United States District Court, W.D. Texas, El Paso Division
before the Court is Defendant State Farm Lloyds'
("State Farm") "Motion for Summary
Judgment" (ECF No. 22) filed on August 9, 2017. Therein,
State Farm requests that the Court grant summary judgment in
its favor on Plaintiffs Word of Life Church of El Paso
("Word of Life Church") and Tom Brown's
"Plaintiffs'") claims arising out of and
related to their insurance contract with State Farm. For the
reasons that follow, the Court GRANTS State Farm's
is the President, Chairman of the Board of Directors, and
Pastor of Word of Life Church. Word of Life Church renewed
Policy Number 93-EZ-0103-2 (the "Church Policy" or
"Policy") with State Farm on November 15, 2010, to
run through November 15, 2011. The Church Policy included
Business Liability; Directors, Officers and Trustees
Liability; and Duty to Defend clauses.
Pasoans for Traditional Family Values ("EPTFV"), a
specific-purpose political committee chaired by Brown, was
created for the purpose of supporting Ordinance Number 017546
on the November 2, 2010, election ballot. Ordinance Number
017546, titled "Traditional Family Values Ordinance,
" stated in part: "[T]he City of El Paso endorses
traditional family values by making health benefits available
only to city employees and their legal spouse and dependent
children." Voters approved the Traditional Family
Values Ordinance (the "Ordinance") at the November
2, 2010, election; however, on June 14, 2011, the El Paso
City Council amended the Ordinance to restore benefits to
those who would have lost them. Mayor John F. Cook
("Cook") cast the tiebreaking vote in favor of
amending the Ordinance.
Cook's vote to amend the Ordinance, EPTFV, Word of Life
Church, and Brown began circulating recall petitions seeking
a recall election for Cook's office. On September
12, 2011, Cook filed suit against Word of Life Church-later
adding Brown as a named defendant-alleging violations of
Texas Election Code Sections 253.094(b) and 253.031(b) for
the misuse of church resources in the circulation and
submission of the recall petitions and in raising and
spending money for the recall effort. Subsequently,
El Paso County Court at Law No. 3 issued a temporary
restraining order enjoining any further circulation of recall
petitions and scheduled a temporary injunction
hearing. On November 28, 2011, the trial court
denied Cook's request for injunctive
relief. On December 1, 2011, Cook appealed to
the El Paso Court of Appeals, and on February 17, 2012, the
El Paso Court of Appeals reversed the trial court's order
denying injunctive relief. The appellate court found that
Plaintiffs had violated the Texas Election Code during the
recall effort. It then ordered the El Paso City Clerk
to decertify the recall petition for Cook and rescind the
resolution calling for an April 2012 recall
election. Subsequently, Word of Life Church
appealed to the Texas Supreme Court, but on December 12,
2012, the Texas Supreme Court denied their petition for
review. On April 6, 2016, while considering the
claims not decided by the El Paso Court of Appeals, the trial
court entered an order finding that Plaintiffs were liable to
Cook for violations of the Texas Election Code and set a
trial to determine damages. Prior to the trial, Plaintiffs
entered into an agreed judgment with Cook that they were
liable to him for $475, 000 in damages.
January 24, 2012, prior to the decision of the El Paso Court
of Appeals, Word of Life Church submitted its first claim for
defense and indemnification of the Cook Lawsuit to State
Farm. However, after the El Paso Court of
Appeals rendered its decision, Plaintiffs informed State Farm
that because the El Paso Court of Appeals had awarded no
fees, neither Brown nor Word of Life Church were making a
claim at that time under the Church Policy. Later, in
December 2012, Plaintiffs submitted their second claim to
State Farm, seeking defense and indemnification in the Cook
Lawsuit. On February 22, 2013, State Farm
informed Plaintiffs that it had determined that it did not
have a duty to defend or indemnity them based on the
allegations made in Cook's Third Amended
Petition. In April 2016, Plaintiffs submitted a
copy of Cook's Fourth Amended Petition and requested that
State Farm reconsider its coverage decision. In May 2016,
State Farm informed Plaintiffs that because Cook's Fourth
Amended Petition was nearly identical to his Third Amended
Petition, State Farm's reasoning for denying coverage
remained applicable. Subsequently, on July 25, 2016,
Plaintiffs submitted a demand to State Farm for $475, 000
plus interest for its liability in the Cook Lawsuit and $450,
000 plus interest for attorney's fees. State Farm
responded in August 2016 that Plaintiffs were not covered
under the Church Policy, so State Farm had no duty to pay
their attorney's fees or indemnify them.
