Blest Investments v. Insurance Co of PA

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 1, 1999
• Docket: 98-20355
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________________________________

No. 98-20355 _______________________________________

BLEST INVESTMENTS CORP. f/k/a/ LEND LEASE TRUCKS INC., LEND LEASE DEDICATED SERVICE, INC., and AIR LIQUIDE AMERICA CORP., individually and as successor in interest to LIQUID AIR CORP.,

Plaintiffs-Appellees,

versus

THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,

Defendant-Appellant. _________________________________________________________________

Appeal from the United States District Court for the Southern District of Texas (H-97-CV-3221) _________________________________________________________________

July 1, 1999

Before WIENER, DeMOSS and PARKER, Circuit Judges.

WIENER, Circuit Judge:*

In this breach of contract and declaratory judgment action

arising out of an insurance coverage dispute, Defendant-Appellant

Insurance Company of the State of Pennsylvania (“ICSP”) appeals the

district court’s grant of summary judgment and award of damages and

attorneys’ fees in favor of Plaintiffs-Appellees Lend Lease and Air

Liquide. Following a de novo review of the record, we reverse in

part, vacate in part, and render judgment in favor of ICSP.

* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. I

FACTS AND PROCEEDINGS

Lend Lease2 is a trucking company engaged in the business of

transporting fuels, chemicals, and other products. Air Liquide

manufactures liquid gas and contracts with trucking companies like

Lend Lease for the delivery of its product to commercial and

industrial customers throughout the United States, as well as in

other countries. In 1987, Lend Lease and Air Liquide entered into

a written “Contract for Hauling” (the “Contract”) pursuant to which

Lend Lease agreed to use its tractors to transport Air Liquide’s

liquid oxygen, nitrogen, and argon in cryogenic trailers owned by

Air Liquide.2 In the Contract, Lend Lease agreed to “procure and

maintain, at its sole expense, policies of comprehensive general

liability and automobile liability insurance” in which Air Liquide

would be designated an additional named insured and pursuant to

which Air Liquide would be furnished legal defense and shielded

from liability for bodily injury, death, and property damage in an

amount not less than $7 million.3

2 Lend Lease is the predecessor of Blest Investment Corporation, one of the named parties in this litigation. 2 Under the heading “Recitals,” the contract provides in pertinent part: WHEREAS, [Air Liquide] desires to avail itself of the trucking services of [Lend Lease] for the transportation of liquid oxygen, nitrogen and argon (“Product”) for [Air Liquide], in liquid cryogenic trailers (“Trailers”) owned by [Air Liquide] in accordance with the provisions of this Agreement . . . . 3 On April 1, 1991, the parties amended the Contract to reduce the required policy limits to an amount not less than $5 million

2 In 1991, Lend Lease purchased a commercial truckers insurance

policy (the “Policy”) from ICSP in which Lend Lease was designated

as the sole named insured. The Policy provides coverage to all

insureds, both named and unnamed, for sums paid as damages because

of bodily injury or property damage “caused by an ‘accident’ and

resulting from the ownership, maintenance or use of a covered

‘auto.’” A covered auto, as defined in the Policy, includes

“‘[t]railers’ with a load capacity of 2,000 pounds or less designed

primarily for travel on public roads.” The Policy defines unnamed

insureds as, inter alia, “[t]he owner or anyone else from whom you

hire or borrow a covered ‘auto’ that is a ‘trailer’ while the

‘trailer’ is connected to another covered ‘auto’ that is a power

unit.” The parties do not dispute that Lend Lease’s tractors are

“power units” or that both the tractors and Air Liquide’s cryogenic

trailers are “covered autos” within the meaning of the policy.

Neither do the parties dispute that the potential for liability on

the part of Air Liquide had been triggered by an occurrence that

was an “accident” within the meaning of the policy. Rather, the

issue to be resolved in this case is whether, on the basis of the

allegations in the complaint of a Lend Lease truck driver’s now-

dismissed state court lawsuit arising out of that accident, ICSP

was obligated to defend Air Liquide in that suit.

In October 1991, Lend Lease’s employee, Steve Carter, drove a

tractor/trailer rig, consisting of a Lend Lease tractor and an Air

Liquide trailer full of liquid nitrogen, to an Illinois storage

per occurrence.

