Emcasco Ins. v. American Intern. Specialty Lines
| Decision Date | 27 January 2006 |
| Docket Number | No. 04-11345.,04-11345. |
| Citation | 438 F.3d 519 |
| Parties | EMCASCO INSURANCE COMPANY, Plaintiff-Appellant, v. AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Thomas Daryl Caudle (argued), Mateer & Shaffer, Dallas, TX, for Plaintiff-Appellant.
Sidney H. Davis, Jr. (argued), Daniel Lee Gus, Touchstone, Bernays, Johnston, Beall & Smith, Dallas, TX, for Defendant-Appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before GARWOOD, SMITH and DEMOSS, Circuit Judges.
EMCASCO Insurance Company ("EMCASCO") filed a subrogation suit against American International Specialty Lines Insurance Company ("AISLIC") to recover under AISLIC's commercial general liability policy for monies EMCASCO paid in defense and settlement of an underlying suit against the two insurers' mutual insured. After limited discovery, both parties moved for summary judgment. The district court granted AISLIC's motion, denied EMCASCO's, and dismissed the subrogation suit with prejudice. Finding the need for further proceedings, we vacate and remand.
In February 2001, Jaime Langston was driving down a paved, public country road with her young son when she skidded on a patch of slick mud, clay, and/or sand. The car swerved off the road, striking a tree. Langston suffered serious injuries, and her son died at the scene.
In April 2002, the Langstons sued Wilson-Riley, Inc. ("Wilson-Riley"),1 the operator of a sand pit located immediately adjacent to the accident site, in state court on the premise that Wilson-Riley, as part of its operation at the sand pit, hauled sand from the pit in trucks that it owned and operated. The original complaint alleged that because of heavy rains preceding the accident, Wilson-Riley's trucks tracked mud onto the roadway when exiting a driveway leading away from the sand pit and that the mud on the road was the producing cause of the accident.
Wilson-Riley and SLS had two different insurance policies covering their activities at the sand pit. Specifically, EMCASCO issued a commercial auto liability policy to Wilson-Riley and SLS, and AISLIC issued both companies a commercial general liability policy (the "CGL policy"). EMCASCO's commercial auto liability policy provides, in relevant part:
SECTION II—LIABILITY COVERAGE
A. COVERAGE
We will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.
AISLIC's CGL policy, meanwhile, provides coverage as follows:
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this Coverage applies. We will have the right and duty to defend any suit seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for bodily injury or property damage to which this Coverage does not apply. We may, at our discretion, investigate any occurrence and settle any claim or suit that may result.
AISLIC's policy also contains the following exclusion:
2. Exclusions
This insurance does not apply to:
. . .
g. Aircraft, Auto or Watercraft
Bodily injury or property damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and loading or unloading.
About seven weeks after the accident but a year before the Langstons sued EMCASCO hired defense counsel Mike Winchester to defend Wilson-Riley. In doing so, EMCASCO asserted its reservation of rights in defending the suit. In April 2002, AISLIC hired its own defense counsel, Chad Parker, to represent Wilson-Riley's interests in the Langston suit. AISLIC also issued Wilson-Riley a reservation of rights letter in which AISLIC advised that, in its view, the existence of the auto exclusion provision in the CGL policy precluded coverage in the Langstons' suit. Specifically, AISLIC stated:
While the plaintiff's pleadings are ambiguous, we expect that it will come out during the course of this litigation that the only involvement of Wilson-Riley, Inc., was the fact that its "autos," as defined by the policy, were going into and out of the sand pit/premises in question for some weeks proceeding [sic] the accident, and liability for this would fall squarely under the above exclusion.... It appears that there will be no coverage for the damages claimed by the plaintiff by virtue of the above policy provisions.
After hiring Parker, AISLIC agreed, in January 2003, to settle the Langstons' claims against SLS for $200,000. After the settlement, counsel for EMCASCO and Wilson-Riley's personal counsel notified AISLIC that they believed the claims the Langstons had remaining against Wilson-Riley still invoked AISLIC's coverage.
It is at this point that the parties disagree as to the extent of the work performed by Parker in AISLIC's defense of Wilson-Riley. EMCASCO maintains that, after the SLS settlement, Parker never reappeared in the suit in Wilson-Riley's defense. Meanwhile, AISLIC argues that at the time it secured the settlement between the Langstons and SLS, the discovery and pleading deadlines relating to Wilson-Riley had passed under the terms of the docket control order. AISLIC acknowledges that Parker did little or no work on behalf of Wilson-Riley after that time but insists that there was little substantive work to be done aside from actually trying the case.
EMCASCO thereafter demanded that AISLIC share equally in the cost of settling the case on Wilson-Riley's behalf. AISLIC refused, citing the Langstons' pleadings, the evidence it assumed would be introduced at trial, and statements made by the Langstons' counsel as eliminating any liability that AISLIC might be exposed to under its CGL policy.
In effect, AISLIC maintained that Wilson-Riley only faced liability stemming from EMCASCO's auto liability policy. The last version of the Fourth Amended Complaint, however, circulated after SLS settled, alleges that the unpaved exit that Wilson-Riley created from the sandpit to the public road "caused a washing of mud onto the road during rainy weather" and that the "exit drive was not paved until after the accident." It also includes a separate claim for negligence per se because the defendant "obstructed the road adjacent to its worksite, which is a violation of Section 42.03 of the Texas Penal Code."
AISLIC did offer to contribute $20,000 to a potential settlement in Wilson-Riley's defense. EMCASCO refused the offer because AISLIC conditioned the money on the agreement that the parties would not later attempt to re-allocate Wilson-Riley's settlement costs. EMCASCO advised AISLIC that it would settle the claims against Wilson-Riley without AISLIC's participation. EMCASCO then obtained a release of all claims against Wilson-Riley by settling with the Langstons for $350,000.
EMCASCO sued AISLIC for subrogation, seeking to recover all or part of the $350,000 it had paid the Langstons in settlement. After limited discovery, EMCASCO and AISLIC simultaneously filed cross-motions for summary judgment.
The district court granted AISLIC's motion, finding that the Langstons' damages were covered by EMCASCO's auto liability policy and were explicitly excluded by AISLIC's CGL policy. It held that the washing of the mud from the unpaved roadway could not have been a "separate" and "independent" cause of the accident, which would have indicated that AISLIC's policy also covered the accident. The court determined that the mud/clay tracked onto the public road by Wilson-Riley "necessarily involved the use of motor vehicles, triggering coverage under its auto policy with EMCASCO." EMCASCO appeals.
We review a summary judgment de novo, applying the same standard as did the district court. Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 890 (5th Cir.2003). Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R.CIV.P. 56(c). We view the evidence in a light most favorable to the non-movant. Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir.1997). To avoid summary judgment, the non-movant must go beyond the pleadings and come forward with specific facts indicating a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is appropriate, however, if the non-movant "fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548.
EMCASCO maintains the district court erred in interpreting the auto exclusion clause in AISLIC's CGL policy, which precludes coverage for damages arising out of the "ownership, maintenance, use or entrustment" of any auto owned or operated by the insured, to eliminate AISLIC's liability for monies recovered in the Langstons' suit. EMCASCO argues that the recovered damages did not arise out of the use of a vehicle; it claims the clause is susceptible to more than one reasonable interpretation and thus, under Texas law, should be construed to provide coverage for any "not unreasonable" construction. EMCASCO insists that the district court erred by not addressing the coverage issue against the backdrop formed by Texas law regarding the construction of insurance contracts.
AISLIC, meanwhile, argues that, for three reasons, this court should not defer...
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