### INTHE UNI TED S TATESCOU RT OFAPPEALS FORTHEFIFTH CIRCU IT

N o. 08- 20532
TR I NI TYUNI VERS AL I NSURANCE COM PA NY; UTI CA NAT I ONAL I NSURANCE; NATI ONAL AM ERI CAN I NSURANCE COM PA NY, S UBROGEES OF LA CY M AS ONRY I NC. , P la in tiffs SA p p ell a n ts S C ross - A pp el l ees v. E M P L O Y E R S M U T U A L C A S U A L T YC O M P A N Y , D e fe nda ntSA pp el l ee S Cro s s - Appe l l ant
A p p ea lf

rom the U n i tedS tates D i stri ct C ou rt f or th e Sou t h ern D i st ri ctof T exas
B ef ore JO L LY , D eM O S S , an d P R A D O , C i rcui tJu dg es . P R A D O , C i rcui tJu dg e: Thi s a ppe alpr e s e nt s a n i s s ue o f f i r s ti m pr e s s i o n. I n Mi d- Cont i ne nt Insura n ce Co. v. L i berty Mu t u al Insura n ce Co. , 2 36 S. W
. 3d7 65 (Tex
. 2 00 7) , t he T ex a s S u p rem e C ou rt he l dtha t if rele v a n t in s u ra n ce p oli ci es to a disp u te c ont a i n p r o r at a o r“ ot heri nsur ance ” c l ause s, and a c o- pri m ar y i nsur erpays m o r e t han i t s pr o r at a po r t i o n o f as e t t l e m e ntt o i ndem ni f y an i ns ur e d a nd an ot h er co- pri m ary i n surer u n derpa ys, then the overpa yi n g i n surer c an n otseek rei m bu rsem en tf

rom t h e un derpa yi n g i n surer u n der t h eori es of contr ibu t i on or sub rog at i o n. I n t hi s a ppe al , w e m us tde c i de w he t he rt he ho l di ng i n Mi dUnited States Court of App eals

Fifth Circuit 

### F I L E D Janua ry 4, 2010 Cha rl es R. F ulb ru g e II I ClerkN o. 08- 20532

2 Cont i ne ntex te n d s to a n in su re r’s d u tyto d e fen dits in su re d
. If Mi d- Cont i ne nt doe s notapply, t hen w e m u st d ec i de w het heri nsur ance c om pani es t hatpay d efen se co sts m a y reco u p a p ortionof th ose costs from a co -i n su rer th a t fa i l s to de fe nd ac o m m o n i ns ur e d. For t he f

oll ow i n g r eas ons , w e a f f i r m t he di st r i c tc our t ’ s f i ndi ng t hat D efen dan t–A p p ell ee – C ross -A p p ell a n t E m p l oy ers M u tu a lC a su a l ty C o. (“ E M C ”) has aduty t o d efen d i t s i ns ur e d i n t he und e r l yi ng s ui t . H o w e ve r , b e c aus e t he d istr ict co u rt e rr e dina p p lyin gth e r u le o f Mid -Co n tin en t to p r o h ib it P l ai n t i ffs–A pp el l an t s–C ross - A pp el l ees Tri n it y U n iversalI n suran ce C o. , U t i ca N a tio n a l In s u r a n c e , a n dN a tio n a l A m e r ic a n In s u r a n c e C o . (co lle c tiv e ly

“A pp el l an t s” ) f

rom rec overi n g defense cos t s, w e rem an d f or a det erm i n ati on of th o s e co s ts . W e d o n o t r e a c h th e p a r tie s ’a n c illa r ys u b r o g a tio n is s u e .

I . F A CT UA L A ND P ROC E DUR A L B A CK GRO UND A. Fac t ualBac kgr ound A p p ell a n ts an dE M C ea ch i ssu e d c o m m ercial gen era ll i a b i l i ty (“ C G L ”) i ns ur a nc e p o l i c i e s t o La c y M a s o nr y , I nc . , c o v e r i ng La c y M a s o nr y whi l e i tw as e nga ge d as t he m as o n i n t he de s i gn, c o ns t r uc t i o n, a nd r e no va t i o n o f M c K e nna M em ori alH ospi t al ( “M cK en n a”) i n N ew B rau n fel s, T exas. E ach pol i cy obl i gated t he i ss ui ng i nsur ertoi ndem ni f y L ac y M as onr y f

or“s um s t hat[Lacy M as onr y] becom es l egally obl i gated to pa y as dam ages becau se of ‘bo d il yinj u ry’or
‘ pr o pe r t y da m ag e ’” t o w hi c h t he poli c y ap pl i e d. Eac h po l i c y f ur t he ro bli ga t e d t he i ssui n g i n surer “t o defen d [ L acy M ason ry] againstan y ‘ sui t ’seeki n g t h ose da m ages. ” T h e f

ou r pol i ci es contai n ed m ater i al l y i den t i cal pro rat a o r “ot h er in s u r a n c e ” c la u s e s u n d e rw h ic h “e a c h in s u r e rco n tr ib u te s e q u a l a m o u n ts u n til i tha s pai d i t s app l i cabl e l i m i tof i n suran ce ornon e of t h e l oss rem ai n s, w h i chever com es f i rst . ” E M C ’ s pol i cy c o n t ai n ed a “D esi gn ated W ork endor se m ent/exc l usi on” (t he “D es i gnat ed W or k exc l usi on” ) l i m i t i ng i t s c ove r age bye xc l udi n g an y i nj ur i e s a r i s i ng o uto f Lac y M as o nr y’ s c o ns t r uc t i o n,N o. 08- 20532

