Ace American Insurance Company v. Lerma et al

Filing 35

ORDER GRANTING 6 Motion to Dismiss. Terminated party Maricela Lerma, Marissa Lerma, Antonio Lerma, Jr and Maribel Lerma (Maribel Lerma, Individually and as Representative of the Estate of Marisela Cadena).; DENYING 10 Motion to Dismiss for Fai lure to State a Claim; GRANTING IN PART AND DENYING IN PART 23 Motion to Dismiss. Terminated party Maricela Lerma, Marissa Lerma, Antonio Lerma, Jr and Maribel Lerma (Maribel Lerma, Individually and as Representative of the Estate of Marisela Cadena). Signed by Judge Jason K. Pulliam. (kg)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

ACE AMERICAN INSURANCE
COMPANY,
Plaintiff/Counter-Defendant,
Case No. SA-23-CV-00539-JKP
v.
MARIBEL LERMA, INDIVIDUALLY
AND AS REPRESENTATIVE OF THE
ESTATE OF MARISELA CADENA,
ANTONIO LERMA JR., MARICELA
LERMA, MARISSA LERMA, RIVER
SUB, LLC,
Defendants/Counter-Plaintiff.
MEMORANDUM OPINION AND ORDER
Before the Court are four motions. Plaintiff/Counter-Defendant ACE American Insurance
Company (hereinafter “ACE”) and Defendants Maribel Lerma, Individually and as a
Representative of the Estate of Marisela Cadena, Antonio Lerma, Jr., Maricela Lerma, and
Marissa Lerma (hereinafter “the Lermas”) bring a motion to dismiss the Lermas, pursuant to the
parties’ stipulation, which the Court GRANTS as unopposed. See ECF No. 6.
Defendant/Counter-Plaintiff River Sub, LLC, (hereinafter “River Sub”) brings a motion to
dismiss the complaint for failure to state a claim and want of jurisdiction, which the Court
DENIES WITHOUT PREJUDICE to refiling as a motion for summary judgment. See ECF
No. 10. ACE brings a motion for judgment on the pleadings, which the Court DENIES
WITHOUT PREJUDICE to refiling as a motion for summary judgment. See ECF No. 13.
Finally, ACE brings a motion to dismiss River Sub’s counterclaim for failure to state a claim,
which the Court GRANTS IN PART and DENIES IN PART. See ECF No. 23. The Court

heard argument on the parties’ motions in an October 23, 2023 hearing. After due consideration
of the parties’ briefings, arguments, and the applicable law, the Court issues its rulings consistent
with this Memorandum Opinion and Order.
BACKGROUND
This action arises out of a present controversy between ACE American Insurance
Company and its insured, River Sub, LLC, d/b/a Subway, regarding whether ACE has a duty to
indemnify River Sub for the judgment award in the underlying state court action styled Maribel
Lerma, et al. vs. River Sub, Ltd. d/b/a Subway under case number 2021CI15278 in the 131st
Judicial District Court of Bexar County, Texas. In the underlying action, the Lermas sued River
Sub because their family member, Marisela Cadena, was murdered by an ex-boyfriend, Andrew
Munoz, at the Subway restaurant where she worked. The parties proceeded to arbitration and the
arbitration award and judgment were entered on April 3, 2023 in the amount of $2,970,000,
finding River Sub responsible in part for Cadena’s death by breaching non-delegable duties,
including the duty to provide a safe place to work and failing to take certain safety measures
despite knowledge of a substantial risk of workplace violence against Cadena.
River Sub requests the Court take judicial notice of the adjudicated facts in the state
court’s Amended Final Judgment and Award of Arbitrator. See ECF No. 10-2. ACE agrees the
award and final judgment are central to the claims and should be considered by the Court in
connection with the parties’ motions. See ECF No. 13 at 8. The adjudicated facts are, therefore,
deemed admitted, and form the basis of the Court’s summary of the background facts in this
case.
Cadena was employed by River Sub as a store manager at a Subway restaurant in San
Antonio, Texas. See ECF No. 10-2 at 3. On February 16, 2020, Cadena’s ex-boyfriend, Munoz,

