Markel Ins. Co. v. S.T.C.G., Inc., Civil Action No. 4:08-CV-758-Y

• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas
• Writing for the Court: TERRY R. MEANS
• Citation: 737 F.Supp.2d 626
• Parties: MARKEL INSURANCE COMPANY v. S.T.C.G., INC., d/b/a Spirit of Texas Cheer & Gymnastics, et al.
• Docket Number: Civil Action No. 4:08-CV-758-Y
• Decision Date: 19 August 2010

737 F.Supp.2d 626

MARKEL INSURANCE COMPANY
v.
S.T.C.G., INC., d/b/a Spirit of Texas Cheer & Gymnastics, et al.

Civil Action No. 4:08-CV-758-Y.

United States District Court,
N.D. Texas,
Fort Worth Division.

Aug. 19, 2010.

737 F.Supp.2d 628

Camille Johnson, William A. Reece, Savrick Schumann Johnson McGarr Kaminski & Shirley, Dallas, TX, for Plaintiff.

Kelly J. Curnutt, Curnutt & Hafer, Arlington, TX, David J. Pels, Shannon Gracey Ratliff & Miller, Fort Worth, TX, C. Mark Stratton, Shannon Gracey Ratliff & Miller, Austin, TX, for Defendants.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT AND GRANTING MOTION FOR DEFAULT JUDGMENT

TERRY R. MEANS, District Judge.

Before the Court are a Motion for Default Judgment (doc. # 35) and a Renewed

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Motion for Summary Judgment (doc. # 58) filed by plaintiff Markel Insurance Company ("Markel"). By the latter motion, Markel seeks entry of a judgment declaring that it owes defendant S.T.C.G., Inc., neither a duty to defend nor a duty of indemnification in a lawsuit filed in a Texas state court ("the Underlying Suit") by defendant Carriel Collins. After review, the Court concludes that Collins's claim in the Underlying Suit against S.T.C.G. is excluded from coverage. Additionally, the Court concludes that, having ruled on Markel's duty to defend and indemnify in the Underlying Suit, default judgment against Collins is now appropriate. Consequently, the Court will grant both the motion for summary judgment and the motion for default judgment.

I. Background

This declaratory-judgment action arises out of a lawsuit filed in a Texas state district court by Carriel Collins against S.T.C.G., a cheerleading and gymnastics facility. Collins also names Spieth Anderson International, Inc.; Spieth Anderson, U.S.A., LLC (together "the Spieth defendants"); and Ross Athletic Supply, Inc. ("Ross"), as defendants in the Underlying Suit. (Mot. App. at 99.) The factual allegations in Collins's petition in the Underlying Suit are sparse: He seeks recovery "for personal injuries suffered by him while in the employ of [S.T.C.G.], on October 17, 2006." ( Id. at 102.) According to Collins, he

suffered an injury which was proximately caused by the Defendants. Plaintiff is now in a quadriplegic state. Defendant [S.T.C.G.] was a non-subscriber to the worker's compensation laws, and [Collins] brings [the Underlying Suit] against [S.T.C.G.] under Tex. Lab.Code § 406.033. On or about October 17, 2006, [Collins] was injured while using equipment sold and manufactured by Defendants Spieth Anderson USA, Spieth Anderson International, and Ross. Namely Collins was using a Ross Tumble Trap and a Spieth Anderson resi-pit mat. Said equipment was defective ... to the point that it was unreasonably dangerous to [Collins]. Further, said defective equipment was a proximate cause of [Collins's] injuries."

( Id.) Collins goes on to allege that "[S.T.C.G.] was guilty of negligence and said negligence was a proximate cause of the occurrence in question." ( Id. at 106.) Collins also alleges strict products liability as to Ross and the Spieth defendants, contending that the equipment in question "failed to perform as safely as an ordinary consumer would expect in [its] intended or reasonably foreseeable use or manner of operation." ( Id. at 103.)

S.T.C.G. is the insured under a commercial general-liability policy ("the CGL policy") issued by Markel. By its summary-judgment motion, Markel seeks a declaratory judgment that it owes S.T.C.G. neither a duty to defend nor a duty of indemnification in the Underlying Suit. Markel is currently defending S.T.C.G. in the Underlying Suit under a reservation of rights. But Markel insists that it owes S.T.C.G. no duty to defend because the events alleged in the Underlying Suit fall within multiple exclusions in the CGL policy. And Markel insists that, for the same reason, it owes S.T.C.G. no duty of indemnification.

