Court Opinion

ID: 9910998
Source: CourtListenerOpinion
Date Created: 2023-12-19 01:00:40.085317+00
Date Added: 2024-06-11T12:55:24.247196
License: Public Domain

Case: 22-51114     Document: 00517005663         Page: 1     Date Filed: 12/18/2023

           United States Court of Appeals
                for the Fifth Circuit                                   United States Court of Appeals
                                                                                 Fifth Circuit
                                ____________                                   FILED
                                                                       December 18, 2023
                                  No. 22-51114
                                                                          Lyle W. Cayce
                                ____________                                   Clerk

   Colony Insurance Company,

                                                           PlaintiffAppellant,

                                      versus

   First Mercury Insurance Company,

                                            DefendantAppellee.
                  ______________________________

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 1:20-CV-474
                  ______________________________

   Before Higginbotham, Higginson, and Duncan, Circuit Judges.
   Per Curiam:
          First Mercury Insurance Co. and Colony Insurance Co. contributed
   to a settlement agreement related to an underlying negligence case against
   DL Phillips Construction, Inc. d/b/a Ja-Mar Roofing (DL Phillips), which
   both companies insured consecutively under commercial general liability in-
   surance policies. After the settlement, Colony sued First Mercury, arguing
   First Mercury needed to reimburse Colony, under either a contribution or
   subrogation theory, for the full amount of its settlement contribution because
   First Mercurys policies covered all damages at issue. After the parties sub-
   mitted cross-motions for summary judgment, the district court adopted the
Case: 22-51114      Document: 00517005663           Page: 2   Date Filed: 12/18/2023

                                     No. 22-51114

   magistrate judges Report and Recommendation, granted summary judg-
   ment in favor of First Mercury, and denied summary judgment for Colony.
          Colony appealed, arguing the district court erred by: (1) holding that
   First Mercury was responsible only for those property damages that occurred
   during the policy period, and in doing so, rejecting the all-sums approach
   to damages allocation; and, alternatively, by (2) finding no genuine dispute
   of material fact regarding the allocation of covered and non-covered damages.
   We AFFIRM.
                                            I.
                                            A.
          This case began when Palmer Cravens, LLC hired DL Phillips to
   replace the roof of an outpatient clinic in McAllen, Texas in November 2012.
   DL Phillips completed the work on February 1, 2013, but the roof began
   leaking by March 2013. The leaks continued through March, April, May,
   June, and September 2013, and Palmer reported them to DL Phillips and
   eventually retained an inspector, Rick Guerra-Prats, to assess the property.
         Guerra-Prats retained a consultant who inspected the roof and, on
   February 17, 2014, issued a report noting that there were serious roof defects
   causing the leaks. Shortly thereafter, Guerra-Prats obtained several estimates
   for re-roofing and additional repairs.
          On June 16, 2014, Palmer sued DL Phillips, asserting claims of fraud,
   negligent misrepresentation, violations of the Texas Insurance Code, breach
   of fiduciary duty, breach of contract, breach of express warranty, breach of
   implied warranty, and negligence. While the lawsuit was pending, a strong
   rainstorm occurred in September 2014 and caused substantial water intrusion
   damage to the interior of the property. Additional water damage occurred in
   June 2018.

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           From 2012 to 2016, DL Phillips was insured by First Mercury and
   Colony. First Mercury issued two consecutive liability policies, each with a
   $1 million per occurrence limit of liability, to DL Phillips. The first was
   effective from April 21, 2012, to April 21, 2013, and the second was effective
   from April 21, 2013, to April 21, 2014. Then, Colonys coverage took over,
   also with a $1 million per occurrence limit. Colonys first policy provided
   coverage from April 21, 2014 to April 21, 2015, and its second policy was
   effective from April 21, 2015, to April 21, 2016.
          The jury found in favor of Palmer and awarded him $600,000 in
   damages, but after Palmers motion notwithstanding the verdict, the district
   court entered a judgment on December 11, 2018 against DL Phillips in excess
   of $3.7 million, which included $2.4 million for replacement of the roof and
   lost rental income and $590,000 in prejudgment interest. Colony and First
   Mercury initially defended DL Phillips under a reservation of rights, but
   Colony later sued DL Phillips and sought a declaration that its policy did not
   cover Palmers claims.
         Between March and April 2019, Palmer, DL Phillips, First Mercury,
   and Colony reached a confidential settlement agreement that addressed both
   Palmers and Colonys lawsuits. Both Colony and First Mercury contributed
   to the settlement, though First Mercury contributed slightly more than
   Colony, and the agreement expressly explained that some sums were
   indemnity payments while others were supplementary payments. As
   part of the settlement, Colony and First Mercury released all claims against
   each other except for the following exclusion:
          Colony and First Mercury reserve the right to pursue further
          claims as to the respective rights and obligations between
          Colony and First Mercury with regard to any reallocation
          and/or reimbursement for all amounts paid as indemnity and

