### I N THE UNI TED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

No. 11-10166

DOUG CROWNOVER and KAREN CROWNOVER, Plaintiffs - Appellants
v. MID-CONTINENT CASUALTY COMPANY, Defendant - Appellee

Appeals from the United States District Court f or the Northern District of Texas

Before KING, BENAVIDES, and DENNIS, Circuit Judges. JAMES L. DENNIS, Circuit Judge: The question in this diversity case is whether a n insurance company, MidContinent Casualty Co. (“Mid-Continent”), is obligated under Texas law to pay for damage caused by one of i t s i nsureds, Arrow Development, I nc. (“Arrow”), when Arrow failed to promptly correct work in the home that it had constructed for Doug and Karen Crownover and which failed to c o nform to the requirements of the construction contract into which Arrow and the Crownovers had entered. An arbitrator had earlier found Arrow liab l e t o t h e Crownovers for breaching this express w arranty to repair and awarded them damages. B ecause Arrow filed for bankruptcy, however, the C rownovers are l i m i ted to recovering what they can from Arrow’s insurance policies. They therefore sued Mid-Continent U n i te d S t a t e s C o u rt o f A p p ea l s

F i f t h C i rc u i t 

### F I L E D June 27, 2014 Ly le W . Cay ce Clerk Case: 11-10166 Document: 00512679295 Page: 1 Date Filed: 06/27/2014in federal court for the damages owed to them by Arrow, and both parties moved

for summary judgment. The district court granted summary judgment for MidContinent. We conclude that, con s i s t e nt with Texas l a w a nd considering the Texas Supreme Court’s decisions i n Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London , 327 S.W.3d 118 (Tex. 2 010), a nd Ewing Construction Co. v. Amerisure I

nsurance Co. , 420 S.W.3d 30 (Tex. 2014), Mi d

- C o n t inent has demonstrated that an exclusion from coverage applies and that the C rownovers have failed to show that an exception to that exclusion applies. We also conclude that the district court committ e d no error in granting summary judgment to Mid-Continent. Accordingly, we AFFIRM. BACKGROUND I. In October 2001, the Crownovers entered into a construction contract with Arrow to construct a home o n their l a n d i n S unnyvale, T exas. The contract contained a warranty-to-repair clause, which in para g r a p h 2 3.1 provided that Arrow w ould “promptly correct work

. . . f ailing to conform to th e requirements of the Cont r act Documents.” The work was completed in November 2002, but by early 2003, cracks began to appear in the w al l s a n d f oundation of the Crownovers’ home. Additional problems with the heating, ventilation, and air conditioning (“HVAC”) s y stem caused l eaking in exterior l ines and air ducts inside the Crownovers’ home. To compensate for defects in the HVAC system, the system’s mechanical units ran continuously in order to heat or cool the house. In all, the Crownovers paid s e veral hundred thousand dollars to fix the problems with the foundation and HVAC system. II. The Crownovers attempted t o have Arrow correct the problems and eventually s o u ght l e gal relief. Their demand letters w ere forwarded to MidContinent, but to no av a i l

. T he Crownovers then i nitiated an arbitration

2 Case: 11-10166 Document: 00512679295 Page: 2 Date Filed: 06/27/2014proceeding against Arrow. The arbitrator determined that the Crownovers had

a meritorious claim for b reach of the express warranty t o repair c ontained in paragraph 23.1 of their c ontract with Arrow, which was not barred by the statute of limitations. Because the arbitrator a warded damages to t he Crownovers on that gr ound, she declined to dec i d e w hether the Crownovers’ other claims were barred by a statute of limitations. Arrow later filed f

or bankruptcy. I n June 2 009, t h e b a nkruptcy court lifted the automati c stay but limited the Crownovers’ recovery to any amount they could recover from an applicable insurance policy. (To d a te, Arrow has not paid the Crownovers any money.) In July 2009, the Crownovers sent a letter to Mid-Continent, demanding that the insurance compan y pay the arbitration award. Mid-Continent denied their d emand in August 2009, c i ting several insurance policy defenses and exclusions. The Crow n o v e r s then sued Mid-Continent for breach of contract. Both parties moved f

or summary judgment. Ultimately, the dis t r i c t court granted Mid-Continent’s m otion and denied the Crownovers’ motion. In its opinion, the district court examined an “Insuring Agreement,” a provision that appeared (in

e x a c t l y the same form) in a series of comprehensive general l i ability (“CG L” ) policies, by which Mid-Continent insured Arr o w , from August 2 001 through 2008. The district court c oncluded that the Insuring Agreement covered Arrow while it constructed the Crownovers’ home. The Insuring Agreement states that Mid-Continent “will pay those sums that [Arrow] becomes legally obli g ated to pay as damages because of

