IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 17-10362

WESCO INSURANCE COMPANY, A DELAWARE CORPORATION,

Plaintiff - Appellee

v.

GWENDOLYN GENE LAYTON; TROYLYNN ANN LAYTON,

Defendants - Appellants

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 4:14-CV-572

Before DAVIS, JONES, and HIGGINSON, Circuit Judges.

PER CURIAM:*

Gwendolyn Gene and Troylynn Ann Layton sued Ledford E. White, their 

longtime attorney and friend, alleging that he defrauded them in connection 

with two transactions. After a jury returned a verdict against White, his 

professional-liability insurer, Wesco Insurance Company, sought a declaratory 

judgment of no coverage under White’s policy. The district court granted 

summary judgment in favor of Wesco, and we AFFIRM.

 

* 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

March 26, 2018

Lyle W. Cayce

Clerk

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I.

A.

On August 16, 2013, Gwendolyn Gene and Troylynn Ann Layton 

(together, the “Laytons”) filed a lawsuit in Texas state court against Ledford 

E. White, among others. The Laytons alleged common-law and statutory fraud, 

negligent misrepresentation, breach of contract, and breach of fiduciary duty,

among other claims.

Specifically, the Laytons alleged that White—their longtime attorney, 

advisor, and friend—had defrauded and stolen from them in connection with 

two transactions. First, the Laytons loaned White, at his request, nearly 

$400,000 to develop a property in Crowley, Texas. According to the Laytons’

original petition, White never repaid those loans and lied about the existence 

of mineral rights on the property, even though he collected tens (if not 

hundreds) of thousands of dollars through the lease and sale of mineral 

interests.1 Second, White persuaded the Laytons to lend money to another of 

White’s clients to invest in his used car business. White represented that he 

would act as an intermediary to facilitate loans totaling $400,000 and would 

personally hold car titles to ensure the Laytons were repaid. Payments stopped 

after the Laytons had received roughly $50,000 in principal and interest. White 

assured the Laytons he would pursue the borrower, and even told them 

(falsely) that their loan was secured by the borrower’s house. He then told the 

Laytons he had foreclosed on the borrower’s house but could not repay them 

because the house had diminished in value. According to the Laytons’ original 

petition, these were all lies. The borrower had long since repaid the loan, and 

White had, in fact, pocketed the money for himself.

 

1 The Laytons’ original petition also alleged that White’s former law partner owned 

half of the Crowley property by virtue of a constructive trust imposed after a jury found White 

liable for fraud and breach of fiduciary duties. 

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The Laytons’ original petition repeatedly emphasized that White was an 

attorney. It described White as “a board certified real estate attorney who has 

served as the Laytons’ attorney, trusted advisor and confidant.” The very first 

paragraph of the petition’s “Factual Background” section reiterated that 

allegation. In stating their common-law fraud cause of action, the Laytons 

alleged that White owed them fiduciary duties because of both their friendship 

and attorney-client relationship. Moreover, in alleging breach of fiduciary 

duty, the Laytons explained first that White owed them a fiduciary duty

because of their attorney–client relationship, only then adding that they also 

had a long-standing friendship. With respect to the used-car transaction, the 

Laytons alleged that White owed them fiduciary duties because he served as 

an intermediary, receiving money for their benefit.

On May 30, 2014, the Laytons filed an amended petition. Their amended 

petition asserted a negligence cause of action against White for failure to act 

reasonably in his role as attorney, advisor, and confidant to the Laytons. They 

alleged, among other things, that White was negligent for failing to reveal the 

extent of his conflicts of interest to them and failing to obtain the Laytons’

written consent before entering into a transaction with them. The amended 

petition also added White’s firm, Ledford E. White, P.C. (“White, P.C.”), as a 

defendant. The amended petition concerned the same allegedly fraudulent 

transactions as the original petition. However, with respect to the used car 

transaction, the amended petition specifically alleged White provided “shoddy” 

legal advice and that White promised the Laytons he would hold their money 

in his firm’s escrow account.

