Acadia Insurance Company et al v. Jacob and Martin, Ltd. et al

Filing 34

MEMORANDUM OPINION AND ORDER: The Court concludes that Plaintiffs Acadia Insurance Company and Continental Western Insurance Company owe no duty to defend Jacob and Martin, Ltd., Alan Derek Turner, Kenneth B. Martin, and Randall Lovelady in the underlying action. A genuine issue of material fact exists as to whether Plaintiffs owe a duty to indemnify Defendants. Accordingly, Plaintiffs' 23 Motion for Summary Judgment is GRANTED in part and DENIED in part. (Ordered by Judge Reed C. O'Connor on 5/28/2014) (twd) Modified on 5/29/2014 (ult).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION

ACADIA INSURANCE COMPANY and
CONTINENTAL WESTERN
INSURANCE COMPANY,
Plaintiffs,
v.
JACOB AND MARTIN, LTD et al.,
Defendants.

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Civil Action No. 4:13-cv-798-O

MEMORANDUM OPINION AND ORDER
Before the Court are Plaintiffs Acadia Insurance Company and Continental Western
Insurance Company’s (“Plaintiffs”) Motion for Summary Judgment (ECF No. 23), filed March 24,
2014; Plaintiffs’ brief in support of their motion for summary judgment (ECF No. 24), filed March
24, 2014; Plaintiffs’ appendix in support of their motion for summary judgment (ECF No. 25), filed
March 24, 2014; Defendants Jacob and Martin, Ltd., Alan Derek Turner, and Kenneth B. Martin’s
(“Defendants”)1 response (ECF No. 27), filed May 5, 2014; Defendants’ brief in support of their
response (ECF No. 28), filed May 5, 2014; Defendants’ appendix in support of their response (ECF
No. 29), filed May 5, 2014; Plaintiffs’ reply (ECF No. 30), filed May 8, 2014; Plaintiffs’ Objection
to Affidavit of Kenneth Martin and Motion to Strike (ECF No. 31), filed May 8, 2014; and Plaintiffs’
supplement to their reply (ECF No. 32), filed May 21, 2014. For the reasons set forth below, the

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The Clerk of Court entered default against Defendant Randall Lovelady (“Lovelady”), and
Plaintiffs’ motion for default judgment against Lovelady is pending before the Court.

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Court GRANTS in part and DENIES in part Plaintiffs’ motion for summary judgment.
I.

FACTUAL AND PROCEDURAL BACKGROUND
This is an insurance coverage dispute in which Plaintiffs seek a declaration as to their duties

to defend and indemnify Defendants in an underlying state court action. Accordingly, the following
facts are drawn from the live pleading in the underlying action. Plaintiffs issued general liability and
umbrella policies to Jacob and Martin, Ltd. See App. Pls.’ Mot. Summ. J. Exs. 1 & 2 (Policies), ECF
No. 25. The policies covered the period from December 1, 2010, to December 1, 2011. Id. In 2011,
Jacob and Martin contracted with the city of Gordon, Texas, to design and install a new sewer
system. Id. Ex.3 (Pet.), App. 250. Turner was the lead engineer on the project, and Lovelady was a
project engineer. Id. Martin is the general partner of Jacob and Martin. Id.
The City of Gordon also contracted with Granbury Contracting & Utilities, Inc. to install
sewer lines. Id. While working on the project, Lovelady directed Eliseo Alberto Ramirez Rodriguez
(“Ramirez”), an employee of Granbury, to open a manhole, climb inside it, and remove a plug from
the sewer line. Id. at 251. When Ramirez removed the plug, “toxic fumes were released and Ramirez
died from asphyxia due to methane gas inhalation.” Id. Ramirez’s parents filed suit against Jacob
and Martin, Lovelady, Turner, and Martin under the Texas Wrongful Death and Survival statutes in
Palo Pinto County, Texas. See id. at 247-48.
Thereafter, Plaintiffs filed a complaint in this Court seeking a declaration that they owe no
duty to defend or indemnify Jacob and Martin, Lovelady, Turner, and Martin in the underlying
lawsuit. All defendants except Lovelady have appeared. On March 24, 2014, Plaintiffs filed their
motion seeking summary judgment. The motion is ripe for adjudication.

