Northfield Insurance Company v. Herrera
ORDER DENYING NIC's 23 Motion for Summary Judgment; GRANTING Herrera's 25 Motion for Summary Judgment. Signed by Judge Sam Sparks. (klw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause,
and specifically Plaintiff Northfield Insurance Company (NIC)'s Motion for Summary
[#23], Defendant Charles Herrera's Response [#27] in opposition, Plaintiff's Reply
support; as well as Defendant's Motion for Summary Judgment [#25], Plaintiff's Response [#28]
in opposition, and Defendant's Reply [#29] in support. Having considered the case file and the
applicable law, the Court enters the following opinion and orders.
This case involves a dispute over insurance coverage. Plaintiff NIC issued a commercial
general liability insurance policy to Defendant Austin Elevator Consultants, dlb/a Charles
Herrera for the period from September 26, 2013 to September 26, 2014. Compi. [#1-2] Ex. 2
(Policy) at 1. Under the Policy, NIC agreed to "to defend the insured against any 'suit' seeking"
damages for '"bodily injury' or 'property damage' to which this insurance applies." Id. at 19.
The Policy contained various endorsements limiting the scope of coverage, including the
following bodily injury exclusion:
This insurance does not apply to "bodily injury" to:
(3) Any person who is employed by, is leased to or contracted with any
(a) Contracted with you or with any insured for services; or
(b) Contracted with others on your behalf for services;
arising out of and in the course of employment by that organization or
performing duties related to the conduct of that organization's business; or
Policy at 36 (the Exclusion).
During the policy period, on March 18, 2014, Thomas McCoy sustained injuries as the
result of an alleged elevator failure at the Sandhill Energy Center (SEC) in Austin, Texas (the
Incident). Pl.'s Mot. Summ. J [#23] at 2. At the time of the Incident, McCoy was an employee
of Austin Energy, the operator of the SEC. Stipulation [#22] at 5. Austin Energy had
contracted with Herrera to service and maintain the elevator involved in the Incident. Id. at 3.
McCoy filed a lawsuit (the McCoy Lawsuit) against Herrera and his company, among others, on
December 22, 2015 in Travis County District Court seeking damages for the injuries he allegedly
suffered in the Incident. Compi. [#1-1] Ex.
Although NIC has defended Herrera in the McCoy Lawsuit, it filed this lawsuit seeking
declaratory judgment that it has no duty to defend or indemnify Herrera in the McCoy Lawsuit.
Both NIC and Herrera have moved for summary judgment on the interpretation of the Exclusion
and whether NIC owes a duty to Herrera under the Policy. The motions are fully briefed and
ripe for consideration.
Legal StandardSummary Judgment
Summary judgment shall be rendered when the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine dispute as to any material fact
and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
Catrett, 477 U.S. 317, 323-25 (1986); Washburn
(5th Cir. 2007). A dispute regarding a material fact is "genuine"
Harvey, 504 F.3d 505, 508
if the evidence
is such that a
reasonable jury could return a verdict in favor of the nonmoving party. Anderson
Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for
summary judgment, the
court is required to view all inferences drawn from the factual record in the light most
to the nonmoving party. Matsushita Elec. Indus. Co.
Zenith Radio, 475 U.S. 574, 587 (1986);
Washburn, 504 F.3d at 508. Further, a court "may not make credibility detenninations or
the evidence" in ruling on a motion for summary judgment. Reeves
Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.
Once the moving party has made an initial showing that there is no evidence to support
the nonmoving party's case, the party opposing the motion must come forward with competent
summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at
586. Mere conclusory allegations are not competent summary judgment evidence, and thus
insufficient to defeat a motion for summary judgment. Turner
476 F.3d 337, 343 (5th Cir. 2007).
Baylor Richardson Med Ctr.,
Unsubstantiated assertions, improbable inferences, and
unsupported speculation are not competent summary judgment evidence.
opposing summary judgment is required to identif' specific evidence in the record and to
articulate the precise manner in which that evidence supports his claim. Adams
Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). Rule 56 does not impose a duty on the
court to "sift through the record in search of evidence" to support the nonmovant' s opposition to
the motion for summary judgment. Id.
"Only disputes over facts that might affect the outcome of the suit under the governing
laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248.
Disputed fact issues that are "irrelevant and unnecessary" will not be considered
by a court in
ruling on a summary judgment motion. Id. If the nonmoving party fails
to make a showing
sufficient to establish the existence of an element essential to its case and on which
it will bear
the burden of proof at trial, summary judgment must be granted.
As indicated above, NIC and Herrera dispute the scope of coverage under the
NIC argues it has no duty to defend Herrera in the McCoy Lawsuit because the
bodily injury from the Incident falls within the Exclusion.
Mot. Sunim. J. [#23] at 4-5.
