United States District Court, N.D. Texas, Dallas Division
BEDIVERE INSURANCE COMPANY F/K/A GENERAL ACCIDENT INSURANCE OF AMERICA, Plaintiff,
PACIFIC VAN & STORAGE OF TEXAS, INC., D/B/A JOYCE MOVING & STORAGE COMPANY, INC., et al., Defendants.
MEMORANDUM OPINION AND ORDER
A. FITZWATER UNITED STATES DISTRICT JUDGE.
action by plaintiff Bedivere Insurance Company f/k/a General
Accident Insurance of America (“Bedivere”)
seeking a declaratory judgment that it has no duty to defend
or indemnify defendant Pacific Van & Storage of Texas,
Inc., d/b/a Joyce Moving & Storage Company, Inc.
(“Pacific”) concerning a lawsuit filed in state
court by Barbara Assouad (“Assouad”), Bedivere
moves for summary judgment, Pacific moves for partial summary
judgment, and Pacific moves to stay the determination of
whether Bedivere has a duty to indemnify Pacific until after
a final judgment is rendered in the underlying lawsuit. For
the reasons that follow, the court grants Pacific's
motion for partial summary judgment, denies in part and
declines to reach in part Bedivere's motion for summary
judgment, and grants Pacific's motion to stay. The court
directs the clerk of court to close this case for statistical
purposes during the pendency of the stay.
an insurer, sues its insured, Pacific, the operator of a
storage facility located in Lancaster, Texas, seeking a
declaratory judgment that it has no duty to defend or
indemnify Pacific in a Texas court lawsuit brought by Assouad
individually and as the legal representative of the estate of
her late husband Karim.See Assouad v. Pacific Van &
Storage, Inc., No. DC-15-10466 (162nd Dist. Ct., Dallas
County, Tex.) (the “Underlying Lawsuit”). In the
Underlying Lawsuit, Assouad alleges that she and Karim
entered into a bailment contract with Pacific under which
Pacific agreed to store the Assouads' personal property
for a monthly fee; that the Assouads stored their property
with Pacific and paid the monthly fee from September 1991
until January 2015; that in May 1999 storms partially
destroyed Pacific's facility, allowing water to penetrate
into the Assouads' vaults and possessions; that
immediately after the storms, Pacific unpacked the
Assouads' property, attempted to remediate the water
damage, and repacked the Assouads' property into new
boxes; that during the attempted remediation, Pacific
misplaced some of the Assouads' property; that Pacific
either never or inappropriately disclosed the water damage,
subsequent remediation and repacking efforts, and loss of the
Assouads' property, yet continued to accept the
Assouads' monthly payment; and that when Karim died in
2014 and the family decided to remove their goods from
storage, they discovered that their property had been
destroyed by water and toxic black mold. In her second
amended original petition (“Petition”) in the
Underlying Lawsuit, Assouad alleges claims against Pacific
for common law fraud, negligent misrepresentation,
negligence, unconscionable conduct, and violations of the
Texas Deceptive Trade Practices-Consumer Protection Act
(“DTPA”), Tex. Bus. & Com. Code Ann. §
17.41 et seq. (West 2015).
time of the alleged storm damage in 1999, Bedivere insured
Pacific under an insurance policy (“Policy”) that
covered Pacific for accidental loss to personal property
stored at Pacific's facility. When Pacific requested that
Bedivere provide a defense in the Underlying Lawsuit,
Bedivere filed the instant declaratory judgment action
against Pacific and Assouad, seeking a declaratory judgment
that is has no duty to defend or indemnify Pacific.
now moves for summary judgment, seeking a declaration that it
has no duty to defend or indemnify Pacific because the Policy
contains an exclusion for damage caused by “dishonest .
. . act(s).” P. 11/7/16 Br. 13. Pacific opposes
Bedivere's motion and also moves for partial summary
judgment, seeking a declaration that Bedivere has a duty to
defend Pacific for claims arising out of negligent acts that
occurred during the Policy period. It separately moves for a
stay, requesting that the court stay the determination of
whether Bedivere has a duty to indemnify Pacific under the
Policy until there is a final judgment in the Underlying
court first considers the parties' cross-motions for
summary judgment regarding Bedivere's duty to defend.
Because the parties' motions present the same issues, the
court will consider them together.
Texas,  “[t]he 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.” St. Paul Guardian Ins. Co. v. Centrum
GS Ltd., 283 F.3d 709, 713 (5th Cir. 2002) (citation
omitted). “Texas follows the ‘eight-corners'
rule, under which the court looks only to the third-party
plaintiff's pleadings and the provisions of the insurance
policy in determining whether an insurer has a duty to
defend.” Trammell Crow Residential Co. v. Va. Sur.
Co., 643 F.Supp.2d 844, 849 (N.D. Tex. 2008) (Fitzwater,
C.J.) (citing GuideOne Elite Ins. Co. v. Fielder Rd.
Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)).
“Neither facts outside the pleadings nor the truth or
falsity of the allegations should be considered, and the
allegations against the insured should be ‘liberally
construed in favor of coverage.'” Id.
(quoting GuideOne Elite, 197 S.W.3d at 308); see
also Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d
589, 597 (5th Cir. 2011) (“[W]e may not infer
additional facts that are not in the pleadings.”). The
court must “resolve all doubts regarding the duty to
defend in favor of the duty.” Zurich Am. Ins. Co.
v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008) (citing
King v. Dall. Fire Ins. Co., 85 S.W.3d 185,
187 (Tex. 2002)). Under the “eight-corners” rule,
[i]f the four corners of a petition allege facts stating a
cause of action which potentially falls within the four
corners of the policy's scope of coverage, the insurer
has a duty to defend. If all the facts alleged in the
underlying petition fall outside the scope of coverage, then
there is no duty to defend, but we resolve all doubts
regarding duty to defend in favor of the duty.
Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 600
(5th Cir. 2006) (footnotes omitted). “If an insurer has
a duty to defend any portion of a suit, the insurer must
defend the entire suit.” St. Paul Fire & Marine
Ins. Co. v. Green Tree Fin. Corp.-Tex., 249 F.3d 389,
395 (5th Cir. 2001).
insured has the initial burden of showing that a claim is
potentially within the scope of policy coverage, and, once
the insured's burden is met, “the insurer bears the
burden of showing that the plain language of a policy
exclusion or limitation allows the insurer to avoid coverage
of all claims, also within the confines of the eight
corners rule.” Northfield Ins. Co. v. Loving Home
Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004) (citing
Tex. Ins. Code Ann. art. 21.58(b) (Vernon Supp. 1997))
(citing Texas cases). “If the insurer proves that an
exclusion applies, the burden shifts back to the insured to
show that an exception to the exclusion brings the claim back
within coverage.” Gilbert Tex. Constr., L.P. v.
Underwriters at Lloyd's London, 327 S.W.3d 118, 124
(Tex. 2010) (citations omitted).
party's summary judgment burden depends on whether it is
addressing a claim or defense for which it will have the
burden of proof at trial. To be entitled to summary judgment
on a matter for which it will have the burden of proof, a
party “must establish ‘beyond peradventure all of
the essential elements of the claim or defense.'”
Bank One, Tex., N.A. v. Prudential Ins. Co. of Am.,
878 F.Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.)
(quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194
(5th Cir. 1986)). When the summary judgment movant will not
have the burden of proof at trial, it need only point the
court to the absence of evidence of any essential element of
the opposing party's claim or defense. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once it does
so, the nonmovant must go beyond its pleadings and designate
specific facts demonstrating that there is a genuine issue
for trial. See Id. at 324; Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per
curiam). An issue is genuine if the evidence is such that a
reasonable jury could return a verdict for the party with the
burden of proof. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). The nonmovant's
failure to produce proof as to any essential element renders
all other facts immaterial. TruGreen Landcare, L.L.C. v.
Scott, 512 F.Supp.2d 613, 623 (N.D. Tex. 2007)
(Fitzwater, J.). Summary judgment is mandatory where the
nonmoving party fails to meet this burden. Little,
37 F.3d at 1076.
maintains that the Petition states a claim that falls within
the Policy's coverage for negligent acts that occurred
during the Policy period. It contends that Assouad's
allegations of negligence are claims of accidental
occurrences resulting in a loss of property that clearly
trigger the duty to defend Pacific in the Underlying Lawsuit:
Assouad has alleged that Pacific was negligent in failing to
allow the stored items to dry thoroughly before repacking
them, and that Pacific was negligent in the method and manner
that it communicated or attempted to communicate the storm
damage to Assouad. Pacific also contends that the
Policy's exclusion for dishonest or criminal acts does
not apply to Pacific's alleged negligent acts,
and that because the Petition alleges both intentional
conduct and negligence, there is a duty to defend.
contends that all of Assouad's damages stem from the
allegedly fraudulent conduct of Pacific, which is expressly
excluded as a cause of loss under the Policy; that in
determining whether there is a duty to defend, the court must
focus on the factual allegations that show the origin of
damages, and that, in the Underlying Lawsuit, all of the
damages claimed by Assouad arose from the fact that Pacific
did not reveal and/or concealed the storm damage to
Assouad's property; and that Assouad's negligence
claims are related to, interdependent to, and inseparable
from the fraud and fraudulent concealment engaged in by
Pacific, and, under Fifth Circuit authority, there is no duty
to defend if the covered cause is related to, and
interdependent to, the excluded cause of injury.
Policy provides coverage for “‘loss' to
personal property of others accepted for storage . . .
arising out of an ‘occurrence' while such property
is located at” Pacific's premises. P. 11/7/16 App.