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kidnapped Cadena at gunpoint and took her to a field for several hours before releasing her. Id.
Cadena reported Munoz to the police and took steps to hide from Munoz in her personal life. Id.
at 4. Specifically, Cadena sought protection from the authorities via a restraining/protective
order, moved in with her daughter, switched cars with her daughter, and had someone else feed
her pets so she could avoid her apartment. Id. On February 25, 2020, Cadena told River Sub’s
District Manager and Cadena’s direct supervisor, Sergio Martinez, about the kidnapping. Id. at 3.
Arbitrator Hon. Carlos R. Cortez found Cadena requested a transfer from Martinez. Id. at 4.
Martinez did not transfer Cadena and Arbitrator Cortez determined there was evidence Martinez
may have demanded an inappropriate quid pro quo before he would agree to transfer Cadena. Id.
On the morning of February 28, 2020, Munoz entered the restaurant and shot Cadena multiple
times, resulting in her death. Id. at 5.
The Lermas asserted premise liability, negligent activity, and gross negligence causes of
action against River Sub, contending River Sub was responsible for Cadena’s death. Arbitrator
Cortez determined Munoz bore the overwhelming percentage of responsibility for the murder. Id.
at 6. However, he also determined River Sub shares at least 1% responsibility for Cadena’s
death. Id. Arbitrator Cortez awarded Maribel Lerma, Antonio Lerma, and Maricela Lerma
$500,000 each for past and future loss of companionship and past and future mental anguish. Id.
at 9–10. He awarded Marissa Lerma $1,000,000 for past and future loss of companionship and
past and future mental anguish. Id. Additionally, he awarded Cadena’s estate $470,000 for
conscious pain and suffering and mental anguish. Id. at 9. The trial court later affirmed the award
in a final judgment. See ECF No. 10-3.

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The parties agree to the Court’s admission of the insurance policy ACE issued River Sub,
which is therefore deemed admitted. See ECF Nos. 10-4, 13-3.1 Specifically, ACE issued
Occupational Accident Insurance to River Sub under Policy Number OCA N04190944001, with
an original effective date of February 19, 2007, which provides liability coverage for certain
injuries to River Sub’s employees. See ECF No. 13-3. The policy is sold as an alternative to the
typical Texas workers’ compensation policy which is governed by statute, Tex. Lab. Code, Title
A, Ch. 406. The policy was renewed by amendment on an annual basis. On February 19, 2020,
Amendment 23 to the policy was added renewing the policy until February 19, 2021. Specific
policy provisions relevant to this lawsuit are quoted and discussed below. ACE contends it has
no duty to indemnify River Sub for the final judgment award under the terms of the policy
agreement. River Sub disagrees and, in the alternative, argues ACE misled it about what the
policy covers.
LEGAL STANDARD
To provide opposing parties fair notice of what the asserted claim is and the grounds
upon which it rests, every pleading must contain a short and plain statement of the claim
showing the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). To survive a Motion to Dismiss filed pursuant to Rule 12(b)(6), the
Complaint must plead “enough facts to state a claim to relief that is plausible on its
face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The focus is not on
whether the plaintiff will ultimately prevail, but whether that party should be permitted to present

The copy of the insurance policy attached to River Sub’s motion is incomplete. The Court, therefore, relies on the
complete copy attached to ACE’s motion. See ECF No. 13 at 8 n.1; 13-3.
1

