Colony National Insurance Co. v. United Fire & Casualty Co.

Case: 16-40676 Document: 00513857268 Page: 1 Date Filed: 01/31/2017

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-40676 FILED
January 31, 2017

COLONY NATIONAL INSURANCE COMPANY, Lyle W. Cayce
Clerk
Plaintiff - Appellee

v.

UNITED FIRE AND CASUALTY COMPANY,

Defendant - Appellant

Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 5:14-CV-10

Before WIENER, CLEMENT, and HIGGINSON, Circuit Judges.
JACQUES WIENER, Circuit Judge:*
Plaintiff-Appellee Colony National Insurance Company (“Colony”)
claims that Defendant-Appellant United Fire & Casualty Company (“United”)
had a duty to defend Carothers Construction, Incorporated (“Carothers”) in a
personal injury lawsuit and seeks to recover half the costs of defending
Carothers in that lawsuit. The district court granted Colony’s motion for
summary judgment, holding that United owed a duty to defend Carothers in

* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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No. 16-40676
the underlying lawsuit and owed Colony half the costs of defending Carothers.
United appeals that ruling, contending that the district court erred in holding
that it had a duty to defend Carothers in the underlying lawsuit and that it
owed Colony half the costs defending Carothers. We affirm.
I.
FACTS AND PROCEEDINGS
A. Factual Background
Carothers was the general contractor on a Red River Army Depot job.
Self-Concrete, Inc. (“Self-Concrete”), a sub-contractor of Carothers, contracted
to form and pour tilt wall concrete panels. United insured Self-Concrete
through a commercial general liability policy, and Carothers was an additional
insured under the United policy.
Premier Constructors, Inc. (“Premier”) was a sub-contractor of
Carothers, hired to erect tilt wall panels. Premier hired Joyce Steel Erection
(“Joyce”) to hoist and lift the tilt wall panels. Colony insured Premier and
further insured Carothers as an additional insured.
Gordon Bonner (“Bonner”), an employee of Premier, filed a lawsuit
against Carothers, Self-Concrete, and Joyce, following an accident on the
jobsite (the “Bonner lawsuit”). According to Bonner, the accident occurred
when one of Self-Concrete’s tilt walls was being hoisted into place and the
panel swung out in an uncontrolled manner, pinning Bonner against a
retaining wall. As a result, Bonner suffered severe injuries.
Carothers tendered defense to United and Colony in the Bonner lawsuit.
Colony accepted the tender and defended Carothers; United declined to defend
Carothers. 1 The Bonner lawsuit was ultimately settled.

1 United did defend Self-Concrete in the Bonner lawsuit.
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B. Procedural Background
Colony filed this action against United for breach of contract, with claims
for subrogation and contribution for United’s refusal to defend Carothers in
the Bonner lawsuit. United claimed that Bonner did not allege facts under
which coverage for Carothers was invoked by its policy because Bonner did not
allege facts or claims that imputed liability of Self-Concrete to Carothers.
Colony and United filed cross-motions for summary judgment. The district
court referred the motions to a magistrate judge and ultimately adopted the
magistrate judge’s report and recommendation, granting Colony’s motion for
summary judgment and denying United’s motion. The court concluded that
United was responsible for one-half of Colony’s costs incurred in defending
Carothers in the Bonner lawsuit, including, pre- and post-judgment interest.
United appeals.
II.
STANDARD OF REVIEW
“We review a grant of summary judgment de novo under the same
standard applied by the district court.” 2 Summary judgment is appropriate
when “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” 3 We consider the evidence in the light
most favorable to the nonmoving party and draw all reasonable inferences in
its favor. 4

2 Boone v. Citigroup, Inc., 416 F.3d 382, 392–93 (5th Cir. 2005).
3 FED. R. CIV. P. 56(a).
4 See Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 856 (5th Cir.