3 i n st al l ati on , app l i cat i on , or ot h er s ervi ce of an “ exte rio r i n sul ati on an d f i n i sh syst em ” (“ E IFS ” ) , or an y w ork L acy M a so n ryperf orm ed on an y exter i or com pon en tof

a bu i l di n g i f

an E IFS w as usedon an y pa rtof t h at s t ructure. M cK en n a sued L acy M ason ry an d s everal ot h er com pa n i es, al l egi n g each w asr e s po ns ibl e f

or propert y da m age cau sed du ri n g t h e desi gn , const r uc t i o n, a nd i m pr o ve m e nto f

t he hos pit albui l di ng. La c y M as o nr y t e nde r e d t he de fe ns e o f t he sui tt o it s i n surers. A pp el l an t s, a l on g w i t h a f ou rt h i n surer t h at i s not i n volved i n t h i s c a s e , a g r e e dt o de fe n dL a c yM a s o n r ya n ds h a r e dt h e d e fe n s e c o s t s . EMC, h ow ever, den i ed that itha d a d u t y t o d efen d t h e su i tu n der i t s pol i cy an d ref u sed t o parti ci pa t e i n or contribu t e to the defense. T h e p art i ci pa t i n g i n surers s et t l ed w ith M c K e n n aw h ile th is a p p e a l p r o g r e s s e d
. B. Pro c e dur alBac kgr ound A pp el l an t s s u ed E M C i n t h e di st ri ctcourt , al l egi n g cl ai m s f or breach of c o n t r a c t , c o n t r ib u t i o n , a n da t t o r n e y ’ s fe e s , a n ds e e k i n gad e c l a r a t i o n t h a tEM C ow e s a d u tyto defen d L acy M ason ry i n t h e M cK en n a suit
. Th e parti es c ross m ovedf or su m m ary j u dg m en t . Th e di st ri ctcourtgran t ed A pp el l an t s’m ot i on f or a decl ar at o r y j udg m e nti n pa r t , f i ndi ng t hatEM C had a dut y t o de fe nd La cy M ason ry i n t h e un derl yi n g sui t . Th e di st ri ctcourtden i ed A pp el l an t s’request f or a di scr et i on a ry aw ard of att orney’ s f

ees, cit i n g t h e T exas D ecl arator y J u d g m e n t A c t. S eeT EX . C IV . P RA C . & R EM . § 3 7
. 0 0 9
. De s p i t e f i n d i n gt h a tEM C h a dv io la te dits d u ty to d e fe n d , th e d is tr ic t c o u r t d is m is s e dA p p e lla n ts ’cla im s on t h e m erit s, f

i n di n g t h at, un der Mi d- Cont i ne nt , A pp el l an t s c ou l d n otrec over d efen se co sts from E M C u n d er eit h er con trib u ti on or su b rog a ti on the ories. B oth p a r tie s tim e lya p p e a le d
.

I I . J URI S DI CT I ON AND S TA NDARD OF RE VI EW W e ha ve j u ri sdi ct i on over t h i s app ealf rom a f i n al o rd e r o f the dis t ri ct cou rt u n d er 28 U
. S. C
. § 1291. W e r evi ew de novo a di s t r i c t c o ur t ’ s award of s u m m a r yju d g m e n t, a p p ly in gth e s a m e s ta n d a r da s th e d is tr ic t c o u r t. F ordN o. 08- 20532

4 Mo t o rCo. v . Tex . D e

p’ tof Tr ans p. , 264 F
. 3d493 , 498 ( 5th C i r. 200 8)
. Su m m ary ju d g m e n t is p r o p e rw h e n “t h e p le a d in g s , th e d is c o v e r y a n d d is c lo s u r e m a te r ia ls on f i l e, and any af

f i davi t s sho w t hatther e i s no ge nui ne i ss ue as t o a ny m at er i al fact an dtha t th e m ov a n t i s en titl ed to j u d gm en t as a m a tt e ro f l a w . ” F ED . R. C IV . P. 56(c)
. “A gen u i n e i ssue of m ater i al fact exi st s w h en t h e evi den ce i s s u ch th a t a rea son a b l e j u ry cou l d retu rn a ve rd i ct for th e no n -m ov i n g p a rty.” G ate s v. T ex. D ep’ tof Prot ect i ve & R egulat ory Servs. , 537 F. 3d 404, 417 ( 5t h C i r . 2008) (c i t i ng Ande rs o n v . Li be r tyLo bby , I n c. , 4 7 7 U .S
. 2 4 2 , 2 4 8 (19 8 6 ))
. “ On cros s- m ot i on s f

