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The Cincinnati Specialty Underwriters Insurance Co. v. Chajon

United States District Court, N.D. Texas, Dallas Division

July 31, 2017

JUAN FRANCISCO CHAJON, et al., Defendants.


          A. JOE FISH Senior United States District Judge.

         Before the court is the plaintiff's motion for summary judgment (docket entry 23) and the motion to allow discovery under Rule 56(d) filed by the defendant, Juan Chajon (“Chajon”) (docket entry 27). For the reasons stated below, the plaintiff's motion is granted and Chajon's motion is denied.

         I. BACKGROUND

         The plaintiff, The Cincinnati Specialty Underwriters Insurance Company (“CSUIC”), brought this action seeking a judgment declaring that it has no duty to defend or indemnify the insured, Chajon, in a pending state-court negligence action.[1]See Original Complaint for Declaratory Judgment (“Complaint”) ¶¶ 8-12 (docket entry 1). On May 9, 2014, CSUIC issued a one-year general liability insurance policy to Chajon, who operates a painting business.[2] See id. ¶ 11. On January 4, 2015, Jose Manual Lopez (“Lopez”) and Samuel Mejia (“Mejia”) were electrocuted and seriously injured while working for Chajon. Id. ¶¶ 9-10.

         The plaintiffs in the state-court action, Lopez and members of his family, and the intervenor, Mejia, assert claims for negligence and gross negligence against Chajon and are seeking monetary damages. CSUIC's Appendix in Support of Its Motion for Summary Judgment (“CSUIC's Appendix”) at 7, 28-29 (docket entry 25). Specifically, in the state petitions, Lopez and Mejia allege that Chajon failed to provide them with a safe work area and failed to warn them of nearby high-voltage power lines. See id. Chajon has requested defense and indemnity from CSUIC under the policy. See CSUIC's Amended Brief in Support of Its Motion for Summary Judgment (“CSUIC's Brief”) at 1-2 (docket entry 26).

         CSUIC commenced this action on November 14, 2016, seeking a declaration that it has no duty to defend or indemnify Chajon. Complaint ¶ 12. On March 16, 2017, CSUIC filed the instant motion for summary judgment. CSUIC's Motion for Summary Judgment (docket entry 23). On April 6, 2017, Chajon filed a motion to allow time for discovery under Rule 56(d), and Lopez and Mejia filed responses to CSUIC's motion for summary judgment. Chajon's Motion to Allow Time for Discovery Under Rule 56(d) (docket entry 27); Lopez's Response to CSUIC's Motion for Summary Judgment (docket entry 32); Brief in Support of Lopez's Response to CSUIC's Motion for Summary Judgment (“Lopez's Response Brief”) (docket entry 33); Mejia's Response to CSUIC's Motion for Summary Judgment (docket entry 29); Brief in Support of Mejia's Response to CSUIC's Motion for Summary Judgment (“Mejia's Response Brief”) (docket entry 30). On April 20, 2017, CSUIC filed replies to Lopez and Mejia's responses. CSUIC's Reply to Lopez (docket entry 36); CSUIC's Reply to Mejia (docket entry 37). Lastly, on April 27, 2017, CSUIC filed a response to Chajon's Rule 56(d) motion. CSUIC's Response to Chajon's Motion Under Rule 56(d) (docket entry 38). The motions are now ripe for decision.

         II. ANALYSIS

         A. Legal Standards

         1. Summary Judgment

         Summary judgment is proper when the pleadings, depositions, admissions, disclosure materials on file, and affidavits, if any, “show[ ] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1).[3] A fact is material if the governing substantive law identifies it as having the potential to affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue as to a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.; see also Bazan ex rel. Bazan v. Hidalgo County, 246 F.3d 481, 489 (5th Cir. 2001) (“An issue is ‘genuine' if it is real and substantial, as opposed to merely formal, pretended, or a sham.”). To demonstrate a genuine issue as to the material facts, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Electric Industrial Company v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). The nonmoving party must show that the evidence is sufficient to support the resolution of the material factual issues in his favor. Anderson, 477 U.S. at 249 (citing First National Bank of Arizona v. Cities Service Company, 391 U.S. 253, 288-89 (1968)).