2014).
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III.
ANALYSIS
A. The Duty to Defend
Under Texas law, the duty to defend and the duty to indemnify are
distinct and separate duties. 5 The duty to defend is the broader of the two. 6 An
insurer’s duty to defend is governed by the eight-corners or complaint-
allegation rule. It determines the duty to defend by examining “the third-party
plaintiff’s pleadings, considered in light of the policy provisions, without regard
to the truth or falsity of those allegations.” 7 We therefore look only to the “eight
corners” of the two documents, viz., the pleadings in the underlying lawsuit
and the insurance contract between the insurer and insured, to determine if
the insurer has a duty to defend. 8 “Even if the plaintiff’s complaint alleges
multiple claims or claims in the alternative, some of which are covered under
the policy and some of which are not, the duty to defend arises if at least one
of the claims in the complaint is facially within the policy’s coverage.” 9 Whether
an insurer is obligated to defend an insured is a question of law for the court
to decide. 10
United does not dispute that Carothers is an additional insured under
its policy with Self-Concrete. However, United argues that it does not owe a
duty to defend Carothers in the Bonner lawsuit because Bonner did not allege
claims against Self-Concrete that can be imputed to Carothers.

5 King v. Dall. Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002).
6 Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W. 3d 487, 490 (Tex. 2008); St. Paul Ins.
Co. v. Tex. Dep’t of Transp., 999 S.W.2d 881, 884 (Tex. App. – Austin 1999, writ denied).
7 GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 308 (Tex.

2006).
8 King, 85 S.W.3d at 187.
9 Lafarge Corp. v. Hartford Cas. Ins. Co., 61 F.3d 389, 393 (5th Cir. 1995).
10 State Farm Lloyds v. Kessler, 932 S.W.2d 732, 736 (Tex. App. – Fort Worth 1996,

writ denied).
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1. Bonner’s Petition 11
Bonner alleged that Carothers undertook “to perform services they knew
or should have known were necessary for . . . BONNER’S protection.” Bonner
also alleged that Carothers was under an obligation to ensure that work on the
jobsite was implemented, complied with, and enforced, in accordance with its
contracts and with (1) the U.S. Army Corps of Engineers Safety and Health
Requirements Manual, (2) Occupational Safety and Health Administration
(“OSHA”) Regulations, and (3) Carothers’s Safety Policy/Accident Prevention
Plan, as well as, ensuring subcontractor implementation, compliance, and
enforcement under the same. Bonner claimed that Carothers breached its duty
to Bonner with respect to ensuring that (1) he had a safe place to work, (2)
unsafe conditions were corrected, including bringing such unsafe conditions to
the attention of subcontractors, and (3) subcontractors complied with
applicable safety plans and OSHA regulations. Bonner alternatively pled that
Carothers had general supervisory authority and control over the jobsite,
including the power to detect, correct, require others to correct, and prevent
unsafe conditions and safety hazards on the site. Bonner further alleged that
Carothers failed to implement an effective system for promptly correcting
discovered hazards and failed to ensure subcontractor compliance with safety
requirements.
Bonner claimed that Self-Concrete had a duty to follow the plans
furnished by Carothers properly in forming, pouring, and preparation of the
concrete tilt-up panels, and that it had breached such duty. 12 Bonner also
alleged that the subcontract required Self-Concrete to clean the jobsite at the

11 For the eight corners review we focus on the most recently filed petition. See Rhodes
v. Chicago Ins. Co., a Div. of Interstate Nat’l Corp., 719 F.2d 116, 119 (5th Cir. 1983).
12 “Tilt-up panels” and “tilt wall panels” are used interchangeably in Bonner’s petition

and the parties’ briefs.
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end of each day, but failed to clean up at the worksite in question, which
resulted in a dangerous jobsite condition that was a direct and proximate cause
of Bonner’s injuries. Bonner additionally alleged gross negligence in Self-
Concrete’s failure to clean the worksite so that workers coming in to assist in
the erection of the tilt wall would have a clear area in which to do their work,
amounting to an extreme degree of risk to Bonner.
2. Bonner’s Petition Applied to the United Insurance Policy
Relevant United policy language states:
Additional Insured – Owners, Lessees or Contractors –
Automatic Status When Required in Construction Agreement
With You
a. Any person or organization for whom you are
performing operations when you and such person
or organization have agreed in writing in a contract
or agreement that such person or organization be
added as an additional insured on your policy.
Such person or organization is an additional
insured only with respect to your liability
which may be imputed to that person or
organization directly arising out of your
ongoing operations performed for that
person or organization. A person’s or
organization’s status as an insured under this
endorsement ends when your operations for that
insured are completed.