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evidence to support adequately asserted claims. See id.; see also Twombly, 550 U.S. at 563 n.8.
Thus, to qualify for dismissal under Federal Rule 12(b)(6), a Complaint must, on its face, show a
bar to relief. Fed. R. Civ. P. 12(b)(6); Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir.
1986). Dismissal “can be based either on a lack of a cognizable legal theory or the absence of
sufficient facts alleged under a cognizable legal theory.” Frith v. Guardian Life Ins. Co., 9 F.
Supp.2d 734, 737–38 (S.D.Tex. 1998).
In assessing a Motion to Dismiss under Rule 12(b)(6), the Court’s review is limited to the
Complaint and any documents attached to the Motion to Dismiss referred to in the Complaint
and central to the plaintiff’s claims. Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748
F.3d 631, 635 (5th Cir. 2014). When reviewing the Complaint, the “court accepts all wellpleaded facts as true, viewing them in the light most favorable to the plaintiff.” Martin K. Eby
Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones v.
Greninger, 188 F.3d 322, 324 (5th Cir. 1999)).
Courts use the same standard under Rule 12(c) as Rule 12(b)(6). Garza v. Escobar, 972
F.3d 721, 727 (5th Cir. 2020). “A motion brought pursuant to Rule 12(c) is designed to dispose
of cases where the material facts are not in dispute and a judgment on the merits can be rendered
by looking to the substance of the pleadings and any judicially noticed facts.” Id.
ANALYSIS
Four motions are currently before the Court: (1) ACE and the Lermas’ motion to dismiss
the Lermas (ECF No. 6); (2) River Sub’s motion to dismiss the complaint (ECF No. 10); (3)
ACE’s motion for judgment on the pleadings (ECF No. 13); and (4) ACE’s motion to dismiss
River Sub’s counterclaim (ECF No. 23). The Court considers each of these motions, in turn,
below.

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ACE and the Lermas’ Motion to Dismiss the Lermas

I.

Based on its understanding that judgment creditors are necessary and proper parties under
the Federal Declaratory Judgment Act, ACE included the Lermas as parties to this civil action.
The Lermas stipulate and agree to be bound by the Court’s final judgment in this action. In
exchange for the Lermas’ agreement to be bound, ACE seeks dismissal of the Lermas from this
action. Pursuant to Rule 41(a)(2), the parties request the Court’s entry of an order dismissing the
Lermas from the case. With this Memorandum Opinion and Order, the Court grants the parties’
request and dismisses the Lermas from the case. This order shall have no impact on the ongoing
coverage dispute between ACE and River Sub, which shall remain pending in this civil action.
River Sub’s Motion to Dismiss the Complaint

II.

In its complaint, ACE contends three exclusions to the policy preclude any duty to
indemnify River Sub from a portion of its liability. Specifically, ACE cites the following
language:
EXCLUSIONS
No reimbursement will be made for, any loss resulting in whole or
in part from, or contributed to by, or as a natural and probable
consequence of any of the following:
*
5.

*

An act of a third person intended to injure the Covered
Person because of personal reasons and not directed at the
Covered Person as an Employee or because of his or her
employment with the Policyholder;
*

10.

*

*

*

Claims arising from work place negligence or employment
relationships including without limitation, claims for any
type of employment discrimination, wrongful discharge,
retaliatory discharge, coercion, sexual harassment,
American with Disabilities Act claims, and claims arising
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from under the Labor Code of any state, and all other
claims affecting or arising from the employment
relationship whether arising under state or federal statutes
or regulations of the common law;
*
30.

*

*

Mental trauma and mental, nervous, emotional or
psychological conditions or disorders.

The parties agree the crux of ACE’s argument is based on Exclusion No. 5, so the Court
focuses its analysis there. Exclusion No. 5 is based on the typical “personal animosity exception”
found in workers’ compensation policies, as prescribed by the Texas Workers’ Compensation
Act, § 406.032. The policy in this case was offered to River Sub as a substitute to the typical
workers’ compensation policy. The parties, therefore, urge the Court to apply Texas caselaw
interpreting the workers’ compensation personal animosity exception to Exclusion No. 5 in this
case. The Court, however, is not convinced that authority is controlling. Exclusion No. 5 largely
tracks the language of the personal animosity exception but differs in material ways. The Court
provides a side-by-side comparison of the two below.

Section 406.032 of the Texas Workers’ Exclusion No. 5 of the Occupational
Compensation
Act
(the
“Personal Accident Insurance Policy
Animosity Exception”)
“An insurance carrier is not liable for
compensation if (1) the injury (c) arose out of
an act of a third person intended to injure the
employee because of a personal reason and
not directed at the employee as an employee
or because of the employment.”

