Republic-Vanguard Insurance Company v. Charlie Mize D/B/A Quality Framing and Doug Settler

Citation: Not availableDocket: 07-08-00253-CV

Court: Court of Appeals of Texas; July 8, 2009; Texas; State Appellate Court

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Republic-Vanguard Insurance Company appealed a summary judgment favoring Charlie Mize and Doug Settler regarding an insurance coverage dispute. The case arose from a tort lawsuit filed by Settler against Mize, alleging negligence that led to Settler's injuries at a construction site where Mize was a subcontractor. Mize sought a defense from Republic under a Commercial General Liability Policy, which covered bodily injury claims.

The central issue was whether Settler's claims against Mize were excluded from coverage under the policy's "WORKERS COMPENSATION EXCLUSION." This exclusion specifically barred coverage for bodily injuries to an "employee" of the insured or any subcontractor arising from employment-related activities. Republic argued that Settler, as a subcontractor, was excluded from coverage, while Mize and Settler contended that the exclusion did not apply to subcontractors themselves.

On August 16, 2007, Republic initiated a declaratory judgment action to clarify its duty to defend Mize. Each party subsequently filed motions for summary judgment. The court ultimately affirmed the trial court's ruling, determining that Republic had a duty to defend Mize against Settler's claims, as the exclusion did not preclude coverage for subcontractors.

On May 16, 2008, the trial court ruled in favor of Settler and Mize by granting their motions for summary judgment and denying other motions. Following this, an appeal was filed. Republic claims the Exclusion clearly denies coverage for Settler’s injuries as a subcontractor for Mize, arguing that the use of 'and/or' in paragraph 2.e.(1) distinguishes 'insured' from 'subcontractor.' Republic maintains that 'employee of the insured' includes 'employees of a subcontractor' as defined in Section V.5.(c), thus interpreting paragraph 2.e.(1) to exclude claims for bodily injury to (1) an employee of the insured, (2) any subcontractor, or (3) any employee of a subcontractor.

Conversely, Mize and Settler argue that 'and/or' assigns equal grammatical importance to 'insured' and 'subcontractor,' leading them to interpret the Exclusion as excluding claims only for (1) employees of the insured and (2) employees of any subcontractor, thereby allowing claims for bodily injury to subcontractors themselves. They further assert that Republic’s interpretation misreads the definition of employees in Section V.5.(c), which specifies 'under the supervision of the insured,' meaning it does not encompass all subcontractor employees but only those under the insured’s control. Therefore, they contend that the term 'any subcontractor' is not redundant and is included to cover all subcontractor employees regardless of supervisory control.

The standard of review for the summary judgment is de novo, where the party with the burden must establish their claim or defense as a matter of law. When both parties seek summary judgment and one is granted while the other is denied, all issues can be reviewed, and the judgment can be upheld if any theory presented is valid. Additionally, the insurer's duty to defend is assessed using the 'eight corners rule,' which examines the pleadings of the third-party plaintiff against the policy provisions, without considering the truth of those allegations.

The duty to defend arises for an insurer if the factual allegations against the insured, when fairly and reasonably interpreted, indicate a cause of action that could be covered by the policy. External facts are typically not considered in this determination, and any uncertainty about the duty to defend must be resolved in favor of the insured. Republic's Policy provides coverage for bodily injury resulting from an 'occurrence' within the coverage territory and during the policy period. Settler's lawsuit claims that Mize’s negligence caused a metal frame to injure him at a construction site in Texas, establishing a legal duty for Republic to defend Mize unless the lawsuit falls under an exclusion.

The assessment of insurance policy language follows contract construction rules, requiring a holistic interpretation of all provisions. If the language can be clearly defined, it is not ambiguous; ambiguity only arises if a contract can be interpreted in multiple reasonable ways. In the case of ambiguity, the interpretation favoring the insured prevails, particularly concerning exclusionary provisions. The specific exclusion discussed is deemed unambiguous, with a straightforward reading indicating that 'employee' refers to employees of both the insured and any subcontractor. The language and structure of the exclusion, including relevant subparagraphs, support this interpretation, clarifying the roles and duties associated with each type of employee in relation to the insured’s business.

The interpretation aligns with the definition of 'subcontractor' in Section V.20. of the Exclusion, which refers to individuals or entities hired by any 'insured' to perform the insured's duties. The Exclusion in paragraph 2.e.(1) clearly applies to employees of both the insured and any subcontractor, but not to subcontractors themselves. The title 'Workers Compensation Exclusion' reinforces this interpretation, indicating a focus on excluding coverage for injuries to employees rather than those suffered by employers. Generally, insurance policy terms are interpreted using their ordinary meanings unless explicitly defined otherwise. Workers' compensation is defined as a system providing benefits for employee injuries incurred during employment and holds employers liable for such injuries regardless of fault. The analysis applies the 'eight corners' rule, interpreting pleadings and the insurance policy liberally to conclude that Settler’s claims fall within potential coverage. Consequently, Republic has a legal duty to defend Mize against these claims. Even if the Exclusion were seen as ambiguous, the interpretation favoring the insured must be adopted, as Settler’s interpretation is deemed reasonable. The trial court's judgment is therefore affirmed.

The definition of 'employee' in Section V.5.(c) is applicable to paragraph 2.e.(1), indicating that 'employee of the insured' includes employees of subcontractors under the insured's supervision, as well as employees of the insured itself. The term 'employee of any subcontractor' in paragraph 2.e.(1) includes all employees of the subcontractor, regardless of their supervision status by the insured. Consequently, the Exclusion applies to all employees of both the insured and any subcontractor, irrespective of supervision. The separate definitions of 'employee' and 'subcontractor' within the Exclusion indicate a deliberate distinction in their treatment. The decision reached did not rely on Don Lundy's deposition or Mize's Traditional Motion for Summary Judgment, rendering Republic's related concerns about these elements on appeal moot.