IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

GENESIS INDEMNITY INSURANCE §

COMPANY, §

 §

Plaintiff-counterdefendant,§

 §

 § Civil Action No. 3:04-CV-1052-D

VS. §

 §

TUDOR INSURANCE COMPANY, §

 §

Defendant-counterplaintiff.§

MEMORANDUM OPINION

 AND ORDER 

In this insurance coverage dispute concerning which insurer is

liable for funds paid to defend and settle a wrongful death suit,

the disposition of the cross-motions for summary judgment turns on

whether it can be determined from the record in the underlying suit

whether one insured party was covered as an additional insured

under another policy. Concluding there are genuine issues of

material fact that preclude summary judgment for either insurer,

the court denies both motions.

I

In November 2000 Statewide Patrol, Inc. (“Statewide”) was

hired as a security and courtesy patrol at Melody Village, an

apartment complex in Dallas, by the complex’s owners and operators,

Texas Melody Apartments, L.P., Texas Melody Properties Corporation,

and Southwest Housing Management, Inc. (collectively, “Melody

Apartments”). In December Osvaldo A. Torres (“Torres”), a

Statewide security guard, was shot and killed while working at

 

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1

Iturralde v. Statewide Patrol, Inc., No. 01-09068-J (191st

Dist. Ct., Dallas County, Tex.).

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Melody Village. A wrongful death action——“the Iturralde Suit1——was

filed in Texas state court. The plaintiffs alleged that Torres’

death was caused by the negligence of both Melody Apartments and

Statewide and that the plaintiffs were entitled to recover from

Melody Apartments under a theory of “Third Party

Beneficiary/Fraud/Conspiracy” arising from its agreement to

indemnify Statewide for Statewide’s negligence in providing

security services to Melody Apartments. 

During the relevant period, Melody Apartments was insured by

plaintiff-counterdefendant Genesis Indemnity Insurance Company

(“Genesis”) under a commercial general liability (“CGL”) insurance

policy (“Genesis Policy”). The Genesis Policy contained an Other

Insurance clause that provided, in relevant part:

4. Other Insurance

If other valid and collectible insurance is

available to the insured [Melody Apartments]

for a loss we [Genesis] cover . . . , our

obligations are limited as follows:

. . .

b. Excess Insurance

This insurance is excess over . . . 

. . .

(2) Any other primary insurance available to

you covering liability for damages arising out

of the premises or operations for which you

 

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2Because in litigating these cross-motions the parties have

filed multiple appendixes, the court will refer to each appendix

according to the party who filed it and the date it was filed.

3Tudor referred specifically to “Southwest Housing

Management,” P. July 1, 2005 App. 111, which is one of the

entities that the court includes in the collective term “Melody

Apartments.”

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have been added as an additional insured by

attachment of an endorsement.

P. July 1, 2005 App. 44.2

Defendant-counterplaintiff Tudor Insurance Company (“Tudor”)

insured Statewide under a CGL policy (“Tudor Policy”). Tudor also

insured Melody Apartments under the Tudor Policy as an additional

insured. The Additional Insured Endorsement of the Tudor Policy

provided, in relevant part: “Coverage is provided for such

‘additional insureds’ only to the extent that liability is created

for such ‘additional insureds’ by the negligent acts, errors, or

omissions of the Named Insured.” Id. at 81. Applied to the

instant case, coverage under the Tudor Policy was provided for

Melody Apartments, as an additional insured, if liability for

Melody Apartments was created by the negligent acts, errors, or

omissions of Statewide.

In the Iturralde Suit Genesis provided Melody Apartments a

defense. Tudor issued a reservation of rights letter in which it

indicated that, although Melody Apartments3 might qualify as an

additional insured under the Tudor Policy, Tudor was reserving its

rights. The Iturralde Suit settled for $73,000, of which $12,000

 

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4

The $12,000 portion of the settlement to be paid by or on

behalf of Statewide is not at issue in this lawsuit. 

