TIG Ins. Co. v. Sedgwick James of Washington

• Decision Date: 09 January 2002
• Docket Number: No. 01-20235,01-20235
• Parties: (5th Cir. 2002) TIG Insurance Company and Safety Lights Sales & Leasing, Inc., Plaintiffs-Appellants, v. Sedgwick James of Washington and Lumbermens Mutual Casualty Co., Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 754

276 F.3d 754 (5th Cir. 2002)

TIG Insurance Company and Safety Lights Sales & Leasing, Inc., Plaintiffs-Appellants, v. Sedgwick James of Washington and Lumbermens Mutual Casualty Co., Defendants-Appellees.

No. 01-20235

UNITED STATES COURT OF APPEALS FIFTH CIRCUIT

January 9, 2002

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

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

Before Smith and Emilio M. Garza, Circuit Judges, and Cummings,^* District Judge.

Jerry E. Smith, Circuit Judge:

The district court dismissed TIG Insurance Co. ("TIG") and Safety Lights Sales & Leasing Co.'s ("Safety Lights") claims to recover for the costs of defending a lawsuit; the insurance seller's certificate of insurance added Safety Lights as an additional insured but disclaimed the power to alter an underlying insurance policy. The parties agree that the certificate of insurance's express limitations combine with the policy's terms to bar coverage contractually. Agreeing with the district court that TIG and Safety Lights also failed to provide summary judgment evidence sufficient to support claims for estoppel, mutual mistake, fraudulent misrepresentation, or negligent misrepresentation, we affirm.

I.

Lumbermens Mutual Casualty Insurance Company ("Lumbermens") issued two general liability insurance policies to Corporate Express, Inc. ("Corporate Express"). Sedgwick James of Washington ("Sedgwick") brokered the general liability contracts among Corporate Express, its subsidiaries, and Lumbermens.

Corporate Express is the parent corporation of Corporate Express Delivery Systems, Inc. ("Corporate Express Delivery"), which owns several delivery companies, including U.S. Delivery Systems ("U.S. Delivery"), Vianet, Inc. ("Vianet"), and United Transnet, Inc. ("United Transnet"). Sedgwick issued two insurance policies to Corporate Express and its subsidiaries. Policy No. 5AA 038 362-00 ("Policy 362") originally covered United Transnet. An endorsement added Corporate Express Delivery, U.S. Delivery, and Vianet as named insureds. Policy 362 is the only Lumbermens policy that covers U.S. Delivery for general liability; that policy does not provide any additional insured coverage.

Corporate Express and its non-delivery, service companies were covered under Policy No. 5AA 038 300-01 ("Policy 300"), which excluded Corporate Express Delivery from coverage but did provide additional insured coverage "where required by written or oral contract" with respect to "liability arising out of your [the named insured's] operations on premises owned or rented by or to you [the named insured]."

U.S. Delivery is a subsidiary of Corporate Express Delivery and insured only under Policy 362. One of U.S. Delivery's subsidiaries, Vianet, did business with Safety Lights, which, in March 1996, sent a letter to Vianet, requesting, within fifteen days, a certificate of insurance ("COI") that should evidence "waiver of subrogation and additional insured in favor of Safety Lights."

In February 1997, Sedgwick issued a COI to Safety Lights. The top of the certificate stated, "This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend, or alter the coverage afforded by the policies below." The certificate erroneously listed Safety Lights as an additional insured under Policy 362.¹

In June 1997, U.S. Delivery hired Guy Wright, an independent contractor, to deliver a steel plate to Safety Lights's premises. Wright was injured when the plate was dropped on his hand during unloading. Wright sued Safety Lights. TIG, as Safety Lights's insurer, defended, incurring defense costs of $38,650.02, and settled for $235,000.

II.

TIG and Safety Lights sued Sedgwick and Lumbermens in state court, and Lumbermens removed to federal court. In the amended complaint, plaintiffs sought a declaration that defendants were obligated to defend and indemnify the Wright suit. In the alternative, plaintiffs sought reformation of Policy 362 to conform to the "intent of the parties" and provide coverage for Safety Lights. Plaintiffs also alleged violations of the Texas Insurance Code, Texas Deceptive Trade Practices Act, breach of contract, fraudulent and negligent misrepresentation, breach of the duty of good faith and fair dealing, and fraud. The parties moved for summary judgment on all claims.

The court granted summary judgment for Sedgwick and Lumbermens on the agency claims, plea for reformation, and claims of misrepresentation. TIG and Safety Lights appeal that judgment.