or s u m m ary j u d gm en t , w e revi ew each p art y’ s m ot i on in d e p e n d e n tly , v ie w in gt h e e v id e n c e a n din fe r e n c e s in th e lig h t m o s t fa v o r a b le to the n on m ov i n g p a rty.” F ord Mot or Co. , 264 F. 3d at498. III . A N A L Y S IS A . E M C ’ s D ut y t o D ef end L acy M as onry E M C a ss e rts th a t w e n e e dn o t re a ch th e a p p li c a t io nof Mi d- Cont i ne nt becau se t h e di st ri ctcourterr ed byf i n di n g t h at E M C ha d a du t y t o defen d L acy M ason ry i n M cK en n a’ s sui t . E M C contends that t h e D esi gn ated W ork excl u si on e x e m p ts it fr o m d e fe n d in gL a c yM a s o n r y . T h is a r g u m e n t la c k s m e r it. 1 . An I ns ur e r ’ s D ut y t o Def e nd U n der a t ypi c alCG L po l i c y an i ns ur e ra s s um e s t w o di s t i nc tdut i e s : t he d u ty to in d e m n ify a n dth e d u tyto d e fe n d
. S ee O h i o Cas. I n s. Co. v. Ti m e W

arn er E n t m ’ tCo. , 244 S. W
. 3d 885, 890 (Tex. A pp. — D al l as 2008, w r i tdeni ed)
. W her eas t he “ dut y t o i ndem ni f y pr ot ec t s i nsur eds ‘f r om paym entof

dam ages t hey m ay be f ou n d l egally obl iga ted to pay, ’” t h e du t y t o defen d “‘ protec t s t h e sam e parti es a ga i n st t h e ex p en se o f a n y su i t seek i n gd a m a ge s’cov ere dbythe po l i cy . ” Pi ne O ak B u i l d ers, I

n c. v. G reatA m . L loyd s I n s. Co. , 279 S. W
. 3d 650, 655 n. 28 (Tex. 2009) ( quot i ng Heyden Newport Ch em . Corp. v. S
. G en. I n s. Co. , 387 S. W
. 2d 22, 2 5 (T e x . 1 9 6 5 )). T h e T exas S u prem e C ou rtrec en t l y sum m ari zed the du t y t o defen d u n derN o. 08- 20532

5 T e x a s la w . S ee Z u ri ch A m . In s. Co. v. Noki a, I n c. , 268 S. W
. 3d 487, 490
S 91 (Tex. 20 08 )
. “An i ns ur e rm us td efend it s i ns ur e d if apl ai nt i f

f ’ s fac t uala l l e ga t i o ns po t e nt i all y s upp o r ta c o ve r e d c l ai m , w hi l e t he fac t s a c t uall y e s t ab l i s he d i n t he u n d erlyingsu i t de term i n e w h eth er th e insu rer m u st i n d em n i fy i ts i n su red
. ” I d. (c i t i ng G u i d eO n e E l i t e I n s. Co. v. Fi eld er R d
. B ap t i stCh u rch , 197 S. W
. 3d 305, 3 1 0 (T ex . 2 0 0 6 )). T h ere fore, “an i n su rer m a y h a ve a d u ty to d efen dbu t, ev en tu a l l y, no ob liga ti on to i n d em n i fy. ” Id
. (c i t i ng F a rm er s T

ex . Co u n ty Mu t. In s. Co . v . G riffin , 9 5 5 S .W .2 d8 1 , 8 2 (T e x . 1 9 9 7 )). T ex a s f oll ow s th e “eigh t- corn ers ru l e,”i n w h i ch “‘ a n i n s u r er’ s d u ty to de fe nd i s de t e r m i ne d b y t he t hi r d- pa r t y pl ai nt i f f ’ s pl e ad i ngs , c o ns i de r e d i n l i ght o f t h e pol i cy provi si on s, w i t h ou tregard t o t h e t ruth or fal si t y of t h ose a lle g a tio n s .’” I

d. at491 ( quot i ng G ui de O ne , 197 S. W
. 3dat 308 )
. Acourt “r e s o lv e [s ] a ll d o u b ts re g a r d in gth e d u tyto d e fe n dinfa v o ro f th e d u tya n d
. . . con stru e[s] the plea d i n gs l ib era l l y.” I d. (c i t at i o ns o m i t t e d)
. “ ‘W he r e t he com pl ai n tdoes not s t ate fact s s u f f i ci en tt o cl earl y bri n g t h e c a se w i t h i n or w i t ho utt he c o ve r ag e , t he g e ne r alr ul e i s t hatt he i ns ur e ri s o bli ga t e d t o de fe nd i f t he r e i s , po t e nt i all y, ac as e und e rt he c o m pl ai ntw i t hi n t he c o ve r ag e o f t he p oli cy . ’” I

d. ( quot i ng Heyden Newport , 3 8 7 S .W .2 da t 2 6 (c ita tio n o m itt e d)). The co ur tm us tr e s o lvea l ldo ubt s r e ga r di ng c o ve r ag e i n fav o ro f t he i n sured, bu titcan n ot“l ook ou t si de t h e p l ead i n gs, or i m agine fact u alsc en ari os w h i ch m i gh t t ri gg e rc o ve ra ge . ” Nat ’lUni on Fi r eI ns. Co. of

