IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 94-20423
Summary Calendar
_____________________
BRAD TAYLOR
d/b/a Taylor System of Houston,
Plaintiff-Appellant,
v.
TRAVELERS INSURANCE COMPANY,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
(CA H 93 2342)
_________________________________________________________________
(November 11, 1994)
Before KING, JOLLY, and DeMOSS, Circuit Judges.
PER CURIAM:*
Appellant Brad Taylor appeals from the district court's grant
of summary judgment for Travelers Insurance Company ("Travelers")
on the issue of the duty to defend. We affirm the judgment of the
district court.
*
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular
cases on the basis of well-settled principles of law imposes
needless expense on the public and burdens on the legal
profession." Pursuant to that Rule, the court has determined
that this opinion should not be published.
I. BACKGROUND
The Case Corporation ("Case") hired Brad Taylor through his
business, the Taylor System of Houston, to remove ferrous oxide
from hundreds of car exteriors that were damaged while parked at
the Case plant in Racine, Wisconsin. Taylor began the repairs at
the Case facility on April 11, 1989. Chemicals were used to remove
the ferrous oxide, but unfortunately, damage was caused to the
finish of many of the vehicles. Taylor attempted to repair the
damage in the summer of 1989, but Case was not satisfied. As a
consequence, Case sued Taylor in February of 1992, seeking
reimbursement for the cost of correcting Taylor's defective work
and a declaratory judgment that it did not owe Taylor on the
initial contract.
Taylor requested that Travelers defend him in the Case lawsuit
pursuant to Taylor's garage liability insurance policy. In
December 1992, Travelers refused to defend Taylor, claiming that
the Case lawsuit involved areas of excluded coverage under the
policy. After settling with Case, Taylor sued Travelers for Case's
recovery -- a recovery which, according to Taylor, resulted from
Travelers' refusal to defend and its denial of coverage. Travelers
removed the lawsuit to federal court, and filed a motion for
summary judgment on the issue of the duty to defend.
In a May 13, 1994 opinion, the district court granted
Travelers motion based on the "insured's work exclusion" and the
"bailment exclusion" found in Taylor's policy. As the district
court explained:
2
The insurance excludes coverage for damage to property
that results from the work done on it by the insured.
Texas recognizes the validity of this exclusion. Case
sought to recover only for the damage to the cars' paint
from the cleaning done by Taylor. The insured's work
exclusion in the insurance contract covers it. Travelers
has no duty to defend Taylor against that claim.
. . .
Under another exclusion, there is no coverage for
property damage when the property is in the insured's
care, custody, or control. Texas courts have limited
this type of exclusion to damage done to the object of
the insured's work and other objects the insured "totally
and physically manipulates." Taylor performed the work
on Case's property, but Taylor had immediate supervision
of the vehicles. Being the subject of the repairs, the
finishes were an essential part of Taylor's work, so here
the work falls under the exclusion in the policy.
(citations omitted). Taylor appeals this grant of summary judgment
for Travelers.
II. STANDARD OF REVIEW
We review the district court's grant or denial of summary
judgment de novo, "reviewing the record under the same standards
which guided the district court." Gulf States Ins. Co. v. Alamo
Carriage Serv., 22 F.3d 88, 90 (5th Cir. 1994) (internal quotations
omitted). Summary judgment is proper "when no genuine issue of
material fact exists that would necessitate a trial." Id. In
determining on appeal whether the granting of summary judgment was
proper, we view all factual questions in the light most favorable
to the non-movant. See Lemelle v. Universal Mfg. Corp., 18 F.3d
1268, 1272 (5th Cir. 1994).
3
Texas law governs this diversity action and informs the
interpretation of the insurance policy.1 See Fireman's Fund Ins.
Co. v. Murchison, 937 F.2d 204, 207 (5th Cir. 1991); Atlantic Mut.
Ins. Co. v. Truck Ins. Exch., 797 F.2d 1288, 1291-92 (5th Cir.