. . . ‘property damage’ to which this insurance applies.” Several exclusions apply to this general c overage provision, however. The district c o u r t concluded that one of th em, the contractual-liability exclusion,

a p p l i e d in the instant case, such that Mid-Continent was not obligate d t o indemnify Arrow for the damages it o wed the Crownovers. This e xclusion states that “ [t]his insurance d oes not apply to[] ‘property damage’ for which the insured

3 Case: 11-10166 Document: 00512679295 Page: 3 Date Filed: 06/27/2014is obligated to pay damages by reason of the assumption of liability i n a contract

or agreement.” There i s, however, a n exception t o this exclusion, for “liab i l ity

. . . [t]hat the insured would have i n the absence of the c ontract o r agreement.” The district court noted that the arbitration a ward to the Crownovers was based only on Arrow’s breach of the express warranty to repair contained in paragraph 23.1; the arbitrator e xplicitly declined t o decide whether Arrow w as liable to the Crownove r s on any other ground. Thus, the district court held that because Arrow “became legally obligated to pay the arbitration damages on the basis of [its] contractually assumed liability,” the c o ntractual-liability exclusion applied with no applicable exception to the exclusion. The Crownovers had argued that the di strict court should consider

w h e t h er Arrow would have been liable in the absence of the express warranty to repair. Specifical l y , t hey had contended that the “implied warranty of good workmanship” continued to apply to the contract they had with Arrow because the c ontract contained no express disclaimer of such a warrant y . The district court d e c lined to adopt t h i s argument, however. First, it noted that under Gilbert , it was confined to the actual f acts of the case and could not consider hypothetical s c enarios. Second, the district c o urt reasoned that when a contract contains an express warranty of good workmanship, that w arranty supersedes any implied warranty of the same. The Crownovers subsequently filed motions for a new trial, to a mend or modify the judgment, and for relief from the judgment, a rguing that the district court had erred i n ruling on i m p l i e d warranties, a ground that had n ot been raised in Mid-Continent’s motion for s u mmary j udgment. They f urther argued that no such w aiver o r disclaimer e xists und e r Texas law. The district court denied their motions, finding th a t the Crownovers had raised the implied warranty i ssue in their briefing and that Mid-Continen t w a s t h us allowed to respond to their argument in its s ur-reply. The district court also adhered to its

4 Case: 11-10166 Document: 00512679295 Page: 4 Date Filed: 06/27/2014earlier reasoning that the express warranty of good workmansh i p superseded

any implied warranty of the same. The Crownovers timely appealed. STANDARD OF REVIEW “[We] appl[y] a de nov o standard of review when determining whether a district court erred in granting summary judgment.” LaBarge Pipe & Steel Co.

v. First Bank , 550 F .3d 442, 449 (5th Cir. 2008). Summary judgment s hould be granted “if the m ovant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment a s a matter of law.” F E D

. R. C I V

. P. 56(a). “A genuine i ssue o f material fact exists when th e evidence is such that a reasonable jury could r eturn a verdict for the nonmoving party.” Gates v. Tex. Dep’t of Protective & Regulatory Servs

. , 5 3 7 F .3d 404, 417 (5th Cir. 2008). “[S]ubstantive law will i dentify which facts are material.” A nderson v. Liberty Lobby, Inc. , 477 U .S. 242, 248 (1986). “When, as here, j urisdiction i s based on diversity, we apply the substantive law of the forum s tate.” Holt v. State Farm Fire & Cas. Co. , 6 27 F.3d 188, 191 (5th Cir. 2010). Thus, in this c ase, T exas law determines which facts are material. DISCUSSION In light of the Texas Supreme Court’s controlling analysis i n G ilbert , and further explication in Ewing , we conclude that Mid-Co ntinent h as demonstrated th a t an exclusion to c overage applies and that the Crownovers have failed to show that an exception to that exclusion applies. We also c onclude that the d i strict c ourt committed no error in granting s ummary judgment fo r M i d

