Amerisure Ins Co v. Navigators Ins Co

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Amerisure Ins Co v. Navigators Ins Co

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
July 13, 2010 N o . 09-20060 Lyle W. Cayce Clerk

A M E R I S U R E INSURANCE CO.,

P la in t if f -A p p e lla n t , v. N A V I G A T O R S INSURANCE CO., D e fe n d a n t -A p p e lle e .

A p p e a l from the United States District Court for the Southern District of Texas

B e fo r e KING, BARKSDALE, and ELROD, Circuit Judges. JENNIFER WALKER ELROD, Circuit Judge: T h is case arises out of a disagreement between two insurers over their r e s p e c t iv e duties to indemnify for personal injuries sustained in an automobile a c c id e n t. Amerisure, the primary insurer, argued that it did not have a duty to in d e m n ify . Navigators, the excess insurer, disagreed, demanding that Amerisure p a y the $1 million limit of its policy. The insurers, however, agreed that the p e r s o n a l-in ju r y lawsuit should be settled, and they agreed on the amount of the s e t t le m e n t , $2.35 million. Amerisure paid the $1 million, but reserved its right

to seek reimbursement. Navigators and another insurer paid the balance. Amerisure then sought reimbursement from Navigators through equitable and contractual subrogation. On cross-motions for summary judgment, the district

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court granted summary judgment for Navigators, finding that, although the Amerisure policy did not cover the incident, Amerisure could not recover through equitable or contractual subrogation.
Before us are four issues: (1) whether Mid-Continent Insurance Co. v. L ib e r ty Mutual Insurance Co., 236 S.W.3d 765 (Tex. 2007), bars Amerisure's c o n t r a c tu a l-s u b r o g a t io n claim; (2) whether equitable subrogation is available; (3 ) whether Amerisure had a duty to indemnify under three exclusions in its p o lic y ; and (4) whether the conditional exclusion of the Navigators policy a p p lie d . We conclude that contractual subrogation is available, and hence, we d o not reach the claim for equitable subrogation. Furthermore, we conclude that t h e r e is a genuine issue of material fact as to Amerisure's duty to indemnify. F in a lly , we conclude that the conditional exclusion does not apply. Accordingly, w e VACATE the grant of summary judgment on the contractual-subrogation c la im , and we REMAND for the determination of Amerisure's duty to indemnify.

BACKGROUND AND PROCEDURAL HISTORY On October 9, 2003, William Sylvester drove two employees of Texas Crewboats Inc., Captain Dixie Clanton and Deckhand Jimmy Satterfield, from Freeport, Texas to Morgan City, Louisiana where the two were to board and crew the Florida Lilly, one of Texas Crewboats's vessels. While en route, Sylvester fell asleep at the wheel, thereby causing the vehicle to veer off of the road and flip over. Clanton and Satterfield suffered significant injuries as a result. They sued Texas Crewboats and Sylvester in Louisiana state court, claiming negligence and recklessness against Sylvester and bringing similar claims under the Jones Act against Texas Crewboats. Clanton and Satterfield claimed that Sylvester was driving in the course and scope of his employment
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with Texas Crewboats and that Texas Crewboats was vicariously liable. They also sued Texas Crewboats for maintenance and cure benefits. At the time, Texas Crewboats carried three insurance policies that the incident potentially implicated. Amerisure provided $1 million of primary automobile-liability insurance. Under that policy, Sylvester, who was driving the
v e h ic le with the permission of Texas Crewboats, was also an insured. Fireman's

Fund Insurance Company provided $1 million of primary coverage for marine protection and indemnity. Navigators was the excess insurer, covering up to $9 million. Under this arrangement, if an incident fell within the coverage of any of the primary insurers, that insurer must indemnify the insured up to $1 million, and then, Navigators would cover the remainder up to $9 million. The Amerisure policy contains three exclusions that are relevant here:
T h e insurance does not apply to any of the following: . . . 3 . WORKERS COMPENSATION Any obligation for which the insured or the insured's insurer may b e held liable under any workers compensation, disability benefits o r unemployment compensation law or any similar law. 4 . EMPLOYEE L IA B IL IT Y B o d ily Injury to: a. A n employee of the insured arising out of and in the course of e m p lo y m e n t by the insured . . . INDEMNIFICATION AND EMPLOYER'S

B u t this exclusion does not apply to bodily injury to domestic e m p lo y e e s not entitled to workers compensation benefits or to lia b ilit y assumed by the insured under an insured contract. 5 . FELLOW EMPLOYEE

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No. 09-20060 B o d ily injury to any fellow employee of the insured arising out of a n d in the course of the fellow employee's employment.

