LCS Corr. Servs., Inc. v. Lexington Ins. Co.

• Decision Date: 13 March 2014
• Docket Number: Civil Action No. 2:13–CV–287.
• Citation: 7 F.Supp.3d 678
• Parties: LCS CORRECTIONS SERVICES, INC., Plaintiff, v. LEXINGTON INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

7 F.Supp.3d 678

LCS CORRECTIONS SERVICES, INC., Plaintiff

v.LEXINGTON INSURANCE COMPANY, et al., Defendants.

Civil Action No. 2:13–CV–287.

United States District Court, S.D. Texas, Corpus Christi Division.

Signed March 13, 2014.

R. Brent Cooper, Timothy Micah Dortch, Cooper Scully PC, Dallas, TX, Christopher David Lindstrom, Cooper Scully PC, Houston, TX, for Plaintiff.

Ellen Lewis Van Meir, Courtney Clegg Kasper, Thompson Coe Cousins and Irons, Dallas, TX, Kathryn Snapka, The Snapka Law Firm, Joe A. Flores, Attorney at Law, Corpus Christi, TX, for Defendant.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

NELVA GONZALES RAMOS, District Judge.

This is a dispute regarding insurance coverage for a claim made against Plaintiff, LCS Corrections Services (LCS) for the death of a state prisoner while in LCS custody. Before the Court are LCS's Motion for Summary Judgment (D.E. 19) and Lexington Insurance Company's (Lexington's) Cross–Motion for Summary Judgment (D.E. 21). At issue is whether Lexington owes LCS the duty to defend the underlying litigation predicated on 42 U.S.C. § 1983 and the Eighth and Fourteenth Amendments for deliberate indifference to the decedent's serious medical needs and violation of due process. For the reasons set out below, LCS's motion (D.E. 19) seeking partial summary judgment on the duty to defend is GRANTED and Lexington's cross-motion (D.E. 21) seeking full summary judgment on all of LCS's claims is DENIED.

FACTS

According to “Plaintiff's Fifth Amended Complaint” (D.E. 19–3) in the underlying case (Garcia action), LCS had a system-wide policy of withholding psychotropic medications from inmates in its custody. When Mario A. Garcia (Decedent) went into LCS custody, he was taking the prescription medication benzodiazepine. Pursuant to its policy, LCS did not permit its employees or medical personnel to administer benzodiazepine to Decedent. Thus Decedent went without this medication. Despite Decedent's seizures and headaches during incarceration for which he was hospitalized, and despite medical direction to resume administration of benzodiazepine, LCS refused or failed to supply Decedent with the medication, which allegedly resulted in his death.

The Garcia action originally went to trial only on claims of medical malpractice. The § 1983 claim (based on the Eighth and Fourteenth Amendments) had been dismissed in a pretrial order. Pursuant to a post-trial motion, that count was reinstated, supplying the claim triggering this coverage dispute. The Garcia allegations reference deliberate indifference and expressly disclaim any intentional conduct on the part of LCS.

Lexington issued two primary insurance policies to LCS: a Healthcare Professional Liability policy (HPL; D.E. 21–5) and a Commercial General Liability policy (CGL; D.E. 19–1). Lexington chose to defend the Garcia action through the previous trial under the HPL. LCS now seeks a defense of the renewed § 1983 civil rights claims under the CGL policy.

LCS claims that Lexington owes it a defense under the CGL coverage supplied by the Violation of Civil Rights Endorsement and Negligent Act Endorsement (D.E. 19–1, pp. 50, 52). Lexington has denied CGL coverage pursuant to the Medical Services Exclusion (D.E. 19–1, p. 31) and argues that the claim does not fall within the terms of the Violation of Civil Rights Endorsement because the incident does not constitute an “occurrence” as defined in the coverage provisions of the base policy (D.E. 19–1, pp. 6, 22), the claim is also excluded as an “expected or intended injury” under the terms of the endorsement (D.E. 19–1, p. 7), and LCS has not demonstrated that it has met its self-insured retention (SIR) requirements under an endorsement by that name (D.E. 19–1, pp. 32–35).

DISCUSSION

A. Jurisdiction and Conflict of Law

This insurance contract dispute was filed pursuant to federal provisions for declaratory judgments: 28 U.S.C. § 2201 et seq. and Fed.R.Civ.P. 57. Plaintiff further claims diversity jurisdiction under 28 U.S.C. § 1332. According to the uncontroverted allegations in the complaint (D.E. 1), LCS is a Louisiana corporation with its principal place of business in Louisiana; Lexington is a Delaware corporation with its principal place of business in Massachusetts; and Defendant Monica Garcia, Individually and as Heir and Representative of Mario A. Garcia, Deceased and as Next Friend of P.G., a Minor, is a citizen of Texas.

