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At a Glance:
Title:
Allstate County Mutual Insurance Company v. Wootton
Date:
June 9, 2016
Citation:
494 S.W.3d 825
Status:
Published Opinion

Allstate County Mutual Insurance Company v. Wootton

Court of Appeals of Texas, Houston (14th Dist.).

ALLSTATE COUNTY MUTUAL INSURANCE COMPANY, Appellant

v.

Bobby WOOTTON and Mary Wootton, d/b/a M. Wootton Construction, Appellees

NO. 14–14–00657–CV

|

Opinion filed March 29, 2016

|

Rehearing Overruled June 9, 2016

*827 On Appeal from the 434th Judicial District Court, Fort Bend County, Texas, Trial Court Cause No. 10–DCV–186083

Attorneys & Firms

Ronald J. Restrepo, Houston, TX, for Appellant.

Joseph Kelly Watts, Sugarland, TX, for Appellee.

Panel consists of Chief Justice Jamison and Busby.

OPINION

Kem Thompson Frost, Chief Justice

This appeal arises out of a dispute between an insurer and its insureds as to the insurer’s duty to defend. We must determine whether the trial court erred in granting summary judgment and declaring as a matter of law that (1) the insurer must defend its insureds in the underlying suit and (2) the insureds have the right to select their defense counsel and require the insurer to pay that counsel’s reasonable and necessary attorney’s fees. We conclude that the trial court did not err in granting summary judgment as to the duty to defend but that the trial court erred in granting summary judgment regarding the insureds’ right to select defense counsel and compel the insurer to pay that counsel’s fees. Accordingly, we affirm in part and reverse and remand in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

In June 2010, Juan Gonzalez, Sr. filed suit against his son, Juan Gonzalez, Jr., and appellees/plaintiffs Bobby Wootton and Mary Wootton, d/b/a M. Wootton Construction (hereinafter the “Woottons”), seeking to recover damages resulting from Gonzalez, Jr.’s alleged negligence in operating a truck, which allegedly caused a collision in which Gonzalez, Sr. sustained personal injury (hereinafter the “Underlying Suit”). Gonzalez, Sr. alleged that the Woottons owned the truck at the time of the collision and that they were responsible for Gonzalez, Jr.’s negligence in operating the truck. Gonzalez, Sr. also alleged the elements of a negligent-entrustment claim.

*828 Personal–Injury Plaintiffs Claim under the Policy

Before filing suit, Gonzalez, Sr. made a claim under a Business Auto Policy issued to the Woottons by appellant/defendant Allstate County Mutual Insurance Company (hereinafter the “Policy”). Allstate responded by denying liability coverage for Gonzalez, Sr.’s claim under the Policy.

Defense of the Underlying Suit

After Gonzalez, Sr. sued the Woottons, they tendered defense of the Underlying Suit to Allstate under the Policy. In response, Allstate retained an attorney to defend the Woottons in the Underlying Suit and sent a reservation-of-rights letter to the Woottons. In addition to reserving its rights to withdraw a defense in the future and to deny coverage, Allstate informed the Woottons that they had the right to retain a different attorney to represent them in the Underlying Suit but that the Woottons would have to do so at their own cost.

Declaratory–Judgment Claims

The Woottons wanted to retain an attorney of their choosing and have Allstate pay that attorney’s reasonable and necessary attorney’s fees. Therefore, the Woottons filed this declaratory-judgment suit against Allstate, asking the trial court to declare that Allstate is obligated to defend the Woottons in the Underlying Suit through counsel of their choice. In addition to seeking declaratory relief, the Woottons requested reasonable and necessary attorney’s fees under section 37.009 of the Civil Practice and Remedies Code, which governs awards of such fees and other costs under the Declaratory Judgments Act.

Allstate filed declaratory-judgment counterclaims against the Woottons, seeking a declaration that Allstate had no duty to defend the Woottons for the claims against them in the Underlying Suit. Allstate asserted that Gonzalez, Sr. and Gonzalez, Jr. were acting in the course and scope of their employment with the Woottons at the time of the collision made the basis of the Underlying Suit and that therefore three exclusions in the Policy eliminated any duty to defend the Woottons.1

