Town Center Mall et al v. Zurich Amerian Insurance Company

Filing 17

ORDER GRANTING 11 Defendant's MOTION for Summary Judgment, DENYING 10 Plaintiff's MOTION for Partial Summary Judgment.(Signed by Judge Gray H. Miller) Parties notified.(rkonieczny)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TOWN CENTER MALL, et al.,
Plaintiffs,
v.
ZURICH AMERICAN INSURANCE COMPANY ,
Defendant.

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CIVIL ACTION H-10-1913

ORDER
Pending before the court are the parties’ cross-motions for summary judgment. Dkts. 10 and
11. Upon review of the motions, the response, and the applicable law, defendant Zurich American
Insurance Company’s (“Zurich”) motion is GRANTED, and plaintiffs’ motion is DENIED.
I. BACKGROUND
This is a declaratory judgment action that was filed in state court but then removed to this
court on the basis of diversity of citizenship. Town Center Mall, L.P., Boxer Property Management
Corporation, Grupo Zocalo, L.P., and Grupo Zocalo Management, L.L.C. (“plaintiffs”) are the
defendants in a lawsuit pending in the 191st Judicial District Court of Dallas County, Texas, styled
Gary Switzer v. Grupo Zocalo Mgm’t, L.L.C., Grupo Zocalo, L.P., Town Ctr. Mall, L.P., Bagby
Elevator Co., Inc, and Thyssenkrup Elevator Corp, Cause No. 2011-00722. Dkts. 10, 11. Switzer
originally filed suit in Harris County, Texas. Id. The lawsuit was re-filed in Dallas County after
Switzer nonsuited his claims against all parties without prejudice. Id. Switzer alleges that he was
injured while working for Schindler Elevator Corporation (“Schindler”) as an elevator technician.
Id.
On February 20, 2009, Switzer was working at La Gran Plaza Mall, a shopping mall located
in Fort Worth, Texas. Dkt. 11-2 at 6. La Gran Plaza is owned by Town Center Mall, L.P. (“Town

Center”) and is managed by Grupo Zocalo, L.P. (“Grupo Zocalo”) and Grupo Zocalo Management,
L.L.C. (“Grupo Zocalo Management”) Id. To complete the repair job, Switzer had to step on the
escape hatch located at the top of the freight elevator. Id. However, the welds securing the escape
hatch on the elevator were broken and Switzer fell through the ceiling, and suffered serious injuries
as a result. Id. at 7. Twice prior to Switzer’s injuries, on March 20, 2006 and February 26, 2008,
the Texas state elevator inspector cited the freight elevator for broken welds on the hatch Switzer
fell through. Id. at 7. Hence, Switzer asserts claims in the underlying state court litigation against
plaintiffs for negligence and failure to warn. Id.
Zurich issued Commercial General Liability Policy (“CGL Policy”) No. GLO 6445435-18
to Schindler with a one year policy period starting January 1, 2009. Dkt. 11-3, 11-4, 11-5, at 62-162.
Schindler is the named insured on the policy. Id. Zurich also issued Owners and Contractors
Protective Liability Policy (“OCP Policy”) No. OC 6637025 to Grupo Zocalo for the same time
period. Dkt. 11-5 at 163-172. Grupo Zocalo Management and Town Center are listed as additional
insureds on the OCP Policy. Id. at 163. Both the OCP Policy and CGL Policy have a limit of
$2,000,000 per occurrence. Id. at 151, 163. The CGL policy has an aggregate limit of $5,000,000
while the OCP policy has an aggregate limit of $2,000,000. Id. at 151, 163.
On September 22, 2009, counsel for Grupo Zocalo and Grupo Zocalo Management sent a
letter to Zurich requesting a defense and indemnity under the CGL Policy1 with respect to Switzer’s
lawsuit. Dkt. 11-2 at 1. On January 27, 2010, plaintiffs’ counsel sent a second letter with a copy of
the First Amended Petition filed in the underlying litigation, which added Town Center and Boxer
Property Management (“Boxer Property”) as defendants. Id. at 17-18. Plaintiffs’ counsel advised
that they also represented Town Center and Boxer Property and requested that Zurich provide a
1

There are no documents showing a request under the OCP Policy, but it is apparent from the parties’ pleadings
that a demand under the OCP Policy was made at some point.

