Northfield Insurance Company v. Herrera

Filing 31

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
AUSTIN DIVISION

I
17

6
CL

liy

NORTHFIELD INSURANCE
COMPANY,
Plaintiff,

4/T

w/L1.s

1TJ.URT

CAUSE NO.:
A-16-CA-00553-SS

-vs-

CHARLES HERRERA,
Defendant.

ORDER
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
Judgment
[#23], Defendant Charles Herrera's Response [#27] in opposition, Plaintiff's Reply
[#30] in

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.

Background
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:

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(3) Any person who is employed by, is leased to or contracted with any
organization that:

(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.

1

(McCoy Petition).

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.

Analysis
I.

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.
56(a);
2

Celotex Corp.

v.

Catrett, 477 U.S. 317, 323-25 (1986); Washburn

(5th Cir. 2007). A dispute regarding a material fact is "genuine"

v.

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

v.

Liberty

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
favorable
to the nonmoving party. Matsushita Elec. Indus. Co.

v.

Zenith Radio, 475 U.S. 574, 587 (1986);

Washburn, 504 F.3d at 508. Further, a court "may not make credibility detenninations or
weigh

the evidence" in ruling on a motion for summary judgment. Reeves

v.

Sanderson Plumbing

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
are

insufficient to defeat a motion for summary judgment. Turner
476 F.3d 337, 343 (5th Cir. 2007).

v.

Baylor Richardson Med Ctr.,

Unsubstantiated assertions, improbable inferences, and

unsupported speculation are not competent summary judgment evidence.

The party

Id.

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

v.

Travelers

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.

3

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.

II.

Celotex,

477 U.S.

at 322-23.

Application
As indicated above, NIC and Herrera dispute the scope of coverage under the
Policy.

NIC argues it has no duty to defend Herrera in the McCoy Lawsuit because the
underlying
bodily injury from the Incident falls within the Exclusion.

See

Pl.'s

Mot. Sunim. J. [#23] at 4-5.

According to NIC, McCoy was "employed by" Austin Energy that itself "[c]ontracted with

[Herrera].

. .

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

Id.

at 4-6.

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
subcontractors.

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
generally

accepted meaning unless the policy shows that the words used are intended to impart
a technical
or different meaning." Tesoro Ref & Mktg. Co. LLC

v.

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.
2016).
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
an

exclusion, the insurer bears the burden of establishing that the exclusion applies. Am.
Home
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
related

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
to
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
the disputed

language excludes coverage for bodily injury to employees and workers of Herrera's
subcontractors and their subcontractors. Tellingly, Northland Insurance Company (the
parent
company of NIC) offered this exact interpretation in another lawsuit involving the
same

FbI

exclusion. See Northland Ins. Co.

v.

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
[the insured's]
sub-subcontractor").

NIC's expansive reading of the Exclusion is unreasonable because it would
render
coverage under the Policy largely illusory. See ATOFINA Petrochemicals, Inc.

v.

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
interpretation, the

Exclusion extends upstream to employees of any organization Herrera contracts with.
The term
"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
coverage for
bodily injury to "[a]ny person who is employed by, is leased to or
contracted with" Herrera's
customers.

Such an interpretation in unreasonable because it would eviscerate the
Policy's

coverage and undermine the very purpose service-providing businesses like
Herrera carry
general liability insurance. See Trinity Universal Ins. Co.
1997) (rejecting insurer's interpretation

v.

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
purchase
insurance").
In light of the above interpretation, Court concludes the Exclusion does
not preclude
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.
The Court

cannot rule as a matter of law that the Exclusion absolves NIC of any
duty to defend or

indemnify Herrera.

Conclusion
Accordingly,
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.

SAMi

UNITED STATES DISTRICT JUDGE

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