Cross–Motions for Summary Judgment

The Woottons filed a motion for traditional summary judgment, asserting the following grounds: (1) the summary-judgment evidence proves as a matter of law that Allstate has a duty to defend the Woottons in the Underlying Suit; (2) as a matter of law, the eight-corners rule, as applied to the Policy and Gonzalez, Sr.’s pleading in the Underlying Suit, imposes on Allstate a duty to defend the Woottons in the Underlying Suit; and (3) because of issues regarding the respondeat-superior theory in the Underlying Suit, the attorney Allstate chose to defend the Woottons labors under a potential conflict of interest, and therefore the Woottons have the right to select an attorney to represent them and to require that Allstate pay the attorney’s reasonable and necessary attorney’s fees in the Underlying Suit. The Woottons sought a summary judgment awarding them declaratory relief as well as reasonable and necessary attorney’s fees for pursuing their declaratory-judgment claims.

Allstate filed a cross-motion for traditional summary judgment, seeking a declaration that Allstate owes no duty to defend *829 the Woottons in the Underlying Suit. Allstate asserted that an exception to the eight-corners rule applies. According to Allstate, after considering extrinsic evidence showing that Gonzalez, Sr. and Gonzalez, Jr. were acting within the course and scope of their employment with the Woottons at the time of the collision that gave rise to the Underlying Suit, three exclusions in the Policy demonstrate that Allstate has no duty to defend the Woottons. In its summary-judgment motion, Allstate did not seek summary judgment as to the Woottons’ request for a declaration that the Woottons have the right to select an attorney to represent them in the Underlying Suit and to have Allstate pay that attorney’s reasonable and necessary attorney’s fees.

Trial Court’s Rulings

The trial court signed an interlocutory summary judgment in which the court (1) granted the Woottons’ summary-judgment motion, (2) denied Allstate’s summary-judgment motion, (3) ordered that Allstate must provide the Woottons a defense in the Underlying Suit, (4) ordered that the Woottons have the right to select the attorney to defend them in the Underlying Suit and that Allstate shall pay that attorney’s reasonable and necessary attorney’s fees and expenses incurred in this defense; and (5) awarded the Woottons reasonable and necessary attorney’s fees and costs on their declaratory-judgment claims as well as conditional appellate attorney’s fees.

Allstate filed a motion for reconsideration of the court’s summary-judgment order and attached to the motion excerpts from the depositions of Gonzalez, Sr. and Gonzalez, Jr., both of which were taken after the trial court signed the summary-judgment order. Allstate filed a supplement to this motion that included the transcript of Bobby Wootton’s deposition. The trial court denied Allstate’s reconsideration motion.

Settlement of the Underlying Suit and Appeal of Summary–Judgment Order

Allstate settled the Underlying Suit on behalf of the Woottons and Gonzalez, Jr., and Allstate nonsuited certain claims in the case under review.2 After the summary-judgment order became final, Allstate perfected this appeal.

II. ISSUES AND ANALYSIS

In its first appellate issue, Allstate asserts that an exception to the eight-corners rule allows courts to consider extrinsic evidence in determining whether Allstate has a duty to defend. Allstate urges that upon considering extrinsic evidence, this court should reverse the trial court’s finding that Allstate has a duty to defend the Woottons in the Underlying Suit. In its second issue, Allstate asserts that this court should reverse the trial court’s duty-to-defend finding because the undisputed evidence shows that, at the *830 time of the accident, Gonzalez, Sr. was the Woottons’ employee and was acting in the course and scope of his employment. In its third issue, Allstate asserts that, if we hold that Allstate has a duty to defend the Woottons in the Underlying Suit, we should reverse the trial court’s declaratory judgment that the Woottons are entitled to counsel of their choice at Allstate’s expense because the facts to be adjudicated in the Underlying Suit are not the same as the facts upon which coverage depends.

Allstate asserts that the trial court erred in granting the Woottons’ summary-judgment motion and in denying Allstate’s summary-judgment motion. Though Allstate did not seek a final judgment in its motion, Allstate sought declaratory relief as a matter of law on the duty-to-defend issue, on which the Woottons also sought summary judgment. Accordingly, we may review the trial court’s denial of Allstate’s motion on the duty-to-defend issue. See Frontier Logistics, L.P. v. Nat’l Prop. Holdings, L.P., 417 S.W.3d 656, 664 (Tex.App.–Houston [14th Dist.] 2013, pet. denied) (concluding that appellate court may render judgment on a cross-motion to the extent that, in the cross-motion, the movant sought summary judgment on the same issue addressed in the summary-judgment motion the trial court granted).

In a traditional motion for summary judgment, if the movant’s motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.2000).

