IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 11-10142

MID-CONTINENT CASUALTY CO.,

Plaintiff-Appellant

v.

ROGER DAVIS d/b/a DAVIS CONSTRUCTION, 

Defendant-Appellee

GLORIA SERRATO, Individually and as personal representative of the

Estate of Jorge Serrato; ET AL.,

Intervenors-Defendants-Appellees

Appeal from the United States District Court

for the Northern District of Texas

Before GARZA, DENNIS, and HIGGINSON, Circuit Judges.

HIGGINSON, Circuit Judge:

Appellant Mid-Continent Casualty Company (“Mid-Continent”) appeals

the district court’s final judgment that Mid-Continent has a duty to indemnify

Davis Construction in the underlying wrongful death action brought by the

family of decedent Jorge Serrato (“Serrato”). We AFFIRM the district court’s

ruling, finding that the district court did not abuse its discretion in determining

that Serrato was an independent contractor and not an employee of Davis

Construction.

United States Court of Appeals

Fifth Circuit

F I L E D

June 8, 2012

Lyle W. Cayce

Clerk

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FACTS AND PROCEEDINGS

In June 2007, decedent Serrato fell through a hole on the second floor of

a construction site where he was working as part of a framing crew for Davis

Construction and eventually died from the fall. Davis Construction, owned by

Roger Davis, was in the business of framing buildings (typically residential) and

obtained jobs by bidding on projects with general contractors. Roger Davis or

Bill Ritchie would hire crew members for projects Davis Construction was

awarded. Davis Construction worked on one job at a time and, therefore, only

used one crew. Typically, Davis Construction’s crew consisted of four people in

addition to Ritchie, who served as a supervisor, and the four workers on the crew

often remained the same for years. During the month of Serrato’s accident, the

four workers on the Davis Construction crew were Vidal Negrete, Eduardo

Negrete, Hector Sanchez, and Jorge Serrato.

Following the accident, the Serratos filed a wrongful death, survival, and 1

personal injury action (the “Underlying Lawsuit”) against Davis Construction

andTommy Richie Construction,LLC. Mid-Continent Casualty Company (“MidContinent”) sued Roger Davis d/b/a Davis Construction, seeking a declaratory

judgment that Mid-Continent had no duty to indemnify Davis Construction in

the UnderlyingLawsuit becauseSerrato was an employee of Davis Construction. 

The Serratos filed a motion to intervene in the Mid-Continent action, and the

district court granted that motion.

Intervenors Gloria Serrato, Cornejo Lopez de Serrato, and Jose Benjamin de Serrato

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seek at least $5 million in damages for Serrato’s wrongful death, at least $5 million for

Serrato’s survival damages, and at least $5 million in exemplary damages in this underlying

lawsuit.

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At the time of Serrato’s accident, Davis Construction had a Commercial

Lines Policy, issued by Mid-Continent under policy number 04-GL000660872

with an effective policy period from January 24, 2007 to January 24, 2008 (the

“Policy”). The Policy contained two relevant coverage exclusions to which the

Policy does not apply:

d. Workers’ Compensation and Similar Laws

Any obligation of the insured under a workers’ compensation,

disability benefits or unemployment compensation law or any

similar law.

e. Employer’s Liability

“Bodily injury” to:

(1) An “employee” of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of that insured’s

business . . . .

Mid-Continent claims that because Serrato was an employee of the insured,

Davis Construction, exclusions “d” and “e” of the Policy apply to exclude coverage

for losses resulting from the Underlying Lawsuit.

The district court conducted a bench trial and issued a nine-page

Memorandum Order and Opinion making findings of fact and conclusions of

law. The following day, the district court signed its final judgment, declaring

that Serrato was an independent contractor—not an employee of Davis

Construction—and, therefore, Mid-Continent has a duty to indemnify Davis

Construction in the Underlying Lawsuit.

STANDARD OF REVIEW

In an appeal from a district court’s final judgment following a bench trial,

we review the district court’s findings of fact for clear error and review

conclusions of law de novo. Dickerson v. Lexington Ins. Co., 556 F.3d 290, 294

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(5th Cir. 2009). Under this standard, “[w]here there are two permissible views

of the evidence, the factfinder’s choice between them cannot be clearly

erroneous.” Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985). 

