Amer Intl Specialty v. Rentech Steel LLC, et al

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PUBLISHED OPINION FILED. [08-11052 Affirmed ] Judge: CDK , Judge: RHB , Judge: JWE Mandate pull date is 10/12/2010 [08-11052]

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Amer Intl Specialty v. Rentech Steel LLC, et al Doc. 0 Case: 08-11052 Document: 00511239102 Page: 1 Date Filed: 09/21/2010 IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED September 21, 2010 N o . 08-11052 Lyle W. Cayce Clerk A M E R I C A N INTERNATIONAL SPECIALTY LINES INSURANCE CO., Plaintiff-Appellant, v. R E N T E C H STEEL LLC; PRESTON TEEL; LESA CROSSWHITE; J E N N I N G S TEEL, Defendants-Appellees. A p p e a l from the United States District Court fo r the Northern District of Texas (Abilene Division) B e fo r e KING, BARKSDALE, and ELROD, Circuit Judges. J E N N I F E R WALKER ELROD, Circuit Judge: T h is case addresses whether an insurance policy that excludes coverage f o r an "obligation" incurred under "any workers' compensation law" bars c o v e r a g e for a judgment that an employee recovers in a negligence action against a Texas employer that does not subscribe to the Texas workers' compensation s y s t e m . Because the Texas Workers' Compensation Act ("TWCA") imposes no o b lig a t io n on a nonsubscriber to compensate an employee for injuries sustained d u e to the employer's own negligence, we find that the exclusion is not a p p lic a b le . Accordingly, we AFFIRM the district court's summary judgment in fa v o r of defendants-appellees. Dockets.Justia.com Case: 08-11052 Document: 00511239102 Page: 2 Date Filed: 09/21/2010 No. 08-11052 I. P la in t iff-A p p e lla n t American International Specialty Lines Insurance Co. ("AISLIC") appeals from the district court's summary judgment in favor of d e fe n d a n t s , holding that AISLIC's umbrella insurance policy ("the AISLIC p o lic y " ), issued to Rentech Boiler Systems, Inc., covered the negligence claims t h a t Preston Teel, Lesa Crosswhite, and Jennings Teel ("the Teels") asserted a g a in s t Rentech Steel, L.L.C. in the underlying litigation and the resulting ju d g m e n t. Rentech Steel, Rentech Boiler Systems, Inc., and Renz Family P a r t n e r s h ip , Ltd. are entities under the control of or owned by a common o w n e r /e n t it y . Rentech Steel, a nonsubscriber to the Texas workers' c o m p e n s a tio n insurance system, maintained both a primary indemnity policy, w h ic h is not implicated in this case, and the AISLIC Policy. Rentech Steel s h a r e d the AISLIC Policy with Rentech Boiler Systems, a subscriber to the w o r k e r s ' compensation system, but they maintained separate primary policies d u e to their differing statuses in relation to the workers' compensation system. T h e underlying litigation commenced when sixteen-year-old Preston Teel s u s t a in e d severe injuries while working at Rentech Steel's manufacturing fa c ilit y in Abilene, Texas. Following the incident, the Teels sued Rentech Steel in state court for gross negligence, negligence, and negligence per se. Lexington In su ra n ce Company, Rentech Steel's primary insurer, initially defended Rentech S t e e l in the litigation. But after Lexington Insurance denied further coverage, A I S L I C assumed Rentech Steel's defense as the umbrella insurer. A few weeks b e fo r e trial was to begin, AISLIC sought a declaratory judgment that it had no o b lig a t io n to defend or indemnify Rentech Steel in the lawsuit. On the first day o f trial, Rentech Steel entered Chapter 7 bankruptcy. According to Rentech 2 Case: 08-11052 Document: 00511239102 Page: 3 Date Filed: 09/21/2010 No. 08-11052 S t e e l, the bankruptcy was necessary because AISLIC would not pay for the suit. The bankruptcy court, however, lifted the stay and permitted the case to proceed t o trial on the condition that any recovery would be limited to the proceeds of the A I S L I C insurance policy. The jury found for the Teels on their negligence and negligence per se c la im s , but it did not find gross negligence on the part of Rentech Steel. The c o u r t then entered a judgment against Rentech Steel for $12,470,000 in actual d a m a g e s , which was reduced to $10,570,000 after applying a settlement credit. Rentech Steel has appealed the judgment, and AISLIC has continued to defend R e n t e c h Steel under a reservation of rights during the appeal. As a consequence o f the state-court judgment, the Teels became proper claimants to Rentech S t e e l's insurance policy. S h o r t ly after the state court entered its judgment, AISLIC filed a d e c la r a to r y judgment action in federal court seeking to establish that it had no d u t y to either defend Rentech Steel in the underlying state-court lawsuit or to in d e m n ify Rentech Steel for the judgment because the AISLIC policy's "Various L a w s " exclusion excluded coverage for any "obligation of the Insured under . . . a n y workers' compensation, disability benefits, or unemployment compensation la w , or any similar law." AISLIC moved for summary judgment, arguing that a negligence claim filed against a nonsubscribing employer is an obligation a r is in g under the TWCA, not state common law, so the Teels' judgment against R e n t e c h Steel was necessarily an "obligation" under Texas's workers' c o m p e n s a tio n law--an obligation explicitly excluded from coverage under the " V a r io u s Laws" exclusion. The Teels and Rentech Steel opposed AISLIC's m o tio n . 