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Frederking v. Cincinnati Insurance Co.

United States Court of Appeals, Fifth Circuit

July 2, 2019

RICHARD BRETT FREDERKING, Plaintiff - Appellant
v.
CINCINNATI INSURANCE COMPANY, Defendant-Appellee

          Appeal from the United States District Court for the Western District of Texas

          Before JONES, HO, and OLDHAM, Circuit Judges.

          JAMES C. HO, CIRCUIT JUDGE.

         Only an insurance company could come up with the policy interpretation advanced here. Cincinnati Insurance Company theorizes that its automobile policies do not cover injuries caused by drunk driving collisions, because such collisions are not "accidents." Its logic is this: intentional acts are not accidents, and drunk drivers make the intentional choice to drink and then drive.

         This theory of interpretation conflicts with the plain meaning and common usage of the word "accident"-and defies the understanding and expectation of everyone who drives a car. Not surprisingly, no court has, to our knowledge, endorsed the policy interpretation advanced here, and Cincinnati cites none (other than the district court in this case). We reverse and remand for further proceedings.

         I.

         Carlos Xavier Sanchez was driving under the influence of alcohol when he failed to yield the right of way, thereby colliding with another car and injuring Richard Brett Frederking. At the time, Sanchez was driving a truck assigned to him by his employer, Advantage Plumbing Services. Advantage, in turn, is insured by Cincinnati.

         Frederking sued both Sanchez and Advantage in Texas state court. The jury found that Sanchez's conduct was grossly negligent, and that Advantage negligently entrusted Sanchez with the vehicle. The jury held Sanchez and Advantage jointly and severally liable for $137, 025 in compensatory damages. It further awarded $207, 550 in exemplary damages for Sanchez's gross negligence.

         As Advantage's insurer, Cincinnati agreed to pay Frederking the amount of the compensatory damages award, thereby discharging Advantage's liability. But when Frederking demanded that Cincinnati also pay Sanchez's exemplary damages, Cincinnati refused. In response, Frederking brought this suit against Cincinnati.

         Frederking is a third-party beneficiary of Advantage's insurance policies with Cincinnati. Those policies have two relevant coverage sections. First, the Auto Policy covers damages resulting from "accidents" caused by Advantage's employees that produce defined injuries. Second, the Commercial Umbrella Liability Coverage applies where the Auto Policy does not. It also covers sums in excess of the Auto Policy's limits. For our purposes, however, its coverage is essentially identical to the Auto Policy, because it covers "occurrences"-which includes (but is not limited to) "accidents" resulting in defined injuries.

         When Cincinnati refused to pay the exemplary damages award, Frederking brought this suit for breach of contract and declaratory judgment in Texas state court. Cincinnati removed to federal court and counterclaimed for declaratory judgment. Cincinnati then moved for summary judgment on various grounds, namely, that (1) Sanchez was not a covered "insured" at the time of the collision; (2) Sanchez's grossly negligent conduct could not result in a covered "accident"; (3) the exemplary damages award is uninsurable as a matter of contract and public policy; and (4) Cincinnati has no duty to indemnify Sanchez. Frederking cross-moved for partial summary judgment on the declaratory judgment claims and argued that a fact issue remained about whether Sanchez was an "insured."

         The district court granted summary judgment to Cincinnati. In particular, it concluded that Sanchez's intentional decision to drive while intoxicated meant that the collision was not an "accident" under Texas law.

         II.

         "An interpretation of an insurance policy provision is an issue of law reviewed de novo." Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d 847, 853 (5th Cir. 2003) (per curiam) (citing Am. States ...


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