St. Paule Ins. v. Texas Dept. of Transp.

• Decision Date: 26 August 1999
• Citation: 999 S.W.2d 881
• Parties: (Tex.App.-Austin 1999) St. Paul Insurance Company, Appellant v. Texas Department of Transportation, Appellee NO. 03-98-00625-CV
• Court: Texas Court of Appeals

Page 881

999 S.W.2d 881 (Tex.App.-Austin 1999)

St. Paul Insurance Company, Appellant v. Texas Department of Transportation, Appellee

NO. 03-98-00625-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

August 26, 1999

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT NO. 97-12662-A, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING

Before Justices Jones, B. A. Smith and Yeakel

Bea Ann Smith, Justice

Affirmed

This is an appeal from a summary judgment granted in favor of the Texas Department of Transportation ("TxDOT") on its declaratory judgment action against the St. Paul Insurance Company. TxDOT sued seeking a declaration that St. Paul had a duty to defend it as an additional insured in connection with a lawsuit arising out of a highway construction project. In one issue on appeal, St. Paul claims the trial court erred in granting summary judgment in TxDOT's favor. We will affirm the trial court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

TxDOT contracted with J.D. Abrams, Inc. to construct a five-mile section of Beltway Eight outside Houston. The contract required Abrams, a general contractor, to provide commercial general liability ("CGL") insurance for TxDOT until the completion of the project. St. Paul issued a package policy to Abrams containing CGL protection for a one-year period beginning November 1, 1993. In the policy, St. Paul agreed to pay amounts that Abrams was legally required to pay as damages for covered bodily injury and property damage that occurred while the agreement was in effect. The policy outlined St. Paul's duty to defend:

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. We'll do so even if any of the allegations of any such claim or suit are groundless, false, or fraudulent. But we have no duty to perform other acts or services.

The policy also contained an additional-insured endorsement, which extended coverage to any person or organization that Abrams was required by contract to show as an "additional protected person." However coverage was only provided for covered injury or damage that resulted from Abrams' work for TxDOT or TxDOT's general supervision of that work.¹

In August 1995, a class-action lawsuit was filed in Brazoria County against TxDOT, Abrams, and others by a group of property owners and residents of northern Brazoria County. The lawsuit alleges that the construction of Beltway Eight caused flooding that damaged the Brazoria plaintiffs' residences in October 1994; the Ninth Amended Petition is the only petition relevant in this appeal.² TxDOT demanded that St. Paul defend it as an additional insured. In a February 1997 letter to TxDOT, St. Paul stated: "St. Paul also expressly reserves its rights to allocate defense costs between any covered and non-covered claims and to recover from TxDOT the defense costs allocable to the defense of non-covered allegations. In particular, the defense costs allocable to the defense of TxDOT against the allegations that it negligently designed this project would not be covered under the St. Paul policy." In September, St. Paul wrote: "In summary, St. Paul does not deny coverage to TxDOT. St. Paul does recognizethere is some potential coverage for TxDOT but the more challenging issue is how do we handle TxDOT's defense." However, St. Paul refused to defend TxDOT, claiming that TxDOT would be adequately protected from vicarious liability by the defenses asserted by Abrams.

TxDOT then sued, seeking a declaration that St. Paul owed a duty to defend it in the Brazoria plaintiffs' lawsuit. In its motion for summary judgment, TxDOT argued that Texas law requires an insurer to defend the entire suit if any of the insured's claims are covered. TxDOT pointed out that the Brazoria plaintiffs' petition includes the following allegations: that the plaintiffs' damages were caused by the diversion of runoff stormwaters resulting in part from the construction of Beltway Eight; that TxDOT, Abrams and other defendants "designed, scheduled, constructed and supervised" the construction of Beltway Eight and its drainage channels; and that the government defendants TxDOT and Harris County Flood Control District "collectively, through their respective employees or representatives," committed acts that resulted in an invasion of the plaintiffs' property and constituted a nuisance. St. Paul responded that the policy required it to defend only covered claims, not the entire suit. The trial court severed the issue of St. Paul's duty to defend from TxDOT's claims for attorney's fees and costs; it then granted TxDOT's motion for summary judgment in the declaratory judgment action, declaring that TxDOT was entitled to "a reasonable non-conflicted legal defense."