3 facility on the premises of Air Liquide’s customer Commonwealth

Edison Company (“Commonwealth”) on which an above-ground storage

tank owned by Air Liquide was located. On his arrival at the

facility, Carter encountered an open ditch on the Commonwealth

premises that prevented his parking the rig in an optimum unloading

position near Air Liquide’s storage tank. As a result of having

had to park some distance away, Carter was forced to walk back and

forth through the ditch and climb its sides in efforts first to

connect the trailer’s transfer hoses to the tank and then to

monitor the pressure gauges on both the trailer and the tank during

the transfer of the liquid nitrogen from the trailer to the storage

tank. At some point after Carter began transferring the liquid

nitrogen, pressure inside the storage tank became dangerously high

and caused liquid nitrogen to be discharged through the tank’s

safety valve, spraying Carter and causing him to sustain severe

cryogenic burns and freezing.

Carter filed suit (the “Carter lawsuit” or “Carter

litigation”) in Illinois state court in October 1993, naming as

defendants both Air Liquide and Commonwealth, among others.4 In

his complaint, Carter sought recovery under theories of strict

products liability, negligence, and breach of implied warranty of

merchantability.

4 As Carter’s injuries were caused by an accident arising during the course and scope of his employment, he received benefits through Lend Lease’s workers’ compensation coverage. Workers’ compensation is Carter’s exclusive remedy against his employer, explaining why Lend Lease was not a defendant in the Carter litigation.

4 On being named a defendant in the Carter lawsuit, Air Liquide

made two separate demands on ICSP for defense and coverage, both of

which were denied. Thereafter, Lend Lease communicated a similar

demand to ICSP on behalf of Air Liquide. After this third demand

also proved fruitless, Air Liquide filed a third-party complaint

against Lend Lease in the Carter litigation alleging, among other

things, that Lend Lease breached its contractual obligation by

failing to have Air Liquide included as a named insured in the

Policy.5 In July 1996, the state court granted partial summary

judgment in favor of Air Liquide on this claim, concluding that

Lend Lease had breached the Contract with regard to insurance but

that Air Liquide had not yet proved damages.

Thereafter, in September 1997, Air Liquide and Lend Lease

filed this action against ICSP in federal district court in Texas,

alleging breach of contract and seeking (1) declaratory judgment on

the issue of insurance defense and coverage; (2) damages in the

form of attorneys’ fees and costs incurred by Air Liquide as a

result of ICSP’s refusal to defend it in the Carter litigation; and

(3) attorneys’ fees and costs incurred by both plaintiffs in the

instant case.

In March 1998, on the parties’ cross motions, the district

court granted summary judgment in favor of Lend Lease and Air

Liquide, ruling without written reasons that (1) ICSP owes a duty

5 In October 1991, Air Liquide had received a certificate of insurance indicating that, in the Policy, Lend Lease had designated itself as the sole named insured, with general and automobile liability coverage in the amount of $1 million per occurrence.

5 to defend Air Liquide in the Carter lawsuit and, in the event

Carter proves that his injuries resulted from the use of Air

Liquide’s trailer, a duty to indemnify Air Liquide for damages paid

in satisfaction of its obligation;6 (2) Air Liquide is entitled to

$358,000 in damages for ICSP’s breach of its duty to defend in the

Carter lawsuit as well as $51,000 for fees, costs, and expenses

incurred in the instant case; and (3) Lend Lease is entitled to

$145,000 for fees, costs, and expenses incurred in the instant

case. ICSP now appeals, seeking reversal.

II

ANALYSIS

A. Standard of Review

We review a grant of summary judgment de novo, applying the

same standard as the district court.7 Summary judgment is

appropriate when the evidence, viewed in the light most favorable

to the nonmoving party, presents no genuine issue of material fact

and shows that the moving party is entitled to judgment as a matter

6 In October 1998, approximately seven months after the district court granted summary judgment in the instant case, Carter voluntarily dismissed his state court lawsuit on the eve of trial. As ICSP’s duty to indemnify rests solely on Carter’s ability to prove at trial that his injuries resulted from the use of Air Liquide’s trailer, the dismissal of Carter’s suit rendered moot this portion of the district court’s judgment. Whether ICSP’s duty to indemnify may ultimately be triggered by the assessment of liability against Air Liquide in another lawsuit is of no consequence to this appeal. Hence, we review only the portions of the district court’s ruling imposing on ICSP a duty to defend and awarding damages and attorneys’ fees for a breach of this duty. 7 Melton v. Teacher’s Ins. & Annuity Ass’n of America, 114 F.3d 557, 559 (5th Cir. 1997).

6 of law.8

B. ICSP’s Duty to Defend Air Liquide

As Carter is a citizen of Indiana, the parties agree that

Indiana law is the appropriate law to apply in determining whether

ICSP owes Air Liquide a duty to defend it in the Carter litigation.