Continent. I. Under Texas law, “ t h e i n sured has the [initial] burden of e stablishing coverage under the terms of the policy.” Gilbert , 327 S.W.3d at 124 (citing Ulico Cas. Co. v. Allied Pilots Ass’n , 262 S.W.3d 773, 782 (Tex. 2008)). “If the insured
proves coverage, then t o avoid liability the i nsurer must prove the l o ss i s within

an exclusion.” Id. (citing Ulico Cas. Co. , 262 S.W.3d a t 7 82). “If the insurer

5 Case: 11-10166 Document: 00512679295 Page: 5 Date Filed: 06/27/2014proves that an exclusion applies, the burden shifts back to the insured to show

that an exception to the exclusion brings the claim back within coverage.” I d. (citing Comsys I

nfo. T ech. Servs., Inc. v. Twin City Fire Ins. Co. , 130 S.W.3d 181, 193 (Tex. Ct. App. 2003)). “The principles [Texas] courts use when i nterpreting an i nsurance policy are well established.” I d. at 126. Those principles include construing the policy according to general rules of contract c onstruction to ascertain th e parties’ intent. First, we l o o k a t t h e language of the policy because we presume parties intend what the words of their contract say. We examine the e ntire agreement and seek to harmonize and give effect to all provisions so that none will be meaningless. The pol i c y ’s terms a re given their ordinary and generally-accepted m eaning unless the policy sh o w s t h e w o r d s were meant in a technical or different sense. Courts strive to honor the parties’ agreement and not remake their contract by reading additional provisions into it. Id. (citations omitted). II. A. In Gilbert , the Texas S upreme Court a ddressed a contractual- l iability exclusion a nd an exception to that exclusion identical to those h ere. The insured party was Gi lb e r t T exas C onstruction (“Gilbert”), which contracted with the Dallas Area Rapid Transit Authority (“DART”) to build a light rail system. I d. at 121-22. As part of the contract, Gilbert agreed to “protect the work site and surrounding property.” Id. at 122. “During construction, D allas s uffered an unusually heavy rain, and a building adjacent to the construction a rea flooded.” Id. The buildi n g o w n er (“RTR”) sued Gilbert a nd DART for, inter alia , breach of contract. Id. Gilbert eventually settled with RTR, but G i lb e r t ’s insurer, Lloyd’s of London (“Lloyd’s”), r efused to i n d e m nify Gilbert on the ground that the contractual-liability e xc lusion applied. See id. Gilbert sued Lloyd’s, a nd the case eventually reached the Texas Supreme Court. Id.

6 Case: 11-10166 Document: 00512679295 Page: 6 Date Filed: 06/27/2014The Texas Supreme C ourt first explained that th e c o n tractual-liability

exclusion “ means what it says: i t excludes claims when the insured assumes liability for damages in a contract or agreement, except

. . . w h en the insured would b e liable abs e n t t he contract or agreement.” Id. at 128; see a lso Ewing , 402 S.W.3d at 37 (“[W]e

. . . d etermined in Gilbert that ‘assumption of liability’

m e a n s that the insured has assumed a l i ability for damages that excee d t h e liability it would have under general law.” (citing 327 S.W.3d at 127)). The court concluded that Gilbert had “assumed” liability b y taking on liability in its contract that it would not otherwise have had under the law: Indep e n d ent of its contractual obligations, Gilbert o wed RTR th e duty to comply w ith law and to conduct its operations with ordinary care so as not to damage RTR’s p roperty[]

. . . . In its contract with DART, however, Gilbert undertook a l egal obligation to p r otect improvements a nd utilities on property adjacent to the construction site, and to repair or pay for damage to any s uch property “resulting from a failure to comply with the requirements o f this contract or failure to exercise r easo n ab l e care in p erforming the w ork.” (emphasis added)

. T h e latter obligation—to exercise reasonable care in performing i t s w o r k—mirrors Gilbert’s duty to RTR under general law principles. The obligation to repair or pay f or damage to RTR’s property “resulting from a failure to comply with th e requirements of this c ontract” extends beyond Gilbert’s obligations under general law and i ncorporates contractual standards to which Gilbert obligated itself. Gilbert , 327 S.W.3d at 127. The trial court had granted summary judgment in favor of Gilb e r t on all o f RTR’s theories of liability apart from breach of contract—in other words, all that remained was RTR’s cl a i m t h a t Gilbert had breached the contract by causing damage “resulting from . . . failure to comply with the requirements of th[e] contract.” See id. Therefore, when Gilbert settled with RTR, its “only potential liability remaining in the lawsuit was liability in

excess of wha t i t h a d under general law principles.” I d. Thus, the court concluded that RTR’s breach-of-contract claim “was founded on a n obligation or liability contractu a l l y assumed by Gilbert within the meaning o f the policy exclusion.” Id. ; see also Ew i ng , 4 2 0 S

