Opinion ID: 150548
Heading Depth: 2
Heading Rank: 2

Heading: Coverage under the Amerisure Policy

Text: Although Amerisure has a contractual-subrogation right, that right only entitles it to reimbursement if Amerisure did not have a duty to indemnify its insureds, Texas Crewboats and Sylvester. Amerisure contends that three exclusions in its policy preclude its duty to indemnify. These exclusions relate to workers' compensation, employee indemnification, and injuries to fellow employees, which we will describe in greater detail below. In order to determine Amerisure's duty to indemnify, we must examine how each of these exclusions applies to each insured. That is because Section V.D. of the Amerisure policy requires that, [e]xcept with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or suit is brought. Amerisure has no duty to indemnify if any one of the exclusions applies to each insured. Put differently, Amerisure must indemnify if none of the exclusions discharges its duty to indemnify Texas Crewboats and Sylvester. The district court found that all three exclusions deny coverage. [3] Navigators disputes this, urging us to hold, as an alternative ground for affirmance, that none of the exclusions apply. In addition, Navigators contends that, under the conditional-exclusion clause of its policy, if the Amerisure policy did not cover Sylvester, its policy also would not. In that situation, Navigators argues that Amerisure may not recover its contribution. With respect to Texas Crewboats, we conclude that only the employee-indemnification exclusion applies. With respect to Sylvester, the only exclusion that could potentially apply is the fellow-employee exclusion, but there is a genuine issue of material fact regarding this question. Hence, the issue of Amerisure's duty to indemnify survives summary judgment. Finally, we conclude that the conditional exclusion of the Navigators policy does not apply.
Under Texas Law, insurance policies are construed as are contracts generally, and must be interpreted to effectuate the intent of the parties at the time the contracts were formed. Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 212 (5th Cir.2009) (citations omitted). When an insurance policy is ambiguous or inconsistent, the interpretation that would afford coverage governs. Id. (citations omitted). Exceptions or limitations on an insurer's liability are construed even more stringent[ly]. Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir.2000) (citation and internal quotation marks omitted) (alterations in original). The court must accept the interpretation of the exclusionary clause urged by the insured if it is not itself unreasonable, even if the insurer's interpretation seems more reasonable or a more accurate reflection of the parties' intent. Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex.1987) (citations omitted). The court resolves all doubts regarding coverage in favor of coverage. See King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002); Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). An insurer has two responsibilities relating to coveragethe duty to defend and the duty to indemnify. See D.R. Horton-Texas, Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 743 (Tex.2009). Two documents determine an insurer's duty to defendthe insurance policy and the third-party plaintiff's pleadings in the underlying litigation, which the court must review without regard to the truth or falsity of those allegations. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.2006) (citations omitted). This is known as the eight-corners rule. Id. (citations omitted). Under the eight-corners rule, the [f]acts outside the pleadings, even those easily ascertained, are ordinarily not material to the determination and allegations against the insured are liberally construed in favor of coverage. Id. The eight-corners rule, however, does not govern the duty to indemnify. See D.R. Horton-Texas, 300 S.W.3d at 743-44. That is because the two duties are distinct such that one duty may exist without the other. Id. at 743. In determining coverage, a matter dependent on the facts and circumstances of the alleged injury-causing event, parties may introduce evidence during coverage litigation to establish or refute the duty to indemnify. Id. at 741. With these principles in mind, we now turn to the exclusions at issue.

The workers'-compensation exclusion does not preclude coverage for Texas Crewboats or Sylvester.
Clanton and Satterfield sued Texas Crewboats for negligence under the Jones Act. This exclusion precludes coverage for [a]ny obligation for which the insured or the insured's insurer may be held liable under any workers compensation ... or any similar law. The issue, therefore, is whether the Jones Act is similar to workers' compensation. It is not. The Texas Supreme Court has not addressed this precise question, and we have located only one published decision that is directly on point, Sanders v. Home Indemnity Insurance Co., 594 So.2d 1345, 1352-53 (La.Ct.App.3d Cir.1994). [4] In Sanders, 594 So.2d at 1352, the court considered the effect of a similar exclusion, stating that [t]his insurance does not cover... [a]ny obligation imposed by a worker's compensation ... law ... or any similar law. The court held that the Jones Act is not similar to workers' compensation because the former is based on the employer's negligence while the latter is not. See Sanders, 594 So.2d at 1352-53; see also Abogado v. Int'l Marine Carriers, 890 F.Supp. 626, 630 (S.D.Tex.1995) (explaining that workers'-compensation claims, which are imposed without regard to fault, are not similar to and independent of claims based on ... Jones Act negligence (citation omitted)). We find this reasoning persuasive. Furthermore, the operative phrase here, any similar law, is ambiguous with respect to the Jones Act claims. In light of this ambiguity, the court must interpret the term so that it does not exclude coverage. See Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir. 2000) (citation omitted).
