St. Paul Fire & Marine v. Green Tree Financial Corp.

• Decision Date: 23 April 2001
• Docket Number: No. 00-10237,00-10237
• Citation: 249 F.3d 389
• Parties: (5th Cir. 2001) ST. PAUL FIRE & MARINE INSURANCE COMPANY; ST. PAUL MERCURY INSURANCE GROUP, Plaintiffs-Appellants, v. GREEN TREE FINANCIAL CORP.-TEXAS, Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 389

249 F.3d 389 (5th Cir. 2001)

ST. PAUL FIRE & MARINE INSURANCE COMPANY; ST. PAUL MERCURY INSURANCE GROUP, Plaintiffs-Appellants, v. GREEN TREE FINANCIAL CORP.-TEXAS, Defendant-Appellee.

No. 00-10237

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

April 23, 2001

Appeal from the United States District Court for the Northern District of Texas

Before GARWOOD, PARKER, and DENNIS, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Plaintiff-Appellant St. Paul Fire & Marine Insurance Company ("St. Paul") argues that the district court erred by entering summary judgment in favor of Green Tree Financial Corp.-Texas ("Green Tree"). The court concluded that St. Paul had a duty to defend Green Tree in a suit involving Green Tree's debt collection practices.¹ We must determine whether the allegations against Green Tree potentially state a cause of action covered under St. Paul's commercial insurance policies.

I. Facts

On April 1, 1993, Green Tree filed suit against Sylvia Lazo and Eduardo Saenz to collect a debt that Lazo and Saenz owed after purchasing a mobile home. Eduardo Saenz and Sylvia Corona, the occupants of the mobile home, asserted counterclaims against Green Tree for wrongful debt collection practices, for breach of a retail installment contract, and for misrepresentations and breach of warranties. The claimants alleged that Green Tree made frequent rude and abusive telephone calls from 1986 to 1993 in an attempt to collect the debt. On October 25, 1993, Green Tree notified St. Paul of the counterclaims.²

St. Paul assumed Green Tree's litigation expenses, but reserved its rights to contest coverage.³ In February of 1995, St. Paul settled with Saenz and Corona over Green Tree's objection. St. Paul filed for declaratory relief in federal district court asserting that it had no duty to defend or indemnify Green Tree. The district court, in two orders granting Green Tree's motions for summary judgment, held that St. Paul had a duty to defend Green Tree under either the personal injury or bodily injury provisions of the general commercial liability policies in effect at the time of the alleged wrongful acts.

II. Analysis

We review a district court's order granting summary judgment de novo. See Guaranty Nat'l Ins. Co. v. Azrock Indus. Inc., 211 F.3d 239, 242 (5th Cir. 2000). Summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Canutillo Indep. School Dist. v. National Union Fire Ins. Co., 99 F.3d 695, 700 (5th Cir. 1996).

A. The Duty to Defend Under Texas Law

Texas courts enforce an insurer's duty to defend even when an insurer's duty to indemnify is not yet settled. See St. Paul Ins. Co., 999 S.W.2d at 887. An insurance company's duty to defend is broader than its duty to indemnify. See St. Paul Ins. Co. v. Texas Dep't of Transp., 999 S.W.2d 881, 884 (Tex. App. -Austin 1999, writ denied). If coverage exists for any portion of a suit, the insurer must defend the insured in the entire suit. See id.

Texas courts apply the "eight corners" or "complaint allegation" rule to determine whether an insurer has a duty to defend. See Potomac Ins. Co. of Illinois v. Jayhawk Medical Acceptance Corp., 198 F.3d 548, 551 (5th Cir. 2000). Under the "eight corners" rule, courts must first look to the factual allegations in the pleadings to ascertain whether the alleged conduct potentially requires coverage. St. Paul Ins. Co., 999 S.W.2d at 884.

[A]n insurer's contractual duty to defend must be determined solely from the face of the pleadings, without reference to any facts outside the pleadings. The duty to defend arises when a third party sues the insured on allegations that, if taken as true, potentially state a cause of action within the terms of the policy.

Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 155 (Tex. App. -Houston [1st Dist.] 1990, writ denied)(citations omitted). The focus of this inquiry is on the facts alleged, not on the actual legal theories. See Maayeh v. Trinity Lloyds Ins. Co., 850 S.W.2d 193, 195 (Tex. App. -Dallas 1992, no writ). "Where the complaint does not state facts sufficient to clearly bring the case within or without 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 Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). The factual allegations in a third party's complaint must be liberally construed in favor of the insured. See Terra Int'l, Inc. v. Commonwealth Lloyd's Ins. Co., 829 S.W.2d 270, 272 (Tex. App. -Dallas 1992, writ denied).

