IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

B. HALL CONTRACTING INC. d/b/a §

HALL CONTRACTING SERVICES, §

§

Plaintiff, §

§

VS. § NO. 4:06-CV-050-A

§

EVANSTON INSURANCE COMPANY, §

§

Defendant. §

MEMORANDUM OPINION

and

ORDER

Before the court for decision are the motion of plaintiff,

B. Hall Contracting Inc. d/b/a Hall Contracting Services,

("Hall") for partial summary judgment and the motion of

defendant, Evanston Insurance Company, ("Evanston") for summary

judgment.

I.

Overview

This is an insurance coverage dispute. The parties seek

declaratory adjudications as to the rights of Hall and the

obligations of Evanston in regard to two state court lawsuits

under a liability insurance policy issued by Evanston to Hall. 

Hall maintains that Evanston has, and has had, an obligation to

defend Hall in the lawsuits and to satisfy on behalf of Hall any

liability that might be imposed on Hall to the plaintiffs in

those lawsuits. Evanston contends that it has no obligation to

defend Hall and will have no payment obligation. Each party has

moved for summary adjudication in its favor as to its basic

 

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1

The descriptions of the lawsuits are based on the most current

state court pleadings in the summary judgment papers--Plaintiffs'

Second Amended Petition and Defendant's First Amended Third-party

Petition in the UTA lawsuit and Plaintiffs' Original Petition in the

personal injury lawsuit.

2

Apparently Devin Hall, Floydell Hall, F. Hall Mowing Company,

and F. Hall, L.L.C., were subcontractors under Jamail on the

construction job in question who are unrelated to Hall, a separate

subcontractor.

2

contentions. The court has concluded that Evanston's motion

should be granted and Hall's denied.

II.

The State Court Litigation

The state court lawsuits arise from an incident that

occurred in October 2003 at the campus of the University of Texas

at Arlington ("UTA") when a structure on the campus was destroyed

by a fire, causing property damage to UTA, which is the plaintiff

in one of the lawsuits, and personal injuries to the two

individuals who are the plaintiffs in the other. A more complete

description follows1

:

A. The UTA Lawsuit.

The UTA lawsuit is pending in the District Court of Tarrant

County, Texas, 236th Judicial District, as Cause No. 236-214456-

05, styled "The University of Texas at Arlington and The

University of Texas System, Plaintiffs, v. Williams & Thomas,

Inc., D/B/A Jamail Construction, Defendant." Though not

reflected in the style, additional defendants are Hall, Devin

Hall and Floydell Hall, individually and d/b/a F. Hall Mowing

Company, and F. Hall, L.L.C.2

 

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UTA alleges that it entered into a contract with Williams &

Thomas, Inc., d/b/a Jamail Construction, ("Jamail") for the

demolition of a structure where UTA's main electrical switchgear

room was located and for the construction of a temporary

structure to protect the switchgear and utility tunnels so that

they would remain operational during the demolition. In October

2003 a fire destroyed the demolition site and the switchgear,

causing UTA to suffer damages in excess of $2,000,000. According

to UTA: 

An investigation revealed that an employee of

Defendant F. Hall Mowing subcontractor ("F. Hall") was

cutting metal pipe and released a spark, which ignited

the fumes from a roof adhesive and/or the roofing

materials from a EPDM membrane roof application being

done by another subcontractor, B. Hall Contracting,

Inc., ("B. Hall"). 

Pl.'s Br. in Resp. to Def.'s Mot. for Summ. J., App. at 69, ¶ 11

(emphasis added). 

Under the heading "Negligence Cause of Action," the

following allegations are made:

Defendants negligently constructed the temporary

housing for the switchgear, which resulted in a fire,

and the resulting destruction of the existing building

as well as the switchgear. In addition, Jamail, the

general contractor, failed in its duty to adequately

supervise the work of the Hall subcontractors. 

Further, both of the Hall subcontractors failed to

properly supervise their workers, allowing them to

continue their work in extremely close proximity to one

another.

Id. at 70, ¶ 17.

Jamail filed a third-party petition against Hall, Devin Hall

individually and d/b/a F. Hall Mowing Company, F. Hall, L.L.C.,

and Floydell Hall, d/b/a F. Hall Mowing Company, alleging that

 

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4

the fire occurred as a result of work being performed by the

third-party defendants. Jamail seeks contribution or indemnity

from the third-party defendants, alleging that:

[T]he occurrence and events made the subject of this

lawsuit, as well as all damages sustained thereby, were

proximately caused, contributorily caused, producingly

caused, in whole or in part, by the acts, omissions,

negligence, breach of contract, breach of warranty,

fault or other conduct on the part of the Third Party

Defendants . . . .

