Court Opinion

ID: 9694923
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:00:48.216977+00
Date Added: 2024-06-11T12:09:42.556791
License: Public Domain

Case: 22-20473    Document: 00516872441       Page: 1    Date Filed: 08/25/2023

          United States Court of Appeals
               for the Fifth Circuit
                                                                   United States Court of Appeals
                                                                            Fifth Circuit

                              ____________                                FILED
                                                                    August 25, 2023
                               No. 22-20473                          Lyle W. Cayce
                              ____________                                Clerk

   The Princeton Excess and Surplus Lines Insurance
   Company,

                                                        Plaintiff—Appellant,

                                    versus

   A.H.D. Houston, Incorporated, doing business as
   Centerfolds; D WG FM, Incorporated, doing business as
   Splendor; D. Texas Investments, Incorporated, doing
   business as Treasures; A.H.D. Houston, Incorporated, doing
   business as Treasures; W.L. York, Incorporated, doing business
   as Treasures; Jaime Middleton; Cora Skinner;
   Jamillette Gaxiola; Jennifer Xzharinova; Jessica
   Hinton; Lina Posada; Lucy Pinder; Paola Canas; Sandra
   Valencia; Tiffany Toth; Cielo Jean Gibson; Maysa Qui;
   Elizabeth Turner; Emily Sears; Gemma Lee Farrell;
   Jaclyn Swedberg,

                                          Defendants—Appellees.
                 ______________________________

                 Appeal from the United States District Court
                     for the Southern District of Texas
                          USDC No. 4:20-CV-3680
                 ______________________________

   Before Elrod, Ho, and Wilson, Circuit Judges.
   Cory T. Wilson, Circuit Judge:
Case: 22-20473       Document: 00516872441            Page: 2     Date Filed: 08/25/2023

                                       No. 22-20473

          This is an insurance coverage dispute arising out of litigation in Texas
   state court. Two insurance policies are at issue, and the district court
   concluded that both provided the insureds coverage. But there is no coverage
   for the claims brought in the underlying lawsuit, so we reverse and render.
                                            I.
                                            A.
          This comparatively pedestrian contract dispute stems from a much
   more salacious lawsuit filed in Texas in 2017. Sixteen professional models
   (the Models) sued three Texas strip clubs known as Treasures, Centerfolds,
   and Splendor (the Clubs) following the Clubs’ use of the Models’ likeness
   for advertising campaigns without the Models’ consent. 1 The Clubs’
   advertising material was manipulated to give the impression that the Models
   endorsed the Clubs or worked as strippers in the Clubs. The Models “were
   depicted    in   various    sexually-charged       social   media    and    Internet
   posts . . . encouraging patrons to visit [t]he Clubs.”           According to the
   Models, the Clubs participated in the selection, creation, and dissemination
   of these advertisements.
          The state trial court granted summary judgment for the Models and
   awarded $1,405,000 in damages. The Clubs appealed the judgment to the
   Court of Appeals for the First District of Texas. That appeal remained
   pending during the course of this action.

          _____________________
          1
            The Models asserted claims for invasion of privacy (misappropriation),
   respondeat superior negligence, and theft. The Models later dropped their theft claim.

                                             2
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                                              B.
           Meanwhile, Princeton Excess and Surplus Lines Insurance Company
   (PESLIC) filed this declaratory judgment action.                 PESLIC issued two
   commercial liability insurance policies to the Clubs covering the time period
   relevant to the Models’ claims: Number 1RA3GL0000179–01, with a policy
   period of November 9, 2015 to November 9, 2016 (the 01 Policy); and
   Number 1RA3GL0000179–02, with a policy period of November 9, 2016 to
   November 9, 2017 (the 02 Policy). 2
           The policies have identical coverage provisions but contain slightly
   different exclusions.       Generally, they include three areas of coverage:
   “Coverage A—Bodily Injury and Property Damage Liability,” “Coverage
   B—Personal and Advertising Injury Liability,” and “Coverage C—Medical
   Payments.” At issue under both policies is Coverage B, which in relevant
   part states:
           1. Insuring Agreement
                   a. We will pay those sums that the insured becomes
                   legally obligated to pay as damages because of “personal
                   and advertising injuries” 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 “personal and
                   advertising injury” to which this insurance does not
                   apply.

