Scottsdale Ins. Co. v. Texas Sec. Concepts and Investigation

• Decision Date: 07 January 1999
• Docket Number: No. 98-20034,98-20034
• Citation: 173 F.3d 941
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: SCOTTSDALE INSURANCE COMPANY, Plaintiff-Appellee, v. TEXAS SECURITY CONCEPTS AND INVESTIGATION, et al., Defendants, Kimberley Barnes and Rolanda Williams, Defendants-Appellants.

Page 941

173 F.3d 941

SCOTTSDALE INSURANCE COMPANY, Plaintiff-Appellee, v. TEXAS SECURITY CONCEPTS AND INVESTIGATION, et al., Defendants Kimberley Barnes and Rolanda Williams, Defendants-Appellants.

No. 98-20034.

United States Court of Appeals Fifth Circuit.

Jan. 7, 1999.

John C. Tollefson, Knox & Tollefson, Irving, TX, for Plaintiff-Appellee.

James C. Plummer, Douglas Alexander Haldane, Houston, TX, for Defendants-Appellants.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, SMITH and WIENER, Circuit Judges.

PER CURIAM:

Scottsdale Insurance Company ("Scottsdale") filed this declaratory judgment action to determine whether coverage exists under one of its liability policies. We must decide whether the Assault and Battery Exclusion in Scottsdale's policy violates Texas public policy and is therefore void. We answer this question in the negative and affirm the district court's judgment.

I.

In the case underlying this appeal, Kimberley Barnes and Rolanda Williams alleged that in December 1993 they were unlawfully restrained, falsely imprisoned, assaulted, and raped in a Houston area apartment complex. According to Barnes and Williams, Texas Security Concepts ("Texas Security"), the company that provided security at the apartment complex, negligently failed to provide proper security. Texas Security was insured by a Scottsdale liability policy. Scottsdale filed an action for declaratory judgment seeking a determination that it provided no coverage and thus had no duty to defend or to indemnify Texas Security for losses related to the underlying suit.

Defendants Texas Security and Raleigh Randal Hanks, a Texas Security employee, were served, but did not appear. The district court granted summary judgment against these defendants. Barnes and Williams answered Scottsdale's complaint. Scottsdale then filed a motion for summary judgment against Barnes and Williams. Scottsdale denied that it had any duty to defend or to indemnify Texas Security in the underlying lawsuit because of the liability policy's Assault and Battery Exclusion. Barnes and Williams responded and filed a cross-motion for summary judgment. The district court granted summary judgment in favor of Scottsdale. Barnes and Williams now appeal.

Barnes and Williams make two main arguments: (1) the Assault and Battery Exclusion is void as against Texas public policy; and (2) some of the claims that they assert do not fall within the Assault and Battery Exclusion.

II.

A.

Barnes and Williams argue first that the Assault and Battery Exclusion is void as against Texas public policy as expressed in Texas Revised Civil Statute Art. 4413(29bb), § 40(a), which regulates the licensing of private security agencies. This statute requires that the licensing board verify that the security agency applying for a license holds a general insurance policy that will cover "all sums which the licensee becomes legally obligated to pay as damages because of bodily injury, property damage, or personal injury Barnes and Williams contend that the Assault and Battery Exclusion violates this statute and is therefore void as against Texas public policy. In response, Scottsdale contends that statutes regulating the amount or kind of insurance that businesses must purchase cannot operate to modify the terms of the policy that is actually purchased. As Scottsdale puts it, "If the businessman does not purchase the required policy, it is between him and the regulating agency," citing Baker v. Guaranty National Insurance Co., 615 S.W.2d 303, 306 (Tex.Civ.App.1981).

caused by an event involving the principal, its servants, officers, agents or employees in the conduct of any business licensed under this Act."

The Texas statute under consideration is regulatory in nature and is addressed to the security business. When considering a similar challenge to a similar statute, the Louisiana Supreme Court determined, among other things, that the insurance requirement for the licensing of private security agents was directed to the security agent, not to the insurance company. Hickey v. Centenary Oyster House, 719 So.2d 421, 424 (La.1998). We agree with the reasoning of the Louisiana court. The Texas statute is regulatory in nature and does not affirmatively establish a public policy of the state that would override the parties' agreement. See Aero Int., Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th Cir.1983) ("Without an affirmative expression of an overriding public policy by the [state] courts or legislature, we are constrained to enforce the parties' agreement according to its plain meaning."); Fidelity & Deposit Co. of Maryland v. Conner, 973 F.2d 1236, 1241 (5th Cir.1992) (public policy exception "to be applied cautiously and only in plain cases...