IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No 13-50469

Summary Calendar

STAR-TEX RESOURCES, L.L.C.; MARIANA ESQUIVEL,

Plaintiffs-Appellants

v.

GRANITE STATE INSURANCE COMPANY

Defendant-Appellee

Appeal from the United States District Court

for the Western District of Texas

USDC No. 1:12-CV-326

Before HIGGINBOTHAM, DENNIS, and GRAVES, Circuit Judges.

PER CURIAM:*

Both Plaintiffs-Appellants—Star-Tex Resources, L.L.C. (“Star-Tex”) and 

Mariana Esquivel (“Esquivel”)—and Defendant-Appellee—Granite State 

Insurance Co. (“Granite State”)—moved for summary judgment before the 

magistrate judge1 on what is, at base, an insurance-coverage dispute. The 

magistrate judge granted Granite State’s motion and denied Star-Tex and 

* 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.

1 Both sides consented to trial by magistrate judge.

United States Court of Appeals

Fifth Circuit

FILED

January 8, 2014

Lyle W. Cayce

Clerk

 

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Esquivel’s motion. Star-Tex and Esquivel have now appealed. For the reasons 

that follow, we AFFIRM.

BACKGROUND

The lawsuit underlying this appeal is a declaratory action seeking to 

determine insurance coverage. The lawsuit underlying that action is a tort 

suit brought by Eddie Siegmund (“Siegmund”) in Texas state court against 

Star-Tex and Esquivel. Siegmund alleges that he was injured in an automobile 

collision caused by Esquivel and based on negligence, negligent-hiring, and 

respondeat superior theories of liability. Specifically, Siegmund alleged that

[o]n or about June 29, 2010, [Siegmund] was seriously 

injured in an automobile collision caused by the negligence of 

Defendant Esquivel, an employee of Star-Tex Resources. 

Defendant Esquivel was under the influence of alcohol and/or 

drugs at the time of the collision.

Star-Tex is a staffing company based in Austin, Texas that sends its 

employees to other companies for temporary-staffing purposes. As relevant 

here, Star-Tex contracted with a company called Auto Auction, which buys and 

sells cars, to supply temporary staff. Esquivel was staffed to Auto Auction 

when Siegmund, an Auto Auction employee, was struck and injured by a 

vehicle owned by Auto Auction while he was walking in the Auto Auction lot.

When Star-Tex and Esquivel were notified of Siegmund’s lawsuit, they 

requested defense from Granite State, Star-Tex’s insurer. The plaintiffs sent 

Granite State a General Liability Notice of Occurrence/Claim, which stated 

that “Mariana Esquivel( an employee of Star-Tex) put car in motion pinning 

Eddie Siegmund between t[w]o cars causing injury.” The notice further stated 

that “Mariana[] Esquivel was the Star-Tex employee driving the car. She 

tested positive for drugs.” 

On evaluating the plaintiffs’ requested defense, Granite State denied 

coverage on the basis that the claims asserted in Siegmund’s suit were barred 

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by the auto-exclusion exception in Star-Tex’s insurance policy with Granite 

State. Effective June 4, 2010, Granite State insured Star-Tex with 

commercial-property and commercial-general-liability insurance, providing 

coverage through June 4, 2011. The policy provides that Granite State

will 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. We will have the right and duty to 

defend the insured against any “suit” seeking those damages. 

However, 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. We may, at our discretion, 

investigate any “occurrence” and settle any claim or “suit” that 

may result.

Included in the definition of “the insured” are “your ‘employees’, other than 

either your ‘executive officers’ . . . or your managers . . . , but only for acts within 

the scope of their employment by you or while performing duties related to the 

conduct of your business.”

The auto exclusion excepts from coverage:

“Bodily injury” or “property damage” arising out of the 

ownership, maintenance, use or entrustment to others of any 

aircraft, “auto” or watercraft owned or operated by or rented or 

loaned to any insured. Use includes operation and “loading or 

unloading”.

This exclusion applies even if the claims against any insured 

allege negligence or other wrongdoing in the supervision, hiring, 

employment, training or monitoring of others by that insured, if 

the “occurrence” which caused the “bodily injury” or “property 

damage” involved the ownership, maintenance, use or 

entrustment to others of any aircraft, “auto” or watercraft that is 

owned or operated or rented or loaned to any insured.