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A jury found White and White, P.C., liable for common-law fraud, breach 

of fiduciary duty, theft, negligence, and civil conspiracy.2 The trial court 

entered final judgment on August 28, 2015. The court awarded actual damages 

in the total amount of $680,000. Although the jury found the Laytons were 

contributorily negligent, the trial court did not reduce the judgment. 

B.

After the Laytons filed their lawsuit, White (on behalf of himself and 

White, P.C.) purchased a claims-made-and-reported Lawyers Professional 

Liability Policy (the “Policy”) from Wesco Insurance Company. The Policy 

provided coverage from March 14, 2014, to March 14, 2015.3 As relevant here, 

Wesco agreed to indemnify and defend White and White, P.C., against claims 

“first made against the Insured and reported to the Company during the policy 

period.” The Policy included the following “condition precedent” to coverage:

1. The Insured, as a condition precedent to the obligations of the 

Company under this policy, shall give written notice to the 

Company during the policy period:

a. of any claim made against the Insured during the policy 

period;

b. of the Insured’s receipt of any notice, advice or threat, 

whether written or verbal, that any person or 

organization intends to make a claim against the Insured;

c. Any act or omission that may reasonably be expected to 

be the basis of a claim against the Insured.

The Policy defined “claim” as follows:

“Claim” means a written or verbal demand received by the Insured 

for money or services arising out of an act or omission . . . in 

 

2 The jury found that White alone committed statutory fraud and negligent 

misrepresentation. 

3 Although White had maintained professional liability insurance for himself and his 

firm since March 1997, Wesco did not issue those policies. 

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rendering of failing to render legal services. A demand shall 

include the service of suit . . . .

Under the Policy, “legal services” included, among other things, services 

performed “in a fiduciary capacity.”

White first submitted the Laytons’ original petition (filed August 16, 

2013) to Wesco on May 8, 2014. Wesco’s Federal Rule of Civil Procedure 

30(b)(6) representative testified that Wesco denied coverage because the claim 

was first made prior to the beginning of the policy period. Wesco alternatively 

based its denial of coverage on the position that White and White, P.C.’s acts 

did not involve “legal services.” The Laytons’ counsel subsequently submitted 

their amended petition to Wesco to place it on notice. Wesco once more denied 

coverage and subsequently filed this lawsuit, seeking a declaratory judgment 

of no coverage under the Policy. The district court granted summary judgment 

in favor of Wesco on March 10, 2017. It concluded that the Laytons first made 

a “claim” within the meaning of the Policy when they filed their original 

petition in state court. Thus, it held the claim was not “first made” during the 

policy period and was excluded from coverage. The court found that, even if the 

claim had been made within the policy period, the fortuity doctrine would 

preclude coverage because White knew or should have known his conduct 

would likely expose him to liability when he bought the Policy.

The Laytons timely appealed.

II.

“We review a grant of summary judgment de novo, applying the same 

standard as the district court.” Vela v. City of Houston, 276 F.3d 659, 666 (5th 

Cir. 2001). A court must enter summary judgment if “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). A genuine dispute of material fact exists 

only if a reasonable jury could find in the non-movant’s favor. Vela, 276 F.3d 

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at 666. In determining whether such a dispute exists, we view the evidence in 

the light most favorable to the non-movant. Id. The interpretation of an 

insurance contract is a question of law, which we review de novo. Royal Ins. 

Co. of Am. v. Hartford Underwriters Ins. Co., 391 F.3d 639, 641 (5th Cir. 2004).

III.

Federal jurisdiction in this case is based on diversity of citizenship. Thus, 

Texas law governs. See RSR Corp. v. Int’l Ins. Co., 612 F.3d 851, 857 (5th Cir. 

2010). Under Texas law, an insurance policy is a contract, see Ruiz v. Gov’t 

Emps. Ins. Co., 4 S.W.3d 838, 841 (Tex. App.—El Paso 1999, no pet.), and the 

ordinary rules of contract interpretation apply, Liberty Surplus Ins. Corp. v. 