Id. at 76, ¶ 9.

In addition, Jamail seeks recovery (a) from Hall and F. Hall

Mowing Company based on their alleged failures to perform under

contracts between Jamail and those parties by which those parties

agreed to defend and indemnify Jamail with respect to claims or

losses arising out of or related to their performance of the work

that led to the fire, and (b) from all third-party defendants

based on their alleged failures to comply with agreements to

provide liability insurance coverage for Jamail so that Jamail

would be provided a full defense and indemnity with respect to

the claims asserted in the lawsuit.

B. The Personal Injury Lawsuit.

The personal injury lawsuit is pending in the District Court

of Tarrant County, Texas, 153rd Judicial District, as Cause No.

153-212299-05, styled "Tim Calhoun and Gustine Gaston,

Plaintiffs, v. B. Hall Contracting, Inc., and F. Hall Mowing

Company/F. Hall L.L.C., Defendants." Plaintiffs Calhoun and

Gaston allege that they were working with the defendants named in

the suit when the fire in question was negligently started by

 

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5

defendants on a roof at UTA, causing the plaintiffs to be injured

when they had to jump to the ground to avoid the fire.

III.

The Activities of Hall at the Site of the Fire

When the Fire Started

The sworn statement of Brett Hall, who is the president and

owner of Hall, provides an explanation of the operation in which

Hall was engaged, through a sub-subcontractor, when the fire

started.

Hall is a construction company that does, among other

things, building construction, office remodeling, fire

restoration, carpentry, roofing, and painting. It was working at

UTA under subcontract with Jamail. At the time of the fire, a

sub-subcontractor, Ramirez Roofing Service ("Ramirez"), was

finishing on behalf of Hall the installation of a roof on a

temporary structure that was being erected to protect switchgear

equipment located inside a larger building that was being

demolished by Jamail, acting through F. Hall, another Jamail

subcontractor.

The roof that was being installed by Hall, through Ramirez,

was a type of membrane roofing known as ethylene propylene diene

monomer, sometimes referred to as EPDM. Use of that type of

roofing product, which is flammable and is applied with a

flammable adhesive, was inappropriate considering the demolition

work being conducted over and around the surface where the roof

was being installed. Because of the demolition work, there was a

 

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3

The insurance policy contains two endorsements that name Jamail

as an additional insured under the policy. Evanston's Mot. for Summ.

J., App. at 42-43. However, those endorsements apparently are not

relevant to the disputes in this case because there does not seem to

be a contention that Evanston has any defense or payment obligation

related to Jamail's third-party claim against Hall that Hall failed

to provide liability insurance coverage for Jamail. Such a

contractual claim, if it had merit, clearly would be outside the

scope of the insurance coverage.

4

The defense-obligation wording of the insurance policy is

different from the wording found in most liability insurance

policies, in that it does not say that Evanston will "defend any suit

(continued...)

6

risk that embers or sparks from cutting torches would fall on the

roofing material, causing it to catch fire.

IV.

Pertinent Parts of the Insurance Policy

The insurance policy in question, which bears policy number

CL 420300372, was issued by Evanston to Hall, as the named

insured, covering the January 8, 2003, to January 8, 2004, time

period. It provided commercial general liability insurance

coverage to Hall.3

The insuring agreement of the policy obligates Evanston to

pay "those sums that the insured becomes legally obligated to pay

as damages because of 'bodily injury' or 'property damage' to

which this insurance applies." Evanston's Mot. for Summ. J.,

App. at 22. In addition, the policy imposes on Evanston the

"duty to defend the insured against any 'suit' seeking those

damages," id.; but, the policy goes on to say that "[h]owever, we

will have no duty to defend the insured against any 'suit'

seeking damages for 'bodily injury' or 'property damage' to which

this insurance does not apply," id.4 According to the insuring

 

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(...continued)

brought against [Hall] seeking damages, even if the allegations of

the suit are groundless, false or fraudulent." See, e.g., GuideOne

Elite Ins. Co. v. Field Road Baptist Church, No. 04-0692, 2006 WL

1791689, at *1 & *4 (Tex. June 30, 2006); American Physicians Ins.

Exch. v. Garcia, 876 S.W.2d 842, 846 (Tex. 1994); Argonaut Sw. Ins.

Co. v. Maupin, 500 S.W.2d 633, 634 n.1 (Tex. 1973); Heyden Newport

Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24-25 (Tex. 1965). 