         When evaluating a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party. Id. at 255 (citing Adickes v. S.H. Kress & Company, 398 U.S. 144, 158-59 (1970)). However, it is not incumbent upon the court to comb the record in search of evidence that creates a genuine issue as to a material fact. See Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003). The nonmoving party has a duty to designate the evidence in the record that establishes the existence of genuine issues as to the material facts. Celotex Corporation v. Catrett, 477 U.S. 317, 324 (1986). “When evidence exists in the summary judgment record but the nonmovant fails even to refer to it in the response to the motion for summary judgment, that evidence is not properly before the district court.” Malacara, 353 F.3d at 405.

         2. Insurance Policy Interpretation Under Texas Law

         The parties agree that Texas law applies to this diversity case. CSUIC's Brief at 5; Mejia's Response Brief at 5; Lopez's Response Brief at 7; see generally Erie Railroad Company v. Tompkins, 304 U.S. 64 (1938). Texas courts interpret insurance contracts according to the “rules of interpretation and construction which are applicable to contracts generally.” National Union Fire Insurance Company of Pittsburgh, Pennsylvania v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex. 1995). “The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument.” Id. (citation omitted). In determining the intent of the parties, the court construes the policy to give effect to each of its terms and to avoid rendering any term meaningless. Ideal Mutual Insurance Company v. Last Days Evangelical Association, Inc., 783 F.2d 1234, 1238 (5th Cir. 1986) (citation omitted).

         In construing a contract, the court must determine whether its meaning is ambiguous. “Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered.” CBI Industries, 907 S.W.2d at 520. A written contract is ambiguous if its language “is subject to two or more reasonable interpretations” but is not ambiguous if it is “so worded that it can be given a definite or certain legal meaning.” Id. Mere disagreement between the parties about the correct interpretation of the term will not render the term ambiguous, nor will it transform the issue of law into an issue of fact. D.E.W., Inc. v. Local 93, Laborers' International Union of North America, 957 F.2d 196, 199 (5th Cir. 1992) (citations omitted).

         Where a policy term is ambiguous, the court will construe that term in favor of the insured. Toops v. Gulf Coast Marine Inc., 72 F.3d 483, 486 (5th Cir. 1996) (quoting Adams v. John Hancock Mutual Life Insurance Company, 797 F.Supp. 563, 567 (W.D. Tex. 1992), aff'd, 49 F.3d 728 (5th Cir. 1995)). In addition, when construing a policy term that excludes or limits coverage, the court must adopt any reasonable interpretation of the exclusion urged by the insured, even if the interpretation of the insurer appears more reasonable or a more accurate reflection of the parties' intent. Id. These rules of construction, however, apply only when the terms of the policy are “susceptible to several reasonable constructions.” Ranger Insurance Company v. Bowie, 574 S.W.2d 540, 542 (Tex. 1978) (citations omitted).

         3. Duty to Defend

         Texas follows the “eight-corners” rule of insurance contract interpretation. See, e.g., GuideOne Elite Insurance Company v. Fielder Road Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006). This rule instructs courts to determine whether an insurer has a duty to defend based solely on the language contained within the four corners of the insurance policy and the allegations contained within the four corners of the plaintiff's pleadings. Allstate Insurance Company v. Disability Services of the Southwest, Inc., 400 F.3d 260, 263 (5th Cir. 2005); National Union Fire Insurance Company of Pittsburgh, Pa. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997) (per curiam). If the pleadings allege facts stating a cause of action that potentially falls within the insurance policy's scope of coverage, the insurer has a duty to defend. Liberty Mutual Insurance Company v. Graham, 473 F.3d 596, 600 (5th Cir. 2006). The duty is determined based on the presumption that the allegations in the plaintiff's pleadings are true. Disability Services of the Southwest, 400 F.3d at 263; Fielder Road Baptist Church, 197 S.W.3d at 308. The insured bears the initial burden of showing that there is coverage, while the insurer bears the burden of showing that any exclusion in the policy applies. Trinity Universal Insurance Company v. Employers Mutual Casualty Company, 592 F.3d 687, 691-92 (5th Cir. 2010). “If an insurer has a duty to defend its insured against any portion of the underlying suit, then the insurer is required to defend the entire suit.” General Star Indemnity Company v. Gulf Coast Marine Associates, Inc., 252 S.W.3d 450, 455 (Tex. App.--Houston [14th Dist.] 2008, pet. denied).

