Liberty Surplus Ins. Corp.. v. Allied Waste Sys. Inc.

• Decision Date: 20 December 2010
• Docket Number: Civil Action No. H–09–3261.
• Citation: 758 F.Supp.2d 414
• Parties: LIBERTY SURPLUS INSURANCE CORPORATION, Plaintiff,v.ALLIED WASTE SYSTEMS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

758 F.Supp.2d 414

LIBERTY SURPLUS INSURANCE CORPORATION, Plaintiff,

v.ALLIED WASTE SYSTEMS, INC., et al., Defendants.

Civil Action No. H–09–3261.

United States District Court, S.D. Texas, Houston Division.

Dec. 20, 2010.

Kevin Lamar Sewell, Walker Sewell LLP, Dallas, TX, for Plaintiff.Roger L. McCleary, Darin Lee Brooks, Beirne Maynard & Parsons, Houston, TX, for Defendants.

MEMORANDUM AND OPINION

LEE H. ROSENTHAL, District Judge.I. Background

This is a declaratory judgment action to resolve an insurance-coverage dispute. The declaratory judgment plaintiff, Liberty Surplus Insurance Corporation, issued a commercial general liability to the one of the defendants, Associated Marine & Industrial Staffing, Inc. (AMI). AMI is in the business of providing temporary workers to clients. The coverage dispute arises from an accident involving an AMI employee who was serving as a temporary worker on a garbage truck for defendants Allied Waste Systems, Inc. and BFI Waste Services of Texas, L.P. (collectively, “Allied”). The AMI employee was riding on an Allied-leased and -operated truck when it rolled. The AMI employee died in the accident. The driver, who was an Allied employee, and another passenger, who was a temporary employee, also died.

The family of the AMI employee sued Allied in state court, asserting liability for negligence, negligent entrustment, and gross negligence and vicarious liability for the driver's negligence. Allied filed a third-party claim against AMI Staffing in the state court, asserting a right to indemnification under the labor services agreement between them. Shortly before the state court case settled, Allied filed cross-claim asserting a similar indemnification claim against AMI in this federal declaratory judgment action.

In this federal suit, Liberty seeks a declaratory judgment that under the CGL policy issued to AMI, Liberty does not owe either defense costs or indemnity to any of the defendants in the underlying state-court suit. Liberty bases its legal arguments on the automobile exclusion of the commercial general liability policy it issued to AMI.

Three motions are pending:

• Liberty moved for summary judgment that it does not have to pay defense costs or provide indemnification under its commercial general liability policy. (Docket Entry No. 27). The defendants have responded, (Docket Entry Nos. 32, 36), and Liberty has replied, (Docket Entry Nos. 49, 50).

• AMI cross-moved for partial summary judgment that Liberty's policy covers Allied's cross-claims against AMI for defense costs and indemnity based on the labor services contract between them. (Docket Entry No. 34). Liberty has responded. (Docket Entry No. 41).

• Allied moved for partial summary judgment that Liberty's policy covers Allied's defense costs and the costs of settling the underlying case. Allied's motion is based on the policy's coverage for AMI's liabilities to Allied under the labor services contract between them. (Docket Entry No. 24). Liberty and AMI have responded. (Docket Entry Nos. 29, 35).

This court heard oral argument on the motions and ordered the parties to produce a copy of the settlement agreement reached in the underlying wrongful-death suit and a brief on the settlement's effect on the duties to defend and indemnify. The parties filed their supplemental briefs. (Docket Entry Nos. 53–56). In deciding the motions, this court assumes, without deciding, that under their contract, AMI owes Allied defense costs and is obligated to indemnify Allied for the amount paid to settle the state-court suit. (Docket Entry No. 39).

Based on a careful review of the complaint; the motions, responses, and replies; the summary-judgment evidence; the arguments of counsel; and the relevant law, this court grants Liberty's motion for summary judgment and denies AMI's cross-motion and Allied's motion for partial summary judgment. The reasons are explained below. The parties must appear on January 24, 2011, at 4:00 p.m. for a status conference to address how best to resolve the remaining issue in the case.

