GuideOne Insurance Company v. Missionary Church of Disciples of Jesus Christ, et al

Filing 58

MEMORANDUM OPINION AND ORDER (Rulings on Objections to Evidence): The court has concluded that certain of the objections should be sustained and others denied. See Order for further specifics. (Ordered by Judge John McBryde on 7/7/2011) (egb) (Main Document 58 replaced on 7/7/2011) (egb).

U.S. DISTRICT COURT
NORTHERN DISTRICT OF TEXAS

IN THE UNITED STATES DISTRIC~ COURT
NORTHERN DISTRICT OF TEX S
FORT WORTH DIVISION

FI~~l)

Jll -72011

1...-_ _ _ _,____

GUIDEONE SPECIALTY MUTUAL
INSURANCE COMPANY,

§
§
§

Plaintiff,

CLERK, U.S. DISTRICT COURT
by _ _-=-_,.--_ __
Deputy

§
§

VS.

§

NO. 4:11-CV-009-A

§

MISSIONARY CHURCH OF DISCIPLES
OF JESUS CHRIST, ET AL.,

§
§
§

Defendants.

§

MEMORANDUM OPINION
and
ORDER
(Rulings on Objections to Evidence)
The court has before it for decision two sets of objections
to evidence on which plaintiff, GuideOne Specialty Mutual
Insurance Company, is relying in support of its motion for
summary judgment, one set filed by defendant Sonya Gilmore
("Gilmore") and the other filed by defendants Missionary Church
of the Disciples of Jesus Christ ("Church") and Armando Salgado
("Salgado")

(collectively, "Church Defendants").

The court has

concluded for the reasons given below that certain of the
objections should be sustained and others denied.

A.

The Objections Made by Church Defendants
1.

Exhibit C

Exhibit C in the amended appendix in support of plaintiff's
motion is a copy of the oral deposition given by Salgado on June
28, 2010, in the underlying damage suit pending in the District
Court of Bexar County, Texas, 131st Judicial District, as Cause
No. 2008-CI-03917, styled "Sonya Gilmore v. Michael A. Meyer, et
al."

Church Defendants object to Exhibit C on two grounds.
The first ground is that extrinsic evidence of that kind is

inadmissible under the "eight-corners" rule that has been applied
by Texas courts and the Fifth Circuit, when applying Texas law,
to determine whether a liability insurance company has a duty to
defend a damage suit brought against a party who potentially is
an insured under a policy issued by the insurance company.

In

GuideOne Elite Insurance Co. v. Fielder Road Baptist Church, the
Texas Supreme Court gave the following explanation of the "eightcorners" rule:
The eight-corners rule provides that when an
insured is sued by a third party, the liability insurer
is to determine its duty to defend solely from terms of
the policy and the pleadings of the third-party
claimant. Resort to evidence outside the four corners
of these two documents is generally prohibited.
197 S.W.3d 305, 307 (Tex. 2006).

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the policy issued by plaintiff is essential to applicability of
the eight-corners rule.

The significance of the omitted language

recently was discussed by the Texas Supreme Court in GuideOne
Elite Insurance Co., where the Court said:
Moreover, were we to recognize the exception urged
here, we would by necessity conflate the insurer's
defense and indemnity duties without regard for the
policy's express terms. Although these duties are
created by contract, they are rarely coextensive. The
policy here obligated GuideOne to indemnify the Church
in the event of a meritorious claim for sexual
misconduct, but with respect to the duty to defend, the
contract provided that GuideOne should "defend any suit
brought against [the insured] seeking damages, even if
the allegations of the suit are groundless, false or
fraudulent
"
The policy thus defined the duty to defend more broadly
than the duty to indemnify.
This is often the case in
this type of liability policy and is, in fact, the
circumstances assumed to exist under the eight-corners
rule. Because the respective duties differ in scope,
they are invoked under different circumstances. A
plaintiff's factual allegations that potentially
support a covered claim is all that is needed to invoke
the insurer's duty to defend; whereas, the facts
actually established in the underlying suit control the
duty to indemnify.
197 S.W.3d 305 at 310 (citations omitted)

(emphasis added) .

