United States District Court, W.D. Texas, El Paso Division
MEMORANDUM OPINION AND ORDER
C. GUADERRAMA UNITED STATES DISTRICT JUDGE
before the Court are Plaintiff Crum & Forster Specialty
Insurance Company's ("Crum & Forster")
"Motion for Partial Summary Judgement" (ECF No. 84)
and Defendant Great West Casualty Company's ("Great
West") "Second Motion for Summary Judgment"
(ECF No. 85) each filed on June 28, 2017. For the reasons
that follow, the Court GRANTS IN PART AND DENIES IN
PART Crum & Forster's motion and
GRANTS IN PART AND DENIES IN PART Great
lawsuit arises from a dispute between Crum & Forster and
Great West over their respective duties to defend and
indemnify MVT Services, LLC ("MVT") in Parada
v. MVT Services, LLC, No. 2013-DCV-3852 (Co. Ct. at Law
No. 3, El Paso County, Tex. Oct. 10, 2013) ("the Parada
lawsuit"). Great West issued a Workers'
Compensation and Employers' Liability Policy containing a
duty to defend,  a duty to indemnify,  and an
"other insurance" clause. Crum & Forster issued an
Occupational Shield Policy also containing a duty to defend,
duty to indemnify,  and an "other insurance"
clause. The instant lawsuit turns on the
application of these provisions.
Parada lawsuit arose from a single-vehicle, double-fatality
accident that occurred on September 15, 2013 and took the
lives of passenger, Lawrence Parada, and driver, John
Mitchem. MVT alerted both Crum & Forster and
Great West, its alleged insurers, to the accident's
occurrence. On October 10, 2013, the family of
Lawrence Parada filed suit against MVT alleging negligence,
gross negligence, and that Parada was an MVT
employee. On October 28, 2013, MVT provided Great
West with the petition from the Parada lawsuit.
Great West denied Parada's workers' compensation
claim and refused to defend MVT. Great West based its
denial of coverage on MVT's request that Great West
terminate its workers' compensation coverage on August
13, 2013. On August 14, 2013, Great West filed the
notice of termination of MVT's workers' compensation
coverage with the Texas Department of Insurance, which
resulted in the cancellation of the policy becoming effective
30 days after the date of filing under Texas
& Forster agreed to defend MVT in the Parada lawsuit and
provided that defense for nearly two years without Great
West's participation. In May 2015, MVT filed a
coverage action against Great West contesting the denial of
coverage under the workers' compensation
policy. On May 22, 2015, Great West retracted
its denial of coverage, admitted that its policy covered MVT
on the day of the accident, and acknowledged its duty to
defend MVT in the Parada lawsuit. Following this change in
position, Great West took control of the defense of MVT, and
Crum & Forster ceased paying for MVT's
defense. In August 2015, Great West and Crum
& Forster both paid their respective policy limits of $1,
000, 000 on behalf of MVT to settle the Parada
November 4, 2015, Crum & Forster filed the instant
lawsuit against Great West seeking declaratory relief and the
reimbursement of the defense costs and indemnity it paid on
behalf of MVT in the Parada lawsuit. On June 28, 2017, the
parties filed the instant motions. Crum & Forster and
Great West both filed their responses to the motions on July
12, 2017 and filed their replies on July 19, 2017.
judgment is appropriate when "the movant shows 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). "A genuine dispute of fact exists
when evidence is sufficient for a reasonable jury to return a
verdict for the non-moving party, and a fact is material if
it 'might affect the outcome of the suit.'"
Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir.
2014) (citing Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)). In deciding whether a genuine dispute
as to any material fact exists, a trial court considers all
of the evidence in the record and "draw[s] all
reasonable inferences in favor of the nonmoving party, "
but it "refrain[s] from making credibility
determinations or weighing the evidence." Turner v.
Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir.
2007) (citation and internal quotation marks omitted).
the party moving for summary judgment "bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact." EEOC v.
LHC Grp., 773 F.3d 688, 694 (5th Cir. 2014) (alterations
in original) (quoting Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986)). When the nonmoving party will bear the
burden of proof at trial, the moving party may satisfy this
responsibility by "point[ing] out the absence of
evidence supporting the nonmoving party's case."