. W.3d at 3 6 (“In other words, Gilbert did
7 Case: 11-10166 Document: 00512679295 Page: 7 Date Filed: 06/27/2014not contractually assume liability for damages within the m eaning of the policy

exclusion unless the liability for damages it c ontractually assumed was greater than the l iability it wo u l d have had under general law—in Gilbert’s case, negligence.”). The Gilbert c ourt then considered whether the exception to the exclusion brought Gilbert’s liability to RTR back into coverage. See 327 S .W.3d at 133-35. The c o urt concluded that no exception applied to the exclusion—in other words, that Gilbert h ad not shown that it would have been liable to RTR “in the absence of the c ontract or agreement”—because G ilbert’s only liability for damages was for b reach of c ontract. Id. at 13 3

- 3 5. B ecause the exclusion applied and the exception did n ot, the Gilbert court c oncluded that there w as no coverage. Id. at 135. B. Following oral argument in this case, a p a n e l of this court certified two questions to the Texas Supreme C ourt that are germane t o the Crownov e r s’ dispute w ith Mid-Continent. See Ewing Constr. Co. v. Amerisure I ns. Co. , 690 F.3d 628, 633 (5th Cir. 2012). Those questions were:

1. Does a g eneral contractor that e n t e r s into a contract in which it agrees to perform its construction work i n a g o o d and workmanlike manner, without m ore specific provisions enlarging t h is obligation, “assume liability” for damages a rising out of th e contractor’s defective w ork so as to trigger the Contractual Liability Exclusion. 2. If the answer to question one is “Yes” a n d the contractual liability exclusion i s triggered, do the allegations i n the underlying lawsuit alleging that the contractor violated its common law duty to perform the contract in a careful, workmanlike, and non-negligent manner fa l l within the exception to the contractual liability exclusion for “liability that would exist in the absence of contract.” Id. The Texa s S upreme Court a nswered the first question “no” and did not

answer the s econd question, Ewing , 4 20 S.W.3d at 31, a nd, in so doing, further explicated the contours of the rule announced in Gilbert

.

8 Case: 11-10166 Document: 00512679295 Page: 8 Date Filed: 06/27/2014Ewing had entered into a contract with the T uluso-Midway I ndependent

School District (“TMISD”) “to serve a s g eneral contractor to renovate and build additions to a school in C orpus Christi, including c onstructin g tennis courts.” 420 S.W.3d a t 31. “Shortly after constructi o n o f t he tennis courts was completed,” however, “TMISD complained that the courts started flaking, crumbling, and cracking, rendering them u n u s able for their intended purpose of hosting competitive tennis events.” Id. TMISD then b r ought suit against Ewing; “[i]ts damages c laims against Ewing were based on faulty construction of the courts and its theories of liability were breach of contract and n egligence.” Id. at 31-32. Ewing t endered d efense of the underlying suit to it s i n s u r er, Amerisure Insurance Co. (“Amerisure”), under an insurance policy that i n c l u d ed CGL coverage. Id. a t 32. Amerisure denied coverage, and Ewing b rough t s u i t , seeking “a declaration that Amerisure h a d , and breached, duties to defend Ewing and indemnify it for any damages awarded to TMISD in the underlying suit.” Id. Amerisure“urge d t h a t policy e xclusions, including the contractual liability exclusion , p r e cluded coverage and negated it s duties to defend and indemnify.” Id. As in this case, “[t]he contractual l iability exclusion in Amerisure’s policy excude[d] claims for damages based on an insured’s contractual assumption of liability except

. . . where the insured’s liability for damages w ould exist absent the contract.” Id. at 36. Amerisure, relying on Gilbert , argu e d t h a t the contractual-liability exclusion applied “because Ewing c o ntractually undertook the obligation to construct tennis courts in a good and workmanlike m anner and thereby assumed l iability for damages if the const r uction did not meet that standard.” Id. E w ing, distinguishing Gilbert , argued that its “agreement to construct the courts in a good and workmanlike manner d[id] not e n l a rge its obligations beyond any general common-law d uty it might have,” namely “the obligation it ha[d] under general law t o c omply w ith the contract’s terms and to

