IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-10451

TRAMMELL CROW RESIDENTIAL COMPANY,

Plaintiff - Appellant

v.

AMERICAN PROTECTION INSURANCE COMPANY

Defendant - Appellee

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:10-CV-2163

Before DENNIS and PRADO, Circuit Judges, and BROWN, District Judge.*

PER CURIAM∗∗

:

Plaintiff Trammell Crow Residential Company (“Trammell Crow”) 

operated a number of apartment complexes in Colorado. Between 2001 and 

2004, Trammell Crow was covered by four insurance policies from three 

different insurance companies—one policy issued by Defendant American 

Protection Insurance Company (“APIC”), one policy issued by Virginia 

Surety, and two policies issued by Old Republic. When Trammell Crow was 

* District Judge of the Eastern District of Louisiana, sitting by designation.

∗∗ Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should 

not be published and is not precedent except under the limited circumstances set forth in 

5TH CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

July 7, 2014

Lyle W. Cayce

Clerk

 

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sued by residents due to a mold problem, it tendered its defense to Virginia 

Surety. Virginia Surety later sued APIC seeking contribution, but the court 

granted summary judgment to APIC finding no contribution was owed. 

Following the litigation against Virginia Surety, APIC was paid funds from a 

Trammell Crow expense account to reimburse its costs in defending against 

Virginia Surety’s claims. Trammell Crow then brought this suit against 

APIC, alleging that Trammell Crow was not required to reimburse APIC’s 

defense costs and that the payment to APIC was improper. APIC 

counterclaimed, urging that Trammell Crow owed it reimbursement.

The district court granted summary judgment in favor of APIC, and 

Trammell Crow now appeals. Concluding that Trammell Crow is required to 

reimburse APIC’s defense costs up to the amount of the deductible under the 

APIC policy, but that the district court improperly determined that Trammell 

Crow was collaterally estopped from arguing that the deductible had been 

met, we affirm in part and reverse in part and remand.

BACKGROUND

This litigation is the third matter in a series of cases involving an 

insurance policy issued to Trammell Crow by APIC. Trammell Crow operated 

a number of apartment complexes in Colorado. Between 2001 and 2004, 

Trammell Crow was covered by four insurance policies from three different 

insurance companies—one policy issued by APIC (the “APIC Policy”), one 

policy issued by Virginia Surety, and two policies issued by Old Republic. The 

APIC policy, which is at issue in the pending case, had a $1,000,000 per 

occurrence limit with a $250,000 deductible and a $5,000,000 general 

aggregate limit.

In the first case, known as the “Colorado Litigation,” Trammell Crow 

was sued by several residents regarding a mold problem. Trammell Crow 

tendered its defense to Virginia Surety, and the claims ultimately settled.

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In the second matter, known as the “Insurance Litigation,” Trammell 

Crow sued Virginia Surety, alleging that Virginia Surety had refused to pay 

all of the defense and settlement payments incurred in the Colorado 

Litigation. Virginia Surety filed a third-party complaint against APIC, 

seeking contribution toward the defense and settlement costs from the 

Colorado Litigation. The court granted APIC’s motion for summary 

judgment, finding that APIC did not have a duty to defend or indemnify 

Trammell Crow in the Colorado Litigation, and thus Virginia Surety was not 

entitled to contribution.

APIC then billed an expense account owned by Trammell Crow for the 

costs it incurred in the Insurance Litigation. Trammell Crow, contending that 

it is not responsible for APIC’s defense costs, filed this lawsuit (the “Current 

Litigation”) seeking return of the money that was paid to APIC out of the 

expense account. APIC counterclaimed requesting compensation for the costs 

incurred in the Insurance Litigation. The parties filed cross-motions for 

summary judgment. The district court granted APIC’s motion for summary 

judgment and denied Trammell Crow’s motion for summary judgment. The 

district court found that APIC’s defense costs qualified as a “claim expense” 

under the APIC policy, thus obligating Trammell Crow to pay these costs up 

to the amount of its deductible. Further, the district court found that 

Trammell Crow was barred pursuant to the doctrine of collateral estoppel 

from arguing that the deductible had been met, based on a previous order in 

the Insurance Litigation. Trammell Crow now appeals these determinations.