filed suit on January 19, 2017, in the 41 st Judicial
District Court of El Paso County. Plaintiffs assert claims
for breach of contract, unjust enrichment, and bad faith
insurance dealings and seek a declaration that State Farm had
a duty to defend them in the Cook Lawsuit. On February
21, 2017, State Farm removed the cause to this Court on the
basis of diversity jurisdiction.
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 "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). Instead, the
court "only 'give[s] credence to the evidence
favoring the nonmovant [and] that evidence supporting the
moving party that is uncontradicted and unimpeached, at least
to the extent that that evidence comes from disinterested
witnesses.'" Orr v. Copeland, 844 F.3d 484,
490 (5th Cir. 2016) (second alteration in original) (quoting
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S.
133, 150-51 (2000)).
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." E.E.O.C. v. LHC
Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014)
(alterations in original) (quotation marks and citation
omitted). When the nonmoving party will bear the burden of
proof at trial, the moving party may satisfy this
responsibility by "pointing] out the absence of evidence
supporting the nonmoving party's case." Latimer
v. Smithkline & French Labs., 919 F.2d 301, 303 (5th
Cir. 1990); see also Boudreaux 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." LHC Grp.,
773 F.3d at 694 (internal quotation marks and citation
omitted). 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, 497 n.20 (5th Cir.
2014) (quotation marks and citation omitted).
Farm requests that the Court grant summary judgment in its
favor on all of Plaintiffs' claims. Mot. Summ. J. at 20.
Plaintiffs seek damages for breach of contract for State
Farm's denial of their claim and a declaration that State
Farm had a duty to defend them in the Cook Lawsuit. Second
Am. Compl. at 8-10, 13. Further, Plaintiffs assert
extra-contractual claims for unjust enrichment and bad faith
insurance dealings. Id. at 10-13. The Court will
analyze these claims in turn.
Plaintiffs' Duty to Defend Claims
argue that State Farm had a duty to defend them in the Cook
Lawsuit, and State Farm's failure to do so constitutes a
breach of contract. Id. at 8-10, 13. They base their
claims on the Business Liability and Directors, Officers and
Trustees Liability clauses in the Church Policy. Id.
at 8-10. State Farm counters that Plaintiffs are not covered
under the Church Policy. Mot. Summ. J. at 11-18.
follows the eight-corners rule, in which an insurer's
duty to defend is determined by the third-party plaintiffs
pleadings, considered in light of the policy provisions,
without regard to the truth or falsity of those
allegations." Trinity Universal Ins. Co. v.
Employers Mut. Cas. Co., 592 F.3d 687, 691-92 (5th Cir.
2010) (internal quotation marks omitted). Courts are
generally prohibited from resorting to evidence outside the
four corners of those two documents. Colony Ins. Co. v.
Peachtree Const., Ltd., 647 F.3d 248, 253 (5th Cir.
2011). Further, when examining the complaint, the court only
defers to "a complaint's characterization of factual
allegations, not legal theories or conclusions."
Evanston Ins. Co. v. Legacy of Life, Inc., 370
S.W.3d 377, 380 (Tex. 2012); see also Laney Chiropractic
& Sports Therapy, P.A. v. Nationwide Mut. Ins. Co.,
866 F.3d 254, 259 (5th Cir. 2017) ("When reviewing the
pleadings, courts must focus on the factual allegations, not
the asserted legal theories or conclusions."). "The
court must resolve all doubts regarding coverage in favor of
the insured, but it cannot.. . imagine factual scenarios
which might trigger coverage." Trinity Universal
Ins. Co., 592 F.3d at 691 (internal quotation marks
omitted) (quoting Nat 7 Union Fire Ins. Co. of
Pittsburgh, Pa. v. Merchs. Fast Motor Lines, Inc., 939
S.W.2d 139, 141-42 (Tex. 1997)). The burden is typically on
the insured to prove that the claim against him is
potentially within the scope of the policy coverage.
