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Sentry Select Insurance Co. v. Ruiz

United States District Court, W.D. Texas, El Paso Division

June 20, 2018

SENTRY SELECT INSURANCE COMPANY, Plaintiff,
v.
CHRISTIAN ULISES RUIZ; RUDOLPH CHEVROLET, LLC; RUDOLPH AUTOMOTIVE, LLC d/b/a RUDOLPH MAZDA; MARCELO FLORES; and LYNN CRAWFORD, Defendants. CHRISTIAN ULISES RUIZ; RUDOLPH CHEVROLET, LLC; RUDOLPH AUTOMOTIVE, LLC d/b/a RUDOLPH MAZDA, Third-Party Plaintiffs,
v.
NORTH AMERICAN CAPACITY INSURANCE COMPANY, Third-Party Defendant.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          DAVID C. GUADERRAMA UNITED STATES DISTRICT JUDGE

         This case presents disputes over insurance coverage. Plaintiff Sentry Select Insurance Company ("Sentry") filed this declaratory judgment action against Defendants Rudolph Automotive, LLC d/b/a Rudolph Mazda ("Rudolph Mazda"), Rudolph Chevrolet, LLC ("Rudolph Chevrolet") (collectively, the "Rudolph Entities"), Christian Ulises Ruiz ("Ruiz"), Marcelo Flores ("Flores"), and Lynn Crawford ("Crawford") (collectively, "Defendants"). Sentry seeks declarations that under a policy it issued to the Rudolph Entities, it has no duty to defend or indemnify Defendants in connection with a lawsuit entitled Andrea Juarez, individually and as Permanent Guardian oflrma Vanessa Villegas, an incapacitated person v. Christian Ulises Ruiz, et. al. Cause No. 2015-DCV-0473, in the 384th Judicial District Court, El Paso County, Texas (hereinafter, the "Underlying Lawsuit"). The Underlying Lawsuit arose from an auto accident that occurred on the premises of Rudolph Mazda (a car dealership); Ruiz, an employee of Rudolph Mazda, hit Irma Vanessa Villegas ("Villegas"), a co-worker, with his vehicle. At the parties' request to try this case on written submission, the Court now enters its findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a)(1).[1]

         I. PROCEDURAL HISTORY[2]

         In August 2016, Sentry filed its Complaint (ECF No. 1) in this declaratory judgment action. Therein, it claims that it has no duty to defend or indemnify Defendants in the Underlying Lawsuit. Defendants filed an answer in November 2016. Moreover, Ruiz and the Rudolph Entities filed a counter-claim seeking declaratory judgment that Sentry has a duty to provide coverage, defend, and indemnify Defendants. Defs.' Original Answer at 11-12, ECF No. 12.

         In July 2017, Sentry moved for summary judgment against Defendants. Pl's Mot. for Summ. J., ECF No. 25. On November 16, 2017, Sentry filed a motion for leave to supplement its motion for summary judgment, and on November 22, the parties filed a "Joint Motion to Try Case on Submission" (ECF No. 41), whereby they requested that the Court adjudicate their disputes based on stipulated facts and evidence. The Court denied Sentry's summary judgement and leave motions, but granted the parties' joint motion to try the case on submission. Order, ECF No.43.

         On January 10, 2018, Sentry filed its opening "Trial Brief (ECF No. 44) (hereinafter "Plaintiffs Trial Brief), and on January 11, Defendants filed their opening "Trial Brief (ECF No. 45) (hereinafter "Defendants' Trial Brief). The parties filed their responsive and reply briefs by February 1. Resp. to Pl's Tr. Br., ECF No. 46; Reply to Pl's Tr. Br., 48; Resp. to Defs.' Tr. Br., ECF No. 47; Reply to Defs.' Tr. Br., ECF No. 49.

         II. FINDINGS OF FACTS

         A. The Policy

         Sentry issued Policy No. 24-48715-07, the insurance policy at issue ("Policy"), which was in effect on the date of the auto accident. Joint Stipulations at 3. Rudolph Mazda and Rudolph Chevrolet are named insureds. Policy Excerpt at 2, ECF No. 40-1;[3] Joint Stipulations at 2. Their employees may also qualify as "insured[s], " if they meet certain conditions set forth in the Policy. Policy Excerpt at 50-52.

         The Policy provides coverage for, inter alia, commercial property coverage, commercial garage liability coverage, and commercial excess/umbrella liability coverage. Id. at 2, 14, 172, ECF No. 40-1; Finn Aff. at 2, ECF No. 26-1. Only the parts of the Policy regarding the garage liability coverage and excess/umbrella liability coverage are at issue in this lawsuit. Joint Stipulations at 3.

         1, Commercial Garage Liability Coverage

         Under the commercial garage liability coverage part of the Policy, Sentry assumed, subject to any applicable limitation and exclusion, the duty to "pay all sums an 'insured' legally must pay as damages ... because of 'bodily injury'... to which this insurance applies, caused by an 'accident' and resulting from 'garage operations' involving the ownership, maintenance or use of any auto. Policy Excerpt at 46, 50. "Garage operations" mean "the ownership, maintenance or use of locations for garage business" and "include all operations necessary or incidental to a garage business." Id. at 80.

         Through a broadened coverage endorsement, Sentry further assumed, subject to any applicable limitation and exclusion, the duty to:

pay all sums the "insured" legally must pay as damages because of "bodily injury" ... arising out of the giving or serving of alcoholic beverages at junctions incidental to your garage business provided you are not engaged in the business of manufacturing, distributing, selling or serving of alcoholic beverages.

