St. Paul Guardian Insurance v. Centrum GS Ltd.

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 00-11339
Summary Calendar

ST. PAUL GUARDIAN INSURANCE COMPANY,

Plaintiff-Appellee,

VERSUS

CENTRUM GS LIMITED; GOODYORK CORPORATION; STEINER & ASSOCIATES,
INC.; YAROMIR STEINER; BRENDA BRUSHABER,

Defendants-Appellants.

Appeal from the United States District Court
for the Northern District of Texas

March 11, 2002
Before EMILIO M. GARZA, STEWART and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:

Centrum GS Limited, et al., appeal the district court’s denial

of their motion for summary judgment and grant of summary judgment

in favor of St. Paul Guardian Insurance Company upon a finding that

the insurance company had no duty to defend any defendant in Gerry

Perdue’s underlying state court action. We affirm in part, reverse

in part and remand for further proceedings not inconsistent with

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this opinion.

FACTS AND PROCEDURAL HISTORY

The relevant facts in this case are not in dispute. St. Paul

Guardian Insurance Company (hereinafter “St. Paul”) is an insurance

company headquartered in St. Paul, Minnesota. Centrum GS Limited

(hereinafter “Centrum”) is a Texas limited partnership and owner of

the Centrum Building, a nineteen-story office tower located in

Dallas, Texas.1 Goodyork Corporation (hereinafter “Goodyork”) is

a Texas corporation headquartered in Los Angeles, California and

general partner of Centrum. Steiner & Associates, Inc.

(hereinafter “Associates”) is a Florida corporation and property

manager of the Centrum Building. Yaromir Steiner (hereinafter

“Steiner”) is a citizen of the state of Florida, employed by

Associates and an officer of Associates. Brenda Brushaber

(hereinafter “Brushaber”) is a citizen of the state of Texas and

employed by Associates as the General Manager of the Centrum

Building.2 Gerry Perdue (hereinafter “Perdue”) was a building

engineer hired during the construction of the Centrum Building.

Under various property management companies, Perdue maintained this

position for approximately eight years until he assumed the

position of Chief Building Engineer for the Centrum Building

1
Centrum’s only limited partner is Spurlington Incorporated,
a Texas corporation headquartered in Los Angeles, California.
Spurlington Incorporated is not a party to this suit.
2
We refer to Centrum, Goodyork, Associates, Steiner and
Brushaber collectively as “Appellants.”

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beginning February 1, 1995.

In 1994, St. Paul issued a Commercial General Liability

insurance policy (hereinafter “CGL policy”) to Centrum effective

from December 23, 1994, to December 23, 1995. The CGL policy

covers inter alia, bodily injury, property damage and personal

injury liability.

On March 6, 1995, Perdue’s employment as Chief Building

Engineer was terminated. Perdue filed suit against Brushaber,

Associates and Steiner on August 23, 1995. Perdue’s claims

included wrongful termination, intentional infliction of emotional

distress, libel, slander, invasion of privacy, fraud, negligence

and breach of contract. On February 7, 1996, Perdue filed his

First Amended Original Petition adding Centrum and Goodyork as

defendants. On July 18, 1997, Perdue filed his Fourth Amended

Original Petition alleging that on or about December 21, 1994,

Steiner, Brushaber and Associates, on their behalf and on behalf of

Centrum and Goodyork, entered into an employment contract with him

for a one year period beginning February 1, 1995.

Perdue further alleged that he was wrongfully terminated on

March 6, 1995, and subsequent to his termination, Appellants hired

eight uniformed Dallas police officers to patrol the building’s

lobby and parking garage and Appellants also circulated to the

general public, including contractors, tenants and customers in the

building, color “WANTED POSTERS” and a memorandum requesting anyone

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who saw him to call security. The “WANTED POSTERS” allegedly

included a color photograph of Perdue, his name, his home address,

his driver’s license number, his social security number and his car

tag number. Perdue also alleged that Appellants made defamatory

statements about him and that Bill Jones, an employee and agent of

Appellants, stated that Perdue tampered with or cut off pumps at

the Centrum Building.

Perdue contends that his wrongful termination caused him to

suffer damages including loss of salary, bonuses, benefits,

commissions, medical expenses and benefits, retirement benefits,

vacation, insurance and a down payment on an automobile financed

during his employment. Additionally, Perdue contends that as a

result of Appellants’ libel, slander, invasion of privacy and

intentional infliction of emotional distress, he has suffered

mental distress, mental anguish, physical sickness and loss of

reputation.