         A pair of countervailing considerations guides the court's review of the facts alleged within the four corners of the underlying pleadings. On the one hand, “the insurer's duty to defend is limited to those claims actually asserted in an underlying suit” and does not extend to “a claim that might have been alleged but was not, or a claim that more closely tracks the true factual circumstances surrounding the third-party claimant's injuries but which, for whatever reason, has not been asserted.” Pine Oak Builders, Inc. v. Great American Lloyds Insurance Company, 279 S.W.3d 650, 655-56 (Tex. 2009). “If the petition only alleges facts excluded by the policy, the insurer is not required to defend.” Id. at 655 (citation and internal quotation marks omitted). The court must not “(1) read facts into the pleadings, (2) look outside the pleadings, or (3) imagine factual scenarios which might trigger coverage.” Gore Design Completions, Limited v. Hartford Fire Insurance Company, 538 F.3d 365, 369 (5th Cir. 2008) (citation and internal quotation marks omitted). On the other hand, the factual allegations that are contained within the pleadings must be liberally construed: “If the petition does not state facts sufficient to bring the case clearly within or outside the insured's coverage, the insurer is obligated to defend if potentially there is a claim under the complaint within the coverage of the insured's policy.” Gulf Coast Marine Associates, 252 S.W.3d at 454 (citing Merchants Fast Motor Lines, 939 S.W.2d at 141) (emphasis in original). A court may draw reasonable inferences from the pleadings that trigger an insurer's duty to defend, id. at 456, and doubts about whether “‘the allegations of a complaint against the insured . . . [are] sufficient to compel the insurer to defend the action . . . will be resolved in [the] insured's favor.'” Merchants Fast Motor Lines, 939 S.W.2d at 141 (quoting Heyden Newport Chemical Corporation v. Southern General Insurance Company, 387 S.W.2d 22, 26 (Tex. 1965)). The net result is that insurers are advised to chart a cautious course: “When in doubt, defend.” Gore Design Completions, 538 F.3d at 369.

         B. Application

         1. Whether the Action Should Be Stayed

         Lopez contends that the court should stay the case until the state-court action concludes. Lopez's Response Brief at 4. The Declaratory Judgment Act “confers discretion on the courts rather than an absolute right on a litigant.” Sherwin-Williams Company v. Holmes County, 343 F.3d 383, 389 (5th Cir. 2003) (quoting Wilton v. Seven Falls Company, 515 U.S. 277, 287 (1995)). The Fifth Circuit has identified seven nonexclusive factors district courts should consider when deciding whether to adjudicate, dismiss, or stay a declaratory-judgment action: (1) whether there is a pending state action in which all of the matters in controversy may be fully litigated; (2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant; (3) whether the plaintiff engaged in forum shopping in bringing the suit; (4) whether possible inequities exist in allowing the declaratory plaintiff to gain precedence in time or to change forums; (5) whether the federal court is a convenient forum for the parties and witnesses; (6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy; and (7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending. St. Paul Insurance Company v. Trejo, 39 F.3d 585, 591 (5th Cir. 1994).

         As to the first factor, courts look to whether the lawsuits are parallel, involving the same parties and the same issues. Canal Insurance Company v. XMEX Transport, LLC, 1 F.Supp.3d 516, 526 (W.D. Tex. 2014). Here, the court concludes that the two lawsuits are not parallel because the two actions do not involve the same parties or the same issues. First, CSUIC is not a party to the state action. Moreover, the state suit involves Chajon's potential tort liability to Lopez and Mejia, and the federal suit pertains solely to CSUIC's duty to defend Chajon. The lack of a parallel proceeding in a different forum “weighs strongly against” staying the case. See Sherwin-Williams, 343 F.3d at 394.

         As to factors two and three, the filing of every lawsuit requires forum selection. “Federal declaratory judgment suits are routinely filed in anticipation of other litigation. . . . Merely filing a declaratory judgment action in a federal court with jurisdiction to hear it . . . is not in itself improper anticipatory litigation or otherwise abusive ‘forum shopping.'” Id. at 391. The court further concludes that the remaining Trejo factors are ...

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