duty to defend. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 528 (5th Cir.2004).

While the duty to defend depends on the allegations in the pleadings, the "duty to indemnify is triggered by the actual facts that establish liability in the underlying lawsuit." Columbia Cas. Co. v. Ga. & Fa. RailNet, Inc., 542 F.3d 106, 111 (5th Cir.2008) (internal quotation marks and citations omitted). Accordingly, an insurer's duty to defend and duty to indemnify are distinct, as in general the underlying suit must be resolved in order to determine the latter. Id.

III

Ooida argues that several policy exclusions apply to deny coverage and thus to foreclose its duty to defend.

A

As an initial matter, the parties' arguments rely on differing assumptions about who is the "insured" under the plan. Ooida contends that the "insured" is Slim Shady Express, and that Moses is thus an "employee" of the named insured. Intervenors, however, argue that Williams, as the party against whom the claim is asserted, is the "insured." We must thus first look to the relevant policy provisions to determine who is the "insured" party for purposes of coverage.

Under "Who is an insured," the Policy states:

The following are "insureds":

a. You for any covered "auto".

b. Anyone else while using with your permission a covered "auto" you own, hire or borrow ...

The Policy's definition of "insured" also contains a clause that states that "coverage applies separately to each insured seeking coverage or against whom a claim or suit is brought." In Commercial Standard Insurance Co. v. American General Insurance Co., 455 S.W.2d 714 (Tex.1970), the Texas Supreme Court addressed a similar "severability of interests" clause providing that the term "the insured" was used severally in the insurance contract.¹ The court held that:

"The insured" does not refer to all insureds; rather, the term is used to refer to each insured as a separate and distinct individual apart from any and every other person who may be entitled to coverage thereunder. When a claim is made against one who is an "insured" under the policy, the latter is "the insured," for the purpose of determining the company's obligations with respect to such claim.

Id. at 721. The court thus found that the term "the insured" in the exclusions referred to the specific individual seeking coverage, not all insureds collectively. The severability of interests clause in the policy issued by Ooida accomplishes the same result as that discussed in Commercial Standard, giving effect to the separate coverage promised each insured by using the term "the insured" to refer to the particular insured seeking coverage. See also King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 188 (Tex.2002) (finding that "separation of insureds" provision required claim to be viewed from standpoint of particular insured against whom injured party's claim is made, and analyzing issue as though party sued were sole insured.)

Intervenors are thus correct that, given the "severability of interests" or "separation of insureds" clause in the policy, we must treat the "insured" as the party against whom the claim is asserted — in this case, Williams, as the permissive driver of the truck. Contrary to Ooida's contention that establishing Williams as the permissive driver of Moses' truck requires us to look outside the eight corners of the pleadings, we may safely infer Williams' status from the allegations in the complaint that Williams was driving the truck while Moses was asleep in the sleeping cab. See Graham, 473 F.3d at 601 (considering "any reasonable inferences that flow from the facts alleged" in the underlying complaint.)

Keeping in mind that Williams, not Moses or Slim Shady Express, is the policy's "insured," we now turn to the applicability of the exclusions.

B

We turn to the "Fellow Employee Exclusion" of the policy, which excludes coverage for:

"Bodily injury" to any fellow "employee" of the "insured" arising out of and in the course of the fellow "employee's" employment or while performing duties related to the conduct of your business.

The application of the "separation of insureds" clause renders Williams, not Moses, the "insured" for purposes of coverage. Because Moses is the party to whom "bodily injury" occurred, in order for the Fellow Employee Exclusion to apply, we must find both Williams and Moses to be statutory "employees."

The Motor Carrier Safety Act and its attendant regulations govern the meaning of terms under insurance policies designed to comply with federal requirements for motor carriers. See Consumers County Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362, 366 (5th Cir.2002). 49 C.F.R. § 390.5, enacted pursuant to the authority of the Motor Carrier Safety Act, defines "employee" as:

[A]ny individual, other than an employer,...