Essex Insurance Co v. Redtail Products Inc

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 12, 2000
• Docket: 99-11056
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 99-11056 Summary Calendar

ESSEX INSURANCE COMPANY

Plaintiff - Counter Defendant - Appellee,

versus

REDTAIL PRODUCTS INC.

Defendant - Counter Claimant - Appellant.

-------------------- Appeal from the United States District Court for the Northern District of Texas USDC No. 3:97-CV-2120-D -------------------- April 12, 2000

Before JOLLY, JONES, and BENAVIDES, Circuit Judges.

PER CURIAM:*

This case arises from a dispute over insurance coverage.

Redtail Products Inc. [Redtail] appeals from a judgment

dismissing its counterclaims and granting a declaratory judgment

that Essex Insurance Company [Essex] had no duty to defend or

indemnify Redtail in an advertising injury case and that Essex

lawfully canceled Redtail’s commercial general liability policy.

We affirm.

Redtail sells motor oils and other lubricants and uses the

marks of certain engine manufacturers in its labeling and

* 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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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. promotional materials to inform customers that they can use

Redtail products for those engines. On September 27, 1996,

Outboard Marine Corporation [OMC] sent Redtail a letter alleging

that Redtail’s use of OMC’s marks violated its trademark rights.

Redtail contacted Corbin Shouse [Shouse], an insurance agent.

Upon being informed that its existing policy did not cover

advertising injury, Redtail instructed Shouse to acquire a policy

that would. Shouse submitted an application on Redtail’s behalf

which represented that there were no known claims or occurrences

that may give rise to claims in the five years previous to the

application. Essex issued a general liability policy to Redtail.

On June 2, 1997, OMC filed suit against Redtail. After Essex

received a copy of the September 27, 1996 OMC letter, Essex

notified Redtail and certain other interested parties that the

policy was being canceled “due to misrepresentation.”

Essex filed a declaratory action, seeking a judgment that it

had no duty under the policy to defend or indemnify Redtail, that

the policy was void ab initio, and that Essex had lawfully

canceled the policy. Redtail counterclaimed for a number of

causes of action, including misrepresentation, breach of

contract, and defamation. On cross motions for partial summary

judgment, the district court ruled that Essex had no duty to

defend or indemnify Redtail in the OMC suit. After a bench

trial, the district court issued judgment in favor of Essex on

all claims except its contention that the policy was void ab

initio and dismissed Redtail’s counterclaims with prejudice.

We review the district court’s partial summary judgment de novo, Amburgey v. Corhart Refractories Corp., 936 F.2d 805, 809

(5th Cir. 1991), factual findings in its final judgment for clear

error and its conclusions of law de novo. See American Home Assur.

Co. v. Unitramp Ltd., 146 F.3d 311, 313 (5th Cir. 1998).

The district court’s grant of partial summary judgment was

proper. The court could consider the September 27, 1996 OMC letter

under John Deere Ins. Co. v. Truckin’ U.S.A., 122 F.3d 270, 272 95th

Cir. 1997) because the facts alleged in the underlying OMC complaint

were insufficient to determine coverage under the policy. The policy

specifically excluded coverage for advertising injury occurring

outside of the policy period and for injury arising out of a

publication of material that first occurred before the beginning of

the policy period. OMC’s complaint letter of September 27, 1996

demonstrates that the alleged trademark violations would be excluded

under those terms. In addition, under the fortuity doctrine, Redtail

could not receive coverage for a loss or damage which was known to

have begun at the time the policy was purchased. See Two Pesos, Inc.

v. Gulf Ins. Co., 901 S.W.2d 495, 501 (Tex. App. 1995, no writ).

The district court’s final judgment dismissing Redtail’s

counterclaims and granting judgment for Essex was likewise proper.

Essential to several of Redtail’s counterclaims was its contention

that Shouse acted as an agent for Essex during the procurement of the

policy. The district court found, however, that Shouse was acting as

Redtail’s agent during the application period. See McKillip v.

Employers Fire Ins. Co., 932 S.W.2d 268, 270 (Tex. App. 1996, no

writ). The district court therefore correctly dismissed Redtail’s

fraud-related counterclaims because they rested on Shouse’s behavior during the application period, which could not be attributed to

Essex.

The district court’s conclusion that Essex complied with the

contract terms and applicable law in canceling the policy is also

correct. Redtail’s defamation counterclaims were properly dismissed

because the allegedly defamatory statements were true as established

by evidence in the record and truth is a defense to such claims. See

Randall’s Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex.

1995). Finally, the district court correctly concluded that Redtail

failed to establish tortious interference with a prospective contract

because it did not show that Essex acted with malice. See Garner v.

Corpus Christi Nat’l Bank, 944 S.W.2d 469, 477 (Tex. App. 1997, writ

denied).

For the reasons stated in the district court’s partial

summary judgment memorandum opinion and order of November 12,

1998 and memorandum opinion of August 17, 1999, we affirm.