KB Home v. Employers Mutual Casualty Company, No. 2-06-383-CV (Tex. App. 1/31/2008)
| Decision Date | 31 January 2008 |
| Docket Number | No. 2-06-383-CV.,2-06-383-CV. |
| Parties | KB HOME F/K/A KAUFMAN AND BROAD HOME CORPORATION, KAUFMAN AND BROAD LONE STAR, L.P., KB HOME LONE STAR, L.P., KAUFMAN AND BROAD OF TEXAS, LTD., AND TOM BANNON, Appellants v. EMPLOYERS MUTUAL CASUALTY COMPANY, Appellee. |
| Court | Court of Appeals of Texas |
Appeal from the 141st District Court of Tarrant County.
Panel B: LIVINGSTON, WALKER, and McCOY, JJ.
In three issues, Appellants KB Home f/k/a Kaufman and Broad Home Corporation, Kaufman and Broad Lone Star, L.P., KB Home Lone Star, L.P., Kaufman and Broad of Texas, Ltd., and Tom Bannon (collectively, "KB") assert that the trial court erred by granting Appellee Employers Mutual Casualty Company's ("EMC") motion for summary judgment and denying KB's motion for partial summary judgment. We affirm.
In 2001, over 230 homeowners from the Arlington neighborhood of Southridge Hills filed or intervened in two lawsuits against KB. In the underlying litigation, the various homeowners alleged that the homes they purchased were developed on property previously utilized by the United States government for munitions testing. As a result of the testing, an unknown number of unexploded bombs existed within the property. The homeowners asserted that KB developed the property for residential use despite its knowledge of the property's prior use and the presence of the unexploded bombs. The homeowners further alleged that KB failed to disclose the information and misrepresented the property's prior use. The suit eventually landed in arbitration before the American Arbitration Association.
Kaufman and Broad Lone Star, L.P. was the named insured under an EMC policy effective from March 26, 1999, to March 26, 2000. It reads in part the following:
Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy. . . .
The word "insured" means any person or organization qualifying as such under WHO IS AN INSURED (SECTION II).
. . . .
SECTION I — COVERAGES
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 insurance applies. We will have the right and duty to defend the insured against 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 insurance does not apply. . . .
. . . .
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and
(2) The "bodily injury" or "property damage" occurs during the policy period.
. . . .
SECTION V — DEFINITIONS
. . . .
12. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
. . . .
15. "Property damage" means:
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it, or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
In February 2005 and October 2005, KB notified EMC of the homeowners' claims and demanded that EMC defend KB in the suits by the homeowners. EMC declined to defend KB.
Litigation between EMC and KB ensued, and in its first amended original petition, EMC pleaded that "EMC does not believe that it is under any duty to defend or indemnify Defendants in connection with the underlying lawsuit and prays for a declaration that it owes no such duties as a matter of law." KB filed their counterclaims against EMC and sought a declaration compelling EMC's compliance with its contract, i.e., defense against the homeowners' lawsuits, for damages resulting from EMC's bad faith, and for damages resulting from EMC's alleged violations of articles 21.21 and 21.55 of the Texas Insurance Code; KB moved for partial summary judgment on its requested declaration of EMC's duty to defend against the homeowners' lawsuits and on its alleged violations of article 21.55 of the insurance code resulting from alleged wrongful refusal or failure to pay the claim.
EMC followed with its own motion for summary judgment, seeking a declaration that it did not owe a duty of defense or indemnity to its insured or other claimants and also requested summary judgment in its favor on all other counterclaims.
The trial court initially granted KB's partial motion for summary judgment and denied EMC's motion. EMC requested clarification of the trial court's order and also filed a motion for reconsideration and for new trial. On June 29, 2006, the trial court withdrew its initial order, and it issued a new order granting EMC's motion for summary judgment on September 20, 2006.
Because of concerns about the finality of the trial court's order, we ordered an appeal to this court abated pending clarification of the trial court's intentions with regard to the disposition of KB's counterclaims. On January 22, 2007, the trial court signed a final order granting summary judgment to EMC and denied KB's motion for partial summary judgment. This appeal followed.
A defendant who conclusively negates at least one essential element of a cause of action is entitled to summary judgment on that claim. IHS Cedars Treatment Ctr. of Desoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004); see TEX. R. CIV. P. 166a(b), (c). When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. IHS Cedars Treatment Ctr., 143 S.W.3d at 798.
When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review both parties' summary judgment evidence and determine all questions presented. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). The reviewing court should render the judgment that the trial court should have rendered. Id.
In its third issue, KB asserts that the trial court erred by denying its motion for partial summary judgment regarding its assertion that each of the named parties in this appeal was an "insured" under the EMC policy.
The named insured on the Declaration Page of the policy is "Kaufman & Broad Lone Star, L.P. dba Kaufman & Broad of Dallas."2 Section II of the EMC policy contains the provisions pertinent to our discussion and reads in part as follows:
SECTION II — WHO IS AN INSURED
a. An individual . . .
b. A partnership or joint venture . . .
c. A limited liability company . . .
d. An organization other than a partnership, joint venture or limited liability company you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds but only with respect to their liability as stockholders.
a. Your "employees," other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) . . . but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business . . .
. . . .
No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations. [Emphasis supplied.]
The KB entities have asserted that all of them were being sued in the underlying lawsuit by the homeowners for the actions of the named insured (a) in that the underlying plaintiffs' allegations did not differentiate purported misconduct amongst the various defendants and (b) through the underlying plaintiffs' allegations of alter ego, single business enterprise, and respondeat superior.3 Therefore, they argue that the EMC policy should cover all of the KB entities, not just the named insured. They assert that this is a correct policy interpretation because (a) the policy does not prohibit insured status for unnamed persons or organizations for the conduct of a named insured and (b) because this concept is indirectly supported by caselaw.
We recognize that application of the much-discussed "eight corners" rule requires that we give the allegations in the pleadings a liberal interpretation in favor of the insured. See Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). However, a plain reading of the previously recounted policy provisions does not include non-named entities, such as the other defendants in this matter, as insureds. It does include executive officers, employees, and stockholders under certain circumstances, but it specifically excludes persons and organizations that were past partnerships, joint ventures, or limited liability companies not shown to be named insureds. The fact that one non-insured entity is purportedly sued for the actions of another insured entity does not magically metamorphose a non-insured into an insured. This is a logic-challenged idea.
Alter ego and single business enterprise are separate and distinct theories. George Grubbs Enters., Inc. v. Bien, 881 S.W.2d 843, 859 (Tex. App.-Fort Worth 19...
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