ILLINOIS NAT. INS. v. Hagendorf Const. Co., Inc.

Citations: 337 F. Supp. 2d 902; 2004 U.S. Dist. LEXIS 17739; 2004 WL 1969990Docket: Civ.A.SA-03-CA1087XR

Court: District Court, W.D. Texas; September 7, 2004; Federal District Court

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Plaintiff Illinois National Insurance Company seeks a summary judgment declaring that it has no duty to defend or indemnify Hagendorf Construction Company in a personal injury lawsuit filed by Frank Prieto. Prieto claims he was a domestic employee of Hagendorf and suffered severe injuries in an accident involving a company vehicle due to alleged negligence in vehicle maintenance and provision of a safe workplace. The court applies the "eight-corners" rule to determine the insurer's duty to defend, emphasizing that coverage is assessed by comparing the facts in the pleadings with the insurance policy language, while favoring coverage in case of doubt.

In the underlying lawsuit, Prieto states he was driving a vehicle owned by Hagendorf when the brakes failed, leading to a rollover accident. The insurance policy in question was effective for a single day, July 9, 2003, with an addendum that did not list Prieto as a covered driver or the vehicle he was driving (a 1974 Dodge truck), although it did list other vehicles. The policy stipulates that coverage applies to damages caused by accidents involving covered vehicles. The plaintiff contends that two policy exclusions justify its position of no coverage obligation.

Section IIB titled "Exclusions" delineates specific exclusions from insurance coverage. Notably, it excludes any obligations under workers' compensation, disability benefits, or similar laws. It also excludes bodily injury claims involving employees of the insured that occur during the course of employment, regardless of the insured's capacity or obligation to share damages. However, this exclusion does not apply to domestic employees not entitled to workers' compensation benefits or liabilities assumed under an insured contract.

Illinois National contends that Prieto, employed by Hagendorf Construction, was injured while driving a water truck, thus invoking the workers' compensation exclusion. Although Hagendorf is a nonsubscriber under the Texas Workers' Compensation Act, Illinois National argues that Prieto's claim falls under this exclusion as it arises from his employment. Hagendorf does not contest this but claims Prieto initially described himself as a domestic employee, arguing that the "eight corners rule" necessitates a duty to defend despite potential indemnity issues.

Under Texas law, non-governmental employers are not mandated to provide workers' compensation coverage. Hagendorf opted out, qualifying as a nonsubscriber. The court evaluates whether Prieto's claim constitutes an obligation under workers' compensation law. It cites Texas Labor Code provisions indicating that nonsubscribers cannot use certain common-law defenses in negligence suits, which further supports the idea that Prieto's suit, although labeled as a common law action, is fundamentally rooted in the Workers' Compensation Act.

The court concludes that Prieto's claim indeed represents an obligation for which Hagendorf may be liable under workers' compensation law, thus triggering the exclusion. Consequently, Illinois National is not required to defend or indemnify Hagendorf in Prieto's lawsuit. The court grants the Plaintiff's Motion for Summary Judgment, dismisses the Defendant's counterclaim, and orders that all parties bear their own costs and attorney's fees. Judgment will be entered accordingly.