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          supplementary payments, damages, costs, fees, or settlements
          paid to resolve the Underlying Lawsuit.
                                            B.
          After the settlement, Colony filed the present lawsuit against First
   Mercury seeking: (1) damages for First Mercurys alleged breach of the First
   Mercury policies; (2) a judicial declaration that First Mercury had a duty to
   indemnify DL Phillips for the full amount of the settlement and that First
   Mercury breached its policies by not doing so; and (3) Colonys attorneys
   fees, pursuant to Section 38.001 of the Texas Civil Practice and Remedies
   Code, as a contractual subrogee of DL Phillips.1 On cross-motions for
   summary judgment, the district court adopted the magistrate judges Report
   and Recommendation, granted summary judgment in favor of First Mercury,
   and denied summary judgment for Colony.
          In doing so, the district court found that Colony failed to raise a
   genuine dispute of material fact as to the scope of First Mercurys
   responsibility. Specifically, although both parties agreed that all damage was
   caused by a single occurrence (the defective roof installation), the court
   found that Colony has not shown or raised a material fact issue that Fist
   Mercury is responsible for property damage that occurred after [its policies]
   expired. It also found that Colony failed to raise a material fact issue as to
   whether monies [Colony] contributed to the settlement were for damages
   or supplemental payments covered under First Mercurys policies because
   Colony did not make any effort to valuate the property damage that
   occurred before the First Mercury policy expired. Instead, it contended that
   allocation was unnecessary because First Mercurys policies cover[ed] all

          _____________________
          1
            The district court vacated its judgment in Palmers case on April 1, 2019 and
   dismissed it with prejudice on August 14, 2019.

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   of the property damages.2 The court did not reach First Mercurys other
   arguments that Colony could not assert contribution or subrogation claims
   because Colony [did] not raise[] a fact issue that defeats First Mercurys
   summary judgment.
          On appeal, Colony argues the district court erred by: (1) holding First
   Mercury responsible only for property damage that took place during its
   policy periods, and in doing so, rejecting the all-sums approach to
   damages allocation; and, alternatively, by (2) finding no genuine dispute of
   material fact regarding allocation of covered and non-covered damages.
   Colony asks this Court to reverse the district courts grant of summary
   judgment and contends it is entitled to reimbursement from First Mercury
   for the entirety of Colonys settlement contribution because First Mercury
   was completely responsible for all the property damage at issue.
           In response, First Mercury argues: (1) the district court properly
   applied Texas insurance law and interpreted the relevant policies when it
   concluded that First Mercurys policies do not cover all of the damages at
   issue in this case; and (2) Colony failed to create a genuine dispute of material
   fact regarding damages allocation and cannot recover payment on a
   contribution or subrogation theory. First Mercury posits that because
   portions of the settled loss are not covered by its policies, Colony needed to
   show that it paid for some damages covered by First Mercurys policies
   and to do so, it had to present sufficient evidence for the district court to
   allocate the damages between the companies. Because Colony did not meet
   this burden, First Mercury argues it is not entitled to reimbursement.

           _____________________
           2
              Of note, the magistrate judges Report and Recommendation said that evidence
   of the allocation may exist somewhere in the record from the Underlying Lawsuit, but it
   is not the undersigneds responsibility to search it out.

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                                             C.
           Several provisions of First Mercurys policy are at issue. To start, the
   policy agrees to 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. Property damage is defined as:
          Physical injury to tangible property, including all resulting loss
          of use of that property. All such loss of use shall be deemed to
          occur at the time of the physical injury that caused it; or [l]oss
          of use of tangible property that is not physically injured. All
          such loss of use shall be deemed to occur at the time of the
          occurrence that caused it.
          The policy specifies that property damage is covered only if it is
   caused by an occurrence that takes place in the coverage territory and if
   the property damage occurs during the policy period. The policy defines
   occurrence as an accident, including continuous or repeated exposure to
   substantially the same general harmful conditions.
          Although the policys boilerplate language covered any
   continuation, change or resumption of property damage after the end of the
   policy period (i.e., paragraph c), that language was expressly excluded
   from the final version of the policy by an endorsement. This endorsement,
   attached and integrated with the final version of the insurance policy, was
   entitled CONTINUOUS OR PROGRESSIVE INJURY AND DAMAGE
   EXCLUSION, explicitly deleted paragraph c (Paragraph b (3), c and d are
   deleted in their entirety), and stated that the endorsement forms a part of
   the Policy to which attached. As such, for all intents and purposes,
   paragraph cs language was stricken from the policy.3

          _____________________
          3
              First Mercury also contends that the mold exclusion provision additionally
   limits its responsibility. The mold exclusion denies coverage for property damage

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                                                  II.
          This Court review[s] grants of summary judgment de novo, applying
   the same standard as the district court.4 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.5
   When parties file 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.6
                                                 III.
            First, we address Colonys argument that First Mercurys insurance
   policies covered all damages resulting from the roof defect (those reported in
   2013, 2014, and 2018) and addressed by the settlement. Colony contends that
   Texas applies an all-sums approach to damage allocation, such that once
   an insurers coverage is triggered by an occurrence, the insurer is liable
   for all resulting damage no matter when it arises. But this reasoning conflicts
   with binding precedent from both the Texas Supreme Court and this Court.