           _____________________
           2
            One plaintiff alleged a claim in the underlying lawsuit for conduct that occurred
   during the 01 Policy period, and the others brought claims for conduct during the 02 Policy
   period.

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   Both policies define “Personal and [A]dvertising Injury” as:
         . . . injury, including consequential “bodily injury”, arising
         out of one or more of the following offenses:
                 a.      False arrest, detention or imprisonment;
                 b.      Malicious prosecution;
                 c.      The wrongful eviction from, wrongful entry into,
                         or invasion of the right of private of occupancy of
                         a room, dwelling or premises that a person
                         occupies, committed by or on behalf of its owner,
                         landlord or lessor;
                 d.      Oral or written publication, in any manner, of
                         material that slanders or libels a person or
                         organization or disparages a person’s or
                         organization’s goods, products or services;
                 e.      Oral or written publication, in any manner, of
                         material that violates a person’s right of privacy;
                 f.      The use of another’s advertising idea in your
                         “advertisement”; or
                 g.      Infringing upon another’s copyright, trade dress
                         or slogan in your “advertisement.”

         The policies contain somewhat divergent exclusions, which largely
   determine the outcome of this case. The 01 Policy contains a “Field of
   Entertainment Exclusion,” which reads:
         This insurance does not apply to any loss, claim, “suit”, cost,
         expense, or liability for damages, directly or indirectly based
         on, attributable to, arising out of, involving, resulting from or
         in any way related to:
                 a.       Actual or alleged activity which is claimed to be
                         an intellectual property infringement or violation
                         of any of the following rights or laws: copyright,

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                         patent, trade dress, trade secrets, trade name,
                         trademark or service mark;
                 b.      Actual or alleged invasion of privacy;
                 c.      Actual or alleged libel, slander, or any form or
                         defamation;
                 d.      Actual or alleged unauthorized use of titles,
                         slogans, names, formats, ideas, characters,
                         artwork, theme, plots or other material;
                 e.      Actual or alleged infringement of copyright or
                         common law rights in literary, artistic or musical
                         material, or actual or alleged infringement of
                         literary, artistic or musical rights codes; . . . .

   In the district court, PESLIC argued that the Field of Entertainment
   Exclusion excluded from coverage Personal and Advertising Injury
   subsections d., e., and g., while leaving in force subsection f., coverage for use
   of another’s advertising idea. If PESLIC’s reading is correct, then coverage
   for the claim implicating the 01 Policy turns on whether the Clubs used the
   Models’ “advertising idea,” as the sole surviving relevant category of
   coverage.
          The 02 Policy contains an “Exhibitions and Related Marketing
   Exclusion” that curtails coverage for Personal and Advertising Injury
   subsections d. through g. The exclusion reads:
          This insurance does not apply to:
          ...
          The following parts of “personal and advertising injury”:
                 d.      Oral or written publication, in any manner, of
                         material that slanders or libels a person or
                         organization or disparages a person’s or
                         organizations goods, products, or services;

                                           5
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                 e.      Oral or written publication, in any manner, of
                         material that violates a person’s right of privacy;
                 f.      The use of another’s advertising idea in your
                         “advertisement”; or
                 g.      Infringing upon another’s copyright, trade dress
                         or slogan in your “advertisement”;
          If such activities arise out of or are part of “exhibitions and
          related marketing” . . . .
          “Exhibitions and related marketing” means:
          (a) The creation, production, publication, performance,
          exhibition, distribution, or exploitation of motion pictures,
          television programs, commercials, web or internet
          productions, theatrical shows, sporting events, music,
          promotional events, celebrity image or likeness, literary works
          and similar productions or work, in any medium including
          videos, phonographic recordings, tapes, compact discs, DVDs,
          memory cards, electronic software or media books, magazines,
          social media, webcasts and websites.
          (b) The conduct of individuals in shows, theatrical
          productions, concerts, sporting events, or any other form of
          exhibition.
          (c) Merchandising, advertising or publicity programs or
          material for the operations and material described in (a) or (b)
          above.

