United States District Court, W.D. Texas, El Paso Division
FINDINGS OF FACT AND CONCLUSIONS OF LAW
C. GUADERRAMA UNITED STATES DISTRICT JUDGE
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
"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
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.
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.
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.
FINDINGS OF FACTS
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; 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
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.
Commercial Garage Liability Coverage
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.
a broadened coverage endorsement, Sentry further assumed,
subject to any applicable limitation and exclusion, the duty
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).
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"
Commercial Excess/Umbrella Liability Coverage
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.
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.
The Underlying Lawsuit
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.
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
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.
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.
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 ...