* Pursuant to the 5TH CIR. R. 47.5, the court has determined that this

opinion should not be published and is not precedent except under li mited

circumstances set forth in 5TH CIR. R. 47.5.4.

1 United States Court of Appeals

Fifth Circuit



## FILED

October 11, 2005

Charles R. Fulbruge III

Clerk IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 05-20050

Summary Calendar

LEXINGTON INS. CO.,

Plaintiff - Counter-Defendant -

Appellee - Cross-Appellant,

versus

EDUCARE COMMUNITY LIVING CORP.-GULF COAST, ET AL,

Defendants,

EDUCARE COMMUNITY LIVING CORP.–GULF COAST,

Defendant - Counter-Claimant -

Appellant - Cross-Appellee.

Appeal from the United States District Court

for the Southern District of Texas

USDC No. H-02-2822

Before HIGGINBOTHAM, BENAVIDES, and DENNIS, Circuit Judges.

PER CURIAM: *

Defendant, Educare Community Living Corporation–Gulf Coast

(“Educare”) appea ls the summary judgment in favor of Plaintiff,

Lexington Insurance Company (“Lexington”), the judgment declaring

that Lexington has no duty to indemnify Educare for the remaining

$1,500,000 that Educare paid in partial fulfillment of a settlement2

agreement. Lexington cross-appeals the denial of attorney’s fees.

Educare was sued as a result of one of its employee’s alleged

sexual assau lt of a resident in an Educare group home. Educare

Employees DeLaCerda and Elvenia Hackett were implicated in claims

for negligent hiring and negligent supervision and training. The

parties settled the underlying lawsuit, Lexington contributing

$1,000,000 to the settle ment in accordance with the primary

policy’s maximum commercial general liability coverage. However,

the primary policy contained two coverage parts: commercial general

liability (“CGL”) and medical professional liability (“MPL”).

Pursuant to t he MPL coverage of the primary policy and to a nonwaiver, reservation of rights agreement entered int o between

Educare and Lexington prior to the se ttlement, Educare seeks

indemnification for the amount it paid in satisfa ction of the

settlement agreement. The crucial question on appeal, therefore,

is whether the negligent supervision claim in the underlying

l awsuit falls within the MPL coverage included in the primary

policy, requiring Lexington to indemnify Educare for the additional

$1,500,000 that Educare paid in settlement. Additionally,

Lexington appeals the denial of attorney’s fees.

I.

S ummary judgment is appropriate if no genuine issue of

material fact exists and the moving party is entitled to judgment1 See Fed. R. Civ. P. 56.

2 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

3 See Prejean v. Foster, 227 F.3d 504, 508 (5th Cir. 2000).

4 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 253 (1986).

5 I d

. at 255; Cabillo v. Cavender oldsmobile, Inc., 288 F.3d 721, 725 (5th

Cir. 2002).

6 Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005).

7 Am. Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir 2001).

3 as a matter of law. 1 Under F E D .R.C IV .P. 56(c), the moving party

bears the initial burden of “informing the district court of the

basis for i ts motion, and identifying those portions of [the

record] which it believes demonstrate the absence of a genuine

issue of material fact.” 2 When the moving party has met its Rule

56(c) burden, the nonmovant cannot survive a motion for summary

judgment by resting on the mere all egations of its pleadings. 3

“The mere existence of a scintilla of evidence in support of the

plaintiff’s position will be insufficient; there must be evidence

on which the jury could reasonably find for the plaintiff.” 4 In

deciding a summary judgment motion, the court reviews the facts

drawing all r easonable inferences in the light most favorable to

the nonmovant. 5 This court reviews a grant of summary judgment d e

novo , applying the same standard as the district court. 6

Texas rules of contract inter pretation control in this

diversity case concerning disputed language in an insurance

policy. 7 In a coverage dispute, the primary concern of the court8 Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.

1983).

9 Puckett v. U.S. Fire Ins. CO., 678 S.W.2d 936 (Tex. 1984).

10 N. Am. Shipbuilding, Inc. v. S. Marine & Aviation Underwriting, Inc.,

930 S.W.2d 829, 834 (Tex. Ct. App. 1996).

11 Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).

12 Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994).

4 is to give effect to the intentions of the parties as expressed by

the policy language. 8 The court gives the terms used in the policy

their plain, ordinary meaning unless the policy itself shows that

the parties intended the terms to have a d ifferent, technical

meaning. 9 The court must “consider the policy as a whole and

interpret it to fulfill [the] reasonable expectations of the

parties in light of customs and use s of the industry.” 1 0 When

considered as a whole, a contract is am biguous only if “it is

reasonably susceptible to more than on e meaning.” 1 1 Although a

court will construe ambiguities in an insurance contract against

the insurer and in favor of coverage, “not every difference in the

interpretation of a contract or an insurance policy amounts to an

ambiguity.” 12

A.