           _____________________
   which would not have occurred, in whole or in part, but for the actual, alleged or
   threatened . . . existence of, or presence of, any fungi or bacteria . . . regardless of whether
   any other cause, event, material or product contributed to the damage. The magistrate
   judges Report and Recommendation did not address the mold exclusion, but it was not
   necessary to the outcome, and this Court need not address it here. Because First Mercurys
   policies did not cover property damage arising after the policies expired, see infra Section
   III.A, Colonys burden to allocate damages was triggered. Because Colony failed to meet
   this burden, the precise amount of damages excluded by the mold exclusion is irrelevant.
           4
           In re La. Crawfish Producers, 852 F.3d 456, 462 (5th Cir. 2017) (citing Templet v.
   Hydrochem Inc., 367 F.3d 473, 477 (5th Cir. 2004)).
           5
               FED. R. CIV. P. 56(a).
           6
             Miller v. Reliance Standard Life Ins. Co., 999 F.3d 280, 283 (5th Cir. 2021) (citing
   Green v. Life Ins. Co. of N. Am., 754 F.3d 324, 329 (5th Cir. 2014)).

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                                                     A.
          Texas substantive law governs the insurance contracts at issue in this
   diversity action.7 Under Texas law, courts construe insurance policies
   according to the same rules of construction that apply to contracts generally
   and aim to give effect to parties intent.8 While unambiguous insurance
   contracts are enforced as written, courts will resolve any ambiguities in
   favor of coverage.9 No one phrase, sentence, or section [of the policy]
   should be isolated from its setting and considered apart from the other
   provisions.10 Courts must also give the policys words their plain meaning,
   without inserting additional provisions into the contract.11 When deciding
   distinct but related questions about an insurers duty to defend, Texas courts
   have declined to issue one universal rule and instead have made clear that
   the text of the policy at issue is controlling: the Texas Supreme Court
   considers policy language before deciding which rule to apply, and different
   courts in Texas have applied different rules depending on the text of the
   relevant policy.12 As the Texas Supreme Court described, varying
   approaches reflect perceived differences in the policy language under
   review as well as different factual circumstances.13

           _____________________
           7
            VRV Dev. L.P. v. Mid-Continent Cas. Co., 630 F.3d 451, 456 (5th Cir. 2011) (citing
   Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938); Bexar Cnty. Hosp. Dist. v. Factory Mut. Ins.
   Co., 475 F.3d 274, 276 (5th Cir. 2007)).
           8
              Dons Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 23 (Tex. 2008)
   (citations omitted).
           9
                Id.
           10
                Id.
           11
                Id.
           12
                Id. at 2530.
           13
                Id. at 25 (citations omitted).

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            Typically, an insurers duty to indemnify an insured cannot be
   established until after the completion of litigation, when liability is
   determined.14 This is because, unlike the duty to defend, which turns on the
   pleadings, the duty to indemnify is triggered by the actual facts establishing
   liability in the underlying suit, and whether any damages caused by the
   insured and later proven at trial are covered by the terms of the policy.15
   Initially, the insured has the burden of establishing coverage under the
   terms of the policy. . . . If the insured proves coverage, then to avoid liability
   the insurer must prove the loss is within an exclusion.16 If the insurer does
   so, then the burden shifts back to the insured to show that an exception to
   the exclusion brings the claim back within coverage.17
            Several cases in this Circuit and in the Texas Supreme Court squarely
   address this issue and, when read together, determine the scope of First
   Mercurys coverage. First, the Texas Supreme Court answered two certified
   questions to determine when coverage is triggered under occurrence-based
   liability policies in Dons Building Supply, Inc. v. OneBeacon Insurance Co.18
   There, the court evaluated a policy similar to the one at issue here and held
   that property damage under this policy occurred when actual physical
   damage to the property occurred because the policy defined property
   damage as [p]hysical injury to tangible property while explicitly stating
   that coverage is available if and only if property damage occurs during the

           _____________________
           14
                Colony Ins. Co. v. Peachtree Constr., Ltd., 647 F.3d 248, 253 (5th Cir. 2011).
           15
                Id.
           16
            Gilbert Tex. Constr., L.P. v. Underwriters at Lloyds London, 327 S.W.3d 118, 124
   (Tex. 2010) (citations omitted).
           17
                Id. (citations omitted).
           18
                Dons Bldg. Supply, Inc., 267 S.W.3d at 2330, 3032.