Under Indiana law, an insurer’s duty to defend is determined solely

by reference to (1) the language of the insurance policy and (2)

the allegations in the plaintiff’s complaint.9 This is frequently

referred to, at least in other jurisdictions, as the “eight corners

test.”10 Although not unconditional, the duty to defend is

expansive.11 Indeed, a duty to defend arises whenever a plaintiff

makes allegations that, if proved true, would trigger an insurer’s

obligation to pay under its policy.12

Ordinarily, in determining whether ICSP has a duty to defend

Air Liquide, we would first try to ascertain whether Air Liquide is

8 River Prod. Co., Inc. v. Baker Hughes Prod. Tools, Inc., 98 F.3d 857, 859 (5th Cir. 1996). 9 Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 565 (7th Cir. 1997)(stating that "[w]hile Indiana's courts may use differing language to describe the standard, we believe there is essentially only one standard —— that the allegations of the complaint, including the facts alleged, give rise to a duty to defend whenever, if proved true, coverage would attach."); General Accident Ins. Co. of Am. v. Gastineau, 990 F.Supp. 631, 634 (S.D. Ind. 1998). 10 See Travelers Indem. Co. v. Holloway, 17 F.3d 113, 115 (5th Cir. 1994). 11 Seymour Mfg. Co., Inc. v. Commercial Union Ins. Co., 665 N.E.2d 891, 892 (Ind. 1996)(noting that the duty to defend is considerably broader than the duty to indemnify). 12 Stroh Brewing Co., 127 F.3d at 565.

7 an insured under the Policy —— because Air Liquide is not a named

insured, an inquiry turning on whether Lend Lease either “hired” or

“borrowed” Air Liquide’s trailer —— before considering whether the

Policy provides coverage for the particular claims alleged. As our

examination of the Policy in pari materia with the allegations in

Carter’s complaint leads us to the ultimate conclusion that the

claims he asserted against Air Liquide are not covered under the

Policy, however, we assume arguendo that Air Liquide is an unnamed

insured by virtue of its ownership of a borrowed or hired “covered

auto” and proceed directly to an analysis of the scope of coverage

provided by the Policy.

As previously noted, ICSP issued a policy to Lend Lease in

which it agreed to “pay all sums an ‘insured’ must pay as damages

because of ‘bodily injury’ or ‘property damage’ . . . caused by an

‘accident’ and resulting from the ownership, maintenance or use of

a covered ‘auto’.”13 Assuming, as we are, that Air Liquide is an

insured under this policy, ICSP’s duty to defend turns on whether

Carter has alleged injury “resulting from the ownership,

maintenance or use” of Air Liquide’s trailer.14

Carter’s complaint comprises four counts, three of which are

13 Emphasis added. 14 In addition, ICSP argues that its policy contains exclusions that explicitly eschew coverage of Carter’s claims and that Air Liquide is estopped —— either judicially or collaterally, or both —— from asserting that ICSP owes it a duty to defend. As ICSP’s duty to defend can adequately be determined without considering these arguments, we forego any discussion of them.

8 relevant to this case.15 In those three he seeks relief under

theories of strict liability, negligence, and breach of warranty

for injuries sustained “due to a discharge of . . . liquid nitrogen

from [Air Liquide’s] on-site storage tank.”16 Even though Carter’s

claims focus exclusively on the condition of Commonwealth’s storage

facility premises and Air Liquide’s on-site storage tank, and not

at all on Air Liquide’s cryogenic trailer, Appellees nevertheless

insist that ICSP is obligated to defend Air Liquide based on the

factual allegation in Carter’s complaint that he was injured while

unloading liquid nitrogen from the trailer.17 Appellees suggest

that, to trigger a duty of ICSP to defend Air Liquide, Carter’s

complaint need not have contained allegations of a causal

connection between his act of unloading the liquid gas from the

trailer and the injuries he incurred when the storage tank

15 In a fourth count, Carter’s wife seeks damages for loss of consortium and services. 16 Two weeks after the voluntary dismissal of his first lawsuit, Carter initiated suit once again by filing another complaint in state court. This complaint —— the November complaint —— is a virtual replica of the original except for the addition of at least nine references to Air Liquide’s cryogenic trailer and the assertion that Carter’s injuries arose from the use of that trailer. In a motion carried with the case, Appellees now ask us to take judicial notice of Carter’s November complaint. As the issues before this court arise from ICSP’s refusal to defend Air Liquide in Carter’s original lawsuit, however, we fail to see how our analysis would be aided by consideration of the November complaint. Appellees’ motion is, therefore, denied. All references in this opinion are to Carter’s original complaint. 17 In his complaint, Carter alleges that he “was delivering liquid nitrogen . . . by unloading [it] from the tanker truck into a stationary tank . . . when he suffered severe burns, cryogenic freezing and other injuries” and that, at all times pertinent to his claim, he was “performing the delivery, transfer and storage of the liquid nitrogen.”