   The parties dispute whether this exclusion renders illusory the Personal and
   Advertising Injury coverage provided in the 02 Policy. If it does not, then the
   Clubs have no coverage applicable to the Models’ claims; if it does, then they
   have coverage, as the district court held.
                                         C.
          In its declaratory action, PESLIC named both the Models and the
   Clubs as defendants. PESLIC alleged that “the policies d[o] not obligate it

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   to defend or indemnify the Clubs.” The parties filed three competing
   summary judgment motions in the district court. After the state court
   granted judgment for the Models, the parties provided supplemental briefing
   on the duty to indemnify in support of their respective dispositive motions.
   The district court granted the Models’ and the Clubs’ motions for summary
   judgment and denied PESLIC’s.
          As to the 01 Policy, the district court found that “the Models’
   pleadings in the underlying lawsuit sufficiently allege[d] that that the Clubs
   used [the] Models’ images (i.e., their ‘advertising ideas’) and placed them in
   their own ‘advertisements.’” Consequently, the district court held that
   PESLIC had a duty to defend and indemnify the Clubs under the 01 Policy.
          As to the 02 Policy, the parties disputed whether that policy’s
   Exhibitions and Related Marketing Exclusion rendered illusory the Personal
   and Advertising Injury coverage. The district court agreed with the Models
   and the Clubs that it did and “decline[d] to give effect to PESLIC’s
   ‘Exhibition and Related Marketing’ exclusion.” The court thus held that
   PESLIC had a duty to defend the Clubs. The district court also held that
   PESLIC had a duty to indemnify the Clubs under the 02 Policy.
          PESLIC now appeals.
                                        II.
          We review a summary judgment de novo, applying the same legal
   standards as the district court. Certain Underwriters at Lloyd’s, London v.
   Axon Pressure Prod. Inc., 951 F.3d 248, 255 (5th Cir. 2020). Summary
   judgment is appropriate when “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).

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                                    No. 22-20473

          “In Texas, insurance policies are interpreted by the same principles
   as contract construction.” Terry Black’s Barbecue, L.L.C. v. State Auto. Mut.
   Ins. Co., 22 F.4th 450, 454 (5th Cir. 2022) (citing State Farm Lloyds v. Page,
   315 S.W.3d 525, 527 (Tex. 2010)). “When interpreting insurance contracts,
   courts seek ‘to ascertain the true intentions of the parties as expressed in the
   instrument.’” United Nat. Ins. Co. v. Mundell Terminal Servs., Inc., 740 F.3d
   1022, 1027 (5th Cir. 2014) (quoting Coker v. Coker, 650 S.W.2d 391, 393 (Tex.
   1983)). “The words of the policy are given their ordinary and generally-
   accepted meaning unless the policy shows the words were meant in a
   technical or different sense.” Terry Black’s Barbecue, 22 F.4th at 455
   (internal quotation marks and citation omitted). We read all parts of the
   policy together and seek to give effect to each part. Id.
          An insurance contract is ambiguous if it is subject to more than one
   reasonable interpretation. See Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI
   Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). “When an insurance policy is
   ambiguous, and the parties offer conflicting reasonable interpretations of the
   policy, Texas law favors adopting the interpretation in favor of the insured.”
   Terry Black’s Barbecue, 22 F.4th at 455 (citing RSUI Indem. Co. v. The Lynd
   Co., 466 S.W.3d 113, 118 (Tex. 2015)). But we only reach this question if the
   policy provisions are subject to two or more reasonable interpretations. Id.
          “[U]nder Texas’s well-established eight-corners rule, an insurer’s
   ‘duty to defend is determined by the claims alleged in the petition and
   coverage provided in the policy.’” State Farm Lloyds v. Richards, 966 F.3d
   389, 392 (5th Cir. 2020) (per curiam) (quoting Pine Oak Builders, Inc. v. Great
   Am. Lloyds Ins. Co., 279 S.W.3d 650, 654 (Tex. 2009)). “The insureds have
   the initial burden to establish that a claim is potentially within the scope of
   coverage.” Id. at 393. The burden then shifts to the insurer to show that it
   can avoid coverage. Id. The duty to defend and the duty to indemnify are
   distinct; under Texas law, the duty to defend is broader than the duty to