3 Case: 08-11052 Document: 00511239102 Page: 4 Date Filed: 09/21/2010 No. 08-11052 T h e district court denied AISLIC's summary-judgment motion, holding t h a t the judgment against Rentech Steel did not fall within the Policy's "Various L a w s " exclusion. The order explained that, although the TWCA deprives a p p e lle e s of the right to assert a common-law negligence or negligence per se c la im against a subscribing employer, the Act imposed no "obligation" on a n o n s u b s c r ib in g employer to compensate an employee for injuries resulting from t h e employer's negligence, but merely limited an employer's defenses against an e m p lo y e e 's common-law claims. Alternatively, the court held that, because the " V a r io u s Laws" exclusion was ambiguous, Texas law required that the exclusion b e interpreted against AISLIC and in favor of coverage where appellees' in t e r p r e t a t io n of the exclusion was reasonable. Following the district court's denial of AISLIC's motion for summary ju d g m e n t , appellees filed for summary judgment on the ground that the AISLIC p o lic y 's "Various Laws" exclusion did not bar coverage of the judgment against R e n t e c h Steel, which the district court granted. This appeal followed. II. We review a district court's summary judgment de novo, applying the same le g a l standards that the district court applied, viewing the evidence in the light m o s t favorable to the nonmoving party. Am. Int'l Specialty Lines Ins. Co. v. C a n a l Indem. Co., 352 F.3d 254, 25960 (5th Cir. 2003). We affirm "only if t h e r e is no genuine issue of material fact and one party is entitled to prevail as a matter of law." Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 488 (5 t h Cir. 2007) (citations omitted). Where, as here, parties have filed crossm o t io n s for summary judgment, each motion must be considered separately b e c a u s e each movant bears the burden of showing that no genuine issue of 4 Case: 08-11052 Document: 00511239102 Page: 5 Date Filed: 09/21/2010 No. 08-11052 m a t e r ia l fact exists and that it is entitled to a judgment as a matter of law. Shaw Constructors v. ICF Kaiser Engr's, Inc., 395 F.3d 533, 53839 (5th Cir. 2 0 0 4 ). III. A t issue in this case is whether an employee's negligence action against an e m p lo y e r that does not subscribe to the Texas workers' compensation system is a n "obligation" under the TWCA, such that it is excluded under the AISLIC P o lic y 's "Various Laws" exclusion. e x c lu s io n provides: T h is insurance does not apply to any obligation of the Insured u n d e r any of the following: 1. the Employee Retirement Income Security Act of 1974 (in c lu d in g amendments relating to the Consolidated O m n ib u s Budget Reconciliation Act of 1985), or any a m e n d m e n t or revision thereto, or any similar law; or any workers' compensation, disability benefits or u n e m p lo y m e n t compensation law, or any similar law. The AISLIC Policy's "Various Laws" 2. Because Texas law governs this claim, we employ the principles of Texas c o n t r a c t construction in interpreting the "Various Laws" exclusion. Texas law p r o v id e s that insurance policies are construed according to common principles g o v e r n in g the construction of contracts, and the interpretation of an insurance p o lic y is a question of law for a court to determine. New York Life Ins. Co. v. T r a v e le r s Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996). Limiting our inquiry to the fo u r corners of the underlying complaint and the four corners of the insurance p o lic y , we interpret the contract to discern the intention of the parties from the la n g u a g e expressed in the policy. See Amerisure Ins. Co. v. Navigators Ins. 5 Case: 08-11052 Document: 00511239102 Page: 6 Date Filed: 09/21/2010 No. 08-11052 C o ., 611 F.3d 299, 309 (5th Cir. 2010). "No single provision taken alone will be g iv e n controlling effect; rather, all the provisions must be considered with r e fe r e n c e to the whole instrument." See Coker v. Coker, 650 S.W.2d 391, 393 (T e x . 1983) (citations omitted). Where, as here, the disputed provision is an e x c lu s io n , the insurer bears the burden of establishing that the exclusion a p p lie s . Guaranty Nat'l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir. 1 9 9 8 ). Whether a contract is ambiguous is a question of law. Kelley-Coppedge, I n c . v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). An ambiguity does n o t arise simply because the parties present conflicting interpretations; it "exists o n ly if the contractual language is susceptible to two or more reasonable in t e r p r e t a t io n s ." Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2 0 0 3 ) (citation omitted). "If policy language is worded so that it can be given a d e fin it e or certain legal meaning, it is not ambiguous," and the court construes it as a matter of law without admitting evidence for the purpose of creating an a m b ig u it y . Id.; see Univ. C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex. 1 9 5 1 ). But if the policy language is ambiguous, we construe it "strictly against t h e insurer and liberally in favor of the insured," Barnett v. Aetna Life Ins. Co., 7 2 3 S.W.2d 663, 666 (Tex. 1987), and an "even more stringent construction is r e q u ir e d " where the ambiguity pertains to an "exception or limitation on [the in s u r e d 's ] liability under the policy," Gulf Chem. & Metallurgical Corp. v. A s s o c ia te d Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993). Consequently, we must adopt the "construction of an exclusionary clause urged b y the insured as long as that construction is not itself unreasonable, even if the c o n s t r