Allstate also asserts that the trial court erred in denying its motion for reconsideration of the summary-judgment order. To reverse this ruling, we must determine that the trial court abused its discretion in denying the motion. See Burnett v. Carnes Funeral Home, Inc., No. 14–12–01159–CV, 2014 WL 2601567, at *4 (Tex.App.–Houston [14th Dist.] June 10, 2014, no pet.) (mem.op.).

A. If the eight-corners rule applies, does the summary-judgment evidence prove as a matter of law that the insurer has a duty to defend?

In the Policy, Allstate promised to defend and indemnify the Woottons. The duty to defend is distinct from, and broader than, the duty to indemnify. Austin Power, Inc., 357 S.W.3d at 823–24.

In determining whether an insurer has a duty to defend its insured, Texas courts follow the eight-corners rule, also known as the complaint-allegation rule, which the Supreme Court of Texas has described as follows: “ ‘[A]n insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.’ ” Austin Power, Inc., 357 S.W.3d at 823–24. With this legal standard in mind, we turn to the language of the Policy.

The Woottons are insureds under the Policy for any “covered auto.” The Policy covers vehicles owned by the Woottons and listed in a schedule of “covered autos” contained in the Policy.3 The Policy states that coverage is afforded for damages the insured is legally obligated to pay “because of bodily injury ... caused by an accident and resulting from the ownership, maintenance or use of a covered auto.”4 The Policy contains various exclusions. Among these are provisions specifying the Policy does not provide coverage for the following:

Any obligation for which the insured or the insured’s insurer may be held liable under any workers compensation, disability *832 benefits or unemployment compensation law or any similar law.

...

Bodily Injury to ... [a]n employee of the insured arising out of and in the course of employment by the insured....

...

Bodily injury to any fellow employee of the insured arising out of and in the course of the fellow employee’s employment.

In the Underlying Suit, Gonzalez, Sr. made the following allegations in support of his claims against the Woottons:

• On or about August 13, 2008, in Fort Bend County, Texas, Gonzalez, Jr. was negligent in the operation of a truck.

• Gonzalez, Jr.’s negligence proximately caused a collision in which Gonzalez, Sr. sustained actual damages.

• At the time of the collision in question, the Woottons were the owners of the vehicle driven by Gonzalez, Jr.

• On or about August 13, 2008, the Woottons allowed Gonzalez, Jr. to use their vehicle for the purpose of operating it on the public streets and highways of Texas.

• Gonzalez, Jr. operated the vehicle with the knowledge, consent, and permission of the Woottons.

• When Gonzalez, Jr. operated the vehicle, he had a suspended driver’s license, and, because of that suspension, was not allowed to operate a motor vehicle on the public streets and highways.

• The Woottons knew, or in the exercise of due care, should have known, that Gonzalez, Jr. had a suspended license and would create an unreasonable risk of danger to persons and property on the public streets and highways of Texas.

• Gonzalez, Jr., for whose acts and omissions the Woottons are responsible, engaged in several acts and omissions constituting negligence, including failure to keep such a lookout as a reasonable and prudent person would have kept and failure to properly apply the brakes of the truck in sufficient time to avoid hitting the dumpster.

• As a direct and proximate result of the Woottons’ negligence, Gonzalez, Sr. has suffered actual damages, including disfigurement and past and future (1) reasonable and necessary costs of medical care and treatment, including doctors, hospitals, nurses, medicine, and other services, (2) physical pain, (3) mental anguish, and (4) physical and mental impairment.

In his petition, Gonzalez, Sr. does not address whether he or Gonzalez, Jr. are employees of the Woottons or whether Gonzalez, Sr.’s injuries arose out of or in the course of Gonzalez, Sr.’s employment. Nor does Gonzalez, Sr. include in his pleading any facts that would trigger any exclusion under the Policy, and no inferences logically flow from the facts alleged in the petition that would trigger any exclusion under the Policy. See Austin Power, Inc., 357 S.W.3d at 823–26.

B. Would the summary-judgment evidence prove as a matter of law that the insurer has a duty to defend the insureds in the underlying suit under any potentially applicable exception to the eight-corners rule?