The Amerisure policy also reserves Amerisure's right to subrogation: If any person or organization to or for whom we make payment under this Coverage Form has rights to recover damages from another, those rights are transferred to us. That person or organization must do everything necessary to secure our rights and must do nothing after accident or loss to impair them. The Navigators policy contains a conditional exclusion that reads, As respects all activities of the Assured (except liability arising out of ownership, charter, use, operation, maintenance, loading, unloading, ship repairing or as a bailee of any watercraft not otherwise excluded or limited herein), this insurance shall be free from liability (unless coverage is provided in an underlying policy scheduled hereon, and then coverage hereunder shall only operate as excess of such coverage): (a) from operation, ownership, use of any automobile, truck or aircraft . . . . Under the circumstances, Texas Crewboats wanted the case settled, and all of the interested parties, including the insurers, agreed. Following mediation, the parties agreed to the following settlement: Clanton's claims would be settled for $1,325,000 and Satterfield's for $1,025,000. The insurers, however, could not agree on which of them should pay. Amerisure argued that only the Fireman's and Navigators policies applied. Navigators insisted that the incident also fell within the Amerisure policy, and therefore, demanded that Amerisure pay its $1 million limit. In April 2006, Amerisure moved for summary judgment in Louisiana state court, seeking a declaration that its policy did not cover the incident. On June 15, 2006, Amerisure voluntarily withdrew that motion. Ultimately,
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Amerisure paid $1 million and Navigators paid $1.35 million, which included sums from Fireman's. In the settlement agreement, Amerisure reserved its right to seek reimbursement from Navigators through subrogation. During those settlement negotiations, Amerisure filed this subrogation action in the United States District Court for the Southern District of Texas. The parties filed cross-motions for summary judgment before the district court in 2006. The motions focused on three issues: (1) whether the three exclusions in the Amerisure policy applied, (2) whether the conditional exclusion in the Navigators policy applied, and (3) whether Amerisure could recover through contractual and equitable subrogation. Over two years later, in January 2009, the district court issued its opinion, addressing only the first and third issues. Amerisure Ins. Co. v. Navigators Ins. Co., 04:06-CV-2069, op.
a t 1-4 (S.D. Tex. Jan. 7, 2009). It decided the former for Amerisure, finding that

all three exclusions "equally apply to deny coverage." Id. at 2. Nonetheless, the court denied reimbursement because it found that Amerisure could not pursue contractual- or equitable-subrogation claims against Navigators. See id. at 3. With respect to contractual subrogation, the court held that Navigators had been released from liability as a party to the settlement. See id. It also held that, under Mid-Continent Insurance Co. v. Liberty Mutual Insurance Co., 236 S.W.3d 765, 776 (Tex. 2007), "Amerisure has no contractual right to be subrogated" because the insured parties were fully indemnified. Id. On the question of equitable subrogation, the court found that Amerisure voluntarily contributed to the settlement. See id. Amerisure timely appealed.

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STANDARD OF REVIEW The court reviews, de novo, a district court's award of summary judgment, applying the same standard as the district court. Ford Motor Co. v. Tex. Dep't of Transp., 264 F.3d 493, 498 (5th Cir. 2001). Summary judgment is proper when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-moving party." Gates v. Tex. Dep't of Protective & Regulatory Servs., 537 F.3d 404, 417 (5th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "On cross-motions for summary judgment, we review each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party." Ford, 264 F.3d at 498 (citation omitted). DISCUSSION I. Contractual Subrogation and Mid-Continent
T h e first issue that we must address is one of first impression for this c o u r t: whether Mid-Continent Insurance Co. v. Liberty Mutual Insurance Co.,

236 S.W.3d 765, 776 (Tex. 2007), precludes contractual subrogation simply
b e c a u s e the insured has been fully indemnified. We hold that it does not. I n Texas, parties create contractual-subrogation rights by agreement or c o n t r a c t, granting the right to pursue reimbursement from a third party in e x c h a n g e for payment of a loss. See id. at 774. When the insurer seeks to recover t h r o u g h contractual subrogation, it "stands in the shoes of the insured, obtaining

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No. 09-20060 o n ly those rights held by the insured against a third party, subject to any d e fe n s e s held by the third party against the insured." Id.