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II.

MOTION FOR SUMMARY JUDGMENT
A.

Legal Standard

Summary judgment is proper when the pleadings and evidence on file show “that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “[T]he substantive law will identify which facts are material.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists “if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The
movant makes a showing that there is no genuine issue of material fact by informing the court of the
basis of its motion and by identifying the portions of the record which reveal there are no genuine
material fact issues. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
When reviewing the evidence on a motion for summary judgment, the court must decide all
reasonable doubts and inferences in the light most favorable to the non-movant. See Walker v. Sears,
Roebuck & Co., 853 F.2d 355, 358 (5th Cir. 1988). The court cannot make a credibility
determination in light of conflicting evidence or competing inferences. Anderson, 477 U.S. at 255.
As long as there appears to be some support for the disputed allegations such that “reasonable minds
could differ as to the import of the evidence,” the motion for summary judgment must be denied.
Id. at 250.
B.

Analysis

Plaintiffs seek summary judgment that they own no duty to defend or indemnify Defendants
in the underlying suit. See generally Br. Supp. Mot. Summ J., ECF No. 24. The duties to defend and
indemnify are distinct. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821-22 (Tex. 1997)
(citing Am. Alliance Ins. Co. v. Frito–Lay, Inc., 788 S.W.2d 152, 153 (Tex. App.—Dallas 1990, writ
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dism’d)). Thus, an insurer may owe one duty but not the other. See D.R. Horton-Tex., Ltd. v. Market
Int’l Ins. Co., Ltd., 300 S.W.3d 740, 741 (Tex. 2009).
1.

Duty to Defend

An insurer owes a duty to defend its insured if the plaintiff’s factual allegations potentially
support a covered claim. Zurich Am. Ins. Co. v. Nokio, Inc., 268 S.W.3d 487, 490 (Tex. 2008) (citing
GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)). An
insurer’s duty to defend is determined solely by the allegations in the underlying pleadings, without
regard to their truth or falsity, in light of the policy provisions. E.g., GuideOne Elite Ins., 197 S.W.3d
at 308 (citing Argonaut Sw. Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973); Heyden Newport
Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex. 1965)). This is known as the “eightcorners” or “complaint–allegation” rule. See id. (“The rule takes its name from the fact that only two
documents are ordinarily relevant to the determination of the duty to defend: the policy and the
pleadings of the third-party claimant.” (citing King v. Dall. Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.
2002)).
Courts resolve all doubts regarding the duty to defend in favor of the duty and construe the
pleadings liberally. Zurich Am. Ins. Co., 268 S.W.3d at 491 (citing King, 85 S.W.3d at 187; Nat’l
Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997)). The duty
“is not affected by facts ascertained before suit, developed in the course of litigation, or by the
ultimate outcome of the suit.” Id. (citing Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 829
(Tex. 1997); 14 Couch on Insurance § 200:19. If the underlying complaint potentially includes a
covered claim, the insurer must defend the entire lawsuit. Id. (citing 14 Couch on Insurance § 200:1).
Here, Plaintiffs contend they owe no duty to defend because the underlying suit falls within
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the pollution exclusion of the policies. See generally Br. Supp. Mot Summ. J. 4-8, ECF No. 24. The
generally liability policy issued by Acadia excludes:
“[b]odily injury” or “property damage” arising out of the actual,
alleged or threatened discharge, dispersal, seepage, migration, release
or escape of “pollutants” . . . [a]t or from any premises, site or
location which is or was at any time used by or for any insured or
others for the handling, storage, disposal, processing or treatment of
waste . . . .
See App. Pls.’ Mot. Summ. J. Ex. 1 (Acadia Policy), App. 49. Similarly, the umbrella policy issued
by Continental Western excludes: “‘[b]odily injury’ or ‘property damage’ which would not have
occurred in whole or part but for the actual, alleged, or threatened discharge, dispersal, seepage,
migration, release or escape of ‘pollutants’ at any time . . . .” See App. Pls.’ Mot. Summ. J. Ex. 2
(Continental Policy), App. 230. The Continental Western policy continues:
This exclusion does not apply if valid “underlying insurance” for the
pollution liability risks described above exists or would have existed
but for the exhaustion of underlying limits for “bodily injury” and
“property damage.” Coverage provided will follow the provisions,
exclusion, and limitations of the “underlying insurance.”
Id. Both policies define “pollutants” as follows: “any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or reclaimed.” Id. at 243; id. Ex. 1(Acadia Policy),
App. 60.
The underlying plaintiffs contend, when Ramirez removed the plug, “toxic fumes were
released and Ramirez died from asphyxia due to methane gas inhalation.” App. Pls.’ Mot. Summ.
J. Ex. 3 (Pet.), App 251. Defendants do not dispute that methane is a pollutant or that the exclusions
otherwise apply to the facts alleged in the underlying suit. Rather, Defendants ask the Court to

