McCarthy Bros. v. Continental Lloyds Ins.

• Decision Date: 18 November 1999
• Parties: (Tex.App.-Austin 1999) McCarthy Brothers Company and McCarthy Western Constructors, Inc., d/b/a/ and a/k/a McCarthy Corporation, McCarthy Construction, and McCarthy, Appellants v. Continental Lloyds Insurance Company; American Casualty Company of Reading, Pennsylvania; and Mike Wilson, Appellees NO. 03-98-00671-CV
• Court: Texas Court of Appeals

Page 725

7 S.W.3d 725 (Tex.App.-Austin 1999)

McCarthy Brothers Company and McCarthy Western Constructors, Inc. d/b/a/ and a/k/a McCarthy Corporation, McCarthy Construction and McCarthy, Appellants v. Continental Lloyds Insurance Company; American Casualty Company of Reading, Pennsylvania; and Mike Wilson, Appellees

NO. 03-98-00671-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

Nov. 18, 1999.

Rehearing Overruled Jan. 6, 2000.

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT

NO. 98-02820, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING

Before Justices Jones, B. A. Smith and Yeakel

LEE YEAKEL, Justice.

Appellants, McCarthy Brothers Company and McCarthy Western Constructors, Inc., doing business as and also known as McCarthy Corporation, McCarthy Construction, and McCarthy,¹ appeal the district court's grant of summary judgment in favor of appellees, Continental Lloyds Insurance Company ("CLIC"), American Casualty Company of Reading, Pennsylvania ("ACC"), and Mike Wilson.² McCarthy complains on appeal that the district court erred in ruling that McCarthy was not insured under commercial general liability policies issued by the insurance companies to subcontractors working for McCarthy even though these policies named McCarthy, the general contractor, as an additional insured. McCarthy further claims that the district court erred by failing to award McCarthy attorney's fees. We will reverse the district court's judgment insofar as it relates to coverage and render judgment in favor of McCarthy. We will affirm the judgment in all other respects.

FACTUAL AND PROCEDURAL BACKGROUND

McCarthy, a general contractor, hired Crouch/Fisk Electric Company and Crouch Electric Company³ to provide electrical services for a Motorola construction project McCarthy was managing. Crouch/Fisk and Crouch Electric purchased separate commercial general liability insurance policies for this project (the "policies") from CLIC and ACC respectively. McCarthy was added to both policies by endorsement as an additional insured ("additional-insured endorsements").⁴

During construction, Mike Wilson, an electrical foreman for Crouch, was injured when he slipped and fell at the construction site. Wilson sued McCarthy for negligence arising out of its duty of care owed to him as a business invitee (the "Wilson suit"). Wilson alleged that the electricians on the construction site were required to traverse a fifty-five to sixty foot incline to retrieve electrical equipment "necessary for their work" and that at the time of the accident, he was descending the incline and "fell on the muddy, slippery surface." Wilson asserted that this incline was unreasonably dangerous and that McCarthy knew or should have known of its condition because Wilson, as well as supervisors from Crouch, had requested that McCarthy place stairs in that area.

Pursuant to the additional-insured endorsements, McCarthy demanded a defense by the insurance companies in the Wilson suit. The insurance companies, asserting that these provisions did not cover the liability arising out of the Wilson suit, denied McCarthy's request. McCarthy then brought this suit in district court seeking a declaratory judgment that the insurance companies had a duty to defend it in the Wilson suit and for attorney's fees, damages, and court costs. The insurance companies counterclaimed for declaratory relief that McCarthy is not an insured covered by the policies and for attorney's fees and court costs.

Both parties moved for summary judgment⁵ on the ground that Wilson's pleadings, read in the light of the additional-insured endorsements, determined as a matter of law whether the insurance companies had a duty to defend McCarthy pursuant to the policies. The insurance companies assert that McCarthy is not covered under the endorsements because the allegations in the Wilson suit allege negligence only on the part of McCarthy and not on the part of Crouch, and thus the liability in this case did not arise out of Crouch's work for McCarthy. McCarthy, on the other hand, urges that it is covered by the policies. McCarthy reasons that because Wilson's injuries were sustained while working on the Motorola construction site for Crouch, which was performing work on behalf of McCarthy, the underlying liability arose from work or operations of Crouch by or for McCarthy. The district court rendered a final summary judgment, granting the insurance companies' motion and denying McCarthy's.⁶ McCarthy appeals the district-court judgment.