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STANDARD OF REVIEW

Summary judgment is appropriate when “there is no genuine dispute 

as to any material fact and the movant is entitled to judgment as a matter of 

law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 

322–23 (1986). We review a district court’s grant of summary judgment de 

novo, construing all facts and evidence in the light most favorable to the nonmoving party. See EEOC v. Chevron Phillips Chem. Co., 570 F.3d 606, 615 

(5th Cir. 2009).

With respect to the district court’s application of collateral estoppel, 

“[g]enerally, the issue of whether to apply collateral estoppel is a question of 

law, making our review de novo.” Bradberry v. Jefferson Cnty., 732 F.3d 540, 

549 (5th Cir. 2013).

DISCUSSION

I.

The dispute between Trammell Crow and APIC focuses on whether 

APIC’s costs and expenses in the Insurance Litigation qualify as a “claim 

expense” under the APIC Policy. In relevant part, the APIC Policy defines 

“claim expense,” stating:

As used in this endorsement, the words claim expense mean:

. . .

D. all reasonable expenses incurred by the insured and by us in 

1. investigating an occurrence, offense, claim or “suit”,

2. defending a “suit”,

3. pursuing rights of recovery against others, and 

4. investigating, defending and settling any coverage dispute under this 

policy

but not including wages or salary of any employee of the insured, normal 

operating or overhead expenses or payments made by the insured under 

contract with the claim service provider stated in the schedule of this 

endorsement.

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Under the terms of the APIC Policy, costs qualifying as a claim expense are 

to be allocated between Trammell Crow and APIC as follows:

A. When the total amount of all damages and claim expense paid for all 

claims or “suits” as a result of any one “occurrence” or offense does not 

exceed the Deductible Amount, we [APIC] will not be obligated to 

pay any part of the claim expense.

B. When the total amount of damages and claim expense paid for all 

claims or “suits” as a result of any one “occurrence” or offense is in 

excess of the Deductible Amount, we [APIC] will be obligated to pay 

that part of the claim expense that exceeds the Deductible Amount.

As mentioned above, the APIC Policy had a $1,000,000 per occurrence limit 

with a $250,000 deductible and a $5,000,000 general aggregate limit.

Trammell Crow argues that the term “claim expense” does not include 

the attorneys’ fees and litigation costs that APIC incurred in defending 

against Virginia Surety’s third-party complaint in the Insurance Litigation. 

Trammell Crow points to the policy’s definition of “claim expense,” noting 

that subsection D provides that reasonable expenses must be incurred by 

Trammell Crow and APIC, as opposed to stating that the expenses may be 

incurred by either Trammell Crow or APIC. Drawing on the distinction 

between “and” and “or,” Trammell Crow reasons that there are no joint 

expenses at issue; rather APIC’s defense costs were only incurred by APIC. 

Accordingly, Trammell Crow maintains that these costs do not qualify as a 

“claim expense.”

Alternatively, Trammell Crow argues that if APIC’s costs in the 

Insurance Litigation qualify as a “claim expense,” then Trammell Crow would 

be deemed to have met its deductible and therefore should not be obligated to 

reimburse APIC for APIC’s defense costs to the extent that they exceed the 

deductible. According to Trammell Crow, it is not collaterally estopped from 

making this argument. Trammell Crow asserts that APIC did not raise the 

issue of collateral estoppel before the district court; rather the district court 

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addressed collateral estoppel sua sponte. Further, Trammell Crow maintains 

that the requisite factors for collateral estoppel are not met here.

According to APIC, its costs in the Insurance Litigation qualify as a 

claim expense because the word “and” in subsection D should be interpreted 

as “either or both.” Additionally, APIC contends that Trammell Crow is 

precluded from asserting that the deductible on the APIC Policy has been 

met on the grounds of collateral estoppel. APIC argues that in the Insurance 

Litigation, the district court found that APIC had no duty to indemnify 

Trammell Crow because Trammell Crow had not met its deductible.

II.

The first issue presented in this appeal is whether APIC’s defense costs 

from the Insurance Litigation qualify as a “claim expense” under the policy.

In diversity cases, this court applies the substantive law of the forum state.

See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Thus, in this case, we 

apply Texas law to determine the meaning of “claim expense.”

In examining an insurance policy under Texas law, this court first 

“look[s] to the plain language of the contract to determine whether it is 

ambiguous.” Horn v. State Farm Lloyds, 703 F.3d 735, 738 (5th Cir. 2012)

(applying Texas law). Whether a contract is ambiguous is a legal question. Id.