u c t io n urged by the insurer appears to be more reasonable or a more 6 Case: 08-11052 Document: 00511239102 Page: 7 Date Filed: 09/21/2010 No. 08-11052 a c c u r a t e reflection of the parties' intent." Glover v. Nat'l Ins. Underwriters, 545 S .W .2 d 755, 761 (Tex. 1977). Employing these principles, we find no ambiguity in the language of the " V a r io u s Laws" exclusion. The exclusion plainly excludes from coverage only t h o s e legal obligations imposed by "any workers' compensation . . . law." This p r o v is io n is straightforward. If Texas's workers' compensation law imposes a d u t y upon Rentech Steel to compensate the Teels for the injuries Preston Teel in c u r r e d due to Rentech Steel's negligence, the exclusion applies and bars coverage. Hence, the only question before the court concerns the proper in t e r p r e t a t io n of Texas law: does the TWCA obligate a nonsubscribing employer t o compensate an employee for injuries sustained as a result of the employer's o w n negligence, or is such compensation a duty under Texas common law? 1 IV . A I S L I C and appellees disagree on two fundamental aspects of Texas law: (1 ) whether an employee's negligence claim against a nonsubscribing employer a r is e s under the TWCA or common law, and (2) if it arises under the TWCA, w h e t h e r the TWCA imposes an "obligation" upon a nonsubscriber to compensate a n employee for injuries caused by its own negligence. AISLIC contends that the p r o v is io n of the TWCA addressing negligence actions against nonsubscribers, c o d ifie d at section 406.033 of the Texas Labor Code, wholly supplanted the Texas c o m m o n - l a w claim with a statutory claim. According to AISLIC, because the T W C A creates the cause of action under which the Teels sued Rentech Steel for Although AISLIC challenges both its duties to indemnify and defend Rentech Steel, which are separate duties creating separate causes of action under Texas law, see Amerisure, 611 F.3d at 30910, the parties agree that the applicability of the "Various Laws" exclusion is determinative of whether AISLIC owes both duties. 1 7 Case: 08-11052 Document: 00511239102 Page: 8 Date Filed: 09/21/2010 No. 08-11052 n e g lig e n c e , the TWCA necessarily imposes an obligation on Rentech Steel to pay t h e Teels' judgment. AISLIC premises its theory on the fact that section 406.033 d e p r iv e s nonsubscribing employers of certain defenses available at common law a n d sets out an employee's burden of proof in negligence cases. Tex. Labor Code 406.033 (b), (c). A p p e lle e s contend that AISLIC can prove neither that the TWCA creates t h e cause of action for negligence against a nonsubscriber, nor that section 4 0 6 .0 3 3 imposes any "obligation" on a nonsubscriber to pay a judgment to an e m p lo y e e for injuries caused by negligence. According to appellees, rather than d is p la c in g the common law, section 406.033 "simply leaves the common law in t a c t with one modification: as a carrot-and-stick incentive to participate in the c o m p e n s a tio n program, the TWCA deprives nonsubscribers of some traditional c o m m o n -la w defenses." But regardless of what law creates the cause of action, a p p e lle e s argue that section 406.033 is devoid of any language creating an " o b lig a t io n " for nonsubscribing employers to compensate employees for accidents r e s u lt in g from negligence, so the exclusion does not apply. W h e r e , as here, the proper resolution of the case turns on the in t e r p r e t a t io n of Texas law, we "are bound to apply [Texas] law as interpreted b y the state's highest court." Barfield v. Madison Cnty., Miss., 212 F.3d 269, 2 7 1 7 2 (5th Cir. 2000). Because the Texas Supreme Court has never ruled on w h e t h e r the Texas Workers' Compensation Act "obligates" a nonsubscribing e m p lo y e r to compensate an employee for injuries sustained due to employer n e g lig e n c e , we must make an "Erie guess" as to how the Texas Supreme Court w o u ld rule upon the issue based on (1 ) decisions of the [Texas] Supreme Court in analogous cases, (2) t h e rationales and analyses underlying [Texas] Supreme Court 8 Case: 08-11052 Document: 00511239102 Page: 9 Date Filed: 09/21/2010 No. 08-11052 d e c is io n s on related issues, (3) dicta by the [Texas] Supreme Court, (4 ) lower state court decisions, (5) the general rule on the question, (6 ) the rulings of courts of other states to which [Texas] courts look w h e n formulating substantive law and (7) other available sources, s u c h as treatises and legal commentaries. H o d g e s v. Mack Trucks, Inc., 474 F.3d 188, 199 (5th Cir. 2006) (quoting C e n te n n ia l Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382 (5th Cir. 1998)). Turning first to the text of section 406.033, nothing in the text indicates t h a t the Texas Legislature intended to impose a legal "obligation" on a n o n s u b s c r ib e r to compensate an injured employee. The statute simply specifies t h a t , "[i]n an action against an employer who does not have workers' c o m p e n s a tio n insurance coverage to recover damages for personal injuries or d e a th sustained by an employee in the course and scope of employment," the d e fe n d a n t employer is deprived of certain defenses available at common law, t h o u g h other defenses remain available. 406.033(a), (b). It also clarifies that t h e common-law negligence standard continues to apply: "the plaintiff must p r o v e negligence of the employer or of an agent or servant of the employer acting w it h in the general scope of an agent's or servant's employment." 