Pi t t s burgh, Pa. v. Merc h s. F

astMot or Lines, I

n c. , 939 S. W
. 2d 139, 141–42 (Tex. 1997)
. Al t hough th e b u r d e n is ty p ic a lly“o n th e in s u r e dto s h o w th a t a cla im a g a in s th i m is potenti al l y w i t h i n t h e scope of coverage un der t h e pol i ci es, ” w h en “t h e i n surer rel i es on t h e pol i cy’ s excl u si on s, i tbears t h e bu rden of provi n g t h at one or m ore of t h ose ex cl u sion s ap p l y.” Fe de r at e d Mu t . I ns . Co. v . G r ape v i neExc av at i o n, Inc. , 197 F
. 3d720 , 723 ( 5th C i r. 1 999 )
. W h en a sses si n g t h e insurer’ s prof fered excl u si on , “ ‘ [t] h e courtm u stadop tt h e c o n stru ct i on of an excl u si on ary cl au seN o. 08- 20532

6 ur ge d b y t he i ns ur e d a s l o ng as t hatc o ns t r uc t i o n i s no tunr e as o nab l e , e ve n if t he con str u ction urgedby the i n surer app ears t o be m ore r eason able or a m ore a ccu ra te refl ectio n o f th e p a rti es’i n ten t. ’” Ut i c aNa t ’lI n s . Co . of

T ex . v . A m. Ind em . Co. , 141 S. W
. 3d 198, 202 (Tex. 2004) ( quot i ng Nat’ lUn i on Fi re Ins. Co. of P i t t sbu rgh, Pa. v. Hu d son E n ergy Co. , 8 1 1 S .W .2d 5 5 2 , 5 5 5 (T e x . 1 9 9 1 )). Th us, i n det er m i ni ng w het herE M C had a dut y t o de fend Lacy M as onr y, w e m us tc o m pa r e t he a l l e ga t i o ns i n M c K e nna’ s Fo ur t h Am e nde d Pe t i t i o n (t he

“ P et i t i o n” ) t o Lac y M as o nr y’ s EM C i ns ur anc e po l i c y (t he “ EM C Pol i c y” ) a nd de t e r m i ne w he t he rt he a l l e ga t i o ns i n t he Pe t i t i o n p ot en t i all y fallw i t hi n t he s c o p e o f th e p o lic y ’ s co v e r a g e . Se e Zur i c h Am
. I ns . Co. , 268 S. W
. 3d at491; L am ar Hom es, I

n c. v. Mi d

- Con t i n ent Cas. Co. , 2 4 2 S .W .3 d1 , 1 3 (T e x . 2 0 0 7 ). 2. T h e E M C P ol i cy T h e E M C P o li cy is a st an da rd C G L pol i cy t h at provi des i n suran ce c ove r age f

or“ pro per t y dam age” ca use d by a n “ oc c urr enc e. ” As t he Texas S u prem e C ou rtrec en t l y recogni zed w h en const rui n g a si m i l ar pol i cy, “ cl ai m s f or d a m a g e ca u s e db ya n in s u r e d ’ s d e fe c tiv e p e r fo r m a n c e o rfa u ltyw o r k m a n s h ip m ayc o ns t i t ut e a n ‘ o c c ur r e nc e ’w he n ‘ pr o pe r t y da m ag e ’r e s ul t s f r o m t he u n e x p e c t e d , u n f

o r e s e e n o ru n d e s i g n e dh a p p e n in go rc o n s e q u e n c eo f t h ein s u r e d ’s n eg l i ge n t beh a vior. ” L am ar Hom es, I n c. , 2 4 2 S .W .3d a t 1 6 (qu o ta tion s o m itted ). Tw o po r t i o ns o f

t he EM C Pol i cy a re pa r t i c ul ar l y r e l e va nt : ( 1) t he b o dyo f t he pol i cy i t sel f

( an d the defi n i t i on s of term s therei n ) a n d ( 2) the D esi gn ated W ork e x c lu s io n . Th e body of t he E M C Pol i c y def i nes c ove r ed “ pro per t y d a m a ge ” as

“ [ p] hysi c ali nj ury t o t angibl e pr ope r t y, i ncl udi ng al lr es ul t i ng l os s of useof t hat p r o p e r ty” o r“[l]o s s o f u s e o f ta n g ib le p r o p e r tyth a t is n o t p h y s ic a llyinju r e d .” H ow ev er, th e D e sign a tedW ork ex cl u sion ex em p ts f rom cov era ge “‘ p rop erty da m ag e ’i nc l ude d i n t he ‘ pr o duc t s /c o m pl e t e d o pe r at i o ns ha z ar d’a nd a r i s i ng o ut o f ‘y o u rw o r k ’s h o w n ” in as c h e d u le in c lu d e din th e e x c lu s io n .N o. 08- 20532

In the Designated Work exclu sion , “if” is writtenas “in.” Rea ding this word as “in” 1 would limitthe scope of the Designated Work exclu sion . This readingis problematic, however, as it renders the remainder of the sentenc e nonsen sical . Most likely, this is atypogr aphical error. Regardle ss, EMC h a s a dutyto defen d Lacy Ma sonryevenif thiswordi s rea d a s “in .” 7 T h e E M C P o lic yd e fin e s a “ p r o d u c ts /co m p le te do p e r a tio n s h a z a r d ” a s “a ll