“A contract is ambiguous ‘if its plain language is amenable to more than one 

reasonable interpretation.’” Id. (quoting Nautilus Ins. Co. v. Country Oaks 

Apartments, Ltd., 566 F.3d 452, 455 (5th Cir. 2009)). If a contract is not 

ambiguous, then this court “appl[ies] its plain meaning and enforce[s] it as 

written.” Id. However, if a contract is ambiguous, the court may “consider 

extrinsic evidence for ‘the purpose of ascertaining the true intentions of the 

parties expressed in the contract.’” Id. (quoting Friendswood Dev. Co. v. 

McDade + Co., 926 S.W.2d 280, 283 (Tex. 1996)).

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When interpreting a policy, “courts are to ensure the policy is 

interpreted in such a way as to give effect to each term in the contract so that 

none will be rendered meaningless.” Nat’l Union Fire Ins. Co. of Pittsburgh, 

PA v. Willis, 296 F.3d 336, 339 (5th Cir. 2002). Moreover, “all provisions of 

the policy should be considered with reference to the whole contract so that 

no provision is controlling.” Id.

“Under Texas law, the maxims of contract interpretation regarding 

insurance policies operate squarely in favor of the insured.” Lubbock Cnty. 

Hosp. Dist. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 143 F.3d 239, 242 

(5th Cir. 1998). When interpreting an ambiguous provision, “the court must 

adopt the insured’s construction of the provision, ‘as long as that construction 

is not unreasonable, even if the construction urged by the insurer appears 

more reasonable or a more accurate reflection of the parties’ intent.’” Id.

(quoting Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Hudson Energy Co., 

811 S.W.2d 552, 555 (Tex. 1991)).

Under the APIC Policy, “claim expense” includes “D. all reasonable 

expenses incurred by the insured and by us in . . . 4. investigating, defending 

and settling any coverage dispute under this policy.” The dispute on appeal is 

the meaning of the phrase “incurred by the insured and by us.”1

First, this court determines whether the language of the contract is 

ambiguous. As this court has previously observed, “the word ‘and’ is often 

construed as conjunctive.” In re Velazquez, 660 F.3d 893, 897 (5th Cir. 2011) 

(applying Texas law). “However, ‘and’ can be interpreted as disjunctive when 

the context requires.” Id. at 898. In Board of Insurance Commissioners of 

1 Before the district court, the parties contested whether the Insurance Litigation 

between Virginia Surety and APIC qualifies as a “coverage dispute” as listed in subsection 

D.4. The district court found that it does qualify as a “coverage dispute,” and neither party 

challenges this finding on appeal.

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Texas v. Guardian Life Insurance Co. of Texas, the Texas Supreme Court 

adopted language from Corpus Juris Secundum to explain when the 

disjunctive interpretation of “and” is appropriate:

Ordinarily the words ‘and’ and ‘or,’ are in no sense interchangeable terms, 

but, on the contrary, are used in the structure of language for purposes 

entirely variant, the former being strictly of a conjunctive, the latter, of a 

disjunctive, nature. Nevertheless, in order to effectuate the intention of the 

parties to an instrument, a testator, or a legislature, as the case may be, the 

word ‘and’ is sometimes construed to mean ‘or.’ This construction, however, is 

never resorted to except for strong reasons and the words should never be so 

construed unless the context favors the conversion; as where it must be done 

in order to effectuate the manifest intention of the user; and where not to do 

so would be to render the meaning ambiguous, or result in an absurdity; or 

would be tantamount to a refusal to correct a mistake.

180 S.W.2d 906, 908 (Tex. 1944) (quoting 3 Corpus Juris Secundum § 1068

(now 17A Corpus Juris Secundum Contracts § 411)) (internal quotation 

marks omitted); see also Robinson v. Reliable Life Ins. Co., 569 S.W.2d 28, 30 

(Tex. 1978) (recognizing that Board of Insurance Commissioners looked to 

Corpus Juris Secundum “in stating the rule for interpreting ‘and’ to mean 

‘or’”).