According to NIC, McCoy was "employed by" Austin Energy that itself "[c]ontracted with
for services arising out of and in the course of employment by that organization or
performing duties related to the conduct of that organization's business," such that any bodily
injury sustained by McCoy is not covered by the Policy. Id. at 5 (quoting the Exclusion from the
Policy at 36). NIC therefore asserts the allegations in the McCoy Lawsuit present no matter that
could potentially be covered by the Policy, thereby absolving it of any duty to defend or
indemnify Herrera. See
On the other hand, Herrera argues the Exclusion does not apply to any bodily injury
sustained in the Incident. Specifically, Herrera contends the only reasonable interpretation of the
Exclusion is it applies downstream to exclude coverage to Herrera, and his employees and
Def.'s Mot. Summ. J. [#25] at 4. Herrera asserts applying the Exclusion
upstream to parties Herrera conducts business with under contract, as NIC suggests, would
render the Policy illusory.
Id. at 5-6.
In the alternative, Herrera argues the Exclusion is
ambiguous and should be interpreted in his favor as the insured. Id. at 6-7.
Under Texas law, courts give insurance policy language "its ordinary and
accepted meaning unless the policy shows that the words used are intended to impart
or different meaning." Tesoro Ref & Mktg. Co. LLC
Nat'! Union Fire Ins. Co. of Pittsburgh,
Pa., 96 F. Supp. 3d 638, 644-45 (W.D. Tex. 2015), affd, 833 F.3d 470 (5th Cir.
Insurance policy language is ambiguous only
if it is susceptible to two or more reasonable
interpretations, and disagreement by the parties over the language does not render the language
ambiguous. Id. Where, as is the case here, the disputed provision in the insurance policy is
exclusion, the insurer bears the burden of establishing that the exclusion applies. Am.
Assur. Co. v. Cat Tech L.L.C., 660 F.3d 216, 220 (5th Cir. 2011).
The Court finds the Exclusion is unambiguous, and Herrera offers the only reasonable
interpretation of the disputed language.
The disputed portion of the Exclusion precludes
coverage for bodily injury to "(3) [a]ny person who is employed by, is leased to or contracted
with any organization that
(a) Contracted with you or with any insured for services
arising out of and in the course of employment by that organization or performing duties
to the conduct of that organization's business." See Policy at 36. Reviewing this
language in the
context of the Exclusion as a whole, it is clear the provision was intended to run downstream
employees and workers of Herrera's subcontractors. The preceding sections of the Exclusion
exclude coverage for bodily injury to (1) Herrera's employees and workers, and (2) Herrera's
subcontractors performing duties related to his business. See Policy at 36 (referring to 1(1) and
1(2) respectively). Following the logical progression, the next section containing
language excludes coverage for bodily injury to employees and workers of Herrera's
subcontractors and their subcontractors. Tellingly, Northland Insurance Company (the
company of NIC) offered this exact interpretation in another lawsuit involving the
exclusion. See Northland Ins. Co.
Doval Remodeling, Inc. et al, No. 1:13-cv-13 192-GAO,
Mot. Summ. J. [#3 6] at 8 (characterizing the disputed language from the
Exclusion as precluding
coverage to "an employee of [the insured's] subcontractor" and "an employee of
NIC's expansive reading of the Exclusion is unreasonable because it would
coverage under the Policy largely illusory. See ATOFINA Petrochemicals, Inc.
Cont '1 Cas.
Co., 185 S.W.3d 440, 444 (Tex. 2005) (rejecting insurer's interpretation
because it "would
render coverage under the endorsement largely illusory"). According to NIC's
Exclusion extends upstream to employees of any organization Herrera contracts with.
"contracted with" is defmed broadly in the Policy to include "contracting with an
oral or written
contract." See Policy at 36. Thus, NIC's reading of the Exclusion would preclude
bodily injury to "[a]ny person who is employed by, is leased to or
contracted with" Herrera's
Such an interpretation in unreasonable because it would eviscerate the
coverage and undermine the very purpose service-providing businesses like
general liability insurance. See Trinity Universal Ins. Co.
1997) (rejecting insurer's interpretation
Cowan, 945 S.W.2d 819, 828 (Tex.
of exclusion provision because it "would render
insurance coverage illusory for many of the things for which insureds commonly
In light of the above interpretation, Court concludes the Exclusion does
coverage to Herrera under the Policy. Stated differently, NIC has failed to
carry its burden of
establishing the Exclusion applies to the disputed coverage in the McCoy Lawsuit.
cannot rule as a matter of law that the Exclusion absolves NIC of any
duty to defend or
IT IS ORDERED that Defendant Charles Herrera's Motion for Summary
Judgment [#25] is GRANTED; and
IT IS FURTHER ORDERED that Plaintiff Northfield Insurance Company's
Motion for Summary Judgment [#23] is DENIED.
SIGNED this the
day of November 2017.
UNITED STATES DISTRICT JUDGE
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