The determination of whether an individual is an employee or an

independent contractor is a conclusion of law to be reviewed de novo. Rodriguez

v. Sarabyn, 129 F.3d 760, 765 (5th Cir. 1997). However, “[f]indings on the

Limestone factors themselves” are factual determinations and, therefore, are

reviewed for clear error. Amerisure Ins. Co. v. Navigators Ins. Co., 445 F. App’x

756, 759 (5th Cir. 2011) (unpublished); cf. Brock v. Mr. W. Fireworks, Inc., 814

F.2d 1042, 1044 (5th Cir. 1987).

DISCUSSION

The issue before us is whether the district court erred in concluding that

Mid-Continent had a duty to indemnify Davis Construction because Serrato was

an independent contractor and not an employee of Davis Construction.2

When jurisdiction is based on diversity of citizenship, as it is in this case,

we apply the substantive law of the forum state “in an attempt to rule as a

[forum state’s] court would if presented with the same issues.” Musser Davis

Appellees alternatively argue that even if the district court erred in its legal 2

conclusion that Serrato was an independent contractor and not an employee, Mid-Continent

is nonetheless estopped from denying that Serrato was an independent contractor based on

evidence that Davis Construction detrimentally relied on Mid-Continent’s representations

with respect to the characterization of Davis Construction’s workforce. Appellees cite: (1) the

yearly audit summaries Davis Construction received from Mid-Continentfor the policy periods

between January 24, 2003 and January 24, 2008 which state, “[t]he insured has no employees;

contractor labor is utilized for the construction work,” and (2) the Policy itself which states,

“[t]he insured has no employees; contractor labor is utilized for the construction work.” The

district court did not address this estoppel argument in its Memorandum and Opinion, and

because we affirm the district court’s legal conclusion that Serrato was an independent

contractor, we need not reach Appellees’ estoppel argument.

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Land Co. v. Union Pac. Res., 201 F.3d 561, 563 (5th Cir. 2000). Therefore,

because the forum state here is Texas, we apply the Texas definition of

“employee” and “independent contractor” in our analysis.

In Texas, determining whether an individual is acting in the capacity of

an “independent contractor” or as an “employee” requires assessment of the

amount of control the employer exerts or has the right to exert over the

“progress, details, and methods of operations of the work.” Limestone Prod.

Distrib. Inc. v. McNamara, 71 S.W.3d 308, 312 (Tex. 2002). The Texas Supreme

Court set forth the following five factors to assess whether a worker is an

employee or independent contractor:

(1) the independent nature of the worker’s business; (2) the worker’s

obligation to furnish necessary tools, supplies, and material to

perform the job; (3) the worker’s right to control the progress of the

work except about final results; (4) the time for which the worker is

employed; and (5) the method of payment, whether by unit of time

or by the job.

Id. at 312. Importantly, “the legal test for determining independent-contractor

status in Texas is right to control, not comparison of control.” Id.

The district court, after conducting a trial on the merits during which

testimony was heard from five witnesses about who controlled Serrato’s fate,

held that Serrato was an independent contractor and not an employee of Davis

construction based on an analysis explicitly applying the five factors laid out by

the Texas Supreme Court in Limestone. We examine the district court’s analysis

of each of the five Limestone factors, reviewing each of these factual

determinations for clear error. Amerisure, 445 F. App’x at 759.

Considering the first Limestone factor, “the independent nature of the

worker’s business,” the district court acknowledged that this factor “does very

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little to shed light on . . . Davis’ right to control the crew’s work,” and MidContinent concedes that the district court’s analysis of this factor “was

inconclusive.” See Limestone, 71 S.W.3d at 312. On the one hand, the district 3

court found that Davis “does not have control over whether the crew members

work for other framing crews or even run their own framing business.” On the 4

other hand, the district court also found that, “Jorge Serrato and the other crew

member’s business does not appear to be independent in nature.” Because the

district court’s findings are mixed, we consider the first Limestone factor to be

neutral, supporting neither a finding that Serrato was an employee nor a finding

that Serrato was an independent contractor.5

We find unpersuasive Mid-Continent’s argument that the district court’s finding, 3

based on the testimony of Davis, Ritchie, and Mid-Continent auditor Lyle Whitsett, that the

industry standard treats members of a framing crew as independent contractors “is influenced

by an erroneous view of the law and is, therefore, entitled to no deference.” Appellants cite

an unpublished district court case, Caballero v. Archer, No. SA-04-CA-561-OG, 2007 WL

628755, at *4 (W.D. Tex. Feb. 1, 2007), as support for their argument that an industry

standard should not be considered. The district court in Caballero, however, gave no weight

to the testimony of a retained expert whose opinions were “based on his own interpretation

of industry standards or trucking practices . . . .” Caballero, 2007 WL 628755, at *4. Here,

by contrast, the industry standard evidence came from the testimony of Mid-Continent’s own

auditor, who testified that, in his experience, most home building businesses, such as Davis

Construction, use contract labor, not employees. Therefore, the district court’s consideration

of Mid-Continent’s auditors’ adverse statements regarding industry standards, which also

serve to illuminate the expectations that Mid-Continent had when it agreed to insure Davis

Construction, was not an error.