. . . ‘ pr o pe r t y da m ag e ’o c c ur r i ng away f r o m pr e m i s e s yo u o w n o r r e nta nd a r i s i ng o uto f ‘yo urpr o duc t ’o r‘yo urw o r k, ’” su bj e c tt o c e r t ai n e xc e pt i o ns no tr e l e va nt he r e . The EM C Pol i c y al s o de f i ne s “yo urw o r k” a s “( 1) [ w ] o r k o ro pe r at i o ns pe r f o r m e d b y yo u o ro n y o urb e half; a nd ( 2) [ m ] at e r i al s , pa r t s o re qui pm e nt furn i sh edi n con n ectionw i th su ch w ork or op era ti on s. ” The D e s i gna t e d W o r k e xc l us i o n a dds asc he dul e t hatsp e c i f i e s w he n“yo ur w ork” i s “ D es i gnat ed W or k” ex c l uded f r om c ove r age. The ex c l usi on e xem p ts

“ [ a] n yw o rk or operati on s w i t h res pect t o an y exter i or c om pon en t , f i xture or fe a tu r e o f a n ys tr u c tu r e i[f] a n [E IF S ] is u s e do n a n yp a r t o f th a t s tr u c tu r e .” 1 T h e sc h edu l e f

u rt h er def

i n es an E IFS as “ an ext eri or c l ad di n g or f i n i sh syst em u sed on an y pa rtof

an y st ructure” consi st i n g of cer t ai n m ater i al s. A s t h e di st ri ctcourtsucci n ct l y sum m ari zed, t h e D esi gn ated W ork exc l usi on i n t he E M C Pol i c y: e x c lu d es co ve ra ge f

or inju ri es to or loss of u se o f tan gible p rop erty o n p r e m is e s n o t o w n e do rre n te db yth e in s u r e d , L a c yM a s o n r y , if t ho s e i nj ur i e s a r i s e o uto f e i t he ri t s c o ns t r uc t i o n, i ns t all at i o n, appl i c at i on, orothers ervi c e o f an E I FS , and al soex c l udes c ove r age f o ra ny w o r k o ro pe r at i o ns pe r f o r m e d b y Lac y M as o nr y o n a ny exter i or c om pon en t s orf eatures of

a st ructure i f E IFS i s used on t h at s t ructure oran y pa rtof t h e st ructure. Tri n i ty Un i vers al Ins. Co. v. E mploye rs Mu t . Cas. Co. , 586 F. Supp. 2d 718 , 723 (S .D
. T e x . 2 0 0 8 ). 3. C om pari s on of t he E M C P ol i cy t o t he P et i t i on Ap pe l l a n t s a n dEM C d i s p u t e t h e c o n s t r u c t i o n o f t h e P e t i t i o n . EMC c o n t e n d s th a tth e P e t it io n o n lya ll e g e s d a m a g e s a r is in gfr o m L a c yM a s o n r y ’s c ons t r uct i on of

an E I FS or i t s w or k on t he e xt er i orc om ponent s of a buil di ng t hatN o. 08- 20532

8 has a n EI FS, e i t he ro f w hi c h w ou l d bri n g i t s w o r k wi t hi n t he s c o pe o f t he D e s ig n a te dW o r ke x c lu s io n . A p p e lla n ts a r g u e th a t t h e P e tit io n p o te n tia lly al l eges property dam ages st em m i n g f rom L acy M ason ry’ s w ork on non - exter i or com pon en t s of

t h e bu i l di n g, w h i ch the E M C P ol i cy w ou l d cover. T h e d is tr ic t c o u r t fo u n dt h a t th e a lle g a tio n s in th e P e tit io n p o te n tia llyfa ll w i t h i n the scope of t h e E M C P ol i cy’ s coverage. W e a gree. Th e P et i t i on al l eged t hatLac y M as o nr y, a s t he “ m as o n f o rt he P r oj e c t [ , ]
. . . w as re s po ns ibl e fo rt he p ro p e r in sta ll a tion of al lm aso nryw ork, ” a n d list ed a w i de array of al l eged defec t s on vari ou s port i on s of t h e bu i l di n g, i n cl u di n g “ w ateri n f i l t rat i on caused by i m prop e rlyin st al l ed m ason ry. ” ( em ph asi s add ed. ) Th i s w ateri n f i l t rat i on c o ul d ha veb e e n c aus e d b y de fe c t s i n i nt e r i o rm as o nr y o rf r o m a so ur c e i ns i de t he buil di ng. I nde e d, t he Pe t i t i o n s pe c i f i c all y i de nt i f

i e s “w at e ri nf

i l t r at i o n a tt he i n t eri oran d exteri or bui l di n g en vel ope, ” w h i ch w ou l d li kely i n cl u de port i on s of t he b ui l di ng o t he rt han i t s e xt e r i o r . ( e m pha si s add e d. ) As pr e vi o us l y no t e d,