In certain situations, courts applying Texas law have interpreted “and” 

to be disjunctive. For example, in Velazquez, this court examined a deed of 

trust between a mortgagor and a mortgagee securing a note executed for the 

purchase of the mortgagor’s home. Section 9 of the deed provided that if 

. . . there is a legal proceeding that might significantly affect Lender’s 

interest in the Property and/or right under this Security Instrument . . . then 

the Lender may do and pay for whatever is reasonable or appropriate to 

protect Lender’s interest in the Property and rights under the Security 

Instrument, including protecting and/or assessing the value of the Property, 

and securing and/or repairing the Property. Lender’s action can include but 

are not limited to (a) paying any sums secured by a lien which has priority 

over this Security Instrument; (b) appearing in court; and (c) paying 

reasonable attorneys’ fees to protect its interest in the Property and/or rights 

under this Security Instrument, including its secured position in a 

bankruptcy proceeding. . . . Any amounts disbursed by the Lender under this 

Section 9 shall become additional debt of the Borrower secured by this 

Security Instrument. 

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Velazquez, 660 F.3d at 895–96 (emphasis added). The mortgagor filed for 

bankruptcy under Chapter 13, and the mortgagee filed a proof of claim in the 

bankruptcy action. Id. at 895. The proof of claim included $200 in “PostPetition Bnk. Atty. Fees.” Id. The mortgagee argued that the fees were 

recoverable pursuant to Section 9. Id. However, the bankruptcy court 

interpreted the deed of trust as allowing only the recovery of fees that were 

incurred to protect both the mortgagee’s interest in the property and its 

rights under the Security Instrument. Id. at 896. The bankruptcy court 

further found that the mortgagee’s “interest in the property—i.e., the 

Velazquezes’ homestead—cannot be affected by the Velazquezes’ Chapter 13 

proceedings because 11 U.S.C. § 1322(b)(2) expressly provides that a Chapter 

13 plan may not modify a home lender’s contract rights.” Id. (internal 

quotation marks and alterations omitted).

This court reversed. First, it cited Lanier v. Spring Cypress 

Investments, a Texas state appellate court case. Id. at 898 (citing Lanier v. 

Spring Cypress Inv., No. 01-93-00414, 1995 WL 489427 (Tex. App.—Houston 

Aug. 17, 1995, no pet.) (mem. op., not designated for publication)). In Lanier, 

a note provided that “[m]aker shall be fully liable to Payee or other holder of 

this note . . . for: (a) ad valorem and other taxes, assessments and impositions 

paid by Payee to protect its interest and the lien of the Deed of Trust securing 

this note.” Id. (emphasis in original) (internal quotation marks omitted)

(citing Lanier, 1995 WL 489427, at *2). The Texas appellate court 

“interpreted the language of the note as imposing liability ‘for any taxes paid 

by Lanier to protect either or both his interest and the lien.’” Id. (quoting 

Lanier, 1995 WL 489427, at *3). Second, this court explained that 

“consideration of Section 9 as a whole requires construing ‘and’ to mean 

‘either or both’ to effectuate the clear intent of the parties.” Id. This court 

noted that under Section 9, the mortgagee’s actions could include “paying 

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reasonable attorneys’ fees to protect its interest in the Property and/or rights 

under this Security Instrument, including its secured position in a 

bankruptcy proceeding.” Id. at 899 (internal quotation marks omitted). It 

then reasoned that “[i]n light of this language, it is clear that the Deed of 

Trust contemplates entitlement to attorney’s fees incurred to protect [the 

lender’s] interest in the property or rights under the Deed of Trust.” Id. Thus, 

to interpret “and” in the conjunctive sense “would impermissibly render 

portions of the agreement meaningless and frustrate the intentions of the 

parties as made clear by Section 9 as a whole.” Id.

In Aerospatiale Helicopter Corp. v. Universal Health Services, Inc., a 

Texas appellate court examined the meaning of “and” in the context of an

indemnity provision in a lease agreement for a helicopter. 778 S.W.2d 492, 

495 (Tex. App.—Dallas 1989, pet. denied). The lessor was a helicopter 

manufacturer; the lessee was a healthcare provider that used the helicopter 

as an air ambulance. Id. at 495. An indemnity clause in the lease provided 

that the lessee would indemnify the lessor 

. . . against any and all losses, damages, injuries, claims, demands and 

expenses including legal expenses of whatsoever kind and nature arising on 

account of (i) the use or operation of the helicopter or any part thereof, by 

whomsoever used or operated other than the LESSOR, its agents, servants, 

or employees and (ii) the installation or removal of any unit of equipment 

pursuant to any provisions of this lease.