II. Discussion

A. Standards of Law

1. Summary-Judgment Standard

When the record establishes "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law," summary judgment is appropriate. Fed. R. Civ. P. 56(c). An issue is considered

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"genuine" if "it is real and substantial as opposed to merely formal, pretended, or a sham." Bazan v. Hidalgo Cty., 246 F.3d 481, 489 (5th Cir.2001). Facts are considered "material" if they "might affect the outcome of the suit under governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To determine whether there are any genuine issues of material fact, the Court must first consult the applicable substantive law to ascertain what factual issues are material. Lavespere v. Niagara Mach. & Tool Works, 910 F.2d 167, 178 (5th Cir.1990). Next, the Court must review the evidence on those issues, viewing the facts in the light most favorable to the nonmoving party. Id.; Newell v. Oxford Mgmt. Inc., 912 F.2d 793, 795 (5th Cir.1990).

In making its determination on the motion, the Court must look at the full record including the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits. See Fed. R. Civ. P. 56(c); Williams v. Adams, 836 F.2d 958, 961 (5th Cir.1988). Rule 56, however, "does not impose on the district court a duty to sift through the record in search of evidence to support" a party's motion for, or opposition to, summary judgment. Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n. 7 (5th Cir.1992). Thus, parties should "identify specific evidence in the record, and ... articulate" precisely how that evidence supports their claims. Forsyth v. Barr, 19 F.3d 1527, 1536 (5th Cir.1994). Further, the Court's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

To prevail on a summary-judgment motion, the moving party has the initial burden of demonstrating that there is no genuine issue as to any material fact and that he is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When the moving party has carried its summary-judgment burden, the respondent must go beyond the pleadings and by his own evidence set forth specific facts showing there is a genuine issue for trial. Arbaugh v. Y & H Corp., 380 F.3d 219, 222 (5th Cir.2004) (citing Celotex, 477 U.S. at 324, 106 S.Ct. 2548); see also Fed. R. Civ. P. 56(e). This burden is not satisfied by creating some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). If the evidence is merely colorable or is not significantly probative, summary judgment may be granted. See Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.

2. Texas Insurance Law

The parties have argued this case in terms of Texas law and thus appear to agree that Texas law governs this dispute. Under Texas law, the duty to defend and the duty to indemnify are separate duties. See Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex.1997). Consequently, an insurer may have a duty to defend but ultimately be found to owe no duty of indemnification. See id.

As to the duty to defend, the insured bears the initial burden to establish that his claim is covered. See Noble Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642, 645 (5th Cir.2008). In determining whether a claim is covered, and thus a duty to defend owed, Texas follows the "eight-corners" rule. Id. That is, in determining whether a duty to defend exists, courts are generally constrained to comparing

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the four corners of the policy to the four corners of the pleadings in the underlying suit against the insured. See id.; see also GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.2006).

"[I]n reviewing the underlying pleadings, the court must focus on the factual allegations that show the origin of the damages rather than on the legal theories alleged." Merchants Fast Motor Lines v. Nat'l Union Fire Ins. Co., 919 S.W.2d 903, 905 (Tex.1996). "It is not the cause of action alleged that determines coverage but the facts giving rise to the alleged actionable conduct." Adamo v. State Farm Lloyds Co., 853 S.W.2d 673, 676 (Tex.App.-Houston [14th Dist.] 1993, writ denied) (emphasis on original). And the factual allegations in the underlying pleadings are accepted as true. See Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 599 (5th Cir.2006).

Overall, the eight-corners rule is "very favorable to insureds" because doubtful cases are resolved in favor of coverage. Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 368 (5th Cir.2008); see also United Nat'l Ins. Co. v. Hydro Tank, Inc., 497 F.3d 445, 448 (5th Cir.2007). "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 coverage of the policy." Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965).

Once the insured establishes coverage, the insurer bears the burden of establishing that an exclusion applies. See Noble Energy, Inc., 529 F.3d at 645. Insurance policy exclusions are narrowly construed in favor of coverage. See Nat'l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991).

B. Analysis

1. Whether the Underlying Suit is Covered

As the insured, S.T.C.G. has the initial burden of showing that the injury alleged by Collins in the Underlying Suit is covered. But Markel did not raise this issue in its brief, instead arguing only that the allegations of the Underlying Suit are excluded under various provisions of the CGL policy. S.T.C.G. does...