Doe 1, Doe 2 and Doe 3 v. National Union Fire Insurance Company of Pittsburgh, PA.

In The
Court of Appeals
Seventh District of Texas at Amarillo

No. 07-14-00109-CV

DOE #1, DOE #2 AND DOE #3, APPELLANTS

V.

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA., APPELLEE

On Appeal from the 108th District Court
Potter County, Texas
Trial Court No. 98,575-E, Honorable Douglas Woodburn, Presiding

July 6, 2015

MEMORANDUM OPINION
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.

The trial court granted summary judgment to appellee National Union Fire

Insurance Company of Pittsburgh, PA, in its coverage dispute with insureds under a

commercial general liability policy issued to “Watchtower Bible and Tract Society Et al.”

Parts of the record are sealed, and the particular entities affiliated with the Watchtower

Society who seek coverage are identified as Doe #1, Doe #2, and Doe #3 (the
“insureds”).1 The insureds appeal, contending the ground National Union asserted in its

traditional summary judgment motion was not meritorious. We agree, and will reverse

the trial court’s judgment and remand the case.

Factual and Procedural Background

National Union issued commercial general liability (CGL) policies annually for

four policy periods, beginning in 1989 and ending in 1993.2 The policies’ “Commercial

General Liability Coverage Form” states coverages for “Coverage A. Bodily Injury and

Property Damage Liability;” “Coverage B. Personal and Advertising Injury Liability;” and

“Coverage C. Medical Payments.” Each coverage contains stated “Exclusions.”

It appears undisputed that the insureds sought coverage under Coverage A,

under which National Union agreed to “pay those sums that the insured becomes legally

obligated to pay because of ‘bodily injury’ or ‘property damage’ to which this insurance

applies.” Regarding the exclusions found under Coverage A, there appear paragraphs

“a” through “n.”3

Endorsement MS #2 is entitled “Clergy Counseling Professional Liability

Coverage.” Following the title is the statement that “[t]his Endorsement modifies such

1
In a prior opinion, we reversed a summary judgment the trial court granted. Doe v. Nat'l Union
Fire Ins. Co., No. 07-11-0251-CV, 2012 Tex. App. LEXIS 2585 (Tex. App.—Amarillo Mar. 30, 2012, no
pet.) (mem. op.). After remand, the insureds amended their pleadings and National Union filed a more
complete motion for summary judgment, which the trial court granted.
2
The CGL policies are Insurance Services Office, Inc. forms. See American Fam. Mut. Ins. Co.
v. Am. Girl, Inc., 673 N.W.2d 65, 73 (Wis. 2004) (discussing history and form of standard CGL policies);
Gilbert Texas Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex. 2010).
3
The fifteen paragraphs of exclusions are virtually identical to those contained in paragraph 2
Exclusions, of Coverage A of Section I Coverages of the CGL policy appended to the court’s opinion in
State Nat'l Ins. Co. v. City of Miami, 08-22861-CIV-SEITZ/O’SULLIVAN, 2009 U.S. Dist. LEXIS 130688
(S.D. Fla. June 15, 2009).

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insurance as is afforded by the provisions of the policy relating to Comprehensive

General Liability Insurance.”4 The endorsement’s remaining language reads:

It is agreed that:

1. The definition of bodily injury is amended to include any acts,
errors, or omissions of the insured arising out of counseling
activities of the insured.

2. The PERSONS INSURED provision is amended to include any
cleric, elder or ministerial servant designated as such by the named
insured while giving counsel within the scope of his duties as such.

3. The Exclusions are replaced by the following:

This insurance does not apply to:

a) liability assumed by the insured under any contract or agreement.

b) liability on account of bodily injury to or sickness, disease or death
of any employee of the insured arising out of and in the course of
his employment or to any obligation for which the insured or any
carrier as his insurer may be held liable under any Worker's
Compensation, Unemployment Compensation or Disability Benefits
Law or under any similar law.

c) liability resulting from the rendering of medical, radiological,
surgical, dental or nursing treatments, including shock therapy and
the prescription, utilization, furnishing or dispensing of drugs or
medical, radiological, surgical, dental or nursing supplies or
appliances.

d) liability resulting from the insured's commitment to a psychiatric
institution.

e) the ownership, maintenance, operation, use, loading or unloading
of any motor vehicle, trailer, semi-trailer, watercraft of [sic] aircraft.

f) liability resulting from the acts, errors or omissions of the insured as
a member of a formal accreditation or professional board or
committee of any hospital or professional society.

4
Despite the reference to “comprehensive” general liability insurance, it is undisputed the
endorsement modifies the CGL coverage.

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 g) liability resulting from an insured accepting and/or undertaking
custodial care or responsibility of a patient pursuant to request,
instruction, authorization or direction of any governmental agency,
authority, board or officer having such authority or responsibility.

h) liability resulting from any actual or alleged conduct of sexual
nature.

i) injury arising out of willful violation of a penal statute or ordinance
committed by or with the knowledge or consent of any insured.

j) any dishonest, fraudulent or criminal act or omissions of any
insured.

All other terms, conditions, and premiums remain the same.

