Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, No. C-438

CourtSupreme Court of Texas
Writing for the CourtCAMPBELL
PartiesFIDELITY & GUARANTY INSURANCE UNDERWRITERS, INC., Petitioner, v. James Richard McMANUS, Respondent.
Docket NumberNo. C-438
Decision Date31 March 1982

Page 787

633 S.W.2d 787
FIDELITY & GUARANTY INSURANCE UNDERWRITERS, INC., Petitioner,
v.
James Richard McMANUS, Respondent.
No. C-438.
Supreme Court of Texas.
March 31, 1982.
Rehearing Denied June 30, 1982.

Page 788

Vinson & Elkins, Michael G. Terry, Houston, for petitioner.

Funderburk & Funderburk, Larry Funderburk and Douglas S. Sandage, Houston, for respondent.

CAMPBELL, Justice.

This is an appeal from a declaratory judgment granted to Fidelity & Guaranty Insurance Underwriters, Inc. The trial court held Fidelity had no duty to defend the insured, James Richard McManus, in a suit alleging negligent entrustment. The Houston (1st Dist.) Court of Civil Appeals reversed the trial court judgment and rendered judgment that Fidelity had a duty to defend the insured. 615 S.W.2d 877. We reverse the court of civil appeals judgment.

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 a Texas Homeowner's Policy issued by Fidelity. The policy provides:

Coverage D-Personal Liability

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage, and the company shall defend any suit against the insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient.

Exclusions-coverage D shall not apply;

4.a. to the ownership, maintenance, operation, use, loading or unloading of;

(3) any recreational motor vehicle owned by any insured, if the bodily injury or property damage occurs away from the resident premises; ....

Fidelity sought a declaratory judgment that it had no duty to defend James McManus. Fidelity contends coverage is excluded because the allegations by Garcia against McManus arose out of the "ownership, maintenance, use, loading or unloading of ... any recreational motor vehicle owned by any insured."

The jury found the McManus trail bike was a recreational motor vehicle. There is no dispute that the accident occurred away from the McManus' premises. The district court rendered judgment in favor of Fidelity.

The court of civil appeals held negligent entrustment does not involve the "ownership, maintenance, operation, use, loading or unloading" of a vehicle by the insured. Negligent entrustment, the court held, is a separate and distinct cause of action involving the permission to use not the use of a vehicle. 615 S.W.2d at 881.

An insurer is required to defend only those cases within the policy coverage. Furthermore, the insurer is entitled to rely on the plaintiff's allegations in determining whether the facts are within the coverage. If the petition only alleges facts excluded by the policy, the insurer is not required to defend. See Heyden Newport Chem. Ins. Co. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 24-25 (Tex.1965); Maryland Cas. Co. v. Moritz, 138 S.W.2d 1095, 1097 (Tex.Civ.App.-Austin 1940, writ ref'd).

The issue before this Court is whether, under the facts here, negligent entrustment arises out of the ownership, maintenance,

Page 789

operation, use, loading or unloading of a recreational motor vehicle away from the residence. We hold it does and; thus, coverage under the homeowner's policy is excluded.

This issue has never been decided by this Court. However, the court of civil appeals as well as McManus and Fidelity considered two lines of cases in foreign jurisdictions addressing the problem. The first line of cases holds the insurance company is obligated under the basic homeowner's policy to defend the insured in a negligent entrustment action. 1 These cases hold negligent entrustment is a distinct and specific cause of action. Liability is founded upon the act of negligent entrustment rather than the "use" of the vehicle. Representative of the decisions upholding coverage is Upland Mutual Ins., Inc. v. Noel, 214 Kan. 145, 519 P.2d 737 (1974). The Kansas Supreme Court held even though the immediate cause of the injury and death was the operation of the automobile, the basis of the action was the...

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137 practice notes
  • Yancey v. Floyd West & Co., No. 2-87-263-CV
    • United States
    • Court of Appeals of Texas
    • July 28, 1988
    ...text." Id. An insurer is required to defend only those cases within the policy coverage. Fidelity & Guar. Ins. Underwriters v. McManus, 633 S.W.2d 787, 788 (Tex.1982). Pleadings and terms of the policy determine an insurer's duty to defend. Heyden Newport Chemical v. Southern General Ins. C......
  • National American Ins. Co. v. Breaux, No. CIV.A. 1:03CV1378.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • January 6, 2005
    ...at 141; American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex.1994); Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 (Tex.1982). An insurer also does not have a duty to defend when the complaint makes allegations which, if proven, would place the plaint......
  • American Physicians Ins. Exchange v. Garcia, No. D-1239
    • United States
    • Supreme Court of Texas
    • March 9, 1994
    ...coverage, an insurer is not legally required to defend a suit against its insured. Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 The first time any pleading was filed against Garcia alleging malpractice during APIE's policy period was the day of trial, July 29, 19......
  • Westport v. Atchley, Fussell, Waldrop & Hlavinka, No. 5:01 CV 280.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • April 10, 2003
    ...a subjective element, and the Court distinguished it from an exclusion clause in Fidelity & Guaranty Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787 (Tex.1982). Admittedly, the King court did not directly address whether the trial court should have examined extrinsic evidence to determin......
  • Request a trial to view additional results
138 cases
  • Yancey v. Floyd West & Co., No. 2-87-263-CV
    • United States
    • Court of Appeals of Texas
    • July 28, 1988
    ...text." Id. An insurer is required to defend only those cases within the policy coverage. Fidelity & Guar. Ins. Underwriters v. McManus, 633 S.W.2d 787, 788 (Tex.1982). Pleadings and terms of the policy determine an insurer's duty to defend. Heyden Newport Chemical v. Southern General Ins. C......
  • National American Ins. Co. v. Breaux, No. CIV.A. 1:03CV1378.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • January 6, 2005
    ...at 141; American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex.1994); Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 (Tex.1982). An insurer also does not have a duty to defend when the complaint makes allegations which, if proven, would place the plaint......
  • American Physicians Ins. Exchange v. Garcia, No. D-1239
    • United States
    • Supreme Court of Texas
    • March 9, 1994
    ...coverage, an insurer is not legally required to defend a suit against its insured. Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 The first time any pleading was filed against Garcia alleging malpractice during APIE's policy period was the day of trial, July 29, 19......
  • Westport v. Atchley, Fussell, Waldrop & Hlavinka, No. 5:01 CV 280.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • April 10, 2003
    ...a subjective element, and the Court distinguished it from an exclusion clause in Fidelity & Guaranty Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787 (Tex.1982). Admittedly, the King court did not directly address whether the trial court should have examined extrinsic evidence to determin......
  • Request a trial to view additional results

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