Southstar Corporation v. St. Paul Surplus Lines Ins. Co.

• Decision Date: 15 February 2001
• Docket Number: No. 13-99-481-CV,13-99-481-CV
• Citation: 42 S.W.3d 187
• Parties: (Tex.App.-Corpus Christi 2001) SOUTHSTAR CORPORATION, BEI ENERGY CORPORATION, CARL BEACH, JIM GRESHAM, TOMMY DUBOIS, AND LARRY BILLINGSLEY, Appellants, v. ST. PAUL SURPLUS LINES INSURANCE COMPANY D/B/A ST. PAUL INSURANCE, Appellee.
• Court: Texas Court of Appeals

Page 187

42 S.W.3d 187 (Tex.App.-Corpus Christi 2001)

SOUTHSTAR CORPORATION, BEI ENERGY CORPORATION, CARL BEACH, JIM GRESHAM, TOMMY DUBOIS, AND LARRY BILLINGSLEY, Appellants, v. ST. PAUL SURPLUS LINES INSURANCE COMPANY D/B/A ST. PAUL INSURANCE, Appellee.

No. 13-99-481-CV

COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS, CORPUS CHRISTI.

February 15, 2001.

Rehearings Overruled April 5, 2001.

On appeal from the 28th District Court of Nueces County, Texas.

Before Justices Dorsey, Rodriguez, and Seerden.¹

OPINION

RODRIGUEZ, Justice.

Southstar Corporation (Southstar), BEI Energy Corporation (BEI), Carl Beach, Jim Gresham, Tommy Dubois, and Larry Billingsley, ² appellants, appeal from a take-nothing summary judgment granted in favor of St. Paul Surplus Lines Insurance Company (St. Paul). We affirm in part and reverse and remand in part.

New West Resources, Inc. (Resources) and BEI formed New West Fuels, L.C. (Fuels) for the purpose of acquiring and developing oil and gas properties. Fuels obtained a commercial general liability insurance policy from St. Paul. Within two years of forming Fuels, the parties agreed to dissolve the business relationship. Thereafter, Beach, Gresham, Dubois, and Billingsley formed Southstar, again for the purpose of acquiring and developing oil and gas properties. The name of the insured on the St. Paul insurance policy was changed from Fuels to Southstar.

Resources sued BEI, Southstar, Beach, Gresham, Dubois, and Billingsley for conspiracy, fraud, breach of fiduciary duty, and breach of contract, and to obtain injunctive relief. According to Resources' petition, Resources, BEI, and BEI's shareholders executed written dissolution agreements as well as a confidentiality and non-disclosure agreement finalizing the dissolution of the business relationship. The dissolution agreements provided, inter alia, that Resources "was assigned all rights to the corporate name and logo of Fuels." The petition alleges that after Southstar was formed, appellants "issued a press release stating that Fuels had been reorganized as Southstar Corporation, a company owned and operated by [appellants]." It further alleges, "appellants misused the Fuels name and misrepresented the history of the company in interviews and various trade publications. Such action violated the agreement . . ., and the Confidentiality and Non-Disclosure Agreement and Release. . . ."

Appellants demanded that St. Paul defend them in the suit filed by Resources pursuant to the insurance policy. St. Paul, however, refused to defend appellants, maintaining the lawsuit was not covered under the policy. As a result, appellants sued St. Paul, alleging breach of the insurance agreement, breach of the duty of good faith and fair dealing, misrepresentations of the policy's coverage, violations of the Deceptive Trade Practices Act (DTPA), and negligence. Both parties moved for summary judgment. St. Paul moved for summary judgment as against all of appellants' claims for relief. Specifically, St. Paul urged that it owed no duty to defend appellants under the policy and that appellants' extracontractual claims were barred because Texas law does not recognize any extracontractual claims in the insurance liability context, and because breach of contract allegations do not create liability under the DTPA or for negligence. The trial court granted St. Paul's motion for summary judgment and entered an order that appellants take nothing.