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was to be paid by or on behalf of Statewide and $61,000 was to be

paid by or on behalf of Melody Apartments.4 Tudor and Genesis

split evenly Melody Apartments’ payment obligation, each paying

$30,500. 

Genesis then filed the instant suit seeking recovery of its

$30,500 payment, attorney’s fees and costs in defending the

Iturralde Suit, and attorney’s fees and costs incurred in

litigating the present case. Genesis alleges that because Melody

Apartments was an additional insured under the Tudor Policy, the

Other Insurance clause of the Genesis Policy makes Genesis’

insurance coverage excess, and the Tudor Policy provides primary

coverage for Melody Apartments’ liability. Under Genesis’ theory,

Tudor was obligated to defend and indemnify Melody Apartments;

Genesis had neither a duty to defend nor to indemnify because its

coverage was excess and Tudor did not exhaust its policy limits in

settling the Iturralde Suit.

Tudor removed the case to this court and filed a counterclaim.

It seeks a declaratory judgment that, in the Iturralde Suit, Tudor

and Genesis were co-insurers of Melody Apartments under the

Additional Insured Endorsement of the Tudor Policy (i.e., Tudor

contends it is not the primary insurer), and that its participation

in the Iturralde Suit on a 50% basis and contribution of 50% of the

 

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5Tudor’s motion is for partial summary judgment. For

convenience, the court will refer to it throughout this opinion as

a motion for summary judgment.

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settlement funds was proper.

Tudor and Genesis have filed cross-motions for summary

judgment.5

II

After the instant motions were briefed, the court sought

additional briefing concerning whether it has subject matter

jurisdiction. Genesis seeks in this litigation to recover its

$30,500 payment in the Iturralde Suit, $29,076.49 in attorney’s

fees and expenses that it expended in that lawsuit, and attorney’s

fees and expenses incurred in the present suit. The court raised

the question whether the requirement of 28 U.S.C. § 1332——that the

matter in controversy must exceed the sum or value of $75,000,

exclusive of interest and costs——is satisfied. If Genesis cannot

recover its attorney’s fees in prosecuting this lawsuit, it is

doubtful that the amount in controversy exceeds the jurisdictional

minimum. 

“[A]ttorney fees are includ[a]ble in computing the

jurisdictional amount if the plaintiff may recover them as an

element of damages, either pursuant to a governing statute or under

the district court’s equitable power to award fees.” 14B Charles

A. Wright et al., Federal Practice and Procedure § 3702, at 89-93

(3d ed. 1998). Genesis filed this suit in Texas state court

 

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seeking declaratory relief under the Texas Declaratory Judgment Act

(“TDJA”), Tex. Civ. Prac. & Rem. Code Ann. §§ 37.001-37.011 (Vernon

1997). Because the TDJA is a procedural rule that does not apply

in federal court, the federal Declaratory Judgment Act, 28 U.S.C.

§§ 2201-2202, governs the court’s determination of attorney’s fees.

See Landscape Design & Constr., Inc. v. Transport Leasing/Contract,

Inc., 2002 WL 257573, at *10 (N.D. Tex. Feb. 19, 2002) (Fitzwater,

J.). The federal Declaratory Judgment Act “‘does not by itself

provide[ ] statutory authority to award attorney’s fees that would

not otherwise be available under state law in a diversity action.’”

Utica Lloyd’s of Tex. v. Mitchell, 138 F.3d 208, 210 (5th Cir.

1998) (quoting Mercantile Nat’l Bank v. Bradford Trust Co., 850

F.2d 215, 218 (5th Cir. 1988)). Moreover, the “otherwise available

state law in a diversity case must be substantive.” Id. (internal

quotation marks and ellipsis omitted). In Utica the Fifth Circuit

concluded that “a party may not rely on the [TDJA] to authorize

attorney’s fees in a diversity case” in federal court. Id. 

In addition to its declaratory judgment claim, Genesis seeks

attorney’s fees “as a result of Tudor’s breach of contract pursuant

to § 38.001 et seq. of the Tex. Civ. Prac. & Rem. Code.” Compl.

¶ 17. Under Texas law, attorney’s fees are available under Tex.