See also C. T. Drechsler, Annotation, Allegations in third person's

action against insured as determining liability insurer's duty to

defend, 50 A.L.R.2d 458, 463-64 § 3 (1956). The language missing

from the insurance policy at issue here has played a role in

developing the "eight-corners or complaint-allegation rule" for

determining whether an insurance company has a duty to defend. See

GuideOne Elite Ins. Co., 2006 WL 1791689, at *2 & *4; 50 A.L.R.2d at

463-64 § 3.

5

The parties apparently are in agreement that the fire in

question was an "occurrence" as that term is used in the policy, that

the damages alleged in the UTA lawsuit are "property damage" within

the meaning of the policy, that the damages alleged in the personal

injury lawsuit constitute "bodily injury" damages within the meaning

of the policy, that the location of the structure that burned was in

the "coverage territory" as that term is used in the policy, and that

alleged injuries and damages occurred during the policy period.

7

agreement, the "insurance applies to 'bodily injury' and

'property damage' only if: (1) The 'bodily injury' or 'property

damage' is caused by an 'occurrence' that takes place in the

'coverage territory'; and (2) The 'bodily injury' or 'property

damage' occurs during the policy period." Id.5

The exclusions on which Evanston relies as precluding

coverage under the policy for the state court lawsuits are (1)

the Roofing Endorsement exclusion; (2) the Breach of Contract

Exclusion; (3) exclusions j.(5) and (6); and (4) the exclusion

contained in the Combination General Endorsement applicable to

bodily injury to any employee of an independent contractor or

subcontractor. Pertinent wording of these exclusions is set

forth below:

 

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(1) The Roofing Endorsement provides, in relevant part, as

follows:

The coverage under this policy does not apply to

"bodily injury," "property damage," . . . or any

injury, loss or damage arising out of:

***

3. Any operations involving any hot tar, wand,

open flame, torch or heat applications, or

membrane roofing;

Id. at 47 (emphasis added).

(2) The Breach of Contract Exclusion endorsement provides:

This insurance does not apply to claims for breach

of contract, whether express or oral, nor claims

for breach of an implied in law or implied in fact

contract, whether "bodily injury," "property

damage," "advertising injury," "personal injury"

or an "occurrence" or damages of any type is

alleged; this exclusion also applies to any

additional insureds under this policy.

Id. at 12.

(3) Exclusions j.(5) and (6) read as follows:

2. Exclusions

This insurance does not apply to:

***

j. Damage to Property

"Property damage" to:

***

(5) That particular part of real property on

which you or any contractors or

subcontractors working directly or indirectly

on your behalf are performing operations, if

the "property damage" arises out of those

operations; or

(6) That particular part of any property

that must be restored, repaired or replaced

 

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The Contractor Limitation Endorsement deletes an exception to

exclusion (j.) by providing in paragraph II that:

The last paragraph of Exclusions:

1. J. Damage to Property, and

. . .

[is] deleted in [its] entirety.

Id. at 13.

9

because "your work" was incorrectly performed

on it.

Id. at 24.6

(4) The pertinent part of the Combination General

Endorsement reads as follows:

8. If you are a contractor, builder or developer,

there is no coverage under this policy for:

* * *

(2) "Bodily injury," "personal injury" or

"property damage" sustained by any

independent contractor / subcontractor, or

any employee, leased worker, temporary or

volunteer help of same, unless a Named

Insured or employee of a Named Insured is on

site, at the time of the injury or damage,

and the Named Insured's actions or inactions

are the direct cause of the injury or damage,

or the injury or damage is directly caused by

an employee of the Named Insured.

Id. at 8. Though not relied on by Evanston as a basis of noncoverage, the wording of an endorsement titled "Employees of

Independent Contractors Endorsement" has relevance to the

interpretation of section 8.(2) of the Combination General

Endorsement. It reads:

The coverage under this policy does not apply to

"bodily injury," "property damage," "personal injury,"

"advertising injury," or any injury, loss or damge

 

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[sic] sustained by any employee of an independent

contractor contracted by you or on your behalf.

Id. at 17 (emphasis added).

V.

Analysis

A. Summary Judgment Standards.

A party is entitled to summary judgment on all or any part

of a claim as to which there is no genuine issue of material fact

and as to which the moving party is entitled to judgment as a

matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 247 (1986). The moving party has the initial

burden of showing that there is no genuine issue of material

fact. Anderson, 477 U.S. at 256. The movant may discharge this

burden by pointing out the absence of evidence to support one or

more essential elements of the non-moving party's claim "since a

complete failure of proof concerning an essential element of the

nonmoving party's case necessarily renders all other facts

immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 323-25

(1986). Once the moving party has carried its burden under Rule

56(c), the non-moving party must do more than merely show that

there is some metaphysical doubt as to the material facts. 