The insurance policy was issued pursuant to Louisiana law (D.E. 19–1, p. 2), with coverage territory extending throughout the United States (Id., p. 20). There is no choice of law provision in the policy. The death that triggered this coverage dispute took place in Texas and the claims are based on conduct that occurred in Texas. D.E. 1. The parties have not briefed any issue with respect to conflict of laws, suggesting that there are no appreciable differences between Texas and Louisiana law on the policy construction issues presented here. D.E. 19, p. 16 n. 3 (specifically stating that there is no substantial difference); D.E. 21, p. 11, et seq. (citing both Texas and Louisiana law without specifically addressing the conflict of laws issue). For that reason, the Court will draw from the authorities of both states, without distinction, in adjudicating this dispute.

B. Summary Judgment Standard of Review

The interpretation of a liability insurance policy is a question of law. See Willbros RPI, Inc. v. Continental Casualty Co., 601 F.3d 306 (5th Cir.2010) (per curiam ); Southern Snow Mfg. Co. v. SnoWizard Holdings, Inc., 921 F.Supp.2d 548 (E.D.La.2013). In a summary judgment proceeding under Fed.R.Civ.P. 56,

the insured must carry the burden of persuasion to establish that any uncompensated (or under-compensated) damage was caused by a covered peril. Simply put, this is what is meant by the rule that the insured must prove coverage under the policy. Then, if the defendant-insurer wishes to avoid liability by relying on a policy exclusion from coverage, it has the burden of persuasion to establish that the uncompensated or under-compensated damage is subject to an exclusion.

Bayle v. Allstate Ins. Co., 615 F.3d 350, 358–59 (5th Cir.2010) (footnote excluded).

Specifically with respect to the duty to defend, the Court applies the “eight corners” rule and considers only the policy (D.E. 19–1) and the allegations in the complaint in the Garcia action (D.E. 19–3).

According to the eight corners rule, the scope of an insurer's duty to defend against a lawsuit is determined exclusively by the allegations in the pleadings and the language of the insurance policy. Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, 939 S.W.2d 139, 141 (Tex.1997). The scope of the duty to defend is interpreted broadly: “Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy.” Id. (quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965) ). “Terms in insurance policies that are subject to more than one reasonable construction are interpreted in favor of coverage.” Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 133 (Tex.2010).

National Casualty Co. v. Western World Ins. Co., 669 F.3d 608, 612–13 (5th Cir.2012). See also, Yount v. Maisano, 627 So.2d 148, 153 (La.1993).

Courts construe insurance policies using familiar principles of contract interpretation. Times–Picayune Publ'g Corp. v. Zurich Am. Ins. Co., 421 F.3d 328, 331 (5th Cir.2005) (quoting Trinity Indus., Inc. v. Ins. Co. of N. Am., 916 F.2d 267, 269 (5th Cir.1990) ); Texas Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex.2004). The words of the policy are construed in their plain, ordinary, and popular sense to reflect the parties' intentions and determine the extent of coverage. Id. at 331–32 ; Calcasieu–Marine Nat'l Bank of Lake Charles v. Am. Employers' Ins. Co., 533 F.2d 290, 296 (5th Cir.1976). Finally, “the court should consider the policy as a whole, and interpret the policy to fulfill the reasonable expectations of the parties in the light of the customs and usages of the industry.” Times–Picayune, 421 F.3d at 331 (quoting Trinity Indus., 916 F.2d at 269 ); Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 841 (Tex.2010).

C. Coverage Under the Civil Rights Endorsement

LCS argues that the policy covers this claim pursuant to its general coverage of bodily injury and pursuant to Endorsement # 014, which reads as follows:

This insurance applies to claims or “suits” arising out of “bodily injury” and “property damage” caused by alleged civil rights violations, so long as such violations and any resulting injury(ies) are not expected or intended from the standpoint of the insured or any person or organization either representing or acting on behalf of the insured.

All other terms and conditions of the policy remain the same.

D.E. 19–1, p. 50 (emphasis added). Lexington does not dispute that the Garcia action is a suit arising out of alleged civil rights violations. What it does dispute is (1) whether the incident constitutes an “occurrence” or an “accident” under the base policy; and (2) whether the injury was “expected or intended” and excluded under the terms of the civil rights endorsement. Each of these issues will be addressed in turn.

1. The base policy's “occurrence” requirement.

With respect to the first issue, the endorsement refers to “bodily injury” in quotation marks, referring back to the base policy's definition. All that is required to constitute “bodily injury” is that it be “physical injury, sickness or disease, including death resulting from any of these; or the following when accompanied by physical injury, sickness or disease: mental anguish; shock; or emotional distress.” D.E. 19–1, p. 49. There can be no argument that the decedent sustained a ...