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   indemnify, and the duty to indemnify will not be triggered unless there is also
   a duty to defend. Id. at 396–97.
                                         III.
          We first consider the 01 Policy. As discussed above, it includes
   coverage for Personal and Advertising Injury. But it also includes a Field of
   Entertainment Exclusion, which narrows the scope of that coverage. We
   discuss the exclusion first, and then consider the coverage that remains in
   view of it.
                                          A.
          The parties dispute the impact of the Field of Entertainment
   Exclusion in the 01 Policy. Their disagreement centers on what coverage
   survives the exclusion and whether the exclusion renders illusory the policy’s
   Personal and Advertising Injury coverage. Texas courts disfavor construing
   insurance contracts such that coverage is rendered illusory. See ATOFINA
   Petrochemicals, Inc. v. Cont’l Cas. Co., 185 S.W.3d 440, 444 (Tex. 2005)
   (adopting the insured’s construction of an exclusion because the insurer’s
   interpretation “would render coverage under [an] endorsement largely
   illusory”); see also Northfield Ins. Co. v. Herrera, 751 F. App’x 512, 518 (5th
   Cir. 2018) (per curiam). However, “when an insurance policy will provide
   coverage for other claims, Texas courts are unlikely to deem the policy
   illusory.” Herrera, 751 F. App’x at 518. “An insurance policy is not illusory
   merely because it does not provide coverage for a claim the policyholder
   thought it would cover.” Balfour Beatty Const., L.L.C. v. Liberty Mut. Fire
   Ins. Co., 968 F.3d 504, 515 (5th Cir. 2020) (citing Constitution State Ins. Co.
   v. Iso-Tex Inc., 61 F.3d 405, 410 n.4 (5th Cir. 1995) (“Texas law does not
   recognize coverage because of [the] ‘reasonable expectation’ of the
   insured.”)).

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           By its terms, the Field of Entertainment Exclusion eliminates
   coverage for most of the “advertising injuries” included in the 01 Policy’s
   Coverage B—Personal and Advertising Injury Liability. But it expressly
   excepts injuries encompassed by subsection f., for the use of another’s
   “advertising idea.” PESLIC contends that the exclusion should thus be
   enforced, reasoning that it is not illusory because it leaves significant
   coverage in place for Personal and Advertising Injury—just none that applies
   in this case. 3 We agree that the exclusion does not render coverage illusory
   and therefore is binding on the parties.
           The Models’ principal contentions regarding the 01 Policy only
   buttress this conclusion.         They agree that, whatever the scope of the
   exclusion, subsection f. remains in force—indeed, they assert subsection f.
   covers their claims, as the district court held. They further contend that
   subsection e., covering violations of a person’s “right of privacy,” remains
   viable and applies in this case. Only if these avenues fail do they alternatively
   contend that the exclusion renders coverage illusory and should be set aside. 4
   But we need not get there, given that, as the parties agree, some measure of

           _____________________
           3
             PESLIC urges this court not to follow the nearly identical case from the Southern
   District of Florida, Princeton Express v. DM Ventures USA LLC, 209 F. Supp. 3d 1252 (S.D.
   Fla. 2016), in which a Florida district court refused to enforce the exclusion because it
   rendered coverage illusory for advertising injuries under Florida law. We agree with
   PESLIC on this point and do not find DM Ventures to be apt. That case applies Florida law,
   while this one turns on Texas law.
           4
             For their part, the Clubs do not engage on these issues. Instead, they contend
   that, because the district court did not analyze the Field of Entertainment Exclusion or
   subsection e., this court need not do so. However, because we disagree with the district
   court’s conclusion that the Clubs appropriated the Models’ “advertising idea,” such that
   coverage obtained under subsection f., it is necessary to consider the interplay between the
   exclusion and these categories of coverage.

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   coverage survives for Personal and Advertising Injury. See Herrera, 751 F.
   App’x at 518; see also Balfour Beatty Const., 968 F.3d at 515.
           As for subsection e. and the “right of privacy,” the Models’ argument
   that coverage survives the exclusion is unavailing.               They submit that
   subsection e. covers injury to the “right of privacy,” while the exclusion
   eliminates coverage for a purportedly different injury, an “invasion of
   privacy.” But in their state court action, the Models pled—and prevailed
   on—a claim for “Invasion of Privacy—Misappropriation,” mirroring the
   terminology of the injury excluded from coverage by the Field of
   Entertainment Exclusion. So the wording of their own claim belies the idea
   that their injury was distinct from the type of injury implicated by the 01
   Policy’s Field of Entertainment Exclusion.
           Beyond the semantics, the Models provide no case supporting the idea
   that an “invasion of privacy” and a violation of the “right of privacy” are
   distinct torts in Texas law. Texas courts have historically recognized “four
   distinct torts encompassed under the category of invasion of the right of
   privacy.” Wood v. Hustler Mag., Inc., 736 F.2d 1084, 1088 (5th Cir. 1984).
   Those are appropriation, intrusion, public disclosure, and false light. Justice
   v. Belo Broad. Corp., 472 F. Supp. 145, 146–47 (N.D. Tex. 1979). 5 None of
   these torts suggest that an “invasion of privacy” is distinct from a violation
   of the “right of privacy.” To the contrary, they comprise the same tort in
   Texas, and the exclusion applies to preclude coverage under subsection e. of
   the 01 Policy’s Personal and Advertising Injury coverage.

