United States District Court, W.D. Texas, San Antonio Division
BITCO GENERAL INSURANCE CORPORATION, formerly known as BITUMINOUS CASUALTY CORPORATION, Plaintiff,
MONROE GUARANTY INSURANCE COMPANY, A MEMBER OF THE FCCI INSURANCE GROUP, Defendant.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE
ELIZABETH S. ("BETSY") CHESTNEY, UNITED STATES
the Honorable Fred Biery:
Report and Recommendation concerns Plaintiff BITCO General
Insurance Corporation's Motion for Summary Judgment [#30]
and Defendant Monroe Guaranty Insurance Company's Motion
for Summary Judgment [#32]. The Honorable Fred Biery referred
all pre-trial proceedings in this case to the undersigned for
disposition pursuant to Rule 72 of the Federal Rules of Civil
Procedure and Rules CV-72 and 1(c) of Appendix C of the Local
Rules of the United States District Court for the Western
District of Texas [#33]. The undersigned has authority to
enter this Report and Recommendation pursuant to 28 U.S.C.
§ 636(b)(1)(B). After considering both motions, the
responses and replies thereto [#34, #35, #37], and the Joint
Stipulation in Support of Cross-Motions for Summary Judgment
[#31], the undersigned recommends that Plaintiff's Motion
for Summary Judgment [#30] be GRANTED and
that Defendant's Motion for Summary Judgment [#32] be
an insurance coverage dispute between two insurance
companies. In this case, the sole remaining issue, and the
issue presented by the cross-motions for summary judgment, is
whether Defendant Monroe Guaranty Insurance Company, a Member
of the FCCI Insurance Group (“MGIC”), had a duty
to defend 5D Drilling and Pump Service, Inc., formerly known
as Davenport Drilling & Pump Service, Inc.
(“5D”), and its president, Dean Davenport
(“Davenport”), in an underlying lawsuit styled
David Jones d/b/a J & B Farms of Texas v. Dean
Davenport, 5 D Drilling and Pump Service, Inc. f/k/a
Davenport Drilling & Pump Service, Inc., Cause No.
2016-CI-10959, filed in the 45th Judicial District Court of
Bexar County, Texas (“the Underlying Lawsuit”).
MGIC did have a duty to defend.
Underlying Lawsuit, David Jones, doing business as J&B
Farms of Texas (“Jones”), sued 5D and Davenport
for breach of contract and negligence. Thereafter, Plaintiff
BITCO General Insurance Corporation, formerly known as
Bituminous Casualty Corporation (“BITCO”), sued
MGIC, Davenport, 5D, and Jones in the instant federal lawsuit
[#1], seeking declaratory relief against MGIC to establish
its duty to defend pursuant to a commercial general liability
(“CGL”) insurance policy that MGIC issued to 5D.
Specifically, BITCO seeks a declaratory judgment that MGIC
had a duty to defend 5D and Davenport against the claims
raised by Jones in the Underlying Lawsuit.
parties agree that the operative pleading in the Underlying
Lawsuit is Jones's Third Amended Petition, which is
attached as Exhibit 1 to BITCO's Complaint [#1-1]. In the
Underlying Lawsuit, Jones asserted claims for negligence and
breach of contract against 5D and Davenport, alleging that
they failed to properly drill an irrigation water well on his
farm in Frio County, Texas. (3d Am. Pet. [#1-1] at 2-3.)
Jones averred that 5D's faulty workmanship damaged his
property and the Edwards Aquifer, which flows under his
property. (Id. at 3.) During the Underlying Lawsuit,
5D and Davenport asserted that BITCO and MGIC had a duty to
defend them against Jones's claims, basing their
contention on two different CGL policies.
issued a CGL policy to 5D for the period of October 6, 2013
through October 6, 2014, and MGIC issued a CGL policy to 5D
for the period of October 6, 2015 through October 6, 2016
(“the MGIC Policy”). (BITCO Policy [#30-1] at 40;
MGIC Policy [#32-1] at 1.) Both BITCO and MGIC
initially refused to defend 5D or Davenport in the Underlying
Lawsuit. (02/22/18 Re-Tender of Defense to
FCCI/MGIC [#30-6] at 3.) However, after being served
with the Third Amended Petition, BITCO agreed to provide a
defense to 5D and Davenport, subject to a reservation of
rights. (Id.) But MGIC continued to refuse to defend
5D or Davenport, citing two business-risk exclusions in the
MGIC Policy and asserting that the alleged “property
damage” occurred outside the policy period. (02/12/18
FCCI/MGIC Attorney Denial of Defense [#30-5] at 4; 02/27/18
FCCI/MGIC Denial of Defense [#30-7] at 2.) The Underlying
Lawsuit has since settled and been dismissed.
federal case concerns only the MGIC Policy and whether it
gave rise to a duty to defend in the Underlying Lawsuit.
BITCO contends that MGIC had a duty to defend 5D and
Davenport in the Underlying Lawsuit and, therefore, seeks to
recover for MGIC's share of their defense, as well as
attorney's fees and costs incurred in pursuing this
declaratory judgment action.
judgment is appropriate under Rule 56(c) of the Federal Rules
of Civil Procedure only “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine
dispute of material fact means that the evidence is such that
a reasonable jury could return a verdict for the non-moving
party. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986).
party moving for summary judgment bears the initial burden of
informing the district court of the basis for its motion and
identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.
