Lincoln General Ins. Co. v. Reyna
| Decision Date | 18 February 2005 |
| Docket Number | No. 04-20079.,04-20079. |
| Citation | 401 F.3d 347 |
| Parties | LINCOLN GENERAL INS. CO., Plaintiff-Appellee, v. Cesar REYNA, d/b/a Reyna Travel Tours Co., Joel Quinones Lozano, Defendants-Appellees, v. Mayra Lizeth Arellano Medina, Individually as next friend of Jorge Luis Garza Arellano and on behalf of the Estate of Jorge Alfonso Garza Cantu; Jose Rodrigo Garza Ramos; Maria Del Socorro Cantu Serna; Manuel Guadalupe Alaniz Muniz; Maria Bartolo Oyervidez Oyervidez, individually and on behalf of the Estate of Manuel Guadalupe Alaniz Oyervidez, Movants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Ruth Greenfield Malinas (argued), Kathy H. Kang, Ball & Weed, San Antonio, TX, for Plaintiff-Appellee.
Joel Quinones Lozano, Pharr, TX, pro se.
Earnest William Wotring (argued), Connelly, Baker, Wotring & Jackson, Houston, TX, Alberto Tover Garcia, III, Law Offices of Alberto T. Garcia, III, McAllen, TX, for Movants-Appellants.
Appeal from the United States District Court for the Southern District of Texas.
Before WIENER and PRADO, Circuit Judges, and KINKEADE1, District Judge.
This appeal stems from the entry of summary judgment in favor of Lincoln General Insurance Company ("Lincoln") in a declaratory judgment action seeking the district court's determination of Lincoln's duty to defend Cesar Reyna ("Reyna"). For the following reasons, we AFFIRM the district court's grant of Lincoln's summary judgment motion.
Lincoln issued a business auto policy to Reyna. This policy was effective February 7, 2002, through February 7, 2003. It is undisputed that during the policy's effective dates, a bus crash occurred in Mexico involving a bus owned by Reyna and driven by one of his employees, Defendant-Appellant, Joel Quinones Lozano ("Lozano"), and another vehicle. As a result of the head-on collision, Jorge Cantu and Manuel Oyervidez (collectively, "victims"), both in the other vehicle, were killed.
Mayra Lizeth Arellano Medina, Jose Rodrigo Garza Ramos, Maria Del Socorro Cantu Serna, and Manuel Guadalupe Alaniz Muniz, all relatives of Mr. Cantu (collectively "Cantu Plaintiffs"), filed suit in Texas state court against Reyna and Lozano on May 15, 2002. Lincoln informed Reyna that it was denying coverage and would not be providing his defense in the state court action. Reyna never filed an answer, and on September 11, 2002, the Cantu Plaintiffs obtained a default judgment against Reyna and Lozano. On November 12, 2002, the state court entered a final judgment against Reyna and his driver Lozano for approximately $13 million with Reyna liable for 90% of the damages. In addition, the judgment transferred Reyna's right to the insurance proceeds from the Policy to the Cantu Plaintiffs.
Lincoln filed the declaratory action that is the subject of this appeal on November 4, 2002. Lincoln sought the federal district court's determination of whether coverage for the damages and loss resulting from the bus crash existed and, consequently, whether Lincoln was required to defend Reyna. The Cantu Plaintiffs, as well as Maria Bartolo Oyervidez Oyervidez, on behalf of Mr. Oyervidez, (collectively "Intervenors") were permitted to intervene. Lincoln and Intervenors filed cross-motions for summary judgment with the trial court ultimately granting Lincoln's motion for summary judgment.