406.033(c). Although we believe that this statute, on its face, does no more than m o d ify the defenses available at common law, and does not create a cause of a c t io n that usurps the common-law cause of action, we "are emphatically not p e r m it t e d to do merely what we think best; we must do that which we think the [T e x a s ] Supreme Court would deem best." Jackson v. Johns-Manville Sales C o r p ., 781 F.2d 394, 397 (5th Cir. 1986) (en banc). Thus, we consider the 9 Case: 08-11052 Document: 00511239102 Page: 10 Date Filed: 09/21/2010 No. 08-11052 r e le v a n t authorities to determine how the Texas Supreme Court would interpret s e c t io n 406.033. A . Texas Cases I n making our Erie guess, we look first to those Texas Supreme Court c a s e s that, while not deciding the issue, provide guidance as to how the Texas S u p r e m e Court would decide the question before us. Our preeminent Erie-guess a u t h o r it ie s , language and decisions from the Texas Supreme Court, suggest that t h e court would find that a negligence claim against a nonsubscriber is a c o m m o n -la w claim, and that section 406.033 imposes no "obligation" upon R e n t e c h Steel to pay the Teels' judgment. The Texas Supreme Court in Kroger C o m p a n y v. Keng, 23 S.W.3d 347, 349 (Tex. 2009), indicated in dicta that a n e g lig e n c e claim against a non-subscriber is modified by the TWCA, but remains a claim at common law. In that case, the court addressed whether Chapter 33 o f the Texas Civil Practice and Remedies Code required the district court to s u b m it a comparative-responsibility question to the jury in a negligence action a g a in s t a nonsubscriber, or alternatively, whether section 406.033 prevented the ju r y from considering comparative responsibility. The Texas Supreme Court e x p la in e d in dicta that the TWCA a llo w [s ] injured workers, whose employers subscribed to workers' c o m p e n s a tio n insurance, to recover without establishing the e m p lo y e r 's fault and without regard to the employee's negligence. In exchange, the employees received a lower, but more certain, r e c o v e r y than would have been possible under the common law. Employers were, however, allowed to opt out of the system, resulting in their employees retaining their common-law rights.2 The Texas Supreme Court went on to explain that the purpose of enacting section 406.033 was to discourage employers from choosing to opt out by depriving them of certain traditional common-law defenses to an employee's negligence action. Kroger, 23 S.W.3d at 2 10 Case: 08-11052 Document: 00511239102 Page: 11 Date Filed: 09/21/2010 No. 08-11052 I d . at 34950 (emphasis added). This suggests that the right to bring a claim a g a in s t a nonsubscriber for negligence remains what it has always been--a right a r is in g under common law. AISLIC, however, argues that this case supports exactly the opposite c o n c lu s io n : that such a claim is an obligation arising under the TWCA because t h e TWCA "governs" the negligence cause of action. AISLIC reads Kroger as " u n e q u iv o c a lly stat[ing] that the [TWCA] governs an employee's personal-injury c la im against a nonsubscribing employer," as the Texas Supreme Court there e x p la in e d that L a b o r Code 406.033, which is part of the Workers' Compensation A c t , governs an employee's personal-injury action against his or her e m p lo y e r , when the employer is a nonsubscriber under the Act. .... I n enacting section 406.033 and its predecessors, the L e g is la t u r e intended to delineate explicitly the structure of an e m p lo y e e 's personal-injury action against his or her nonsubscribing e m p l o y e r . Section 406.033(a) prescribes the defenses that are u n a v a ila b le to a nonsubscriber; section 406.033(c) dictates the d e fe n s e s that implicate the employee's conduct and on which an e m p lo y e r may rely; and section 406.033(d) provides the employee's b u r d e n of proof . . . . 23 S.W.3d 347, 34951 (Tex. 2000). Thus, according to AISLIC, because the T W C A governs an employee's negligence claim against a nonsubscriber, it also p r o v id e s an obligation for the nonsubscriber to compensate the injured employee. N o t so. We agree that this language in Kroger indicates that a negligence c la im against a nonsubscriber must proceed within the parameters delineated in section 406.033. But it does not follow that simply by virtue of governing the 350. 11 Case: 08-11052 Document: 00511239102 Page: 12 Date Filed: 09/21/2010 No. 08-11052 c la im , the TWCA also "obligates" Rentech Steel to pay the Teels' judgment. Many common-law claims are "governed" by statutes of limitations, but those s t a t u t e s neither give rise to the cause of action they govern, nor do they obligate any party to pay a judgment arising from a governed claim. See Texas Civ. Prac. & Rem. Code 16.003(a), (b) (providing a two-year statute of limitations for such c o m m o n -la w claims as trespass, injury to the estate or property of another, c o n v e r s io n of personal property, taking or detaining the personal property of a n o t h e r , personal injury, and forcible entry and detainer); Porterfield v. Ethicon, I n c ., 183 F.3d 464, 467 (5th Cir. 1999) (citing section 16.003(a) for the premise t h a t "a two-year statute of limitations governs personal injury actions." (e m p h a s is added)). Because it is clear that AISLIC's chain of logical a s s u m p t io n s is missing a key link, we must conclude that Kroger provides no s u p p o r t for AISLIC's theory. M o r e o v e r , in Kroger, the Texas Supreme Court explicitly declined to adopt t h e appellate court's reasoning, favorable to AISLIC, that a suit against a n o n s u b s c r ib e r is "`an action to collect workers' compensation benefits under the w o r k e r s compensation laws of this state.'" See Kroger, 23 S.W.3d at 352 (quoting T e x a s Civ. Prac. & Rem. Code 33.002(c)(1)). The court reserved that question f o r another day, and instead affirmed the appellate court's decision that no c o m p a r a t iv e -r e s p o n s ib ilit y jury instruction was required on the ground that no s u c h jury instruction was possible because section 406.033 precludes a finding o f comparative responsibility. Id. Thus, we do not read Kroger to suggest that t h e TWCA imposes an obligation on Rentech Steel to compensate the Teels for P r e s t o n 's injuries. 