See Celotex Corp., 477 U.S. at 323; Wise v. E.I.
DuPont de Nemours & Co., 58 F.3d 193, 195 (5th Cir.
1995). Once the movant carries its initial burden, however,
the burden shifts to the non-movant to show that summary
judgment is inappropriate. See Bayle v. Allstate Ins.
Co., 615 F.3d 350, 355 (5th Cir. 2010); Fields v.
City of S. Hous., 922 F.2d 1183, 1187 (5th Cir. 1991).
The non-movant “must do more than simply show that
there is some metaphysical doubt as to the material
facts.” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). Nor may the non-movant
“rely on mere allegations in the pleadings; rather, the
non-movant must respond to the motion for summary judgment by
setting forth particular facts indicating that there is a
genuine issue for trial.” Miss. River Basin All. v.
Westphal, 230 F.3d 170, 174 (5th Cir. 2000). The
non-movant can satisfy its burden by tendering depositions,
affidavits, and other competent evidence to buttress its
claim. See Topalian v. Ehrman, 954 F.2d 1125, 1131
(5th Cir. 1992); Int'l Shortstop, Inc. v.
Rally's, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991).
The district court must view the evidence in the light most
favorable to the non-moving party, drawing all justifiable
inferences in the non-movant's favor. See Envtl.
Conservation Org. v. City of Dall., 529 F.3d 519, 524
(5th Cir. 2008); Rosado v. Deters, 5 F.3d 119, 123
(5th Cir. 1993).
the non-movant has been given the opportunity to raise a
genuine factual issue, if no reasonable juror could find for
the non-movant, summary judgment will be granted.”
Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424
(5th Cir. 2000). However, if the moving party fails to
satisfy its initial burden, the motion for summary judgment
must be denied, regardless of the non-movant's response.
See Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994) (en banc).
seeks a declaratory judgment that MGIC had a duty to defend
5D and Davenport in the Underlying Litigation. MGIC argues
that it did not have such a duty for two reasons: (1) the
alleged “property damage” occurred outside the
policy period; and (2) two business-risk exclusions apply and
exclude Jones's claims from coverage. After considering
the pleadings and the MGIC Policy language, as is required by
the “eight-corners rule, ” the undersigned finds
that neither reason is persuasive. Because the Third Amended
Petition alleges “property damage” caused by an
“occurrence” that could have occurred during the
policy period, and because the business-risk exclusions cited
by MGIC bar coverage for some, but not all, of the alleged
“property damage, ” MGIC's duty to defend was
triggered under the MGIC Policy. Thus, Plaintiff's Motion
for Summary Judgment should be granted, and Defendant's
Motion for Summary Judgment should be denied.
The eight-corners rule applies.
Texas law, “an insurer's duty to defend is
determined by the allegations in the pleadings and the
language of the insurance policy.” Nat'l Union
Fire Ins. Co. of Pittsburgh v. Merchs. Fast Motor Lines,
Inc., 939 S.W.2d 139, 141 (Tex. 1997) (per curiam);
see also Dall. Nat. Ins. Co. v. Sabic Ams., Inc.,
355 S.W.3d 111, 117 (Tex. App.-Houston [1st Dist.] 2011, pet.
denied) (“The insurer's duty to defend arises when
pleadings raise allegations that, if taken as true,
potentially state a cause of action within the terms of the
policy.”). This is known as the
“eight-corners” or “complaint-allegation
rule.” GuideOne Elite Ins. Co. v. Fielder Rd.
Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006).
a petition does not allege facts within the scope of
coverage, an insurer is not legally required to defend a suit
against its insured.” Am. Physicians Ins. Exch. v.
Garcia, 876 S.W.2d 842, 848 (Tex. 1994). However, in the
event of an ambiguity, courts “construe the pleadings
liberally, resolving any doubt in favor of coverage.”
Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 643
(Tex. 2005). At the same time, courts “may not read
facts into the pleadings, look outside the pleadings, or
speculate as to factual scenarios that might trigger coverage
or create an ambiguity.” Gilbane Bldg. Co. v.
Admiral Ins. Co., 664 F.3d 589, 596 (5th Cir. 2011).
And, while “[t]he factual allegations are considered
without regard to their truth or falsity, ” Ewing
Const. Co. v. Amerisure Ins. Co., 420 S.W.3d 30, 33
(Tex. 2014), courts “only defer 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).
the complaint does not state facts sufficient to clearly
bring the case within or without the coverage, the general
rule is that the insurer is obligated to defend if there is,
potentially, a case under the complaint within the coverage
of the policy.” Zurich Am. Ins. Co. v. Nokia,
Inc., 268 S.W.3d 487, 491 (Tex. 2008) (quoting
Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387
S.W.2d 22, 26 (Tex. 1965)). “The duty to defend is not
affected by facts ascertained before suit, developed in the
process of litigation, or by the ultimate outcome of the
suit.” Am. All. Ins. Co. v. Frito-Lay, Inc.,
788 S.W.2d 152, 154 (Tex. App.-Dallas 1990, writ dism'd
w.o.j.). “If a complaint potentially includes a covered
claim, the insurer must defend the entire suit.”
Nokia, 268 S.W.3d at 491.
The relevant allegations are contained in Jones's Third
the eight-corners rule, the relevant pleading is the Third
Amended Petition, which contains the following factual