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defense and indemnity to all plaintiffs as additional insureds under the CGL Policy issued to
Schindler. Id.
The relevant facts asserted in the underlying litigation filed by Switzer are as follows:
9.
It has become necessary to bring this action because of serious injuries
and damages sustained by Plaintiff, Gary Switzer, on February 20, 2009, at La Gran
Plaza Mall in Fort Worth, Texas. On that date, Plaintiff, Garry Switzer, was
employed as an elevator technician for Schindler Elevator located in Irving, Texas.
Mr. Switzer was dispatched to a job at the La Gran Plaza Mall in Fort Worth, Texas
to work on a freight elevator in the mall. La Gran Plaza Mall is owned by Town
Center Mall, L.P. It is managed by Defendant Grupo Zocalo, L.P. and its general
partner, Grupo Zocalo Management, L.L.C. In order to accomplish the job Mr.
Switzer was assigned to do, he had to step on the escape hatch on the top of the
freight elevator. Mr. Switzer had stepped on the escape hatches numerous times in
his line of work as an elevator technician and this practice was common in the
industry. However, the welds securing the hatch on the freight elevator in question
were broken. For this reason, when Mr. Switzer stepped on the hatch, he fell through
the ceiling of the elevator landing ten feet below on the floor of the elevator car. Mr.
Switzer sustained serious injuries as a result of this accident.
10.
On March 20, 2006 and February 26, 2008, the freight elevator in
question had been cited by a Texas state elevator inspector for the broken welds on
the hatch through which Mr. Switzer fell. This citation was given and Defendants
were aware of the elevator’s damaged condition almost two years before Mr. Switzer
was injured. Even though Defendants were aware of the freight elevator’s damaged
condition, they made no attempt to repair the elevator and as result of Defendants’
omission, Mr. Switzer was seriously injured.
23.
Defendants. . . . fail[ed] to adequately warn Plaintiff of the broken
welds and fail[ed] to make the condition reasonably safe.
Dkt. 1-7 at 3-4, 8-9. Plaintiffs are seeking declaratory judgment regarding Zurich’s duty to defend
against Switzer’s suit. Dkt. 1-3 at 8. Plaintiffs contend that the allegations made in the Switzer
lawsuit trigger Zurich’s duty to defend and indemnify under both the OCP Policy issued to Grupo
Zocalo, and the CGL Policy issued to Schindler. Id. at 7. Zurich responds, first, that exclusion “d”
of the OCP Policy excludes coverage for the injury alleged in the underlying litigation. Dkt. 11 at
10. Next, Zurich argues that plaintiffs do not qualify as “additional” insureds under the CGL Policy
issued to Schindler and are, therefore, not entitled to coverage thereunder. Dkt. 1-4 at 2. Finally,
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Zurich argues that the claims asserted against plaintiffs in the underlying lawsuit do not fall within
the defense and indemnity provisions of the Blanket Additional Insured Endorsement of the CGL
Policy, or that coverage under that policy is otherwise excluded by the terms of the the Elevator and
Escalator Service Agreement (“Service Agreement”) executed between Schindler and plaintiffs. Id.
II. LEGAL STANDARDS
1. SUMMARY JUDGMENT
A timely motion for summary judgment shall be granted “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” FED . R. CIV . P. 56(c); see also Carrizales v. State Farm Lloyds, 518 F.3d 343, 345
(5th Cir. 2008). Ultimately, “[w]here the record taken as a whole could not lead a rational trier of
fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348 (1986). An issue is “material” if its
resolution could affect the outcome of the action. Burrell v. Dr. Pepper/Seven Up Bottling Group,
Inc., 482 F.3d 408, 411 (5th Cir. 2007).
When considering a motion for summary judgment, the court must view the evidence in the
light most favorable to the non-movant and draw all justifiable inferences in favor of the nonmovant. Envtl. Conservation Org. v. City of Dallas, Tex., 529 F.3d 519, 524 (5th Cir. 2008). The
court must review all of the evidence in the record, but make no credibility determinations or weigh
any evidence; disregard all evidence favorable to the moving party that the jury is not required to
believe; and give credence to the evidence favoring the non-moving party as well as to the evidence
supporting the moving party that is uncontradicted and unimpeached. Moore v. Willis Ind. Sch.
Dist., 233 F.3d 871, 874 (5th Cir. 2000). However, the non-movant cannot avoid summary judgment

