St. Paul Insurance Company v. Texas Department of Transportation

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN NO. 03-01-00192-CV St. Paul Insurance Company, Appellant v. Texas Department of Transportation, Appellee FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT NO. 97-12662-B, HONORABLE C. W. DUNCAN, JR., JUDGE PRESIDING Appellant St. Paul Insurance Company ("St. Paul") seeks reversal of the trial court's summary judgment in favor of the Texas Department of Transportation ("TxDOT"). The trial court found that St. Paul owed TxDOT, as an insured, a duty to defend for the period from July 8, 1999 to December 20, 2000. St. Paul disputes the existence of this duty, alleging that TxDOT failed to meet its summary judgment burden and that the trial court erred by ruling in favor of TxDOT. We will reverse the trial court's grant of summary judgment. BACKGROUND In 1993, J.D. Abrams, Inc. ("Abrams") contracted with the State of Texas to build a portion of Beltway Eight outside Houston. Abrams, as general contractor, agreed to provide insurance coverage for its work, naming TxDOT as an additional insured on its Contractors Commercial General Liability Protection policy ("CGL policy"). Under the CGL policy, St. Paul was to provide insurance coverage up to the total amount of two million dollars or one million dollars per event for any bodily injury or property damage liability incurred by Abrams. St. Paul also had a "right and duty to defend any claim or suit for covered injury or damage. . . loss made or brought against any protected person." In addition, the CGL policy contained an exhaustion provision stating that St. Paul's "duty to defend claims or suits ends when they have used up the limits of coverage that apply with the payment of judgments, settlements or medical expenses." Allegedly due to the beltway construction, a number of properties were damaged by a flood in late 1994, and the property owners filed a class-action suit against Abrams and TxDOT, among others. TxDOT demanded that St. Paul defend the department as an additional insured, but St. Paul refused. St. Paul Ins. Co. v. Texas Dept. of Transp., 999 S.W.2d 881, 883 (Tex. App.--Austin 1999, pet. denied). In that class-action suit, TxDOT filed a motion for summary judgment seeking an adjudication of St. Paul's duty to defend it. Id. The motion was granted by the trial court, holding that St. Paul owed TxDOT a duty to defend; on appeal, this Court affirmed the summary judgment holding that St. Paul had a duty to defend TxDOT. Id. On or about July 8, 1999, shortly before our opinion issued, St. Paul and Abrams entered into an agreement ("the Agreement") with the plaintiffs in the underlying suit. The Agreement stated that the plaintiffs would fully and completely release Abrams, St. Paul, and anyone else who might be liable for the work or conduct which was the subject of the underlying suit. Based on its contention that all claims had been settled and that the exhaustion clause accordingly relieved it of any further duty to TxDOT, St. Paul refused to acknowledge a duty to defend TxDOT after July 8, 1999. Once again, TxDOT filed a motion for summary judgment asking for an adjudication of the continuing duty to defend. The trial court granted TxDOT's motion, and St. Paul appealed. STANDARD OF REVIEW St. Paul's only issue asserts that the trial court erred in ruling that, as a matter of law, St. Paul has a continuing duty to defend TxDOT. The standards for reviewing a summary judgment are well established: (1) the movant for summary judgment has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Roland v. DaimlerChrysler Corp., 33 S.W.3d 468, 469 (Tex. App.--Austin 2000, pet. denied) (citing Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985)). Because the propriety of the summary judgment is a question of law, this Court reviews the judgment de novo. Id. DISCUSSION In disposing of St. Paul's first summary judgment appeal, this Court applied the eight corners rule. St. Paul, 999 S.W.2d at 884; see also Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997). In applying the rule, we looked to the allegations in the pleadings and the language of the insurance policy. St. Paul, 999 S.W.2d at 884. We established that St. Paul owed TxDOT a duty to defend it in the underlying action. Id. St. Paul emphasizes that it is not challenging this Court's prior determination; it contends that its only issue in this appeal is whether the July Agreement constituted a settlement which exhausts the CGL policy's limits, thereby terminating St. Paul's duty to defend