“No reimbursement will be made for, any loss
resulting in whole or in part from, or
contributed to by, or as a natural and probable
consequence of any of the following: …
“5.
An act of a third person intended to
injure the Covered Person because of personal
reasons and not directed at the Covered
Person as an Employee or because of his or
her employment with the Policyholder; …”

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ACE notes, and the Court agrees, the precatory language in Exclusion No. 5 differs
materially from the personal animosity exception. Specifically, Exclusion No. 5 has anticoncurrent causation language leading into the exclusion. Whereas the personal animosity
exception bars liability for compensation for an injury if it “arose out of” the acts of a third party
for personal reasons, Exclusion No. 5 bars reimbursement for “any loss resulting in whole or in
part from, or contributed to by, or as a natural and probable consequence of” the acts of a third
party for personal reasons. In this way, the language of Exclusion No. 5 is broader than the
typical personal animosity exception. That being said, the Court agrees the actual language of
Exclusion No. 5 is materially the same as the language of the workers’ compensation personal
animosity exception. Therefore, caselaw interpreting the personal animosity exception has some
bearing on the Court’s analysis in this case.
The parties offer different interpretations of what the caselaw says. According to ACE,
the caselaw provides that the personal animosity exception applies to those injuries resulting
from a dispute which has been transported into the place of employment from the injured
employee’s private or domestic life. ACE further contends that in this case, Cadena, as a victim
of domestic abuse, was killed as a result of a pattern of threats and violence perpetuated by her
ex-boyfriend for personal reasons, and not as an employee or because of her employment. As a
result, ACE concludes Exclusion No. 5 applies and any judgment against River Sub entered in
the underlying proceeding is not covered under the policy.
River Sub offers a more nuanced view of the caselaw. River Sub cites the Texas Supreme
Court opinion in Nasser v. Security Ins. Co. for the premise that the operative question in
determining whether the personal animosity exception applies is whether the plaintiff’s injury
was sustained “in the course of” their employment. 724 S.W.2d 17 (Tex. 1987). In the Nasser

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case, a restaurant manager was stabbed by the jealous ex-boyfriend of a customer he frequently
served. Id. at 18. The Nasser court found the “personal animosity exception” did not apply
because the perpetrator’s animosity was “exacerbated” by the employee’s job, serving
customers. Id. at 19. “Whenever conditions attached to the place of employment or otherwise
incident to the employment are factors in the catastrophic combination, the consequent injury
arises out of the employment.” Id. Here, River Sub argues the conditions of Cadena’s
employment were factors in her injury—namely, Martinez’s refusal to transfer Cadena to a
different Subway restaurant gave Munoz an opportunity to find and kill Cadena at the location
where Munoz knew Cadena worked. River Sub further analogizes to Commercial Std. Ins. Co. v.
Marin, in which the employee was raped and murdered in the early morning hours as she was
opening her employer’s service station for business. 488 S.W.2d 861, 868–870 (Tex. Civ.
App.—San Antonio 1972 writ ref’d n.r.e.). The Marin court found the employer requiring the
employee work “during the hours of darkness” imposed “occupational hazards not shared by
others.” Id. at 869–70. Here again, River Sub argues Martinez requiring Cadena to work at the
Subway restaurant where Munoz could find her created a danger arising out of the conditions of
her employment.
ACE distinguishes Nasser and Marin from the case at bar. ACE notes the Nasser
employee had no personal dispute that was transported into his place of employment from his
private or domestic life. Nasser, 724 S.W.2d at 19. To the contrary, the Nasser employee was
fulfilling a requirement of his employment, being nice to customers, which caused his
customer’s ex-boyfriend to become jealous and attack him. Id. In contrast, Munoz attacked
Cadena for solely personal reasons. In Marin, the perpetrator offered inconsistent accounts of
whether he had a prior relationship with the victim; however, the Marin court found the jury did