As the Texas Supreme Court explained, the policy language
that is missing from plaintiff's policy is "assumed to exist
under the eight-corners rule."

Id.

And, that policy language is

what causes the insurance company's duty to defend to be broader

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than its duty to indemnify.

Because plaintiff's policy does not

contain that language, the eight-corners rule is not applicable
to this case.

The language of plaintiff's policy makes the duty

to pay and the duty to defend coextensive.
Not only does the insurance policy issued by plaintiff not
contain the "groundless, false, or fraudulent" policy language
that is so essential to the eight-corners rule, the language of
plaintiff's policy could not make any clearer that the parties
contracted in such a way as to eliminate applicability of the
rule.

The basic definition of plaintiff's defense obligation is

set forth in the Commercial General Liability Coverage Form,
which is adopted by reference in the endorsement titled
"Amendatory Endorsement, Hired and Nonowned Business Auto
Coverage -- Excess Liability and Medical Payments Insurance."
Pl. 's Mot., Am. App. at GIG 0059 (GIG 0169)

i

GIG 0082 (GIG 0192).

It reads as follows:
We will
against
have no
seeking
damage"

have the right and duty to defend the insured
any "suit" seeking those damages.
However we
duty to defend the insured against any "suit"
damages for "bodily injury" or "property
to which this insurance does not apply.

Id. at GIG 0059 (GIG 0169).

To eliminate any possible

uncertainty on the subject, the amendatory endorsement added the

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following language:
However we have no duty to defend "suits" for "bodily
injury" or "property damage" not covered by this
endorsement.
Id. at GAG 0082 (GIG 0192).

The "endorsement" to which the added

language refers is the part of the insurance policy upon which
defendants rely in support of their claim that the insurance
policy provides insurance coverage for the accident that is the
subject matter of the underlying suit brought by Gilmore against
Church Defendants and Michael A. Meyer.
The dictate of Texas law that "insurance policies are
interpreted in accordance with the rules of construction that
apply to all contracts generally," Sharp v. State Farm Fire &
Cas. Ins. Co., 115 F.3d 1258, 1260 (5th Cir. 1997), compels the
conclusion that plaintiff has no obligation to provide a defense
to anyone in the state court lawsuit if the insurance provided by
plaintiff's policy does not apply to the claims made in that
lawsuit. 1

Therefore, extrinsic evidence is proper for

lIn Pendergest-Holt v. Certain Underwriters at Lloyd's, the Fifth Circuit made the following
observations that are pertinent to the instant action:

Thus, we need not and hence do not pause to decide whether the eight comers rule
applies to the duty to advance costs as a general matter, for Texas prefers freedom of
contract and honors the well-worn prerogatives of parties to override judge-made
doctrines--like the eight comers rule--by contracting around them. After all, it is a
contract that we are construing. Assuming but not deciding the eight comers rule would
(continued ... )
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consideration in determining whether plaintiff has an obligation
to defend anyone in the state court action brought by Gilmore
against Church Defendants.
The second ground of the objection of Church Defendants to
the Exhibit C oral deposition is that the "exhibit is
inadmissible on the issue of the duty to indemnify, which must be
determined on the basis of the facts established in the
Underlying Action."

Objections of Church Defendants at 2.

Church Defendants cite a hotchpotch of court decisions that fail
to give legal substance to this second ground.

A review of the

most recently decided of the cases, D.R. Horton-Texas v. Markel
International Insurance Co., 300 S.W.3d 740 (Tex. 2009), does,
however, provide insight into the reasoning of Church Defendants.
A premise of the Horton-Texas decision was that an insurance
company's duty to defend and its duty to indemnify "are distinct
and separate duties."

Id. at 743.

Another premise of Horton-

Texas was that the insurance policy was worded in such a way that
the eight-corners rule applied.

Id. at 744.

In Horton-Texas,

the insurance company was taking the position that a
I( ... continued)
have applied, the parties chose--in plain language--to displace it and to provide for the
use of extrinsic evidence. We must give effect to those bargained-for choices.