Id. at 500–01 (emphasis added). Universal Health argued that in order to 

establish that the underlying claims fell within the scope of the indemnity 

clause, Aerospatiale was required to prove that the claims satisfied both 

subsections. Id. at 501. 

The Texas appellate court rejected this argument. The court noted that 

it was “mindful of the fact that indemnity agreements are to be strictly 

construed in favor of the indemnitor,” and it further acknowledged that “in 

common usage ‘and’ is conjunctive and ‘or’ is disjunctive.” Id. at 502.

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However, the court explained that “[o]ne of the recognized uses of ‘and’ is to 

refer to ‘either or both’ of two alternatives, when ‘or’ might be interpreted as 

referring to only one or the other.” Id. Looking at the contract language, the 

Court concluded that “[a] common sense reading of the indemnity agreement 

is that Universal agreed to indemnify Aerospatiale for liability arising from 

two separate circumstances which the lease placed under Universal’s 

exclusive control: use and operation of the helicopter, and alteration of the 

helicopter.” Id.

In support of its position that the APIC Policy is not ambiguous, 

Trammell Crow cites American National Insurance Company v. Wilson State 

Bank, a Texas state appellate court decision. 480 S.W.2d 296 (Tex. Civ. 

App.—Amarillo 1972, no pet.). In Wilson State Bank, American National 

Insurance Company would offer a policy of hospital and medical insurance to 

the depositors of a bank in a county of a state. Id. at 297. American National 

would issue a numbered franchise to the bank, and each franchise would be 

limited to the county in which the bank was located without regard to the 

addresses of the depositors. Id. American National would then contact the 

depositors, and if the depositors subscribed to the insurance, American 

National would draw a draft for the premium on the depositors’ accounts in 

the bank. Id. American National granted a franchise to Wilson State Bank in 

Lynn County, Texas. Id. Each policy issued under the franchise contained a 

provision stating that “American National shall not have the right to refuse 

to renew any Benefit of this policy during the Renewal Period of such Benefit 

unless, at the same time, it declares its intention to non-renew all policies of 

the same class which were issued on this form in the same state and county.” 

Id. at 298 (emphasis added). Three years after the Wilson State Bank 

franchise was granted, American National decided not to renew the policies 

in Lynn County. Id. Wilson State Bank and a number of policyholders sued, 

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seeking an injunction to prohibit the non-renewal of the Lynn County policies 

unless American National refused to renew all policies of the same class in 

Texas. Id. American National argued that under the policy, it had the right to 

decline to renew all policies in Lynn County without the obligation not to 

renew all policies of the same class in Texas. Id.

The Texas Court of Civil Appeals rejected American National’s 

argument, holding that the insurance company “deliberately restricted its 

right to non-renew the Lynn County policies only if it declared its intention to 

non-renew all policies of the same class in the State of Texas.” Id. at 299. The 

court explained that “[o]rdinarily, nice distinctions in language are not 

favored, and the desired meaning of the language is that which would be 

attached by the ordinary person of average understanding in purchasing the 

insurance.” Id. at 300. Therefore, “[h]ad appellant meant to convey its right of 

non-renewal on a selected area basis only, it would have been simple to 

eliminate the phrase ‘state and,’ or to substitute for the phrase ‘in the same 

state and county’ such language as ‘in the same state or county,’ or ‘in the 

same county of this state,’ or some other expression free from doubt.” Id.

As mentioned above, “[a] contract is ambiguous ‘if its plain language is 

amenable to more than one reasonable interpretation.’” Horn, 703 F.3d at 738 

(quoting Nautilus Ins. Co., 566 F.3d at 455). Under Texas law, “and” can be

used disjunctively, as Velazquez, Lanier, and Aerospatiale Helicopter

demonstrate. To be sure, “and” may also be used conjunctively, as was the 

case in Wilson State Bank. However, considering that Texas law accepts both 

the conjunctive and the disjunctive use of “and,” the plain language of the 

definition of claim expense is amenable to more than one reasonable 

interpretation—that is, “and” can be interpreted conjunctively or 

disjunctively. Thus, under the definition of “ambiguous” set forth in Horn, the 

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provision “all reasonable expenses incurred by the insured and by us” is 

ambiguous.

