State Farm Fire & Cas. Co. v. Wade

• Decision Date: 05 March 1992
• Docket Number: No. 13-91-133-CV,13-91-133-CV
• Parties: STATE FARM FIRE & CASUALTY COMPANY, Appellant, v. Ted WADE, Administrator of the Estate of Norris O'Dell Williamson, Deceased, Appellee.
• Court: Texas Court of Appeals

Page 448

827 S.W.2d 448

STATE FARM FIRE & CASUALTY COMPANY, Appellant, v. Ted WADE, Administrator of the Estate of Norris O'Dell Williamson, Deceased, Appellee.

No. 13-91-133-CV.

Court of Appeals of Texas Corpus Christi.

March 5, 1992.

Rehearing Overruled April 2, 1992.

Portia Pott, Thornton, Summers, Biechlin, Dunham & Brown, San Antonio, for appellant.

Michael Terry, Edwards & Terry, Corpus Christi, for appellee.

Before KENNEDY, DORSEY and GILBERTO HINOJOSA, JJ.

OPINION

KENNEDY, Justice.

State Farm Fire & Casualty Insurance (State Farm) appeals following the dismissal of their petition for declaratory relief after the trial court sustained appellee Ted Wade's special exceptions. We reverse and remand.

In the declaratory action, State Farm sought to obtain an interpretation of a business pursuit exclusion from insurance coverage in a personal boatowner's liability policy and a declaration that State Farm did not owe a duty to defend a lawsuit currently pending against the estate of one of its insured. By two points of error, State Farm contends that its declaratory judgment action was erroneously dismissed because 1) its petition states a cause of action for which relief may be granted and 2) it is not limited to the face of the pleadings in the underlying suit in determining the applicability of a policy exclusion in its personal boatowner's liability policy.

The facts giving rise to this appeal are that at the time of Norris O'Dell Williamson's death, on or about November 20 1988, he had in effect a standard boatowner's liability insurance policy with State Farm insuring his 1987 seventeen-foot VIP outboard boat. Williamson and a passenger, David John Holland, disappeared and were later found drowned in the Gulf of Mexico after the pair departed from Port O'Connor, Texas, in Williamson's seventeen-foot VIP boat. As a result of the accident, Holland's beneficiaries filed a wrongful death action against the administrator of Williamson's estate, Ted Wade. Williamson's estate then called State Farm to defend it in Holland's lawsuit and to indemnify it for any damages awarded. State Farm provided a defense but also brought a declaratory action. State Farm brought the declaratory action to contest its duty to defend Williamson's estate in the Holland lawsuit.

In response to the declaratory action, Williamson's administrator, Wade, filed special exceptions asserting that State Farm's petition for declaratory judgment failed to set forth a cause of action for which relief may be granted. Additionally, Wade asserted by special exception that because the factual allegations in the Holland wrongful death petition, which Wade contends are controlling, did not allege facts which establish the applicability of the business pursuit exclusion State Farm relies upon, then declaratory relief may not be granted, and State Farm has a duty to defend Williamson's estate in the Holland lawsuit.

The trial court sustained Wade's special exceptions and ordered State Farm to replead in conformity with the special exceptions. State Farm then filed its Plaintiff's First Amended Original Petition setting out specific language in the Holland petition which it contended raised the business pursuit exclusion. In addition, State Farm contended that if the relevant Holland pleadings are inconclusive or do not even address the issue giving rise to the insurer's defense (here the business pursuit exclusion from coverage), the insurer is not precluded from asserting such a policy defense in a declaratory judgment action.

In response to State Farm's amended petition, Wade filed more special exceptions asserting the same complaints and asking the court to dismiss State Farm's declaratory judgment action. The trial court sustained Wade's second set of special exceptions and dismissed State Farm's claims against Wade. State Farm appeals.

By point one, State Farm contends that the trial court erred in sustaining Wade's special exceptions and dismissing State Farm's suit for declaratory relief because State Farm's first amended original petition stated a cause of action for which relief may be granted. We agree.

In Texas, courts recognize an insurance company's ability to bring a declaratory judgment action to determine whether it has a duty to defend an insured prior to a determination of liability in the underlying lawsuit. Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 (Tex.1982); Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 332 (Tex.1968). The special exceptions were improperly sustained and State Farm's first amended original petition was improperly dismissed. We sustain point one and reverse and remand to the trial court.