9 Case: 11-10166 Document: 00512679295 Page: 9 Date Filed: 06/27/2014exercise ordinary care in d oing so.” Id. The Texas S upreme Court agreed with

Ewing. Id. The court first n oted that “TMISD’s claim that Ewing failed to perform in

a goo d a nd workmanlike manner and its claims that Ewing negligently
pe rf o r m e d u n d e r th e contracts [were] s ubstantively the s ame” and then observed that Ewing “had a common law duty to perform its contract with skill and care.” Id. at 37. On this basis, the court held that “a general contractor who agrees to perform its construction i n a good and w orkmanlike manner, without more, does not enlarge its duty to exercise ordinary care i n fulfilling its contract” and “thus does not ‘assume liability’ for damages a rising o ut of its defective work so as to t rigger the Contractual Liability Exclusion.” I d. at 38. The Texas Supr e m e Court therefore a nswered the firs t c e r t ified question from this c ourt “no” and declined to address the second question. 1 I II. A. The district court did not err in concluding that Mid-Continent had demonstrated that the contractual-liability exclusion applies. T h e a rbitrator f o u n d in f

avor of the C rownovers, concluding that Arrow had breached the
express warranty t o repair contained in par a g r a p h 2 3 .1 o f the c ontract. That paragraph—which is virtually indistinguishable from the contract provision in Gilbert that the Texas Supreme C ourt d etermined “extend[ed] beyond Gilbert’s obligations under general law and incorprate[d] contractual standards to which Gilbert obligated itself,” see 327 S

. W

. 3 d at 122, 127—obligated Arrow to “promptly correct work

. . . failing to conform t o the requirements of the Contract Documents.” Whereas contractually agreeing to repair d amage resulting from

a f ailure to exercise reasonable care in performing the w ork or agreeing to

1 This court s ubs equently vacated the ord er o f t h e d is trict court granting s um m ary j u d gm ent in f

avor of Am eris ure on the ground that coverage w as exclud ed u n d e r t h e contractual- liability exclus ion and rem and ed the cas e to the d is t r i c t court f or f urther p roceed ings

. See Ew i ng Constr. C o. v . A m eri sure Ins. C

o. , 744 F. 3d 917, 917- 18 ( 5th Cir. 2014)

. 10 Case: 11-10166 Document: 00512679295 Page: 10 Date Filed: 06/27/2014pe r f

o r m work in a good and workmanlike manner would m irror a contractor’s duty under general l aw, see Ewing , 4 2 0 S.W.3d at 37-38; G ilbert , 327 S.W.3d at 127, contractually agreeing to repair d a mage resulting from a failure to comply with the requirements of the contract would not, s ee Gilbert , 3 27 S.W.3d at 127. We therefore conclude that M i d -Continent has demonstrated that the contractual-liability exclusion applies. In arguing t o the contrary, the Crownovers cite paragr a p h 14.4 of the construction contract, which states that “ [t]he Contra c t o r w arr a nts to the Owner

. . . that the Work w ill be free from defects not inherent in the quality required

or p ermitted, and that the Work will conform w ith the requirements o f the Contract Documents” and submit that this express warranty of workmanship is
equ i v a l e n t to the implied warranty of w orkmanship that already exists under Texas l a w. Under Gilbert , the contractual-liability e xclusion applie s only if Arrow “assumed” a duty in its contract with the Crownovers that i t d i d n o t already have under the law. H o w e v e r , t he Crownovers’ focus on whether paragrap h 14.4 involved an assumption of liability b eyond what Arrow would h av e been subject to under Texas law is m isplaced. A s M id-Continent poi n t s out, paragraph 14.4 was not the b asis for liability under the arbitration award. Rather, paragraph 23.1, w h i c h contains the “express warranty to repair,” was the provision that th e arbitrator decided that Arrow had breached. The Crownovers respond that paragraph 23.1 “merely states that Arrow must repair nonconforming work under paragraph 14.4” and that, therefore, a violation of paragraph 23.1 means that there was also a violation of paragraph 14.4. Howeve r , t h a t Arrow is liable under paragraph 23.1 does not automatically mean that it is liable under para gr a p h 14.4, e ven if under some circumstances, such as the instant case, the latter provision must be violated in order f or the former provision to be violated. This is so because paragraph 14.4 includes a warranty b y Ar r o w “ that the Work will c o nform with the requirements o f the C ontract Documents,” and paragr a p h 2 3

