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Frederking v. Cincinnati Insurance Co.

United States District Court, W.D. Texas, San Antonio Division

March 27, 2018

RICHARD BRETT FREDERKING, Plaintiff,
v.
CINCINNATI INSURANCE COMPANY, Defendant.

          ORDER

          XAVIER RODRIGUEZ, UNITED STATES DISTRICT JUDGE

         On this date, the Court considered the status of the above captioned-case. After careful consideration, the Court hereby GRANTS Defendant's Motion for Summary Judgment (Docket no. 19) and DENIES Plaintiff's Counter-Motion for Partial Summary Judgment (Docket no. 21).

         BACKGROUND

          I. Factual Background

         On June 13, 2017, Plaintiff Richard Brett Frederking filed his Original Petition in the 408th Judicial District Court of Bexar County, Texas, bringing claims related to commercial insurance coverage for an automobile collision that was the subject of an underlying lawsuit. Docket no. 1-2. On July 18, 2017, Defendant Cincinnati Insurance Company (“Cincinnati”) removed the case to this Court on the basis of diversity jurisdiction. Docket no. 1.

         On September 14, 2014, Plaintiff allegedly suffered serious personal injuries in a motor vehicle collision that was caused by Carlos Xavier Sanchez. Docket no. 1-2 at 3. Sanchez was allegedly operating a motor vehicle owned by his employer, Advantage Plumbing Services (“Advantage”), at the time of the collision. Id. Advantage was the named insured under a Business Auto Coverage insurance policy issued by Defendant that was in full force and effect at the time of the collision. Id.

         Plaintiff filed suit against Sanchez and Advantage in state court in the case Richard Brett Frederking v. Carlos Xavier Sanchez and Advantage Plumbing Services, Ltd., No. 2015-CI-060614 (224th Dist. Ct., Bexar County, Tex. Apr. 10, 2015) (the “Underlying Lawsuit”). In that case, Plaintiff alleged Sanchez drove while intoxicated, failed to yield the right-of-way at an intersection, and struck Plaintiff's vehicle. Docket no. 21 at 8. Sanchez was arrested after the collision, taken to the Bexar County jail, later pled guilty to criminal charges of driving while intoxicated, and admitted his actions or inactions were the cause of the collision. Docket no. 19 at 15.

         Because Plaintiff alleged that at the time of the wreck, Sanchez was operating a vehicle owned by and assigned to him by his employer, Advantage, Plaintiff sued both Sanchez and Advantage. Plaintiff brought claims for negligence, gross negligence, respondeat superior, and negligent entrustment. Defendant defended Sanchez and Advantage in the Underlying Lawsuit under a reservation of rights. The trial court granted Advantage partial summary judgment and dismissed the respondeat superior claim, finding that Sanchez did not act in the course and scope of his employment for Advantage at the time of the collision. The jury considered claims of negligence and gross negligence against Sanchez and a claim of negligent entrustment against Advantage. Docket no. 19-6. The jury found that Sanchez was negligent and that Advantage was negligent under the theory of negligent entrustment. Id. The jury also found that Sanchez was grossly negligent. Id. Plaintiff was awarded $137, 025.00 in compensatory damages and interest, jointly and severally, against Sanchez and Advantage. Docket no. 19-1. Plaintiff was further awarded $207, 550.00 in punitive damages with interest against Sanchez. Id.

         Defendant paid Plaintiff an amount of $153, 086.94 in satisfaction of the full amount of the compensatory damages awarded against Advantage and Sanchez jointly and severally. Docket no. 19-6. Plaintiff then fully released Advantage from the judgment against it. Id. Plaintiff also partially released Sanchez from the compensatory portion of the judgment, but not from the punitive damages portion resulting from the finding of gross negligence. Id.

         II. Procedural History

         Plaintiff filed this action after he attempted to collect the award for punitive damages in the Underlying Lawsuit from Defendant. Plaintiff alleges he is a third-party beneficiary under the insurance policy, and although he has repeatedly demanded that Defendant pay him the punitive damages on behalf of Sanchez, Defendant refuses to pay that award. Docket no. 1-2 at 4. Plaintiff brings a claim for breach of contract against Defendant for failure to pay the punitive damages given the relevant insurance policy. Id. Plaintiff also seeks a declaration that Sanchez was operating a “covered vehicle” under the insurance policy with Advantage's permission at the time of the collision, that Sanchez was a permissive user and additional insured under the insurance policy, and that Defendant is contractually obligated to pay the punitive damage award from the Underlying Lawsuit. Id. at 5.

         Defendant filed its answer denying that Sanchez had Advantage's permission to be operating the vehicle at the time of the collision and denying it is obligated to pay the punitive damages award. Docket no. 2. Defendant also asserted a counterclaim, seeking a declaration of its obligations under the insurance policy to indemnify Sanchez in the Underlying Lawsuit. Id. at The insurance policy under which Defendant provided Advantage coverage has two relevant sections. First, the policy addresses Commercial Auto Coverage (the “Auto Policy”), which carries a per-occurrence limit of $1, 000, 000. Language in the Auto Policy speaks to who is covered and defines certain terms under the policy:

Throughout this policy the words “you” and “your” refer to the Named Insured shown in the Declarations. The words “we”, “us” and “our” refer to the Company providing this insurance.

         . . .

         SECTION II - LIABILITY COVERAGE

         A. Coverage

         We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.

         . . .

         1. Who is an Insured?

         The following are “insureds”:

         a. You for any covered “auto”.

         b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except:

         (1) The owner or anyone else from whom you hire or borrow a covered “auto”. This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own.

         (2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

         (3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.

         (4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower of any of their “employees”, ...


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