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   policy period.19 Thus, the court held that property damage occurred
   when a home that is the subject of the underlying suit suffered wood rot or
   other physical damage, not when the damage was discovered (nor, by
   implication, when the initial installation of defective products occurred).20
          Next, this Court in Wilshire Insurance Co. v. RJT Construction, LLC
   evaluated when insurance coverage was triggered under a policy that
   expressly covered only property damage that occurs during the policy
   period [of June 2004 through June 2006].21 Citing Dons Building Supply,
   this Court held that, under Texas law, what matters is when the actual
   physical damage at issue arose, rather than when a but-for cause of the
   damage occurred.22 In Wilshire, a homes foundation was repaired in 1999,
   but cracks in the walls and ceilings appeared in 2005 allegedly caused by
   the faulty foundation.23 This Court held that the occurrence of the cracks
   triggered coverage under the policy period even though their underlying
   cause occurred years prior:
         The cracks themselves are physical damage allegedly caused by
         the faulty foundation. This is not a case where latent internal
         rot long lies undiscovered before external signs warn of the
         festering damage. The cracks are not merely a warning of prior
         undiscovered damage; they are the damage itself. It is of no
         moment that the faulty foundation work occurred in 1999, or

         _____________________
         19
              Id. at 24 (internal quotations omitted).
         20
              Id. at 22, 24.
         21
              See generally Wilshire Ins. Co. v. RJT Constr., LLC, 581 F.3d 222 (5th Cir. 2009).
         22
              Id. at 225.
         23
              Id.

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           that the damage was discovered in 2005; it matters only that
           damage was alleged to have occurred in 2005.24

          Two years later, this Court reaffirmed Wilshire in VRV Development
   L.P. v. Mid-Continent Casualty Co.25 In VRV Development L.P., the insured
   argued that the court should consider damage arising after the insurance
   policies expired to have occurred at the same time as the but-for cause of the
   damage.26 The Court rejected this bootstrapping argument and held that
   the alleged damage occurred only when the [defective] retaining walls
   collapsed, which took place after the insurance policies expired, and not
   when the walls were first installed or when cracks first appeared, which
   occurred during the policy window.27 Notably, the Court made this holding
   despite policy language that property damage that occurs during the policy
   period includes any continuation, change or resumption of that . . . property
   damage after the end of the policy period.28 It explained:
           What Wilshire recognized is that property damage does not
           necessarily occur at the first link in the causal chain of
           events giving rise to that property damage. Nearly all property
           damage will be traceable back to earlier events, but this is not
           the nature of our inquiry. As the Texas Supreme Court has
           instructed, we must focus on the time of the actual physical
           damage to the property, and not the time of the negligent
           conduct or the process . . . that later results in the damage.
           Dons Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20,
           24, 2930 (Tex. 2008). It may be difficult at times to determine
           _____________________
           24
                Id. (citations omitted).
           25
                630 F.3d 451, 45758 (5th Cir. 2011).
           26
                Id.
           27
                Id.
           28
             Id. at 458. This language was in the boilerplate version of First Mercurys policy
   but was excluded through an endorsement.

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           precisely when actual physical damage occurs, but we must
           draw a line somewhere. Id. at 29 (Pinpointing the moment of
           injury retrospectively is sometimes difficult, but we cannot
           exalt ease of proof or administrative convenience over
           faithfulness to the policy language.).
           Here, the homeowners backyards and the Citys easement
           were actually, physically damaged not by the negligent design
           and construction of the retaining walls, nor by a continuous
           exposure to the walls between May 2004 and May 2006, but
           rather by the collapse and failure of the walls in January
           and March 2007. In other words, this is not a case involving
           festering, undiscovered damage to covered property during the
           policy period. . . . This is a case in which potentially covered
           property damage occurred only after the policy period.29

          Finally, the Texas Supreme Courts analysis in Lennar Corp. v. Markel
   American Insurance Co. is instructive.30 Like the VRV Development L.P.
   policy, the policy at issue in Lennar broadly defined property damage
   (covering it from a continuous exposure to the same harmful conditions);
   but the Lennar court reached the opposite conclusion.31 That is, the Texas
   Supreme Court found the insurance company in Lennar liable for the total
           _____________________
           29
                Id. (citations omitted).
           30
                Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d 750 (Tex. 2013).
           31
             VRV Dev. L.P., 630 F.3d at 458; Lennar, 413 S.W.3d at 758. The polices in Lennar
   and VRV Development L.P. defined property damage to include damage caused by
   continuous exposure to harmful conditions, indicating that the insurers may be
   responsible for damage that occurs outside of the policy windows. First Mercury expressly
   excluded this language from its definition of property damage through its endorsement.
   However, First Mercurys policies utilized continuous language in their definition of
   occurrence, defined as an accident, including continuous or repeated exposure to
   substantially the same general harmful conditions. This language, however, does not
   impact our analysis, as the parties do not dispute that the property damage stemmed from
   one single occurrence. Moreover, the court in Lennar did not squarely address the policy
   language at issue here.