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simply by presenting “conclusory allegations and denials, speculation, improbable inferences,
unsubstantiated assertions, and legalistic argumentation.” See TIG Ins. Co. v. Sedgwick James of
Wash., 276 F.3d 754, 759 (5th Cir. 2002); see also Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994) (en banc). By the same token, the moving party will not meet its burden of proof
based on conclusory “bald assertions of ultimate facts.” Gossett v. Du-Ra-Kel Corp., 569 F.2d 869,
872 (5th Cir. 1978); see also Galindo v. Precision Amer. Corp., 754 F.2d 1212, 1221 (5th Cir. 1985).
2. Contract Interpretation - Eight Corners Rule
“Texas courts interpret insurance policies according to the rules of contract construction.”
de Laurentis v. U.S. Auto. Ass'n, 162 S.W.3d 714, 721 (Tex.App.-Houston [14th Dist.] 2005, pet.
denied). The primary objective of the court is to ascertain the parties' intent, as expressed in the
written instrument. See Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). “[T]he
parties' intent is governed by what they said, not by what they intended to say but did not.” Nautilus
Ins. Co. v. Country Oaks Apartments, Ltd., 566 F.3d 452, 455 (5th Cir. 2009) (quoting Fiess v. State
Farm Lloyds, 202 S.W.3d 744, 746 (Tex. 2006)) (internal quotation omitted).
An insurance policy that can be given a definite or certain legal meaning is not ambiguous,
and must be construed by the court as a matter of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124
S.W.3d 154, 157 (Tex. 2003). An ambiguity exists where a policy is susceptible to more than one
meaning. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Courts interpreting contractual
provisions give terms their plain, ordinary, and generally accepted meanings, unless otherwise
defined by the parties. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). “‘Both
the insured and the insurer are likely to take conflicting views of coverage, but neither conflicting
expectations nor disputation is sufficient to create an ambiguity.’” Nat'l Union Fire Ins. Co. of
Pittsburgh, PA v. U.S. Liquids, Inc., 271 F.Supp.2d 926, 932 (S.D. Tex. 2003) (quoting Forbau v.

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Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex.1994)). “[I]f, and only if, the court finds an
ambiguity in the contract provisions, particularly in exclusionary clauses, the court should construe
the policy strictly against the insurer.” Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 271 F.Supp.2d
at 932; see also Waffle House, Inc. v. Travelers Indem. Co. of Ill., 114 S.W.3d 601, 607
(Tex.App.-Ft. Worth 2003, pet. denied) (cautioning that exclusionary provisions “must be clearly
expressed and must not be ambiguously worded”). And, “if the insured's construction of an
exclusionary provision is reasonable, it must be adopted, even if the insurer's construction is more
reasonable.” Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 271 F.Supp.2d at 931.
“Under the eight-corners rule, the duty to defend is determined by the claims alleged in the
petition and the coverage provided in the policy.” Pine Oak Builders, Inc. v. Great Am. Lloyds Ins.
Co., 279 S.W.3d 650, 654 (Tex. 2009). “Resort to evidence outside the four corners of these two
documents is generally prohibited.” Nautilus Ins. Co., 566 F.3d at 454. “The duty to defend does
not depend upon the truth or falsity of the allegations: ‘A plaintiff's factual allegations that
potentially support a covered claim is all that is needed to invoke the insurer's duty to defend . . . .’”
Id. (internal citations omitted).
“The insured bears the initial burden of showing that the claim . . . is potentially within the
insurance policy's scope of coverage.” Harken Exploration Co. v. Sphere Drake Ins. PLC, 261 F.3d
466, 471 (5th Cir. 2001). When the petition does not present facts within the scope of the policy's
coverage, the insurer is not legally obligated to defend a suit on behalf of the insured. Pine Oak
Builders, Inc., 279 S.W.3d at 654. But, if the facts in the pleadings give rise to any claim covered
under the policy, then the insurer has a duty to defend the insured with respect to all of the claims.
Utica Nat'l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 201 (Tex. 2004). If coverage is
proven by the insured then, to avoid liability, the insurer must prove that the loss falls within an