This factual finding is supported by testimony that crew leader Bill Ritchie had a side

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business framing and building homes. Also, crew-member Vidal Negrete testified that he

worked for “a lot” of other people, including “some of [his] own work,” during the ten years he

also worked with Davis Construction “because sometimes we work not all of the time [for

Davis].”

Mid-Continent contends that the district court’s finding, listed under the 5

“Background” section of its Memorandum Opinion and Order, that, “[m]ost of the workers

have framing experience when Davis Construction hires them to be on the crew” is clearly

erroneous. Because the district court does not discuss this point in its analysis of the first

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The district court found that, “[t]he second Limestone factor, ‘the worker’s

obligation to furnish necessary tools, supplies, and material to perform the job’

weighs heavily in favor of finding that Jorge Serrato was an independent

contractor.” Though framing crew member Vidal Negrete testified that Davis

Construction provided some of the tools to the crew members, he also testified, 6

both before and after his single statement that Davis provided some tools, that:

(1) the compressors used by the crew in 2007 belonged to either him or Ritchie;

(2) that Serrato had his own nail gun, saw, and hand tools; and (3) that Davis

did not provide any tools to Serrato. Similarly, Ritchie testified that: (1) he had

a compressor that the other crew members would use; (2) “everybody has got a

compressor;” and (3) that most workers had their own nail guns, but if they did

not, they would “be a cut man instead of a nail man or something of that nature.” 

Crew member Hector Sanchez testified that he and his fellow crew members had

their own tools or borrowed them from other crew members. Finally, in his 7

Limestone factor, we need not address it here.

While testifying about the work that was being done in 2007, the year of Serrato’s 6

accident, Vidal Negrete was asked, “[s]ome of the tools that were being used were furnished

by the company?” Vidal Negrete responded, “[t]hat is right.” We have not found and MidContinent does not point to any other evidence in the record that shows Davis provided tools

to crew members.

Q: Mr. Sanchez, did Vidal have tools in his truck for the workers 7

 to use who didn’t have their own tools?

A: You see, normally it is our tools. We put it in the truck just so

that we don’t have to carry it around ourselves.

Q: Did everyone have their own compressor?

A: Not compressor but, you know, like the gun or the saw, yes.

Q: Did everyone have their own nail gun?

A: Yes.

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deposition, Davis stated, “[t]he guys furnish all their hand tools, that’s nail guns,

they’ve got—they carry their own compressors and everything.”8

At oral argument, Mid-Continent contended that the district court’s

finding that, “there is no evidence that Davis or Davis Construction ever

provided any of the crew members with tools” (emphasis added) was clearly

erroneous. We agree that this particular factual finding is clearly erroneous 9

because, as discussed above, there was a statement by Vidal Negrete that Davis

Construction provided some tools to crew members. However, considering the

inherent inconsistency of Vidal Negrete’s testimony, coupled with the testimony

from crew members and Davis himself that shows Davis did not provide tools for

the crew, the district court did not clearly err in finding that the evidence overall

showed that Davis did not provide tools to the crew members and that Davis

Construction crew members either provided their own tools or borrowed tools

from other crew members. Moreover, the district court did not err in any of the

other factual findings it made in its analysis of the second Limestone factor.

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Davis continued to explain that no other tools were needed: “[t]o build a house, you 8

need a nail gun and a compressor and some nails and that’s it.” Later, Davis reiterated, “[t]he

guys that work out there. Each one has got their own set of tools.”

Mid-Continent failed to make this argument in any of its briefing to this court, but 9

we nonetheless address this argument because this factual finding is included in the district

court’s analysis of the second Limestone factor and therefore necessary to a review of the

district court’s factual finding regarding that factor.