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   amount of water-related damage and resulting remediation costs for covered
   homes despite the fact that some damage occurred before and after the policy
   period.32 It explained that the policy is limited to property damage that
   occurs during the policy period but expressly includes damage from a
   continuous exposure to the same harmful conditions such that, [f]or
   damage that occurs during the policy period, coverage extends to the total
   amount of loss suffered as a result, not just the loss incurred during the
   policy period.33
          Dons Building Supply Inc., Wilshire, VRV Development L.P., and
   Lennar provide the general rule that occurrence-based liability policies are
   triggered when the actual physical damage at issue occurred, rather than
   when a but-for cause of the damage occurred;34 however, if a policy covers
   property damage that includes continuous damage and as such, indicates
   an intent to cover damage occurring outside the policy period, the insurer
   may also be responsible for damages occurring outside of the policys
   coverage period.35
          As applied and pursuant to its policy language and the endorsement,
   First Mercury is responsible only for the damage that occurred during the
   applicable policy periods, not all damage resulting from the initial roof defect.
   Like the insurers in Dons Building Supply and Wilshire, First Mercurys
   policies limited its liability to property damage that occurred during the
   policy periods. And unlike the insurers in VRV Development L.P. and Lennar,

           _____________________
           32
                Lennar, 413 S.W.3d at 758.
           33
                Id.
           34
              See Dons Bldg. Supply, Inc., 267 S.W.3d at 24; Wilshire, 581 F.3d at 225; VRV
   Dev. L.P., 630 F.3d at 45758.
           35
                Lennar, 413 S.W.3d at 758.

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   First Mercury expressly declined to extend coverage to property damage that
   resulted from continuous exposure to the same harmful conditions beyond
   its policy terms.36 Moreover, absent clauses to the contrary, this Circuit has
   hesitated to condone bootstrapping arguments that would hold insurers
   responsible for damage occurring outside of the policy periods.37 Holding
   First Mercury responsible only for the property damage that arose during its
   policy period, then, is consistent with Texas Supreme Court and this Courts
   precedent.38
                                               B.
         Colonys arguments to the contrary are unpersuasive. Colony relies
   on American Physicians Insurance Exchange v. Garcia to argue Texas applies
   an all-sums approach to damage allocation, such that an insurer is
   responsible for all damages that stem from an occurrence if that occurrence

           _____________________
           36
              Compare id. at 757 (The policy obligated Markel [the insurer] to pay the total
   amount of Lennars loss because of property damage that occurred during the policy
   period, including continuous or repeated exposure to the same general harmful
   condition.) with First Mercurys policy (explaining that property damage is covered
   only if it occurs during the policy period and specifically deleting the boilerplate
   paragraph that would provide coverage for any continuation, change or resumption of
   property damage after the end of the policy period).
           37
                See Wilshire, 581 F.3d at 225 (denying a bootstrapping argument that would
   hold an insurer liable for property damage occurring beyond its policy period absent express
   language to the contrary). Moreover, the Court has hesitated to condone such arguments
   even when the contract expressly contemplates them. See VRV Dev. L.P., 630 F.3d at 457
   58 (denying a bootstrapping argument and reaffirming Wilshire despite contractual
   language providing coverage for any continuation, change or resumption of
   that . . . property damage after the end of the policy period).
           38
              That the parties agree the damage stemmed from one single occurrence does
   not impact our analysis: Wilshire instructs that when interpreting such agreements, we
   examine when the property in question suffered actual physical damage, not when a but-
   for cause of property damage occurred. 581 F.3d at 225.

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   transpires during the policy period.39 However, this argument misuses
   Garcia. First, Garcia did not consider the question here: whether an insurer
   is responsible for property damage that arose after its policies expired (here,
   post-April 21, 2014 damage), or only property damage that arose during its
   policy period, when the insurance contract expressly limits coverage as such.
   Instead, Garcia considered whether the insurer breached its duties to defend
   or settle when some of the bodily injury at issue occurred before the policies
   took effect.40 Second, Garcia provides no guidance as to how this Court
   should determine when property damage occurs under a given insurance
   policy. Third, while it is true that Garcia cites Keene Corp. v. Insurance Co. of
   North America, a case from the D.C. Circuit which adopted the all-sums
   approach to allocation, the Garcia court by no means held that it would adopt
   such an approach itself.41 Ultimately, contrary to Colonys argument, Garcia
   simply stands for the proposition that if an occurrence triggers more than one
   policy, insurers should allocate the damages among themselves, but an
   insured may collect only one award.42 This holding is inapplicable here.43