. 1 s t at e s th at Arrow

11 Case: 11-10166 Document: 00512679295 Page: 11 Date Filed: 06/27/2014“shall promptly correct Work rejected by the architect o r failing to conform to the

requirements of the Contract” (emphasis added). The a rbitrator indicated that she was not ruling on whether any other cla i m s w ere “barred by limitations,” which suggests that it i s possible that s he thought that the C r o wnovers had a viable c laim under paragraph 14.4 but that such a claim would nonetheless f ail because it was b arred by the statute of limitations. A s such, her determination that Arrow w a s l i able u n der paragraph 23.1 does not require a determination that Ar r o w must have also been liable under paragraph 14.4. M oreover, a builder may violate paragraph 14.4 b y doing non-conformi n g work, but the failure to promptly correct such w ork as required by paragraph 23.1 is a separate violation of the contract. 2 Amicus Texas Association of Builders (“TAB”) argues th a t a p p lying the contractual-liability exclusion here renders another e xclusion a n d its corresponding exception, which are part of CGL contracts, m eaningless. TAB refers t o the “Your Work” exclusion, under which insurance does n ot cover “‘property damage’ to ‘your work’ arising out o f it or any part of it and included in the ‘products-completed operations hazard.’” The exception to this exclusion provides for coverage “if the damaged work o r the work out of which the damage arises was performed on your behalf by a subcontractor.” Here, subcontractors

were involved in the work on th e f oundation of the Crownovers’ home. TAB argues that a p p l y ing the contractual-liability exclusion here would remove coverage when subcontractors caused the property da m a g e, even though the subcontractor exception to the “Your Work” e x c l usion should bring the Crownovers’ claim back under coverage.

2 In their rep ly brief, the Crow novers s ugges t, f or the f irs t tim e and w ith little analys is , that in agreeing to p aragrap h 23. 1, Arrow d id no t a s s um e any obligation it d id not alread y have und er Texas law

. “We need not ad d res s this argum ent, as it is rais ed f or the f irs t tim e in a rep ly brief.” E. g. , M edi na Cnty. Env tl

. Acti on A ss’n v . Surf ace Tra nsp . Bd. , 602 F. 3d 687, 702 ( 5th Cir. 2010) )

. N onetheles s , p aragr a p h 2 3

. 1 p a rallels the p rovis ion that the G i l bert court held cons tituted an exclus ion. 327 S. W. 3d at 127. 12 Case: 11-10166 Document: 00512679295 Page: 12 Date Filed: 06/27/2014H o w eve r, this argument assumes that the b asis for liability h e r e p e rt ai n e d

to the work done initially by the subcontractors on the Crownovers’ home. Yet the arbitrator held Arrow liable for failing t o repair , per paragraph 23.1, not for the work done initially. Thus, the “Your Work” e xclusion a nd the subcontractor

e x c e p tion would not apply in this case. Accordingly, we conclude that M i d

Continent has demonstrated that the contractual liability exclusion applies. B. Because Mid-Continent has demonstrated that a contractual-liability exclusion applies, th e burden shifts to the Crownovers to establish that an exception to that exclusion applies. Gilbert , 327 S.W.3d at 124. They h ave failed to do so. The Crownovers a rgue that the exception to the contractual-liability exclusion for “liability

. . . [t]hat the insured would have i n t h e ab s e n c e of the contract or agreement” applies and that, therefore, Mid-Continent still has the duty to indemnify. Specifically, they contend that under Gilbert , the district court should have l ooked beyond the arbitration award. If the district court had done so, they r eason, i t w o u ld have d etermined that Arrow was liable for breaching not only the express warranty of go od w orkmanship under paragraph 14.4, but also th e implied warranty of good workmanship, which is identical in substance to the express warranty, but with a longer statute of limitations. Relatedly, they argue that the di s tri c t c o u rt c o ntr avened Texas law in concluding that the express w a rranty of good workmanship contained in Arrow’s construction contract with the Crownovers superseded any implied warranty of the same. These arguments a re unavailing. First, Gilbert does not permit us to look beyond the a rb i t r a t i o n award. “[I]t is well settled that a claim based on a contract that provides indemnification from liability d o es not a ccrue until the [insured’ s ] l iability becomes fixed and certain.” 327 S.W.3d at 134 (internal quotation marks omitted). “[T]he duty to i ndemnify arises f r o m p roven,