           _____________________
           5
             In 1994, the Supreme Court of Texas receded somewhat, holding that false light
   was not a cognizable tort in Texas. Cain v. Hearst Corp., 878 S.W.2d 577 (Tex. 1994). The
   Cain court’s holding does not alter our analysis.

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          To sum up, the Field of Entertainment Exclusion is enforceable, as
   the 01 Policy nonetheless “will provide coverage for other claims[.]”
   Herrera, 751 F. App’x at 518. Coverage under the policy is thus not illusory.
   Subsection e. of the policy’s Personal and Advertising Injury coverage does
   not survive the exclusion, but the parties agree that coverage remains for
   injuries encompassed by subsection f. The lingering question is whether that
   subsection applies to the claims at issue in this case.
                                          B.
          Subsection f. covers injuries caused by “the use of another’s
   advertising idea in [the Clubs’] ‘advertisement.’” PESLIC avers that the
   district court erred when it found that the Clubs’ unlawful use of the Models’
   images constituted use of their “advertising idea,” bringing the Models’
   underlying claims within the ambit of subsection f. PESLIC contends that
   “[t]he misappropriation of a person’s image is not an appropriation of that
   person’s ‘idea.’” The Models, joined by the Clubs, respond that their
   images constitute “advertising ideas” by which they commercialize their
   brands, and they reject any notion that their images are “just fungible stock
   photos.” Thus, the Clubs’ use of the images falls squarely under subsection
   f., triggering PESLIC’s duties to defend and indemnify the Clubs. We are
   persuaded that PESLIC has the stronger position.
          “Advertising idea” is not defined in the 01 Policy. And “[t]he Fifth
   Circuit and Texas[] courts have not spoken directly to the definition of an
   advertising idea in [commercial general liability] policies . . . .”    Laney
   Chiropractic & Sports Therapy, P.A. v. Nationwide Mut. Ins. Co., 866 F.3d 254,
   259 (5th Cir. 2017) (citation omitted). In Laney, this court contemplated
   three definitions of “advertising idea” espoused by other courts: (1) “any
   idea or concept related to the promotion of a product to the public,” Hyman
   v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th Cir. 2002); (2) “an

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   idea about the solicitation of business and customers,” Green Mach. Corp. v.
   Zurich-Am Ins. Grp., 313 F.3d 837, 839 (3d Cir. 2002); and (3) “a concept
   about the manner a product is promoted to the public,” Gemini Ins. Co. v.
   Andy Boyd Co., 2006 WL 1195639, at *2 (S.D. Tex. May 3, 2006). See Laney,
   866 F.3d at 259–60 (discussing cases). But in deciding the coverage question
   there, our Laney colleagues did not adopt one of these definitions; instead
   that panel considered them together and held that no “advertising idea” was
   implicated where the defendant had unlawfully used a patented product and
   advertised that product on its website. 866 F.3d at 260–61.
             To support the argument that the Models’ images constitute their
   “brand” and therefore comprise an “advertising idea,” the Clubs offer two
   out-of-circuit cases. See Holyoke Mut. Ins. Co. in Salem v. Vibram USA, Inc.,
   106 N.E.3d 572, 579 (Mass. 2018); Cont’l W. Ins. Co. v. Pimentel & Sons
   Guitar Makers, Inc., No. CIV 05-0067, 2005 WL 6332339, at *6 (D.N.M.
   Nov. 16, 2005). The Clubs further point to Mid-Continent Casualty Co. v.
   Kipp Flores Architects, L.L.C., 602 F. App’x 985 (5th Cir. 2015). In Vibram,
   the insured “used the name of a legendary barefoot marathon runner” to
   promote “running shoes that simulated barefoot running.” 106 N.E.3d at
   579. In Pimentel & Sons, the court found that “[a]llegations that an insured
   traded on a recognizable name or mark . . . qualif[ied] as the use of another’s
   advertising idea.” 2005 WL 6332339, at *6. And in Kipp Flores, an architect
   firm sued a homebuilder after the homebuilder built more homes than
   originally agreed using the firm’s designs. 602 F. App’x at 987–88. This
   court held that the homes themselves served as “advertisements” for the
   firm’s house plans, such that there was coverage for an advertising injury. Id.
   at 994.
             None of the Clubs’ cases are precedential. But they falter because
   they are also inapposite. For instance, in Vibram, the family of famed
   marathon runner Abebe Bikila had “intentionally created a connection

