Fielder Rd. Baptist Church v. Guideone Elite

• Decision Date: 20 May 2004
• Docket Number: No. 2-02-231-CV.,2-02-231-CV.
• Citation: 139 S.W.3d 384
• Parties: FIELDER ROAD BAPTIST CHURCH, Appellant, v. GUIDEONE ELITE INSURANCE COMPANY f/k/a Preferred Abstainers Insurance Company, Appellee.
• Court: Texas Court of Appeals

139 S.W.3d 384

FIELDER ROAD BAPTIST CHURCH, Appellant, v. GUIDEONE ELITE INSURANCE COMPANY f/k/a Preferred Abstainers Insurance Company, Appellee.

No. 2-02-231-CV.

Court of Appeals of Texas, Fort Worth.

May 20, 2004.

Rehearing Overruled June 17, 2004.

Appeal from the 153rd District Court, Tarrant County, Kenneth C. Curry, J Hoodenpyle & Lobert, P.C., Jerry R. Hoodenpyle, James E. Lobert, Arlington, for Appellant.

Brown, Herman, Dean, Wiseman, Liser & Hart, LLP, Sandra C. Liser, Grant Liser, for Appellee.

PANEL B: HOLMAN, GARDNER, and WALKER, JJ.

OPINION

ANNE GARDNER, Justice.

Introduction

In this declaratory judgment case, Fielder Road Baptist Church ("FRBC") appeals the trial court's determination that GuideOne Elite Insurance Company f/k/a Preferred Abstainers Insurance Company ("GuideOne") has no duty to defend FRBC in an underlying lawsuit. We reverse and render in part and remand in part.

Factual and Procedural Background

GuideOne issued a commercial general liability insurance policy to FRBC. The policy included sexual misconduct liability coverage:

We agree to cover your legal liability for damages because of bodily injury, excluding any sickness or disease, to any person arising out of sexual misconduct which occurs during the policy period. We shall have the right and duty to investigate any claim ... and to defend any suit brought against you seeking damages, even if the allegations of the suit are groundless, false or fraudulent, and we may make any settlement we deem expedient.

FRBC is a named insured under the policy. The policy became effective on March 31, 1993 and expired on March 31, 1994.

On June 6, 2001, Jane Doe filed a sexual misconduct lawsuit against FRBC and Charles Patrick Evans. In her pleadings, Jane Doe alleged that "[a]t all material times herein from 1992 to 1994, Evans was employed as an associate youth minister and was under Fielder Road's direct supervision and control when he sexually exploited and abused Plaintiff." FRBC demanded that GuideOne defend it in the lawsuit and indemnify it for any judgment or settlement. GuideOne agreed to defend FRBC, subject to its reservation of rights to a determination of coverage under the policy.

On September 18, 2001, GuideOne then filed this declaratory judgment action seeking a construction of the policy and a declaration that it had no duty to defend or indemnify FRBC in the underlying sexual misconduct lawsuit. GuideOne also sought discovery of extrinsic evidence outside the pleadings and the insurance policy. The trial court denied FRBC's motions objecting to the discovery requests concerning Evans's employment history with FRBC. FRBC then filed what the parties refer to as a "stipulation" that Evans ceased working for FRBC before the GuideOne policy went into effect.¹

GuideOne and FRBC each filed motions for summary judgment. The trial court granted GuideOne's motion for summary judgment, denied FRBC's motion for summary judgment, and rendered a declaratory judgment declaring that GuideOne had no duty to defend FRBC in the underlying sexual misconduct case. The trial court stated in the declaratory judgment that it considered the stipulation concerning Evans's employment in reaching its decision. In three issues on appeal, FRBC contends that the trial court erred by granting GuideOne's motion for summary judgment, denying FRBC's motion for summary judgment, and denying FRBC's motions opposing discovery.

Extrinsic Evidence

FRBC's major complaint on appeal is that the trial court erred by considering evidence outside the pleadings and policy in determining whether GuideOne had a duty to defend FRBC. GuideOne responds that extrinsic evidence may be considered to determine whether there is a duty to defend when coverage under the insurance policy, as opposed to liability, is challenged.

Whether an insurer of a liability policy is obligated to defend the insured is a question of law to be decided by the court. State Farm Lloyds v. Kessler, 932 S.W.2d 732, 736 (Tex.App.-Fort Worth 1996, writ denied). An insurer's duty to defend is determined solely by the allegations in the pleadings and the language of the insurance policy. Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997); Kessler, 932 S.W.2d at 736. This is sometimes referred to as the "eight corners" or "complaint allegation rule." King v. Dallas Fire, 85 S.W.3d 185, 187 (Tex.2002). Under this rule, the allegations in the pleadings are considered in light of the policy provisions without reference to the truth or falsity of such allegations and without reference to what the parties know or believe the true facts to be. Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex.1965). Thus, the duty to defend is not affected by facts ascertained before suit or developed in the process of litigation, or by the ultimate outcome of the suit. Argonaut S.W. Ins. Co. v. Maupin, 500 S.W.2d 633, 636 (Tex.1973); Heyden, 387 S.W.2d at 24. If a petition does not allege facts within the scope of coverage, an insurer is not legally required to defend a suit against its insured. King, 85 S.W.3d at 187. If a petition alleges facts that, if taken as true, potentially state a cause of action within the terms of the policy, the insurer has a duty to defend. Heyden, 387 S.W.2d at 26. When applying the eight corners rule, we give the allegations in the petition a liberal interpretation, focus on the factual allegations that show the origin of the damages rather than on the legal theories alleged, and resolve all doubts concerning the duty to defend in favor of the insured. King, 85 S.W.3d at 187; Nat'l Union Fire, 939 S.W.2d at 141.