If a provision is ambiguous, under Texas law, “the court must adopt the 

insured’s construction of the provision, ‘as long as that construction is not 

unreasonable, even if the construction urged by the insurer appears more 

reasonable or a more accurate reflection of the parties’ intent.’” Lubbock 

Cnty. Hosp. Dist., 143 F.3d at 242 (quoting Nat’l Fire Ins. Co., 881 S.W.2d at 

555). Thus, the question becomes whether Trammell Crow’s, the insured,

construction—using “and” in the conjunctive sense—is unreasonable.

In the context of the APIC policy, Trammell Crow’s construction is 

unreasonable. As previously mentioned, “courts are to ensure that the policy 

is interpreted in such a way as to give effect to each term in the contract so 

that none will be rendered meaningless,” and “all provisions of the policy 

should be considered with reference to the whole contract so that no provision 

is controlling.” Nat’l Union Fire Ins. Co., 296 F.3d at 339. Looking at the 

APIC policy as whole, it appears that the policy contemplates that either one 

party or the other will incur the costs of investigating an occurrence, offense, 

claim or suit; defending a suit; pursuing rights of recovery against others; 

and investigating, defending and settling any coverage dispute under the 

policy. 

Just above the provision defining “claim expense,” there is a provision 

regarding APIC’s obligations in the defense of suits and in the investigation 

and settlement of claims:

A. We shall have the right, but not the duty or obligation to:

1. defend or participate in the defense of any “suit” against the 

insured and

2. investigate and settle any “occurrence”, offense, claim or suit.

B. If we choose not to investigate any “occurrence”, offense or claim, or 

not to defend any “suit” against the insured, you will see to it that all 

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necessary investigation and defense is made, and will, to the best of 

your ability effect settlement we agree to. You agree to discharge this 

obligation solely by means of your contract with the claim service 

provider stated in the schedule of this endorsement for claim 

adjustment services. If such services do not run to the ultimate 

disposition of all claims or ‘suits’ to which this insurance applies, we 

shall have the right to approve a replacement or to assign to 

NATLSCO, Inc. to provide claim adjustment services at your expense.

This provision contemplates that if APIC exercises its right to defend, then it 

will be responsible for defending and investigating an offense, claim, or suit. 

However, if APIC chooses not to participate, then Trammell Crow will be 

responsible for defending and investigating an offense, claim, or suit. In this 

manner, the costs of defending and investigation will be incurred either by 

APIC or by Trammell Crow. If the “claim expense” provision were read not to 

cover costs only incurred by APIC or costs only incurred by Trammell Crow,

then costs incurred investigating a suit as well as costs incurred defending 

suit would never qualify as a “claim expense.” This reading would render 

subsections D1 and D2 of the definition of “claim expense” effectively 

meaningless,2 which would be an unreasonable result.

Further supporting that “and” should be read disjunctively, there is a 

provision of the policy entitled “Reimbursement” which states: 

In the event we pay all or any part of the Deductible Amount in order to 

effect settlement of any claim or suit, the first named insured shall promptly, 

upon notification of the action taken, reimburse us for any such part of the 

Deductible Amount that has been paid by us including any claim expense.

This section of the policy specifically describes a situation in which a claim 

expense is paid by APIC, requiring reimbursement from Trammell Crow. In 

light of the principle that “all provisions of the policy should be considered 

with reference to the whole contract so that no provision is controlling,” the 

inclusion of this reimbursement requirement further indicates that “claim 

2 The definition of “claim expense” includes “D. all reasonable expenses incurred by 

the insured and by us in 1. investigating an occurrence, offense, claim, or ‘suit’, 2. defending 

a ‘suit’ . . . .”

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expense” includes costs incurred by either or both Trammell Crow or APIC. 

Nat’l Union Fire Ins. Co., 296 F.3d at 339.

Accordingly, “and” should be construed in the disjunctive, and costs 

incurred by either or both Trammell Crow or APIC qualify as a “claim 

expense.” Therefore, APIC can recover the defense costs it incurred in the 

Insurance Litigation up to the deductible amount. We affirm the district 

court on this issue.

III.

The second issue presented is whether Trammell Crow is barred from 

asserting that the deductible has been met pursuant to the doctrine of 

collateral estoppel. Federal law governs the application of collateral estoppel 

in a diversity suit involving a prior federal judgment. Rabo Agrifinance, Inc. 

v. Terra XXI, Ltd., 583 F.3d 348, 353 (5th Cir. 2009); see also Hardy v. JohnsManville Sales Corp., 681 F.2d 334, 337 (5th Cir. 1982). To establish 

collateral estoppel under federal law, a party must make three showings: 

(1) that the issue at stake be identical to the one involved in the prior 

litigation; 

(2) that the issue has been actually litigated in the prior litigation; and 

(3) that the determination of the issue in the prior litigation has been a 

critical and necessary part of the judgment in that earlier action.