Civ. Prac. & Rem. Code Ann. § 38.001 (Vernon 1997). See, e.g., Am.

Home Assurance Co. v. United Space Alliance, LLC, 378 F.3d 482, 492

(5th Cir. 2004). The question presented is whether Genesis can

 

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recover attorney’s fees under § 38.001, even if they are not

available under the TDJA.

In response to the court’s directive, the parties have

submitted a joint brief in which they maintain that Genesis has

alleged that it was equitably and legally subrograted to the rights

of the underlying insureds. Joint Br. 1. They urge that because

Genesis asserts a breach of contract action as subrogee, it may be

entitled to attorney’s fees under § 38.001. Id. The parties do

not address Genesis’ earlier characterization of its complaint as

one for declaratory judgment. Indeed, Genesis does not appear to

be requesting a declaratory judgment as that term has traditionally

been understood, because it seeks to recover monetary damages from

Tudor. See 10 Charles A. Wright & Arthur R. Miller, Federal

Practice and Procedure § 2751, at 457-58 (3d ed. 1998) (describing

declaratory judgments to “permit[ ] actual controversies to be

settled before they ripen into . . . a breach of contractual duty”)

(emphasis added)). Nevertheless, because Genesis may be entitled

to recover its attorney’s fees under § 38.001(8), the court

concludes that it has subject matter jurisdiction because the

amount in controversy exceeds the sum or value of $75,000,

exclusive of interest and costs. The court will therefore reach

the merits of the parties’ cross-motions for summary judgment.

 

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6

Tudor’s motion for summary judgment seeks recoupment of its

$30,500 payment on behalf of Melody Apartments to settle the

underlying litigation. The court will address this claim in § IV.

7Because in litigating these cross-motions the parties have

filed multiple briefs, the court will refer to each brief according

to the party who filed it and the date it was filed.

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III

Because the parties’ cross-motions present related arguments,

the court will, with one exception,6

 consider them together.

A

 Tudor concedes that the Additional Insured Endorsement of the

Tudor Policy provided coverage for Melody Apartments to the extent

liability was “created for” Melody Apartments by Statewide’s

negligent acts, errors, or omissions. It contends, however, that

“because the [Iturralde Suit] did not allege that Melody Apartments

should be held liable for [Statewide’s] negligent acts, errors, or

omissions, and because Melody Apartments as a legal matter could

not have been thus held liable,” Melody Apartments’ liability was

not created by covered activity. D. June 29, 2005 Br. 6 (emphasis

omitted).7 Tudor argues that because the Tudor Policy provides no

coverage to Melody Apartments in these circumstances, the Other

Insurance clause of the Genesis Policy is inapplicable and does not

make Genesis’ coverage excess to Tudor’s.

Genesis contends that Tudor has admitted that Melody

Apartments was insured under the Additional Insured Endorsement of

the Tudor Policy and that Tudor is barred from contending

 

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8

It is well settled, of course, that in Texas “the duty to

defend and to indemnify are distinct and separate duties creating

distinct and separate causes of action.” Am. Alliance Ins. Co. v.

Frito-Lay, Inc., 788 S.W.2d 152, 153 (Tex. App. 1990, writ dism’d

w.o.j.). The duty to defend is “broader than the duty to

indemnify.” E&L Chipping Co. v. Hanover Ins. Co., 962 S.W.2d 272,

274 (Tex. App. 1998, no pet.). “The duty to defend arises when a

third party sues the insured on allegations that, if taken as true,

potentially state a cause of action within the terms of the

policy.” St. Paul Guardian Ins. Co. v. Centrum GS Ltd., 283 F.3d

709, 713 (5th Cir. 2002) (internal quotation marks omitted). By

contrast, the duty to indemnify is triggered by the actual facts

establishing liability in the underlying suit. Quorum Health Res.,

L.L.C. v. Maverick County Hosp. Dist., 308 F.3d 451, 468-69 (5th

Cir. 2002); see also Enserch Corp. v. Shand Morahan & Co., 952 F.2d

1485, 1493 (5th Cir. 1992) (observing that even if insurer breaches

duty to defend, it is not in all respects estopped from challenging

duty to indemnify). 