Following Granite State’s denial of coverage, Star-Tex and Esquivel filed 

a declaratory action in Texas state court (subsequently removed to federal 

court) asking the court to declare that Granite State erred in its denial-ofcoverage determination and that Star-Tex and Esquivel were entitled to full 

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coverage under the policy. Additionally, the declaratory action sought to 

determine whether Granite State owed the plaintiffs duties to defend and 

indemnify in Siegmund’s underlying suit.

Both parties moved for summary judgment. Granite State moved for 

summary judgment on the basis that, under the “eight-corners” rule, which 

governs an insurer’s duty to defend in Texas, courts must make the reasonable 

inference that Esquivel was driving an automobile at the time of the collision, 

which would trigger the insurance policy’s auto exclusion and negate any 

duties to defend and indemnify on the part of Granite State. Star-Tex and 

Esquivel moved for summary judgment on the basis that the eight-corners rule 

requires courts to construe their claim broadly and expansively, resolving all 

doubts in favor of coverage. Because, according to the plaintiffs, Sigemund’s 

underlying complaint asserts a potentially covered claim, Granite State’s duty 

to defend was triggered. Further, the plaintiffs reason that the auto exclusion 

does not apply because the complaint does not state that Esquivel was driving 

or operating an automobile at the time of the collision. On review of the parties’ 

respective arguments, the magistrate judge granted Granite State’s motion 

and denied Star-Tex and Esquivel’s motion. Star-Tex and Esquivel 

subsequently appealed.

STANDARD OF REVIEW

“We review de novo a district court’s award of summary judgment, 

applying the same standard as the district court.” Trinity Universal Ins. Co. 

v. Emp’rs Mut. Cas. Co., 592 F.3d 687, 690 (5th Cir. 2010). “The court shall 

grant summary judgment if the movant shows that 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 issue of material fact exists when the 

evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Gates v. Tex. Dep’t of Protective & Regulatory Servs., 537 F.3d 

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404, 417 (5th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 

248 (1986)). “On cross-motions for summary judgment, we review each party’s 

motion independently, viewing the evidence and inferences in the light most 

favorable to the nonmoving party.” Ford Motor Co. v. Tex. Dep’t of Transp., 

264 F.3d 493, 498 (5th Cir. 2001). An insurer’s duty to defend is a question of 

law that we review de novo. Ooida Risk Retention Grp., Inc. v. Williams, 579 

F.3d 469, 471-72 (5th Cir. 2009).

DISCUSSION

“When, as here, jurisdiction is based on diversity, we apply the forum 

state’s substantive law.” Bayle v. Allstate Ins. Co., 615 F.3d 350, 355 (5th Cir. 

2010). In this case, both parties agree that Texas law applies, and so we 

discuss and apply (1) Texas’s eight-corners rule, (2) a relevant exception to that 

rule recognized by this court, and (3) Texas law regarding an insurer’s duty to 

indemnify.

I.

“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.” GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 

S.W.3d 305, 308 (Tex. 2006); see also Zurich Am. Ins. Co. v. Nokia, Inc., 268 

S.W.3d 487, 491 (Tex. 2008) (“Thus, ‘[e]ven if the allegations are groundless, 

false, or fraudulent the insurer is obligated to defend.’” (quoting 14 LEE R. RUSS 

& THOMAS F. SEGALLA, COUCH ON INSURANCE § 200:19 (3d ed. 2007))

(alteration in original)). “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.” GuideOne, 197 

S.W.3d at 308. Importantly, “[f]acts outside the pleadings, even those easily 

ascertained, are ordinarily not material to the determination and allegations 

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against the insured are liberally construed in favor of coverage.” Id.; see also 

Zurich, 268 S.W.3d at 491 (“The duty to defend is not affected by facts 

ascertained before suit, developed in the course of litigation, or by the ultimate 

outcome of the suit.”).

Under Texas law, the insured bears the burden of establishing that the 

insurance policy covers the claim. See Northfields Ins. Co. v. Loving Home 

Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004). At that point, “to defeat the duty 

to defend, the insurer bears the burden of showing that the plain language of 

a policy exclusion or limitation allows the insurer to avoid coverage of all 

claims, also within the confines of the eight corners rule.” Id. In evaluating 

whether each side has satisfied its respective burden, the Texas Supreme 

Court has directed courts applying Texas law to “resolve all doubts regarding 

the duty to defend in favor of the duty and . . . construe the pleadings liberally.” 