The Texas Supreme Court, in Mid-Continent, elaborated on the contractual-subrogation doctrine when this court presented the following certified question: Two insurers, providing the same insured applicable primary insurance liability coverage under policies with $1 million limits and standard provisions (one insurer also providing the insured coverage under a $10 million excess policy), cooperatively assume defense of the suit against their common insured, admitting coverage. The insurer also issuing the excess policy procures an offer to settle for the reasonable amount of $1.5 million and demands that the other insurer contribute its proportionate part of that settlement, but the other insurer, unreasonably valuing the case at no more than $300,000, contributes only $150,000, although it could contribute as much as $700,000 without exceeding its remaining available policy limits. As a result, the case settles (without an actual trial) for $1.5 million funded $1.35 million by the insurer which also issued the excess policy and $150,000 by the other insurer. In that situation is any actionable duty owed (directly or by subrogation to the insured's rights) to the insurer paying the $1.35 million by the underpaying insurer to reimburse the former respecting its payment of more than its proportionate part of the settlement? Id. at 768. Both policies included pro rata clauses, limiting each insurer's exposure to the lesser of (1) the limit of the policy that it issued and (2) its proportion of the settlement. Id. at 772. The Texas Supreme Court held that, in the context presented, . . . a fully indemnified insured has no
r ig h t to recover an additional pro rata portion of settlement from an in s u r e r regardless of that insurer's contribution to the settlement. H a v in g fully recovered its loss, an insured has no contractual rights

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No. 09-20060 t h a t a co-insurer may assert against another co-insurer in s u b r o g a tio n . I d . at 772, 775-76. From this, the court concluded that, "after being fully in d e m n ifie d , [the insured does not have] any contractual rights remaining a g a in s t Mid-Continent. Because [the insured] has no rights to which Liberty M u t u a l may be subrogated, Liberty Mutual has no right of reimbursement t h r o u g h subrogation." Id. at 777. D is t r ic t courts in this circuit have differed on the impact that MidC o n tin e n t has had on contractual subrogation. Two courts, including the district c o u r t here, have broadly construed Mid-Continent to preclude contractual s u b r o g a t io n whenever the insured is fully indemnified or defended: Because the men fully recovered their losses in the settlement, they n o longer have contractual rights against either co-insurer--even w h e r e not all of them contributed to the men's recovery. Without a c la im against an insurer, Amerisure has no contractual right to be s u b r o g a t e d . Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S .W .3 d 765, 776 (Tex. 2007). Amerisure Ins. Co. v. Navigators Ins. Co., 04:06-CV-2069, op. at 3 (S.D. Tex. Jan. 7 , 2009); see also Trinity Univ. Ins. Co. v. Employers Mut. Cas. Co., 586 F. Supp. 2 d 718, 731 (S.D. Tex. 2008) ("Applying Mid-Continent, Plaintiffs stand in no b e tt e r position than Lacy Masonry, who, having been fully defended by Plaintiffs in the underlying suit, has no basis to recover damages against EMC for its fa ilu r e to defend."), aff'd on other grounds and rev'd on other grounds, 592 F.3d 6 8 7 (5th Cir. 2010).1 On appeal, this court did not reach the subrogation question u n d e r Mid-Continent after finding that the appellants could recover through a c o n t r ib u t io n claim. See Trinity Univ. Ins. Co. v. Employers Mut. Cas. Co., 592

1

Navigators has not argued for affirmance on this basis.

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No. 09-20060 F .3 d at 695-96. T h e majority of courts, however, have cabined Mid-Continent to its facts. S e e Arrowood Indem. Co. v. Gulf Underwriters Ins. Co., No. EP-08-CV-285-DB, 2 0 0 8 WL 5686082, at *5 (W.D. Tex. Dec. 19, 2008) (noting that Mid-Continent w a s heavily dependant on the existence of pro rata clauses and that it "should n o t be stretched beyond the facts which underlie that case"); Duininck Bros., Inc. v . Howe Precast, Inc., No. 4:06-CV-441, 2008 WL 4372709, at *9 (E.D. Tex. Sept. 1 9 , 2008) ( "Mid-Continent is a narrow case . . . ."); Lexington Ins. Co. v. Chi. Ins. C o ., No. H-06-1741, 2008 WL 3538700, at *13, 21-22 (S.D. Tex. Aug. 8, 2008) (e m p h a s i z in g that Mid-Continent "does not address whether an insurer that c o n t r ib u t e s to a settlement fund but denies coverage for the underlying lawsuit, a n d that reserves the right to dispute coverage and seek reimbursement for the e n tir e amount it paid, may recover that amount from the other insurer . . ."); A m e r ic a n Home Assur. Co. v. Liberty Mut. Ins. Co., No. 02-3842, 2008 WL 4 4 0 3 0 3 , at *2 n.4 (E.D. La. Feb. 12, 2008) (acknowledging that Mid-Continent is confined to the factual circumstances). M o s t recently, Judge Lee Rosenthal, in a well-reasoned opinion, rejected t h e argument that Mid-Continent automatically precludes subrogation claims w h e n e v e r the insured is fully indemnified. See Employers Insurance Co. of W a u s a u v. Penn-America Insurance Co., -- F. Supp. 2d --, 2010 WL 1404111, at * 1 2 -1 3 (S.D. Tex. 2010). There, the court emphasized that Mid-Continent is lim it e d to situations where the insurers (1) were co-primary insurers, (2) did not d is p u t e that both covered the loss, and (3) were subject to pro rata clauses. See id . at *12. The court further reasoned that such a broad reading of MidC o n tin en t

