Case: 11-50068 Document: 00511762898 Page: 1 Date Filed: 02/20/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 20, 2012
No. 11-50068 Lyle W. Cayce
Clerk
COLONY NATIONAL INSURANCE COMPANY,
Plaintiff - Appellant,
v.
MANITEX, L.L.C.; MANITEX, INCORPORATED; MANITEX SKYCRANE,
L.L.C.; QUANTUM EQUIPMENT, L.L.C. formerly known as Quantum
Heavy Equipment, L.L.C.; QUANTUM VALUE MANAGEMENT, L.L.C.,
QUANTUM VALUE PARTNERS, L.P.; JLG INDUSTRIES,
INCORPORATED,
Defendants - Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:09-CV-724
Before DeMOSS, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:*
Colony National Insurance Company (“Colony”) appeals the district court’s
summary judgment in favor of Manitex, L.L.C. (“Manitex”) and the district
court’s denial of Colony’s motion for summary judgment. Pursuant to an
insurance policy (the “policy”) that Manitex purchased from Colony, Colony was
*
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5th Cir.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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required to defend and indemnify Manitex when Manitex assumed the “tort
liability” of another party through an “insured contract” as the policy defines
those terms. The district court determined that Colony was required to defend
Manitex in the underlying lawsuit because Manitex had assumed the tort
liability of a third party through an insured contract. We hold, however, that
under the plain language of the policy, Manitex did not assume tort liability
through an insured contract, and therefore, Colony was not obligated to defend
Manitex. Accordingly, we REVERSE the district court’s summary judgment in
favor of Manitex and REMAND for entry of summary judgment in favor of
Colony.
I.
The following facts are undisputed. JLG Industries, Inc. (“JLG”)
manufactured and sold a boom truck crane line of productsto Powerscreen, USC,
Inc. (“Powerscreen”), and Powerscreen assumed JLG’s liabilities associated with
the cranes. Powerscreen later sold the cranes to another company, Manitowoc,
which assumed the associated liabilities. Manitowoc subsequently changed its
name to Manitex.
Manitex purchased an insurance policy from Colony that covered the time
period from December 30, 2005, to December 30, 2006. On November 8, 2006,
a JLG-manufactured crane allegedly malfunctioned, injuring Hugh Hawkins and
Joshua Martin. Hawkins and Martin sued JLG under theories of negligence,
breach of warranty, and strict liability. Manitex defended JLG based upon its
perceived obligation to do so under its purchase agreement with Powerscreen.
Colony sought a declaratory judgment from the district court that it had
no duty to defend or indemnify Manitex. Manitex, in turn, sought a declaratory
judgment that the policy covered defense of the Hawkins/Martin suit against
JLG and indemnity for damages arising out of it. On cross-motions for summary
judgment, the district court denied Colony’s motion and granted Manitex’s
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motion with regard to Colony’s duty to defend. Because the Hawkins/Martin
lawsuit was ongoing at the time, the district court denied as premature both
motions with respect to Colony’s duty to indemnify. The district court certified
its summary judgments regarding the duty to defend for interlocutory appeal,
and we granted permission to appeal.
II.
We review a grant or denial of summary judgment under the de novo
standard of review. First Am. Bank v. First Am. Transp. Title Ins. Co., 585 F.3d
833, 836–37 (5th Cir. 2009). The parties agree that Texas law applies to our
review of the subject insurance policy. In Texas, insurance policies are
construed using traditional rules of contract construction. Tex. Farm Bureau
Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004). If a policy provision
has only one reasonable interpretation, it is unambiguous and is construed as
a matter of law. Id. If an exclusion has more than one reasonable
interpretation, it is construed in favor of the insured. Id.
III.
Colony argues that the policy does not cover any liabilities transferred
from Powerscreen to Manitex and that, therefore, it is obligated neither to
defend nor indemnify Manitex in the Hawkins/Martin–JLG lawsuit. Evaluation
of that argument requires detailed reference to certain key provisions of the
policy, the JLG–Powerscreen Purchase Agreement, and the
Powerscreen–Manitex Purchase Agreement. Accordingly, an introduction to
those provisions follows.
The policy states in relevant part: “[Colony] will pay those sums that the
insured becomes legally obligated to pay as damages because of ‘bodily injury’
or ‘property damage’ to which this insurance applies.” An exclusion to that
coverage provision provides that the insurance does not apply to “Contractual
Liability,” that is, “‘Bodily injury’ or ‘property damage’ for which the insured is
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obligated to pay damages by the reasons of the assumption of liability in a
contract or agreement.” An exception to that exclusion provides that “[t]his
exclusion does not apply to liability for damages: . . . (2) Assumed in an ‘insured
contract,’ provided that the ‘bodily injury’ or ‘property damage’ occurs
subsequent to the execution of the contract or agreement.” Thus, the
“Contractual Liability” exception removes from coverage Manitex’s contractual
assumption of liability, but the “insured contract exception” brings “insured
contracts” back into coverage.