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   between their family name and . . . Bikila’s legacy and desirable qualities for
   purposes of using ‘Bikila,’ and everything it conveyed, to attract customers
   to their running-related commercial ventures.” 106 N.E.3d at 488. In other
   words, Bikila’s family branded his name to promote products associated with
   his accomplishments, and the unauthorized use of the runner’s name thus
   constituted improper use of the family’s advertising idea. Likewise, Pimentel
   & Sons involved improper use of a trademark—a quintessential (and
   protected) “advertising idea.” By contrast, while the Models’ curated
   photographs could similarly be used to promote an array of business
   ventures, the images themselves would not be the “advertising idea”;
   arranging them as part of a promotion might well be. In other words, image
   and idea are distinct, unlike the brands at issue in Vibram or Pimentel & Sons.
          Kipp Flores does not change the calculus. Though the case turned on
   the novel notion that constructed homes served to advertise the architect’s
   underlying house plans, Kipp Flores did not hold that the builder had
   appropriated the architect’s “advertising idea,” i.e., that the builder had
   built more homes to advertise the architect’s plans. See 602 F. App’x at 994
   (holding that infringing houses qualified as “advertisements” under the
   disputed insurance policies). Indeed, the concept of “advertising idea” was
   not really at play in Kipp Flores, as the dispute centered on the threshold
   question of whether the homes were “advertisements.” And the Kipp Flores
   policy was not similar enough to the 01 Policy to supply useful analogy.
          Instead, we find Laney to be salient. Following that case’s reasoning,
   the Clubs’ misappropriation of the Models’ images did not amount to use of
   their “advertising idea” because at essence, the Models’ images are their
   products, not their advertising ideas. The Clubs took those products and
   used them without permission.          “[W]ithout more, taking and then
   advertising another’s product is different from taking another’s ‘advertising
   idea.’” Laney, 866 F.3d at 261. PESLIC, therefore, has no duty to defend or

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   indemnify the Clubs based on the 01 Policy’s “advertising idea” coverage,
   and the district court erred in concluding otherwise.
                                         IV.
          We now consider the 02 Policy, which applies to most of the Models’
   claims. Its scope of coverage turns on the policy’s Exhibition and Related
   Marketing Exclusion, which eliminates coverage for Personal and
   Advertising Injury subsections d. through g. (pertaining to advertising
   injuries), to the extent “such activities arise out of or are part of ‘exhibitions
   and related marketing.’” The exclusion leaves in force subsections a.
   through c. (covering personal injuries). The basic question presented is
   whether this exclusion works to render the relevant coverage illusory, such
   that it should not be enforced. The answer largely turns on whether the
   policy’s Personal and Advertising Injury coverage should be viewed as one
   “umbrella” of coverage or carved into subcategories, i.e., bifurcated into
   personal injury coverage and advertising injury coverage. The district court
   took the latter approach and considered the exclusion’s effect on subsections
   d. through g. in isolation. Doing so, the court found that the exclusion
   “essentially eliminates all advertising injury coverage in a move that is not
   condoned by Texas law,” set it aside, and held there was coverage for the
   Models’ claims under the 02 Policy.
          PESLIC asserts that instead, the former approach is correct and that
   the district court’s holding was thus in error. PESLIC contends that, though
   the exclusion removes coverage for the underlying lawsuit, it leaves
   significant coverage intact for other Personal and Advertising Injury claims.
   As a result, the exclusion does not make the 02 Policy’s Personal and
   Advertising Injury coverage illusory—but it should be enforced to bar
   coverage in this case.