Latimer v. Smithkline & French Lab., 919 F.2d
301, 303 (5th Cir. 1990); see also Boitdreaux v. Swift
Transp. Co., 402 F.3d 536, 544-45 (5th Cir. 2005).
moving party succeeds, "the onus shifts to the nonmoving
party to go beyond the pleadings and by her own affidavits,
or by the depositions, answers to interrogatories, and
admissions on file, designate specific facts showing that
there is a genuine issue for trial." E.E.O.C.,
773 F.3d at 694 (internal quotation marks omitted) (citing
Celotex Corp., 477 U.S. at 324). However, the
nonmoving party "cannot defeat summary judgment with
conclusory allegations, unsubstantiated assertions, or only a
scintilla of evidence." Davis v. Fort Bend
Cty., 765 F.3d 480, 484 (5th Cir. 2014) (citing
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th
Cir.1994) (en banc) (per curiam)).
evaluating whether the parties have met their respective
burden, "the Court considers only competent summary
judgment evidence." Reeves v. Wells Fargo Bank,
NA, No. EP-14-CV-00187-DCG, 2015 WL 11598711, at *1
(W.D. Tex. Sept. 4, 2015) (citing, inter alia, Goodwin v.
Johnson, 132 F.3d 162, 186 (5th Cir. 1997)); see
also Fed. R. Civ. P. 56(c).
motion, Crum & Forster requests that the Court enter
partial summary judgment declaring that Great West is
obligated to reimburse Crum & Forster for the defense
costs paid on behalf of MVT. The theories of subrogation and
contribution provide the basis for Crum & Forster's
claim to a right of reimbursement. Pl.'s Mot. Partial
Summ. J. at 4. Great West, on the other hand, requests that
the Court enter summary judgment against Crum & Forster
on its claims for declaratory relief and
reimbursement. Below, the Court addresses each claim in
Right to Reimbursement
West asserts in its Second Motion for Summary Judgment that
the Court should grant it summary judgment on Crum &
Forster's allegation that it has a right to reimbursement
from Great West for the amounts it paid to defend and
indemnify MVT. The Court will analyze Crum &
Forster's right to reimbursement for defense costs and
indemnity in succession.
Reimbursement of Defense Costs
threshold question in determining whether Crum & Forster
has a right to reimbursement for the defense costs it paid on
behalf of MVT is whether and when Great West had a duty to
defend MVT. Great West does not contest that it had a duty to
defend MVT, but rather, it argues that duty did not arise
until it retracted its denial of coverage and voluntarily
undertook MVT's defense. Def.'s Second Mot. Summ. J.
at 18-21. Great West provides no case law supporting this
proposition. Quite the contrary, under Texas law, the duty to
defend arises when '"a petition alleging a
potentially covered claim is tendered to the
insurer.'" Royal Ins. Co. of Am. v. Hartford
Underwriters Ins. Co., 391 F.3d 639, 644 (5th Cir. 2004)
(quoting Lafarge Corp v. Hartford Cas. Ins. Co., 61
F.3d 389, 400 (5th Cir. 1995)). A denial of a claim does not
sever the contractual obligation to provide a defense.
See Cont'l Cas. Co. v. N. Am. Capacity Ins. Co.,
683 F.3d 79, 87-88 (5th Cir. 2012) (explaining that the
primary insurers each retained their contractual obligations
to provide a defense at all times following their wrongful
refusals to defend the insured).
Texas utilizes the eight-corners rule in determining whether
the duty to defend is implicated. Colony Ins. Co. v.
Peachtree Const., Ltd., 647 F.3d 248, 253 (5th Cir.
2011) (citing Pine Oak Builders, Inc. v. Great Am. Lloyds
Ins. Co., 279 S.W.3d 650, 654 (Tex. 2009)). Practically,
this rule establishes that "[w]hen an insured party is
sued, an insurer's duty to defend is determined solely by
the facts alleged in the petition and the terms of the
policy." Id. If the plaintiffs factual
allegations even potentially support a claim, the insurer
must defend its insured. Trinity Universal Ins. Co. v.
Employers Mut. Cas. Co., 592 F.3d 687, 691 (5th Cir.
2010) (quoting GuideOne Elite Ins. Co. v. Fielder Rd.