The language of the insurance policy is clear. The MPL

covered amounts that Edu care become legally obligated to pay as

“damages resulting from a medical incident arising out of

professio nal services.” The MPL defined a “medical incident” as

“any act, error or omission in the providing o f or failure to1 3 Additionally, the MPL provisions excluded coverage “for any actual,

alleged, attempted, or proposed erotic physical contact, or any sexual abuse or

harassment” and contained a “separation of insureds” clause. The primary policy

limited insurance to $1,000,000 per “each medical incident.”

5 provide professional services.” 1 3 The MPL defined “professional

services” as follows:

1. Medical, surgical, dental, nursing or other

he alth care services including but not limited to

the fu rnishing of food or beverages in connection

with such services; the practice of nuclear

medicine; the furnishing or dispensing of drugs or

medical, dental or surgical supplies or appliances;

or the handlin g or treatment of deceased human

bodies, including autopsies, organ donation or

other procedures;

2. Services by any person as a member of a formal

accreditation, standards review or similar

professional board or committee of any Insured; or

3. Supervising, teaching, proctoring others at

your request.

On appeal, Educare argues that the negligent training

and supervision of its employee qualifies as falling within

the “supervising, teaching, and proctoring” prong of the

professional services definition, resulting in coverage

under the MPL. This assertion, however, wholly removes the

phrase from the list in which it is enumerated and from the

context which that list provides–-namely, professional

hea lthcare. The very title of the coverage, “Medical

Professional Liability,” suggests that coverage depends on

providing professional medi cal care. All of the examples

of services enumerated in part 1 of the definition require14 Cochran v. B.J. Services Co. USA, 302 F.3d 499, 502 (5th Cir. 2002)

(stating “[i]nsured professionals, such as engineers...ordinarily carry special

insurance separate from the CGL policy to cover obligations arising from the

rendering of professional services”).

6 some specialized education or expe rience. Furthermore,

part 2 requires some special accreditation. Though urging

a broad interpretation of the language “other health care

services” found in part 1, Educare does not argue that the

rel evant employees are covered by parts 1 or 2 of the

definition. If we were to accept Educare’s view of

coverage under part 3 , all of Educare’s employees, simply

by virtue of being trained or supervi sed in a group home

environment, would qualify for coverage under the MPL part

of the policy, irrespective of the employee’s level of

participation in providing healthcare. This cannot be

true.

Interpreting the policy as a whole, it is clear that

the MPL excludes the trainin g and supervision of an

employee not possessing the type of skills set forth in

parts 1 or 2 of the definitio n. After all, this is the

purpose of MPL coverage, to supplement non-professional CGL

coverage. 14 Therefore, when read in context, the

supervision and teaching must be for healthcare services--

p r ofessional in nature–-demanding either specialized

knowledge, such as that required to perform the enumerated

tasks in part 1, or recognized training, such as that15 I d

. In an appeal from the Western District of Louisiana, a supervisory

exclusion within the definition of professional services was deemed not to

preclude coverage where an insured was injured merely by removing a cement head

from an oil rig because the nature of the work did not constitute a professional

service, which would require “special insurance.” The pol icy defined

professional services as: “1. The preparing, approving, or failure to prepare or

approve maps, shop drawings, opinions, report s, surveys, field orders, change

orders or drawings and specifications; and 2. Supervisory, inspection,

architectural, or engineering activities.” Id

.

16 B ig Town Nursing Homes v. Reserve Ins. Co., 492 F.2d 523, 525 (5th Cir.

1974); Guaranty Nat’l Ins. Co. v. North River Ins. Co., 909 F.2d 133, 137 (5th

Cir. 1990) (applying same definition).

17 Duncanville Diagnostic Ctr. v. Atlantic Lloyd’s Ins. Co., 875 S.W.2d

788, 790-91 (Tex.App.-E astland 1994), reh’g denied (Though holding that a

professional services exclusion from coverage in a CGL policy was inapplicable

to a radiological technician who administered a lethal dose of a chemical to a

7 required by part 2. In affirmation, this court previously

has interpreted a coverage exclusion for supervisory

act ivities contained within a detailed definition for

professional services to require specialized training. 15

Moreover, whe n not expressly defined in such a way

that purports to vary the customary usage of the term, the

accepted m eaning of professional services, according to

both Fifth Circuit and Texas state law, conforms to this

inter pretation of the professional services definition in

the present case. This Court has defined professional

healthcare services as not “a purely physical act ion in

response to a business determination, but rather the

exercise of a trained judgment in obedience to an

established medical policy.” 1 6 Likewise, Texas courts

define “professional services” as requiring specialized

education and knowledge. 1 7 These customary definitions dopatient, Dunca nville l imited “professional services” to those applying

specialized education and knowledge, as well as predominantly intellectual rather

than physical skills.)

.

18 The D uncanville lawsuit included claims of negligence, as well as the

failure to adequately hire, train, and supervise the medical center's employees

and the failure to institute adequate policies and procedures at the center. S ee

Duncanville Diagnostic Ctr.

, 875 S.W.2d at 788. The court determined that

without the rendering of negligent medical services, the other negligence claims

could not follow. Id

.

8 not singularly inform b ut, rather, stand to buttress the

conclusion that the parties contracted for coverage related

to professional medical treatment.

B.