Based on the United policy’s language, we must decide whether Bonner’s
pleadings sufficiently allege liability with respect to Self-Concrete which may
be imputed to Carothers directly arising out of Self-Concrete’s ongoing
operations performed for Carothers.
United contends that Bonner’s allegations are based solely on the
independent acts of Carothers and Self-Concrete and that there are no facts or
theories that support imputed liability. United reasons that, because the
accident was caused by an out of control tilt wall panel, and the contract
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between Self-Concrete and Carothers specifically excluded lifting tilt wall
panels from the scope of Self-Concrete’s work, it is not under a duty to defend
Carothers. However, Bonner expressly alleges that Carothers retained
authority over the jobsite and plans for the tilt wall panels and further failed
to ensure that its subcontractors abided by the requirements and standards
contained in the subcontracts. This is sufficient to find liability on the part of
Self-Concrete, which may be imputed to Carothers, giving rise to a duty to
defend. 13
Although an employer is not generally liable for the negligence of an
independent contractor, 14 an employer may be liable when it controls
“operative details” of the independent contractor’s work. 15 To have control of
“operative details,” the employer must have “the right to control the means,
methods, or details of the independent contractor’s work to the extent that the
independent contractor is not entirely free to do the work his own way.” 16 The
right to “inspect, test, and approve” the independent contractor’s work to
ensure compliance with the contract specifications and safety requirements

13 The parties disagree about the definition of imputed negligence. Bonner has stated
facts on which negligence could be imputed to Carothers under either definition urged by the
parties. See Imputed Negligence, BLACK’S LAW DICTIONARY (9th ed. 2009) (“Negligence
of one person charged to another; negligence resulting from a party’s special relationship
with another party who is originally negligent – so that, for example, a parent might be held
responsible for some acts of a child.”); see also Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d
734, 736 (Tex. 1990) (setting forth the proposition that in Texas, when a policy contains no
technical definitions of words it uses, the words must be given their plain, ordinary, and
generally accepted meanings).
14 St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 542 (Tex. 2002).
15 See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788 , 792 (Tex. 2006) (quoting

RESTATEMENT (SECOND) OF TORTS § 414 cmt. c (AM. LAW INST. 1965)).
16 Ellwood Tex. Forge Corp. v. Jones, 214 S.W.3d 693, 700 (Tex. App. – Houston [14th

Dist.] 2007, pet. denied).
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does “not implicate a right to control the details of the independent contractor’s
work.” 17
Here, Bonner alleged that Carothers provided plans for the tilt wall
panel formation to Self-Concrete. Providing “plans” may be typical of a general
contractor and may not rise to the level of imputing liability to a general
contractor for the purposes of tort liability. 18 However, Bonner alleged that
Carothers’s control over the “plans” included much more than simply
furnishing the plans. Moreover, Bonner’s petition set forth the detailed level of
control that Carothers exercised over the jobsite and Self-Concrete’s work,
which, in addition to following the terms of its contracts, included having the
right and duty to enforce regulations of the U.S. Army Corps of Engineers,
OSHA, and Carothers’s own Safety Policy/Accident Prevention Plan, which
were incorporated into Carothers and Self-Concrete’s subcontract. This level of
control over Self-Concrete’s actions amounts to “operative control” so that
United was under a duty to defend Carothers in the Bonner lawsuit.
This is especially true under Texas’s broad scope of the duty to defend
which extends even “[w]here the [petition] does not state facts sufficiently to
clearly bring the case within . . . coverage”, because “the general rule is that
the insurer is obligated to defend if there is, potentially, a case under the
[petition] within the coverage of the policy.” 19

17 Victoria Elec. Co-op., Inc. v. Williams, 100 S.W.3d 323, 330 (Tex. App. – San Antonio
2002, pet. denied).
18 See Inclan v. Gen. Homes Corp., No. 14-94-00995-CV, 1996 WL 401002, *3 (Tex.