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not believe they had a prior relationship. Marin, 488 S.W.2d at 863. This led the Marin court to
conclude the Marin employee, unlike Cadena, was not attacked for personal reasons. ACE
further cites Liberty Mut. Ins. Co. v. Upton for the premise that employees injured by their
current or former romantic partners fit squarely within the personal animosity exception. 492
S.W.2d 623, 625–26 (Tex. App.—Fort Worth 1973, no pet.). The Upton employee was at work,
talking on the telephone regarding company business, when her ex-husband walked up and shot
her four times, killing her. Id. at 624. The Upton court found the exception applied because
“[t]he undisputed evidence showed that the shooting was directed against her because of reasons
that were personal to her and [the perpetrator].” Id. at 626.
To summarize the difference between the parties’ interpretation of the caselaw, ACE
contends any personal dispute transported into the place of employment is subject to the personal
animosity exception, whereas River Sub suggests even personal disputes may fall outside the
exception if the conditions of employment are a contributing factor to the injury. On this point,
differences between the language of the personal animosity exception interpreted by the caselaw
and the language of Exclusion No. 5 in this case are relevant. If, as ACE suggests, the precatory
language to Exclusion No. 5 is broader than the personal animosity exception, the caselaw on
this question is not dispositive. Though ACE raised this argument in its written briefing and oral
argument, neither party thoroughly briefed it. The Court, therefore, denies without prejudice
River Sub’s motion to dismiss subject to refiling as a motion for summary judgment. The parties
may re-urge arguments made at this stage of the litigation in their future filings; however, the
parties are on notice that the Court will apply principles of Texas contract law interpreting
insurance contracts in rendering its final decision.

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The Court similarly reserves ruling on the applicability of Exclusion No. 10 and
Exclusion No. 30. ACE informed the Court those exclusions are raised as arguments made in the
alternative and, therefore, did not thoroughly brief them.
III.

ACE’s Motion for Judgment on the Pleadings
ACE combines its response to River Sub’s motion to dismiss with its own Rule 12(c)

motion for judgment on the pleadings, arguing that, as a matter of law, there is no coverage
under the policy ACE issued to River Sub. See ECF No. 13. ACE relies on the same arguments
for its response and its motion. For the same reasons the Court gave for denying River Sub’s
motion to dismiss, the Court denies without prejudice ACE’s motion for judgment on the
pleadings, subject to refiling as a motion for summary judgment.
IV.

ACE’s Motion to Dismiss River Sub’s Counterclaim
River Sub brings a counterclaim against ACE for declaratory judgment and breach of

contract, arguing the policy exclusions cited by ACE do not apply in this case and ACE breached
its contract to insure River Sub by refusing to indemnify River Sub following entry of judgment
in the underlying state court action. ACE relies on arguments made in its earlier filings as to
these causes of action because they turn on the same question before the Court in ACE’s
complaint—that is, whether ACE has a duty to indemnify River Sub. The Court denies without
prejudice ACE’s motion as to these causes of action for the reasons discussed above.
River Sub argues in the alternative that, if the Court finds ACE has no duty to indemnify
River Sub under the policy, ACE should be liable based on an alleged misrepresentation
regarding coverage made in February 2008. See ECF No. 17. Specifically, River Sub contends
Brett Morgan with SWBC Insurance Services, Inc., in promoting the policy, indicated the policy
would cover liability for criminal acts resulting in injuries to and claims by River Sub’s

