Canal Insurance Company v. Xmex Transport, LLC et al
Filing
91
ORDER DENYING 83 Motion for Reconsideration Signed by Judge Kathleen Cardone. (dl1)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
CANAL INSURANCE COMPANY,
Plaintiff,
v.
XMEX TRANSPORT, LLC, et al.,
Defendants.
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EP-13-CV-156-KC
ORDER
On this day, the Court considered Plaintiff’s Motion for Reconsideration (the “Motion”),
ECF No. 83, Defendant Jessica Lopez’s Response to Canal Insurance Company’s Motion for
Reconsideration (the “Lopez Response”), ECF No. 86, and Plaintiff’s Reply to Response to
Motion for Reconsideration (the “Canal Response”), ECF No. 88, in the above-captioned case
(the “Case”). For the foregoing reasons, the Motion is DENIED.
I.
BACKGROUND
On September 4, 2014, the Court issued its Order, ECF No. 77, finding that Plaintiff
owed Defendants XMEX Transport, LLC (“XMEX”), Charles “Chip” Strader, and Roger
Franceware (“Franceware”) a duty to defend in a state court wrongful death lawsuit under a
liability insurance policy Plaintiff issued to XMEX. Order 27-35.
On September 30, 2014, Plaintiff filed its Motion. By the Motion, Plaintiff argues that
the Court erred in finding that the underlying state court petition alleged sufficient facts to trigger
Plaintiff’s duty to defend.
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II.
DISCUSSION
A.
Standard
“While the Federal Rules of Civil Procedure do not provide for a motion for
reconsideration, such a motion may be considered either a Rule 59(e) motion to alter or amend
judgment or a Rule 60(b) motion for relief from judgment or order.” Shepherd v. Int’l Paper
Co., 372 F.3d 326, 328 n. 1 (5th Cir. 2004) (citing Hamilton Plaintiffs v. Williams Plaintiffs, 147
F.3d 367, 371 n. 10 (5th Cir. 1998)). Whether a motion is considered under Rule 59(e) or Rule
60(b) depends on when it is filed. See id. “If the motion is filed within 28 days of the judgment
or order of which the party complains, it is considered a Rule 59(e) motion.” Obersteller v.
United States, Civil No. A-13-CV-198-LY, 2013 WL 7138802, at *1 (W.D. Tex. July 19, 2013);
see also Fed. R. Civ. P. 59 advisory committee’s notes (2009). Here, Plaintiff filed its Motion
within 28 days of the Court’s Order. See Order 1, Mot. 1. Accordingly, the Court considers the
Motion under Rule 59.
“A Rule 59(e) motion must clearly establish either a manifest error of law or fact or must
present newly discovered evidence and cannot raise issues that could, and should, have been
made before the judgment issued.” United Nat’l Ins. Co. v. Mundell Terminal Servs., Inc., 740
F.3d 1022, 1031 (5th Cir. 2014) (citing Advocare Int’l LP v. Horizon Labs., Inc., 524 F.3d 679,
691 (5th Cir. 2008)). The Fifth Circuit has explained that Rule 59(e) “favor[s] the denial of
motions to alter or amend a judgment.” S. Constructors Grp., Inc. v. Dynalectric Co., 2 F.3d
606, 611 (5th Cir.1993). In other words, “[r]econsideration of a judgment after its entry is an
extraordinary remedy that should be used sparingly.” Templet v. HydroChem Inc., 367 F.3d 473,
479 (5th Cir. 2004).
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B.
Analysis
In its Motion, Plaintiff asserts that the Court incorrectly found that Plaintiff owed
Defendants a duty to defend. See Mot.; Canal Resp. The Court addresses, and rejects, Plaintiff’s
arguments below.
Plaintiff first argues that “[i]nstead of going straight to the ‘eight corners’ analysis, the
Court should have first held any party seeking to establish whether a duty to defend existed to
their burden of proof to establish standing as an insured.” Mot. 2. In the Order, the Court
expressly analyzed whether Defendants potentially qualified as insureds under the policy. See
Order 32-37. Accordingly, the Court previously addressed Plaintiff’s concern in the Order.
Plaintiff offers no substantive explanation why the Court’s analysis in this regard was a manifest
error of law. Accordingly, the Court rejects Plaintiff’s argument. See United Nat’l, 740 F.3d at
1031.