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S.

574, 586 (1986). The party opposing the motion may not rest on

mere allegations or denials of pleading, but must set forth

specific facts showing a genuine issue for trial. Anderson, 477

U.S. at 248, 256. To meet this burden, the nonmovant must

"identify specific evidence in the record and articulate the

 

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'precise manner' in which that evidence support[s] [its]

claim[s]." Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994). 

An issue is material only if its resolution could affect the

outcome of the action. Anderson, 477 U.S. at 248. Unsupported

allegations, conclusory in nature, are insufficient to defeat a

proper motion for summary judgment. Simmons v. Lyons, 746 F.2d

265, 269 (5th Cir. 1984).

The standard for granting a motion for summary judgment is

the same as the standard for rendering judgment as a matter of

law. Celotex Corp., 477 U.S. at 323. If the record taken as a

whole could not lead a rational trier of fact to find for the

non-moving party, there is no genuine issue for trial. 

Matsushita, 475 U.S. at 597. See also Boeing Co. v. Shipman, 411

F.2d 365, 374-75 (5th Cir. 1969) (en banc) (explaining the

standard to be applied in determining whether the court should

enter judgment on motions for directed verdict or for judgment

notwithstanding the verdict).

B. Pertinent Texas Rules of Insurance Policy

Interpretation:

In Sharp v. State Farm Fire and Casualty Insurance Co., the

Fifth Circuit summarized the controlling Texas rules for 

 

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interpretation of language in an insurance policy, saying:

Under Texas law, insurance policies are

interpreted in accordance with the rules of

construction that apply to all contracts generally. It

is well-established that ambiguities in insurance

contracts are to be strictly construed against the

insurer. However, this rule of strict construction

applies only if the contract is determined to be

ambiguous.

Whether the contract is ambiguous is a question of

law for the court to decide. The fact that the parties

disagree as to coverage does not create an ambiguity,

nor may extrinsic evidence be admitted for the purpose

of creating an ambiguity. As in all contract cases,

the court looks first to the language of the contract

itself, and [w]hen there is no ambiguity, it is the

court's duty to give the words used their plain

meaning.

115 F.3d 1258, 1260-61 (5th Cir. 1977) (citations & internal

quotation marks omitted).

Under Texas law, "parol evidence is not admissible to render

a contract ambiguous, which, on its face, is capable of being

given a definite certain legal meaning." Lewis v. E. Tex. Fin.

Co., 146 S.W.2d 977, 980 (Tex. 1941). "Only where a contract is

first determined to be ambiguous may the court consider the

parties' intention and admit extraneous evidence to determine the

true meaning of the instrument." Id. (citations omitted).

Hall has the initial burden to show that there is insurance

coverage, while Evanston bears the burden to show the

applicability of the exclusions upon which it relies. Guaranty

Nat'l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir.

1998). Once Evanston shows that an exclusion applies, the burden

then is on Hall to show that the claims at issue come within an

exception to the exclusion. Id.

 

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C. Applicability, vel non, of the Exclusions on Which

Evanston Relies.

1. The Roofing Endorsement.

The roofing endorsement unambiguously says that "[t]he

coverage under this policy does not apply to . . . any injury,

loss or damage arising out of . . . [a]ny operations involving

any membrane roofing." Evanston's Mot. for Summ. J., App. at 47. 

By establishing through the sworn statement of the president and

owner of Hall that at the time of the fire Hall, through a subsubcontractor, was engaged in an operation involving membrane

roofing, Evanston has carried its burden to establish

applicability of the exclusion contained in the Roofing

Endorsement. Hall has not shown any exception to the exclusion. 

Therefore, the membrane roofing exclusion applies to prevent

insurance coverage for all of the claims made against Hall in the

state court lawsuits.

The court has studied, and has given appropriate

consideration to, the declarations of John E. Gibson and Brett

Hall that Hall submitted in its summary judgment papers. Pl.'s

Br. in Resp. to Defs.' Mot. for Summ. J., App. at 132-47, and

Pl.'s Reply to Defs.' Resp. to Pl.'s Mot. for Partial Summ. J.,

Ex. A. The declarants argue that the term "membrane roofing" has

more than one meaning in the roofing industry and that the words

"membrane roofing" as used in Evanston's insurance policy should

be interpreted to mean only a "hot application membrane roofing." 