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No. 09-20060 w o u ld make statutory or contractual indemnification in Texas u n a v a ila b le to the insurer of a seller asserting that its acts or o m is s io n s did not cause the underlying plaintiff's injury if the s e lle r 's insurer assumed the insured's defense and paid to settle the c la im . This reading is not supported by the Texas Supreme Court's s t a t e m e n t s after Mid-Continent. See Frymire Eng'g Co. v. Jomar I n t'l, Ltd., 259 S.W.3d 140, 145 (Tex. 2008) ("[The allegedly r e s p o n s ib le party's] argument that [the settling party] cannot assert e q u it a b le subrogation because its indemnity payment was under a v o lu n ta r y contract would, if accepted and applied to other contracts, b e a radical departure from long-settled Texas subrogation law. For in s t a n c e , insurance policies are contracts, too, and if the hotel's p r o p e r t y insurer had paid the hotel for the cost of repairs pursuant t o a policy agreement, it would certainly be able to assert an e q u it a b le subrogation claim against [the allegedly responsible p a r t y ]." ). I d . at *13. W e agree with the majority of courts that have examined this issue and we r e je c t the overly broad view of Mid-Continent's subrogation exclusion. That view w o u ld effectively end contractual subrogation in Texas. This cannot be so, p a r tic u la r ly in light of the Texas Supreme Court's most recent contractuals u b r o g a t io n decision in Texas Health Insurance Risk Pool v. Sigmundik, -- S .W .3 d -- , 2010 WL 2136625 (Tex. 2010). Although Sigmundik does not specifically address the reach of MidC o n tin e n t, it is nonetheless instructive. There, the insurer had fully indemnified t h e insured for his medical expenses ($336,874.71) arising out of injuries s u s t a in e d in an oil-field explosion. See id. at *1. After the death of the insured, h is wife filed a negligence action on behalf of herself, her two minor sons, and t h e insured's estate. Id. The insurer intervened, arguing that it was "subrogated t o the rights of [the insured] and his estate" based on an express subrogation

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No. 09-20060 p r o v is io n in the policy: W e will be subrogated to all rights of recovery which any person m a y have against another party for all benefits paid by the Pool w h ic h were incurred by the Insured Person as a result of the n e g lig e n c e or misconduct of another party. Our right to repayment s h a ll be a lien against any recovery by the Insured Person whether it be by judgment, settlement, or otherwise. I d . The negligence action settled for $800,000, and the court explained that, t h r o u g h contractual subrogation, the insurer stepped into the shoes of the in s u r e d (the estate) and has a valid claim to recover the $336,874.71 from the s e t t le m e n t . See id. at *2-3. The court could not have reached this result if the b r o a d view of Mid-Continent was in fact the law of Texas. Since Mid-Continent, the Texas Supreme Court has not specified the p r e c is e boundaries of its holding as it applies to contractual subrogation when t h e insured is fully indemnified. Nor do we attempt to do so here. Instead, our d e c is io n here is an Erie guess, and in making an Erie guess, we must determine h o w the Texas Supreme Court would resolve the issue under the specific c ir c u m s t a n c e s presented. See Chaney v. Dreyfus Serv. Corp., 595 F.3d 219, 229 (5 t h Cir. 2010) (citation omitted). Accordingly, in light of Sigmundik, we hold t h a t Mid-Continent does not bar contractual subrogation simply because the in s u r e d is fully indemnified.2 O u r inquiry does not end here, however, as we still must determine w h e t h e r Mid-Continent precludes contractual subrogation in this case. It does n o t. In Mid-Continent, the insured was fully protected because both insurers

In so holding, we recognize that one could reasonably interpret the plain language of Mid-Continent to support such a broad exclusion of subrogation. We also note that the district court did not have the benefit of Sigmundik.