1986). Whether a liability insurer has a duty to defend is
generally reviewed de novo as a question of law. See, e.g.,
Fidelity & Guaranty Ins. Underwriters, Inc. v. City of Kenner, 894
F.2d 782, 783-85 (5th Cir. 1990).
III. ANALYSIS AND DISCUSSION
A. The "Eight Corners" Rule
Under Texas law, a court determines an insurer's duty to
defend "by examining the allegations in the petition filed against
the insured and the relevant insurance policy." Gulf States Ins.,
22 F.3d at 90. As one court described:
Under this analysis we cannot consider anything outside
(a) the policy and (b) the pleadings, even if there is
evidence tending to show [that] the suit is utterly
specious. The effect of this "eight corners rule" is to
minimize uncertainty in assessing a liability insurer's
duty, as well as to favor the insured in cases where the
merits of the action may be questionable.
Feed Store, Inc. v. Reliance Ins. Co., 774 S.W.2d 73, 74-75 (Tex.
App. -- Houston [14th Dist.] 1989, writ denied); see also American
Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153-54 (Tex.
App. -- Dallas 1990, writ dism'd) ("This [eight corners] rule
requires the trier of fact to examine only the allegations in the
complaint and the insurance policy in determining whether a duty to
1
The parties do not dispute that Texas law governs the
disposition of this appeal.
4
defend exists. . . . The duty to defend is not affected by facts
ascertained before suit, developed in the process of litigation, or
by the ultimate outcome of the suit."). Similarly, the Texas
Supreme Court has noted that:
[a]n insurer is required to defend only those cases
within the policy coverage. Furthermore, the insurer is
entitled to rely on the plaintiff's allegations in
determining whether the facts are within the coverage.
If the petition only alleges facts excluded by the
policy, the insurer is not required to defend.
Fidelity & Guaranty Ins. Underwriters, Inc. v. McManus, 633 S.W.2d
787, 788 (Tex. 1982); see also Gulf States Ins., 22 F.3d at 90
("[W]hen the plaintiff's petition makes allegations which, if
proved, would place the plaintiff's claim within an exclusion from
coverage, there is no duty to defend."). Finally, it is important
to understand that "[i]t is not the cause of action alleged which
determines coverage but the facts giving rise to the alleged
actionable conduct." Adamo v. State Farm Lloyds Co., 853 S.W.2d
673, 676 (Tex. App. -- Houston [14th Dist.] 1993, writ denied),
cert. denied, 114 S. Ct. 1613 (1994). Simply put, "[i]f a petition
alleges facts that, prima facie, exclude the insured from coverage,
the insurer has no duty to defend." Id. at 677 (emphasis added).2
2
In his brief, Taylor asserts that Travelers should have
conducted a minimal investigation into the Case-Taylor lawsuit
before declining to defend. Such an investigation, however, is
not required under Texas law. As one court wrote:
[Appellants] contend that where there is a variance
between the allegations of a petition and the known or
ascertainable facts, the insurer cannot rely on the
allegations in the petition, but rather must ascertain
if the facts in reality fall within the exclusion
before declining to defend; that even though a petition
in a damage suit against the insured may have alleged
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B. "Work You Performed" Exclusion
Taylor's garage insurance policy with Travelers contained the
following exclusion from coverage:
WORK YOU PERFORMED
Property damage to work you performed if the property
damage results from any part of the work itself or from
the parts, materials or equipment used in connection with
the work.3
This type of "business risk" exclusion is quite common in liability
policies, as such policies "provide protection to the insured for
personal injury or for property damage caused by the completed
product, but not for the replacement and repair of that product."
T.C. Bateson Constr. Co. v. Lumbermens Mut. Casualty Co., 784
S.W.2d 692, 694-95 (Tex. App. -- Houston [14th Dist.] 1989, writ
denied) (emphasis added); see also Travelers Ins. Co. v. Volentine,
578 S.W.2d 501, 503-04 (Tex. Civ. App. -- Texarkana 1979, no writ)
("[I]t has been uniformly held that a liability policy containing
such an exclusion does not insure the policyholder against
facts that relieved the insurer of its duty to defend,
the insurer is a under a duty to ascertain facts of the
cause of action before declining to defend. Such is
not our law.