In addition the policy issued in 1992 contains an endorsement MS #14, which

states, “In consideration of the premium charged, it is hereby understood and agreed

that MS #2 ‘Clergy Counseling Professional Liability Coverage’ is amended as follows:

3. ‘The Exclusions for this coverage part only are replaced by the following:’” Nothing

comes thereafter except a final sentence providing: “All other terms and conditions

remain unchanged” and a blank signature line.

The insureds sued National Union, alleging breach of contract and bad faith

claims from its failure to defend against and pay claims brought against them in 2008

and 2009 by individuals. The individuals alleged that, while minors, they were

victimized by sexual conduct of persons associated with the insureds during the policy

periods of one or more of National Union’s CGL policies. The conduct did not occur in

the course of counseling activities by clergy. The insureds settled the claims.

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 Analysis

National Union’s amended motion for summary judgment asserted that “the clear

and unambiguous language of [the CGL policies] does not provide coverage for liability

that resulted from conduct of a sexual nature, including the sexual abuse of minors.”

National Union likewise asserted coverage was excluded because the insureds “willfully

failed to report the abuse of the complainants to the proper authorities,” in violation of

law.

We apply to insurance policies the rules of construction applicable to other

contracts, aiming to ascertain the parties’ intent. Gilbert Texas Constr., L.P., 327

S.W.3d at 126; Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 23

(Tex. 2008). The question whether a contract is ambiguous is one of law to be decided

by the court, looking at the contract as a whole in light of the circumstances present

when it was executed. Progressive Cty. Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808

(Tex. 2009) (per curiam); Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). An

unambiguous instrument is worded so that it can be given a certain or definite legal

meaning or interpretation. See Kelley, 284 S.W.3d at 807 (citing Coker, 650 S.W.2d at

393). But when its meaning is uncertain and doubtful or it is reasonably susceptible to

more than one meaning, then it is ambiguous and its meaning must be resolved by a

finder of fact. Coker, 650 S.W.2d at 394.

Neither the sexual conduct exclusion nor the willful violation of law exclusion on

which National Union relies appears in the list of exclusions stated in the CGL policy’s

Coverage A. National Union relies instead on exclusions listed in the MS #2

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endorsement. The endorsement’s exclusion list includes paragraph (h), excluding

“liability resulting from any actual or alleged conduct of a sexual nature,” and paragraph

(i), excluding “injury arising out of willful violation of a penal statute or ordinance

committed by or with the knowledge or consent of any insured.”

To reach its position that the two exclusions stated in the endorsement apply to

the insureds’ claims, National Union points to the endorsement’s language stating that

the “Exclusions are replaced” by those listed in the endorsement. It contends that by

the endorsement’s language, the parties expressed an intention to apply the

endorsement’s listed exclusions to all the policy’s coverage for bodily injury and

property damage liability, replacing for all purposes the exclusions listed in the CGL

form’s Coverage A. The insureds’ pleadings asserted that the endorsement’s

“Exclusions are replaced” wording also can be read to apply its listed exclusions only to

liability arising under the clergy counseling professional liability coverage, and asserted

the endorsement language was therefore ambiguous. They contended that the 1992

endorsement MS #14 was intended to clarify what was unclear in MS #2, that the

endorsement’s exclusions were limited to coverage provided under the clergy

counseling professional liability coverage.

By its grant of summary judgment, the trial court implicitly determined that the

policy language was reasonably susceptible to only one reading, and that the one

reading was that given it by National Union. Coker, 650 S.W.2d at 394. We cannot

agree that the reading given the policy by National Union is its only reasonable reading.

As the dissent observes, National Union’s position may give the word “replace” its usual

and common meaning. But even that point is not free from difficulty. Nothing in the

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phrase “the Exclusions are replaced” limits its application to the exclusions in Coverage

A of the CGL policy. Does the language replace also the exclusions listed in Coverages

B and C of the policy? The MS #2 endorsement does not tell us. Moreover, the topics

addressed by most of the exclusions listed in the endorsement are significantly different

even from those listed under Coverage A of the CGL policy. The consequences of the

wholesale deletion of Coverage A’s exclusions and substitution of those listed in the

endorsement are such as to leave us uncertain that National Union’s position in this

litigation reflects the intentions of the parties at the time the policies were issued. 5 See

Kelley, 284 S.W.3d at 808.

We find the language of the MS #2 endorsement ambiguous. It follows that the

trial court could not properly have granted summary judgment on the ground asserted

by National Union. Coker, 650 S.W.2d at 394. The trial court’s judgment is reversed

and the cause is remanded for further proceedings not inconsistent with this opinion.

James T. Campbell
Justice

Quinn, C.J., dissenting.

5
For instance, if National Union’s position reflects the intentions of the parties, the CGL policy
carried none of the “business risk” exclusions, no exclusion for intended or expected losses, and no
exclusion for damage to property owned by the insured. See American Fam. Mut., 673 N.W.2d at 74
(noting “[t]he CGL insuring agreement is a broad statement of coverage, and insurers limit their exposure
to risk through a series of specific exclusions”).

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