Trinity Universal Ins. Co., 592 F.3d at 691-92.
"[u]nder Texas Law, insurance policies are construed as
are contracts generally, and must be interpreted to
effectuate the intent of the parties at the time the
contracts were formed." Amerisure Ins. Co. v.
Navigators Ins. Co., 611 F.3d 299, 309 (5th Cir. 2010)
(internal quotation marks omitted) (quoting Mid-Continent
Cas. Co. v. JITP Dev., Inc., 557 F.3d 207, 212 (5th Cir.
2009) (citations omitted)). If an insurance policy is
ambiguous or inconsistent, the interpretation that would
grant coverage governs. Id. Moreover, a court must
adopt the insured's construction of an ambiguous policy
provision as long as that construction is not unreasonable,
even if the insurer's construction appears more
reasonable. Lubbock Cty. Hosp. Dist. v. Nat'l Union
Fire Ins. Co. of Pittsburgh, Pa., 143 F.3d 239, 242 (5th
Cir. 1998). However, "[w]hen an insurance policy defines
its terms, those definitions control." Evanston Ins.
Co., 370 S.W.3d at 381; see also McQuinnie v. Am.
Home Assur. Co., 400 Fed.Appx. 801, 804 (5th Cir. 2010)
(per curiam) ("Reliance on defined terms in
insurance policies to construe those contracts is necessary
to determine the intent of the parties and integral to the
application of basic principles of contract interpretation to
insurance policies." (internal quotation marks omitted)
(quoting Provident Life & Ace. Ins. Co. v.
Knott, 128 S.WJd 211, 219 (Tex. 2003))). If the terms
are not defined, they are given their plain, ordinary
meaning. Great Am. Ins. Co. v. AFS/IBEXFin. Servs.,
Inc., 612 F.3d 800, 805 (5th Cir. 2010).
Court will first analyze whether State Farm had a duty to
defend Word of Life Church before turning to the question of
whether State Farm had a duty to defend Brown.
State Farm's Duty to Defend Word of Life Church
Farm requests that the Court grant summary judgment in its
favor because the allegations from the Cook Lawsuit fall
outside the Church Policy. Mot. Summ. J. at 11-13.
Specifically, Stale Farm contends that the recall election
posting on Word of Life Church's website does not qualify
as an advertisement and the Cook Lawsuit is not a result of
an advertising injury, as defined by the Church Policy.
Id. Thus, State Farm argues that it did not breach
its contract when it refused to defend Word of Life Church.
However, Word of Life Church counters that the petition in
the Cook Lawsuit did state an advertising injury because its
allegations implied that Word of Life Church's actions in
trying to recall Cook disparaged him as the Mayor of El Paso.
Resp. at 15.
Business Liability clause in the Church Policy states in
relevant part: 'This insurance applies only ... to
advertising injury caused by an occurrence committed in the
coverage territory during the policy period. The occurrence
must be committed in the course of advertising your goods,
products, or services." Mot. Summ. J.., Ex. A at 32.
Further, the Policy defines "advertising injury" in
relevant part as an "oral or written publication, in any
manner, of material that slanders or libels a person or
organization or disparages a person's or
organization's goods, products or services[.]"
Id. at 61. Next, the Policy defines
"advertisement" as "a notice that is broadcast
or published to the general public or specific market
segments about your goods, products or services for the
purpose of attracting customers or supporters."
Id. Finally, the notice at issue here, titled
"Open Letter to City Council" and posted to the
Word of Life Church website, stated:
City Council and the Mayor disrespected the will of the
people. They overturned the legitimate vote for the
Traditional Family Ordinance. People who have complained that
their votes do not count are justified. You lost the most
basic, fundamental civil right of all, and that is to have
your vote count. The whole idea that the people have the
right to address grievances against their government has been
abolished by this council. If you are upset at this action
and would like to sign and/or circulate a recall petition
against Mayor John Cook and Representatives Susie Byrd and
Steve Ortega, then fill out the form below or come to one of
the locations and sign a petition. Share this page with your
friends and get them to fill out the form. Thanks.