In view of a remand, we make the following observations. Williamson's State Farm insurance policy was a private boatowner's policy, not a more expensive commercial boatowner's policy. The standard policy consisted of a basic insuring agreement establishing coverage, specific exclusions from coverage, and finally, amendments and endorsements which, in return for a higher premium, would modify or limit the scope of the exclusions. At issue is the provision in the policy which excluded coverage arising from the use of the boat in a business pursuit. The policy provided in pertinent part,

EXCLUSIONS,

This policy does not apply: to an occurrence while the boat to which the insured motor is attached, or the boat insured hereunder, is used as a public livery conveyance for carrying passengers for compensation, or rented to others, or used for any other business pursuit, or while operated (except with respect to a sailboat) in any official race or speed test.

The pertinent factual allegations in the Holland petition were:

III.

On or about November 20, 1988, David John Holland, son of Plaintiff Lilly Holland, disappeared offshore in the Gulf of Mexico and was found drowned on November 25, 1988, on St. Jose Island in the Gulf of Mexico just off the Texas coast. The decedent David John Holland, age 37 at the time of his death, was last seen leaving the Brown & Root dock at Port O'Connor, Texas in an 18 ft. outboard "VIP" boat owned and operated by Defendant Norris O'Dell Williamson, deceased, who was also found drowned in the Gulf of Mexico, separate and apart from his boat and David John Holland.

IV.

On November 20, 1988, at approximately 6:30 p.m., Norris O'Dell Williamson, Captain of the 105 ft. crew boat "C" Ravin departed Port O'Connor, alongside passenger Holland, with the intended destination of the boat "C" Ravin grounded at Matagorda Island in the Gulf of Mexico. The decedent David John Holland was accompanying him as a pleasure passenger and not in any employment capacity with Williamson, while he, Mr. Holland, was waiting for high tide when he could assist a salvage operation in freeing the "C" Ravin. The salvage-type operation for the "C" Ravin was being conducted by Homer Roberson, doing business as Roberson Marine Sales, Inc., under a contract from Mako Marine Operators, the owners of the "C" Ravin. David Holland was to assist in this operation when the tide came in around 3:30 a.m. the next morning.

Generally, an insurer's duty to defend its insured is determined by the allegations against the insured without regard to the truth or falsity of those allegations, and all doubts are resolved in favor of the insured. Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973); Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 24-25 (Tex.1965); Fort Worth Lloyds v. Garza, 527 S.W.2d 195, 205 (Tex.Civ.App.--Corpus Christi 1975, writ ref'd n.r.e.).

At the same time, however, an insurer is required to defend its insured if and only if a cause of action asserted in a petition is within the policy coverage. McManus, 633 S.W.2d at 788; Heyden Newport Chemical, 387 S.W.2d at 24. Furthermore, the insurer is entitled to rely on the plaintiff's allegations in determining whether the facts are within the coverage. McManus, 633 S.W.2d at 788. If the petition only alleges facts excluded by the policy, then the insurer is not required to defend. Id. This, however, does not address the issue present in this case where the facts in the petition do not establish whether there is even a potential for coverage under the private boatowner's liability policy.

The problem here is that by reading the underlying petition broadly, in favor of the insured, it is impossible to know how the boat covered by the policy was used when it left the Brown & Root dock at Port O'Connor. In determining whether or not the personal boatowner's liability policy even possibly provides coverage, the use of the boat is critical.

State Farm's position is that when allegations in pleadings filed against the insured are silent or neutral about an asserted policy exclusion, as they are in this instance, the insurer is not foreclosed from litigating the application of an exclusion by using evidence and facts outside the pleadings in the underlying wrongful death suit. State Farm points out that it does not challenge the veracity of the facts alleged in the underlying pleadings. Rather, its position is that independent of the truth or falsity of the allegations in the Holland petition, the business pursuit exclusion may indicate no coverage and thereby relieve them of their obligation to defend the lawsuit.

When the petition in the underlying lawsuit does not allege facts sufficient for a determination of whether those facts, even if true, are covered by the policy, the evidence adduced at the trial in a declaratory judgment action may be considered along with the allegations in the underlying petition. Gonzales v. American States Ins. Co., 628 S.W.2d 184, 186 (Tex.App.--Corpus Christi 1982, no writ).

The issue of whether coverage is lacking under the policy cannot be litigated in the underlying lawsuit because it would conflict with the interest of the insured. Employers Casualty Co....