Genesis maintains that Tudor had a duty to defend Melody

Apartments in the Iturralde Suit because “Tudor’s insurance was

primary.” P. July 1, 2005 Br. 4; see also P. July 1, 2005 App. 45

(Genesis Policy provides that “[w]hen this insurance is excess, we

will have no duty under Coverages A or B to defend [Melody

Apartments]”). It does not contend, however, that Tudor had a duty

to defend Melody Apartments in the Iturralde Suit apart from its

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otherwise. It also maintains that the language of the Additional

Insured Endorsement is ambiguous and must be construed in favor of

coverage for Melody Apartments. Finally, Genesis posits that Texas

law regarding premises liability triggers Melody Apartments’

liability for Statewide’s negligence within the meaning of the

Additional Insured Endorsement. Id. It concludes that the Other

Insurance clause of the Genesis Policy applies because the Tudor

Policy provides primary coverage to Melody Apartments.

In sum, both parties’ contentions turn on whether Tudor owed

a duty to defend and/or indemnify Melody Apartments under the

Additional Insured Endorsement of the Tudor Policy.8

 

 

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obligation to indemnify Melody Apartments. In other words, Genesis

does not assert that Tudor had an independent duty to defend Melody

Apartments arising from the allegations in the Iturralde Suit.

Indeed, Genesis and Tudor both focus solely on the question whether

Melody Apartments is covered by the Tudor Policy. In this case,

the court cannot resolve on summary judgment whether Tudor had a

duty to indemnify, and the parties premise Tudor’s duty to defend

on its duty to indemnify. Accordingly, the court also declines to

resolve on summary judgment the duty to defend, where neither party

addresses the duties separately. 

Alternatively, even if the court could conclude at this

juncture that Tudor had a duty to defend Melody Apartments based on

the allegations of the Iturralde Suit, it could not grant partial

summary judgment for Genesis concerning the attorney’s fees and

costs it incurred in defending Melody Apartments in that case.

This is because the court cannot say that only Tudor, and not

Genesis, had a duty to defend. See, e.g., Utica Nat’l Ins. Co. of

Tex. v. Tex. Prop. & Cas. Ins. Guar. Ass’n, 110 S.W.3d 450, 458

(Tex. App. 2001) (holding that where multiple insurers have duty to

defend, neither must pay all defense costs because they share duty

until one has either exhausted its policy limits or is declared

impaired), rev’d on other grounds sub nom. Utica Nat’l Ins. Co. of

Tex. v. Am. Indem. Co., 141 S.W.3d 198 (Tex. 2004) (on rehearing).

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B

The court turns first to Genesis’ contention that Tudor has

admitted that Melody Apartments is an additional insured under the

Tudor Policy. This argument is logically considered as a threshold

question because, if correct, it is dispositive of Tudor’s duty to

indemnify Melody Apartments.

In its initial brief in support of its own summary judgment

motion and in its brief in opposition to Tudor’s motion, Genesis

relies on Tudor’s pleadings to argue that Melody Apartments is not

covered under the Tudor Policy. See P. July 1, 2005 Br. 3

(“Tudor’s pleadings admit its status as an insurer.”). The only

pleading that Genesis cites in its initial brief, however, is one

 

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page from Tudor’s answer and counterclaim in which Tudor admits

that it and Genesis were co-insurers of Melody Apartments and that

Tudor was a co-insurer under a limited additional insured

endorsement. See id. (citing P. July 1, 2005 App. 116). This

assertion is consistent with the one made in Tudor’s motion for

summary judgment, which forms the basis for the argument that the

Tudor Policy provided no coverage. See D. June 29, 2005 Br. 1-2.