St. Paul first received notification of Perdue’s claims

against Centrum on February 26, 1997, when it received from

Appellants’ counsel a copy of the suit papers from the Perdue

lawsuit. On June 18, 1997, St. Paul filed a complaint seeking a

declaratory judgment that it has no duty to defend or indemnify

Centrum or any other defendant in Perdue’s state court action.

Subsequently, St. Paul filed a motion for summary judgment

contending that Perdue’s claims are not covered under the CGL

policy and thus it has no duty to defend nor indemnify Appellants.

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Appellants in turn filed a cross-motion for summary judgment

arguing that Perdue’s claims are covered under the CGL policy and

therefore, St. Paul is obligated to defend Appellants.

Perdue alleged both physical damages (mental distress, mental

anguish, physical sickness and loss of reputation resulting from

slander and invasion of privacy) and economic damages (lost salary,

bonuses, benefits, health insurance, vacation, commissions and loss

of property resulting from wrongful termination) in his underlying

state court action. Although the district court agreed that

Perdue’s economic damages resulting from wrongful termination would

be covered under the definition of personal injury as that term is

defined in the CGL policy, the court held that Perdue’s claims for

economic damages were not covered because the damages were not the

result of a personal injury offense as defined in and required

under the CGL policy for personal injury coverage.

Furthermore, the district court found that under Texas law,

Perdue alleged facts sufficient to state a cause of action for

invasion of privacy and slander as those terms are defined in the

personal injury provisions of the CGL policy. However, the

district court found that Perdue’s alleged physical damages from

the personal injury offenses, invasion of privacy and slander, did

not result from Appellants’ “business activity” (owning and

managing property) as also required for coverage under the personal

injury provisions of the CGL policy. Therefore, the district court

held that Perdue’s claims for physical damages resulting from

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personal injury offenses were not covered and that St. Paul had no

duty to defend or indemnify under the personal injury provisions of

the CGL policy. St. Paul’s motion for summary judgment was granted

and Appellants’ cross-motion for summary judgment was denied.

On this appeal, Appellants argue that 1) the district court

erred in not granting summary judgment to Appellants because

sufficient facts were pled in the Perdue lawsuit to potentially

state a claim under the CGL policy’s personal injury provisions, 2)

the district court erred in granting summary judgment to St. Paul

in finding that St. Paul had no duty to defend under the CGL

policy’s personal injury provisions, 3) the district court erred in

not granting summary judgment to the Appellants on St. Paul’s late

notice defense, and 4) the district court erred in excluding

Perdue’s libel and libel per se claims as personal injury offenses.

STANDARDS OF REVIEW

We review a district court’s grant of summary judgment de

novo. New York Life Ins. Co. v. Travelers Ins. Co., 92 F.3d 336,

338 (5th Cir. 1996)(citation omitted). “On summary judgment the

inferences to be drawn from the underlying facts . . . must be

viewed in the light most favorable to the party opposing the

motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.

Ct. 993, 994, 8 L. Ed. 2d 176 (1962). Summary judgment is

appropriate “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

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affidavits, if any show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as

a matter of law.” FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett,

477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986).

We review a district court’s interpretation of an insurance

contract de novo. Potomac Ins. Co. of Ill. v. Jayhawk Med.

Acceptance Corp., 198 F.3d 548, 550 (5th Cir. 2000).

ANALYSIS

“In a diversity case state law provides the elements of the

plaintiff’s case.” Thrash v. State Farm Fire & Cas. Co., 992 F.2d

1354, 1356 (5th Cir. 1993) (citation omitted). “In Texas,

insurance policies are construed according to ordinary contract

principles. The interpretation of an insurance policy is a

question of law.” New York Life Ins. Co., 92 F.3d at 338

(citations omitted).

Under Texas law, courts follow the “Eight Corners” or

“Complaint Allegation” rule to determine if there is a duty to

defend. Id. at 338 (citing Gulf Chem. & Metallurgical Corp. v.

Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir.

1993)). “This rule requires the trier of fact to examine only the

allegations in the [underlying] complaint and the insurance policy

in determining whether a duty to defend exists.” Id. “The duty to

defend arises when a third party sues the insured on allegations

that, if taken as true, potentially state a cause of action within

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the terms of the policy.” Houston Petroleum Co. v. Highlands Ins.

Co., 830 S.W.2d 153, 155 (Tex. App.-Houston [1st Dist.] 1990, writ

denied)(citation omitted).

