Gilbane Bldg. Co. v. Admiral Ins. Co., 10–20817.

• Citation: 664 F.3d 589
• Decision Date: 12 December 2011
• Docket Number: No. 10–20817.,10–20817.
• Parties: GILBANE BUILDING COMPANY, Plaintiff–Appellee, v. ADMIRAL INSURANCE COMPANY, Defendant–Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

664 F.3d 589

GILBANE BUILDING COMPANY, Plaintiff–Appellee,

v.ADMIRAL INSURANCE COMPANY, Defendant–Appellant.

No. 10–20817.

United States Court of Appeals, Fifth Circuit.

Dec. 12, 2011.

Mary Alice Parsons (argued), Houston, TX, for Plaintiff–Appellee.

Nathan Montgomery Rymer (argued), Laura Wilson Slay (argued), Rymer, Moore, Jackson & Echols, Houston, TX, for Defendant–Appellant.

Patrick J. Wielinski, Cokinos, Bosien & Young, P.C., Irving, TX, for Amici Curiae.Appeal from the United States District Court for the Southern District of Texas.

Before WIENER, CLEMENT, and ELROD, Circuit Judges.

JENNIFER WALKER ELROD, Circuit Judge:

This insurance coverage case arises out of an underlying personal injury lawsuit brought by Michael Parr against Gilbane Building Company. Gilbane, a general contractor, sought defense and indemnification from Admiral Insurance Company based on an insurance policy held by Empire Steel Erectors, a subcontractor. On cross-motions for summary judgment, the district court determined that Admiral owed a duty to defend and indemnify. We REVERSE the summary judgment on the duty to defend and AFFIRM the judgment on the duty to indemnify.

I. Background.

The material facts of this case are undisputed. Parr sustained injuries on a construction site while climbing down a ladder. He sued Gilbane, the general contractor operating the construction project, and Baker Concrete, the company responsible for installing and maintaining the ladders at the site.¹ He did not sue his employer, Empire Steel. He alleged that recent rainstorms had caused the construction site to accumulate mud and that Gilbane had been negligent in failing to keep the workplace clean.

Gilbane requested that Admiral Insurance defend and indemnify it as an additional insured under the commercial general liability (CGL) policy that Empire Steel had obtained from Admiral. The CGL policy contains the following provisions that are relevant here:

SCHEDULE

Name of Additional Insured Person(s) or Organization(s):

Any person or organization that is an owner of real property or personal property on which you are performing ongoing operations, or a contractor on whose behalf you are performing ongoing operation, but only if coverage as an additional insured is required by written contract or written agreement that is an “insured contract,” and provided that the “bodily injury,” “property damage” or “personal & advertising injury” first occurs subsequent to execution of the contract or agreement ....

A. Section II—Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury,” “property damage” or “personal & advertising injury” caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above ....

9. “Insured contract” means: ...

f. That part of any other contract or agreement pertaining to your business ... under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization, provided the “bodily injury” or “property damage” is caused, in whole or in part, by you or those acting on your behalf. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.

In other words, the CGL policy provides coverage to additional insureds for their own or their agents' acts or omissions, so long as Empire Steel had previously assumed the liability of the potential additional insured in a written contract.

Gilbane requested coverage from Admiral, claiming that it qualified as an additional insured under the CGL policy. Gilbane based its claim on the Trade Contractor Agreement (TCA) between it and Empire Steel, according to which Empire Steel agreed to secure insurance coverage for Gilbane as an additional insured. Empire also agreed to “indemnify and hold harmless” Gilbane and all of its agents for any losses caused by Empire, regardless of whether those losses were caused in part by Gilbane.

Admiral denied coverage under the policy to Gilbane for reasons not relevant here. Parr and Gilbane eventually settled the lawsuit, and Gilbane filed an action for declaratory judgment and breach of contract against Empire and Admiral, seeking a declaration that Admiral had a duty to defend and indemnify it. The parties filed competing motions for summary judgment. The district court granted Gilbane's motion as to the duty to defend but initially denied it as to the duty to indemnify because of outstanding factual issues. Later, the district court held a trial by written submission on stipulated facts. It found that Parr had tripped while climbing down a ladder carrying an extension cord, and his feet had gotten tangled in the cord. The court determined that Admiral had a duty to indemnify because a jury would have found Parr or Empire at least 1% responsible for Parr's injuries. Admiral appealed.