600 F.3d 562,574 (5th Cir. 2010) (footnotes omitted).
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determination that it had no duty to defend under the eightcorners rule would necessarily lead to the conclusion that it had
no duty to indemnify.

Id. at 741.

The Supreme Court's holding

was that "the duty to indemnify is not dependent on the duty to
defend and that an insurer may have a duty to indemnify its
insured even if the duty to defend never arises."

rd.

That

holding led to a reversal and remand on the duty-to-indemnify
issue.

In the Horton-Texas opinion, the Court noted that there

could be situations where the duty-to-indemnify issue should be
deferred until after the trial of the underlying lawsuit because
the issue of coverage may turn on facts actually proved in the
underlying lawsuit.

Id. at 745.

The reasoning of Church Defendants is unsound if they are of
the belief that the holding in Horton-Texas or the other cases
they cited causes the Exhibit C oral deposition to be
inadmissible as summary judgment evidence.

The exhibit is

admissible for consideration on the issue of whether there is
insurance coverage under the policy issued by plaintiff to Church
for the claims made by Gilmore in the underlying suit.

Under the

language of the policy contract between plaintiff and Church, if
there is insurance coverage, the duties to indemnify and defend
both exist (unless an insured has engaged in conduct leading to a
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forfeiture of the insurance coverage) i but, if there is no
insurance coverage, neither duty exists.

Those are the very

issues the court is asked by the motion for summary judgment to
decide.
If Church Defendants are suggesting that Texas law is that
an insurance company cannot obtain a declaratory judgment against
its insured that the insurance company does not have an
indemnification obligation as to damage-suit claims made against
the insured until after the underlying damage suit has been tried
and that the court must apply Texas law, Church Defendants are
mistaken in two respects.
First, they would be mistaken in thinking that Texas law
governs.

In this federal declaratory judgment action, federal

law determines "justiciability."

See Cincinnati Ins. Co. v.

Holbrook, 867 F.2d 1330, 1333 (11th Cir. 1989) i Ohio Cas. Ins.
Co. v. Cooper Mach. Corp., 817 F. Supp. 45, 47 (N.D. Tex. 1993) i
State Farm Mut. Auto. Ins. Co. v. Bates, 542 F. Supp. 807, 817
(N.D. Ga. 1982).

Federal law is that the question of whether an

insurance company has a duty to indemnify under an insurance
policy is a justiciable controversy under the Declaratory
Judgment Act, 28 U.S.C.

§§

2201, 2202, even though the underlying

litigation as to which the indemnification obligation might arise
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has not been resolved by trial.

See Maryland Cas. Co. v. Pacific

Coal & Oil Co., 312 U.S. 270, 273-74 (1941); see also Cincinnati
Ins. Co., 867 F.2d at 1332-33; Ohio Cas. Ins. Co., 817 F. Supp.
at 47.

In American States Insurance Co. v. Bailey, the Fifth

Circuit held that it was not an abuse of discretion for a federal
district court to decide the issue of the duty to indemnify as
well as the duty to defend even though the underlying state court
litigation had not been resolved by trial.

133 F.3d 363, 368-69

(5th Cir. 1998).
The second respect in which Church Defendants would be
mistaken is in their apparent belief that Texas law would
prohibit the granting of a declaratory judgment on the
indemnification issue before conclusion of the trial of the
underlying damage suit.

At one time the law of Texas did

prohibit a declaratory judgment action at that point in time.
See Firemen's Ins. Co. v. Burch, 442 S.W.2d 331 (Tex. 1968).
However, that nonjusticiability concept was done away with by an
amendment to the Texas Constitution and a subsequent Texas
Supreme Court decision.

See Farmers Tex. Cnty. Mut. Ins. Co. v.

Griffin, 955 S.W.2d 81, 83 (Tex. 1997).

Now the law of Texas is

that the duty to indemnify is justiciable even though the

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insured's liability has not been determined in the underlying
damage lawsuit.

Id. at 84.

Therefore, Church Defendants' objection to Exhibit C is
denied.
2.

Exhibit D

Exhibit D in the amended appendix in support of plaintiff's
motion is a transcription of a videotaped interview of Michael
Meyer, Salgado, and Raul Rodriguez.