Zurich, 268 S.W.3d at 491 (citation omitted). “Where the complaint does not 

state facts sufficient to clearly bring the case within or without the coverage,” 

however, “the general rule is that the insurer is obligated to defend if there is, 

potentially, a case under the complaint within the coverage of the policy.” Id.

(quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 

(Tex. 1965)) (internal quotation marks omitted). “Thus, the duty to defend 

arises only when the facts alleged in the complaint, if taken as true, would 

potentially state a cause of action falling within the terms of the policy.” 

Northfield, 363 F.3d at 528.

In undertaking this analysis, ordinarily “[c]ourts may not[] . . . (1) read 

facts into the pleadings, (2) look outside the pleadings, or (3) imagine factual 

scenarios which might trigger coverage.” Guar. Nat’l Ins. Co. v. Azrock Indus., 

211 F.3d 239, 243 (5th Cir. 2000). However, “we may draw inferences from the 

petition that may lead to a finding of coverage.” Gen. Star Indem. Co. v. Gulf 

Coast Marine Assocs., 252 S.W.3d 450, 456 (Tex. App. 2008). Accordingly, 

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when a court applies the eight-corners rule, it must consider “any reasonable 

inferences that flow from the facts alleged.” Lib. Mut. Ins. Co. v. Graham, 473 

F.3d 596, 601 (5th Cir. 2006) (citing Allstate Ins. Co. v. Hallman, 159 S.W.3d 

640, 645 (Tex. 2005)).

Siegmund’s suit asserts that he was “seriously injured in an automobile 

collision caused by the negligence of . . . Esquivel,” who was “under the 

influence of alcohol and/or drugs at the time of the collision.”2 Apart from that, 

however, the complaint is short on factual allegations. Nevertheless, Granite 

State argues that the auto exclusion applies because it is reasonable to infer 

from the complaint that Esquivel was operating a vehicle at the time she 

allegedly caused the collision. Granite State also reasons that the fact that 

Siegmund sued only Esquivel and no one else underscores that it is reasonable 

to infer that Esquivel was operating a vehicle. Any other assumption, 

according to Granite State, would impermissibly imagine factual scenarios not 

capable of reasonable inference based on the pleadings.

However, whereas Granite State’s inference is a reasonable one, it is not 

the only reasonable inference that we may draw from the complaint. Other 

reasonable inferences are possible that would not place Esquivel in an 

automobile at the time of the accident. For example, Star-Tex and Esquivel 

argue that it would be reasonable to infer from the complaint that Esquivel 

caused the accident while directing traffic in the Auto Auction lot or while 

walking in the lot, causing another driver to swerve and hit Siegmund. Both 

are reasonable inferences based on the complaint and both would explain why 

Siegmund supposedly brought suit only against Esquivel. Because the 

2 The complaint asserts negligence, negligent-hiring, and respondeat superior theories 

of liability, but we have said that “[i]t is the factual allegations, not the legal theories, that 

control” our analysis. Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 

369 (5th Cir. 2008). 

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allegations in the underlying complaint—which can charitably be described as 

terse—lend themselves to multiple reasonable inferences, we cannot 

determine, based solely on the pleadings, whether there is a potentially 

covered claim. Compare Ooida, 579 F.3d at 475 (“The underlying complaint 

does not establish Moses’[s] role in the truck at the time of the accident; thus, 

determination of his status as tandem driver”—necessary to determine 

whether the insurance policy’s fellow-employee exclusion applied—“requires 

consideration of evidence outside the eight corners of the complaint and the 

Policy.”).

II.

Our conclusion that the pleadings alone do not permit a determination 

concerning the issues of coverage and Granite State’s duty to defend does not 

end the analysis. Granite State asserts that we may consider extrinsic 

evidence in determining the duties it owes to Star-Tex and Esquivel in the 

event that Siegmund’s complaint is insufficiently precise to determine 

coverage. We conclude that there is a limited exception to the eight-corners 

rule that, under the circumstances of this appeal, allows us to consider 

extrinsic evidence.