II. Standard of Review.

We review a district court's grant of summary judgment de novo, applying the same legal standards that the district court applied, and we view the evidence in the light most favorable to the nonmoving party. Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 561–62 (5th Cir.2010). We affirm “only if there is no genuine issue of material fact and one party is entitled to prevail as a matter of law.” Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 488 (5th Cir.2007). We review the district court's findings of fact for clear error. One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 262 (5th Cir.2011).

III. Interpreting Insurance Policies in Texas.

“In this diversity action, we must apply Texas law as interpreted by Texas state courts.” Mid–Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir.2000). Our primary obligation is to make an Erie guess as to how the Texas Supreme Court would decide the question before us. Am. Int'l Specialty Lines Ins. Co., 620 F.3d at 564. “When making an Erie guess, our task is to attempt to predict state law, not to create or modify it.” SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 442 (5th Cir.2008) (internal quotation marks omitted). We consider Texas Supreme Court cases that, “while not deciding the issue, provide guidance as to how the Texas Supreme Court would decide the question before us.” Am. Int'l Specialty Lines Ins. Co., 620 F.3d at 564. Moreover, while “the decisions and dicta of the Texas Supreme Court weigh more heavily in our Erie analysis,” we also consider decisions of the intermediate appellate courts in determining how the Texas Supreme Court would decide this issue. Id. at 566. We are bound by our own precedent interpreting Texas law unless there has been an intervening change in authority. Lee v. Frozen Food Express, Inc., 592 F.2d 271, 272 (5th Cir.1979); see, e.g., OneBeacon Ins. Co. v. Don's Bldg. Supply, Inc., 496 F.3d 361, 364–65 (5th Cir.2007).

Under Texas law, an insurer may have two responsibilities relating to coverage—the duty to defend and the duty to indemnify. See D.R. Horton–Tex., Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 743 (Tex.2009). The Texas Supreme Court has explained that the two duties are distinct, and they are to be decided separately. Id. “Two documents determine an insurer's duty to defend—the insurance policy and the third-party plaintiff's pleadings in the underlying litigation, which the court must review ‘without regard to the truth or falsity of those allegations.’ ” Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299, 309 (5th Cir.2010) (quoting GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.2006)). This is known as the eight-corners rule. Id. The duty to indemnify, on the other hand, is “a matter dependent on the facts and circumstances of the alleged injury-causing event, [and] parties may introduce evidence during coverage litigation to establish or refute the duty to indemnify.” D.R. Horton–Tex., 300 S.W.3d at 741. With these principles in mind, we now consider Admiral's duties to defend and indemnify.

IV. The Duty to Defend.

In order to decide whether Admiral owed Gilbane a duty to defend under the policy, we must consider two issues: (1) whether Gilbane qualifies as an additional insured under the policy, and (2) whether, under Texas's strict eight-corners rule, the facts alleged in the underlying Parr lawsuit are sufficient to trigger Admiral's duty to defend Gilbane. An affirmative answer to both is required to affirm the district court's determination that Admiral had a duty to defend Gilbane. Gilbane bears the burden on each of these issues. Canutillo Indep. Sch. Dist. v. Nat'l Union Fire Ins. Co., 99 F.3d 695, 701 (5th Cir.1996).

A. Additional Insured Status.

Initially, we must address whether Gilbane qualifies as an additional insured under the CGL policy, which is issued solely to Empire as a named insured. According to the policy, a party is an additional insured if coverage “is required by written contract or written agreement that is an ‘insured contract.’ ” “Insured contract” is a commonly used term of art in Texas insurance law, usually defined by the insurance policy to mean a separate contract that acts as insurance. See Gilbert Tex. Const., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 124–25 (Tex.2010). Here, the policy defines an insured contract as one where the named insured “assume[s] the tort liability” of the additional insured. The district court found that the TCA, which required Empire to secure insurance coverage for Gilbane, qualified as an insured contract.

Admiral argues that the TCA is not an insured contract because its indemnity provision is unenforceable under Texas law, and therefore Empire never actually assumed...