The same standards for summary judgment bind us and the district court. McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 301 (5th Cir. 1993). Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," when viewed in the light most favorable to the non-movant, "show that there is no genuine issue as to any material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 248. The court must draw all justifiable inferences in favor of the non-moving party. Id. at 255. Once the moving party has initially shown "that there is an absence of evidence to support the non-moving party's cause," Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the non-movant must come forward with "specific facts" showing a genuine factual issue for trial. Fed. R. Civ. P. 56(e); Matsushita Elec. Indus. Corp. v. Zenith Radio, 475 U.S. 574, 587 (1986). Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial. SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993).

III.

TIG asserts that Sedgwick's COI should obligate Lumbermens because Sedgwick acted as Lumbermens's agent. Although laying out the agency relationship will aid us in resolving other matters, TIG mistakenly assumes that merely establishing an agency relationship will create liability for Lumbermens. Lumbermens delegated the power to issue COI's to Sedgwick, but those COI's could not alter the underlying policy's terms or create liability. Because the COI expressly disclaims any power to alter the underlying policy, and the parties agree that Lumbermens withheld from Sedgwick the power to alter policies, Sedgwick's issuance of the COI did not create coverage.

A.

Texas law classifies insurance sellers into three categories brokers, soliciting agents, and recording agents. A seller can have an agency relationship with both the insurer and insured. McKillip v. Employers Fire Ins. Co., 932 S.W.2d 268, 270 (Tex. App. Texarkana 1996, no writ). Regardless of the agency relationship, the agent's actual or apparent authority to perform a task can create vicarious liability. Duzich v. Marine Office of Am. Corp., 980 S.W.2d 857, 865 (Tex. App. Corpus Christi 1998, writ denied).

An insurance seller acts as a broker when a potential insured approaches the insurance seller and the insurance seller only submits an application to the insurance agency. McKillip, 932 S.W.2d at 270. If the insurance seller has contact only with the buyer, the seller is a broker. Id.; Employers Cas. Co. v. Mireles, 520 S.W.2d 516, 520 (Tex. Civ. App. San Antonio 1975, writ ref'd n.r.e.).

An insurance seller acts as a soliciting agent when the seller contacts the insured but the seller lacks the power to modify, change, or waive the terms of the policy. Tex. Ins. Code Ann. art. 21.04 (Vernon Supp. 2001); Maccabees Mut. Life Ins. Co. v. McNiel, 836 S.W.2d 299, 231-32 (Tex. App. Dallas 1992, writ denied). The soliciting agent has limited actual authority to make representations on behalf of the insurance company. Maccabees, 836 S.W.2d at 231-32.

A recording agent solicits insurance, has the power to write policies of insurance, binds the insurer on risks, and collects premiums on behalf of the insurer. Tex. Ins. Code Ann. art 21.14 (Vernon Supp. 2001); Maccabbees, 836 S.W.2d at 231-32. The recording agent is closest to the principal, and his actions will always bind the principal. Lexington Ins. Co. v. Buckingham Gate, Ltd., 993 S.W.2d 185, 198 (Tex. App. Corpus Christi 1999, pet. denied).

If the insurance seller is not a broker, soliciting agent, or recording agent, the seller falls into the catch-all category of the insurer's agent. Tex. Ins. Code. Ann. art. 21.02 (Vernon Supp. 2001); Maccabees, 836 S.W.2d at 232. Sellers in this category lack the power to modify the terms of a policy. Tex. Ins. Code art. 21.02 (stating that this article "does not authorize an agent to . . . alter, amend, modify, waiver, or change a term or condition of an insurance policy . . .").

The district court correctly categorized Sedgwick as a soliciting agent, relying on the agency agreement between Sedgwick and Lumbermens to reach this conclusion. The agency agreement authorized Sedgwick to solicit insurance on behalf of Lumbermens but permitted Sedgwick to bind Lumbermens only "to the extent specific authority [was] granted in the schedule(s) attached." Under Policy 362, Sedgwick had the authority to issue COI's and binders but lacked the authority to modify the policy itself.

On appeal, TIG argues that Lumbermens granted Sedgwick the power to issue COI's. The certificates of insurance, however, expressly state that they do not modify the underlying insurance policy. The COI's comport with the agency agreement; Lumbermens granted Sedgwick the power to solicit and negotiate but not to bind. The district court properly categorized Sedgwick as a soliciting agent.

B.

TIG contends that, regardless of the statutory category in which Sedgwick falls, Lumbermens granted Sedgwick the...