App. – Houston [14th Dist.] July 18, 1996) (citing Restatement Second of Torts § 414, cmt. c
(1965); Newspapers Inc. v. Love, 380 S.W.2d 582, 588 (Tex. 1964)).
19 GuideOne, 687 F.3d at 683 (quoting Nat’l Union Fire Ins. Co v. Merchant Fast Motor

Lines, 939 S.W.2d 139, 141 (Tex. 1997)) (first and last alteration in original); see also Gore
Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 369 (5th Cir. 2008) (“When
in doubt, defend.”); Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.
1965) (“[I]n case of doubt as to whether or not the allegations of a complaint . . . state a cause
of action within the coverage of a liability policy sufficient to compel the insurer to defend the
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B. Priority of Coverage
Under Texas law, when coverage is triggered under policies issued by
different insurers for a claim of injury, the duty to defend is absolute because
the insurance contract requires the insurer to defend the insured, not merely
to provide a partial or pro rata defense. 20 Each insurer whose policy obligations
are triggered independently owes the insured a complete defense. 21 To
determine priority of coverage, a court must first determine whether the
insured is entitled to complete coverage by each of the insurers involved. 22 If
the insured is covered by each insurer, then the court will determine if each
applicable policy contains an “other insurance” clause that seeks to limit
coverage of liability. 23 If both policies under consideration contain a provision
that negates liability because of the existence of another policy, then the
conflicting provisions are mutually repugnant and are ignored, and the
liability is applied on a pro rata basis between the insurers. 24
United argues that even if the court finds that it was required to defend
Carothers in the Bonner lawsuit, it need not cover half the costs of defense to
Carothers because the Colony policy is primary and non-contributing, and the
United policy is excess.
1. The “Other Insurance” Clauses
Both the United policy and the Colony policy contain “other insurance”
clauses. These policies mirror each other as to “other insurance” and state that

action, such doubt will be resolved in [the] insured’s favor.”) (internal quotation marks
omitted).
20 Tex. Prop. & Cas. Ins. Guar. Ass’n v. Sw. Aggregates, Inc., 982 S.W.2d 600, 607 (Tex.

App. – Austin 1998, no pet.).
21 Id. at 605.
22 Hardware Dealers Mut. Fire Ins. v. Farmers Ins. Exch., 444 S.W.2d 583, 589 (Tex.

1969).
23 Id.
24 Id. at 590.

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defense costs should be shared equally. Both policies are primary policies,
except when dealing with an additional insured like Carothers. When coverage
is needed for Carothers, both policies become excess. As a result, the “other
insurance” clauses are mutually repugnant, cancelling each other out and
requiring the equal sharing of defense costs. 25 Consequently, Colony and
United were obligated to share in the costs of defending Carothers in the
Bonner lawsuit.
2. The Colony Policy’s Primary and Non-Contributing Insurance
Endorsement

United claims that, even if it is obligated to share in the defense costs of
defending Carothers, the Colony policy’s “Primary and Non-Contributing
Insurance Endorsement” negates its duty and forces the United policy to be
excess to the Colony policy. United claims that because the endorsement
“deletes in its entirety and replaces” the Colony policy’s “other insurance”
clause as to the third party, any argument that the “other insurance” clause in
the Colony policy requires United to share in defense costs is completely
negated. United argues that since no third party was named in the
endorsement, the provisions of this endorsement apply as required by the
contract between Premier and Carothers. According to United, the contract
that should be incorporated includes a provision which states that “[t]he
Subcontractor’s insurance shall be primary as to any insurance under
which the Contractor is a named or additional insured or which
otherwise extends coverage to the Contractor.” From this contract provision,
United concludes that the Colony policy requires that it be primary and non-
contributing to the United policy because the United policy names Carothers
as an additional insured.

25 Hardware Dealers, 444 S.W.2d at 589.
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Inserting the respective party names into the policy language
demonstrates why United’s argument fails:
With respect to Carothers, the insurance provided by this policy
shall be primary and non-contributing insurance. Any and all other valid
and collectible insurance available to Carothers in respect of work
performed by Premier under written contractual agreements with
Carothers for a loss covered by this policy, shall in no instance be
considered as primary, co insurance, or contributing insurance. Rather,
any such other insurance shall be considered in excess over and above
the insurance provided by this policy.

Third Party to whom this endorsement applies is:
_______________[BLANK]_______________

Absence of a specifically named Third Party above means that the
provisions of this endorsement apply “as required by written contractual
agreement with Carothers.”