Under its first and second issues, Allstate asserts that this court should apply an exception to the eight-corners rule. Allstate presents two different formulations of the proposed exception. Under one formulation, Allstate argues that extrinsic evidence may be considered under a rather broad exception to the eight-corners rule if (1) the pleading in the underlying case does not contain sufficient facts to determine whether coverage exists, and (2) the extrinsic evidence goes solely to a fundamental issue of coverage that does not overlap with the merits of, or engage the truth or falsity of, any facts alleged in the underlying case (hereinafter the “Broad Exception”). Under the other formulation, Allstate argues that extrinsic evidence may be considered under a narrower exception to the eight-corners rule if (1) it is impossible to discern whether coverage is potentially implicated by the pleading in the underlying case, and (2) the extrinsic evidence goes solely to a fundamental issue of coverage that does not overlap with the merits of, or engage the truth or falsity of, any facts alleged in the underlying case (hereinafter the “Narrow Exception”). We now address whether either of these proposed exceptions shows that the trial court erred in granting the Woottons’ summary-judgment motion and in denying Allstate’s summary-judgment motion.

1. The Broad Exception

Despite various requests over the years to recognize exceptions to the eight-corners rule, the Supreme Court of Texas has never done so.5 See *834 King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002) (stating that “[a]n insurer’s duty to defend is determined solely by the allegations in the pleadings and the language of the insurance policy”).

In GuideOne Elite Ins., 197 S.W.3d at 309).

Under current law, if the Supreme Court of Texas were to allow any exception to the eight-corners rule, it would be the Narrow Exception. See id.

2. The Narrow Exception

The circumstances of today’s case do not fall within the Narrow Exception described by the Supreme Court of Texas as a potential exception to the eight-corners rule. See Nokia, Inc., 268 S.W.3d at 497–98 (holding that the high court would not apply any exception to the eight-corners rule because the circumstances of the Narrow Exception were absent, given that the pleadings in the underlying cases alleged bodily injury and it was not impossible to discern whether coverage was potentially implicated).7

The circumstances of the Narrow Exception are not present in today’s case, so this court should not recognize an exception to the eight-corners rule.8 See Austin Power, Inc., 357 S.W.3d at 823–26. Accordingly, we overrule Allstate’s first and second issues.

C. Did the trial court err in granting summary judgment for the insureds on their request for a declaration that they are entitled to independent counsel at the insurer’s expense?

In its third issue, Allstate asserts that, if we hold that Allstate has a duty to defend the Woottons in the Underlying Suit, we should reverse the trial court’s declaratory judgment that the Woottons are entitled to counsel of their choice at Allstate’s expense because the facts to be adjudicated in the Underlying Suit are not the same as the facts upon which coverage depends.

Absent application of an exception to the general rule, appellate courts may affirm a summary judgment based only on a ground expressly stated in the summary-judgment motion. See Stiles, 867 S.W.2d at 26. The only ground the Woottons expressly set out in their motion as a basis for their alleged right to choose independent counsel is that there is a potential conflict of interest because a respondeat-superior theory and the coverage exclusions upon which Allstate relies all depend upon proof that Gonzalez, Jr. was acting within the course and scope of his employment at the time of the accident made the basis of the Underlying Suit.

1. Potential Conflicts of Interest

In their summary-judgment motion, the Woottons asserted that a potential conflict of interest is sufficient to give them the right to select counsel to defend them at Allstate’s expense. The Policy language imposes on Allstate a duty to defend the Woottons and gives Allstate the *837 right to conduct the Woottons’ defense. See id.

Under certain circumstances, however, an insurer may not insist upon its contractual right to control the defense. See Id.

The Downhole Navigator, L.L.C., 686 F.3d at 329–30.

2. Grounds Not Raised in the Summary–Judgment Motion

On appeal, the Woottons assert that Gonzalez, Sr. pleaded facts sufficient to give fair notice of a negligent-entrustment claim and that adjudication of the negligent-entrustment claim will require adjudicating facts upon which coverage depends. They also claim a conflict of interest exists because Allstate conditioned its *838 defense of the Woottons upon an unreasonable extra-contractual demand that the Woottons agree to the attorney chosen by Allstate, thus allegedly subjecting them to waiver of their right to invoke the rule allowing them to obtain independent counsel. Because the Woottons did not assert either of these arguments as grounds for summary judgment in their motion, we cannot affirm the trial court’s summary judgment on either of these grounds.12 See Stiles, 867 S.W.2d at 26.