“ [w ] h ere th e com pl ai n tdoes not s t ate fact s s u f f i ci en tt o cl e a rlyb rin g t h e case w i t h i n or w i t h ou tt h e coverage . . . t h e i n surer i s obl i gated to defend i f t h ere i s, p o te n tia lly , aca s e u n d e rth e co m p la in t w ith in th e co v e r a g e o f th e p o lic y .” Heyden Newport , 3 87 S. W
. 2da t2 6 ( quo t at i o n m ar ks om i t t e d)
. I n t hi s ca s e , t he p o te n tia l cle a r lye x is ts . W e m u s t lib e r a llyco n s tr u e th e P e tit io n a n dre s o lv e a l la m b ig u itie s in fa v o ro f c o v e r a g e . Se eAl ls t at eI ns . Co. v . Hal l m an , 159 S. W
. 3d 640, 643 (Tex. 20 05 )
. Bec aus e t he a l l e ga t i o ns do no tc l e ar l y andunam bi guo us l y fallo ut s i de t he s c o p e o f t h e EM C Po li c y ’ s c o v e r a g e , t h e di s t r i c tc o u r tpr o p e r l yfo u n dt h a tEM C h a s a d u tyt o d e fe n dL a c yM a s o n r y . W e a ffir m t h e d is tr ic t c o u r t’s fin d in go n th is i ssue. B . T h e R u le o f M i d- Cont i ne nta s A p p li e d to D e fen se C o sts M i d-C on t i n e n t a n d L ibert y M u t u alw ere c o- pri m ary i n surers of K i n sel In d u s tr ie s . Mi d- Cont i ne nt , 236 S. W
. 3d at768
S 69
. Bot h M i d- Cont i ne nt ’ s a ndN o. 08- 20532

9 Libe r t y M ut ual ’ s i ns ur anc e po l i c i e s c o nt ai ne d a n “ o t he ri ns ur anc e ” cl aus e , a nd b oth i n su rers ass u m edresp on sibi l i ty for a pr o ra ta sh a re of K i n sel’ s l i a b i l i ty s te m m in gfr o m aca ra c c i d e n t. I d. at 76 9
. L ib ertyM u tu a len tered i n to s e tt le m e n t n e g o tia tio n s a n da g r e e d to s e tt le fo r$ 1 .5 m illio n . I d. M i d- Cont i ne nt c o nt r ibut e d o nl y $1 50 , 00 0 t o t he s e t t l e m e nt , l e av i ng Libe r t y M ut ualt o payt he b a la n c e . I

d. Libe r t y M ut uals ue d M i d- Cont i ne nti n Te xa s s t at e c o ur tt o r e c o ve rt he am o unti tha d c o nt r ibut e d t o t he s e t t l em ento ve ri t s pr o r at a s har e . M i dC on t i n en t rem oved t h e case t o federal di st ri ct court. T h e di st ri ct court f ou n d f or L ibert y M u t u al , rul i n g t h at th e subroga t i on cl au se i n L ibert y M u t u al ’ s pol i cy a llo w e ditt o r e c o v e rf r o m M id -C o n tin e n t o n K in s e l’ s b e h a lf. I d. M i d- Cont i ne nt a p p e a le d , a n d w e c e r tifie d th e q u e s tio n to th e T e x a s S u p r e m e C o u r t. L ib er ty Mu t . I n s. Co. v. Mi d

- Con t i n ent Ins. Co. , 4 0 5 F .3d 2 9 6 , 2 9 7 (5t h C ir. 2 0 0 5 ). T h e T exas S u pr e m e C ou rtrej ect ed L ibert y M u t u al ’ s c l ai m s f or contribu t i on an d f

ou n d t h at i td i d n oth ave a ri gh tof subroga t i on becau se Ki n sel w a s f u l l y in d em n i fi ed
. Mi d- Cont i ne nt , 236 S. W
. 3d at768, 772. The Texas Supr e m e Cour t c i t e d it s e ar l i e rde c i s i o n i n Tr aders & G e neralI nsur anceCo. v. Hi cks R u bber Co. , 169 S. W
. 2d142 (T ex. 194 3) , w h ere itheld th a tan “ ot h er i n suran ce” cl au se preclu des a cl ai m f or contribu t i on assert ed by on e co- i n surer a g a in s t a n o th e r . Mi d- Cont i ne nt , 236 S. W
. 3d at 772. The c our tal sonot ed t hat

“ t hi s dir e c tc l ai m f

o rc o nt r ibut i o n b e t w e e n c o - i ns ur e rs di sappe ar s w he n t he i n su ra n ce p oli ci es co n tain‘ oth er ins u r a n c e’or ‘ p ro ra ta’cl a u ses . ” I d. (cit ati on o m i t t e d)
. The c o ur tr e as o ne d: T h e ef fectof t h e pro r a ta cl au se precl u des a dir ectcl ai m f or con trib u ti on am on g in su rers be c ausethe c l ausem a k es th e con tracts s e ve r ala nd i nde pe nde n to f e ac h o t he r . W i t h i nde pe nde nt co nt r ac t ualo bli ga t i o ns , t he c o - i ns ur e r s dono tm e e tt he c o m m on obl i gati on requi rem en tof a contr ibu t i on cl ai m — each co- i n surer contract u al l y agreedw i t h t h e i n sured t o pa y on l y i t s pro r ata share of a c ove r ed l os s; t he c o- i nsur er s di d notc ont r ac t ual l y agr ee t o payN o. 08- 20532

