Zurich American Ins. Co. v. Nokia, Inc., 06-1030.

Citation268 S.W.3d 487
Decision Date29 August 2008
Docket NumberNo. 06-1030.,06-1030.
PartiesZURICH AMERICAN INSURANCE COMPANY, Federal Insurance Company, and National Union Fire Insurance Company, Petitioners, v. NOKIA, INCORPORATED, Respondent.
CourtSupreme Court of Texas

Thomas R. Phillips, Joseph R. Knight, Jennifer Lee Cafferty, Baker & Botts L.L.P., Austin, TX, Jeffrey S. Levinger, Hankinson Levinger LLP, Stephanie Dooley Nelson, Rebecca Lynn Visosky, Carrington Coleman Sloman & Blumenthal, L.L.P., Allyson Newton Ho, Baker & Botts L.L.P. Michael W. Huddleston, J. Stephen Gibson, Shannon Gracey Ratliff & Miller, Dallas, TX, Phillip R. King, Eric D. Stubenvoll, Darryl Durham, Jerome C. Studer, Meckler, Bulger & Tilson, LLP, Chicago, IL, Kirk C. Chamberlin, Chamberlin Keaster & Brockman LLP, Encino, CA, Nicholas R. Andrea, Lan Vu, Charleston Revich & Chamberlin, L.L.P., Los Angeles, CA, James N. Isbell, Thompson, Coe, Cousins & Irons L.L.P., Kenneth G. Engerrand, Brown Sims, P.C., Robin Howard Wexler, Houston, TX, Russell H. McMains, Law Offices of Russell H. McMains, Corpuys Christi, TX, for Petitioners.

Alexandra Giselle White, Brian D. Melton, Eric J. Mayer, Susman Godfrey LLP, Houston, TX, Ian B. Cosby, Susman Godrey LLP, Seattle WA, for Respondent.

D. Todd Smith, Austin, TX, Mary Olga Lovett, Greenberg Traurig LLP, Houston, TX, for Amici.

Chief Justice JEFFERSON delivered the opinion of the Court, in which Justice O'NEILL, Justice WAINWRIGHT, Justice MEDINA, Justice GREEN, Justice JOHNSON, and Justice WILLETT joined.

A wireless telephone manufacturer, sued in a number of putative class actions alleging that radiation emitted by the phones caused biological injury, turned to its insurers, who had agreed to defend claims seeking damages because of bodily injury. After initially providing a defense, the insurers later sought a declaration that they had no duty to do so. Because we conclude that most of the underlying suits seek damages because of bodily injury, we modify the court of appeals' judgment and, as modified, affirm.

I Factual and Procedural Background

Nokia, Incorporated, a Texas corporation, is the world's largest manufacturer of wireless telephone handsets. Nokia and other wireless telephone manufacturers were sued in a number of putative class action cases filed in various courts across the country. The consumer-plaintiffs in those cases alleged that radio frequency radiation (RFR) from wireless phones causes "biological injury."

Nokia tendered the defense of one of these cases to Zurich American Insurance Company, from which it had purchased several commercial general liability (CGL) insurance policies covering the years 1985-89 and 1995-2000. Zurich agreed to defend Nokia but reserved its right to later contest its obligation to defend or indemnify. Nokia's other insurers, National Union Fire Insurance Company1 and Federal Insurance Company,2 followed suit.

Seeking to resolve the coverage issue, Zurich sued Nokia, National Union, and Federal in Dallas County and sought a declaration that Zurich had no duty to defend or indemnify Nokia and that Zurich was not responsible for defense or indemnity payments made by National Union or Federal. Zurich also sought contribution and subrogation against all defendants. National Union and Federal cross-claimed against Nokia asserting, among other things, that they had no duty to defend or indemnify Nokia.

The trial court granted the insurers' motion for summary judgment. After Nokia tendered new and amended complaints in the underlying actions, Zurich filed an amended motion for summary judgment. At issue in the various motions were the following five cases (the "MDL cases"):

1. Pinney et al. v. Nokia, Inc., et al., 216 F.Supp.2d 474 (D.Md.2002), originally filed in the Circuit Court for Baltimore City, Maryland;

2. Farina v. Nokia, Inc., et al., 216 F.Supp.2d 474 (D.Md.2002), originally filed in the Court of Common Pleas, Philadelphia County, Pennsylvania;

3. Gilliam et al. v. Nokia, Inc., et al., 216 F.Supp.2d 474 (D.Md.2002), originally filed in the Supreme Court of the State of New York;

4. Gimpelson et al. v. Nokia, Inc., et al., 216 F.Supp.2d 474 (D.Md.2002), originally filed in the Superior Court of Fulton County, State of Georgia; and

5. Naquin et al. v. Nokia, Inc., et al., 216 F.Supp.2d 474 (D.Md.2002), originally filed in the Civil District Court, Parish of Orleans, State of Louisiana;3 plus a sixth action, Dahlgren v. Audiovox Commc'ns. Corp., et al., Case No. 02-0007884, in the Superior Court of the District of Columbia.