Church Defendants object to

Exhibit D on two grounds.
The first ground is that the exhibit constituted extrinsic
evidence of a kind that is inadmissible under the eight-corners
rule.

For the reasons discussed above, that ground is without

merit.
The second ground is that the contents of the transcript are
hearsay, with the possible exception of statements made by
Salgado offered as admissions against a party.
objection is sustained as to Exhibit D.

The hearsay

If proof of an exception

to the hearsay rule becomes available, the court will be willing,
in response to an appropriate motion, to further consider this
matter.

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3..

Exhibit E

Exhibit E is a statement signed by Michael Meyer concerning
the accident that led to the underlying suit and the events that
led to his operation of the vehicle that was involved in the
accident.

Church Defendants have two grounds for their objection

to Exhibit E.
The first ground relies on the eight-corners rule.

For

reasons previously given, that ground is without merit.
The second ground is that the contents of the exhibit are
hearsay.

The hearsay objection is sustained as to Exhibit E.

If

proof of an exception to the hearsay objection becomes available,
the court will be willing, in response to an appropriate motion,
to further consider this matter.
4.

Objections to Exhibits F, G, H, I, J, and K

Church Defendants give as a ground for their objections to
Exhibits F, G, H, I, J, and K that the exhibits are objectionable
by reason of the eight-corners rule.

For the reasons given

above, that ground for the objections is without merit.
Church Defendants further object to Exhibits F (the oral
deposition given by Officer Robert Urdiales in the underlying
damage suit) and G (the investigating officer's report pertaining
to the motor vehicle accident in question) on the further grounds
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that each lacks proof of authenticity and each contains hearsay
not subject to an exception to the hearsay rule.

The court is

inclined to think that those grounds have merit, and the court
sustains them as to Exhibits F and G.

If those objections can be

overcome, the court will reconsider in response to an appropriate
motion.
Another ground of Church Defendants' objection to Exhibit H
is that it is hearsay.

The court concludes that paragraph 3 of

that exhibit, the affidavit of Holly Inman, is not hearsay, but
that paragraph 4 of the affidavit is hearsay.

The court so

rules.
Church Defendants refer in their objections to Exhibit K as
being "an affidavit of an attorney, Ben Motal, of Plaintiff's law
firm."

This is an inaccurate description of Exhibit K, which is

an affidavit of Bonnie Peck.

Inasmuch as Church Defendants have

misdescribed Exhibit K, the court denies their objection to that
exhibit.
B.

The Objections Made by Gilmore
1.

Exhibits C, Dr Er Fr and G

Gilmore's objections to Exhibits C, D, E, and F include
objections based on the same theory relied on by Church
Defendants as the second ground of their objection to Exhibit C.
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Gilmore's objections based on that theory are without merit for
the same reason the second ground of Church Defendants' objection
to Exhibit C was without merit.
Other grounds of Gilmore's objections to Exhibits E and G
are the same as grounds asserted by Church Defendants in support
of their objections to those exhibits, and the court makes the
same rulings thereon.
2.

Exhibits H, I, and J

Gilmore objections to Exhibits H, I, and J on the ground
that they are irrelevant to any issue in this case.

The court

disagrees, and denies the objections on those grounds.
Gilmore objects to Exhibit H on the further ground that it
is wholly conclusory.

The court disagrees, and denies the

objection on that ground.
3.

Exhibits K, K-1, and K-2

Gilmore objects to Exhibits K, K-1, and K-2 because of lack
of authenticity and because they are inadmissible hearsay.

While

the court questions the relevancy of certain parts of those
exhibits, the court does not consider that statements made in the
documents necessarily are hearsay.

However, the court, for the

time being, is sustaining those objections, with the proviso that

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the court will reconsider upon the filing of an appropriate
motion.

*

*

*

*

Therefore,
The court denies all objections to the extent that they are
grounded on the eight-corners rule or the theory that the court
should defer resolution of indemnity issue until after the
underlying third-party litigation is resolved.
Otherwise, the courts rulings are as indicated above.
THE COURT SO ORDERS.
SIGNED July 7, 2011.

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