10 e a c h o th e r ’ s p r o ra ta s h a r e . I d. (c i t at i ons om i t t ed)
. Thu s, t he c our thel d t hat “ a c o- i nsur erpayi ng m or e than its p r o p o r tio n a te s h a r e c a n n o t r e c o v e rth e e x c e s s fr o m th e o th e rco -in s u r e r s .” I d. (c i t i ng Hi cks R u bber Co. , 1 6 9 S .W .2d a t 1 4 8 ). G iv e n th e T e x a s S u p r e m e C o u r t ’s d e c is io n , w e r e v e r s e dth e d is t r ic tc o u r t ’s j udg m e ntand r e m and e d wi t h i ns t r uc t i o ns t o e nt e rat ak e - no t hi ng j udg m e nt a g a in s t L ib e r tyM u tu a l. L i berty Mu t . I n s. Co. v. Mi d

- Con t i n ent Ins. Co. , 508 F .3d 2 6 1 , 2 6 2

– 6 3 (5t h C ir. 2 0 0 7 ) (p e r c u ria m ). 1 . A p p li c a tion o f M id-Co n ti n e n t t o Ap pel l ant s ’C ont r i but i on C la im fo r D e fen se C o sts D es pi t e f

i ndi ng t hat E M C had br eac hed i t s dut y t o def end Lacy M as onr y, t he di s t r i c tco ur tfo und t hat , unde rt he Te xa s Supr e m e Cour t ’ s de c i s i o n i n Mi dCont i ne nt , A pp el l an t s c ou l d n otrec over defen se cost s f rom E M C u n der ei t h er a c o n tr ib u tio n o rs u b r o g a tio n th e o r y . A lth o u g h th e d is tr ic t c o u r t c o r r e c tly exp l ai n ed m u ch of

t h e Mi d- Cont i ne ntde c i s i o n, i tm i s c har ac t e r i z e d t he ho l di ng w ith r e s p e c t to it s d e n ia l o f L ib e r tyM u tu a l’ s co n tr ib u tio n cla im
. Mi d- Cont i ne nt on l y ad dressed t h e qu est i on of w h et h er one co- i n surer has a ri gh tof contr ibu t i on or su b rog a ti on ag a i n st a n on -pa yin g co -i n su rer to rec ov er m on eypa i dto in d em n ifyaco m m o n in s u r e dfo ralo s s . Mi d- Cont i ne nt l eft op en th e s e p a ra te q u e stio n of w h e th e r a co -in su re r th a t p a y s m o re th a n its sh a re of d efe n seco sts m ayr e c o ve rs uc h c o s t s f r o m ac o - i ns ur e rw ho v i o l at e s i t s duty to de fe nd a c o m m o n in s u r e d
. T e x a s c o u r ts h a v e r e p e a te d ly a ffir m e d th a t a n in s u r e r ’ s d u tyto d e fe n dis s e p a r a te fr o m a n db r o a d e rth a n its d u tyto in d e m n ify
. See, e . g. , Z u ri ch A m . I n s. Co. , 2 6 8 S
. W
. 3 da t4 9 0
. T h e l a n g u a g e o f t h e EM C P o l i c yc o n f i r m s t h i s d u t y . By it s e x p r e s s te r m s , t h e “o t h e rin s u r a n c e ” p r o v is io n s p e a k s o n lyto a n in s u r e d ’s “lo s s .” Itp r o v i d e s th a t, if th e r e a r e co -p r im a r yin s u r a n c e p o lic ie s , E M C w ill sha re th e cos tof

pay i n g f

or anyl oss t h at La cy M ason ry su ffers. I tdoes notN o. 08- 20532

11 i ndi c at e as i m i l arpr o r at i o n o f c o s t s i n curre d i n f ul f i l l i ng i t s s e pa r at e a nd d is tin c t d u tyto d e fe n dL a c yM a s o n r y . T h e “ o th e rin s u r a n c e ” c la u s e a p p lie s o n ly to th e d u tyto in d e m n ify , n o t t h e d u tyto d e fe n d
. T h e fact tha t th e “oth er ins u ra n ce” cl a u se a p p l i es o n lyt o E M C ’ s d u ty to i n d em n i fy i s d i sp ositive of th i s i ssu e. T o p rev a i lon a claim f or co n trib u tio n , a pa rt y m u stshow t h at “ ( 1) t h e severali n surers s h are a com m on o b li g a ti on or bu rden an d th at ( 2) t h e i n surer seeki n g contribu t i on h as m ad e a co m p u l sory pa ym en tor ot h er d i scharge of m ore than it s fai r sh are of t h e com m on obl i gati on or b u rd en . ” Mi d- Cont i ne nt , 2 36 S. W
. 3da t7 72 (num be r i ng ad de d)
. I n Mi dCont i ne nt , t h e T exas S u prem e C ou rth el d t h at “[t] h e eff ectof t h e pro rat a [ ‘ ot h er i n suran ce’] cl au se preclu des a dir ectcl ai m f or c on t ribu tion a m on g i n surers b e c a u s e th e c la u s e m a k e s th e c o n tr a c ts s e v e r a l a n d in d e p e n d e n t o f e a c h o th e r .” I d. at 77 2
. B eca u se th e d u ty to i n d em n ify i s “sev era lan di n d ep en d en t, ” L ib erty M u t u alcoul d “n o t m e e t t h e com m on obl i gati on requi rem en tof a contr ibu t i on cl ai m . E ach co- i n surer con t ract u al l y agreedw i t h t h e i n sured to pay on l y i t s pro r at a s hare of

a co vere d l os s; t he c o- i nsur er s di d notc ont r ac t ual l y agr ee t o pay ea ch oth er’ s p ro ra ta sh a re.” I d. The s am e i s no tt r ue as t o EM C a nd i t s dut y t o de fe nd Lac y M as o nr y. The EM C Poli cy p rov i de s t hatEM C “ w i l lha ve t he r i ghta nd d ut y t o de fe nd the i n s u r e d a g a i n s t a n y ‘ s u i t ’ s e e k i n g” d a ma g e s c o v e r e d b y t h e E MC P o l i c y . An