“Although [the Texas Supreme Court] has never expressly recognized an 

exception to the eight-corners rule, other courts have.” GuideOne, 197 S.W.3d

at 308; see, e.g., Northfield, 363 F.3d at 531. “Generally, these courts have 

drawn a very narrow exception, permitting the use of extrinsic evidence only 

when relevant to an independent and discrete coverage issue, not touching on 

the merits of the underlying third-party claim.” GuideOne, 197 S.W.3d at 308 

& n.2 (collecting cases). For instance, this court has Erie guessed that “if [the 

Texas Supreme Court] were to recognize an exception to the eight-corners rule, 

it would likely do so under [these] circumstances.” Id. at 308-09. 

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Specifically, this court has Erie guessed that the Texas Supreme Court 

would recognize an exception to the eight-corners rule “when it is initially 

impossible to discern whether coverage is potentially implicated and when the 

extrinsic evidence goes solely to a fundamental issue of coverage which does 

not overlap with the merits of or engage the truth or falsity of any facts alleged 

in the underlying case.” See Northfield, 363 F.3d at 531. Importantly, we have 

said that “[i]n GuideOne, the Supreme Court of Texas cited this language from 

Northfield with approval, though it held that the circumstances of the case 

before it did not meet the conditions of the exception.” Ooida, 579 F.3d at 475-

76 (citation omitted).3 Accordingly, we concluded in Ooida that “GuideOne

supports our ‘Erie guess’ that the limited conditions of an exception to the eight 

corners rule exists here.” Id. at 476.4

Further, we have suggested that extrinsic evidence is more likely to be 

considered when an “explicit policy coverage exclusion clause[]” is at issue. See 

Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 603 (5th Cir. 2006); see also 

Oodia, 579 F.3d at 476 (considering extrinsic evidence to determine whether 

3 We note that Granite State incorrectly describes GuideOne as failing to reject the 

extrinsic-evidence exception despite having had the opportunity to do so. In GuideOne, the

insurer “relie[d] on extrinsic evidence that [was] relevant both to coverage and the merits 

and thus [did] not fit the . . . exception to the rule.” 197 S.W.3d at 309 (emphasis added). 

Because the insurer failed to satisfy even the limited exception recognized by this court, the 

GuideOne court had no opportunity to reject our exception to the eight-corners rule. See id.

at 309-10. 

4 Star-Tex and Esquivel state that Texas courts have specifically declined to consider 

extrinsic evidence under the eight-corners rule. However, we observed in Northfield that 

“certain Texas appellate courts[] . . . have appeared to recognize a narrow exception” to the 

eight-corners rule. 363 F.3d at 528 & n.1 (citing State Farm Fire & Cas. Co. v. Wade, 827 

S.W.2d 448, 452-53 (Tex. App. 1992); Gonzales v. Am. States Ins. Co., 628 S.W.2d 184, 187 

(Tex. App. 1982); Cook v. Ohio Cas. Ins. Co., 418 S.W.2d 712, 715-16 (Tex. App. 1967); Int’l 

Serv. Ins. Co. v. Boll, 392 S.W.2d 158, 161 (Tex. App. 1965)). Further, the plaintiffs ignore 

that this court has endorsed the exception. Absent a change in law announced by the Texas 

Supreme Court, a subsequent panel of this court may not overlook or ignore a prior panel’s 

Erie guess.

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deceased was tandem truck driver because coverage depended on applicability 

of fellow-employee exclusion); W. Heritage Ins. Co v. River Entertainment, 998 

F.2d 311, 314-15 (5th Cir. 1993) (considering extrinsic evidence demonstrating 

that cause of defendant’s “impairment” was intoxication, triggering application 

of insurance policy’s liquor-liability exclusion); Boll, 392 at 160-61 (considering 

extrinsic evidence that underlying car accident occurred while insured’s son 

was operating the vehicle, thereby excluding coverage). Because coverage and 

Granite State’s duty to defend in this case depend on the application of an 

“explicit policy coverage exclusion clause”—namely, the auto exclusion—it is 

more likely that extrinsic evidence may be considered. See Graham, 473 F.3d 

at 603.