Davis’ testimony supports the district court’s finding thatthough crew members were 10

not responsible for providing materials for the jobs, Davis Construction also did not have

ultimate responsibility for providing materials. A general contractorwould sometimes request

that Davis or Ritchie place an order for necessary materials, such as wood, but the general

contractor retained ultimate responsibility for provision of and payment for materials. In a

factually similar case, Anchor Cas. Co. v. O.E. Hartsfield, 390 S.W.2d 469 (Tex. 1965), where

the general contractor furnished materials needed for the job, the court did not discuss that

fact as weighing in favor of either a finding that Hartsfield was an employee or an independent

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Therefore, we conclude that the district court did not err in its ultimate factual

finding that the second Limestone factor weighs in favor of a determination that

Serrato was an independent contractor. 

The district court held that the third Limestone factor, “the worker’s right

to control the progress of the work except about final results,” also supported

finding that Serrato was an independent contractor and not employee of Davis

Construction. See Limestone, 71 S.W.3d at 312. The freedoms that the district

court correctly lists to support its third Limestone factor analysis—that the crew

members were free to choose when to start and stop work each day and decided

among themselves which particular task each worker would perform and the

ways in which tasks were to be completed—are supported by evidence in the

record. See id. (finding that a worker’s ability to set his own hours supports a

finding that the worker was an independent contractor); Anchor Cas., 390

S.W.2d at 471 (same). In his deposition and at trial, Ritchie testified that: (1)

the crew members, not Davis, divided up who does what on the job site; (2) that

though the crew members generally worked eight-hour days, they set their own

hours and "they showed up when they showed up." Similarly, Davis testified at

trial that: (1) he did not set work hours for the crew; (2) he did not keep track of

the actual hours each crew member worked; (3) he did not assign crew members

particular tasks; and (4) he "primarily just want[ed] them to do the job and get

it done." Finally, Vidal Negrete testified at trial that: (1) the crew members, not

contractor and ultimately held that a worker for the subcontractor was an independent

contractor. Id. at 470–71 (holding that Hartsfield was an independent contractor of

subcontractor Wolff where Hartsfield was an experienced finish carpenter who furnished his

own tools, set his own hours, was paid by the job, and was not carried on the social security

or income tax withholding rolls of Wolff).

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Davis, set their work start and stop times and (2) that Davis did not assign tasks

to the crew members.

Mid-Continent argues that Davis Construction, not Serrato or the other

crew members, controlled the progress of the work because Davis tried to come

by the job site once a day to check on the work and supervisor Ritchie reported

to Davis daily on the progress being made on the job. However, Davis did not

control each step of the progress of the job; instead, he only made sure that the

work was being done according to blueprints, identified any problems with the

work and asked that they be corrected, and tried to speed up the work if it was

progressing too slowly. See Limestone, 71 S.W.3d at 313 (holding that where

evidence establishes that employer “merely controlled the end sought to be

accomplished” and the worker “controlled the means and details of

accomplishing the work,” the worker was an independent contractor).

The district court found that the fourth Limestone factor, “the time that

the worker is employed,” supported a finding that Serrato was an independent

contractor because Serrato was “employed for two week time periods several

times over the course of approximately eighteen months.” See id. at 312. The

district court’s factual findings that support its analysis of this factor—that crew

members were only employed by Davis Construction for the time that it takes

to complete one job and that there was no guarantee that Davis would hire a

crew member for the next job or that there will even be a next job—are

supported by testimony at trial. Davis testified at trial that the crew members

only get paid if they are working a job, stating, “[i]f they don’t work, no, sir, there

is no pay.” Moreover, the evidence shows that one crew member, Eduardo

Negrete, worked for Davis Construction for three or four years, but not

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continuously, and “left in 2008 and all when work got slow.” Eduardo Negrete

later returned to working for Davis.

Mid-Continent argues that the fact that Ritchie had worked continuously

for Davis Construction for seventeen years and Vidal Negrete for eight years

when Serrato’s accident occurred in 2007 supports a finding that Serrato and the

other crew members were employees. However, a long-term relationship does

not necessarily mean that relationship is employer-employee. See id. at 310

(holding that a driver who had worked for the same entity for more than three

years was an independent contractor). More importantly, Serrato, the subject

of the district court’s analysis, had only been working for Davis Construction for

approximately eighteen months to two years prior to his June 2007 accident. 

Therefore, we cannot say that the district court clearly erred when it credited

testimony that the fourth Limestone factor supported a finding that Serrato was

an independent contractor.