Amundsen v. Great Central Ins. Co., 451 S.W.2d 277, 278 (Tex.
Civ. App. -- El Paso 1970, writ ref'd n.r.e.) (emphasis added).
3
The policy also defines "work you performed" as
including "work that someone performed for you." Thus, the use
of independent contractors to perform Taylor's work does not, by
itself, preclude application of the exclusion. See also T.C.
Bateson Constr. Co. v. Lumbermens Mut. Casualty Co., 784 S.W.2d
692, 695-96 (Tex. App. -- Houston [14th Dist.] 1989, writ denied)
(construing the language "on behalf of the named insured" in a
"Work You Performed" exclusion to include independent contractors
hired by the insured; otherwise, there would be policy coverage
for the completed operations of independent contractors, but not
for the work of the insured or his employees).
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liability to repair or replace his own defective work or product .
. . . "); Sarabia v. Aetna Casualty and Sur. Co., 749 S.W.2d 157,
157 (Tex. App. -- El Paso 1988, no writ) (same). The justification
for treating these risks differently "is that the insured can
control the quality of the goods and services he supplies, while
accidental injury to property or persons exposes him to almost
limitless liability." Bateson, 784 S.W.2d at 695. As the Bateson
court noted:
[T]he exclusions are designed to protect insurers from
contractors' attempts to recover funds to correct
deficiencies caused by the contractors' questionable
performance. Their use demonstrates the insurers' belief
that the cost of not performing well is a cost of doing
business and not considered part of the risk sharing
scheme for which general liability policies are written.
Id. Thus, a contractor "cannot recover from the insurer for his
own failure to perform his contract, but can recover for damage
other than to his own work, whether or not that work is defective."
Hartford Casualty Co. v. Cruse, 938 F.2d 601, 603 (5th Cir. 1991)
(emphasis added) (internal quotation omitted).
C. Case's Allegations
Of course, the "Eight Corners" rule and the "Work You
Performed" exclusion operate in conjunction, as there is no duty to
defend if the petition only alleges facts that exclude the insured
from coverage, such as facts that invoke the "Work You Performed"
exclusion. Thus, an examination of the allegations in Case's
complaint is necessary for a proper resolution of this appeal. The
following allegations are relevant to our determination:
9. In April of 1989, . . . Case entered into a contract
with Taylor to remove the ferrous oxide deposited on the
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automobile body surfaces by a chemical process involving
friction, which would not require repainting the
vehicles. Taylor guaranteed that the process would
remove the ferrous oxide from the vehicles and, at a
minimum, not harm the car finish, including the chrome on
the vehicle.
11. All of the work on the four hundred and forty (440)
damaged vehicles was performed by Taylor/Houston, by the
employees/owners, in Racine, Wisconsin . . . As a result
of faulty workmanship by the employees/owners of
Taylor/Houston, Taylor/Houston employees/owners returned
in July and August of 1989 for remedial work on damaged
vehicles.
12. Not only did the Taylor process not remove the
ferrous oxide deposited as represented by Mr. Brad Taylor
but . . . a chemical reaction occurred with the
materials used, under Wisconsin atmospheric conditions
prevailing at the time the work was performed, and, based
on information and belief, the skill of the applicators
of the chemical substances, [sic] serious damage was
caused to vehicle finishes, including the chrome of
vehicles . . .
14. In addition, Case has paid for the refinishing of
damaged surfaces of many of the vehicles or the
replacement of damaged parts incapable of being repaired,
such damage caused by Taylor's/Houston's breach of
contract and its technical, professional negligence or
malpractice.
Because of Taylor's alleged breach of contract and negligent
performance, Case requested 1) a declaratory judgment that Case
does not owe Taylor on the contract; 2) the repayment of funds
already advanced to Taylor; and 3) the reimbursement of funds
expended by Case to refinish or replace the damaged surfaces.