Plaintiff further argues that the Court “erred in imagining a factual scenario while
applying the ‘eight-corners’ rule.” Canal Resp. 2; see also Mot. 5-6. Texas’s eight-corners rule
requires courts to compare the plaintiff’s allegations in the underlying pleadings with the terms
of the insurance policy to determine whether the facts affirmatively alleged fall within the scope
of the policy. See, e.g., ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d
832, 839-40 (5th Cir. 2012). In conducting this analysis, a court may not read facts into the
pleadings, look outside the pleadings, or speculate as to factual scenarios which might trigger
coverage. Id. at 840. Nonetheless, “Texas law requires [courts] to consider the allegations in the
complaint along with any reasonable inferences that flow from the facts alleged.” Liberty Mut.
Ins. Co. v. Graham, 473 F.3d 596, 601 (5th Cir. 2006) (citing Allstate Ins. Co. v. Hallman, 159
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S.W.3d 640, 645 (Tex. 2005)); see also Star-Tex Res., L.L.C. v. Granite State Ins. Co., 553 F.
App’x 366, 370 (5th Cir. 2014) (citing Gen. Star Indem. Co. v. Gulf Coast Marine Assocs., Inc.,
252 S.W.3d 450, 456 (Tex. App. 2008)) (explaining that courts “may draw inferences from the
petition that may lead to a finding of coverage”). Texas’s eight-corners analysis is deferential to
an insured and “‘the general rule is that the insurer is obligated to defend if there is, potentially, a
case under the complaint within the coverage of the policy.’” Zurich Am. Ins. Co. v. Nokia, Inc.,
268 S.W.3d 487, 491 (Tex. 2008) (quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387
S.W.2d 22, 26 (Tex. 1965)).
Plaintiff asserts that the Court impermissibly imagined a factual scenario by finding the
vehicle a potentially covered “temporary substitute” vehicle because the underlying petition does
not expressly allege either that the vehicle was a substitute auto or that any of the three listed
vehicles were inoperable or out of service. Mot. 5-6; Canal Resp. 2. In support of this argument,
Plaintiff cites to Pine Oak Builders, Inc. v. Great American Lloyds Insurance Co., 279 S.W.3d
650 (Tex. 2009) and Gilbane Building Co. v. Admiral Insurance Co., 664 F.3d 589 (5th Cir.
2011). See Mot. 6-8; Canal Resp. 2-7. For the following reasons, Plaintiff’s reliance on the cited
opinions is unpersuasive.
In Pine Oak, the only claims alleged in the underlying petition were clearly excluded
from coverage under the policy. 279 S.W.3d at 654-55. Pine Oak therefore stands for the
proposition that “[i]f the petition only alleges facts excluded by the policy, the insurer is not
required to defend.” Id. at 655 (emphasis added). Here, unlike in Pine Oak, the factual
allegations in the underlying petition are not expressly excluded from coverage. Accordingly,
Pine Oak is not controlling.
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In Gilbane, the Fifth Circuit held that the district court erred in characterizing the
underlying petition as alleging that an employee had climbed down a ladder with muddy boots,
therefore triggering the duty to defend because it was “possible that a jury could eventually find
that [the employee] caused his own injuries.” 664 F.3d at 598. The district erred, however,
because the petition did not affirmatively allege that the employee climbed down a ladder with
muddy boots and, in fact, the “petition [did] not allege any facts suggesting that [the employee’s]
own negligence could have caused his injuries.” Id. at 599 (emphasis added). Thus, Gilbane
held that a court may not read facts into the petition or draw inferences from facts not
affirmatively pleaded in the petition. Id. at 600.
Here, unlike in Gilbane, the Court drew inferences directly from factual allegations
affirmatively pleaded in the underlying petition. As the Court stated in its Order, both Defendant
Lorenzo Munoz (“Munoz”) and Franceware pleaded that Moore Freight owned the vehicle
involved in the accident. Order 28. Defendant Lopez additionally pleaded facts indicating
Moore Freight had at least some ownership in the vehicle. Id. All three pleadings further
alleged that the vehicle was being used in the scope of XMEX’s business. Id. at 29-30. These
allegations, taken together and “liberally construed in favor of coverage,” clearly raise the
reasonable inference that XMEX had borrowed the vehicle from Moore Freight. See Star-Tex
Res., 553 F. App’x at 369. From the natural inference that XMEX borrowed the vehicle from
Moore Freight, it is reasonable to infer that XMEX potentially did so as a temporary substitute
auto. See Liberty Mut. Ins. Co., 473 F.3d at 601 (Texas law “requires [courts] to consider . . .
reasonable inferences that flow from the facts alleged.”); Zurich Am. Ins., 268 S.W.3d at 491
(finding a duty to defend where there was potential coverage under policy). These inferences
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flow naturally from facts affirmatively alleged in the underlying petitions and are distinguishable
from both Pine Oak and Gilbane. Accordingly, Plaintiff has failed to show that the Court’s
inferences drawn in favor of the insureds were manifest errors of law under the Texas eightcorners rule and the Court declines to reconsider its Order. See United Nat’l, 740 F.3d at 1031.