By their first issue, appellants complain the trial court erred in granting summary judgment because St. Paul had a duty to defend appellants under the policy. To be entitled to summary judgment, the movant has the burden of showing that no genuine issue of material fact exists and that it is entitled to the summary judgment as a matter of law. Tex. R. Civ. P. 166a; Nixon v. Mr. Property Management, 690 S.W.2d 546, 548 (Tex.1985). The reviewing court must accept all evidence favorable to the non-movant as true and indulge all reasonable inferences in favor of the non-movant. Id.; Siegert v. Seneca Resources Corp., 28 S.W.3d 680, 682 (Tex. App.--Corpus Christi 2000, no pet.). If the trial court fails to specify the grounds upon which it granted summary judgment, we will affirm the summary judgment if any theory expressly presented in the movant's motion for summary judgment is meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

An insurer is only required to defend a case against its insured if a petition alleges facts within the scope of the policy coverage. National Union Fire v. Merchants Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997); Fidelity & Guar. Ins. Underwriters Inc. v. McManus, 633 S.W.2d 787, 788 (Tex. 1982); Zamora v. Dairyland County Mut. Ins. Co., 930 S.W.2d 739, 742 (Tex. App.--Corpus Christi 1996, writ denied). Under the "eight corners" rule, the trier of fact must determine whether there is a duty to defend by the allegations in the pleadings and the language of the insurance policy. National Union, 939 S.W.2d at 141; Zamora, 930 S.W.2d at 742. The duty to defend is determined from the face of the pleading, without regard to the ultimate truth or falsity of the allegations. Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex. 1965).

We liberally construe the petition in determining the duty to defend, resolving any doubt in favor of the insured. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 825 (Tex. 1997). "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 the coverage of the policy." National Union, 939 S.W.2d at 141 (citing Heyden, 387 S.W.2d at 26). The question of an insurer's duty to defend is a matter of law, which we review de novo. King v. Dallas Fire Ins. Co., 27 S.W.3d 117, 121 (Tex. App. Houston [1st Dist.] 2000, Rule 53.7(f) motion filed Nov. 7, 2000); State Farm Gen. Ins. Co. v. White, 955 S.W.2d 474, 475 (Tex. App. Austin 1997, no writ).

The insurance policy in the instant case provides, in relevant part:

Advertising injury liability. We'll pay amounts any protected person is legally required to pay as damages for covered advertising injury that:

* results from the advertising of your products, work or completed work; and

* is caused by an advertising injury offense committed while this agreement is in effect.

* * * *

Advertising injury means injury, other that bodily injury or personal injury, caused by an advertising injury offense.

Advertising injury offense means any of the following offenses:

* Libel or slander

* Making known to any person or organization written or spoken material that belittles the products, work or completed work of others.

* Making known to any person or organization written or spoken material that violates an individual's right of privacy.

* Unauthorized taking or use of any advertising idea, material, slogan, style or title of others.

Advertising means attracting the attention of others by any means for the purpose of seeking customers or increasing sales or business.

* * * *

Breach of contract. We won't cover advertising injury that results from the failure of any protected person to do what is required by a contract or agreement.

But we won't apply this exclusion to the unauthorized taking or use of advertising ideas if the contract or agreement doesn't specifically prohibit such taking or use.

Appellants contend that the lawsuit filed against them by Resources is covered under the advertising injury provision of the policy. Specifically, appellants contend Resources alleged an advertising injury by pleading that appellants used and misused Fuel's name in contravention of the dissolution agreements. As appellants note, the policy provides that an advertising injury includes the unauthorized taking or use of any title of others.

St. Paul contends that even if the petition alleged an advertising injury, any advertising injury arising from a breach of contract, according to the policy, is expressly excluded from coverage. Because the alleged advertising injury (i.e., the unauthorized taking or use of title) arose from breach of the dissolution agreement, which assigned all rights to the corporate name and logo to Resources, St. Paul contends any such injury is excluded from coverage. We agree.

The dissolution agreements granted Resources all rights to the corporate name and logo of Fuels. Nonetheless, according to Resources's petition, appellants engaged in the unauthorized use and misuse of the name of Fuels. Thus, the alleged advertising injury, if any, resulted from the alleged breach of the dissolution agreement by appellants. Consequently, St. Paul did not have a duty to defend appellants against Resources under the advertising injury provision of the policy.

Appellants contend that the exclusion for advertising which results from breach of an agreement is inapplicable because the dissolution agreements did not expressly prohibit the taking or use of Fuel's name. The relevant provision in the policy is as follows, "[b]ut we won't apply this exclusion to the unauthorized taking or use of advertising ideas if the contract or agreement doesn't specifically prohibit such taking or use." Significantly, this statement is limited to the taking of advertising ideas. Under the terms of the policy, the unauthorized taking or use of any advertising idea is an advertising injury offense in addition to, and distinct from, the unauthorized taking or use of any advertising material, slogan, style or title of others. When we construe exclusions in an insurance policy, we must "attempt to give effect to all contract provisions so that none will be rendered meaningless." Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex.1998). Here, the policy distinguishes between advertising...