Presumably the declarants are contending that only the "hot

application membrane roofing" is contemplated by the insurance

 

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7

Decisions of the courts of the State of Texas, which has a rule

of evidence identical in material respects to Rule 702 of the Federal

Rules of Evidence, are helpful. See St. Paul Ins. Co. v. Rahn, 641

S.W.2d 276, 284 (Tex. App.--Corpus Christi 1982, no writ) ("The

coverage afforded by an insurance policy is not an area subject to

interpretation by expert witnesses."). See also Cluett v. Med.

Protective Co., 829 S.W.2d 822, 827 (Tex. App.--Dallas 1992, writ

denied).

14

policy because the cold application membrane roofing that was

being installed at UTA at the time of the fire did not have riskof-fire characteristics sufficient to include it in an exclusion

that was intended to eliminate from the coverage of the policy

roofing operations that posed a risk of fire. Brett Hall's sworn

statement proves the fallacy of any such contention. Supra at 5-

6.

Interestingly, neither declarant professes to have any

expertise in the interpretation of insurance policies. Neither

has been shown to have the qualifications required by Rule 702 of

the Federal Rules of Evidence for the giving of an opinion

relative to the meaning of the words used in the policy.7

 For

the most part, the declarations present nothing more than Hall's

legal arguments in the guise of opinions of persons who have no

apparent knowledge of the insurance business. In the final

analysis, the only thing relevant to this case the declarations

establish is that the roofing operation in which Hall was engaged

at the time of the fire was, indeed, an operation involving

membrane roofing.

In his supplemental declaration, Brett Hall adds a new

wrinkle to Hall's efforts to avoid the effect of the Roofing

 

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8

The summary judgment evidence is that Evanston charged a

premium of $77 for the "Roofing-Commercial" classification, which is

less than 2% of the total premium of $5,400.00. Evanston's Reply to

Pl.'s Resp. to Evanston's Mot. for Summ. J., App. at 2.

15

Endorsement by claiming that he was prompted to sign and return

the endorsement because, before he did so, he had seen the

specifications for the UTA project, understood that Hall would be

requested to apply the EPDM roofing material at the project, and

concluded that the cold application of that roofing material was

not included within paragraph 3 of the Roofing Endorsement. The

court is not persuaded that extrinsic evidence of that kind can

be used to restrict the meaning of the term "membrane roofing" as

it is used in the endorsement. If it could be, no insurer could

rely on the wording of its insurance policies--an insured would

be able to rewrite an insurance policy after the fact simply by

saying that he understood when he bought the policy that the

words meant something different from, or were more restrictive

than, their literal meaning.

Nor is the court impressed by the argument that the term

"membrane roofing" as used in the Roofing Endorsement must be

given a narrow meaning because the policy shows that a premium

was charged for the "Roofing-Commercial" hazard. Evanston's Mot.

for Summ. J., App. at 6. The fact that the insurance company

collected a small premium for the less than complete coverage for

commercial roofing provides no reason for disregarding the clear

language of the Roofing Endorsement, which defines the limited

nature of the coverage.8

 

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9

As noted earlier, supra at 6 n.3, there are two endorsements to

the insurance policy that cause Jamail to be named as an insured

under the policy, subject to certain limitations. Evanston's Mot.

for Summ. J., App. at 42-43. The parties have not mentioned these

endorsements in the summary judgment papers, and the court finds no

reason to evaluate how those endorsements might bear on the issues

raised by the summary judgment motions.

16

2. The Breach of Contract Exclusion.

There does not seem to be a disagreement between the parties

that the Breach of Contract Exclusion causes there to be no

insurance coverage for the claims being made against Hall in the

UTA lawsuit based on alleged contractual commitments of Hall to

Jamail. This exclusion applies to Jamail's third-party claims

(a) that Hall failed to perform its contract to defend and 

indemnify Jamail with respect to claims or losses arising out of

or related to Hall's performance of the work that led to the

fire, and (b) that Hall failed to perform a contractual

commitment to provide liability insurance coverage for Jamail.9

3. Exclusions j.(5) and (6).

The court is not prepared to conclude at this time that

either exclusion j.(5) or exclusion j.(6) is applicable to the

state court lawsuits. Upon further study, the court could well

conclude that one or both of those exclusions apply, but, in view

of other conclusions the court has reached, the court is not

devoting further attention to them.

