UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 97-10850
_______________________
HVAW, A Limited Partnership; BILL C. HUNTER,
Plaintiffs-Appellants,
versus
AMERICAN MOTORISTS INSURANCE CO.; DAVID E. LEE,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
(3:96-CV-1836-D)
_________________________________________________________________
June 17, 1998
Before POLITZ, Chief Judge, REAVLEY, and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:*
Hunter, Van Amburgh & Wolf, P.C. (“HVAW”) and Bill C.
Hunter, a lawyer at HVAW, were insured under primary and umbrella
policies issued by American Motorist Insurance Company (“AMICO”).
AMICO declined to defend HVAW and Hunter in adversary bankruptcy
proceedings brought by Malcolm Kelso and Legal Econometrics, Inc.
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
(“LEI”). After settling their dispute with Kelso and LEI, HVAW and
Hunter brought this suit in Texas state court alleging that AMICO
had a duty to defend them against the claims of Kelso and LEI.
AMICO removed the case to federal court, where both parties filed
for judgment as a matter of law on the issue of coverage. The
district court granted AMICO judgment as a matter of law, finding
that it did not have a duty to defend HVAW and Hunter. We affirm.
I. Background
A. Facts
HVAW and Hunter provided legal representation and
services to various individuals and business entities associated
with Grady and Gary Vaughn (“Vaughn entities”). In the late 1980s,
the Vaughn entities were faced with numerous financial and legal
difficulties. In an attempt to resolve these difficulties, the
Vaughn entities entered into various complex financial and
management agreements with LEI and Kelso in order to protect their
money and properties. In short, LEI and Kelso were to provide
“crisis management services” to the Vaughn entities. As part of
this arrangement, LEI and Kelso received ownership interests in and
control over certain Vaughn entities. Disputes soon arose between
the Vaughn entities and LEI and Kelso over both LEI’s and Kelso’s
control of various Vaughn entities and LEI’s and Kelso’s fees. LEI
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and Kelso eventually declared bankruptcy, allegedly as a result of
the financial difficulties caused by these disputes.
Once in bankruptcy, LEI and Kelso filed two adversary
proceedings against HVAW, Hunter, and other defendants. The first
suit (No. 393-3585) alleged a laundry list of causes-of-action
including conspiracy, fraud, conversion, breach of fiduciary duty,
tortious interference with contract, legal malpractice, and
violations of the Texas Deceptive Trade Practices Act and federal
racketeering law. The second suit (No. 393-3668) alleged that
HVAW, Hunter, and other defendants violated the automatic stay by
seeking to enforce various state court judgments against LEI and
Kelso. It also alleged legal malpractice, breach of fiduciary
duty, fraud, and conspiracy to defraud. The factual basis for
these two adversary proceedings boils down to HVAW’s and Hunter’s
alleged knowing and intimate participation in a complicated
conspiracy involving the Vaughn entities and numerous other
defendants to defraud LEI and Kelso.
AMICO refused to defend HVAW and Hunter in LEI’s and
Kelso’s adversary proceedings on the ground that under the terms of
the two policies at issue the alleged wrongful acts did not
constitute an “occurrence.” Eventually, HVAW and Hunter settled
with LEI and Kelso in both adversary proceedings. HVAW and Hunter
then initiated this lawsuit against AMICO to recover the cost of
their defense in the two adversary proceedings.
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B. Insurance Policies
AMICO issued two types of policies to HVAW and Hunter.
The first type of policy is a commercial general liability (“CGL”)
policy that covered “bodily injury” or “property damage” caused by
an “occurrence.” An “occurrence” is defined as “an accident,
including continuous or repeated exposure to substantially the same
general harmful conditions.”
The second type of policy is a commercial catastrophe
liability (“CAT”) policy that essentially served as an umbrella
policy to the CGL policy. Just like the CGL policy, the CAT policy
provided coverage for certain injuries caused by an “occurrence.”
“Occurrence” is defined the same as in the CGL policy.
II. Analysis
This court reviews a grant of summary judgment de novo.
See American States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir.
1998). A district court’s interpretation of an insurance contract
is a question of law which this court also reviews de novo. See
id. An insurer bears the burden of proving that exclusions in the
policy in question bar coverage for the plaintiff’s claims. See
id.
In this diversity case, Texas rules of contract
interpretation control. See id. Under Texas law, the
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interpretation of insurance contracts is governed by the same rules
that apply to contracts in general. See id. (citing Forbau v.
Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994)).