13 Case: 11-10166 Document: 00512679295 Page: 13 Date Filed: 06/27/2014adjudi c a t e d facts.” Hartrick v. Great A m. Lloyds Ins. Co. , 62 S.W.3d 270, 275

(Tex. Ct. App. 2001). The Gilbert court explained: As modified by th e . . . e x c e p tion, the e xclusion precludes th e insurer’s li ability f

or indemnity if the insured is obligated to pay only because of its contractually a ssumed l iability. I f the insured’s liability is because o f an otherwise covered basis in addition to its contractually-assumed liability , the

. . . exception brings the claim back into coverage. 327 S.W.3d at 134 (emphasis added). Thus, the e xc eption applies only if Ar r o w is l iable t o the C rownovers “because of an otherwise covered basis in addition to its contractually-assumed liability.” Id. Here, the only ground on which the arbitrator awarded damages to the C rownovers was the breach o f the express warranty to repa i r c ontained in paragraph 23.1, which was part of Arrow’s contractually assumed l iability. Furthermore, the Crownovers’ a rgument on this point depends on the premise t h a t the arbitrator awarded damages based on p a ragraph 14.4 and, as previously explained, she did not. Accordingly, the e xception does not apply. See id. at 134 (“Gilbert ass e r t s no other basis for its settlement than the breach of contract claim; thus, Gilbert’s settlement payment for which it seeks indemnity simply was not a liability for damages it had apart from its c ontract with DART, as it must have been in order for the . . . exception to apply.”). Additionally, the C rownovers’ argument fails beca use the implied warranty of good workmanship was superseded by the express warranty of good workmanship. In Beucher , the Texas Supreme Court h as held that “the parties’ agreement may supersede the implied standard for workmanship [and thus] the implied warranty o f good workmanship may be disclaimed by the parties when their a greement p rovides f or the manner, performance or quality of the desired const r u c t i on.” 9 5 S.W.3d at 274-75. The Crownovers h ave failed to articulate any reason why the express warranty here fails to meet this requirement.

14 Case: 11-10166 Document: 00512679295 Page: 14 Date Filed: 06/27/2014IV.

Finally, the Crownovers argue that the district c ourt erred i n granting

summ a r y j u d g m ent by: (1) b asing its decision on a rejection of the implied

warra n t y o f g o od workmanship; and (2) failing to give the Crownovers time to file a response, or a motion for leave to file a response, to Mid-Continent’s surreply regarding this issue. We disagree. A. The district court did not impermissibly base its d ecision on a rejection of the implied warranty of good workmanship. Both parties moved for summary judgment and each b riefed all issues related to coverage, exclusions to coverage,

a n d e xceptions to exclusions. The Crownovers raised the implied war r a n t y o f good workmanship in their briefing. Th at the district court agreed with MidContinent’s analysis on that issue i s n o t comparable to granting summary judgment on a ground of which the n on-movant had no notice. Se e Lozano v. Ocwen Fed. Bank, FSB , 489 F .3d 636, 6 41 (5th Cir. 2007) (noting that the nonmovant must be “on n o tice to present a rguments” o n each claim in their response to a summary judgment motion). Accordingly, the district court did not “grant
summary judgment sua sponte on grounds not requested by the moving party.’” B a k e r v. M

etro. Life Ins. Co. , 364 F .3d 624, 632 (5th Cir. 2004) (inter n a l quotation marks omitted). B. The Cro w n o v e r s cite no authority for reversing the grant of summary judgment based o n the district court’s r efusal to p r ovide th em an o pportunity to respond to Mid-Continent’s arguments regarding the implied warranty of good

w o rkmanship. Moreover, a s we have now fully considered the Crownov e r s ’ arguments on this point, and conclude that they lack merit, any alleged error by the district court here is harmless. CONCLUSION For the foregoing reasons, w e AFFIRM the judgment of the district court.

15 Case: 11-10166 Document: 00512679295 Page: 15 Date Filed: 06/27/2014