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exclusion. Gilbert Texas Constr. L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124
(Tex. 2010). If the insurer proves an applicable exclusion, the burden shifts back to the insured that
the claim is still covered because of an exception to the exclusion. Id. Although the allegations in
the petition are interpreted liberally and in favor of the insured, the court must not “read facts into
the pleadings,” “look outside the pleadings,” or “imagine factual scenarios which might trigger
coverage.” Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Merchs. Fast Motor Lines, Inc., 939
S.W.2d 139, 142 (Tex. 1997). The court's inquiry must turn on the facts alleged and the origin of
damages, rather than the legal theories asserted. See Nat'l Union Fire Ins. Co. of Pittsburgh, PA,
271 F.Supp.2d at 931; see also Am. Auto., Inc. v. Mayfield, 287 F.Supp.2d 661, 664 (N.D. Tex.
2003). Nonetheless, “all doubts regarding the duty to defend [are resolved] in favor of the duty.”
King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002).
III. ANALYSIS
1. OCP Policy
Section I of the OCP Policy issued to Grupo Zocalo, in a section entitled “coverages,”
provides that:
1.

Insuring Agreement

a.
We will pay those sums that the insured becomes legally obligated to
pay as damages because of “bodily injury” or “property damage” to which this
insurance applies. We will have the right and duty to defend the insured against any
“suit” seeking those damages. However, we will have no duty to defend the insured
against any “suit” seeking those damages for “bodily injury” or “property damage”
to which this insurance does not apply.
b.

This insurance applies to “bodily injury”. . . only if:
(1)

The “bodily injury” or “property damage” is caused by an
occurrence and arises out of
(a)

Operations performed for you by the “contractor” at
the location specified in the Declarations; or
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(b)

(2)

Your acts or omissions in connection with the general
supervision of such operations; and

The “bodily injury” or “property damage” occurs during the
policy period.