4. The Combination General Endorsement.

Evanston maintains that this exclusion is another reason why

the policy does not provide coverage for the claims asserted in

the personal injury lawsuit, pointing out that the plaintiffs in

 

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17

that lawsuit, Calhoun and Gaston, were employees of a

subcontractor at the work site, and maintaining that there is no

evidence in the summary judgment record that an employee of Hall,

the named insured, was present at the work site when Calhoun and

Gaston were injured. Hall maintains that this exclusion does not

apply, because, first, it contends that the word "subcontractor"

as used in the exclusion refers to a subcontractor of Hall, not

of someone else, and, second, it contends that, in any event,

there is evidence in the summary judgment record that an employee

of Hall was at the site at the time Calhoun and Gaston were

injured and that Hall's actions or inactions were the direct

cause of the injuries and damages suffered by Calhoun and Gaston

or their injuries and damages were directly caused by an employee

of Hall.

Hall's first contention is without merit. The exclusion

unambiguously has reference to any subcontractor or employee of

same. If the intent had been to limit the exclusion to

subcontractors contracted by Hall or on its behalf, there would

have been language in the exclusion similar to the language used

in the Employees of Independent Contractors Endorsement that

"[t]he coverage under this policy does not apply to . . . any

injury, loss or damage sustained by any employee of an

independent contractor contracted by you or on your behalf."

Evanston's Mot. for Summ. J., App. at 17 (emphasis added).

However, the court is inclined to think that Hall's second

contention has merit. The employee of Hall overseeing the

 

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roofing work Hall was doing at UTA has provided a declaration of

facts that could form the basis for a finding that an employee of

Hall was at the job site at the time Calhoun and Gaston were

injured. Pl.'s Br. in Resp. to Defs.' Mot. for Summ. J., App. at

148-49. Thus, Hall appears to have raised an issue of fact

invoking the first element of the exception to the exclusion

under discussion. Likewise, the court is not prepared summarily

to conclude that the second element (that "[Hall's] actions or

inactions are the direct cause of the injury or damage, or the

injury or damage is directly caused by an employee of [Hall]")

should be resolved against Hall. Therefore, the court concludes

that summary relief should not be granted relative to the

potentially applicable exclusion in the Combination General

Endorsement.

D. Effect of the Court's Determinations Concerning

Applicability of the Exclusions on Evanston's

Obligations Relative to Payment and Defense.

1. Payment.

The summary judgment papers disclose a disagreement between

Hall and Evanston over whether Evanston's payment obligation has

been put in issue. The uncertainty on that subject was resolved

by an agreement the parties reached during a telephone conference

conducted between the court and counsel on August 24, 2006, and

an order signed by the court on that same date. The issue of

whether Evanston has a payment obligation is justiciable even

though no judgment has been entered against Hall in the

 

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19

underlying actions. See American States Ins. Co. v. Bailey, 133

F.3d 363, 368-69 (5th Cir. 1998).

For the reasons given above, the court has concluded that

the exclusion contained in the Roofing Endorsement causes there

to be no insurance coverage under the policy as to any of the

claims that are being made against Hall in the state court

lawsuits. There being no insurance coverage, Evanston has no

obligation under the insurance policy to make any payment as to

any of the claims being made against Hall in the state court

lawsuits. Hall is entitled to a summary adjudication to that

effect. While not dispositive, the court also has concluded that

the Breach of Contract Exclusion provides a further reason why

Evanston has no payment obligation under the insurance policy as

to the breach of contract claims.

2. Defense.

As noted earlier, the defense-obligation language of the

Evanston insurance policy differs significantly from the language

found in the insurance policies that have been involved in the

cases through which the "eight-corners or complaint-allegation"

rule has developed. Supra at 7 n.4. The Evanston policy imposes

on Evanston the duty to defend only those suits seeking damages

to which the insurance provided by the policy applies. As if to

eliminate any possible uncertainty on that subject, the policy

adds that Evanston "will have no duty to defend the insured

against any 'suit' seeking damages for 'bodily injury' or

'property damage' to which this insurance does not apply." 

 

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Evanston's Mot. for Summ. J., App. at 22. Bearing in mind the

dictate of Texas law that "insurance policies are interpreted in

accordance with the rules of construction that apply to all

contracts generally," supra at 12, Evanston clearly has no

obligation to provide a defense to the state court lawsuits

because the insurance provided by the policy does not apply to

the damages sought in those lawsuits.