3. Respondeat–Superior Theory

In their motion, the Woottons asserted a conflict of interest based on Gonzalez, Sr.’s purported allegation of facts supporting the respondeat-superior theory of vicarious liability. In their motion, the Woottons asserted that this theory requires proof that Gonzalez, Jr. was acting within the course and scope of his employment at the time of the accident made the basis of the Underlying Suit, which the Woottons claimed is also the basis for Allstate’s coverage exclusions. Even under a liberal construction of Gonzalez, Sr.’s live pleading, Gonzalez, Sr. did not allege a respondeat-superior theory or facts that would trigger application of this theory. See Downhole Navigator, L.L.C., 686 F.3d at 329–30. Accordingly, the trial court erred in granting summary judgment in this regard, and we sustain Allstate’s third issue.

III. CONCLUSION

No possible exception to the eight-corners rule would allow consideration of the extrinsic evidence Allstate submitted in support of its motion for summary judgment and its motion for reconsideration. The trial court did not err in granting summary judgment as to Allstate’s duty to defend or in denying Allstate’s summary-judgment motion and its reconsideration motion. The Woottons did not prove as a matter of law that they have the right to select the attorney to defend them in the Underlying Suit and to have Allstate pay that attorney’s reasonable and necessary fees and expenses. Accordingly, we reverse the trial court’s judgment as to the Woottons’ alleged right to select the attorney to defend them in the Underlying Suit and to have Allstate pay that attorney’s fees and expenses, and we remand for *839 further proceedings in the trial court.14

On appeal, we have concluded that the trial court erred in rendering part of the declaratory relief contained in its judgment. Because our disposition on appeal substantially affects the trial court’s judgment, reversal of the trial court’s attorney’s-fees awards against Allstate is warranted so that on remand the trial court can address what costs and attorney’s fees, if any, should be awarded against Allstate under the Declaratory Judgments Act in light of the relief granted in the trial court’s judgment on remand. See Chase Home Fin., L.L.C. v. Cal West. Reconveyance Corp., 309 S.W.3d 619, 634 (Tex.App.–Houston [14th Dist.] 2010, no pet.). Accordingly, we also reverse all of the attorney’s fees awards. We affirm the remainder of the trial court’s judgment.

Footnotes

1

Allstate also asserted declaratory-judgment claims against Gonzalez, Jr. Allstate later nonsuited these claims.

2

Allstate reported to the trial court in the case under review that Allstate settled the Underlying Suit on behalf of the Woottons and Gonzalez, Jr. at mediation. Despite the settlement of the Underlying Suit, there still is a live, justiciable controversy in this case as to: (1) whether Allstate or the Woottons are entitled to declaratory relief regarding Allstate’s duty to defend, (2) whether the Woottons are entitled to declaratory relief regarding their alleged right to select the attorney to defend them in the Underlying Suit and to require that Allstate pay the attorney’s reasonable and necessary attorney’s fees and expenses incurred in this defense, and (3) the Woottons’ requests for attorney’s fees under the Declaratory Judgments Act. See Ward v. Lamar University, 484 S.W.3d 440, 450–52, 2016 WL 145817, at *7–8 (Tex.App.–Houston [14th Dist.] Jan. 12, 2016, no pet.).

3

Allstate agrees that the vehicle Gonzalez, Jr. was driving at the time of the accident made the basis of the Underlying Suit was a “covered auto” under the Policy.

4

The Policy states in section II. A.:

We will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.

5

In Weingarten Realty created.

In Burks.

6

This potential exception is the Narrow Exception for which Allstate advocates in part of its briefing.

7

Allstate relies in part on Ooida Risk Retention Group, Inc., 579 F.3d at 476.

8

Allstate also cites an opinion of the Thirteenth Court of Appeals and statements from this court’s opinion in Wade, 827 S.W.2d at 451–53.

9

In Magee, 347 S.W.3d at 297–98.

10

In Davalos, 140 S.W.3d at 688–89.

11

As the Davalos, 140 S.W.3d at 689.

12

We do not address the merits of these arguments in this opinion.

13

Whether Gonzalez, Sr. was acting within the course and scope of his employment at the time of the accident made the basis of the Underlying Suit also is not a fact to be adjudicated in the Underlying Suit.

14

Allstate did not move for summary judgment as to the Woottons’ claim in this regard and therefore Allstate may not obtain rendition of judgment. See Marzo Club, LLC v. Columbia Lakes Homeowners Ass’n, 325 S.W.3d 791, 799–801 (Tex.App.–Houston [14th Dist.] 2010, no pet.).

End of Document
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