2

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No. 09-20060 a c k n o w le d g e d their duties to defend and indemnify. See 236 S.W.3d at 769. L im it in g Mid-Continent to such circumstances is faithful to the longstanding v i e w of the Texas Supreme Court, as articulated over half a century ago by J u s tic e Jack Pope, that dueling coinsurers must place the interests of their in s u r e d s before their own. See Hardware Dealers Mut. Fire Ins. Co. v. Farmers I n s . Exch., 444 S.W.2d 583, 588-89 (Tex. 1969) (emphasizing that the "settled p r in c ip le s " of Texas insurance law require insurers to "give dominant c o n s id e r a t io n to the rights of the insured"). That is the missing element here: A m e r is u r e insisted that its policy did not apply, and Navigators refused to in d e m n ify until Amerisure paid its $1 million policy limit. In other words, the in s u r e d s would not have been fully protected, and applying the Mid-Continent e x c lu s io n in this situation would have further deviated from settled principles o f Texas insurance law by discouraging insurers from first defending and in d e m n ify in g and then seeking reimbursement for the costs that a coinsurer s h o u l d have paid. See Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of P itts b u r g h , Pa., 20 S.W.3d 692, 703 (Tex. 2000) (rejecting a view of subrogation a s "bad public policy" because it would "discourage insurance companies from p a y in g or settling disputed claims and thereby force insureds more often into lit ig a t io n with their insurers"); see also Hardware Dealers, 444 S.W.2d at 588-89. T h e r e fo r e , we hold that Mid-Continent does not bar contractual subrogation w h e n an insurer has denied coverage. T h e district court provided an additional basis for dismissing Amerisure's con tra ctu a l-su b roga t io n claim. It held that, "[a]lthough Amerisure purchased the r ig h t to pursue the mens' claims against third parties, Navigators has been r e le a s e d from liability as a party to the settlement." Amerisure Ins. Co. v.

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No. 09-20060 N a v ig a to r s Ins. Co., 04:06-CV-2069, op. at 3 (S.D. Tex. Jan. 7, 2009). This o v e r lo o k s how contractual subrogation places Amerisure in the shoes of its in s u r e d s , Texas Crewboats and Sylvester. See Mid-Continent, 236 S.W.3d at

774. Neither released Navigators. Furthermore, in its settlement agreement
w it h Clanton and Satterfield, Amerisure reserved its right to recoup its c o n t r ib u t io n through subrogation from Navigators. In sum, Amerisure has a r ig h t to contractual subrogation. Accordingly, we do not reach the equitables u b r o g a t io n claim. See Bay Rock Operating Co. v. St. Paul Surplus Lines Ins. C o ., 298 S.W.3d 216, 225 (Tex. App.--San Antonio 2009, pet. denied) ("Here, t h e r e is no dispute that St. Paul had a contractual subrogation right pursuant t o its insurance policy with Hollimon; therefore, the express agreement of the p a r tie s controls, and equitable principles do not come into play."). II. C o v e r a g e under the Amerisure Policy A lt h o u g h Amerisure has a contractual-subrogation right, that right only e n tit le s it to reimbursement if Amerisure did not have a duty to indemnify its in s u r e d s , Texas Crewboats and Sylvester. Amerisure contends that three e x c l u s io n s in its policy preclude its duty to indemnify. These exclusions relate t o workers' compensation, employee indemnification, and injuries to fellow e m p lo y e e s , which we will describe in greater detail below. In order to determine A m e r is u r e 's duty to indemnify, we must examine how each of these exclusions a p p lie s to each insured. That is because Section V.D. of the Amerisure policy r e q u ir e s that, "[e]xcept with respect to the Limit of Insurance, the coverage a ffo r d e d applies separately to each insured who is seeking coverage or against w h o m a claim or suit is brought." Amerisure has no duty to indemnify if any one o f the exclusions applies to each insured. Put differently, Amerisure must

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No. 09-20060 in d e m n ify if none of the exclusions discharges its duty to indemnify Texas C r e w b o a t s and Sylvester. The district court found that all three exclusions deny coverage.3 N a v ig a t o r s disputes this, urging us to hold, as an alternative ground for a ffir m a n c e , that none of the exclusions apply. In addition, Navigators contends t h a t , under the conditional-exclusion clause of its policy, if the Amerisure policy d id not cover Sylvester, its policy also would not. In that situation, Navigators a r g u e s that Amerisure may not recover its contribution. With respect to Texas Crewboats, we conclude that only the employeein d e m n ific a t io n exclusion applies. With respect to Sylvester, the only exclusion t h a t could potentially apply is the fellow-employee exclusion, but there is a g e n u in e issue of material fact regarding this question. Hence, the issue of A m e r is u r e 's duty to indemnify survives summary judgment. Finally, we c o n c lu d e that the conditional exclusion of the Navigators policy does not apply. A . Interpreting Insurance Policies in Texas " U n d e r Texas Law, insurance policies are construed as are contracts g e n e r a lly , and must be interpreted to effectuate the intent of the parties at the t im e the contracts were formed." Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F .3 d 207, 212 (5th Cir. 2009) (citations omitted). When an insurance policy is a m b ig u o u s or inconsistent, the interpretation that would afford coverage g o v e r n s . Id. (citations omitted). "Exceptions or limitations on an insurer's

The district court, in one sentence and without analysis, found that the employeeindemnification and fellow-employee exclusions apply: "The second and third exclusions equally apply to deny coverage." Amerisure Ins. Co. v. Navigators Ins. Co., 04:06-CV-2069, op. at 2 (S.D. Tex. Jan. 7, 2009). In addition, the district court did not separately evaluate coverage for each insured, as the policy requires.