The determinative inquiry in a "Work You Performed" exclusion
analysis involves a definition of Taylor's work product. See,
e.g., Cruse, 938 F.2d 601, 603 (5th Cir. 1991) ("The decisive issue
here is definition of [the] work product."); Volentine, 578 S.W.2d
at 504 ("The decisive question then becomes: What was [the] work
8
product?"). In other words, the operative question is "what was
Taylor hired to do?"
Simply put, Taylor was hired to repair the exterior finishes
of the vehicles; hence, Taylor's work product was intended to be
"restored" exterior finishes. As mentioned, the petition alleges
that "Case entered into a contract with Taylor to remove the
ferrous oxide deposited on the automobile body surfaces by a
chemical process involving friction." Despite Taylor's contentions
and creative semantic arguments, the chemical process is not the
crucial element here; rather, the essence of Taylor's work was the
removal of the ferrous oxide deposits, or, stated differently, the
restoration of the finishes.
Moreover, the petition seeks only monetary damages related to
the repair or replacement of Taylor's defective work on the vehicle
finishes. As mentioned, the petition requests reimbursement for
the expenses of refinishing the surfaces damaged by Taylor, and for
the costs of replacing the damaged parts that could not be
repaired. Such requests for monetary relief all stem from Taylor's
defective work product -- the vehicle finishes. In short, Taylor
was hired to work on vehicle finishes, and damages were requested
only for the repair or replacement of the vehicle finishes. As
such, these claims fall directly into the "Work You Performed"
exclusion. See, e.g., Bateson, 784 S.W.2d at 694-95; Volentine,
578 S.W.2d at 503-04. Similarly, the petition also requests
repayment of the funds previously advanced to Case under the
contract. This relief also falls directly into the "Work You
9
Performed" exclusion from coverage, as an insured "cannot recover
from the insurer for his own failure to perform his contract."
Cruse, 938 F.2d at 603. Thus, analyzing the "Eight Corners" rule
and the "Work You Performed" exclusion in conjunction, we conclude
that the allegations in Case's petition are directly within the
scope of the coverage exclusion. As such, Travelers had no duty to
defend.4
Taylor also asserts that he should be given "the benefit of
the doubt" in this case because insurance policies are to be
construed strictly against the insurer and in favor of the insured.
While Taylor correctly states the general rule, this "benefit of
the doubt" is only invoked when the policy provisions are
ambiguous. See, e.g., Gulf Chemical & Metallurgical Corp. v.
Associated Metals & Minerals Corp, 1 F.3d 365, 369 (5th Cir. 1993)
("[W]hen the language of a policy is susceptible to more than one
construction, the `polic[y] should be construed strictly against
the insurer and liberally in favor of the insured.'") (quoting
Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex. 1987)).
In this case, however, the policy provisions, including the
exclusions, are not ambiguous. More importantly, the policy
provisions themselves are not challenged by Taylor; rather, Taylor
seems to assert that the allegations in Case's petition are
ambiguous. Aside from the fact that we find no ambiguity in the
4
Because we find that the "Work You Performed" exclusion
supports the summary judgment in this case, we do not decide
whether the "Care, Custody, or Control" or the "Contractual"
exclusions would have been applicable as well.
10
pleadings, some courts have not afforded a "benefit of the doubt"
in construing pleadings. As the Feed Store court explained:
[A]ppellant seeks to transform the rule of contra
proferentum out of the realm of contract interpretation
and into the area of construing pleadings. . . . Yet the
law is, and always has been, otherwise. There is good
reason to construe a printed form against its author, and
the law encourages an insurance company to think
carefully about its draftsmanship. But it takes a great
leap to transform this rule into one which construes a
third party's pleadings strictly against the insurance
company, a leap we simply cannot make.
774 S.W.2d at 75.
IV. CONCLUSION
For the foregoing reasons, the district court's grant of
summary judgment for Travelers on the duty to defend is AFFIRMED.
11