The defense-obligation language missing from the insurance

policy in question is the language that obligates the insurer to

defend a damage suit against the insured "even if the allegations

of the suit are groundless, false, or fraudulent." The

significance of the omitted language to the "eight-corners or

complaint-allegation rule" was recently discussed by the Texas

Supreme Court in GuideOne Elite Insurance Co. v. Fielder Road

Baptist Church, where the Court said:

Moreover, were we to recognize the exception urged

here, we would by necessity conflate the insurer's

defense and indemnity duties without regard for the

policy's express terms. Although these duties are

created by contract, they are rarely coextensive. The

policy here obligated GuideOne to indemnify the Church

in the event of a meritorious claim for sexual

misconduct, but with respect to the duty to defend, the

contract provided that GuideOne should "defend any suit

brought against [the insured] seeking damages, even if

the allegations of the suit are groundless, false or

fraudulent . . . ."

The policy thus defined the duty to defend more

broadly than the duty to indemnify. This is often the

case in this type of liability policy and is, in fact,

the circumstances assumed to exist under the eightcorners rule. Because the respective duties differ in

scope, they are invoked under different circumstances. 

A plaintiff's factual allegations that potentially

support a covered claim is all that is needed to invoke

the insurer's duty to defend; whereas, the facts

 

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21

actually established in the underlying suit control the

duty to indemnify.

2006 WL 1791689, at *4 (Tex. June 30, 2006) (citations omitted)

(emphasis added). As the Texas Supreme Court explained, the

policy language that is missing from the Evanston policy is

"assumed to exist under the eight-corners rule." Id. And, that

policy language is what causes the insurance company's duty to

defend to be broader than its duty to indemnify. Because

Evanston's policy does not contain that language, the "eightcorners or complaint-allegation rule" is not applicable to this

case. The language of the Evanston policy makes the duty to pay

and the duty to defend coextensive.

That is not to say that Evanston would not have a duty to

defend a damage suit brought against Hall in which the claims in

the suit are based on groundless, false, or fraudulent

allegations. Such a duty to defend would exist under the

language of the Evanston insurance policy so long as the alleged

liability facts state a claim for damages "to which [the]

insurance applies." Evanston's Mot. for Summ. J., App. at 22

(emphasis added). The policy imposes on Evanston the "duty to

defend the insured against any 'suit' seeking those damages."

Id. (emphasis added). Under the language of the policy, Evanston

would not be able to avoid the defense obligation on the ground

that extrinsic facts establish that the insured is not liable in

the underlying suit. The key is whether the suit "seeks" damages

to which the insurance applies. However, the insurance policy

makes clear that if the insurance coverage does not extend to

 

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22

damages sought in the suit against the insured, the insurance

company does not have an obligation to defend the suit. As a

consequence, Evanston has no obligation to defend either of the

state court lawsuits because neither "seeks" damages to which the

insurance applies. 

Even if the court were to assume that, notwithstanding the

unique defense-obligation language used in the Evanston policy,

the court should apply the "eight corners or complaintallegation" rule, the outcome would be the same. In GuideOne,

the court explained the rule as follows:

Under the eight-corners or complaint-allegation

rule, an insurer's duty to defend is determined by the

third-party plaintiff's pleadings, considered in light

of the policy provisions, without regard to the truth

or falsity of those allegations. The rule takes its

name from the fact that only two documents are

ordinarily relevant to the determination of the duty to

defend: the policy and the pleadings of the third-party

claimant. Facts outside the pleadings, even those

easily ascertained, are ordinarily not material to the 

determination and allegations against the insured are

liberally construed in favor of coverage.

GuideOne Elite Ins. Co., 2006 WL 1791689, at *2 (citations

omitted).

When that rule is applied to the UTA lawsuit, it leads to

the conclusion that Evanston has no duty to defend that lawsuit

because, within the "eight-corners," enough information exists to

disclose that the damages claimed in the lawsuit are outside the

scope of the insurance coverage. One need only to look to UTA's

pleading to know that the damages arose out of operations

involving membrane roofing. Pl.'s Br. in Resp. to Defs.' Mot.

for Summ. J., App. at 69, ¶ 11. Then, one need only to look to

 

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23

the insurance policy to know that the coverage under the policy

does not apply to any operations involving membrane roofing. 

Evanston's Mot. for Summ. J., App. at 47.

However, there is no allegation of fact in the personal

injury lawsuit that discloses that the damages sought in that

lawsuit are outside the scope of the insurance coverage. So,

unless the personal injury lawsuit comes within an exception to

the rule, Evanston would have an obligation to defend that

lawsuit if the "eight corners" rule were applicable. In

GuideOne, the Texas Supreme Court described such an exception,

which permits the use of extrinsic evidence "when relevant to an

independent and discrete coverage issue, not touching on the

merits of the underlying third-party claim." GuideOne Elite Ins.