Plaintiff next argues that the Court “should have applied the narrow exception to the
‘eight-corners’ doctrine and considered evidence regarding the unlisted vehicle and the
application of the ‘employee exclusion.’” Mot. 8. Plaintiff offers no new substantive analysis on
this issue and the Court rejects Plaintiff’s contention as rehashing prior argument. See Templet,
367 F.3d at 479 (noting that a motion for reconsideration “is not the proper vehicle for rehashing
evidence, legal theories, or arguments that could have been offered or raised before the entry of
judgment”). Nonetheless, the Court reiterates that extrinsic evidence is admissible under Texas’s
eight-corners rule only where it is initially impossible to discern whether coverage is potentially
implicated and when it goes solely to a fundamental issue of coverage that does not engage the
truth or falsity of any facts alleged in the underlying case. See ACE Am. Ins., 699 F.3d at 840.
Here, “[Plaintiff’s] duty to defend can arise under the temporary substitute provision regardless
of whether the Truck was specifically listed [under the policy].” Order 26. Therefore, because it
is initially possible to discern that the vehiclewas potentially a covered temporary substitute auto
under the policy, the VIN number evidence does not fall within the narrow exception to the
eight-corners rule. See ACE Am. Ins., 699 F.3d at 840. Regardless, even if this evidence were
admissible, it would not undermine the temporary substitute auto provision and would not
change the Court’s analysis because it is not pertinent to the temporary substitute vehicle
exception.
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Moreover, “[t]he underlying pleadings clearly alleged that neither Munoz nor Franceware
was employed by any of the defendants.” Order 26-27. “Accordingly, any extrinsic evidence
offered to prove otherwise would engage the truth or falsity of the allegations in the underlying
pleadings and would not be permissible under Texas law.” Id. at 27 (citing Star-Tex Res., 553 F.
App’x at 372). Therefore, because Plaintiff has failed to establish that the extrinsic evidence was
either admissible or relevant, or that the Court’s refusal to consider the extrinsic evidence was
manifest error, the Court declines to reconsider its Order. See United Nat’l, 740 F.3d at 1031.
Plaintiff lastly argues that the Court’s consideration of T.H.E. Insurance Co. v. Larsen
Intermodal Services, Inc., 242 F.3d 667 (5th Cir. 2001), was misplaced because Louisiana
applies a different standard than Texas to determine the duty to defend. Canal Resp. 7.
However, the Fifth Circuit, applying Texas law, has found a duty to defend where the factual
“allegations [did] not clearly and unambiguously” fall outside the scope of coverage. See Colony
Nat. Ins. Co. v. Unique Indus. Prod. Co., 487 F. App’x 888, 892-93 (5th Cir. 2012) (citing
Allstate Ins., 159 S.W.3d at 643). This language is nearly identical to the standard employed in
T.H.E. Insurance. See T.H.E. Ins., 242 F.3d at 678. Furthermore, a federal court interpreting the
duty to defend in Louisiana has found case law under Texas’s eight-corners rule to be
“instructive” because of the similarities in the standards. See Grand Acadian, Inc. v. Fluor
Corp., No. 2:07 CV 295, 2009 WL 994990, at *8 (W.D. La. Apr. 9, 2009). The Court’s
consideration of T.H.E. Insurance as highly instructive in the present case was neither improper
nor manifest error. Plaintiff offers no substantive argument to the contrary. Accordingly,
Plaintiff has failed to show a manifest error of law and the Court will not reconsider its Order.
See United Nat’l, 740 F.3d at 1031.
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Plaintiff’s Motion for Reconsideration, ECF No. 83, is therefore DENIED.
SO ORDERED.
SIGNED this 31st day of October, 2014.
KATHLEEN CARDONE
UNITED STATES DISTRICT JUDGE
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