Centennial Ins. Co. v. Hartford Acc. and Indem. Co.

• Decision Date: 08 August 1991
• Docket Number: No. B14-90-860-CV,B14-90-860-CV
• Citation: 821 S.W.2d 192
• Court: Texas Court of Appeals
• Parties: CENTENNIAL INSURANCE COMPANY, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Appellee. (14th Dist.)

Page 192

821 S.W.2d 192

CENTENNIAL INSURANCE COMPANY, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Appellee.

No. B14-90-860-CV.

Court of Appeals of Texas Houston (14th Dist.).

Aug. 8, 1991.

Julia J. Knight, Houston, for appellant.

William K. Luyties, Houston, for appellee.

Before PAUL PRESSLER, JUNELL and ELLIS, JJ.

OPINION

JUNELL, Justice.

Centennial Insurance Company ("Centennial"), plaintiff in the trial court, appeals from a summary judgment in favor of Hartford Accident and Indemnity Company ("Hartford"), defendant in the trial court. In four points of error, Centennial contends the trial court erred in granting Hartford's motion for summary judgment and denying Centennial's motion for summary judgment.

Eve Lawson died as the result of injuries received when her automobile was struck by one driven by Susan Webb, who was then acting within the course and scope of her employment with World Courier Metro Services, Inc. ("World Courier"). Webb was driving her own automobile at the time of the collision. Lawson's wrongful death beneficiaries brought suit against Webb and World Courier alleging that Webb was negligent in the operation of her vehicle and that World Courier was liable under the doctrine of respondeat superior. World Courier was covered under two separate insurance policies provided by their general agent. Centennial provided their automobile liability protection and Hartford was the insurer under a standard comprehensive general liability ("CGL") policy. The CGL policy contained the following exclusion:

This insurance does not apply:

(b) to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of

(1) any automobile or aircraft owned or operated by or rented or loaned to any insured, or

(2) any other automobile or aircraft operated by any person in the course of his employment by any insured....

Centennial undertook the defense of its insured, World Courier, pursuant to terms of the automobile liability policy. The plaintiffs subsequently amended their petition to include allegations of negligent hiring and negligent entrustment by World Courier, and demand was made upon Hartford to provide a defense against these claims. Hartford responded to Centennial and World Courier by letter in which the insurer reserved its rights under the policy exclusion and indicated it would conduct an investigation of the claim.

Hartford engaged the services of an attorney to defend the insured, investigated the circumstances of the accident and conducted legal research on the issue of its liability for the auto collision under the terms of the CGL policy. As a result of its efforts Hartford concluded the company had no coverage and withdrew from the representation of World Courier. Centennial subsequently settled the suit for $600,000.00 and brought this action to compel Hartford's pro rata participation in the settlement and payment of reasonable attorneys' fees.

Centennial and Hartford made the following stipulations:

(1) the accident was caused by the negligence of Susan Webb;

(2) Webb was an employee of World Courier, Inc. and was acting within the course of her employment at the time of the accident; and

(3) World Courier, Inc. was negligent in employing Webb and retaining her in its employment when it knew or should have known that she was incompetent and unfit to be driving for a delivery courier service.

Centennial and Hartford agree that the only issue for decision is whether the above quoted policy exclusion applies in this case. If it does, there is no coverage, no duty to defend and no liability on the part of Hartford to pay anything to Centennial. If the exclusion does not apply, Hartford is liable.

Hartford relies on the decision of the Texas Supreme Court in Fidelity and Guaranty Insurance Underwriters, Inc. v. McManus, 633 S.W.2d 787 (Tex.1982). In that case Fidelity had issued a Homeowner's Policy to Harold McManus. The policy provided liability coverage for bodily injury but contained an exclusion stating that bodily injury coverage shall not apply to the ownership, maintenance, operation, use, loading or unloading of any recreational motor vehicle owned by any insured, if the bodily injury occurs away from the resident premises.

Harold McManus purchased a trail bike for his son James. James allowed his friend, Craig Wooley, to use the bike. While using the bike, Wooley collided with a bike ridden by Daniel Garcia. Garcia sued Craig Wooley and James McManus, alleging that James McManus negligently entrusted the trail bike to Wooley. James McManus was an insured under the Homeowner's Policy.

Fidelity brought suit against James McManus seeking a declaratory judgment that Fidelity had no duty to defend McManus and that coverage was excluded under the terms of the policy. The supreme court agreed, holding the policy exclusion applied and there was no coverage and no duty to defend. The court noted that in Texas, to recover under negligent entrustment, the plaintiff must prove: (1) entrustment by the owner or custodian; (2) to a driver the owner knows or should know is a reckless or incompetent driver; and (3) negligent operation of the vehicle proximately causing damage to a third party. The supreme court stated:

Whether the entrustment is to an insured or non-insured, the plaintiff must still show negligent operation or use by the entrustee as an element of the cause of action. In other words, there would have been no accident in this case without the negligent operation or use of a recreational motor vehicle. See Cooter v. State Farm Fire & Cas. Co., 344 So.2d 496, 497 (Ala.1977). The homeowner's policy excludes coverage for claims arising out of the ownership, use, or operation of a recreational motor vehicle. Fidelity is under no duty to defend McManus under facts excluded from coverage under the policy. See Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 24-25 (Tex.1965).

633 S.W.2d at 790.

Centennial tries to distinguish between the negligent hiring theory of recovery and the negligent entrustment theory of recovery. Centennial fails in this...