12 Case: 08-11052 Document: 00511239102 Page: 13 Date Filed: 09/21/2010 No. 08-11052 F u r t h e r , the Texas Supreme Court's decision in Fairfield Insurance Co. v. S te p h e n s Martin Paving, L.P., demonstrates that, even where the TWCA sets c e r t a in parameters on an employee's claim against a nonsubscriber, it does not n e c e s s a r ily transform the claim into an obligation under the TWCA. 246 S.W.3d 6 5 3 , 659 (Tex. 2008). In Fairfield, the Texas Supreme Court held that the s t a n d a r d -fo r m employers' liability policy--the same policy AISLIC issued to R e n t e c h Steel, containing the very same "Various Laws" exclusion--did not e x c lu d e coverage for claims of gross negligence against nonsubscribers. See id. This holding is significant because Texas Labor Code section 408.001(b), the p r o v is io n of the TWCA governing gross-negligence claims against n o n s u b s c r ib e r s , specifies the employee's burden of proof in that action: the e m p lo y e e must prove that the employee's "death was caused by an intentional a c t or omission of the employer or by the employer's gross negligence."3 Tex. L a b . Code 408.001(b). Fairfield thus belies AISLIC's contention that section 4 0 6 .0 3 3 subsumed the common law because it "specif[ies] the employee's burden o f proof and the defenses available to the employer." Where the TWCA provides t h e employee's burden of proof for both gross-negligence and negligence claims, a n d the former are unquestionably covered by the insurance policy, the statute's p r o v is io n of the employee's burden of proof cannot provide the basis for a c o n t r a r y result here. Though the decisions and dicta of the Texas Supreme Court weigh more h e a v ily in our Erie analysis, we also consider those decisions of Texas appellate courts in determining how the Texas Supreme Court would rule on this issue. Further, section 408.001 goes on to define "gross negligence" as "the meaning assigned by Section 41.001, Civil Practices and Remedies Code." Tex. Lab. Code 408.001(c). 3 13 Case: 08-11052 Document: 00511239102 Page: 14 Date Filed: 09/21/2010 No. 08-11052 A I S L I C invites us to follow Robertson v. Home State County Mutual Insurance C o m p a n y , --S.W.3d--, 2010 WL 2813488 (Tex. App.--Ft. Worth, 2010, no pet.), w h ic h held that the employee's judgment for damages against his n o n s u b s c r ib in g employer was an "obligation" under workers' compensation law, e x c lu d e d from coverage by the "Various Laws" exclusion in his employer's lia b ilit y policy.4 We decline this invitation, as Robertson is inconsistent with b o th the relevant Texas Supreme Court caselaw and the plain reading of section 4 0 6 .0 3 3 . See Warfield v. Byron, 436 F.3d 551, 558 (5th Cir. 2006) (finding that, w h e r e authorities were split, the Texas Supreme Court would adopt the view t h a t was most consistent with the "plain reading" of the statute). We consider Robertson to be unpersuasive because it conflates "governs" w it h "obligates," and because it fails to account for the Texas Supreme Court's d e c is io n in Fairfield. See Robertson, 2010 WL 2813488, at *5. The Robertson court grounded its holding that no coverage existed on the statute's provision of t h e plaintiff's burden of proof, id. at *7. This conflicts, however, with Fairfield's h o ld in g that the standard employers' liability policy covered claims for gross n e g lig e n c e , though the TWCA sets the standard of proof for those claims as well, S e e Fairfield, 246 S.W.3d at 657. We are convinced by the plain language of s e c t io n 406.033 and by Fairfield that the Texas Supreme Court would not follow R o b e r ts o n , so we do not defer to it. Mem'l Hermann Healthcare Sys., Inc., v. E u r o c o p te r Deutschland, GMBH, 524 F.3d 676, 678 (5th Cir. 2008) (explaining t h a t we need not defer to an intermediate state appellate court decision where w e are "convinced by other persuasive data that the highest court of the state 4 But see In re Autotainment Partners, 183 S.W.3d 532, 537 (Tex. App.--Houston [14th Dist.] 2006, no pet.) (holding that a negligence claim against a nonsubscriber for workers' compensation benefits does not arise under the TWCA). 