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employees. In its motion to dismiss, ACE argues, as an initial matter, the statute of limitations on
River Sub’s counterclaim has expired. ACE further argues, to the extent the statement was ever
made, it was not a misrepresentation because the policy does cover liability for criminal acts—
just not acts of a third person intended to injure the employee because of personal reasons. The
Court need not reach ACE’s main arguments; however, because River Sub, as the insured, has a
duty to read the policy and is charged with knowledge of the policy terms and conditions under
Texas law. See Glenn v. L. Ray Calhoun & Co., 83 F.Supp.3d 733, 747 (W.D. Tex. 2015).
River Sub attached to its counterclaim a copy of the policy that was issued to River Sub
on March 13, 2007, which includes the personal animosity exclusion at issue in this case. See
ECF No. 17-1 at 12 ¶ 7. Courts may consider documents that are attached to a motion that are
referred to in the plaintiff’s complaint and central to the plaintiff’s claims. Sullivan v. Leor
Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010). Because the 2007 policy was attached to the
motion and the counterclaim, referred to in the counterclaim, and central to the counterclaim, the
Court will consider the 2007 policy in connection with ACE’s motion to dismiss. The 2007
policy was issued before Morgan allegedly made misrepresentations about the policy on either
February 7, 2008 or February 17, 2008. Because River Sub is deemed to have knowledge of the
policy terms and conditions as a matter of law, and the policy included the personal animosity
exclusion at the time the alleged misrepresentations were made, the Court finds River Sub had
knowledge of the personal animosity exclusion at the time the alleged misrepresentations were
made. River Sub’s counterclaim based on Morgan’s alleged misrepresentation therefore fails as a
matter of law and ACE’s motion to dismiss the counterclaim on those grounds is granted.
ACE further notes River Sub, in its amended counterclaim, removed all factual
allegations regarding ACE’s alleged unreasonable failure to settle claim; however, conclusory

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allegations regarding violations of the Texas Insurance Code and Deceptive Trade Practices Act
remain. The Court agrees the allegations in question are conclusory and offered without factual
or legal support. Those claims are, therefore, dismissed pursuant to Rule 12(b)(6).
River Sub was given the opportunity to amend its counterclaim, pursuant to the Court’s
standing order, and did amend its counterclaim. See ECF Nos. 11, 14, 17. The Court, therefore,
finds River Sub has pled its best case and dismissal of the dismissed causes with prejudice is
appropriate. See Foman v. Davis, 371 U.S. 178, 182 (1962); Hitt v. City of Pasadena, 561 F.2d
606, 608–09 (5th Cir. 1977); DeLoach v. Woodley, 405 F.2d 496, 496–97 (5th Cir. 1968). Only
River Sub’s causes of action for declaratory judgment, breach of contract, and attorneys’ fees
shall be allowed to proceed.
CONCLUSION
For the reasons discussed, the Court grants ACE and the Lermas’ motion to dismiss the
Lermas, denies without prejudice River Sub’s motion to dismiss the complaint, denies without
prejudice ACE’s motion for judgment on the pleadings, and grants in part and denies in part
ACE’s motion to dismiss River Sub’s counterclaim.
IT IS THEREFORE ORDERED that, pursuant to the parties’ stipulation, the Court
GRANTS ACE and the Lermas’ Motion to Dismiss the Lermas and DISMISSES the Lermas
from this case. See ECF No. 6. The Clerk of Court is INSTRUCTED to dismiss Maribel Lerma,
Individually and as a Representative of the Estate of Marisela Cadena, Antonio Lerma, Jr.,
Maricela Lerma, and Marissa Lerma. This order shall have no impact on the ongoing coverage
dispute between ACE and River Sub, which shall remain pending in this civil action.

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IT IS FURTHER ORDERED that the Court DENIES WITHOUT PREJUDICE
River Sub’s Motion to Dismiss the Complaint, subject to refiling as a Motion for Summary
Judgment. See ECF No. 10.
IT IS FURTHER ORDERED that the Court DENIES WITHOUT PREJUDICE
ACE’s Motion for Judgment on the Pleadings, subject to refiling as a Motion for Summary
Judgment. See ECF No. 13.
IT IS FINALLY ORDERED that the Court GRANTS IN PART and DENIES IN
PART ACE’s Motion to Dismiss River Sub’s First Amended Counterclaim. See ECF No. 23.
River Sub’s causes of action for declaratory judgment, breach of contract, and attorneys’ fees
shall be allowed to proceed. See ECF No. 17 at 20, 24 ¶¶ 50, 51, 52, 53, 61. All other causes of
action in River Sub’s counterclaim are DISMISSED WITH PREJUDICE pursuant to Rule
12(b)(6).
It is so ORDERED.
SIGNED this 13th day of November, 2023.

JASON PULLIAM
UNITED STATES DISTRICT JUDGE

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