Rabo Agrifinance, 583 F.3d at 353. Further, “[t]he parties to the suits need 

not be completely identical, so long as the party against whom estoppel 

applies had the full and fair opportunity to litigate the issue in the previous 

lawsuit.” Id. Although usually an affirmative defense, collateral estoppel may 

be raised sua sponte by the district court, particularly if both actions were 

brought in courts of the same district, as is the case here.3 United Home 

3 The Insurance Litigation and the Current Litigation were both in the Northern 

District of Texas.

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Rentals, Inc. v. Tex. Real Estate Comm’n, 716 F.2d 324, 330 (5th Cir. 1983) 

(recognizing that “in the interest of judicial economy, res judicata may 

properly be raised by a district court sua sponte, particularly where both 

actions are brought in the courts of the same district”); see also Meador v. 

McFaddin, 172 F.3d 869, 1999 WL 129938, at *1 (5th Cir. 1999) 

(unpublished) (“Although usually an affirmative defense, collateral estoppel 

may be raised sua sponte by the district court if both actions were brought in 

courts of the same district.”). As mentioned above, this court reviews the 

district court’s application of collateral estoppel de novo. Bradberry, 732 F.3d 

at 549.

Although neither party raised the issue of collateral estoppel in their 

memoranda to the district court regarding the cross-motions for summary 

judgment, the district court found that the doctrine barred Trammell Crow 

from arguing that it had met its deductible under the APIC policy. On appeal, 

Trammell Crow argues that the district court’s determination in the 

Insurance Litigation that the APIC deductible had not been met did not 

include or consider APIC’s defense costs as a “claim expense.” Thus, 

according to Trammell Crow, the deductible issue in the Insurance Litigation 

did not involve the same facts and issues as the deductible issue in the 

Current Litigation. APIC counters that collateral estoppel does apply because 

the district court ruled in the Insurance Litigation that the APIC deductible 

had not been met and Trammell Crow failed to appeal that determination.

For collateral estoppel to apply, the issue at stake in the Current 

Litigation must be identical to the issue at stake in the Insurance Litigation. 

See Rabo Agrifinance, 583 F.3d at 353. In the Insurance Litigation, the

district court examined whether Trammell Crow had met its deductible based 

on the damages and claims expense then existing in November 2009, which 

did not include APIC’s defense costs in the Insurance Litigation. The issue at 

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 Case: 13-10451 Document: 00512688424 Page: 16 Date Filed: 07/07/2014
No. 13-10451

stake in the Current Litigation is different. Now the question is whether 

Trammell Crow has currently met the deductible, considering the newly 

added claim expense of APIC’s defense costs in the Insurance Action. 

Therefore, the doctrine of collateral estoppel does not bar Trammell Crow 

from arguing that it has met its deductible under the APIC Policy, which 

would obligate APIC to pay any claim expense in excess of the deductible.4

Accordingly, the district court erred in not considering whether Trammell 

Crow had met its deductible after accounting for APIC’s defense costs, and we 

reverse on this issue.

CONCLUSION

For the foregoing reasons, the district court’s judgment is AFFIRMED 

IN PART and REVERSED IN PART and the cause is REMANDED for 

further proceedings consistent with this opinion.

4 Looking at the district court’s ruling on the parties’ cross-motions for summary 

judgment, it is apparent that the district court did not include APIC’s defense costs in its 

consideration of the collateral estoppel issue. The district court framed the issue as 

“whether Trammell Crow’s costs in the Colorado Action exceeded its deductible under the 

APIC Policy.” Additionally, the district court made its determination, stating: “The Court 

has reviewed the prior order [from the Insurance Litigation] presented by the parties as 

summary judgment evidence and concludes that it addressed the issue of whether 

Trammell Crow met the APIC deductible with the payments made by Trammell Crow itself 

as well as the payments made by Virginia Surety on Trammell Crow’s behalf, which eroded 

the deductible.” Nowhere in its analysis does the district court address the extent to which 

APIC’s defense costs further impacted the deductible.

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 Case: 13-10451 Document: 00512688424 Page: 17 Date Filed: 07/07/2014