TxDOT. St. Paul argues that TxDOT failed to meet its summary judgment burden. TxDOT responds that it has met its burden by showing that St. Paul owes it a general duty to defend. See St. Paul, 999 S.W.2d at 881. TxDOT contends that St. Paul has the burden of proving the applicability of any policy defenses, such as the exhaustion provision. See Texas Farmers Ins. Co. v. Murphy, 996 S.W.2d 873, 879 (Tex. 1999). (1) St. Paul argues that the exhaustion provision is not a policy defense. Instead, St. Paul asserts that the provision is merely a qualification on the duty to defend, manifesting the parties' intent to limit the duty to the time before the policy limits are exhausted. See American States Ins. Co. v. Arnold, 930 S.W.2d 196, 201 (Tex. App.--Dallas 1996, writ denied) (construing exhaustion provision of insurance policy to be unambiguously read in favor of insurer). According to the plain language of the CGL policy, St. Paul's duty to defend ends when the limits of coverage are met or exceeded through payment of judgments, settlements or medical expenses. This provision does not specify a defense or exception to providing a legal defense to an insured; instead, it states a condition upon that duty. Therefore, St. Paul contends that TxDOT did not meet its summary judgment burden merely by establishing the existence of St. Paul's general duty to defend. Once St. Paul raised the issue of whether the July Agreement exhausted the policy limits, thereby terminating its duty to defend, TxDOT's summary judgment burden required it to negate that issue as a matter of law. See Roland, 33 S.W.3d at 469. The principal issue in this appeal, then, is whether the Agreement between Abrams, St. Paul, and the plaintiffs serves as a settlement agreement, thereby activating the exhaustion provision of the CGL policy. TxDOT alleged in its motion for summary judgment that a settlement has not yet occurred in this case. It cites the language of the Agreement letter to illustrate that the alleged settlement is tentative, nonbinding, and dependent upon several contingent factors, such as plaintiff approval. (2) St. Paul, on the other hand, maintains that the Agreement is a settlement. The record on appeal contains the affidavits of St. Paul's attorney and the plaintiffs' attorney, both of whom manifest an agreement to the "stated settlement terms." The record also contains a copy of the settlement check, which is currently being held in trust, subject to the fulfillment of the settlement's contingencies. (3) While these facts do not conclusively establish that this Agreement is a full and final settlement of all claims, taking all evidence favorable to St. Paul as true and indulging every reasonable inference in favor of St. Paul, there remains a genuine issue of material fact: whether the cause has been settled so that the limits of the policy are exhausted, thereby terminating St. Paul's duty to defend TxDOT. Because TxDOT has not shown that it is entitled to judgment as a matter of law, we reverse the trial court's summary judgment. CONCLUSION Because there is a genuine issue of material fact as to whether the Agreement is a final settlement triggering the policy's exhaustion provision, the trial court erred by sustaining TxDOT's motion for summary judgment. Accordingly, we reverse the trial court's judgment and remand the cause for further proceedings. Marilyn Aboussie, Chief Justice Before Chief Justice Aboussie, Justices B. A. Smith and Puryear Reversed and Remanded Filed: December 20, 2001 Do Not Publish 1. In Texas Farmers, an arsonist burned his own home to the ground and attempted to recover under his homeowner's insurance policy. Texas Farmers Ins. Co. v. Murphy, 996 S.W.2d 873 (Tex. 1999). The insurance company denied the claim, and his wife, who did not contribute to the arson, filed her own claim. Id. at 875. The court held that a plaintiff seeking recovery under an insurance policy must prove only those provisions that allow recovery. Id. at 879. 2. The following excerpts from the Agreement indicate that its finality is questionable: (1) "the tentative agreement between the Plaintiffs, J.D.Abrams and St. Paul to settle any and all claims . . ."; (2) "voidable at the election of J.D. Abrams if . . ."; and (3) "binding only if 90% of . . . Plaintiffs elect to be bound . . ." (Emphasis added). 3. The check, made payable to the Reich & Binstock/Musselwhite Pearland Trust Account, contains the words "full and final settlement of any and all claims" typed in the memo space. The check is being held in the plaintiffs' attorney's trust account.