Co., 2006 WL 1791689, at *2. The Texas Supreme Court gave

International Service Insurance Co. v. Boll, 392 S.W.2d 158 (Tex.

Civ. App.--Houston 1965, writ ref'd n.r.e.), as an example of a

case where the exception was applied. When explaining the

distinction between the facts of Boll and the GuideOne facts, the

court said:

The extrinsic evidence in Boll, . . ., went strictly to

the coverage issue. It did not contradict any

allegation in the third-party claimant's pleadings

material to the merits of that underlying claim. In

contrast, the extrinsic evidence here concerning Evans'

employment directly contradicts the plaintiff's

allegations that the Church employed Evans during the

relevant coverage period, an allegation material, at

least in part, to the merits of the third-party claim.

GuideOne Elite Ins. Co., 2006 WL 1791689, at *3. As was true in

Boll, the extrinsic evidence here (the facts establishing

 

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24

applicability of the Roofing Endorsement exclusion) does not

contradict any allegation in the state court pleadings. Rather,

the extrinsic evidence establishing non-coverage is perfectly

consistent with the allegations in the state court pleadings.

In Cook v. Ohio Casualty Insurance Co., a court of appeals

of Texas (relying on the failure of the Texas Supreme Court to

review the Boll decision) observed that:

[T]he Supreme Court draws a distinction between cases

in which the merit of the claim is the issue and those

where the coverage of the insurance policy is in

question. In the first instance the allegation of the

petition controls, and in the second the known or

ascertainable facts are to be allowed to prevail.

418 S.W.2d 712, 715-16 (Tex. Civ. App.--Texarkana 1967, no writ). 

Similarly, in Gonzales v. American State Insurance Co. of Texas,

the court, after having reviewed the cases cited in support of

the "eight-corners or complaint-allegation rule," observed

that:

A careful reading of these cases, however, discloses

that the allegations referred to are allegations as to

the insured's liability. In other words, no legal

determination of the insured's ultimate liability is

required before the insurer's duty to defend arises. 

But where the petition does not allege facts sufficient

for a determination of whether those facts, even if

true, are covered by the policy, the evidence adduced

at the trial in a declaratory judgment action may be

considered along with the allegations in the petition.

628 S.W.2d 184, 186 (Tex. App.--Corpus Christi 1982, no writ).

Evanston is not taking the position that any allegation made

in the state court pleadings is false or fraudulent. Rather,

Evanston accepts the allegations of the state court pleadings as

true when pointing out that there simply is no insurance coverage

 

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25

for the claims asserted by those allegations. This differs from

the contention of the insurer in GuideOne. In GuideOne, the fact

on which the insurance company relied to avoid coverage (that the

alleged wrongdoer in the underlying suit was not an employee of

the insured during the period of the policy) disputed a pleaded

fact that was an element of the damage claim made in the

underlying suit (that is, that the alleged wrongdoer was acting

as an employee of the insured at that time). The issue was not

one of coverage, but rather one of merit, vel non, of the

allegations of damage suit. That is quite a different

proposition from the one presented in the instant action.

Potential merit of the state court lawsuits, on the one

hand, and whether there is insurance coverage for the damages

alleged in those lawsuits, on the other, are separate and

distinct issues here. While, coincidently, some of the same

facts might be relevant to those separate issues, none of the

facts relied on by Evanston to defeat insurance coverage would

contradict, much less defeat, the claims asserted in the damage

lawsuits, and, vice versa. Thus the exception to the rule

applies here--the extrinsic evidence, in the form of Brett Hall's

statement, that establishes non-coverage is "relevant to an

independent and discrete coverage issue, not touching on the

merits of the underlying claim[s]." GuideOne Elite Ins. Co.,

2006 WL 1791689, at *2.

 

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VI.

Order

For the reasons given above,

The court ORDERS that Evanston's motion for summary judgment

be, and is hereby, granted, and that Hall's motion for partial

summary judgment be, and is hereby, denied.

The court further ORDERS and DECLARES that Evanston does not

have, and has not had, any obligation to defend Hall in either of

the state court lawsuits, Cause No. 236-214456-05 and Cause No.

153-212299-05, and that Evanston has no obligation to make any

payment on behalf of Hall with respect to any liability imposed

on Hall as to any of the claims asserted against it in either of

those lawsuits or to provide any indemnification to Hall with

respect to any payment Hall is required to make because of any of

those claims.

SIGNED September 1 , 2006.

 /s/ John McBryde

JOHN McBRYDE

United States District Judge

 

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