           _____________________
           39
                876 S.W.2d 842 (Tex. 1994).
           40
                See generally id.
           41
                Keene Corp. v. Insurance Co. of N. Am., 667 F.2d 1034 (D.C. Cir. 1981).
           42
                Garcia, 876 S.W.2d at 85355.
           43
               Colony cites four additional cases, but they too carry no weight. First, Colony
   cites CNA Lloyds of Tex. v. St. Paul Ins. Co., 902 S.W.2d 657 (Tex. App.Austin [3rd Dist.]
   1995), writ dismd by agr. (Nov. 16, 1995), as an example of when Texas courts have applied
   the all-sums approach, but nowhere in that case does the court do so. Rather, the
   brawling insurers stipulated that coverage was triggered under both polices; the question
   before the court was how liability should be allocated among multiple insurers and focused
   on interpreting other insurance clauses. Id. at 65961. The court did not hold that an
   insurer is responsible for property damage that occurs outside its policy period.
          Next, Colony cites Maryland Cas. Co. v. S. Texas Med. Clinics, P.A., No. 13-06-089-
   CV, 2008 WL 98375 (Tex. App.Corpus Christi & Edinburg [13th Dist.] Jan. 10, 2008)
   (mem. op.) and Mid-Continent Cas. Co. v. Acad. Dev., Inc., No. H-08-21, 2010 WL 3489355

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                                               IV.
          Because we find First Mercury is not responsible for damages that
   arose after its policies ended, we turn to the second question: has Colony
   created a genuine dispute of material fact as to whether it paid for damages
   covered by First Mercurys policies, such that it could be entitled to
   reimbursement under a contribution or subrogation theory? To do so, Colony
   must have presented sufficient evidence before the district court to
   demonstrate how the settlement contributions were allocated in order to
   show a genuine possibility that it paid for damages that should have been
   covered by First Mercury. It did not.
                                                A.
          Under Texas law, insurers may seek reimbursement under the
   doctrines of contractual and equitable contribution or contractual and
   equitable subrogation.44 Generally, equitable contribution may be available:
           [I]f two or more insurers bind themselves to pay the entire loss
           insured against, and one insurer pays the whole loss, the one so
           paying has a right of action against his co-insurer, or co-
           insurers, for a ratable proportion of the amount paid by him,

           _____________________
   (S.D. Tex. Aug. 24, 2010), affd, 476 F. Appx 316 (5th Cir. 2012) (per curiam)
   (unpublished). But these cases are inapposite, as they both address the broader question of
   whether the insurer had a duty to defend the insured.
           Lastly, Mid-Continent Casualty Co. v. Castagna focused on whether it was
   necessary to allocate covered property damage that spanned multiple policies issued by the
   same insurance company to receive coverage; it did not speak to the questions present here.
   410 S.W.3d 445, 45355 (Tex. App.Dallas [5th Dist.] 2013, pet. denied).
           44
              Colony fails to cite a contractual basis for a contribution or subrogation claim on
   appeal, see infra note 65.

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           because he has paid a debt which is equally and concurrently
           due by the other insurers.45
          To qualify for equitable contribution, the insurers must have: (1)
   shared a common obligation or burden; and (2) the insurer seeking
   contribution must have made a compulsory payment or other discharge of
   more than its fair share of the common obligation or burden.46 A common
   obligation arises if two insurances policies insure the same party, the same
   interest, and the same risk.47 However, pro rata or other insurance
   clauses (present here) may preclude direct equitable contribution claims
   because if no contractual obligations exist between co-insurers to apportion
   between themselves the payment on behalf of the insured . . . we are not
   persuaded to create such an obligation under the common law.48
         If insurers are not entitled to contribution, they may still seek
   subrogation.49 A right to subrogation is often asserted by one who pays a
   debt owed by another.50 Under Texas law, there are two types of
           _____________________
           45
              Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 772 (Tex. 2007)
   (citing Traders & Gen. Ins. Co. v. Hicks Rubber Co., 169 S.W.2d 142, 148 (Tex. 1943)).
           46
                Mid-Continent Ins. Co., 236 S.W.3d at 772.
           47
             Mt. Hawley Ins. Co. v. Lexington Ins. Co., 110 F. Appx 371, 376 (5th Cir. 2004)
   (per curiam) (unpublished). It is important to note that this rule does not come from the
   Texas Supreme Court, and there is little precedent from the Texas Supreme Court about
   whether the common obligation relates to the underlying policy, the underlying
   settlement, or a contractual obligation between the insurers.
           48
                Mid-Continent Ins. Co., 236 S.W.3d at 773.
           49
              Id. at 774 ([P]ayment of the insureds entire loss by one co-insurer does not
   relieve the other co-insurers contractual obligations to the insured to pay their pro rata
   share of the loss. . . . The implication is that the insured would still have a right to enforce
   the contractual obligation, and presumably, that the co-insurer seeking reimbursement
   could be subrogated to this right.) (citations omitted).
           50
             Frymire Engg Co. ex rel. Liberty Mut. Ins. Co. v. Jomar Intl, Ltd., 259 S.W.3d
   140, 143 (Tex. 2008) (internal citation omitted).