Exxon Mobil Corp., 483 S.W.3d 96, 100 (Tex. App.—Houston [14th Dist.] 2015,

pet. denied). The primary goal of the court is to give effect to the intention of 

the parties as expressed in the policy. See id. If a court determines the policy 

is ambiguous, then it must resolve those ambiguities in favor of the insured. 

State Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998). “A 

policy is unambiguous, as a matter of law, if the court can give it a definite 

legal meaning.” Id.

The Policy in this case involves two different duties: the duty to defend 

and the duty to indemnify. See Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 

589, 594 (5th Cir. 2011) (citing D.R. Horton-Tex., Ltd. v. Markel Int’l Ins. Co., 

300 S.W.3d 740, 743 (Tex. 2009)). These duties are distinct and should 

generally be decided separately. See id. (citing D.R. Horton, 300 S.W.3d at 743). 

Under Texas law, a court determines an insurer’s duty to defend according to 

the “eight-corners rule” by looking only to the insurance policy and the thirdparty complaint. Id. In determining the duty to indemnify, however, the court 

is not bound by the eight-corners rule but may instead look to the evidence 

introduced by the parties during the coverage litigation. See D.R. Horton, 

300 S.W.3d at 741. Although “one duty may exist without the other,” id. at 743,

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the same reasons that negate one duty may also negate the other, see Farmers 

Tex. Cty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997).

The fortuity doctrine is premised on the principle that an insured 

“cannot insure against something that has already begun and which is known 

to have begun.” Two Pesos, Inc. v. Gulf Ins. Co., 901 S.W.2d 495, 501 (Tex. 

App.—Houston [14th Dist.] 1995, no writ) (citations omitted). The fortuity 

doctrine precludes coverage for known losses or losses in progress. Scottsdale 

Ins. Co. v. Travis, 68 S.W.3d 72, 75 (Tex. App.—Dallas 2001, pet. denied); Two 

Pesos, Inc. v. Gulf Ins. Co., 901 S.W.2d 495, 501 (Tex. App.—Houston [14th 

Dist.] 1995, no writ). “A ‘known loss’ is one that the insured knew had occurred 

before the insured entered into the contract for insurance,” Warrantech Corp. 

v. Steadfast Ins. Co., 210 S.W.3d 760, 766 (Tex. App.—Fort Worth 2006, pet. 

denied), whereas a “loss in progress” is an “ongoing progressive loss” that the 

“insured is, or should be, aware of . . . at the time the policy is purchased,” 

Scottsdale Ins. Co., 68 S.W.3d at 75. A final judgment against the insured is 

not required for the fortuity doctrine to apply. See Warrantech, 210 S.W.3d at 

766. The key inquiry is “not whether the insureds actually knew of the 

underlying loss or potential liability, but rather whether they knew, at the 

inception of coverage that they were ‘engaging in activities’ which might 

reasonably be expected to expose them to or result in liability.” RLI Ins. Co. v. 

Maxxon Southwest Inc., 108 F. App’x 194, 199 (quoting Franklin v. FugroMcClelland (Sw.) Inc., 16 F. Supp.2d 732, 737 (S.D. Tex. 1997)).

Whether the fortuity doctrine precludes coverage under the Policy 

depends on whether the Laytons’ first petition alleged sufficient facts to put 

White on notice a loss had occurred before the Policy’s coverage period had 

begun. Under Texas law, application of the fortuity doctrine in the duty-todefend context is resolved by the eight-corners rule. Colony Nat. Ins. Co. v. 

Unique Indus. Product Co., 487 F. App’x 888, 893 (5th Cir. 2012). The Laytons’ 

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original petition was sufficient to put White on notice of an “ongoing loss” at 

the time the Policy was purchased. The original petition contained a breach of 

fiduciary duty claim—a claim falling directly within the Policy’s definition of 

legal services. Moreover, the original petition was replete with references to 

White’s status as an attorney. It identified White as an attorney in its 

preliminary statement and then again just one paragraph later in the very first 

paragraph of the Factual Background section. Two of the causes of action 

alleged White owed the Laytons a fiduciary duty as their attorney. The 

Laytons even concede in their brief on appeal that White acted as their attorney

in connection with both fraudulent transactions. The allegations in the 

Laytons’ original petition were thus more than sufficient to put White on notice 

of an ongoing, potential loss. See Warrantech Corp., 210 S.W.3d at 766–68.