In reviewing a district court's grant of summary judgment, this Court uses a de novo standard and applies the same legal standards as the district court.2 Summary judgment is appropriate when the pleadings, affidavits and other summary judgment evidence show that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law.3 The movant bears the burden of identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact.4 The burden then shifts to the nonmovant to show the existence of a genuine fact issue for trial; however, the nonmovant may not rest upon allegations in the pleadings to make such a showing.5 All evidence and reasonable inferences must be viewed in the light most favorable to the nonmovant.6
This Court examines whether Lincoln had a duty to defend Reyna using a de novo standard of review.7 Under Texas law, an insurer's duty to defend is determined by the "eight corners" doctrine, or "complaint allegation rule"; in other words, the court looks only to the allegations in the pleadings and the language of the insurance policy.8 Using this analysis, the allegations in the petition are liberally interpreted.9
The "four corners" of the complaint must allege facts that, if taken as true, could possibly assert a claim within the scope of coverage in the "four corners" of the insurance policy; otherwise, an insurer is not legally required to defend a suit against its insured.10 The court must look to the alleged facts in the pleadings, not the legal theories being asserted.11 Any doubt regarding the duty to defend is resolved in favor of the duty.12 However, if the only facts alleged are excluded from the policy's coverage, the insurer is not required to defend.13 It is the insured's burden to establish that a claim is potentially within the scope of coverage.14 Once the insured has established this, the burden shifts to the insurer to show "that the plain language of a policy exclusion or limitation allows the insurer to avoid coverage of all claims, also within the confines of the eight corners rule."15
Intervenors claim in their first issue the district court erred in granting Lincoln's summary judgment motion. In their second issue on appeal, Intervenors contend Lincoln's standard business auto policy requires it to provide a defense to Reyna for the negligent hiring, training, and supervision claim. In their final issue on appeal, Intervenors argue, based on King v. Dallas Fire. Ins. Co.,16 that a claim for negligent hiring, training, and supervision equates to an "accident" under the Policy, thereby independently triggering coverage and a duty to defend.
Citing to the Texas Supreme Court in King,17 Intervenors claim the district court erred in determining "accident" was restricted to an automobile collision and did not include coverage for negligent hiring training, and supervision. Irrespective of the bus crash occurring in Mexico, they argue Lincoln's duty to defend Reyna was triggered by Reyna's actions of negligently hiring, training, and supervising Lozano, which occurred in Texas within the coverage area, because his actions constitute an "accident" under the Policy. Lincoln contends that because the bus crash occurred outside the coverage area, under the language of the Policy, coverage was never triggered; therefore, it was not required to defend Reyna.
In their First Amended Original Petition ("Petition") in state court, the Cantu Plaintiffs assert separate claims of negligence against Lozano and Reyna. This Court must look beyond the claims asserted, to the alleged facts.18 Paraphrasing those allegations, the Cantu Plaintiffs allege in the Petition's factual background that the bus crash, which killed the victims, occurred in Mexico. The Cantu Plaintiffs also contend Lozano operated the bus in a negligent manner, causing the collision and their damages. They add that his negligence was a breach of the duty to exercise ordinary care in operating the bus "reasonably and prudently." In their allegations against Reyna, they contend that Reyna is vicariously liable for their damages, because of Lozano's negligence. They also allege Reyna is directly liable to them for their damages because he breached an independent duty of care in negligently entrusting Lozano with the bus, failing to implement safety policies, failing to enforce company safety policies, and negligently hiring, training, supervising, and retaining Lozano.
The policy explicitly sets forth the conditions which must be met in order to trigger coverage. Coverage is triggered when "bodily injury or property damage" results from an "accident" and "from the ownership, maintenance or use of a covered auto." The policy defines "accident" as including "continuous or repeated exposure to the same conditions resulting in bodily injury or property damage." The accident or loss must occur within (1) the policy period and (2) the coverage territory. The coverage territory is defined in the policy as the United States, territories and possessions of the United States, Puerto Rico, and Canada.
Employing the "eight corners" doctrine, the issue before this Court is whether the facts, as alleged in the state court pleadings, give rise to potential coverage under the Policy, thereby triggering Lincoln's duty to defend Reyna.
Intervenors contend Reyna's actions in negligently hiring, training, and supervision Lozano are an "accident" as defined by the Policy, separately triggering coverage and the duty to defend. As support for their argument, Intervenors rely on the Texas Supreme Court case of King v. Dallas Fire Ins. Co.,19 in which the court held a duty to defend existed because the claim against the insurer for negligent hiring, training, and supervision was an "occurrence" under the policy regardless of the underlying intentional conduct being excluded from coverage. They allege it is dispositive because the language of the policy provision in King is nearly identical to the language in the Policy at issue. Lincoln contends this case is more akin to Fidelity & Guaranty Ins. Underwriters, Inc. v. McManus,20 in which the court determined the insured had no duty to defend because the claim against the insured for negligent entrustment could not exist without the underlying negligent conduct which was excluded from coverage.
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