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   subrogation: contractual and equitable.51 Contractual subrogation is created
   by an agreement or contract that grants the right to pursue reimbursement
   from a third party in exchange for payment of a loss.52 In contrast, equitable
   subrogation does not depend on contract but arises in every instance in
   which one person, not acting voluntarily, has paid a debt for which another
   was primarily liable and which in equity should have been paid by the
   latter.53 In either case, the insurer stands in the shoes of the insured,
   obtaining only those rights held by the insured against a third party, [and]
   subject to any defenses held by the third party against the insured54 and the
   right to subrogation is limited by the contractual and common law duties an
   insurer owes its insured.55 When a loss includes both covered and non-
   covered damages (as here), the insured bears the burden of allocating the
   amount owed between covered and uncovered lossesotherwise, the court
   must assume that all of the settlement proceeds went first to satisfy the
   covered damages.56
         To prevail on its contribution or subrogation claims, Colony must
   present sufficient evidence upon which a reasonable factfinder could

           _____________________
           51
                Mid-Continent Ins. Co., 236 S.W.3d at 774.
           52
                Id.
           53
                Id. (citations omitted).
           54
                Id. (citations omitted).
           55
                Id. at 775.
           56
              Satterfield & Pontikes Constr., Inc. v. United States Fire Ins. Co., 898 F.3d 574, 583
   (5th Cir. 2018); see also Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co., 130 S.W.3d
   181, 198 (Tex. App.Houston [14th Dist.] 2003, pet. denied) (citation omitted) (Because
   the insured can recover only for covered events, the burden of segregating the damage
   attributable solely to the covered event is a coverage issue for which the insured carries the
   burden of proof. . . . Otherwise, failure to segregate covered and noncovered perils is fatal
   to recovery.).

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   conclude that it paid a debt owed by First Mercury.57 To do so, Colony could
   present evidence upon which a fact finder could segregate covered
   damages, such as internal memoranda, correspondence between the
   insurer and insured, communications with the injured party, [and]
   investigative reports.58 While mathematical precision is not required,
   there does need to be some reasonable basis for allocation.59
                                               B.
          Colony is entitled to reimbursement from First Mercury for its
   settlement contributions only if it paid more than its fair share of the costs,
   meaning it paid for damages covered by First Mercurys policies. Great
   American Insurance Co. v. Employers Mutual Casualty Co. provides a
   framework for this Court to determine whether Colony met its burden to
   create a genuine dispute of material fact regarding this allocation.
          The Court in Great American found sufficient evidence that created a
   reasonable basis for the jury to believe there was unfair allocation when: (1)
   one insurer paid nothing; (2) the other paid the entirety of the settlement;
   and (3) there was evidence that the total value of the claims against the first

           _____________________
           57
              See Mid-Continent Ins. Co., 236 S.W.3d at 772 (The right of action is one of
   contribution, the elements of which require . . . that the insurer seeking contribution has
   made a compulsory payment or other discharge of more than its fair share of the common
   obligation or burden.); id. at 774 (Contractual (or conventional) subrogation is created
   by an agreement or contract that grants the right to pursue reimbursement from a third
   party in exchange for payment of a loss.); Frymire, 259 S.W.3d at 142 ([A] party seeking
   equitable subrogation must show it involuntarily paid a debt primarily owed by another in
   a situation that favors equitable relief.).
           58
              Great Am. Ins. Co. v. Emprs. Mut. Cas. Co., 18 F.4th 486, 492 (5th Cir. 2021)
   (citation omitted).
           59
                Id. (citation omitted).

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   insurer would have exceeded the total value of the settlement.60 In other
   words, the second insurer necessarily overpaid because it paid the entire
   amount of the settlement even though the first insurer was responsible for
   damages that eclipsed the amount of the settlement.
                                                C.
           Colony maintains that, like the insurer in Great American, it
   introduced sufficient evidence that it overpaid in the settlement. As evidence
   of this claim, Colony provided three estimates of the degree of roof damage
   that occurred during First Mercurys policy period.61
          However, contrary to Great American, this evidence does not show
   that the claims against First Mercury exceeded the value of the settlement
   (or that they exceeded First Mercurys portion of payment).62 The estimates

           _____________________
           60
                Id. at 49294.
           61
              Colony provided three estimates indicating the cost to repair the property
   damage that occurred during First Mercurys policy period. Baldwin Roofing issued two
   estimates to repair the clinics roof, and Guerra Prats Construction provided a third, more
   comprehensive estimate that addressed the roof damage and repairs to the HVAC system.
   Based on the parties briefings and the Courts review of the estimates, this Court
   understands these to be competing, not cumulative, estimates to repair the same damage.
           62
              The magistrate judges Report and Recommendation, adopted by the district
   court, agreed:
           Colony has not offered any evidence that the amount it contributed toward
           indemnity was for property damage that took place before First Mercurys
           policy expired. . . . In response to First Mercurys summary judgment
           motion, Colony again relies on its assertion that First Mercurys policies
           cover all of the property damages and therefore argues First Mercury is
           responsible for Colonys contribution to the settlement. . . . Colony did
           not, in the alternative, make any effort to valuate the property damage that
           occurred before the First Mercury policy expired.
          The Report also noted that the evidence may exist somewhere in the record from
   the underlying lawsuit, but it is not the [courts] responsibility to search it out. But even