Id. at 127 (emphasis added). Heretofore, this broadened coverage will be referred to as the "Host Liquor Liability" coverage. Sentry assumed, subject to any applicable limitation and exclusion, the "duty to defend any 'insured' against a 'suit' asking for such damages." Id. at 50 (emphasis added).

         The garage liability coverage part of the Policy contains an exclusionary clause, under the heading "Employee Indemnification and Employers Liability, " which provides in relevant part: "This insurance does not apply to ... 'Bodily injury' to[] [a]n 'employee' of the 'insured' arising out of and in the course of: (1) Employment by the 'insured'; or (2) Performing the duties related to the conduct of the "insured's business[.]" Id. at 53. Heretofore, this exclusion will be referred to as the "Employer's Liability" exclusion.

         2. Commercial Excess/Umbrella Liability Coverage

         As to the excess liability coverage, Sentry assumed, subject to any applicable limitation and exclusion, the duty to "pay on behalf of the insured the 'ultimate net loss' in excess of 'underlying insurance' because of[]... "Bodily injury" ... to which this insurance applies." Id. at 177. "Ultimate net loss" is defined as "the total sum, after reduction for recoveries ..., that the insured becomes legally obligated to pay as damages by reason of settlement or judgments .. .." Id. at 194. That part of the Policy provides: "When the limits of the 'underlying insurance' have been used up in the payment of judgments or settlements, [Sentry] will have the[]... duty to defend the insured against any 'suit.'" Id. at 177. '"Underlying insurance' means any policies of insurance listed in the Declarations under the schedule of' underlying insurance.'" Id. at 198. The excess coverage does not apply to '"Bodily injury'... to which 'underlying insurance' does not apply for any reason other than the exhaustion of 'underlying insurance' limits of liability." Id. at 178.

         As to the umbrella liability coverage, Sentry assumed, subject to any applicable limitation and exclusion, the duty to "pay on behalf of the insured the 'ultimate net loss' in excess of the Retained Limit stated in the Declarations because of 'bodily injury' ... to which this insurance applies, " but only if the "'[underlying insurance' does not apply, " Id. at 179; the Retained Limit as stated in the Declarations is "none, " Id. at 172. The umbrella liability coverage section of the Policy provides: "In the absence of 'underlying insurance', [Sentry] will have the[]... duty to defend the insured against any 'suit.'" Id. at 180. That section contains an exclusion that is identical to the "Employer's Liability" exclusion in the garage liability coverage part of the Policy. Id.

         B. The Underlying Lawsuit

         On February 17, 2015, Villegas, through Andrea Juarez, brought the Underlying Lawsuit by filing her original petition, which named Ruiz as the sole defendant. State Ct. Pleadings at 1, ECF No. 40-4. Subsequently, Villegas filed multiple supplemental pleadings and joined Flores, Crawford, and the Rudolph Entities as defendants. Id. at 42.

         According to these pleadings, at the relevant time, Flores and Crawford were managers of Rudolph Mazda. See Id. at 44 (" .. . Defendant RUDOLPH MAZDA managers (MARCELO FLORES and LYNN CRAWFORD ... ")); see also id 48 (describing Flores and Crawford as "managers and vice principals of... Rudolph Mazda"). The pleadings refer to Villegas and Ruiz as the Rudolph Entities' sales people, Id. at 44 ("Defendants RUDOLPH had its [sic] sales people including Defendant RUIZ and IRMA VANESSA VILLEGAS ...").

         The allegations in the Underlying Lawsuit were in part as follows: To further their business, the Rudolph Entities had their sales people, including Ruiz and Villegas, begin work at 9:00 am, provided lunch on their premises to keep them on premises and sell its inventory, and had a policy that the sales people would stay as long as needed, sometimes until 10:00 pm. Id. at 44. On December 27, 2013, Flores sent Ruiz to a store during working hours to buy beer. Id. The beer was placed in the Rudolph Entities' refrigerator for consumption on their premises by sales people that night. Id. After Ruiz had consumed alcohol on Rudolph Mazda's premises with Flores and Crawford, he struck Villegas with his vehicle in the front sales/service area of Rudolph Mazda's premises at 1301 N. Lee Trevino Dr., El Paso, Texas; at the time, Villegas was a pedestrian crossing Rudolph Mazda's parking lot. Id. at 2, 44. As a result of this collision, she sustained injuries to her head, neck, and other parts of her body. Id. at 44.

         In the Underlying Lawsuit, which is currently pending, see e.g., Pl's Tr. Br. at 4, Villegas asserted several causes of action; among them were: negligence against Ruiz, negligence against Flores and Crawford, and vicarious liability against the Rudolph Entities. Id. at 45-48. She claimed that Ruiz owed a degree of reasonable care on operation of a motor vehicle to Villegas and that the collision and Villegas's damages were proximately caused by Ruiz's negligence. Id. at 45. She averred that Flores and Crawford, Rudolph Mazda's managers, were individually negligent for purchasing and providing alcohol for their employees on business premises, knowing full well that the employees would have to drive a motor vehicle on the business premises as well as on the public streets. Id. at 48. She claimed that the Rudolph Entities were vicariously liable for her damages and injuries, which were caused by the negligence of Ruiz, Flores, and Crawford. Id. at 47. She also claimed that a joint venture/joint enterprise existed between Rudolph Chevrolet and Rudolph Mazda, and therefore they were jointly and severally liable for the damages sustained by her. Id. at 45-46. She sought monetary relief over one million dollars and all other relief to which she is entitled. Id. at 3, 50.

         In October 2014, Sentry sent a reservation of right letter to the Rudolph Entities, after receiving notice of claim. See Letter from Renee Schude of Sentry to Soraya Hanshew, counsel for the Rudolph Entities, ECF No. 40-2. Therein, it took the position that there would be no coverage under the Policy if Villegas ...


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