14 Case: 08-11052 Document: 00511239102 Page: 15 Date Filed: 09/21/2010 No. 08-11052 w o u ld decide otherwise."); see also Warfield, 436 F.3d at 558 (holding that the T e x a s Supreme Court would follow those decisions that were most consistent w it h the "plain reading" of the statute). B. Decisions From Other Courts A lt h o u g h Texas cases provide greater guidance for our Erie analysis, we m a y likewise "consider, among other sources, treatises, decisions from other ju r is d ic t io n s , and the `majority rule.'" SMI Owen Steel Co. v. Marsh USA, Inc., 5 2 0 F.3d 432, 437 (5th Cir. 2008) (citation omitted); see also Amerisure Ins. Co. v . Navigators Ins. Co., 611 F.3d 299, 311 (5th Cir. 2010). Here, we have the b e n e fit of a number of federal cases5 interpreting the TWCA, and we consider t h e s e cases in determining whether the Texas Supreme Court would conclude that section 406.033 imposes an obligation on Rentech Steel to pay the Teels' ju d g m e n t. We generally consider decisions from other states to the extent they are relevant, but the decisions AISLIC submits are largely inapposite because, unlike most other states, Texas grants employers the right to choose whether to participate in the workers' compensation system. In AISLIC's cases, the courts considered how nonsubscribers were acting illegally under state law, but Rentech Steel is not similarly situated. See Indian Harbor Ins. Co. v. Williams, 998 So. 2d 677, 67879 (Fla. Ct. App. 2009); Weger v. United Fire & Cas. Co., 796 P.2d 72, 74 (Colo. Ct. App. 1990); Hanover Ins. Co. v. Ramsey, 539 N.E.2d 537, 538 (Mass. 1989); Florida Ins. Guar. Ass'n v. Revoredo, 698 So. 2d 890, 89293 (Fla. Ct. App. 1997); Tri-State Constr., Inc. v. Columbia Cas. Co., 692 P.2d 899, 903 (Wash. App. 1984); cf. Liberty Mut. Ins. Co. v. United Nat'l Ins. Co., 731 P.2d 167, 16870 (Haw. 1987) (addressing a different issue). In states where employers are compelled to participate in the workers' compensation system, there is a stronger argument that employers who fail to participate in the mandatory system are nevertheless "obligat[ed]" by law to compensate injured employees. See 21 Eric Mills Holmes & Mark S. Rhodes, Holmes' Appleman on Insurance 2d, 132.5 (Lexis Nexis ed. 2002) ("The [policy] exclusion excludes `any obligation' of the insured under a workers' compensation, disability benefits, or unemployment compensation, or any similar law. Including the word `obligation' means that no coverage applies when (1) an insured has statutory coverage and it applies to a loss or (2) an insured should have obtained the statutory protection that applies to a loss."). 5 15 Case: 08-11052 Document: 00511239102 Page: 16 Date Filed: 09/21/2010 No. 08-11052 W e begin this analysis by considering Middleton v. Texas P&L Co., a S u p r e m e Court decision examining the TWCA only a few years following its 1 9 1 3 enactment. 249 U.S. 152 (1919). The TWCA withstood constitutional c h a lle n g e in the Texas Supreme Court in 1916,6 but with United States Supreme C o u r t review imminent, the Texas Legislature amended the Act while the appeal w a s pending to allow workers to forego workers' compensation remedies and t h e r e b y retain their common-law rights of action. See Ferguson v. Hosp. Corp. I n t'l, 769 F.2d 268, 271 (5th Cir. 1985). In 1919, the Supreme Court affirmed t h e Texas Supreme Court and held that the statute was constitutional. Middleton, 249 U.S. at 155. In describing the Act, the Court explained that the T W C A shielded employers from common-law suits, but "[e]mployers who do not b e c o m e subscribers are subject as before to suits for damages based on n e g lig e n c e ." Id. (emphasis added). Negligence suits preceding the enactment of t h e TWCA were unquestionably suits under common law. Therefore, the S u p r e m e Court's statement leaves little doubt that it interpreted the TWCA as n o t fundamentally changing the characterization of common-law negligence c la im s against nonsubscribers. We are also guided by those federal decisions that have considered the q u e s t io n whether an action against a nonsubscriber arises under common law o r the TWCA. Rentech Steel argues that we should follow Pyle v. Beverly E n te r s .- T e x . , 826 F. Supp. 206, 209 (N.D. Tex. 1993), holding that negligence Middleton v. Texas P. & L. Co., 185 S.W. 556, 561-62 (1916) (rejecting an employee's challenge that the statute's requirement that he accept compensation under his employer's compensation policy in lieu of common-law damages constituted a deprivation of property without due process in violation of the Fourteenth Amendment). 6 16 Case: 08-11052 Document: 00511239102 Page: 17 Date Filed: 09/21/2010 No. 08-11052 c la im s against nonsubscribers exist independently of the TWCA.7 In that wellr e a s o n e d opinion, Judge Fitzwater considered whether the plaintiff's negligence s u it against her nonsubscribing employer arose under the TWCA, such that it w a s not preempted by ERISA. The court held that they were not so preempted b e c a u s e the plaintiff's s t a t e court petition does not seek recovery pursuant to the TWCA. I t clearly alleges common law claims of negligence, intentional in flic t io n of emotional distress and breach of duty of good faith and fa ir dealing. These are not causes of action that are created by the T W C A ; they exist independently. Moreover, the fact that the TWCA d e p r iv e s employers of certain defenses to negligence claims does not m e a n that claims by employees against nonsubscribing employers a r e brought pursuant to the TWCA. See Eurine v. Wyatt Cafeterias, I n c ., 1991 WL 207468 at *2 (N.D. Tex. Aug. 21, 1991) (Sanders, C.J.) (" A cause of action does not arise under workers' compensation laws m e r e ly because the workers' compensation statute deprives the d e fe n d a n t of certain defenses to the cause of action."). Id. This approach, we believe, is consistent with the Texas Supreme Court's a p p r o a c h in Kroger v. Keng, 23 S.W.3d 347 (Tex. 2000), and with the history of t h e TWCA, see Nunez, 771 F. Supp. at 16768 ("When the Texas Legislature put a workers' compensation law into effect in 1917 it, for all practical purposes, a b o lis h e d the right of an employee to bring a common-law action against an e m p l o y e r having workers' compensation insurance coverage. However, the L e g is la t u r e preserved the common law right of action for the employees of an See also Nunez v. Wyatt Cafeterias, Inc., 771 F. Supp.165, 16768 (N.D. Tex. 1991) (holding that by bringing a cause of action against his nonsubscribing employer, the plaintiff had "but exercised his common law rights, as those rights have been enhanced by the workers' compensation laws of Texas"). 