Finally, the district court found that the fifth Limestone factor, “the

method of payment, whether by unit of time or by the job,” weighed strongly in

favor of finding that Serrato was an independent contractor. See id. at 312. The

district court found that: (1) the amount of time each crew member was

employed and the amount each crew member was paid depended on the job; (2) 11

Davis did not withhold any social security, federal withholding taxes, or

Medicare from the payments he made to crew members; (3) Davis did not pay

the State of Texas unemployment taxes based on compensation being paid to the

crew members; and (4) Davis issued each crew member a 1099 at the end of the

As the district court correctly noted from Davis’ testimony at trial, Serrato was paid 11

between $300 and $400 per week.

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year. These findings, supported by evidence in the record, support a

12

determination that the fifth Limestone factor weighs in favor of finding that

Serrato was an independent contractor. See id. at 312–13 (holding that the

worker was an independent contractor where the worker’s income was reported

on a 1099 form instead of a W-2 and the worker paid his own social security and

federal income taxes); Anchor Cas., 390 S.W.2d at 471 (holding that the fact that

the worker was not on the social security and income tax withholding rolls of the

subcontractor helped establish the worker was an independent contractor).

Mid-Continent argues that the district court erred in its fifth Limestone

factor analysis because there is testimony in the record from crew members

Vidal Negrete and Hector Sanchez that they were paid at an hourly rate. 

However, there is also ample conflicting testimony from Davis and Ritchie that

crew members were not paid hourly and were, instead, paid a weekly rate, which

varied based on the job, and was the same rate regardless of how many hours

they actually work each week. Therefore, because there is conflicting evidence 13

Notably, Davis testified that he was audited by the IRS in 1993 and the IRS did not 12

at that time question his classification of the members of the framing crew as independent

contractors. Davis also testified that his CPA never questioned him about his classification

of the framing crew members.

Ritchie testified that: (1) the amount of money he was paid per week “changed per 13

job;” (2) that “[e]very job pays differently. There is more money is some jobs than there is

other jobs, and if a job are [sic] larger, more complex, they pay more, you know;” and (3) that

the amount he was paid was the same regardless of the number of days he worked in a

particular week. Davis testified at trial that he calculated the crew members’ pay, which was

by the week, in the following manner: “It is more or less when I bid a job, as I put in my

deposition, that I about know what it takes in labor costs to build that house up to 12 days,

and so I break it down that way due to their experience and everything,” an explanation he

repeated later during his testimony. When Davis was asked again about the crew members’

pay, he stated, “it is based on the bid of the job . . . .” Davis explained that the crew members

“would be compensated by the amount of the money I was able to draw from the builder for

the amount of work that was done.” Davis also testified at trial that the weekly rate he paid

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in the record, the district court did not err by giving more weight to the

testimony of Davis and Ritchie and finding that Davis Construction framing

crew members were paid by the job. See Halliburton v. Texas Indem. Ins. Co.,

213 S.W.2d 677, 679–81 (Tex. 1948) (holding that workers’ calculation of their

pay in order to receive a certain hourly rate did not make them employees when

the majority of other evidence presented weighed in favor of finding workers

were independent contractors).

In sum, the facts of this case may be analogized to the facts of Limestone,

where the Texas Supreme Court held that summary judgment evidence

established that Mathis, a distributer, was, as a matter of law, an independent

contractor. 71 S.W.3d at 313. In Limestone, Coy Mathis had been an employee

of Limestone Products for a long period of time when Limestone Products

changed his designation to an independent contractor, including changing his

tax documentation from a W-2 to a 1099 form. Id. at 310. Mathis had been

working for Limestone for more than three years as both an employee and then

as an independent contractor when his accident occurred. Id. The court found

that Mathis was an independent contractor because he provided his own tools

(including his truck); paid his own insurance, social security and federal income

taxes; no longer received workers’ compensation coverage from Limestone;

received a 1099; and had considerable discretion regarding the details of his

work and how to complete it. See id. at 312–13. Similarly, here, Serrato

provided his own tools (or borrowed them from other crew members); did not

have social security or federal income taxes withheld; was issued a 1099 (not a

W-2)from Davis Construction; was not provided workers’ compensation coverage

crew members did not vary based on the actual number of hours worked per week.

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from Davis Construction; and had discretion over the details of how his work

was to be completed.

The district court did not abuse its discretion because, as discussed above,

there is evidence in the record to support the factual findings the district court

made that four of the five Limestone factors, the remaining factor being

inconclusive, weigh in favor of the conclusion that Serrato was an independent

contractor and not an employee of Davis Construction. 

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s final judgment

that Mid-Continent has a duty to indemnify Davis Construction in the

underlying wrongful death action brought by the family of decedent Serrato,

based on a conclusion that Serrato was an independent contractor. 

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