Baptist Church, 197 S.W.3d 305, 310 (Tex. 2006)). This
is true because the allegations against the insured are
"liberally construed in favor of coverage."
Fed. Ins. Co. v. Northfield Ins. Co., 837 F.3d 548,
552 (5th Cir. 2016) (quoting GuideOne Elite Ins.
Co., 197 S.W.3d at 308). Indeed, Texas law mandates that
courts resolve all doubts regarding coverage in favor of the
insured. Trinity Universal Ins. Co., 592 F.3d at
the Court finds that Great West, by its own admission, had a
duty to defend MVT, and the petition from the Parada lawsuit
implicated Great West's duty to defend when it was
tendered to Great West on October 28, 2013. This finding is
in accordance with the settled principles of Texas insurance
law that an insurer must defend when a petition is presented
with a claim that is potentially covered under its policy.
determined that Great West had a duty to defend MVT, the
Court now addresses whether Crum & Forster can recover
the costs spent defending MVT prior to Great West's
change in position. Crum & Forster advances two theories
upon which it relies: subrogation and contribution. The Court
will discuss each claim in turn.
& Forster asserts that under the theory of equitable
subrogation it is entitled to reimbursement from Great West
of all its costs paid to defend M VT in the Parada lawsuit.
Great West contends that Crum & Forster
"voluntarily" made payments when it accepted the
obligation to defend MVT despite there being doubts about
whether its policy covered MVT. Def.'s Second Mot. Summ.
J. at 11-13.
prevail on a claim of equitable subrogation, a party must
show that it involuntarily paid a debt primarily owed by
another which in equity should have been paid by the other
party." Colony Ins. Co., 647 F.3d at 256
(citing Mid-Continent Ins. Co., 236 S.W.3d at 774
and Frymire Eng'g Co. v. Jomar Int'l,
Ltd., 259 S.W.3d 140, 142 (Tex.2008)). However, Texas
courts tend to give a lot of latitude to insurers when
determining whether payments were made involuntarily.
Colony Ins. Co., 647 F.3d at 256 ("Nonetheless,
in the context of equitable subrogation, Texas courts have
been liberal in their determinations that payments were made
involuntarily."). Further, "[a]n insurer who pays a
third-party claim against its insured is not a volunteer if
the payment is made in good faith and under a reasonable
belief that the payment is necessary to its protection."
Keck, Mahin & Cate v. Nat'l Union Fire Ins. of
Pittsburgh, 20 S.W.3d 692, 702-03 (Tex.2000). In
considering a similar argument, Texas Supreme Court rejected
Great West's conception of the volunteer doctrine by
KMC's position is contrary to our liberal application of
the reasonable belief rule. Adopting it would significantly
increase potential conflicts of interest between insureds and
their insurers. If an insurance company's right to
subrogation could be challenged by the wrongdoer on the
grounds that the policy did not actually provide coverage, it
would necessarily be in the company's interest to
litigate all questionable claims with its insured ....
KMC's conception of the volunteer doctrine is bad public
policy, and we decline to adopt it.
Id. at 703 (internal citations and quotations
omitted). It is a settled principle of Texas insurance law
that an insurer should first defend and indemnify the insured
before seeking reimbursement for the costs that another
insurer should have paid. Cont'l Cas. Co., 683
F.3d at 86 (quoting Amerisure Ins. Co. v. Navigators Ins.
Co., 611 F.3d 299, 308 (5th Cir.2010)). Accordingly,
Crum & Forster's handling of the Parada lawsuit was
consistent with the principles announced by the Texas Supreme
Court and Fifth Circuit. Crum & Forster chose to defend
the insured after Great West's wrongful denial rather
than risk leaving the insured completely unprotected by
disputing its policy coverage. Great West cannot now allege
that Crum & Forster acted voluntarily by living up to its
legal and contractual duties. Thus, the Court finds that Crum
& Forster's payments of defense costs on behalf of
MVT were involuntary because they were made in good faith and
under a reasonable belief that the payments were necessary
for its protection.
Court already determined that Great West owed a duty to
defend MVT starting on October 28, 2013. Based on its
analysis above, the Court also finds that Crum & Forster
involuntarily paid a debt to defend MVT that Great West was
at least partially responsible for paying. Moreover, it is
equitable to expect Great ...