3

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No. 09-20060 lia b ilit y are construed even more stringent[ly]." Mid-Continent Cas. Co. v. Swift E n e r g y Co., 206 F.3d 487, 491 (5th Cir. 2000) (citation and internal quotation m a r k s omitted) (alterations in original). The court must accept the in t e r p r e t a t io n of the exclusionary clause urged by the insured if it is "not itself u n r e a s o n a b le ," even if the insurer's interpretation seems "more reasonable or a m o r e accurate reflection of the parties' intent." Barnett v. Aetna Life Ins. Co., 723 S .W .2 d 663, 666 (Tex. 1987) (citations omitted). The court resolves all doubts r e g a r d in g coverage in favor of coverage. See King v. Dallas Fire Ins. Co., 85 S .W .3 d 185, 187 (Tex. 2002); Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. M e r c h s . Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). A n insurer has two responsibilities relating to coverage--the duty to d e fe n d and the duty to indemnify. See D.R. Horton-Texas, Ltd. v. Markel Int'l I n s . Co., 300 S.W.3d 740, 743 (Tex. 2009). Two documents determine an insurer's d u t y to defend--the insurance policy and the third-party plaintiff's pleadings in t h e underlying litigation, which the court must review "without regard to the t r u t h or falsity of those allegations." GuideOne Elite Ins. Co. v. Fielder Rd. B a p tis t Church, 197 S.W.3d 305, 308 (Tex. 2006) (citations omitted). This is k n o w n as the eight-corners rule. Id. (citations omitted). Under the eight-corners r u le , the "[f]acts outside the pleadings, even those easily ascertained, are o r d in a r ily not material to the determination and allegations against the insured a r e liberally construed in favor of coverage." Id. T h e eight-corners rule, however, does not govern the duty to indemnify. S e e D.R. Horton-Texas, 300 S.W.3d at 743-44. That is because the two duties are d is t in c t such that one duty may exist without the other. Id. at 743. "In d e t e r m in in g coverage, a matter dependent on the facts and circumstances of the

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No. 09-20060 a lle g e d injury-causing event, parties may introduce evidence during coverage lit ig a t io n to establish or refute the duty to indemnify." Id. at 741. With these p r in c ip le s in mind, we now turn to the exclusions at issue. B. T h e Amerisure Exclusions

i. Workers'-Compensation Exclusion

The workers'-compensation exclusion does not preclude coverage for Texas Crewboats or Sylvester. a. Texas Crewboats Clanton and Satterfield sued Texas Crewboats for negligence under the Jones Act. This exclusion precludes coverage for "[a]ny obligation for which the
in s u r e d or the insured's insurer may be held liable under any workers c o m p e n s a tio n . . . or any similar law." The issue, therefore, is whether the Jones

Act is "similar" to workers' compensation. It is not. The Texas Supreme Court has not addressed this precise question, and we have located only one published decision that is directly on point, Sanders v. Homes Indemnity Insurance Co., 594 So.2d 1345, 1352-53 (La. Ct. App. 3d Cir. 1994).4 In Sanders, 594 So.2d at 1352, the court considered the effect of a
s i m ila r exclusion, stating that "[t]his insurance does not cover . . . [a]ny o b lig a t io n imposed by a worker's compensation . . . law . . . or any similar law."

The court held that the Jones Act is not similar to workers' compensation because the former is based on the employer's negligence while the latter is not. See Sanders, 594 So.2d at 1352-53; see also Abogado v. Int'l Marine Carriers,

In making an Erie guess, this court may consult the decisions of other jurisdictions so long as the highest court of the forum state has not addressed the issue. See SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 437 (5th Cir. 2008) (citation omitted).

4

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890 F. Supp. 626, 630 (S.D. Tex. 1995) (explaining that workers'-compensation claims, which are imposed without regard to fault, are not similar to and "independent of claims based on . . . Jones Act negligence" (citation omitted)).
W e find this reasoning persuasive. Furthermore, the operative phrase here, "any similar law," is ambiguous w it h respect to the Jones Act claims. In light of this ambiguity, the court must in t e r p r e t the term so that it does not exclude coverage. See Mid-Continent Cas. C o . v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir. 2000) (citation omitted). b . Sylvester T h is exclusion does not apply to Sylvester. Clanton and Satterfield c h a r g e d Sylvester with negligent and reckless driving. Because Sylvester was n o t Clanton or Satterfield's employer, such claims, if proven, would not create " o b lig a t io n [s ] for which [Sylvester] or [his] insurer may be held liable under any w o r k e r s compensation, disability benefits or unemployment compensation law o r any similar law." ii. Employee-Indemnification Exclusion T h is exclusion precludes coverage for Texas Crewboats, but not for S y lv e s te r . a . Texas Crewboats T h e parties agree that the accident involved "bodily injury to . . . e m p lo y e e [s ] of [Texas Crewboats] arising out of and in the course of employment b y [Texas Crewboats] . . . ." Navigators, however, contends that the exclusion is in a p p lic a b le under the subsection of the exclusion that states, "[t]his exclusion d o e s not apply to bodily injury to domestic employees not entitled to workers c o m p e n s a tio n benefits . . . ." According to Navigators, the term "domestic