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                                     No. 22-20473

          By contrast, the Models and the Clubs say the district court properly
   set aside the exclusion. They reason that commercial general liability policies
   historically separated these forms of coverage, as personal injury and
   advertising injury are distinct types of injuries. Thus, the 02 Policy’s
   Personal and Advertising Injury coverage really provides two separable
   subcategories of coverage.      Because the exclusion curtails the policy’s
   advertising injury coverage, the Models and the Clubs argue that it renders
   that subcategory of coverage illusory and should thus not be given effect.
   Despite the intuitive appeal of the Models’ and the Clubs’ reasoning, we
   again fall on PESLIC’s side of the ledger.
          First, we are not persuaded by the argument that commercial general
   liability policies have traditionally separated advertising injury coverage from
   personal injury coverage, such that we should segregate them in the 02
   Policy. That argument requires us to look beyond the eight corners of the
   complaint in the underlying lawsuit and the insurance policy at issue,
   something we cannot do. E.g., GuideOne Elite Ins. Co. v. Fielder Rd. Baptist
   Church, 197 S.W.3d 305, 307 (Tex. 2006); see also Herrera, 751 F. App’x at
   515 (“Texas’s ‘eight-corners rule’ instructs that an insurer’s duty to defend
   must be determined ‘solely from terms of the policy and the pleadings of the
   third-party claimant. Resort to evidence outside the four corners of these
   two documents is generally prohibited.’” (citation omitted)).
          Second, returning to the text of the 02 Policy, the interpretive issue
   here is not whether there is any factual scenario under the exclusion that
   would yield coverage for an advertising injury—though there very likely is,
   as the exclusion only withdraws coverage for subsections d. through g. “[i]f
   such activities arise out of or are part of ‘exhibitions and related marketing.’”
   Rather, the question is whether Personal and Advertising Injury should be
   read as a single category of coverage, or split into two separate categories, as
   the district court approached it. If the former, then coverage under the 02

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Case: 22-20473     Document: 00516872441           Page: 17    Date Filed: 08/25/2023

                                    No. 22-20473

   Policy is not illusory because no one disputes that coverage remains in force
   for subsections a. to c., encompassing enumerated personal injuries. See
   Herrera, 751 F. App’x at 518. If the latter, then the district court may have
   been correct that the 02 Policy’s coverage for advertising injuries is illusory
   because the Exhibition and Related Marketing Exclusion negates all such
   coverage for “exhibitions and related marketing.”
          But to slice and dice the policy language as the district court did in
   nullifying the exclusion is contrary to the policy’s text and structure, and
   therefore to the intent of the parties. Personal and Advertising Injury
   coverage is delineated in the 02 Policy as one unit of coverage, with seven
   covered types of injuries listed in subsections a. through g. “Advertising
   Injury” is nowhere defined separately. Considering the plain policy text, the
   use of “and” to link “Personal and Advertising Injury” indicates that the
   policy grouped these injuries under the single rubric of “Coverage B—
   Personal and Advertising Injury Liability.” Just as plainly, the policy’s
   Exhibition and Related Marketing Exclusion then largely eliminates coverage
   for subsections d. through g., while leaving subsections a. to c. in force. Such
   drafting legerdemain may be cumbersome or counterintuitive, but it is also
   commonplace in insurance contracts. The one before us today, the 02 Policy,
   “is not illusory merely because it does not provide coverage for a claim the
   policyholder[s] thought it would cover.” Balfour Beatty Const., 968 F.3d at
   515; accord Iso-Tex, 61 F.3d at 410 n.4 (“Texas law does not recognize
   coverage because of [the] ‘reasonable expectation’ of the insured.”).
          Instead, the text of the 02 Policy is not ambiguous, and Texas law
   “presumes that the party knows and accepts the contract terms.” Nat’l Prop.
   Holdings L.P. v. Westergren, 453 S.W.3d 419, 425 (Tex. 2015). Those terms
   disclose that the policy’s Personal and Advertising Injury coverage comprises
   a single category of coverage, and further that the Exhibition and Related
   Marketing Exclusion removes much, but by no means all, of that coverage.

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                                        No. 22-20473

   The 02 Policy is therefore not illusory, and the exclusion must be enforced,
   constraining us to conclude there is no coverage for the Models’ underlying
   claims under the 02 Policy. 6
                                             V.
           PESLIC does not have a duty to defend or indemnify the Clubs in the
   underlying lawsuit because neither the 01 Policy nor the 02 Policy provides
   coverage for the claims alleged by the Models. The district court erred by
   concluding otherwise. The court’s summary judgment is therefore
                                                   REVERSED and RENDERED.