The policy defines “insured contract” as follows:
“Insured contract” means:
....
f. That part of any other contract or agreement pertaining to your
business (including indemnification of a municipality in connection
with work performed for a municipality) under which you assume
the tort liability of another party to pay for “bodily injury” or
“property damage” to a third person or organization. Tort liability
means a liability that would be imposed by law in the absence of any
contract or agreement.
The parties dispute whether the Powerscreen–Manitex Purchase Agreement is
an insured contract. If Manitex assumed JLG’s tort liability by way of the
Powerscreen–Manitex Purchase Agreement, then the Powerscreen–Manitex
Purchase Agreement would be an insured contract. Accordingly, the liability
would fall under the exception to the contractual liability exclusion, rendering
it covered by the policy.
Colony argues that the Powerscreen–Manitex Purchase Agreement was
not an insured contract. Specifically, it contends that JLG is the only entity that
has any “tort liability” as the policy defines that term because only JLG’s
liability would be imposed by law in the absence of any contract or agreement.
Manitex’s liability, argues Colony, can only be imposed by operation of the
Powerscreen–Manitex Purchase Agreement. Therefore, that liability is not “tort
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liability,” but contractual liability, and as a result, the Powerscreen–Manitex
Purchase Agreement is not an insured contract, and Manitex’s liability falls
within the contractual liability exclusion and outside of coverage by the policy.
The district court rejected Colony’s argument for three reasons. First, the
district court found the policy ambiguous and noted that where a policy is
ambiguous, a “court must adopt the construction of an exclusionary clause urged
by the insured as long as that construction is not unreasonable, even if the
construction urged by the insurer appears to be more reasonable or a more
accurate reflection of the parties’ intent.” Nat’l Union Fire Ins. Co. of Pittsburgh,
Pa. v. Hudson Energy Co., Inc., 811 S.W.2d 552, 555 (Tex. 1991). Accordingly,
because the district court found Manitex’s interpretation of the policy
reasonable, it found that it was obligated to adopt Manitex’s interpretation.
Second, the district court found Colony’s interpretation strained because, in its
view, Manitex assumed, through contract, “the tort liability of another party,”
JLG, to pay for the bodily injury of two third parties, Hawkins and Martin.
Third, the district court concluded that “Colony’s interpretation flies in the face
of common sense,” because “[a]n insurance policy that specifically covered
contractually-assumed tort liability, yet removed from coverage any agreement
involving more than a single contractual link, seems unlikely to have been
intended by the parties.” Because we find the policy unambiguous, we disagree
with each of these determinations.
Where a policy is unambiguous, we need not, as the district court did,
adopt the construction urged by the insured even if the construction urged by the
insurer appears to be more reasonable. Sturrock, 146 S.W.3d at 126 (explaining
that rules of construction like the one that favors an insured’s construction of an
exclusionary clause even where it is less reasonable than the insurer’s
construction only apply when construing ambiguous contracts).
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Manitex did not assume tort liability (as the policy defines that term)
through the Powerscreen)Manitex Purchase Agreement. The Purchase
Agreement provides that Manitex assumed “[a]ll liabilities of the Seller
[(Powerscreen)] for claims, . . . and actions in law . . . brought after the Effective
Time of Closing by any Person seeking recovery from personal injury.” Thus,
according to the Purchase Agreement’s plain language, Manitex assumed
Powerscreen’s liability. Powerscreen’s liability arose strictly from a contract,
namely, its purchase agreement with JLG. If that contract did not exist, then
Powerscreen would have had no liability related to the Hawkins and Martin
claims. Powerscreen’s liability, therefore, was not one that “would be imposed
by law in the absence of any contract or agreement.” Therefore, it was not “tort
liability.” Given that Manitex did not assume tort liability through the
Powerscreen–Manitex Purchase Agreement, that Agreement was not an
“insured contract.”1
For these reasons, we REVERSE the district court’s decision to enter
summary judgment in favor of Manitex. Because there are no factual disputes
to resolve on remand, we REMAND for entry of summary judgment in favor of
Colony.
1
Manitex also argues as follows:
To fit the definition of an Insured Contract, a contract must simply be one
under which the insured “assume[s] the tort liability of another party.” The
definition plainly contemplates that an Insured Contract could be one in which
the insured assumed the tort liability of any other person or entity, not just the
other party to the contract.
Manitex is correct that an insured contract could be one in which the insured assumed the tort
liability of any other person or entity, not just the other party to the contract. That is not the
case here, however, where the policy explicitly provides that Manitex assumed “[a]ll liabilities
of the Seller [(Powerscreen)]” and does not address the tort liability of any other party.
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