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consider extrinsic evidence that they contend demonstrates Ramirez may have died from a lack of
oxygen. See Defs.’ Resp. 9-10, ECF No. 28. Accordingly, Defendants argue summary judgment
should be denied because facts outside the underlying pleadings may give rise to coverage.
Although the Texas Supreme Court has not decided the issue, several courts “have drawn a
very narrow exception [to the eight-corners rule], permitting the use of extrinsic evidence only when
relevant to an independent and discrete coverage issue, not touching on the merits of the underlying
third-party claim.” See GuideOne Elite Ins. Co., 197 S.W.3d at 308-09 & n.2 (compiling cases).
Here, however, the extrinsic evidence Defendants ask the Court to consider “engage[s] the truth or
falsity of . . . facts alleged in the underlying case.” Id. (quoting Northfield Ins. Co. v. Loving Home
Care, Inc., 363 F.3d 523, 531 (5th Cir. 2004)). As such, the Court will not consider any evidence
beyond the policies and underlying pleading. Accordingly, the Court concludes that Plaintiffs are
entitled to summary judgment on their duty to defend based on the complaint-allegation rule.
2.

Duty to Indemnify

An insurer’s duty to indemnify turns on the facts actually established—rather than
alleged—in the underlying dispute. Zurich Am. Ins. Co. v. Nokio, Inc., 268 S.W.3d 487, 490 (Tex.
2008) (citing GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.
2006)); see also D.R. Horton-Tex., Ltd. v. Market Int’l Ins. Co., Ltd., 300 S.W.3d 740, 744 (Tex.
2009) (“The insurer’s duty to indemnify depends on the facts proven and whether the damages
caused by the actions or omissions proven are covered by the terms of the policy.”). Thus, an insured
may have a duty to indemnify even if the duty to defend never arises. D.R. Horton-Tex., Ltd., 300
S.W.3d at 741.
In support of their motion, Plaintiffs submitted the autopsy report for Ramirez and the results
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of the Occupational Safety and Health Administration (“OSHA”) investigation for the incident. See
Pls.’ Reply Exs. 1-3, ECF Nos. 30-1, 30-2, 30-3. The autopsy report was amended to change the
cause of death from “asphyxia due to methane gas inhalation” to “asphyxia due to oxygen
displacement in a confined space.” See Pls.’ Reply Ex. 1 (Original Report), ECF No. 30-1; Pls.’
Suppl. Reply Ex. 1 (Am. Report), ECF No. 32-1. The OSHA investigation indicated that Ramirez
died from asphyxiation due to the inhalation of toxic vapor. See Pls.’ Reply Ex. 2 (OSHA Report),
4, ECF No. 30-2.
Defendants attached the affidavit of Martin to their response to the motion for summary
judgment. See App. Defs.’ Resp., ECF No. 29. Plaintiffs object to Martin’s affidavit on the grounds
that it fails to meet the requirements of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579
(1993) and Federal Rule of Evidence 702 and that the statements therein are conclusory, not
supported by facts or personal knowledge, and are inadmissible as fact or expert testimony. See Pls.’
Obj. ¶ 3, ECF No. 31. Defendants submitted the affidavit in an effort to raise a genuine issue of
material fact as to whether a lack of oxygen caused Ramirez’s death. Thus, in pertinent part, Martin
attests:
It is my understanding that [Ramirez] died of asphyxiation while in
one of the lift stations during construction. It is also my understanding
that the pipeline had not been utilized at that time, so there was no
raw sewage in the line. Also it is my understanding that there was a
plug in the pipeline that prevented any gas or fluids from entering the
lift station.
See App. Defs.’ Resp. Ex. A (Martin Aff.). Martin, a professional engineer, attests that he is familiar
with pipeline construction and based on his understanding of the circumstances “and the absolute
lack of any sewage in the line” it is his opinion that Ramirez’s death “was just as likely, if not more