After assessing the potential causes of action in the pleadings, courts must determine whether the policy covers the alleged conduct. Any ambiguity in an insurance policy is resolved in favor of the insured. See National Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 554 (Tex. 1991). If the terms of the policy are not ambiguous, then the words must be given their plain meaning. See Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984). "Language in insurance provisions is only ambiguous if the court is uncertain as to which of two or more meanings was intended." Houston Petroleum Co., 830 S.W.2d at 155. "If multiple interpretations are reasonable, the court must construe the contract against the insurer . . .." Travelers Indemnity Co. v. Citgo Petroleum Corp., 166 F.3d 761, 769 (5th Cir. 1999).

B. The Factual allegations Against Green Tree

The relevant facts set out in Carona and Saenz' eleventh amended counterclaim are as follows:

. . . The debt collection activities of which Sylvia Corona and Eduardo Saenz complain include frequent calls to the homes and workplaces of Sylvia Corona, Eduardo Saenz, and their families during 1986, 1987, 1988, 1989, 1990, 1991, 1992, and 1993, using abusive and rude language. The calls were as frequent as three or more times per week. Many times the callers threatened to inform the employers of Sylvia Corona and Eduardo Saenz that they were trying to collect a debt from Sylvia Corona and Eduardo Saenz. The callers told Eduardo Saenz' mother that her son was delinquent in his payments on a debt to GREEN TREE. The calls continued even after Sylvia Corona and Eduardo Saenz and his mother told GREEN TREE that the calls were making them sick and causing them extreme mental anguish. On at least one occasion GREEN TREE called and said they were going to go out to the land and pick up the trailer while nobody was at home.

Corona and Saenz pleaded causes of action for negligence, statutory and common law unfair debt collection practices, and claims under the Deceptive Trade Practices Act. The pleadings requested actual damages, costs, and any other relief to which the claimants were legally entitled.

C. The General Commercial Liability Policies

Green Tree was insured under numerous policies with St. Paul during the eight years during which the alleged conduct occurred. With a few exceptions, the language in the policies remained the same.

St. Paul Commercial General Liability Policy CK06303193: June 30, 1989 Through June 30, 1990

What This Agreement Covers

Personal injury and advertising injury liability. We'll pay amounts any protected person is legally required to pay as damages for covered personal injury or advertising injury that's caused by an offense committed while this agreement is in effect.

Personal Injury means injury, other than bodily injury, caused by any of the following offenses that result from your business activities, other than advertising, broadcasting, publishing or telecasting done by of for you:

-false arrest, detention, or imprisonment;

-malicious prosecution;

-wrongful entry or wrongful eviction;

-libel or slander;

-written or spoken material made public which belittles the products or work of others;

-written or spoken material made public which violates an individual's right of privacy.

Right and duty to defend. We'll have the right and duty to defend any claim or suit for covered injury or damage made or brought against any protected person . . ..

Claim means a demand in which damages are alleged.

Suit means a civil proceeding in which damages are alleged. And it includes an arbitration proceeding for such damages to which you must submit or submit with our consent.

Injury or damage means bodily injury, personal injury, advertising injury or property damage or fire damage.

Exclusions-What This Agreement Won't Cover

Deliberately breaking the law. We won't cover personal injury or advertising injury that results if the protected person knowingly breaks any criminal law.

Green Tree was also covered under an Umbrella Policy with St. Paul through June of 1987. The Umbrella Policy contains the same language as the above policy with two relevant exceptions. First, the Umbrella Policy does not limit coverage for invasion of privacy to "written or spoken material made public." Second, the Umbrella Policy does not have an exclusion from coverage for personal injury that results from the insured's deliberate unlawful conduct.

D. St. Paul's Duty to Defend

St. Paul argues that it was not obligated to defend Green Tree because the claimants' pleadings did not specifically allege an offense covered by the personal injury terms of its policies. St. Paul contends that its use of the word "offense" in the definition of personal injury raises the level of pleading specificity that is generally required to precipitate its duty to defend. According to St. Paul, a third party's pleadings must name a specific offense listed in the personal injury definition before it has a duty to pay the costs of the insured's defense.

Under Texas law, a third party's pleadings need not allege a specific offense to evoke an insurer's duty...