Except to this limited extent, Tudor does not, as Genesis contends,

admit that the underlying defendants were covered under the Tudor

Policy. In its responsive brief, Genesis argues that Tudor’s

admission that it is a co-insurer precludes Tudor from denying

coverage. See P. July 19, 2005 Br. 3 (“By admitting liability as

a co-insurer of [Melody Apartments] on several occasions, Tudor is

barred from taking an inconsistent position that its insurance did

not cover [it].”). This assertion misunderstands Tudor’s

conception of “co-insurer.” Throughout Tudor’s briefing, it

characterizes itself as a co-insurer with Genesis of Melody

Apartments under the terms of a limited additional insured

endorsement that it maintains was never triggered. In other words,

it concedes that it was contractually bound to cover Melody

Apartments under the terms of the additional insured endorsement,

but it consistently denies that it was factually obligated to do

so. Tudor has not judicially admitted that it was obligated to

indemnify Melody Apartments in connection with the claims of the

 

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Iturralde Suit.

Genesis urges in a surreply brief that Tudor has “already

judicially admitted that the underlying defendants qualify as

additional insureds under its policy.” P. Aug. 25, 2005 Br. 6. It

contends that “there is no need for the Court to consider whether

or not the underlying defendants are covered, Tudor is estopped

from taking an inconsistent position that the underlying defendants

are not covered, and therefore coverage should be extended to the

underlying defendants as a matter of law.” Id. Genesis relies on

language contained in Tudor’s reservation of rights letter, in

which Tudor stated that “[i]t appears that [Melody Apartments]

will, in fact, qualify as an additional insured under the . . .

Additional Insured Endorsement.” See P. July 1, 2005 App. 111; see

also id. at 111-113. The court rejects Genesis’ contention. 

A reservation of rights letter “protects an insurer from a

subsequent attack on its coverage position on waiver or estoppel

grounds.” Tex. Ass’n of Counties County Gov’t Risk Mgmt. Pool v.

Matagorda County, 52 S.W.3d 128, 133 (Tex. 2000) (internal

quotation marks omitted). The reservation of rights letter fully

and unambigously informed Genesis that

by participating in [Melody Apartments’]

defense under this letter’s terms, Tudor is

reserving its rights. The reasons for this

reservation of rights are (1) the limiting

language of the Tudor policy’s Additional

Insured Endorsement as set out and explained

above . . . . Neither by . . . settling . . .

[nor] participating in defense . . . does

 

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9Although both parties’ contentions turn on whether Tudor owed

a duty to indemnify Melody Apartments for its liability in the

underlying litigation, neither party mentions this duty. 

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Tudor waive the right to deny coverage under

its policy.

P. App. 112. Accordingly, Tudor is not now estopped from denying

coverage on the ground that Melody Apartments’ liability does not

fall within the Tudor Policy’s coverage.

C

The question whether Tudor owed a duty to indemnify Melody

Apartments is determined by examining the actual facts establishing

liability in the underlying suit. See Quorum Health Res., L.L.C.

v. Maverick County Hosp. Dist., 308 F.3d 451, 468-69 (5th Cir.

2002) (“The duty to indemnify arises from the actual facts that are

developed to establish liability in the underlying suit.”); Trinity

Univ. Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997) (“The duty

to indemnify is triggered by the actual facts establishing

liability in the underlying suit.”).9 The “duty to indemnify

requires facts, and factual allegations in a petition do not

necessarily all become facts merely because of a settlement of the

suit.” W. Alliance Ins. Co. v. N. Ins. Co. of N.Y., 176 F.3d 825,

831 (5th Cir. 1999). Moreover, the insured initially bears the

burden of proving coverage by presenting facts sufficient to

demonstrate coverage, whereas the insurer bears the burden of

establishing that a policy limitation excludes coverage. Id.

 

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1 

Because Genesis will have the burden at trial of establishing

facts that entitle it to coverage, to prevail on its motion for

summary judgment it “must establish ‘beyond peradventure all of the

essential elements of the claim[.]’” Bank One, Tex., N.A. v.