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so, due to a lack of oxygen as opposed to methane gas.” Id.
“Unsubstantiated assertions, improbable inferences, and unsupported speculation are not
sufficient to defeat a motion for summary judgment.” Brown v. City of Hous., Tex., 337 F.3d 539,
541 (5th Cir. 2003) (citing Bridgmon v. Array Sys. Corp., 325 F.3d 572, 577 (5th Cir. 2003); Hugh
Symons Group, plc v. Motorola, Inc., 292 F.3d 466, 468 (5th Cir. 2002)). Martin does not contend
that he witnessed the incident, and he does not demonstrate the basis for his opinion as to Ramirez’s
cause of death. Accordingly, the Court concludes that Martin’s affidavit fails to raise a genuine issue
of material fact.
The Court, however, concludes that the corrected autopsy report raises a genuine issue of
material fact as to whether Ramirez’s death falls outside the pollution exclusion of Plaintiffs’
policies. Although the report was amended to list “asphyxia due to oxygen displacement in a
confined space” as the cause of death, Plaintiffs contend the report fails to raise a genuine issue of
material fact. Specifically, Plaintiffs contend the report is inconsistent with other evidence—namely,
the original report, the OSHA investigation, and witness testimony in the underlying suit. See Pls.’
Suppl. Reply 2, ECF No. 32. Additionally, Plaintiffs argue that if the oxygen was displaced, “it
would have to have been displaced by methane or some other gaseous substance that was present in
a concentration capable of causing injury or death.” Id. at 3.
Plaintiffs, however, fail to demonstrate that the substance which displaced the oxygen was
in fact a pollutant as defined by the policies. It is not sufficient for Plaintiffs to note that the oxygen
must have been displaced by another substance. Rather, Plaintiffs must show, by competent
summary judgment evidence, that the substance which displaced the oxygen was a pollutant under
the policies and that the means by which the oxygen was displaced falls within the exclusions.
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Accordingly, the Court concludes that Plaintiffs have failed to meet their burden to demonstrate that
they are entitled to judgment as a matter of law on the duty to indemnify.
III.

CONCLUSION
In light of the foregoing, the Court concludes that Plaintiffs Acadia Insurance Company and

Continental Western Insurance Company owe no duty to defend Jacob and Martin, Ltd., Alan Derek
Turner, Kenneth B. Martin, and Randall Lovelady in the underlying action. A genuine issue of
material fact exists as to whether Plaintiffs owe a duty to indemnify Defendants. Accordingly,
Plaintiffs’ motion for summary judgment is GRANTED in part and DENIED in part.
SO ORDERED on this 28th day of May, 2014.

_____________________________________
Reed O’Connor
UNITED STATES DISTRICT JUDGE

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