9. “Occurrence” is defined to include “an
accident that takes place during the policy period.”
Id. at 16. Pacific has shown that at least one of
Assouad's claims in the Underlying Lawsuit is potentially
within the Policy. For example, Pacific has demonstrated that
Assouad's negligence claim based on Pacific's failure
to appropriately remediate the water damage caused by the
1999 storm and failure to take appropriate steps to notify
the Assouads that their possessions had been infiltrated with
water from the storm is potentially covered under the Policy.
Because Pacific has met this burden, for Bedivere to
establish that it has no duty to defend, it must show that
the plain language of one or more policy exclusions bars
coverage of all claims. See Northfield, 363 F.3d at
relies on the following policy exclusion to argue that it has
no duty to defend:
This insurance does not apply to any loss, damage or expense
for loss or damage: . . . caused by any dishonest or criminal
act(s) by you, any of your partners, employees, or any other
person in your service whether or not such an act or acts
occur during the regular hours of employment or service.
11/7/16 App. 10. Bedivere contends that the court must focus
on the factual allegations that show the origin of damages in
determining the duty to defend, and that “[h]ere, the
origin of Assouad's damages is clearly the dishonest acts
of Pacific, ” as demonstrated by the Petition, in which
Assouad “alleges that her damages were caused by the
fraudulent concealment of Pacific.” P. 12/27/16 Br. 7.
court disagrees that all of Assouad's claims fall within
the Policy's “dishonest acts” exclusion.
Although the Petition clearly alleges damages arising from
Pacific's intentional conduct, see, e.g., P.
11/7/16 App. 48-49,  she also alleges that she has incurred
damages as a result of Pacific's negligence,
see id. at 50. The Supreme Court of Texas has held
that when a complaint alleges both intentional conduct and
negligence, the insurer has a duty to defend. See Zurich
Am. Ins. Co., 268 S.W.3d at 495 (“[T]he factual
allegations here support a duty [to defend]. The pleadings
allege both intentional conduct (Nokia knew of RFR's
harmful effects and nonetheless intentionally sold its
products to consumers) and negligence (Nokia should have
known of RFR's harmful effects.”). This is true
even when the plaintiff pleads her negligence claim in the
alternative. See, e.g., Harken Expl. Co. v. Sphere Drake
Ins. PLC, 261 F.3d 466, 474 (5th Cir. 2001)
(“[T]he [insurer] must defend [the insured] against the
entire suit including causes of action that would not alone
trigger the duty to defend, regardless whether the complaint
is pled in the alternative or not because the Rices's
factual allegations of negligence are sufficient to trigger
the duty to defend.” (citing St. Paul Ins. Co. v.
Tex. Dep't of Transp., 999 S.W.2d 881, 884 (Tex.
App. 1999, pet. denied)); Rhodes v. Chicago Ins.
Co., 719 F.2d 116, 119 (5th Cir. 1983) (“Whether a
complaint pleads in the alternative or alleges more than one
cause of action, the insurer is obligated to defend, as long
as the complaint alleges at least one cause of action within
the coverage of the policy.”); Gehan Homes, Ltd. v.
Emp'rs Mut. Cas. Co., 146 S.W.3d 833, 843 (Tex. App.
2004, pet. denied) (“Alternative allegations of
intentional or malicious conduct will not defeat the duty to
defend if combined with allegations that would trigger
determine whether a duty to defend exists, the court focuses
on the facts alleged in the underlying lawsuit, not the legal
theories pleaded. See, e.g., Fed. Ins. Co. v.
Northfield Ins. Co., 837 F.3d 548, 553 (5th
Cir. 2016) (“The facts alleged in the claim against the
insured, not legal theories, control.”); Ewing
Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30, 33
(Tex. 2014) (“In reviewing the pleadings and
[determining whether there is a duty to defend], courts look
to the factual allegations showing the origin of the damages
claimed, not to the legal theories or conclusions
alleged.” (citing cases)); St. Paul Ins. Co.,
999 S.W.2d at 887 (“Although the plaintiffs
also allege gross negligence and intentional torts,
this is not controlling because we must focus on the facts
alleged, not the legal theories pleaded . . . that coverage
may not be available for some of the causes of
action pleaded does not relieve St. Paul of its duty to
defend.”). In the Petition, Assouad asserts that
Pacific breached its duty to exercise reasonable care when it
attempted to remediate the water damage caused by the 1999
storm. In support, Assouad alleges the following facts:
Defendant unpacked the Assouads' possession[s] and
undertook steps to dry and remediate the water infiltration
caused by the storm. Defendant only briefly allowed the
Assouads' possession[s] to air dry. Defendant did not
take any steps to determine whether the Assouads'
possessions were appropriately and thorougly dry before
repacking them. Along with other ...