Prudential Ins. Co. of Am., 878 F. Supp. 943, 962 (N.D. Tex. 1995)

(Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190,

1194 (5th Cir. 1986)). Conversely, because Tudor will not have

this burden at trial, it may be able to show that it is entitled to

summary judgment by pointing the court to the absence of evidence

to support Genesis’ claim. See Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986). If Tudor does so, Genesis must then go beyond its

pleadings and designate specific facts showing there is a genuine

issue for trial. See id. at 324; Little v. Liquid Air Corp., 37

F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). Summary

judgment is mandatory when the nonmoving party fails to meet this

burden. Little, 37 F.3d at 1076. 

2

To decide the cross-motions for summary judgment, the court

must principally determine whether the facts establish that

Statewide’s negligent acts, errors, or omissions created liability

for Melody Apartments. There may be cases where the allegations of

the underlying state-court petition alone permit the court to

decide this issue, such as where the court need only “compare the

 

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insurance contract with the complaint and determine as a matter of

law what portion of the damages were covered.” Enserch Corp. v.

Shand Morahan & Co., 952 F.2d 1485, 1494 (5th Cir. 1992). This

appears to be Tudor’s contention, i.e., that none of the

allegations in the Iturralde Suit asserts facts under which Tudor

could owe a duty to indemnify Melody Apartments. See D. June 29,

2005 Br. 5 (“Nowhere did any of the [Iturralde Suit] pleadings

allege that Melody Apartments should be held vicariously liable for

the acts of [Statewide].”); D. Aug. 2, 2005 Br. 8 (“[A]s a matter

of law [Melody Apartments] could not have been held liable in the

[Iturralde Suit] for [Statewide’s] acts.”). For reasons the court

will explain, this is not a case in which the allegations of the

Iturralde Suit enable it to decide whether Melody Apartments was

covered by the Tudor Policy.

The Iturralde plaintiffs alleged that Statewide itself was

negligent, inter alia, for failing to train its employees, provide

on-the-job support, and provide necessary safety equipment. They

also asserted that Melody Apartments was negligent, inter alia, in

failing to evict drug dealers and other criminals, provide security

measures and adequate lighting, and act as a reasonable and prudent

owner or manager of an apartment complex. Finally, and

significantly, the Iturralde plaintiffs alleged a “Third Party

Beneficiary/Fraud/Conspiracy” claim against Melody Apartments on

the basis that it had agreed to indemnify Statewide “for any

 

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10The plaintiffs contended that, although Melody Apartments had

agreed to indemnify Statewide for injuries associated with

Statewide’s negligence, after Torres’ death, Melody Apartments and

Statewide fraudulently modified their contract to exclude the

indemnity provision and backdated the contract. The reservation of

rights letter Tudor sent to Genesis on April 7, 2003 also indicated

that the indemnity provision in the security services contract was

deleted upon amendment. The contract in the summary judgment

record for services beginning on December 4, 2000 in fact contains

an indemnity provision. Moreover, Tudor directs the court to this

indemnity provision without indicating that it had been amended.

And the court has been unable to locate in the summary judgment

record an amendment that deleted the indemnity provision. Neither

party has offered an explanation for this discrepancy.

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injuries, claims or damages associated with [Statewide’s]

negligence and in connection with providing security on the [Melody

Apartments’] premises.” D. June 29, 2005 App. 64. They alleged

that “Contractually, [Melody Apartments was] required to satisfy

any judgment obtained by Plaintiffs against Statewide, thereby

making Plaintiffs third-party beneficiaries to the Contract.

Accordingly, any and all liability and damages imposed upon

Statewide must be satisfied by [Melody Apartments].” Id. at 64-

65.10 As this claim was pleaded, the Iturralde plaintiffs sought

to establish that Melody Apartments was contractually liable for

Statewide’s negligence. Arguably, liability for Melody Apartments

was created by the negligent acts, errors, or omissions of

Statewide, albeit via the terms of an indemnity agreement. The

court must therefore reject Tudor’s contention that, based solely

on the allegations of the pleadings in the Iturralde Suit, it can

be determined that Melody Apartments is not an additional insured

 

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under the Tudor Policy.

