Fairfield Insurance v. Stephens Martin Paving, LP

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT August 11, 2004

______________________________ Charles R. Fulbruge III
Clerk
No. 03-10982
______________________________

FAIRFIELD INSURANCE COMPANY,

Plaintiff-Appellant,

versus

STEPHENS MARTIN PAVING, LP; CARRIE BENNETT, Individually
and as Representative of the Estate of Roy Edward Bennett,
Deceased, and as Next Friend of Lane Edward Bennett,
Cody Lee Bennett, and April Anne Bennett, Minors,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Texas,
Abilene Division

Before JOLLY, DAVIS, and JONES, Circuit Judges.

PER CURIAM:

This diversity case involves an important question of

state law which the Texas courts have not resolved. Accordingly,

we certify the unresolved question to the Supreme Court of Texas.

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE
FIFTH CIRCUIT TO THE SUPREME COURT OF TEXAS, PURSUANT TO
THE TEXAS CONSTITUTION ART. 5, § 3-C AND RULE 58 OF THE
TEXAS RULES OF APPELLATE PROCEDURE TO THE SUPREME COURT OF TEXAS
AND HONORABLE JUSTICES THEREOF:
 I. STYLE OF THE CASE

The style of the case in which certification is made is

Fairfield Insurance Co., Plaintiff-Appellant v. Stephens Martin

Paving, LP; Carrie Bennett, Individually and as Representative of

the Estate of Roy Edward Bennett, Deceased, and as Next Friend of

Lane Edward Bennett, Cody Lee Bennett, and April Anne Bennett,

Minors, Defendants-Appellees, Case No. 03-10982, in the United

States Court of Appeals for the Fifth Circuit, on appeal from the

United States District Court for the Northern District of Texas.

Federal jurisdiction is based on diversity of citizenship.

II. STATEMENT OF THE CASE

In December 2002, Roy Bennett (“Deceased”), an employee

of Stephens Martin Paving (“Stephens”), was killed when a broom

machine he was operating overturned. Fairfield Insurance Company

(“Fairfield”) is Stephens’s insurance carrier for both workers’

compensation and employer liability coverage. Fairfield, to this

day, provides workers’ compensation benefits to Carrie Bennett

(“Bennett”), the Deceased’s wife.

In January 2003, Bennett filed suit against Stephens

claiming gross negligence in the death of her husband and seeking

only punitive damages. Stephens requested that Fairfield defend

against this suit. Fairfield initially defended, but reserved the

right to deny indemnification and costs of the defense.

Thereafter, Fairfield filed the present action in federal district

court seeking a declaratory judgment that it had no duty to defend
or indemnify Stephens. Fairfield argued, inter alia, that Texas

public policy, as a matter of law, precludes indemnification for

punitive damage awards. Fairfield moved for summary judgment. The

district court denied Fairfield’s motion and held that there was

both a duty to defend and a duty to indemnify against any punitive

damages award. Fairfield appeals this ruling.

III. LEGAL ISSUES1

This court, in Ridgeway v. Gulf Life Ins. Co., 578 F.2d

1026 (5th Cir. 1978), made an Erie prediction that Texas public

policy did not bar indemnification of punitive damages awards.

Decisions of the Texas intermediate courts have substantially

undermined this conclusion.2 A few Texas intermediate courts

appear to have disagreed.3

1
“We briefly discuss the background legal issues involved in this
appeal solely to provide the context for our decision to certify the question
presented, without suggesting any opinion on the merits.” Interstate Contracting
Corp. v. City of Dallas, Tex., 320 F.3d 539, 543 n.5 (5th Cir. 2003).
2
See generally State Farm Mutual Auto Ins. Co. v. Shaffer, 888 S.W.2d
146 (Tex. Civ. App. — Houston [1st Dist.] 1994, writ denied); GEICO v. Litche,
792 S.W.2d 546 (Tex. Civ. App. — El Paso 1990, writ denied); Vanderlinden v.
United Servs. Auto Ass’n Property & Cas. Ins. Co., 885 S.W.2d 239 (Tex. Civ. App.
— Texarkana 1994, writ denied); Milligan v. State Farm Auto Ins. Co., 940 S.W.2d
228 (Tex. Civ. App. — Houston [14th Dist.] 1997, writ denied). These rulings
appear to be predicated on the Texas Supreme Court’s decision in Transportation
Ins. Co. v. Moriel, 879 S.W.2d 10, 16-17 (Tex. 1994).
3
See generally Dairlyland Cty. Mut. Ins. Co. v. Wallgren, 477 S.W.2d
341 (Tex. Civ. App. — Ft. Worth 1972, writ ref’d n.r.e.); Home Indemnity Co. v.
Tyler, 522 S.W.2d 594 (Tex. Civ. App. — Houston [14th Dist.] 1975, writ ref’d
n.r.e.); Am. Home Assurance Co. v. Safeway Steel Prod. Co., Inc., 743 S.W.2d 693
(Tex. Civ. App. — Austin 1988, writ denied); Westchester Fire Ins. Co. v. Admiral
Ins. Co., __ S.W.3d __, 2003 WL 21475423 (Tex. Civ. App. — Ft. Worth 2003, reh’g
granted).
 Because the issue whether punitive damages awards are

insurable under Texas public policy is significant for Texas law4

and because the Texas intermediate courts have reached competing

rulings with no definitive guidance from the Supreme Court of

Texas, we hereby certify the following question to the Supreme

Court of Texas and the Honorable Justices thereof. See, e.g.,

Chevron USA, Inc. v. Vermilion Parish Sch. Bd., 364 F.3d 607, 612

(5th Cir. 2004).

IV. QUESTION CERTIFIED

Does Texas public policy prohibit a liability insurance

provider from indemnifying an award for punitive damages imposed on

its insured because of gross negligence?

We disclaim any intention or desire that the Supreme

Court of Texas confine its reply to the precise form or scope of

the question certified. The answer provided by the Supreme Court

of Texas will determine this issue on appeal in this case. The

record of this case, together with copies of the parties’ briefs,

is transmitted herewith.

QUESTION CERTIFIED.

4
See generally, Catherine M. Sharkey, “Revisiting the Noninsurable
Costs of Accidents,” article to be published in The Maryland Law Review,
available electronically on the Social Science Research Network at:
http://papers.ssrn.com/author=091822.