Extrinsic evidence is permitted to show no duty to defend only in very limited circumstances. Westport Ins. Corp. v. Atchley, Russell, Waldrop & Hlavinka, L.L.P., 267 F.Supp.2d 601, 621 (E.D.Tex.2003); Tri-Coastal Contractors, Inc. v. Hartford Underwriters Ins. Co., 981 S.W.2d 861, 863 n. 1 (Tex.App.-Houston [1st Dist.] 1998, pet. denied). Those limited circumstances include the following: (1) whether a person has been excluded from any coverage; (2) whether the property in suit has been excluded from any coverage; and (3) whether the policy exists. Westport Ins. Corp., 267 F.Supp.2d at 621; Tri-Coastal Contractors, Inc., 981 S.W.2d at 863 n. 1; Cook v. Ohio Cas. Ins. Co., 418 S.W.2d 712, 715-16 (Tex.Civ.App.-Texarkana 1967, no writ) (holding extrinsic evidence allowed to show automobile involved in accident was excluded from coverage); Int'l Serv. Ins. Co. v. Boll, 392 S.W.2d 158, 161 (Tex.Civ.App.-Houston 1965, writ ref'd n.r.e.) (holding extrinsic evidence allowed to show person involved in accident was excluded from policy). These fundamental coverage issues must be capable of being determined by a readily ascertained fact that does not engage the truth or falsity of any material allegation in the underlying petition. See Westport Ins. Corp., 267 F.Supp.2d at 621; King, 85 S.W.3d at 187 ("The court should not imagine factual scenarios that might trigger coverage or read facts into the pleadings."); Argonaut S.W. Ins. Co., 500 S.W.2d at 635 (holding duty to defend triggered if pleadings raise a potential for coverage"); Tri-Coastal Contractors, Inc., 981 S.W.2d at 863 (holding court cannot question merits of underlying suit). Courts have held that extrinsic evidence also may be considered to determine the duty to defend where the terms of the policy are ambiguous, or where the petition in the underlying suit does not allege facts sufficient for a determination of whether those facts, even if true, are covered by the policy. Kessler, 932 S.W.2d at 736; State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 450 (Tex.App.-Corpus Christi 1992, writ denied).

GuideOne asserts that Jane Doe artfully pleaded facts to bring her claims within the policy's coverage, and asserts that it can use the stipulation regarding Evans's employment by FRBC as extrinsic evidence to rebut those allegations and thus show there is no coverage. We disagree because the circumstances of this case do not fall within any of the recognized exceptions to the eight corners rule.

In Gulf Chemical and Metallurgical Corporation v. Associated Metals & Minerals Corp., former steel mill employees sued toxic chemical manufacturers and suppliers, claiming that the chemicals caused them injuries from 1946 to 1990. 1 F.3d 365, 367 (5th Cir.1993). Gulf Chemical, one of the suppliers, then sued its insurers for failing to defend it in the toxic tort case. Id. ISLIC had provided Gulf Chemical with liability coverage from January 17, 1985 to January 17, 1986. Id. ISLIC argued that the court could consider extrinsic evidence that Gulf Chemical did not ship chemicals to the steel mill until January 20, 1986, which was three days after its policy expired. Id. at 370-71. The Fifth Circuit held that the extrinsic evidence concerning whether the alleged act actually occurred during the policy period could not be considered because it related to liability, not to a fundamental coverage issue. Id. at 371.

It is possible to discern from Jane Doe's pleading that coverage is potentially implicated. Jane Doe unambiguously pleaded that from 1992 to 1994 she was sexually assaulted by Evans, who she claims was employed "at all relevant times herein" as an associate youth minister by FRBC and was under FRBC's direct supervision and control when he committed the sexual assaults. GuideOne insured FRBC for sexual misconduct claims alleged to have occurred between March 31, 1993 and March 31, 1994. Importantly, the stipulation concerning the dates that Evans was employed by FRBC pertains to FRBC's liability for his alleged conduct, and is not solely limited to coverage. See Gulf Chem., 1 F.3d at 371. Even when extrinsic evidence concerning the duty to defend is allowed, the court may consider only evidence pertaining to coverage, and it cannot consider facts...