DISCUSSION

The resolution of the summary-judgment motions rests on the proper interpretation of the additional-insured endorsements, a question of law. See Admiral Ins. Co. v. Trident NGL, Inc., 988 S.W.2d 451, 453 (Tex. App.-Houston [1st Dist.] 1999, pet. filed) (citing Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983)) (construction of insurance policy and limiting language in endorsement are questions of law for court). We review the district court's decision de novo, taking into account the summary-judgment evidence presented by both sides, to determine the questions presented and render judgment such as the district court should have rendered. See Grocers Supply Co. v. Sharp, 978 S.W.2d 638, 642 (Tex. App.-Austin 1998, pet. denied) (citing Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex. 1994)) (courts review summary judgment de novo where propriety of summary judgment is question of law); Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997) (citing Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988)) (setting forth standard of review when trial court grants one motion for summary judgment and denies opposing motion).

To determine an insurer's duty to defend, Texas courts follow the "eight corners" rule. See National Union Fire Ins. Co. v. Merchants Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997); Texas Property & Cas. Ins. Guar. Ass'n v. Southwest Aggregates, Inc., 982 S.W.2d 600, 604 (Tex. App.-Austin 1998, no pet.) (citing American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153-54 (Tex. App.-Dallas 1990, writ dism'd)). Pursuant to the rule, we consider only the allegations in the underlying complaint and the terms of the insurance policy to determine whether a duty to defend exists. See Merchants Fast Motor Lines, 939 S.W.2d at 141; Southwest Aggregates, 982 S.W.2d at 604. "The duty to defend is not affected by the facts of the case ascertained before, during, or after the suit." Cullen v. Commonwealth Lloyd's Ins. Co., 852 S.W.2d 252, 255 (Tex. App.-Dallas 1993, writ denied). Nor do we consider the reliability of the allegations in the underlying pleading. See id. We instead give the allegations in the petition a liberal interpretation, resolving any doubt in favor of the insured. See Texas Med. Liab. Trust v. Zurich, 945 S.W.2d 839, 842 (Tex. App.-Austin 1997, writ denied) (citing Merchants Fast Motor Lines, 939 S.W.2d at 141). If the underlying petition does not allege facts within the scope of coverage, the insurer has no duty to defend. See id. Therefore, to determine whether the insurance companies have a duty to defend McCarthy, we consider only the allegations in Wilson's petition and the additional-insured endorsements in the policies.

Insurance policies are contracts, and their construction is governed by the same rules of construction applicable to all contracts. See Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 740-41 (Tex. 1998); National Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995). In construing a written contract, the primary goal of the court "is to give effect to the written expression of the parties' intent." Balandran, 972 S.W.2d at 741 (quoting State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995)); Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994) (emphasis added). The court should "ascertain the intent of the parties as expressed in the instrument." National Union, 907 S.W.2d at 520 (citing Forbau, 876 S.W.2d at 133) (emphasis added).

A written contract that can be given a definite or certain legal meaning is not ambiguous. See National Union, 907 S.W.2d at 520; Coker, 650 S.W.2d at 393. If a contract is not ambiguous, the words used in the contract are to be given their ordinary meaning. See Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984); see also Security Mut. Cas. Co. v. Johnson, 584 S.W.2d 703, 704 (Tex. 1979) (terms of insurance contract given their "ordinary and generally accepted meaning"). However, if "the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous," and the construction that would afford coverage to the insured must be adopted. National Union, 907 S.W.2d at 520; see also Balandran, 972 S.W.2d at 741.

Construction of the Additional-Insured Endorsements

The parties join issue over the meaning of the term "arising out of" as used in defining McCarthy's coverage as an additional insured. In its first two issues, McCarthy contends that the contract can be given a certain and definite meaning affording coverage, or at least is ambiguous and should therefore be construed in its favor. We agree.

The supreme court has recently given a broad construction to the phrase "arising out of" in a case involving the construction of an automobile policy. See Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d 153, 156 (Tex. 1999). In Lindsey, while attempting to get into his parents' truck through the sliding rear window, a boy accidently touched a loaded shotgun on a gun rack mounted over the window and shot a man sitting in an adjacent parked car. See id. at 154. The relevant insurance policy provided coverage for injuries arising out of the use of a motor vehicle. See id. at 155. The court held: "For liability to 'arise out of' the use of a motor vehicle, a causal connection or relation must exist between the accident or injury and the use of the motor vehicle." Id. at 156....