II. The Applicable Legal StandardsA. Summary Judgment

Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). “The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact.” Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir.2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

If the burden of proof at trial lies with the nonmoving party, the movant may satisfy its initial burden by “ ‘showing’—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case.” See Celotex, 477 U.S. at 325, 106 S.Ct. 2548. While the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it does not need to negate the elements of the nonmovant's case. Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir.2005) (citation omitted). “A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law.” Sossamon v. Lone Star State of Tex., 560 F.3d 316, 326 (5th Cir.2009) (quotation omitted). “If the moving party fails to meet [its] initial burden, the motion [for summary judgment] must be denied, regardless of the nonmovant's response.” United States v. $92,203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir.2008) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc)).

When the moving party has met its Rule 56(a) burden, the nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of its pleadings. The nonmovant must identify specific evidence in the record and articulate how that evidence supports that party's claim. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir.2007). “This burden will not be satisfied by ‘some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.’ ” Boudreaux, 402 F.3d at 540 (quoting Little, 37 F.3d at 1075). In deciding a summary judgment motion, the court draws all reasonable inferences in the light most favorable to the nonmoving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir.2008).

B. Contract Interpretation

The parties agree that Texas law applies. Under Texas law, insurance contracts are interpreted under ordinary principles of contract law. Am. Nat'l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir.2001). A court faced with a coverage dispute must give effect to the parties' intentions as expressed by the policy language. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.1983). The policy terms are given their plain, ordinary meaning, considering the policy as a whole, unless the policy itself shows that the parties intended the terms to have a different, technical meaning. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984); Hartrick v. Great Am. Lloyds Ins. Co., 62 S.W.3d 270, 274 (Tex.App.-Houston [1st Dist.] 2001, no pet. h.) (“[W]e construe the terms of the policy as a whole, and consider all of its terms, not in isolation, but within the context of the policy.”). Courts cannot consider extrinsic evidence unless the insurance contract is ambiguous. Sharp v. State Farm Fire & Cas. Ins. Co., 115 F.3d 1258, 1262 (5th Cir.1997); Fiess v. State Farm Lloyds, 202 S.W.3d 744, 745 (Tex.2006). “Ambiguity must be evident from the policy itself; it cannot be created by introducing parol evidence of intent.” Fiess, 202 S.W.3d at 745 (citing Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex.1995)).

Whether an insurer has a duty to defend the insured is a distinct issue from whether the insurer has a duty to indemnify the insured. D.R. Horton–Tex., Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 743 (Tex.2009). Texas courts previously held that because the duty to defend is broader than the duty to indemnify, if there was no duty to defend, there was no duty to indemnify. The Texas Supreme Court has clarified that the duty to indemnify is independent from the duty to defend and an insurer may have a duty to indemnify even if a duty to defend never arises. Id. at 744.

To determine whether an insurer has a duty to defend, Texas courts apply the “eight-corners rule.” That rule “provides that when an insured is sued by a third party, the liability insurer is to determine its duty to defend solely from [the] terms of the policy and the pleadings of the third-party claimant.” GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 307 (Tex.2006). “Resort to evidence outside the four corners of these two documents is generally prohibited.” Id. This approach requires that the court compare only the “four corners” of the latest amended pleading with the “four corners” of the policy. Allstate Ins. Co. v. Disability Servs. of the Sw. Inc., 400 F.3d 260, 263 (5th Cir.2005) (applying Texas law). “The focus of the inquiry is on the alleged facts, not on the asserted legal theories.” Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 528 (5th Cir.2004) (citing St. Paul Fire & Marine Ins. Co. v. Green Tree Fin. Corp.—Tex., 249 F.3d 389, 392 (5th Cir.2001)). When the rule applies, the court does not examine the merits of the underlying dispute or evidence extrinsic to the policy and the underlying lawsuit pleadings. Artful pleading, absent evidence of collusion between the third-party claimant and the insured, does not create an exception to the general rule. GuideOne, 197 S.W.3d at 311.

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