           _____________________
           6
             PESLIC also asks us to enforce the Knowing Violation of Rights of Another
   Exclusion in the 02 Policy. We need not reach that issue in view of our holding as to the
   other policy provisions at play.

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Case: 22-20473      Document: 00516872441            Page: 19    Date Filed: 08/25/2023

                                      No. 22-20473

   James C. Ho, Circuit Judge, dissenting:
          The panel majority makes a reasonable Erie guess as to how Texas law
   might answer the questions presented in this appeal. But I would certify
   those questions to the Supreme Court of Texas. Accordingly, I dissent.
          Suppose one section of an insurance policy provides coverage against
   various enumerated risks. But another section of the policy eliminates
   coverage for those risks.
          In other words, the policy contains two provisions that appear to be in
   irreconcilable conflict with one another—what one provision giveth, the
   other taketh away.
          So a court will have to decide which provision governs, in the event
   that an incident occurs that is covered by the first section, but excluded by
   the other section. Do we apply the coverage provision? Or do we enforce the
   exclusion? It’s impossible to give effect to both provisions. So how is the
   reader supposed to know which one to apply, and which one to ignore?
          If there’s truly no way to reconcile the conflict, then “the proper
   resolution is to apply the unintelligibility canon . . . and to deny effect to both
   provisions.” Greenbrier Hosp., L.L.C. v. Azar, 974 F.3d 546, 547–48 (5th Cir.
   2020) (quoting Antonin Scalia & Bryan A. Garner, Reading
   Law: The Interpretation of Legal Texts 189 (2012)). “After
   all, if we cannot make a valid choice between two differing interpretations,
   we are left with the consequence that a text means nothing in particular at
   all.” Id. at 548 (quoting Scalia & Garner at 189) (cleaned up).
          “But make no mistake: This is a last resort.” Id. “‘Courts rarely
   reach this result,’ because ‘outright invalidation is admittedly an unappealing
   course.’” Id. (quoting Scalia & Garner at 189–90).

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                                     No. 22-20473

          Notably, there are principles of Texas law that may supply a way out
   of this morass—and thereby avoid the need to invoke Justice Scalia’s “last
   resort” canon.
          As the panel majority notes, Texas law protects insureds against
   “illusory” coverage. That is, Texas law resists any reading of an insurance
   contract that would render a coverage provision meaningless. See, e.g.,
   ATOFINA Petrochemicals, Inc. v. Cont’l Cas. Co., 185 S.W.3d 440, 444 (Tex.
   2005) (per curiam) (adopting the insured’s construction of an exclusion
   because the insurer’s interpretation “would render coverage under [an]
   endorsement largely illusory”).
          In addition, Texas law generally provides that, if an insurance contract
   “is susceptible of more than one reasonable interpretation,” courts must
   “resolve the uncertainty by adopting the construction that most favors the
   insured.” Nat’l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552,
   555 (Tex. 1991).     “[E]xceptions or limitations on liability are strictly
   construed against the insurer and in favor of the insured.” Id.
          To my mind, there’s at least a persuasive argument to be made that
   these two principles of Texas law suggest we must side with the insured,
   rather than the insurer, in this case.
          To be sure, there’s a slight difference between my initial hypothetical
   and this case. In my hypothetical, one section of the policy provides coverage
   against various enumerated risks—and another section of the policy
   eliminates coverage for those risks. Here, by contrast, one section of the
   policy provides coverage against various enumerated risks—but another
   section eliminates coverage for most, but not all, of the risks enumerated in
   the first section.
          The panel majority seems to say that this slight difference in drafting
   matters. The panel theorizes that the answer varies depending on “whether

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                                     No. 22-20473

   the policy’s Personal and Advertising Injury coverage should be viewed as
   one ‘umbrella’ of coverage or carved into subcategories, i.e., bifurcated into
   personal injury coverage and advertising injury coverage.” Ante, at 15.
            I’m not so sure. Why would Texas law treat coverage as illusory, but
   only if the excluded coverage happens to be structured as an “umbrella”
   provision—and not if it’s drafted as a mere “subcategory” of coverage? It’s
   not clear to me why these principles of Texas law would turn on a drafting
   quirk.
            Rather than decide these questions ourselves, I would certify them to
   the Supreme Court of Texas. See, e.g., JCB, Inc. v. The Horsburgh & Scott
   Co., 941 F.3d 144, 145 (5th Cir. 2019).

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