The rec ord demonstrates that the training of and

supervision by the Educare employees named in the

underlying lawsuit did not involve professional services as

defined by the instrument, ther eby precluding coverage

under the MPL part of the ins urance policy. 1 8 Neither

DeLaCerda nor his supervisor Elve nia Hackett had any

specialized medical education or experience. DeLaCerda was

hired as a night-time “program technician,” a position that

req uired a high school diploma or equivalent, a valid

driver’s license with an acceptable driving record, and a

demonstration of competency on the one-week new emp loyee

orient ation that included a thirty-minute introduction to

mental retardation. No state license was required. The

program administrator for Educare described the night-shift

program t echnician’s duties as typically not involving19 Duncanville Diagnostic Ctr., 875 S.W.2d at 790-91 (Though actual

diagnosis of medical conditions certainly rises to the level of professional

service, “to the ext ent the acts involved in this case did not require the

exercise of professional medical judgment, the acts were nonetheless an intricate

part of the professional medical services provided by the Center.”); Employers

Reins. Corp. v. Newcap Ins. Co., 209 F.Supp.2d 1184, 1197-98 (D.Kan. 2002)

(distinguishing Duncanville

, stating that security guards who enforced hospital

policy by calling a dispatcher upon recognizing a health em ergency were not

intimately involved in providing health care services).

9 resident con tact, except in the case of emergency. 1 9 The

job required cleaning and home maintenance duties and

visually verifying that the residents were sleeping safely.

Moreover, DeLaCerda was not allowed to perform medical

tasks or even hand a pill to a resident; therefore, he was

not even remot ely involved in administering any type of

professional medical care. The evidence on record does not

create a question of fact; DeLaCerda’ s employment duties

with Edurcare did not qualify as “professional services” as

defined in the insurance policy.

The claims against Educare in the underlying

lit igation also alleged the negligent supervision and

training of DeLaCerda’s supervisor Elvenia Hackett.

Hackett, a residential director, obtained a G.E.D. and had

attended both a business program and a cosmetology school

prior to her employment with Educare. In addition to the

same one-week orientation that DeLaCerda attended, she also

received one week of on-the-job t raining, which included

sit ting in on interviews and familiarization with the20 See B ig Town Nursing Homes

, 492 F.2d, 5 25 (recognizing a distinction

between medical and administrative activities for the purposes of distinguishing

between professional and non-professional services but concluding that the facts

of the case did not support a finding that a nurse’s restrai ning of a patient

constituted administrative activity).

21 Consequently, we do not reach other arguments against coverage raised

by Lexington.

10 paperwork involved in the administration of a group home. 20

Hac kett was responsible for the grocery and household

supply shopping, for staffing, and for interacting with the

residents’ guardians. She was not, however, allowed to

perform any medical tasks, such as distributing medication

to a resident. Thus, Hackett was not responsible for

providing professional services.

The record before this Court, v iewed in light most

fa vorable to Educare, does not raise a genuine issue of

material facts regarding DeLaCerda and Hackett’s provision

of professional services as required by the MPL part of the

insurance policy. We agree with the district court that

Educare is not entitled to indemnification for the

additional $1,500,000 it paid in satisfac tion of the

settlement agreement. 21

II.

Lexington also cross-appeals the district court’s

rejection of its claim for attorney’s fees under its

written agreement with Educare.22 Boudreaux, 402 F.3d at 540.

23 See Lockette v. Greyhound Line s

, Inc., 817 F.2d 1182, 1185 (5th Cir.

1987).

24 Texas Commerce Bank Nat’l Ass’n v. Capital Bancshares, Inc., 907 F.2d

1571, 1575 (5th Cir. 1990).

11 Again, this court reviews a grant of summary judgment

de novo

, applying the same standard as the district court. 22

Of course, state law governs construction of the

agreement. 23 For diversity cases, attorney's fees awards

are also governed by state law. 24

Lexington and Educare entered into an agreement

preserving rights and possibly for reimbursement. Two

separate paragraphs provided for re covery of fees in

litigation in the event of any overpayment during

settlement. Paragraph five provided that any party funding

more than its share of the settlement would be reimbursed

with interest and r easonable attorney’s fees. Paragraph

nine provided that “[t]he successful party shall be

entitled to recover its reasonable and necessary attorney’s

fees incurred in connection with this coverage dispute

between the Parties incurred from t he effective date of

this agreement through final resolution.” The agreement

did not define the term “successful party.”

Again, extricating a single clause from the whole

instrument, Lexington now argues that it is the successful12

party under paragraph nine and is, therefore, entitled to

atto rney’s fees. However, the instrument, as read in its

entirety, requires that the successful party prevail in an

action for reimburseme nt of funds paid in excess of its

share. Paragraph nine states that “[t]he successful party

shall...recover...attorney’s fees incurred in con n ection

with this cov erage dispute”–-not in connection with any

coverage dispute (emphasis added). Lexington did not

overpay in the present case and is not entitled to any

reimbursement pursuant to the non-waiver agreement.

Therefore, as the district court concluded, attorney’s fees

cannot be sustained by the non-waiver agreement.

AFFIRMED