The “you” referenced in the endorsement clearly refers to Colony’s named
insured, Premier, and does not have any application to Carothers. The “Third
Party” to whom the endorsement applies is Carothers, the party with whom
Premier contracted. 26 The term “third party” does not include Self-Concrete or
United: The policy is primary only as to Carothers and only “in respect of work
performed by Premier . . . for a loss covered by the policy.” Here, Colony seeks
recovery from United based on Self-Concrete’s imputed liability to Carothers.
Furthermore, the United policy is not other insurance “in respect of” work
performed by Premier. Bonner alleged that Self-Concrete – not Premier – was
responsible for his injuries, so the United policy is not coverage to which the
endorsement makes Colony primary. The Colony policy and the United policy

26 Recall, no contract exists between Premier and Self-Concrete or Premier and
United.
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are “mutually repugnant” cancelling out each other, so the insurers share the
costs of defending Carothers in the Bonner lawsuit equally.
C. Waiver of the Right to Subrogation
Colony’s policy contains a subrogation clause, entitling it to recover
defense costs from any insurer that breached its duty to defend an insured
party. 27 United contends that Colony waived its subrogation right against
United and Carothers and that both prongs of the test for waiver of subrogation
are met through the subcontract between Carothers and Premier and the
policy that Colony issued to Premier. A valid waiver of subrogation generally
requires that an insured must (1) obligate itself to a waiver pursuant to an
underlying contract and (2) obtain a separate endorsement from its insurance
carrier, waiving those rights. 28
1. The Subcontract
The subcontract between Carothers and Premier required Premier to
obtain additional insurance to give adequate and complete protection to
Carothers. Section 13 of the subcontract provides that “[t]he Sub-contractor’s
insurance shall contain a standard cross-liability endorsement and a waiver
of all rights of subrogation against the Contractor, Contractor’s surety,
and Contractor’s insurers.” United claims that it qualifies as the
“Contractor’s insurer” so Colony waived its right of subrogation against
United.

27See Cont’l Cas. Co. v. N. Am. Capacity Ins. Co., 683 F.3d 79, 87 (5th Cir. 2012)
(applying Texas law).
28 See, e.g. Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 355 (Tex.

2000); Chevron U.S.A, Inc. v. Cigna Ins. Co. of Tex., No. 09-97-032 CV, 1998 WL 472501, at
*3-4 (Tex. App. – Beaumont Aug. 13, 1998, pet. denied).
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2. The Endorsement
Even if we assume United qualifies as one of the “Contractor’s insurers”
under the subcontract between Carothers and Premier, no separate
endorsement from Colony waived Colony’s rights to subrogate United.
The Colony policy contains an endorsement that states:
WAIVER OF TRANSFER OF RIGHTS OF RECOVERY AGAINST
OTHERS TO US
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
PRODUCTS/COMPLETED OPERATIONS COVERAGE PART
SCHEDULE
Name of Person or Organization:

Any person or organization to whom or to which you are obligated
by virtue of a written contract to waive your right of recovery.

SECTION IV – CONDITIONS. 8. Transfer of Rights of
Recovery Against Others To Us is amended by the addition of the
following:

We waive any right of recovery we may have against the person
or organization shown in the Schedule above because of payments we
make for injury or damage arising out of your ongoing operations or
“your work” done under a contract with that person or organization and
included in the “products-completed operations hazard.” This waiver
applies only to the person or organization shown in the Schedule above.

United claims that it qualifies under the schedule as one of the
“organizations to whom [Colony] is obligated by virtue of a written contract to
waive [its] right to recovery.” However, the “you” and “your” in the subject
Colony policy endorsement and schedule unequivocally refer to Premier as
Colony’s named insured. When we insert proper names, the Colony
endorsement reads:

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Colony waive(s) any right of recovery Colony may have against
Carothers because of payments Colony make(s) for injury or damage
arising out of Premier’s ongoing operations or ‘Premier’s work’ done
under a contract with Carothers and included in the ‘products
completed operations hazard.’ This waiver applies only to Carothers.

And, when we insert proper names in the schedule it reads:
Any person or organization to whom or to which Premier [is]
obligated by virtue of a written contract to waive Premier’s right of
recovery.

Carothers is the only party that could be listed in the schedule because
Carothers is the only party with whom Premier contracted. That is why the
quoted endorsement protects only Carothers’s interests, and not Self-
Concrete’s as well. As discussed above, Bonner proffered multiple allegations
against Self-Concrete on which liability is imputed to Carothers. Thus, Colony
did not waive its rights against United.

IV.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s judgment.

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