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No. 09-20060 e m p lo y e e s " does not refer to "butlers and chambermaids," but rather to e m p lo y e e s who work in the United States as opposed to those who work abroad. T h is interpretation is unreasonable, and therefore, does not defeat the otherwise a p p lic a b le exclusion. Cf. Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex. 1 9 8 7 ) (citations omitted). N a v ig a t o r s admits that it was only able to locate one decision to support it s interpretation, Carroll v. Castillo, No. 13-99-006-CV, 2000 WL 34592617, at * 5 (Tex. App.--Corpus Christi April 6, 2000, no pet. h.) (finding that the term " d o m e s t ic employee" is ambiguous because it can refer to someone who works in t h e United States, and therefore, the term is "incapable of precise determination fo r summary judgment purposes"). Carroll was not designated for publication, w h ic h means that, under Texas Rule of Appellate Procedure 47.7, it has no p r e c e d e n t ia l value. Furthermore, this court does not consider unpublished o p in io n s when making an Erie guess. See Primrose Operating Co. v. Nat'l Am. I n s . Co., 382 F.3d 546, 565 (5th Cir. 2004). The Texas Supreme Court has not resolved this question. Nor does it a p p e a r that any Texas court has resolved this issue in a published opinion. Thus, w e consult decisions from other jurisdictions and the "majority rule" in making t h is Erie guess. See SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 437 (5 t h Cir. 2008) (citation omitted). Several courts have found that the term " d o m e s t ic employees," as used in an insurance exclusion, refers to household w o r k e r s and not to those working in the United States. See, e.g., United Fire & C a s . Co. v. Gravette, 182 F.3d 649, 655 (8th Cir. 1999) (holding that "domestic" r e fe r s to a person who performs services in a private household); Dakota, Minn., & E. R.R. Corp. v. Heritage Mut. Ins. Co., 639 N.W.2d 513, 517 (S.D. 2002)

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No. 09-20060 (h o ld in g that "domestic servant" means a person whose "labor is directed to the c o n s t r u c t io n , maintenance or repair of the master's private properties or care of t h e master's family" (internal quotation marks and citation omitted)); U.S. Fid. & Guar. Co. v. Rosso, 521 A.2d. 301, 304 (Me. 1987) (holding that the phrase " d o m e s t ic employee," as found in an insurance exclusion, refers to one that w o r k s in a house or on household chores). We agree with the interpretation of t h e s e courts. T h is domestic-employee exception to the exclusion is inapplicable for a n o t h er reason--it only applies to those domestic employees who are not entitled to workers'-compensation benefits. Clanton and Satterfield were entitled to such b e n e fits because Texas Crewboats was a workers'-compensation subscriber. In s u m , the employer-indemnification exception barred coverage for Texas C rew boa ts. b . Sylvester T h is exception does not apply to Sylvester because he was not Clanton or S a t te r fie ld 's employer: "This insurance does not apply to . . . bodily injury to . . . [a ]n employee of the insured . . . ." Sylvester is the "insured." Clanton and S a t te r fie ld suffered bodily injuries. In order for this exclusion to apply, they m u s t be employees of Sylvester. Neither party has claimed this, nor is there any b a s is in the record for this conclusion. iii. Fellow-Employee Exclusion T h e fellow-employee exclusion does not preclude coverage for Texas C r e w b o a t s , but it may preclude coverage for Sylvester if he was an employee of T e x a s Crewboats.

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No. 09-20060 a . Texas Crewboats T h i s exclusion does not apply to Texas Crewboats because it is Clanton a n d Satterfield's employer, not their fellow employee. The exclusion only applies t o "[b]odily injury to any fellow employee of the insured . . . ." b . Sylvester A m e r is u r e and Navigators contest whether Sylvester was an employee of T e x a s Crewboats when the incident occurred. If he was, the exclusion applies, b u t if he was not, the exclusion does not apply. There is a genuine issue of m a t e r ia l fact on this point. Navigators submitted the Declaration of James T r a v is , the Operations Manager of Texas Crewboats, explaining that Sylvester w a s not an employee, but rather, an independent contractor. Amerisure disputes t h is , pointing to deposition testimony from Clanton indicating that Sylvester was a n employee. This court must consider the declaration and the deposition t e s t i m o n y when determining an insurer's duty to indemnify. See D.R. HortonT e x a s , Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 741, 744 (Tex. 2009). In light o f this conflicting testimony, neither party is entitled to summary judgment on A m e r is u r e 's duty to indemnify. C. T h e Conditional Exclusion of the Navigators Policy