Accordingly, the court must examine the actual facts that

established liability in the Iturralde Suit. Relevant facts may

include those regarding whether Statewide acted negligently and

whether such negligence created liability for Melody Apartments

under Texas contract or tort law. Other courts interpreting Texas

law have identified several possible “sources” that may help this

court in determining the pertinent facts: the allegations of the

petition in the Iturralde Suit, the settlement between Melody

Apartments and the Iturralde plaintiffs, and the facts that would

have been the subject of the Iturralde Suit had the case not

settled. See W. Alliance Ins. Co., 176 F.3d at 831; Enserch, 952

F.3d at 1494; Swicegood v. Med. Protective Co., 2003 WL 22234928,

at *14 (N.D. Tex. Sept. 19, 2003) (Fitzwater, J.). This court has

previously made an Erie prediction that the Texas Supreme Court

would allow new evidence to be introduced at the instant coverage

trial when such proof is necessary to resolve coverage questions

that were not determined in the underlying lawsuit. See Swicegood,

2003 WL 22234928, at *14 (denying in part cross-motions for summary

judgment where genuine issues of fact remained as to insurer’s duty

to indemnify). New evidence may likewise be necessary in this

case, and it may consist of historical evidence from the Iturralde

Suit and/or expert testimony to assist the trier of fact in

determining Tudor’s duty to indemnify. See id. at *15.

 

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The parties maintain that the instant case can be resolved

based on the court’s interpretation of the Additional Insured

Endorsement alone. In their June 21, 2005 joint scheduling

proposal, they indicate that “[t]here are almost certainly no

questions of fact that will need to be tried . . . .” Joint

Scheduling Proposal 1. Although the Additional Insured Endorsement

controls Melody Apartments’ ultimate entitlement to coverage,

neither party has sufficiently developed the record to permit this

court to decide, under the controlling summary judgment standard,

whether Tudor had a duty to indemnify Melody Apartments under the

Tudor Policy. Moreover, the principal case upon which Tudor relies

for the proposition that an additional insured’s liability fell

outside the scope of the policy’s coverage——BP Chemicals, Inc. v.

First State Ins. Co., 226 F.3d 420 (6th Cir. 2000)——was also a

coverage dispute that followed a state court settlement of a

wrongful death action. But significantly, the United States

District Court that presided over the ensuing insurance coverage

litigation conducted a jury trial to determine the relative

negligence of the state court defendants before it considered the

dispute over the scope of the additional insured endorsement at

issue. See id. at 423. The record in the present case has not yet

been as fully developed. 

The court thus concludes that this case does not turn on a

question that can be decided on motion for summary judgment.

 

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Because genuine issues of fact exist as to Tudor’s duty to

indemnify Melody Apartments in the Iturralde Suit, neither party is

entitled to summary judgment.

Moreover, once it is determined whether the Tudor Policy

affords coverage for Melody Apartments as an additional insured

and, in turn, whether the Tudor policy is primary, an apportionment

or allocation question may remain. Although the parties do not

address this issue, it should be noted that, even if Melody

Apartments is entitled to coverage under the Tudor Policy for

liability created for it by Statewide’s negligence, the plaintiffs

in the Iturralde Suit also alleged that Melody Apartments was

itself negligent. Neither party contends that the Tudor Policy

provides coverage for liability created for Melody Apartments by

its own negligence. Accordingly, there may remain issues of fact

concerning the sources of Melody Apartments’ liability, whether

created for it by Statewide’s negligence or through its own

negligence. See Swicegood, 2003 WL 22234928, at *5-*6

(interpreting Texas law to provide that apportionment or allocation

not made in underlying third-party litigation may be made in firstparty coverage case).

IV

Although the question whether Tudor is entitled to recoup its

$30,500 payment turns in part on the determination of its duty to

indemnify Melody Apartments, Genesis also opposes Tudor’s summary

 

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judgment motion on separate grounds. Genesis urges that Tudor was

required to, but did not, plead reimbursement as a theory of

recovery. See P. July 19, 2005 Br. 1. The court understands this

contention to be that, even if Tudor had no duty to indemnify

Melody Apartments, it nevertheless is not entitled to recover its

$30,500 payment.