In its sole issue on appeal, St. Paul asserts that the trial court improperly granted summary judgment for TxDOT in its suit for declaratory judgment. St. Paul argues that the trial court erred because the Brazoria plaintiffs' petition "failed to allege facts or claims for damages that would trigger a duty to defend for an additional insured under the specific policy provisions at issue."

DISCUSSION

We review this summary judgment under well-established standards: (1) the movant for summary judgment has the burden of showing that there is no genuine issue of fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true; (3) every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. See Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Whether an insurance carrier owes a duty to defend under an insurance policy is a question of law that the appellate court reviews de novo. See State Farm Gen. Ins. Co. v. White, 955 S.W.2d 474, 475 (Tex. App.-Austin 1997, no pet.); State Farm Lloyds v. Kessler, 932 S.W.2d 732, 735 (Tex. App.-Fort Worth 1996, writ denied).

The duty to defend is broader than the duty to indemnify. See Texas Property & Cas. Ins. Guar. Ass'n v. Southwest Aggregates, Inc., 982 S.W.2d 600, 606 (Tex. App.-Austin 1998, no pet.); Colony Ins. Co. v. H.R.K., Inc., 728 S.W.2d 848, 850 (Tex. App.-Dallas 1987, no writ). Once coverage has been found for any portion of a suit, an insurer must defend the entire suit. See Lafarge Corp. v. Hartford Cas. Ins. Co., 61 F.3d 389, 393, 395 (5th Cir. 1995); St. Paul Surplus Lines Ins. Co. v. Dal-Worth Tank Co., 917 S.W.2d 29, 56 (Tex. App.-Amarillo 1995), rev'd in part on other grounds, 974 S.W.2d 51 (Tex. 1998); Maryland Cas. Co. v. Moritz, 138 S.W.2d 1095, 1097 (Tex. Civ. App.-Austin 1940, writ ref'd). This is because the insurance contract obligates the insurer to defend its insured, not to provide a partial defense. See Southwest Aggregates, 982 S.W.2d at 606.

The "Eight Corners" Rule

An insurer's duty to defend is determined by the allegations in the pleadings and the language of the insurance policy. See National Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997); Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997); American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847-48 (Tex. 1994). This is known as the "eight corners" rule.³ See National Union, 939 S.W.2d at 141. In applying the eight corners rule, we give the allegations in the petition a liberal interpretation. As the supreme court has explained:

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. Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in the insured's favor.

Id. (quoting Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965)). In reviewing the underlying pleadings, the court must focus on the factual allegations that show the origin of the damages rather than on the legal theories alleged. See id; Adamo v. State Farm Lloyds Co., 853 S.W.2d 673, 676 (Tex. App.-Houston [14th Dist.] 1993, writ denied) ("It is not the cause of action alleged that determines coverage but the facts giving rise to the alleged actionable conduct."). The factual allegations against the insured should be considered in light of the policy provisions without reference to their truth or falsity and without reference to what the parties know or believe to be the true facts. See Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973). However, the court may not read facts into the pleadings, may not look outside the pleadings, and may not "imagine factual scenarios which might trigger coverage." National Union, 939 S.W.2d at 142.

The Allegations in the Brazoria Plaintiffs' Petition

The petition names twenty individuals and corporations as defendants and divides them into three groups: Government Entities, Engineers/Contractors, and Developers. TxDOT is included as a Government Entity and Abrams as an Engineer/Contractor. In a section entitled "Factual Background" the petition states:

On or about October 17 and 18, 1994, Plaintiffs and those they seek to represent, suffered extensive damages to their persons, residences, and property located in northern Brazoria County and encompassed in the Class Area. Said damages were due in whole or in part to diversion of run-off stormwaters in the Clear Creek and Mary's Creek watersheds and the subsequent presence of floodwaters...