Dkt. 11-5 at 164. The policy defines “bodily injury” as “bodily injury, sickness or disease sustained
by a person, including death resulting from any of these at any time.” Id. at 170. Occurrence is
defined as an “accident.” Id. at 171. Switzer suffered “bodily injury” caused by an “occurrence”
arising out of “operations performed for [plaintiffs] by [Schindler]. . .” during the policy period.
Viewing the factual allegations of the original petition liberally in favor of plaintiffs as the insureds,
a claim that is “potentially within the insurance policy's scope of coverage” has been alleged.
Harken Exploration Co., 261 F.3d at 471.
Next, it must be determined whether Zurich has proven an applicable exception. The first
section of the OCP Policy continues with exclusions to the policy:
SECTION I – COVERAGES
BODILY INJURY AND PROPERTY DAMAGE LIABILITY
2.
Exclusions
This insurance does not apply to:
d.
Acts or Omissions by You and Your Employees
“Bodily injury” or “property damage” arising out of your, or your
“employees,” acts or omissions other than general supervision of “work”
performed for you by the “contractor.”
Dkt. 11-5 at 165. In the underlying lawsuit, Switzer alleges that his injuries were caused by the
negligence of plaintiffs in failing to repair the escape hatch on the freight elevator, or to warn him
about its defective condition, despite two citations from the Texas state elevator inspector. Dkt. 1-7
at 4. These allegations clearly fit within the exclusion for “acts or omissions” by Grupo Zocalo or
its employees. There are no allegations that Switzer’s injuries arose from plaintiffs’ general
supervision of his work. Therefore, Zurich has met its burden of proving an applicable exception,
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and has shifted the burden back to plaintiffs to prove an exception to the exclusion. Gilbert Texas
Constr. L.P., 327 S.W.3d at 124. Plaintiffs have failed to present evidence of an applicable
exception. Accordingly, the allegations by Switzer in the underlying litigation are not covered by the
OCP Policy issued to Grupo Zocalo and Zurich has no obligation to defend the plaintiffs in the
underlying case.
2. CGL Policy
Unlike the OCP Policy, the court must determine if Plaintiffs are additional insureds for
purposes of the CGL Policy issued to Schindler. The CGL Policy contains the following additional
insured endorsement:
Name of Additional Insured Person(s) Or Organization(s):
Only those persons or organizations where required by written contract.
Location(s) of Covered Operations:
Only those locations required by written contract.
A.
Section II- Who Is An Insured is amended to include as an additional
insured the person(s) or organizations shown in the Schedule, but only with respect
to liability for “bodily injury”, “property damage” or “personal and advertising
injury” caused, in whole or in part, by:
1.
2.

Your acts or omissions; or
The acts or omissions of those acting on your behalf

In the performance of your ongoing operations for the additional insured(s) at the
location(s) designated above.
Dkt. 11-4 at 132. The Blanket Additional Insured Endorsement of the CGL Policy amends the
definition of who is an insured person to include “any person or organization for whom [Schindler]
has specifically agreed by written contract to procure bodily injury, property damage and personal
liability insurance. . .” Dkt 11-4 at 110. The parties contest whether the Service Agreement makes
plaintiffs additional insureds under the CGL Policy. The court need not reach this issue, however,
because assuming, without deciding, that plaintiffs qualify as additional insureds under the CGL
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Policy, plaintiffs’ assertion that they are entitled to a defense and indemnity for Switzer’s injuries
would still fail because they cannot meet the causation requirement of the CGL Policy.
The Blanket Additional Insured Endorsement of the CGL Policy states:
The “persons insureds” provision is amended to include as an insured any person or
organization for whom the Named Insured has specifically agreed by written contract
to procure bodily injury, property damage and personal injury liability insurance
provided that:
C.
This insurance applies only to bodily injury or property damage arising solely
out of negligent acts, errors, omissions of [Schindler] while [Schindler] is actively
engaged in the operations at the site designated in the contract between [Schindler]
and the additional Insured.
Dkt. 10-4 at 2 (emphasis added). Therefore, coverage for additional insureds extends only to bodily
injury “arising solely out of negligent acts, errors, omissions of [Schindler] while [Schindler was]
engaged in operations at the site designated in the contract between [Schindler] and the additional
insured.” Dkt. 10-4 at 2. An insurance policy that can be given a definite legal meaning is not
ambiguous, and must be construed by the court as a matter of law. Am. Mfrs. Mut. Ins. Co., 124
S.W.3d at 157. Additionally, courts interpreting contractual provisions give terms their plain,
ordinary, and generally accepted meanings. Valence Operating Co., 164 S.W.3d at 662 (Tex. 2005).
The plain language of the CGL Policy blanket additional insured endorsement provides that the
policy is applicable only to injuries arising solely out of the negligence of Schindler or Schindler’s
agents. Dkt. 10-4 at 2. No such allegations are made in the underlying lawsuit. Rather, the
negligence and failure to warn claims are asserted against plaintiffs in this case, and not Schindler.
Therefore, plaintiffs have failed to satisfy their burden of showing that the claim is potentially within
the scope of coverage of the CGL Policy, and Zurich has no obligation to defend plaintiffs in the
underlying state litigation. Pine Oak Builders, Inc., 279 S.W.3d at 654.