Appellants argue that the district court erred in not granting

summary judgment in their favor because sufficient facts were pled

in the Perdue lawsuit to potentially state a claim under the CGL

policy’s personal injury provisions. The personal injury

provisions of the CGL policy state that coverage is provided for

damages for personal injuries that: 1)result from the insured’s

business activities, and 2)are caused by a personal injury offense.

The district court found that Perdue stated at least two

claims (slander and invasion of privacy) that fell within the CGL

policy’s definition of personal injury offense. However, St. Paul

asserts that Perdue’s claims were not the result of Appellants’

business activities and alternatively, that Appellants’ late notice

of suit negates coverage under the CGL policy provisions. In

finding that the “business activity” criterion was not satisfied,

the district court did not reach the merits of St. Paul’s late

notice defense.

The CGL policy does not define the term “business activity.”

Appellants argue that the circumstances relating to the termination

of an employee are “business activities” while St. Paul argues that

circumstances relating to the termination of an employee are

internal employment practices and are not a “business activity.”

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When the language of an insurance policy is not ambiguous, it is

our duty to give the words used their plain meaning. See Houston

Petroleum Co., 830 S.W.2d at 155 (citing Puckett v. U.S. Fire Ins.

Co., 678 S.W.2d 936, 938 (Tex. 1984)). “[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.’” Gulf Chem. & Metallurgical Corp. v.

Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993)

(quoting Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex.

1987)). “And where the question of interpretation ‘involves an

exception or limitation on [the insurer’s] liability under the

policy, an even more stringent construction is required.’” Id.

The district court characterized the Appellants’ actions as

“the posting of an employee’s personal and private information

around [the] employee’s former place of employment, for public view

and possible misuse by others” and then found this inconsistent

with the Appellants’ “business activity” of owning and managing

property. We disagree.

Perdue’s Fourth Amended Original Petition alleges that the

complained of actions, including the personal injury offense of

invasion of privacy, were undertaken by Brushaber as part of her

property management of the Centrum Building to protect its tenants

and the real estate on behalf of Centrum. “Usually, the criminal

conduct of a third party is a superseding cause relieving the

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negligent actor from liability. However, the tortfeasor’s

negligence will not be excused where the criminal conduct is a

foreseeable result of such negligence.” Nixon v. Mr. Prop. Mgmt.

Co., Inc., 690 S.W.2d 546, 550 (Tex. 1985). “In the landlord-

tenant relationship, for example, a landlord who retains control

over the security and safety of the premises owes a duty to a

tenant’s employee to use ordinary care to protect the employee

against an unreasonable and foreseeable risk of harm from the

criminal acts of third parties.” Centeq Realty, Inc. v. Siegler,

899 S.W.2d 195, 197 (Tex. 1995) (citation omitted).

In light of the potential duty and perceived risk, Appellants’

posted information concerning a perceived risk to the Centrum

Building and its tenants in a place where it could be viewed and

appropriately used. Giving the term “business activity” its plain

meaning, Appellants’ actions were consistent with their business of

owning and managing property. Even if we found the term, “business

activity,” to be ambiguous, construing the policy strictly against

St. Paul and liberally in favor of Appellants, would require that

we find error in the district court granting summary judgment in

favor of St. Paul.

Appellants furthermore contend that the district court erred

in not granting summary judgment in favor of Appellants on St.

Paul’s late notice defense. The district court found that

Appellants’ actions relating to the termination of Perdue were not

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“business activities” as required under the CGL policy and

therefore, St. Paul had no duty to defend. As it was not necessary

in light of the district court’s findings on the issue of “business

activities,” the district court did not reach the merits of St.

Paul’s late notice defense. Therefore, we remand to the district

court for determination of the merits of St. Paul’s late notice

defense.

Finally, Appellants argue that the district court erred in

excluding Perdue’s libel and libel per se claims as personal injury

offenses. “If coverage exists for any portion of a suit, the

insurer must defend the insured in the entire suit.” St. Paul Fire

& Marine Ins. Co. v. Green Tree Fin. Corp.-Tex., 249 F.3d 389, 391

(5th Cir. 2001) (citation omitted). Because we have already

concluded that the damages resulting from the personal injury

offense of invasion of privacy were the result of Appellants’

business activities, and barring some other defense are therefore

covered under the CGL policy, it is not necessary for this court to

consider the libel and libel per se claims.

CONCLUSION

The district court will decide on remand the merits of St.

Paul’s late notice defense and determine whether St. Paul has a

duty under the CGL policy to defend Appellants against the claims

set forth in Perdue’s underlying state court action.

AFFIRMED in part, REVERSED in part and REMANDED.

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