The trial court granted Zurich's amended motion for summary judgment and signed a judgment declaring, in pertinent part, that Zurich, National Union, and Federal4 had no duty to defend or indemnify Nokia in the MDL cases or in Dahlgren. The court ordered that Nokia take nothing on its counterclaims for declaratory relief regarding the duty to defend, breach of contract, failure to make prompt payment, breach of the duty of good faith and fair dealing, and for violation of article 21.21 of the Texas Insurance Code. The trial court severed the adjudicated claims, and Nokia appealed.

The court of appeals reversed as to the MDL cases, holding that, because (1) the complaints alleged claims for "bodily injury" and sought "damages because of bodily injury"; and (2) the "business risk" exclusions did not apply, the insurers had a duty to defend Nokia. 202 S.W.3d 384, 392. As to Dahlgren, in which the plaintiffs had explicitly disclaimed personal injuries and sought only economic and related equitable relief, the court of appeals affirmed the trial court's judgment and held that the insurers had no duty to defend Nokia. Id. at 392-93. Finally, the court of appeals held that, in light of its determination that the insurers had a duty to defend the MDL cases, the trial court's ruling that there was no duty to indemnify Nokia in those cases was premature. Id. at 393. Thus, the court of appeals reversed and remanded that portion of the trial court's judgment.5 Id.

The insurers petitioned this Court for review, arguing that they had no duty to defend the MDL cases, as the complaints did not state claims for bodily injury or seek damages because of bodily injury.6 We granted the petitions for review.7 51 Tex. Sup.Ct. J. 126 (Nov. 30, 2007).

II Duty to Defend

In exchange for premiums paid, CGL insurers typically promise to defend and indemnify their insureds for covered risks. "[T]he duty to defend is distinct from, and broader than, the duty to indemnify." 14 LEE R. Russ & THOMAS F. SEGALLA, COUCH ON INSURANCE § 200:1 (3d ed. 2007) ("COUCH ON INSURANCE"). An insurer must defend its insured if a plaintiff's factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 310 (Tex.2006). Thus, an insurer may have a duty to defend but, eventually, no obligation to indemnify. Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex.1997).

In determining a duty to defend, we follow the eight-corners rule, also known as the complaint-allegation rule: "an insurer's duty to defend is determined by the third-party plaintiff's pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations." GuideOne, 197 S.W.3d at 308. Thus, "[e]ven if the allegations are groundless, false, or fraudulent the insurer is obligated to defend." 14 COUCH ON INSURANCE § 200:19. We resolve all doubts regarding the duty to defend in favor of the duty, King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002), and we construe the pleadings liberally, Nat'l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (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." Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965) (citing George S. Golick, Annotation, Liability Insurer — Duty to Defend, 50 A.L.R.2D 458, 504 (1956)); see also Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 368 (5th Cir.2008) (noting that "[t]he rule is very favorable to insureds because doubts are resolved in the insured's favor"). The duty to defend is not affected by facts ascertained before suit, developed in the course of litigation, or by the ultimate outcome of the suit. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 829 (Tex.1997); see also 14 COUCH ON INSURANCE § 200:19 (noting that duty to defend is unaffected by "what the parties know or believe the alleged facts to be, the outcome of the underlying case, or the merits of the claim"). If a complaint potentially includes a covered claim, the insurer must defend the entire suit. 14 COUCH ON INSURANCE § 200:1 ("Typically, even if only one claim in a complaint containing multiple claims could be covered, the insurer must defend the entire action and the insurer must demonstrate that all the claims of the suit fall outside the policy's coverage to avoid defending the insured.").

III

The Policies and the Pleadings

A Bodily Injury

With this in mind, we turn to the policy language at issue here. The policies covered "all sums which [Nokia] shall become legally obligated to pay as damages because of ... bodily injury" caused by an occurrence during the policy period. Some of the Zurich policies define bodily injury, some do not. Of those that do, bodily injury is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."8 But this circular definition9 is not helpful in answering the question before us: have...

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