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                                           No. 22-51114

   indicated X worth of damage that occurred during First Mercurys
   policies,63 but First Mercury paid more than X dollars in the settlement
   more than the claims raised against it. Given that math, Colonys evidence
   does not give rise to a reasonable belief of wrongful allocation.64
          Because Colony did not proveor even create a genuine dispute
   that it paid for damages that First Mercury should have covered, its
   contribution and subrogation claims must fail.65 And given that we resolve

           _____________________
   after conducting a search for such evidence, this Court was unable to find enough that
   would create a genuine dispute as to damages allocation.
           63
              Because the settlement agreement was confidential, this Court will not disclose
   the exact amount of payments.
           64
             Alternatively, First Mercury argues Colony waived this issue because Colony
   consistently argued no segregation was necessary because the loss was entirely covered by
   the First Mercury policies and entirely excluded by the Colony Policy and that it only
   offered the argument and evidence it presents now in its Objections to the magistrate
   judges Report and Recommendation. But this argument is unpersuasive. The record is
   clear that Colony has previously raised the question of allocation and presented this
   evidence before the district court.
           First Mercury also argues Colony did not provide testimonial evidence, as the
   parties did in Great American, to support its allocation argument, and that it instead
   belatedly asked the District Court to consider the entirety of the summary judgment
   record, which the District Court had no obligation to undertake and which this Court also
   has no obligation to undertake. This contention, too, is unpersuasive, as Colony did cite
   estimates prepared by experts and testimony from experts, DL Philips employees,
   contractor invoices, and photographs.
           65
               Neither the magistrate judge nor the district court addressed Colonys
   contribution or subrogation arguments. Because we find First Mercury responsible only for
   those damages that occurred during the policy period, and because First Mercurys
   settlement payments exceeded Colonys evidence of damages covered by First Mercurys
   policies, there is also no basis for this Court to hold that First Mercury breached its
   contractual or equitable duty to reimburse Colony or DL Phillips.
           In brief: first, there is no contractual basis for a contribution or subrogation claim.
   The closest Colony comes to citing a contractual basis on appeal is the claim that First
   Mercury expressly agreed with Colony to litigate this coverage dispute as a term of the
   underlying settlement. However, this argument is misleading and does not provide a

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                                          No. 22-51114

   this case based on the absence of a genuine dispute regarding allocation, we
   need not reach the parties other arguments regarding contribution and
   subrogation.66
                                               V.
          The plain language of First Mercurys policies, as well as binding case
   law from Texas and this Court, indicate First Mercury is liable for only a
   portion of the damages at issue. This finding triggered Colonys burden to
   present sufficient evidence that would create a genuine dispute of material
   fact about whether there was an unfair allocation of damages. It failed to do
   so. Thus, Colonys contribution and subrogation arguments fail. We

           _____________________
   contractual basis: the settlement only contains a reservation of rights to pursue further
   claims; it does not provide a contractual right to receive reimbursement or even serve as
   an express agreement to litigate.
            Second, Colonys equitable contribution claim must fail because Colony failed to
   prove, or create a genuine dispute, that it paid for more than its fair share of damages.
   Lastly, regarding subrogation, there is no evidence First Mercury breached any equitable
   or contractual duties it held to DL Phillips. If anything, First Mercury overpaid. Thus,
   using the methodology outlined in Great American, Colony did not pay more than its fair
   share and is not entitled to either form of relief.
           66
              To note these alternative arguments: First Mercury contends Colony denies
   sharing a common obligation with First Mercury to fund the settlement and that they both
   issued polices covering different policy periods, such that Colony cannot recover under
   an equitable contribution theory (because, by implication, the parties do not insure the
   same interest or the same risk). Colony, on the other hand, fails to adequately respond to
   these contentions and argues (1) it expressly agreed with First Mercury to litigate the
   coverage dispute in the settlement; and (2) Mid-Continent has been read narrowly by this
   Court and limited to the facts of that case. While this Court need not reach these
   arguments, we note that (1) as previously described, the settlement only contains a
   reservation of rights to pursue further claims, not an express agreement to litigate; and
   (2) while this Court has rejected a broad view of Mid-Continent, it has done so on
   grounds not relevant to this case. Additionally, as explained supra note 47, Texas law about
   the meaning of common obligation remains unclear.

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                                No. 22-51114

   AFFIRM the district courts grant of summary judgment to First Mercury
   and its denial of summary judgment to Colony.

                                     23