Mot. Summ. J., Ex. C at 107. The notice went on to list six
different locations where interested parties could sign the
recall petition, including Word of Life Church. Id.
considering whether the notice constitutes "advertising,
" the Court looks to the definition in the Church Policy
and Texas law. "The Texas Supreme Court's definition
of 'advertising' . .. accord[s] with our common
understanding of the term as referring to a device for the
solicitation of business." Sport Supply Grp., Inc.
v. Columbia Cas. Co., 335 F.3d 453, 462 (5th Cir. 2003);
see also Smith v. Baldwin, 611 S.W.2d 611, 615 (Tex.
1980) (defining "advertising" as a marketing device
designed to induce the public to patronize a particular
establishment). The Policy defines "advertisement"
similarly to the Texas Supreme Court's definition of
"advertising." See Mot. Summ. J., Ex. A at
61. Therefore, the question here is whether the notice posted
to the Word of Life Church website was a marketing device
designed to inform the public about the Church's goods,
products, or services in order to induce them to patronize
Life Church did not respond State Farm's contention that
the notice posted on its website did not qualify as an
"advertisement" or an occurrence committed "in
the course of advertising [its] goods, products, or
services." See Resp. at 14-16. The notice
discussed the recall election and solicited the general
public to sign the recall petition. This does not advertise
the Church's goods, products, or services. Further, while
Brown argues that Word of Life Church took part in the recall
election to solicit likeminded members, this argument is
unavailing here because the notice lists six different
locations, only one of which was Word of Life Church, where
interested parties could go to sign recall petitions. Resp.
at 14; Mot. Summ. J.., Ex. C at 107. Construing the notice as
advertising the Church's goods, products, or services
would defy the plain meaning of those terms, the definition
in the Policy, and common sense. See Mid-Continent Cas.
Co. v. Kipp Flores Architects, L.L.C, 602 Fed.Appx. 985,
994 (5th Cir. 2015) (per curiam) (using a
"common sense" approach to determining whether the
definition of "advertisement" was met).
Accordingly, no reasonable jury could find that the notice
posted on Word of Life Church's website constituted an
"advertisement" or an occurrence committed in the
course of advertising the Church's goods, products, or
even if the notice constituted an "advertisement"
or an occurrence committed in the course of advertising the
Church's goods, products, or services, Word of Life
Church still would not be covered under the Church Policy
because the Cook Lawsuit did not allege an advertising injury
in its petition. Word of Life Church argues that Cook's
Fourth Amended Petition alleges that Plaintiffs
disparaged him as the Mayor of El Paso. Resp. at
15. In support, Word of Life Church points to Paragraph 28 of
Cook's Fourth Amended Petition.
Word of Life Church mischaracterizes Cook's Fourth
Amended Petition. Cook only alleges violations of the Texas
Election Code and states "Defendants' illegal
conduct was an attempt to disenfranchise those voters who
elected Cook to his office" as his injury. Mot. Summ.
J.., Ex. C at 22. Further, in alleging his damages, Cook
refers to corporate campaign expenditures that violated the
Texas Election Code as the basis for his statutory damages.
Id. at 24. At no point does Cook assert damages or a
cause of action related to the disparagement of his office or
his person. The factual allegations of Cook's Fourth
Amended Petition focus on Word of Life Church's
violations of the Texas Election Code via its use of its
resources, as a corporation, to gather signatures for the
recall petitions. Mot. Summ. J.., Ex. C at 11-15, 19. Word of
Life Church can only point to one purported reference in the
Petition that supports their disparagement argument, and that
reference merely explains the utility of a recall petition
and why it was not appropriate in this case. See Id.
at 15. The Petition does not allege any sort of claim for the
disparagement of Cook. Thus, there is no genuine dispute that
Cook's Fourth Amended Petition does not allege an
advertising injury potentially covered by the Church Policy.