N a v ig a t o r s contends that, if Amerisure does not have a duty to indemnify S y lv e s t e r , then Navigators also does not have such a duty under its conditional e x c lu s io n , which provides, "this insurance shall be free from liability . . . unless c o v e r a g e is provided in an underlying policy scheduled hereon, and then c o v e r a g e hereunder shall only operate as excess of such coverage . . . ." According t o Navigators, "[b]ecause Amerisure deliberately declined to include an a llo c a t io n in its settlement agreement for Amerisure's release versus Sylvester's

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No. 09-20060 r e le a s e , no part of the settlement amount is subject to its subrogation." This conditional exclusion does not apply when the liability "arise[s] out o f . . . [the] ownership, charter, use, operation, [or] . . . loading . . . of any w a t e r c r a ft not otherwise excluded or limited herein . . . ." The vessel at issue, the F lo r id a Lilly, appears on the schedule of covered vessels. So the issue is whether t h e incident arose out of the ownership, charter, use, operation, or loading of the F lo r id a Lilly. In Utica National Insurance Co. of Texas v. American Indemnification Co., 1 4 1 S.W.3d 198, 203 (Tex. 2004), the Texas Supreme Court explained that the p h r a s e "`arise out of' means that there is simply a `causal connection or relation,' w h ic h is interpreted to mean that there is but for causation, though not n e c e s s a r ily direct or proximate causation." (citations omitted). Citing to our d e c is io n s in Red Ball Motor Freight, Inc. v. Employers Mutual Liability I n s u r a n c e Co., 189 F.2d 374, 378 (5th Cir.1951), and American States Insurance C o . v. Bailey, 133 F.3d 363, 370 (5th Cir.1998), the court further noted that " `[a ]r is in g out of' are words of much broader significance than `caused by.'" Utica, 1 4 1 S.W.3d at 203. This court has also explained that, under Texas insurance la w , the phrase "arising out of" has a broad definition favoring coverage--all that is needed is an "incidental relationship" between a claim and the conduct that t h e policy describes. Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 4 5 3 , 458-59 (5th Cir. 2003) (citations omitted); American States Ins. Co., 133 F .3 d at 370 ("[T]he words `arising out of,' when used within an insurance policy, a re `broad, general, and comprehensive terms effecting broad coverage.'" (citation a n d footnote omitted)). A p p ly in g this broad definition of "arising out of," we find that there is a

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No. 09-20060 c a u s a l connection or incidental relationship between the incident and the o w n e r s h ip , use, or operation of the Florida Lilly. Texas Crewboats had assigned C la n t o n and Satterfield to operate the Florida Lilly as captain and deckhand r e s p e c t iv e ly . The incident occurred as Texas Crewboats was transporting them fr o m Freeport, Texas, where Texas Crewboats has offices, to Morgan City, L o u is ia n a , where the Florida Lilly was docked. Texas Crewboats transported t h e m in a company car and provided a driver and a company credit card for food a n d gas during the trip. Furthermore, Texas Crewboats began paying them for t h e ir services as soon as they departed from Freeport. The sole purpose of the t r ip was to transport these crewmen to the Florida Lilly, where they were to b o a r d and operate the vessel. Under these circumstances, we hold that (1) t r a n s p o r t in g the operators of a vessel (2) to that vessel (3) by the owners of the v e s s e l (4) for the sole purpose of operating that vessel, has an incidental r e la t io n s h ip to the ownership, use, or operation of that vessel. Moreover, insofar a s the language of this exclusion is "ambiguous or inconsistent, the construction t h a t would afford coverage to the insured must govern." Mid-Continent Cas. Co. v . Swift Energy Co., 206 F.3d 487, 491 (5th Cir. 2000) (citations omitted). A c c o r d in g ly , the conditional exclusion in the Navigators policy does not apply. C O N C L U S IO N F o r the reasons set forth above, we VACATE the grant of summary ju d g m e n t , dismissing the contractual-subrogation claim, and we REMAND for t h e determination of Amerisure's duty to indemnify.5 Amerisure may seek

Because Amerisure's entitlement to recovery remains unresolved, Amerisure's request for attorney's fees under Texas Civil Practice & Remedies Code § 38.001 is premature. See Green Int'l., Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) ("To recover attorney's fees under Section 38.001, a party must (1) prevail on a cause of action for which attorney's fees are

5

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No. 09-20060 reim b u rse m en t through contractual subrogation if the fellow-employee exclusion p r e c lu d e s coverage for Sylvester. This, in turn, rests on the determination as to w h e t h e r Sylvester was an independent contractor or an employee of Texas C rew boa ts.

recoverable, and (2) recover damages." (citation omitted)).

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