National American Ins. Co. v. Breaux

• Decision Date: 06 January 2005
• Docket Number: No. CIV.A. 1:03CV1378.,CIV.A. 1:03CV1378.
• Citation: 368 F.Supp.2d 604
• Parties: NATIONAL AMERICAN INSURANCE COMPANY, Plaintiff, v. Norman BREAUX, Kenneth Young, Individually and as Representative of the Estate of K.S. Y., a Minor, and Cheryl Young, Individually, Defendants.
• Court: U.S. District Court — Eastern District of Texas

Page 604

368 F.Supp.2d 604

NATIONAL AMERICAN INSURANCE COMPANY, Plaintiff, v. Norman BREAUX, Kenneth Young, Individually and as Representative of the Estate of K.S. Y., a Minor, and Cheryl Young, Individually, Defendants.

No. CIV.A. 1:03CV1378.

United States District Court, E.D. Texas, Beaumont Division.

January 6, 2005.

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COPYRIGHT MATERIAL OMITTED

Fred Lawrence Shuchart, of Kroger, Myers Frisby & Hirsch, Houston, TX, for Plaintiffs.

Bryan Adam Terrell, of Weller Green Toups & Terrell, Ethan L. Shaw of Moore Landrey, Beaumont, TX, for Defendants Norman Breaux Youngs.

MEMORANDUM AND ORDER

CRONE, District Judge.

Pending before the court are Plaintiff National American Insurance Company's ("NAICO") Motion for Summary Judgment (# 30) and Defendants and Third-Party Plaintiffs Kenneth Young, Individually and as Representative of the Estate of K.S. Y., a Minor, and Cheryl Young's, Individually (collectively, "the Youngs"), Motion for Summary Judgment (# 32). NAICO seeks a declaratory judgment that it has no duty to defend and/or indemnify Defendant Norman Breaux ("Breaux") for claims asserted against him by the Youngs in the lawsuit styled Kenneth Young, et al. v. NationsRent, et al., No. D-167,925 (136th Dist. Ct., Jefferson County, Tex., filed Sept. 5, 2002) ("the Underlying Lawsuit"). The Youngs seek summary judgment on the grounds that they are improper parties to this lawsuit because they are not in contractual privity with NAICO and, without a judgment in the Underlying Lawsuit, no justiciable controversy exists between them and NAICO. Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that NAICO's Motion for Summary Judgment should be granted and the Youngs' Motion for Summary Judgment should be denied.

I. Background

The incident giving rise to the Underlying Lawsuit in this case occurred on Saturday, August 3, 2002, when Breaux, an employee of Hart Construction, Inc. ("Hart"), was clearing land with equipment known as a Bobcat 763 Skidsteer ("Bobcat") in his backyard at his residence located in Sour Lake, Texas. Hart had leased the Bobcat on July 25, 2002, from NationsRent, a rental company in Port Arthur, Texas, for use at a job at Office Depot in Beaumont, Texas. Neither Breaux nor Hart owned the Bobcat, and it was not registered to either of them under any motor vehicle registration law.

According to the record, Kevin Rogeau ("Rogeau"), the general superintendent at Hart, took the Bobcat home on Friday, August 2, 2002, to cut down a pine tree on his property. Although the lease agreement bears a termination date of August 2, 2002, NationsRent did not regain possession of the Bobcat until August 6, 2002. Rogeau had requested and received permission from NationsRent to take the Bobcat "off-rent" for use at his residence over the weekend. As a result, Hart was charged for renting the Bobcat only through August 2, 2002. When Breaux learned that Rogeau was using the Bobcat to cut down a tree, he volunteered to take the pine tree to his property and cut it up for lumber. According to Rogeau, Breaux inquired if he could take the Bobcat with him to unload the tree and use it the remainder of the weekend. After Rogeau gave his permission, Breaux picked up the Bobcat from Rogeau and transported it to his residence in Sour Lake on Saturday, August 3, 2002. In his affidavit, Ira Hart ("Mr.Hart"), the president of Hart, stated, however, that "[n]either myself nor Hart Construction, Inc. were aware that Mr. Breaux intended to use the Bobcat for his own personal reasons on Saturday, August 03, 2002."