Tudor requests by its counterclaim that the court “declare

that Tudor was a co-insurer rather than the primary insurer of

[Melody Apartments].” D. Countercl. ¶ 4. Its summary judgment

motion, however, requests that “Genesis take nothing and that Tudor

recover its 50% share of the settlement from Genesis.” D. June 29,

2005 Br. 7; see id. at 2 (seeking similar relief). The question

presented is whether Tudor’s request for reimbursement on summary

judgment is merely a form of relief or is instead a legal theory to

establish liability that must be pleaded. See S. Constructors

Group v. Dynalectric Co., 2 F.3d 606, 609-610 (5th Cir. 1993)

(concluding that because quasi-contract claim was not merely a form

of relief under Louisiana law, party was required to plead it). 

Fed. R. Civ. P. 54(c) “vests district courts with broad

discretion to fashion a remedy, even if the remedy awarded is not

specifically requested in the prayer for relief.” N. Alamo Water

Supply Corp. v. City of San Juan, Tex., 90 F.3d 910, 918 (5th Cir.

1996) (per curiam); see also Rule 54(c) (“[E]very final judgment

shall grant the relief to which the party in whose favor it is

 

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rendered is entitled, even if the party has not demanded such

relief in the party’s pleadings.” (emphasis added)); Int’l

Harvester Credit Corp. v. E. Coast Truck, 547 F.2d 888, 891 (5th

Cir. 1977) (“Rule 54(c) does permit or perhaps even requires the

trial judge to grant relief to which a party is entitled even if

not requested in the prayer for relief, but there are exceptions to

the rule.”). If the reimbursement Tudor seeks is merely a form of

relief, the court has the discretion to award it. If the

reimbursement is a legal theory, however, the court must decline to

award reimbursement on the basis that it has not as yet been

pleaded. See S. Constructors Group, 2 F.3d at 609-10 (concluding

theories of case not raised are waived); see also Cutrera v. Bd. of

Supervisors of La. State Univ., 429 F.3d 108, 113 (5th Cir. 2005)

(holding that “claim which is not raised in the complaint but,

rather, is raised only in response to a motion for summary judgment

is not properly before the court”). Moreover, this analysis

conforms with Rule 8(c), which requires parties to plead

affirmative defenses. See Rule 8(c) (“In pleading to a preceding

pleading, a party shall set forth affirmatively . . . any . . .

matter constituting an avoidance or affirmative defense.”). 

Because the court has determined that neither party is

entitled to summary judgment, it need not now resolve whether

Tudor’s reimbursement request is a form of relief or a legal

theory. If, for instance, it is ultimately determined that Tudor

 

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has a duty to indemnify Melody Apartments and that Statewide’s

negligence created the entirety of Melody Apartments’ liability,

Genesis’ contention that Tudor is not entitled to reimbursement is

potentially moot. In other words, Tudor’s entitlement to

reimbursement depends in part on whether it has the duty to

indemnify Melody Apartments. 

Moreover, under Rule 15(a), a party may amend its pleadings by

leave of the court, “and leave shall be freely given when justice

so requires.” Rule 15(a). In view of this standard, it would

appear that any pleading defect could be remedied well before the

case is tried, thus eliminating this issue from the case.

Genesis contends in the alternative that, if the court adopts

Tudor’s position that its policy did not cover Melody Apartments,

then its payment to settle the Iturralde Suit was voluntary, and

Tudor is barred from recovering the payment as a matter of law.

The court disagrees. Tudor made the payment subject to a

reservation of rights letter, which “protects an insurer from a

subsequent attack on its coverage position on waiver or estoppel

grounds.” Tex. Ass'n of Counties County Gov’t Risk Mgmt. Pool, 52

S.W.3d at 133 (internal quotation marks omitted). 

 

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* * *

For the reasons set out above, the court denies both Tudor’s

June 29, 2005 motion for partial summary judgment and Genesis’ July

1, 2005 motion for summary judgment.

SO ORDERED.

February 10, 2006.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

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