7 17 Case: 08-11052 Document: 00511239102 Page: 18 Date Filed: 09/21/2010 No. 08-11052 e m p lo y e r who elected not to carry workers' compensation insurance, and e n h a n c e d those rights by a statutory provision that prevented an employer in s u c h an action from asserting defenses that theretofore had been available to e m p lo y e r s ." ). AISLIC, however, contends that we must consider those district-court d e c i s io n s holding that claims against nonsubscribers are not removable to fe d e r a l court under 28 U.S.C. 1445(c), the federal statute addressing " n o n r e m o v a b le actions," because such claims "arise" under the TWCA. See F ig u e r o a v. Healthmark Partners, 125 F. Supp. 2d 209, 210 (S.D. Tex. 2000); see a ls o Smith v. Tubal-Cain Indus., Inc., 196 F. Supp. 2d 421, 423 (E.D. Tex. 2001); D e a n v. Tex. Steel Co., 837 F. Supp. 212, 214 (N.D. Tex. 1993). But see Eurine v . Wyatt Cafeterias, Inc., No. 3-91-0408-H, 1991 WL 207468, at *2 (N.D. Tex. A u g . 21, 1991) (unpublished) (holding that, for the purposes of section 1445(c), a negligence action against a nonsubscriber is a common-law claim that does not a r is e out of the TWCA). We find these cases to be of limited value because s e c t io n 1445(c) does not require the court to determine whether the TWCA im p o s e s an "obligation" on a nonsubscriber to pay a judgment to an employee in ju r e d as a result of the employer's negligence. It provides only that "a civil a c t io n in any State court arising under the workmen's compensation laws of such s t a t e may not be removed to any district court of the United States." Further, even if we assume arguendo that a claim that "arises under" the T W C A becomes an "obligation" under that law, the section 1445(c) cases n e v e r t h e le s s remain an imperfect litmus test for how the Texas Supreme Court w o u ld resolve the case before us. This is because of the deference courts afford t o the congressional intent behind the removal statute, which is not applicable 18 Case: 08-11052 Document: 00511239102 Page: 19 Date Filed: 09/21/2010 No. 08-11052 h e r e . As the district court explained in Figueroa, "Section 1445(c) denotes an e ffo r t by Congress to restrict the district courts' diversity jurisdiction in order to r e lie v e the collectively overburdened docket of the federal courts. Courts have t h e r e fo r e construed section 1445(c) broadly in order to further this purpose." Figueroa, 125 F. Supp 2d. at 211 (internal citations omitted). This broad c o n s t r u c t io n was also apparent in Smith, where the court found that a n e g lig e n c e claim "aro[se] under" the TWCA simply because "[n]egligence actions a g a in s t nonsubscribing employers are expressly contemplated by Texas workers' c o m p e n s a tio n law; indeed, several common-law defenses have been eliminated b y statute." Smith, 196 F. Supp. 2d at 423 (citation omitted). We do not c o m m e n t on whether the TWCA's mere "contemplat[ion]" of a cause of action p r o v id e s sufficient justification to deny removal under section 1445(c), but it is n o proof at all that the TWCA actually "obligate[s]" a nonsubscriber to c o m p e n s a te an employee for negligence-induced injury. L ik e w is e , Illinois National Insurance Co. v. Hagendorf Construction Co., 3 3 7 F. Supp. 2d 902 (W.D. Tex. 2004), is similarly unpersuasive. In that case, t h e court held that a policy exclusion, similar to the one considered here, e x c lu d e d coverage for an employee's negligence claim against a nonsubscriber b e c a u s e the claim arose under the TWCA.8 See id. at 905. We are disinclined to fo llo w this decision for four reasons. First, though the Texas appellate court in K r o g e r followed the reasoning that the federal district court would later apply in Hagendorf, the Texas Supreme Court expressly declined to adopt that r e a s o n in g , and decided the case on other grounds. Kroger v. Keng, 23 S.W.3d 8 The exclusion in Hagendorf excluded "[a]ny obligation for which the insured or the insured's insurer may be held liable under any workers compensation, disability benefits or unemployment compensation law or any similar law." Hagendorf, 337 F. Supp. 2d at 904. 19 Case: 08-11052 Document: 00511239102 Page: 20 Date Filed: 09/21/2010 No. 08-11052 3 4 7 (Tex. 2000). This inspires little confidence that the court would opt to follow t h a t decision in this instance. Second, Hagendorf's holding is grounded on F ig u e r o a , Smith, and Dean--decisions that were decided using a broad c o n s t r u c t io n of the term "arising under," a construction that we do not apply h e r e . Illinois Nat'l, 337 F. Supp. 2d at 905 (citing Figueroa,125 F. Supp. 2d 209; S m ith , 196 F. Supp. 2d 421; Dean, 837 F. Supp. 212). Third, just as in the rem o v a l cases, Hagendorf held that the exclusion applied because the negligence c la im s were "commenced pursuant" to the TWCA, but this reasoning does not h o ld water. The text of the exclusion does not purport to exclude claims The language " c o m m e n c e d pursuant" to any workers' compensation law. r e q u ir e d the court to determine whether the TWCA actually imposed an o b lig a t io n on the nonsubscriber to compensate an employer for injuries caused b y negligence. The court did not do so.9 F in a lly , we find Hagendorf unreliable because the three decisions upon w h ic h the court premised its holding--Figueroa, Smith, and Dean--derive their r e s p e c t iv e holdings, at least in part, from a misreading of Foust v. City Insurance C o , 704 F. Supp. 752 (W.D. Tex. 1989) (Gee, J., sitting by designation). These c o u r ts interpreted Foust's language--that employers "depart the general c o m m o n -la w tort system" upon hiring workers regardless of whether they choose t o subscribe to the workers' compensation system--as implying that the c o m m o n -la w claims had been extinguished. Id. at 753; see also Figueroa, 125 F. S u p p . 