This exclusion does not apply to Sylvester. Clanton and Satterfield charged Sylvester with negligent and reckless driving. Because Sylvester was not Clanton or Satterfield's employer, such claims, if proven, would not create obligation[s] for which [Sylvester] or [his] insurer may be held liable under any workers compensation, disability benefits or unemployment compensation law or any similar law.
This exclusion precludes coverage for Texas Crewboats, but not for Sylvester.
The parties agree that the accident involved bodily injury to ... employee[s] of [Texas Crewboats] arising out of and in the course of employment by [Texas Crewboats].... Navigators, however, contends that the exclusion is inapplicable under the subsection of the exclusion that states, [t]his exclusion does not apply to bodily injury to domestic employees not entitled to workers compensation benefits.... According to Navigators, the term domestic employees does not refer to butlers and chambermaids, but rather to employees who work in the United States as opposed to those who work abroad. This interpretation is unreasonable, and therefore, does not defeat the otherwise applicable exclusion. Cf. Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex. 1987) (citations omitted). Navigators admits that it was only able to locate one decision to support its interpretation, Carroll v. Castillo, No. 13-99-006-CV, 2000 WL 34592617, at  (Tex. App.Corpus Christi April 6, 2000, no pet. h.) (finding that the term domestic employee is ambiguous because it can refer to someone who works in the United States, and therefore, the term is incapable of precise determination for summary judgment purposes). Carroll was not designated for publication, which means that, under Texas Rule of Appellate Procedure 47.7, it has no precedential value. Furthermore, this court does not consider unpublished opinions when making an Erie guess. See Primrose Operating Co. v. Nat'l Am. Ins. Co., 382 F.3d 546, 565 (5th Cir.2004). The Texas Supreme Court has not resolved this question. Nor does it appear that any Texas court has resolved this issue in a published opinion. Thus, we consult decisions from other jurisdictions and the majority rule in making this Erie guess. See SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 437 (5th Cir.2008) (citation omitted). Several courts have found that the term domestic employees, as used in an insurance exclusion, refers to household workers and not to those working in the United States. See, e.g., United Fire & Cas. Co. v. Gravette, 182 F.3d 649, 655 (8th Cir.1999) (holding that domestic refers to a person who performs services in a private household); Dakota, Minn., & E. R.R. Corp. v. Heritage Mut. Ins. Co., 639 N.W.2d 513, 517 (S.D.2002) (holding that domestic servant means a person whose labor is directed to the construction, maintenance or repair of the master's private properties or care of the master's family (internal quotation marks and citation omitted)); U.S. Fid. & Guar. Co. v. Rosso, 521 A.2d 301, 304 (Me.1987) (holding that the phrase domestic employee, as found in an insurance exclusion, refers to one that works in a house or on household chores). We agree with the interpretation of these courts. This domestic-employee exception to the exclusion is inapplicable for another reasonit only applies to those domestic employees who are not entitled to workers'-compensation benefits. Clanton and Satterfield were entitled to such benefits because Texas Crewboats was a workers'-compensation subscriber. In sum, the employer-indemnification exception barred coverage for Texas Crewboats.
This exception does not apply to Sylvester because he was not Clanton or Satterfield's employer: This insurance does not apply to ... bodily injury to ... [a]n employee of the insured .... Sylvester is the insured. Clanton and Satterfield suffered bodily injuries. In order for this exclusion to apply, they must be employees of Sylvester. Neither party has claimed this, nor is there any basis in the record for this conclusion.