“ ot heri nsur ance ” c l ause doe s notm odif y t hi s obli gat i on so as t o r enderi ts eve r al a n din d e p e n d e n t. A lth o u g h E M C m a yow e on ly o n e -fifth of th e co st to in d e m n ify L acy M ason ry, i t

— al on g w i t h A pp el l an t s— h ad a com pl et e du t y t o defen d L acy M a s o n r y . T h e d u tyto d e fe n dcr e a te s “a d e b t w h ic h is e q u a llya n dco n c u r r e n tly d u e b y” a ll o f its in s u r e r s . Id
. (in te r n a l q u o ta tio n m a r k s o m itt e d). In d e e d , th is c o nc l us i o n i s s upp o r t e d b y t he u n i form h ol di ngs o f Te xa s c o ur t s t hatif e ve n a si n gl e cl ai m in a law sui tpotenti al l y fal l s w i t h i n an i n suran ce pol i cy’ s c overage, t he i nsur erhas a dut y t o pr ovi de a co mp leted e fe n s e . See, e . g. , T ex. Prop. & Cas.N o. 08- 20532

12 Ins. G u ar. A ss’

n /S w . Aggregate s, I

n c. v. S w . Aggregate s, I n c. , 982 S. W
. 2d 600, 6 0 6 (T e x . A p p .—A u s tin 1 9 9 8 , n o p e t.); seea lso Ind i an Harbor Ins. Co. v. V alley For geI ns . G ro up , 53 5 F
. 3 d35 9 , 36 3 ( 5 th C i r. 20 0 8 ) (n o tin gt h e “com p l ete de fe ns e ” o bli ga t i o n o f a n i ns ur e rund e rTe xa s l aw)
. As o ne Te xa s c o ur ts t at e d,

“ [t] h i s i s because the contr actob l i gates the i n surer t o def e ndi ts i n su red , n ot to p rov i d e a pr o ra ta d efen se.” S w . Aggregate s , 9 82 S. W
. 2d at6 06
. Con t r ar y t o t he di s t r i c tc o ur t ’ s c o nc l us i o n, A ppe l l ant s s at i s f i e d t he “ c o m m o n o bli ga t i o n” r e q u i r e me n tf

o rac o n t r ib u t i o n c l a i m. B ecau se E M C adm i t s t h at itdi d n otparti ci pa t e i n or con tribu t e t o L acy M ason ry’ s d efen se, A pp el l an t s s ati sf y t h e sec on d requ i rem en tf or a c on t ribu t i on c l ai m , “t hatt he i ns ur e rse e ki ng c o nt r ibut i o n has m ad e a co m pul s o r y pa ym e nt o r o th e r d i scharge of m ore th an i t s fai r s h are of t h e com m on obl i gati on or b u rd en . ” Mi d- Cont i ne nt , 236 S .W
. 3dat 772
. A ccor di n gl y, t h e di st ri ctcourt erred i n f

i n di n g t h at A pp el l an t s c ou l d n otrec over f rom E M C a one-f

i f t h port i on o f t h e c o s to f

d e fe n d i n gL a c yM a s o nr yi n t h e Mc Ke n n as u i t . T h e r e f o r e we r e ve r s e t he di s t r i c tc o ur t ’ s f i ndi ng o n t h i s i s s ue a nd r e m andf o rt he d eterm i n a ti on of d efen se co sts to w h i ch A p p ell a n ts are e n tit ledan dw i th i n stru cti on s to en ter j u d gm en t f or A p p ell a n ts i ntha t am ou n t. 2. Sub r ogat i on Th e p a r t i e s b r i e f

l ya d d r e s s Ap p e l l a n t s ’ r i g h t o f s u b r o g a t i o n a g a i n s tEM C. O u r hol di n g t h at A pp el l an t s s u cceed on th e ir contr ibu t i on cl ai m precl u des d is c u s s io n o f s u b r o g a tio n a n dw e n e e dn o t r e a c h th a t is s u e . IV . C ONC L US I ON W e AFF I RM t hatpor t i on o f t he di s t r i c tc o ur t ’ s j udg m e nti n whi c h t he dist ri ctcourtf

ou n d that E M C ha s a du t y t o defen d L acy M ason ry. H ow ever, be c aus e t he di s t r i c t c o ur ti nc o r r e c t l y ap pl i e d Mi d- Cont i ne nt , w e RE V E R SE t hat p ortionof th e d i stri ct co u rt’ s j u d gm en t a n dh old th a t A p p ell a n ts a re en titl edto c o l l e c tapr o po r t i o nat e s har e o f de fe ns e c o s t s f r o m EM C. W e RE M AN D f o rt heN o. 08- 20532

13 d e te r m in a tio n o f th e d e fe n s e co s ts . A F F IR M E D IN P A R T , R E V E R S E D IN P A R T , a n dR E M A N D E D
.