Such knowledge may also be imputed to White, P.C. Under Texas law, 

the knowledge of a corporation’s representative is imputed to the corporation. 

See Hirsch v. Tex. Lawyers’ Ins. Exch., 808 S.W.2d 561, 563 (Tex. App.—El 

Paso 1991, writ denied). White testified he was the president and sole 

principal of White, P.C. since its founding. By the time the Laytons filed their 

petition, White had parted ways with his law partner. Further, he was the only 

attorney from White, P.C. with any relationship to the fraudulent transactions. 

Because the original and amended petitions are based on the same facts and 

concern the same two fraudulent transactions, that the Laytons first named 

White P.C. in the amended petition is irrelevant. And while the Laytons added 

allegations that funds from both transactions were placed into the firm’s 

escrow account, those facts were already known to White and, thus, to White, 

P.C. See id. As a result, the fortuity doctrine precludes coverage for White, 

P.C., as well. See Travis, 68 S.W.3d at 76–77; Two Pesos, 901 S.W.2d at 502; 

Maxxon Sw., 108 F. App’x at 198.

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The Laytons contend a fact issue exists because White testified at his 

deposition he did not believe a covered claim had occurred. But White’s selfserving deposition testimony is insufficient to create a genuine issue of 

material fact here. See, e.g., Jackson v. Cal-Western Packaging Corp., 602 F.3d 

374, 379 (5th Cir. 2010) (finding the plaintiff’s “self-serving statements that he 

did not commit sexual harassment” were “insufficient to create a triable issue 

of fact as to whether Cal-Western fired him because of his age” because the 

truth or falsity of another employee’s complaint is not material to “whether the 

employer reasonably believed the employee’s allegation and acted on it in good 

faith.” (internal citation omitted)). It is immaterial whether White believed a 

covered claim existed. See Scottsdale Ins. Co., 68 S.W.3d at 77 (“The key 

question [the fortuity doctrine asks] is whether the wrongdoing occurred before 

or after the purchase of the insurance.”). And to the extent White believed the 

loss was not covered, that belief was unreasonable because the original petition 

alleged a breach of fiduciary duty, which fell within the Policy’s definition of 

covered legal services. Even accepting as true White did not know of a loss or 

loss in progress, he certainly knew of the underlying acts and so should have

known of a loss that was ongoing at the time the Policy was issued. See 

Warrantech Corp., 210 S.W. 3d at 766 (citations omitted). The fortuity doctrine 

precludes coverage under these circumstances.

The only case the Laytons cite in support of their argument that White 

had to be aware of coverage is not to the contrary. See Roman Catholic Diocese 

of Dall. ex rel. Grahmann v. Interstate Fire & Cas. Co., 133 S.W.3d 887 (Tex. 

App.—Dallas 2004, pet. denied). In that case, the court denied summary 

judgment because there was a dispute of fact over whether the insured was 

aware its employee had previously molested children. See id. at 895–96. By 

contrast, White was aware of both the wrongful conduct and the allegations 

contained in the original petition. The Laytons merely contend he was not (as 

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he claimed at his deposition) aware the lawsuit involved covered legal services. 

Appellants cite to no case holding such awareness is required to trigger 

application of the fortuity doctrine. 

In sum, we conclude the fortuity doctrine bars coverage for defense and 

indemnity. Because that holding is sufficient to grant summary judgment, we 

need not reach the alternate ground the district court relied upon in granting 

summary judgment. See, e.g., Shamloo v. Miss. State Bd. of Trs. of Insts. of 

Higher Learning, 620 F.2d 516, 524 (5th Cir. 1980) (“[C]ases are to be decided 

on the narrowest legal grounds available.”).

IV.

For the foregoing reasons, we AFFIRM the judgment of the district 

court.

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