2d at 211 (quoting Foust, 704 F. Supp. at 753); Smith, 196 F. Supp. 2d at 4 2 3 (same); Dean, 837 F. Supp. at 214 (same). This interpretation conflicts with For these same reasons, we are not persuaded by Markel Insurance Company, Inc. v. Spirit of Texas Cheer & Gymnastics, No. 4:08-CV-758-Y, 2010 WL 3283051 (N.D. Tex. Aug. 19, 2010), which followed Hagendorf. See id. at *6. 9 20 Case: 08-11052 Document: 00511239102 Page: 21 Date Filed: 09/21/2010 No. 08-11052 F o u s t's language just sentences later: depending on whether an employer s u b s c r ib e d to the workers' compensation system, the TWCA either "admitted [t h e employer] to the worker's compensation system or removed its defenses and r e le g a te d it to Texas common law, shorn of [its] defenses." Foust, 704 F. Supp. a t 753 (emphasis added). Accordingly, we hold that a negligence claim against a nonsubscriber is not an "obligation" imposed by the TWCA. V. A lt e r n a t iv e ly , assuming arguendo that the "Various Laws" exclusion is a m b ig u o u s , summary judgment for appellees would still be proper if their in t e r p r e t a t io n of the exclusion is reasonable.1 0 See Amerisure Ins. Co. v. N a v ig a to r s Ins. Co., 611 F.3d 299, 309 (5th Cir. 2010) (explaining that we must a d o p t the "interpretation of the exclusionary clause urged by the insured if it is `n o t itself unreasonable,' even if the insurer's interpretation seems `more r e a s o n a b le or a more accurate reflection of the parties' intent.'" (citation o m i t te d )). The district court stated in its alternative holding that the phrase " a n y obligation . . . under any workers' compensation . . . law" could be We reject AISLIC's argument that the district court was prohibited from finding ambiguity sua sponte, as we have previously held that "[t]he interpretation of the contract and determination of ambiguity, however, is a matter of law, and the court `may conclude that a contract is ambiguous even in the absence of such a pleading by either party.'" In re Newell Indus., Inc., 336 F.3d 446, 449 n.5 (5th Cir. 2003) (quoting Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993)). As this court has observed, this scenario rarely presents itself. Brooks, Tarlton, Gilbert, Douglas & Kressler v. U.S. Fire Ins. Co., 832 F.2d 1358, 1365 (5th Cir. 1987) (citations omitted) ("An allegation of ambiguity. . . is of pivotal importance. Moreover, `[a]s necessity is the mother of invention, so is ambiguity the father of multiple reasonable constructions, and where lawyers are involved, one never lacks an eager parent of either gender.' . . . It is interesting, therefore, that the allegation of ambiguity in this case came, not from the parties, but from the district court."). 10 21 Case: 08-11052 Document: 00511239102 Page: 22 Date Filed: 09/21/2010 No. 08-11052 in t e r p r e t e d to incorporate only workers' compensation benefits, not a judgment in a negligence suit. It explained that t h e "Various Laws"exclusion could be interpreted as only excluding c l a im s already covered by workers' compensation benefits rather t h a n excluding all claims of employees, whether filed to collect w o r k e r s ' compensation benefits or damages by common-law. In such a case, there is more than one plausible interpretation of the " V a r io u s Laws" exclusion. Thus, applying the provisions of the " V a r io u s Laws" exclusion to the dispute before the Court produces a n uncertain or ambiguous result, and the exclusion will be in t e r p r e t e d against AISLIC and in favor of coverage. W e agree with the district court that an "obligation" under "workers' c o m p e n s a tio n law" could be interpreted to refer only to benefits paid by the w o r k e rs' compensation system, as the meaning of the term obligation has "many, w id e , and varied meanings" that depends on the context in which the word is u s e d . See Black's Law Dictionary (9th ed. 2009). Where negligence claims a g a in s t nonsubscribers, at least traditionally, have been recognized as arising u n d e r common law, we conclude that it is reasonable to interpret the "Various L a w s " exclusion to exclude only mandatory benefit payments. C O N C L U S IO N I n summary, AISLIC has failed to meet its burden of proving that the " V a r io u s Laws" exclusion bars coverage of the Teels' claims and the judgment a g a in s t Rentech Steel. AISLIC has not shown that the Texas Supreme Court w o u ld conclude either that a negligence claim against a nonsubscriber arises u n d e r the TWCA rather than common law, or that Texas Labor Code section 4 0 6 .0 3 3 imposes any obligation upon Rentech Steel to pay the Teels' judgment. For these reasons, we AFFIRM the judgment of the district court. 22

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