Knife River Corp.-S. v. Zurich Am. Ins. Co.
| Decision Date | 08 March 2022 |
| Docket Number | Civil Action 3:21-CV-1344-B |
| Parties | KNIFE RIVER CORPORATION - SOUTH, Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY and AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court is Defendants Zurich American Insurance Company and American Guarantee and Liability Insurance Company (hereinafter “Zurich, ” “AGLIC, ” and collectively “the Insurers”)'s Motion to Dismiss for Failure to State a Claim (Doc. 17). For the following reasons, the Court DENIES the Insurers' motion.
This is a declaratory judgment action about whether an insurer must indemnify a third party who settled claims arising out of a single-car accident. Plaintiff Knife River Corporation-South (“KRC”) “contract[ed] with the Texas Department of Transportation (‘TxDOT') to complete road work” on a stretch of highway. Doc. 14, Am. Compl., ¶ 8. “KRC subcontracted with AWP to provide and place required signage” and “with Tex Op Construction, LP (‘Tex Op') for milling operations in which the existing road surface is removed.” Doc. 17, Defs.' Mot., 3. AWP and Tex Op's Subcontract Agreements with KRC required each to defend and indemnify KRC for certain claims. Doc. 14, Am. Compl., ¶ 10.
On March 19, 2019, a driver in the construction area lost control of his car, crashed, and was seriously injured. Id. ¶ 7; Doc. 17, Defs.' Mot., 3. The driver and his wife sued in Texas state court (the “Underlying Lawsuit”) claiming that KRC, AWP, and Tex Op (collectively, the “Underlying Defendants”) “were negligent with respect to [the] road work . . . [leading] to the accident causing [the driver's] personal injuries.” Doc. 14, Am. Compl., ¶¶ 6-7. Specifically, the couple's petition in the state case (the “Underlying Petition”) alleged that:
the [Underlying] Defendants failed to properly backfill, slope, or otherwise make safe an excessive height difference at the edge of a roadway travel lane that occurred during the course of the road work, and failed to properly, compliantly, and/or sufficiently warn the traveling public of the unreasonable dangers posed by the uneven lane edge and other roadway hazards requiring signage.
Eventually, KRC “settled the Underlying Lawsuit . . . and [the couple] dismissed their claims against all [Underlying Defendants].” Id. ¶ 10. “KRC contends that its settlement . . . was made necessary because of, and arose out of, in whole or in part, the negligence of . . . AWP and Tex Op, both of which . . . [had] agreed to defend and indemnify KRC against claims just like those asserted in the Underlying Lawsuit.” Id. “Tex Op and its insurers” subsequently “reached an agreement with KRC concerning their defense and indemnification obligations, ” but “AWP and its insurers Zurich and AGLIC have not.” Id. ¶ 11.
KRC filed suit in this court seeking a declaratory judgment “that Zurich . . . owes defense and indemnity to KRC on Zurich's policy issued to AWP. . . either because KRC is an additional insured or because Zurich is required to honor AWP's contractual indemnity obligations to KRC, and that the applicable excess policy issued by . . . AGLIC . . . also provides coverage to KRC in connection with the claims at issue.” Id. at 1. “KRC also asserts a breach[-]of[-]contract claim against [the Insurers].” Id. The Insurers now move to dismiss the claims. Doc. 17, Defs.' Mot. They argue that “KRC's additional-insured claim is prohibited under Texas's anti-indemnity statute” because KRC “seeks reimbursement from its subcontractor's insurers for a settlement of KRC's own negligence-not the negligence of [AWP].” Id. at 1. They also argue that the breach-of-contract and duty-to-indemnify claims are not ripe. See id. at 17-21. The motion has been fully briefed and the Court considers it below.[2]
A party may move for judgment on the pleadings after the pleadings are closed and when doing so would not delay the trial. Fed.R.Civ.P. 12(c). A Rule 12(c) motion “is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Hebert Abstract Co., Inc. v. Touchstone Props., Ltd., 914 F.2d 74, 76 (5th Cir. 1990). A motion for judgment on the pleadings is reviewed under the same standard as a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Guidry v. Am. Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007) (citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)).
In analyzing a motion to dismiss for failure to state a claim under Rule 12(b)(6), “[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d at 205 (quotations omitted). A Rule 12(b)(6) motion to dismiss should be granted only if the complaint does not include “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). However, a complaint will not suffice “if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (quoting Twombly, 550 U.S. at 557).
The Court's review under Rule 12(b)(6) is limited to a plaintiff's allegations in the complaint and to those documents attached to the complaint or to the defendant's motion to dismiss to the extent that those documents are referred to in the complaint and are central to the plaintiff's claims.[3] Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). If other evidence is considered, “the motion to dismiss must be treated as a motion for summary judgment under Rule 56(c).” Id.
The Texas Anti-Indemnity Statute, found at Subchapter C of Chapter 151 of the Texas Insurance Code, “applies to a construction contract for a construction project for which an indemnitor is provided or procures insurance subject” to Chapter 151. Tex. Ins. Code Ann. § 151.101(a).
Section 151.102 voids indemnity provisions in a qualifying construction contract or collateral agreement if the provision:
[R]equires an indemnitor to indemnify, hold harmless, or defend a party, including a third party, against a claim caused by the negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee, its agent or employee, or any third party under the control or supervision of the indemnitee, other than the indemnitor or its agent, employee, or subcontractor of any tier.
Id. § 151.102. “This section allows a party to indemnify another in limited circumstances, but it disallows indemnification for claims caused by the party seeking indemnification.” Maxim Crane Works, L.P. v. Zurich Am. Ins. Co., 392 F.Supp.3d 731, 739 (S.D. Tex. 2019).
Section 151.104(a) similarly voids additional-insured provisions “to the extent that [such a provision] requires or provides coverage the scope of which is prohibited under this subchapter for an agreement to indemnify.” Tex. Ins. Code Ann. § 151.104(a).[4] So, Texas law:
[P]rohibits additional-insured coverage when the insurance contract requires the insuring party to provide coverage of a claim caused by the Additional Insured's ‘negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee,' or those of the additional-insured's agent, employee, or third party under its control or supervision [other than the indemnitor or its agent, employee, or subcontractor of any tier].
Under Texas law, “courts are to construe insurance policies ‘using ordinary rules of contract interpretation.'” Landmark Am. Ins. Co. v. Lonergan L. Firm, P.L.L.C., 809 Fed.Appx. 239, 241 (5th Cir. 2020) (quoting Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 257 (Tex. 2017)).
“In Texas, an insurer's duty to defend is distinct from, and broader than, its duty to indemnify.” Armstrong Moving & Storage, Inc. v. Am. Cas. Co., 2012 WL 12850261, at *3 (W.D. Tex. Dec. 18, 2012) (citing Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 527-28 (5th Cir. 2004)). Determination of the duty to defend begins under the eight-corners rule, which compares the allegations in the plaintiff's petition, taken as true, with the insurance policy's provisions. Monroe Guar. Ins. Co. v. BITCO Gen. Ins. Corp., 2022 WL 413940 at *3, *6 (Tex. Feb. 11, 2022); Armstrong Moving & Storage, 2012 WL 12850261, at *3 (citing GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)). “[I]n case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in [the] insured's favor.” Id. () ...
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