9 overflowed, so long as a temporal connection is evidenced by

discrete facts alleged in his complaint.

In support of this proposition, Appellees cite the Indiana

Supreme Court’s decision in Lumbermens Mut. Ins. Co. v. Statesman

Ins. Co..18 In that case, a deliveryman was injured when stairs in

a customer’s home collapsed under him while he was carrying a water

softener from his truck to the basement of that home.19 After

settling the deliveryman’s claim, the customer’s homeowners’

liability insurer brought a subrogation action against the insurer

of the deliveryman’s truck. Although the automobile liability

policy defined the term “insured” as including “any person while

using an owned automobile” and defined the term “use” as including

the “loading and unloading” of that automobile, the court

nevertheless determined that there was no coverage under the policy

because the deliveryman’s injuries did not “arise out of the ‘use’

of the truck.”20 In reaching its decision, the court held that an

accident or injury “arises out of” the use of a motor vehicle only

when such use is the “efficient and predominating cause” of the

18 291 N.E.2d 897 (Ind. 1973). 19 Id. at 898. 20 Id. at 899. Unlike the instant case, in Lumbermens, the homeowners’ liability insurer argued that the deliveryman’s customers —— rather than the deliveryman himself —— were “users” of the deliveryman’s truck (by virtue of cooperating with the driver in the loading and unloading process), and were, therefore, also insured under the automobile liability policy. Id. at 898. As the court ultimately rejected coverage based not on a determination regarding the customers’ status under the policy but rather on a determination that the deliveryman’s use of the truck did not cause his injuries, this distinction does not alter the relevance of Lumbermens to the case at bar.

10 accident or injury.21

Contrary to the purpose for which Appellees cite the case, we

read Lumbermens as standing for the proposition that, under Indiana

law, the phrase “arising out of” is synonymous with the phrase

“caused by” in the context of insurance coverage.22 Within the four

corners of Carter’s complaint, then, the cryogenic trailer is the

analog of the delivery truck in Lumbermens and the defective

premises and storage tank are the analogs of the customer’s stairs.

We are cognizant that, in the instant case, ICSP’s policy

employs the phrase “resulting from” rather than “arising out of.”

Nevertheless, we observe that, linguistically, the phrase

“resulting from” connotes an even tighter causal nexus between a

plaintiff’s injuries and his ownership, maintenance, or use of a

vehicle than does the phrase “arising out of.” Appellees have

cited no Indiana case —— and we have found none in our independent

research —— that militates in favor of adopting a broader

construction of the phrase.23 Consequently, we conclude that the

Policy provides coverage only for bodily injury and property damage

21 Id. 22 See Shelter Mut. Ins. Co. v. Barron, 615 N.E.2d 503, 506 (Ind. Ct. App. 5th Dist. 1993)(noting that, in Indiana, “a more narrow construction has been given to the phrase ‘arising out of the ownership, maintenance or use’ of a vehicle”); State Farm Mut. Auto Ins. Co. v. Spotten, 610 N.E.2d 299, 301-02 (Ind. Ct. App. 3d Dist. 1993). 23 Cf. State Farm Mut. Auto. Ins. Co. v. Barton, 509 N.E.2d 244, 246 (Ind. Ct. App. 2d Dist. 1987)(implying, although not explicitly stating, that, to trigger a duty to defend under a policy that employs the phrase “resulting from,” plaintiff’s complaint must allege a causal connection between use of a covered vehicle and his injuries).

11 caused by the ownership, maintenance or use of a covered auto.

As noted, Appellees contend that Carter’s allegation that he

was unloading Air Liquide’s trailer at the time of the accident is

an allegation of “use” of that covered auto. Nowhere in his

complaint, however, does Carter allege a causal connection —— or

facts that fairly imply such a nexus —— between this use and his

injuries. To the contrary, Carter alleges that his injuries

resulted solely from, i.e., were solely caused by, defects in the

storage facility premises and the on-site storage tank. As ICSP is

not obligated under the Policy to pay damages for injuries caused

by those objects, it is not obligated to defend Air Liquide against

Carter’s damage claims for those injuries.

III

CONCLUSION

We deny Appellees’ motion to take judicial notice of other

proceedings; in conducting a de novo review of a district court’s

grant of summary judgment, we will consider only such pleadings and

evidence as were before that court at the time of its ruling.

Based on our plenary review of the summary judgment record, and for

the aforementioned reasons, we reverse the district court’s summary

judgment in favor of Lend Lease and Air Liquide, vacate the court’s

award of damages and fees, and grant a take-nothing judgment in

favor of ICSP.

REVERSED in part, VACATED in part, and RENDERED.