In determining an insurer’s duty to defend, Texas courts
utilize the “eight corners rule.” See id. (citing National Union
Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139,
141 (Tex. 1997)). Under this rule, an insurer’s duty to defend is
determined by the language of the insurance policy and a liberal
interpretation of the allegations in the pleadings. See id. “In
reviewing the underlying pleadings, the court must focus on the
factual allegations that show the origin of the damages rather than
on the legal theories alleged.” Id. (quoting National Union Fire
Ins. Co., 939 S.W.2d at 141); see also Adamo v. State Farm Lloyds
Co., 853 S.W.2d 673, 676 (Tex. App.--Houston [14th Dist.] 1993,
writ denied) (“It is not the cause of action alleged that
determines coverage but the facts giving rise to the alleged
actionable conduct.”).
The district court found that the factual allegations
contained in LEI’s and Kelso’s two suits against HVAW and Hunter
did not constitute an “occurrence” under the terms of the CGL and
CAT policies and, therefore, AMICO had no duty to defend. We
agree.
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Under Texas law, a person’s acts are not accidental when
he commits an intentional act that results in injuries that
ordinarily follow from or could be reasonably anticipated from the
intentional act. See id. (citing Trinity Universal Ins. Co. v.
Cowan, 945 S.W.2d 819, 827-28 (Tex. 1997); see also Argonaut
Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973)
(stating that when “acts are voluntary and intentional and the
injury is the natural result of the act, the result was not caused
by accident . . . .” (quoting Thomason v. United States Fidelity &
Guar. Co., 248 F.2d 417, 419 (5th Cir. 1957)).
Therefore, in order to determine whether AMICO had a duty
to defend Hunter and HVAW under the terms of its policies, we must
decide whether Kelso and LEI alleged facts in their two adversary
proceedings that could constitute an “accident” under Texas law.
A. Adversary Proceeding No. 393-3585
LEI’s and Kelso’s first complaint is premised on the
factual allegation that HVAW and Hunter knowingly engaged in a
complex conspiracy with the Vaughn entities and other defendants to
defraud LEI and Kelso. The complaint itself states that “Hunter
learned or knew of the Vaughns’ intent to defraud Legal
Econometrics and Kelso and set about to organize and orchestrate an
even more elaborate conspiracy to defraud and otherwise damage
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Legal Econometrics and Kelso . . . .” (¶ 138).1 “Hunter was the
mastermind and architect of the evolving conspiracy . . . .” (¶
140). “Each [defendant] knew the object and purpose of the
conspiracy was to defraud Legal Econometrics and Kelso and
wrongfully deprive them of their services and property, each agreed
to so wrong Legal Econometrics and Kelso, and each of them acted in
furtherance of the said conspiracy.”2 (¶ 140). The complaint
repeatedly describes the defendants’ actions as “intentional,
malicious, willful and wanton.” In fact, Kelso’s and LEI’s request
for relief on their claim of legal malpractice (Count XII) is
factually premised on Hunter’s and HVAW’s knowing participation in
the complex conspiracy against Kelso and LEI. (See ¶ 264).
Although Kelso and LEI allege negligence (in the form of legal
malpractice) against Hunter and HVAW, the facts supporting their
allegation are all voluntary and intentional acts. Cf. Farmers
Texas County Mutual Ins. Co. v. Griffin, 955 S.W.2d 81, 83 (Tex.
1997) (“[A]lthough [plaintiff] seeks relief on legal theories of
1
The complaint also states that the “Vaughns’ scheme to loot
the corporations was fully known to and aided and abetted by their
counsel, Bruce Bowman and Bill Hunter, as well as Bowman’s and
Hunter’s respective law firms (Vial Hamilton and Hunter Van Amburgh
& Wolf).” (¶ 190).
2
The complaint’s request for relief states that “[e]ach of
the above-named Defendants [including Hunter and HVAW]
intentionally acted in furtherance of the conspiracy to defraud
Legal Econometrics and Kelso and thereby caused Plaintiffs damage.”
(¶ 239).
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negligence and gross negligence, he alleged facts indicating that
the origin of his damages was intentional behavior. He made no
factual contention that could constitute negligent behavior by
[defendant].”).
Because Kelso’s and LEI’s factual allegations all
constitute intentional and voluntary acts, AMICO has no duty to
defend under the terms of its policies.
B. Adversary Proceeding No. 393-3668
LEI’s and Kelso’s second complaint essentially alleges
that “[t]he violations of the automatic stay were willful, knowing,
voluntary, volitional, and intentional. The violations were
consummated with full and actual knowledge of the pendency of the
automatic stay . . . .” (¶ 59). Kelso’s and LEI’s complaint
repeatedly refers to Hunter’s and HVAW’s actions as both
“deliberate” and “intentional, malicious, willful, and wanton.”
Again, while Kelso’s and LEI’s complaint alleges negligence (in the
form of legal malpractice), the underlying factual claims are based
on knowledge and intent. Because Kelso’s and LEI’s factual
allegations all constitute intentional and voluntary acts, AMICO
has no duty to defend under the terms of its policies.
III. Conclusion
For the foregoing reasons, AMICO has no duty to defend
Hunter or HVAW. The judgment of the district court is AFFIRMED.
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