Therefore, State Farm is entitled to judgment as a matter of
law on this claim.
the Court GRANTS summary judgment in favor of State Farm with
regard to all of Word of Life Church's claims arising out
of or related to State Farm's refusal to defend Word of
Life Church in the Cook Lawsuit.
State Farm's Duty to Defend Brown
Farm requests that the Court grant summary judgment in its
favor because the allegations from the Cook Lawsuit fall
outside the Church Policy. Mot. Summ. J. at 13-15.
Specifically, State Farm contends that Brown's actions,
as a director, in involving Word of Life Church in the recall
election in violation of the Texas Election Code does not
qualify as a wrongful act, as defined by the Church Policy.
Id. Thus, State Farm argues that it did not breach
its contract with Brown when it refused to defend him in the
Cook Lawsuit. However, Brown counters that the petition in
the Cook Lawsuit did state acts that qualify as wrongful acts
under the Directors, Officers and Trustees Liability clause
of the Church Policy because Brown's actions were not
intentional and were in furtherance of a ministry of the
Church. Resp. at 12-14. Nonetheless, State Farm argues that
even if Brown's actions qualified as wrongful acts under
the Policy, the Criminal Acts Exclusion would apply because
the election laws he violated are criminal laws. Mot. Summ.
J. at 15-19. Brown responds that the Criminal Acts Exclusion
cannot apply here because the First Amendment to the United
States Constitution prevents the Texas Election Code from
being criminally applied to this sort of case. Resp. at
17-19. Nevertheless, State Farm avers that collateral
estoppel applies and prevents Brown from relitigating the
First Amendment issues. Reply at 2-4.
Directors, Officers and Trustees Liability clause of the
Church Policy states: "We will pay those sums that the
insured becomes legally obligated to pay as damages because
of 'wrongful acts' committed by an insured solely in
the conduct of their management responsibilities for the
church." Mot. Summ. J.., Ex. A at 39. Further, the
Policy defines "wrongful acts" as "any
negligent acts, errors, omissions or breach of duty
directly related to the operations of your
church." Id. (emphasis added). There is no
dispute that Brown qualifies as an insured under the
Policy. The issues here are twofold: 1) Do
Brown's actions qualify as wrongful acts, and if so, 2)
did Brown's actions directly relate to the operations of
Word of Life Church?
Farm argues that Brown is not covered under the Policy
because his actions were intentional, not negligent. Mot.
Summ. J. at 14-15. Brown counters that his actions that
violated the Texas Election Code were not intentional;
rather, they were negligent mistakes. Resp. at 12- 14. Brown
asserts that he attempted to adhere to the Texas Election
Code when he created EPTFV but unintentionally violated the
law with the recall election efforts. Id. at 12.
Quoting Webster's Dictionary, Brown contends that his
actions that violated the Texas Election Code were simply
"errors" based on his ignorance of the law.
Id. at 13. Drawing all reasonable inferences in
favor of Brown, a reasonable jury could conclude that his
actions that violated the Texas Election Code were
unintentional errors. Therefore, there is a genuine issue of
material fact as to whether Brown's actions constituted a
Brown's actions must also have been directly related to
the operations of Word of Life Church. State Farm contends
that Brown's actions were not directly related to the
operations of Word of Life Church because Brown's own
statement says that the actions he took were "to help
restore the rights of the voters." Mot. Summ. J.
at 14. Brown responds that his actions were directly related
to the operations of Word of Life Church because the Church,
through Brown, engaged in the recall effort as a ministry to
solicit likeminded people to join the Church. Resp. at 14;
see also Resp., Ex. A ¶ 6 ("By advertising
the recall effort on the church's website, I was not only
communicating this effort as a ministry of our church,
through my leadership, as a church we were also seeking
additional supporters for our church. God calls us to be salt
and light in our communities. Our church is devoted to living
out God's word, not just talking about God's
word."). The word "operations" is not defined
in the Church Policy, so the Court gives it its plain meaning
of "the whole process of planning for and operating a