The fellow-employee exclusion does not preclude coverage for Texas Crewboats, but it may preclude coverage for Sylvester if he was an employee of Texas Crewboats.
This exclusion does not apply to Texas Crewboats because it is Clanton and Satterfield's employer, not their fellow employee. The exclusion only applies to [b]odily injury to any fellow employee of the insured ....
Amerisure and Navigators contest whether Sylvester was an employee of Texas Crewboats when the incident occurred. If he was, the exclusion applies, but if he was not, the exclusion does not apply. There is a genuine issue of material fact on this point. Navigators submitted the Declaration of James Travis, the Operations Manager of Texas Crewboats, explaining that Sylvester was not an employee, but rather, an independent contractor. Amerisure disputes this, pointing to deposition testimony from Clanton indicating that Sylvester was an employee. This court must consider the declaration and the deposition testimony when determining an insurer's duty to indemnify. See D.R. Horton-Texas, Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740, 741, 744 (Tex.2009). In light of this conflicting testimony, neither party is entitled to summary judgment on Amerisure's duty to indemnify.
Navigators contends that, if Amerisure does not have a duty to indemnify Sylvester, then Navigators also does not have such a duty under its conditional exclusion, which provides, this insurance shall be free from liability ... unless coverage is provided in an underlying policy scheduled hereon, and then coverage hereunder shall only operate as excess of such coverage.... According to Navigators, [b]ecause Amerisure deliberately declined to include an allocation in its settlement agreement for Amerisure's release versus Sylvester's release, no part of the settlement amount is subject to its subrogation. This conditional exclusion does not apply when the liability arise[s] out of ... [the] ownership, charter, use, operation, [or] ... loading ... of any watercraft not otherwise excluded or limited herein .... The vessel at issue, the Florida Lilly, appears on the schedule of covered vessels. So the issue is whether the incident arose out of the ownership, charter, use, operation, or loading of the Florida Lilly. In Utica National Insurance Co. of Texas v. American Indemnity Co., 141 S.W.3d 198, 203 (Tex.2004), the Texas Supreme Court explained that the phrase `arise out of' means that there is simply a `causal connection or relation,' which is interpreted to mean that there is but for causation, though not necessarily direct or proximate causation. (citations omitted). Citing to our decisions in Red Ball Motor Freight, Inc. v. Employers Mutual Liability Insurance Co., 189 F.2d 374, 378 (5th Cir.1951), and American States Insurance Co. v. Bailey, 133 F.3d 363, 370 (5th Cir. 1998), the court further noted that `[a]rising out of' are words of much broader significance than `caused by.' Utica, 141 S.W.3d at 203. This court has also explained that, under Texas insurance law, the phrase arising out of has a broad definition favoring coverageall that is needed is an incidental relationship between a claim and the conduct that the policy describes. Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453, 458-59 (5th Cir.2003) (citations omitted); American States Ins. Co., 133 F.3d at 370 ([T]he words `arising out of,' when used within an insurance policy, are `broad, general, and comprehensive terms effecting broad coverage.' (citation and footnote omitted)). Applying this broad definition of arising out of, we find that there is a causal connection or incidental relationship between the incident and the ownership, use, or operation of the Florida Lilly. Texas Crewboats had assigned Clanton and Satterfield to operate the Florida Lilly as captain and deckhand respectively. The incident occurred as Texas Crewboats was transporting them from Freeport, Texas, where Texas Crewboats has offices, to Morgan City, Louisiana, where the Florida Lilly was docked. Texas Crewboats transported them in a company car and provided a driver and a company credit card for food and gas during the trip. Furthermore, Texas Crewboats began paying them for their services as soon as they departed from Freeport. The sole purpose of the trip was to transport these crewmen to the Florida Lilly, where they were to board and operate the vessel. Under these circumstances, we hold that (1) transporting the operators of a vessel (2) to that vessel (3) by the owners of the vessel (4) for the sole purpose of operating that vessel, has an incidental relationship to the ownership, use, or operation of that vessel. Moreover, insofar as the language of this exclusion is ambiguous or inconsistent, the construction that would afford coverage to the insured must govern. Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 491 (5th Cir.2000) (citations omitted). Accordingly, the conditional exclusion in the Navigators policy does not apply.