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3. Duty to Indemnify
The duty to indemnify is a separate and distinct duty from the duty to defend. King v. Dallas
Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). The duty to defend is determined by reviewing the
policy and the factual allegations in the underlying pleadings. Pine Oak Builders, Inc. v. Great
American Lloyds Ins. Co., 292 S.W.3d 48, 65 (Tex.App.-Houston [14th Dist.] 2006, pet. denied).
Unlike the duty to defend, the duty to indemnify turns not on the existence of allegations potentially
within the policy’s coverage, but is determined with reference to the actual facts established in the
underlying lawsuit. Id. “Thus, generally, the duty to defend can be determined prior to the
resolution of the underlying lawsuit, while the duty to indemnify may not be justiciable until the
question of the insured’s liability has been resolved.” Id. (emphasis added). However, “the duty to
indemnify is justiciable before the insured's liability is determined in the liability lawsuit when the
insurer has no duty to defend and the same reasons that negate the duty to defend likewise negate
any possibility the insurer will ever have a duty to indemnify.” Farmers Texas County Mut. Ins. Co.
v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997) (italics in original).
In Griffin, the insurance policy covered the negligent acts of the insured resulting in an “auto
accident,” but excluded coverage for intentional acts. Pine Oak Builders, Inc., 292 S.W.3d at 65.
The plaintiff in Griffin asserted legal theories of negligence and gross negligence, but the facts
alleged revealed that his damages were caused by intentional acts.2 Id. The Texas supreme court
concluded that it was impossible for facts to be developed at trial that would require indemnification
of the insured. Id. Accordingly, declaratory judgement was entered for the insurer on the issue of
indemnification. Id. at 66.

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The plaintiff in Griffin was injured in a drive-by shooting.

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In this case, it is likewise not possible for facts to be developed at trial that would require
Zurich to indemnify plaintiffs under either policy. With respect to the OCP Policy issued to Grupo
Zocalo, the facts alleged by Switzer would only permit a finding that the injury was the result of an
act or omission by Grupo Zocalo or its employees (Grupo Zocalo’s failure to repair the welds on the
hatch, or to warn Switzer of the defect), and such injuries are specifically excluded from coverage
under the OCP Policy. For the same reason, indemnity is foreclosed with respect to the CGL Policy
issued to Schindler, because indemnity under that policy extends only to injuries “arising solely” out
of the negligence of Schindler or Schindler’s agents. Again, the factual allegations in the underlying
suit clearly assert that plaintiffs’ acts or omissions were the cause of his injury, and no construction
of those facts would permit a finding that Switzer’s injuries were caused solely by Schindler’s
negligence. Farmers Texas County Mut. Ins. Co., 955 S.W.2d at 84. Zurich, therefore, has no duty
to indemnify plaintiffs for the same reasons that it has no duty to provide them a defense in the state
court lawsuit. Id.

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III. CONCLUSION
Viewing the factual allegations of the original petition liberally in favor of plaintiffs as the
insureds, a claim that is “potentially within the insurance policy's scope of coverage” has been
alleged under the OCP Policy issued to Grupo Zocalo. Harken Exploration Co., 261 F.3d at 471.
However, Zurich has established that an exclusion applies under the OCP Policy and plaintiffs failed
to satisfy their burden of proving an exception to that exclusion. Gilbert Texas Constr. L.P., 327
S.W.3d at 124. Further, even assuming that plaintiffs qualify as additional insureds under the CGL
Policy issued to Schindler, Switzer’s injuries do not constitute a claim that is potentially within that
policy’s coverage. Harken Exploration Co., 261 F.3d at 471. Accordingly, plaintiffs motion for
partial summary judgment (Dkt. 10) is DENIED and Zurich American Insurance Company’s motion
for summary judgment (Dkt. 11) is GRANTED.
Signed at Houston, Texas on June 24, 2011.

__________________________________
Gray H. Miller
United States District Judge

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