Granite State argues that, if we look beyond the eight corners, we should 

consider the undisputed extrinsic evidence that Esquivel was driving a car, put 

the car in motion, and pinned Siegmund between the car and another car, thus 

causing him injury and thereby triggering the auto exclusion. First, however, 

we must consider, based on the underlying complaint, whether “it is initially 

impossible to discern whether coverage is potentially implicated.” Northfield, 

363 F.3d at 531. We believe that it is. The complaint contains only one, brief

sentence describing the facts of the accident. Importantly, it contains no 

description of how Esquivel caused the collision. Because Granite State’s duty 

to defend hinges on what Esquivel was doing when she caused the accident, 

“[s]uch an explanation is critical to the question of coverage” under the policy. 

W. Heritage, 998 F.2d at 315 (considering extrinsic evidence because it was 

impossible, based on the vague allegations in the complaint, to determine the 

basis of the defendant’s impairment when causing a car accident). In this 

respect, we find the magistrate judge’s reasoning persuasive:

Siegmund’s petition triggered the potential application of the Auto 

Exclusion in alleging he was injured in an “automobile collision.” 

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Had Siegmund’s petition alleged only an accident without 

referencing an automobile or collision, it would have stated a 

potentially covered claim and the Auto Exclusion would not have 

applied. Alternatively, had the petition stated Esquivel was 

“driving” or “operating” at the time she negligently caused the 

collision, this case would fall squarely within the Auto Exclusion. 

Because Siegmund’s petition triggers a potential exclusion but 

omits a fundamental fact—how Esquivel’s negligence caused the 

collision that harmed Siegmund—the first requirement to permit 

the Court to consider evidence outside the eight corners of the 

complaint is satisfied.

Second, we must consider whether “the extrinsic evidence goes solely to 

a fundamental issue of coverage which does not overlap with the merits of or 

engage the truth or falsity of any facts alleged in the underlying case.” 

Northfield, 363 F.3d at 531. We conclude that the extrinsic evidence here goes 

to coverage because it establishes that Esquivel, an “insured” within the 

meaning of the insurance policy, was operating a vehicle at the time of the 

accident, triggering the auto exclusion. Moreover, the evidence goes only to 

coverage. It does not overlap with the merits of the underlying dispute because 

the mere fact that Esquivel was operating a motor vehicle does not establish 

her negligence or relate to Siegmund’s negligent-hiring or respondeat superior 

claims. Further, the evidence does not engage in the truth or falsity of any fact 

alleged, particularly given the paucity of facts contained in Siegmund’s terse 

complaint.

Thus, considering this undisputed, extrinsic evidence in addition to the 

eight corners, we conclude that the auto exclusion applies, bars coverage, and 

removes Granite State’s duty to defend Star-Tex and Esquivel in the 

underlying lawsuit.

III.

Finally, we must consider Granite State’s motion for summary judgment 

with respect to its duty to indemnify Star-Tex and Esquivel. “[T]he duty to 

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defend is distinct from, and broader than, the duty to indemnify.” Zurich, 268 

S.W.3d at 490 (alteration in original) (quoting COUCH ON INSURANCE § 200:1) 

(internal quotation marks omitted). “[T]he facts actually established in the 

underlying suit determine whether the insurer must indemnify its insured.” 

Id. Thus, “[g]enerally, Texas law only considers the duty-to-indemnify 

question justiciable after the underlying suit is concluded, unless ‘the same 

reasons that negate the duty to defend likewise negate any possibility the insurer 

will ever have a duty to indemnify.’” Northfield, 363 F.3d at 529 (quoting 

Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.3d 81, 84 (Tex. 1997)).5 In 

this case, because there is no duty to defend in the underlying lawsuit due to

of the auto exclusion, the same reason that negates that duty likewise 

precludes any possibility that Granite State will have to indemnify Star-Tex 

and Esquivel. Accordingly, we conclude that Granite State has no duty to 

indemnify Star-Tex and Esquivel.

CONCLUSION

For the foregoing reasons, we AFFIRM the magistrate judge’s grant of 

summary judgment in favor of Granite State and also AFFIRM the magistrate 

judge’s denial of summary judgment in favor of Star-Tex and Esquivel.

5 Perhaps recognizing that Granite State’s duty to indemnify depends on the insurer’s 

duty to defend, Star-Tex and Esquivel offer no argument with respect to the magistrate 

judge’s duty-to-indemnify ruling.

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