When Breaux arrived at his residence, the decedent, K.S. Y., who lived with his parents in Nederland, Texas, was a guest of Breaux's household. Breaux began operating the Bobcat in his backyard to "pil[e] brush up." He admits that the work he was performing was purely personal in nature and had nothing to do with Hart's business. At deposition, Breaux testified that he used the Bobcat from thirty minutes to one hour before the incident occurred. At that time, according to the Youngs' Fourth Amended Original Petition, Breaux "backed the Bobcat over the Deceased, proximately causing the Deceased to sustain grave physical harm, and which subsequently caused the death of the Deceased." Consequently, the Youngs filed suit against Breaux, NationsRent, and Hart in the 136th Judicial District Court of Jefferson County, Texas, on September 5, 2002, alleging claims of negligence.

At the time of the accident, Hart maintained commercial general liability insurance coverage through NAICO under policy number MP1956642H ("the Policy"), with a policy period of August 15, 2001, to August 15, 2002. Breaux is not a named insured on the Policy. NAICO is a corporation organized and existing under the laws of the State of Oklahoma, which has its principal place of business in Lincoln County, Oklahoma. Throughout the proceedings in the Underlying Lawsuit, NAICO has been providing a defense to Breaux as an employee of Hart, the insured.

On November 14, 2003, NAICO filed its Original Complaint for Declaratory Judgment in federal court based on diversity jurisdiction. NAICO claims that "[a] dispute between the parties has arisen regarding whether the policy of insurance provides coverage to Breaux for the allegations against him in the Underlying Lawsuit and whether NAICO has any duty to defend him in the Underlying Lawsuit and a duty to indemnify as a result of any judgment and/or settlement." NAICO argues that the Policy covers only those who qualify as "an insured." Although Breaux is not a named insured, the Policy provides coverage for employees of the insured, but "only for acts within the scope of their employment by the named insured or while performing duties related to the conduct of the named insured's business." NAICO contends that neither the allegations nor the facts in the Underlying Lawsuit establish that Breaux was acting in such a capacity as to warrant coverage as an employee of Hart.

On February 27, 2004, the Youngs filed their First Amended Third Party Complaint against NAICO, Breaux, and Travelers Property Casualty Company ("Travelers"), alleging "that the underlying negligence was caused by Norman Breaux's negligent operation of a piece of `mobile equipment.'" The Youngs claim that the Policy's "mobile equipment" clause provides coverage for liability stemming from the operation of such equipment. Travelers was dismissed as a party on March 8, 2004, leaving NAICO and Breaux as third-party defendants. Hence, the Youngs' Third Party Complaint against NAICO is, in effect, a counterclaim. On October 15, 2004, NAICO filed its Motion for Summary Judgment seeking entry of a declaratory judgment that the Policy provides no coverage and that it has no duty to defend and/or indemnify Breaux as a result of the allegations asserted against him in the Underlying Lawsuit. On October 18, 2004, the Youngs filed their Motion for Summary Judgment seeking dismissal from the instant lawsuit, asserting that they are improper parties absent the rendition of a judgment in the state court action.

II. Analysis

A. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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." FED. R. CIV. P. 56(c). The parties seeking summary judgment bear the initial burden of informing the court of the basis for their motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which they believe demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Martinez v. Schlumberger, Ltd., 338 F.3d 407, 411 (5th Cir.2003); Terrebonne Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 877 (5th Cir.2002); Colson v. Grohman, 174 F.3d 498, 506 (5th Cir.1999).

"A fact is `material' if it `might affect the outcome of the suit under governing law.'" Bazan v. Hidalgo County, 246 F.3d 481, 489 (5th Cir.2001) (emphasis in original) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505); see Harken Exploration Co. v. Sphere Drake Ins. PLC, 261 F.3d 466, 471 (5th Cir.2001); Merritt-Campbell, Inc. v. RxP Prods., Inc., 164 F.3d 957, 961 (5th Cir.1999); Burgos v. Southwestern Bell Tel. Co., 20 F.3d 633, 635 (5th Cir.1994). "An issue is `genuine' if it is real and substantial, as opposed to merely formal, pretended, or a sham." Bazan, 246 F.3d at 489 (emphasis in original). Thus, a genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505; accord Harken Exploration Co., 261 F.3d at 471; Merritt-Campbell, Inc., 164 F.3d at 961. The moving parties, however, need not negate the elements of the nonmovants' case. See Wallace v. Texas Tech Univ., 80 F.3d 1042, 1047 (5th Cir.1996) (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994)).

Once a proper motion has been made, the nonmoving parties may not rest upon mere allegations or denials in the pleadings but must present affirmative evidence, setting forth specific facts, to show the existence of a genuine issue for trial. See Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. 2548; Anderson, 477 U.S. at 257, 106 S.Ct. 2505; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Rushing v. Kansas City S. Ry. Co., 185 F.3d 496, 505 (5th Cir.1999), cert. denied, ...