COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS
THE BURLINGTON NORTHERN AND § SANTA FE RAILWAY COMPANY F/K/A/ THE ATCHISON, TOPEKA AND § No. 08-06-00022-CV SANTA FE RAILWAY COMPANY, § Appeal from the Appellant, § 41st Judicial District Court v. § of El Paso County, Texas
NATIONAL UNION FIRE INSURANCE § (TC# 2000-1286) COMPANY OF PITTSBURGH, PA, § Appellee.
OPINION
The Burlington Northern and Santa Fe Railway Company (“BNSF” or “the railroad”)
appeals the entry of summary judgment in favor of National Union Fire Insurance Company
(“National Union”). The trial court below entered a take-nothing judgment that determined that
National Union did not have a duty to defend the railroad, and that the railroad had no right to
indemnity. The railroad raises four issues challenging the entry of judgment on both claims.
In February of 1994, BNSF entered into a three-year contract with SSI Mobley for
vegetation control along the railroad’s right-of-ways in Texas. As part of the contract, SSI
Mobley agreed to purchase a comprehensive general liability policy and a contractual liability
policy insuring itself for one million dollars per occurrence, or three million dollars aggregate.1
1 In relevant part, the contract’s “Insurance Provision” provided as follows:
Contractor shall, at its sole cost and expense, provide: SSI Mobley also agreed that BNSF would be named as an “additional insured” on the policies,
with coverage to extend to incidents occurring within fifty feet of a railroad track. SSI Mobley
purchased the required insurance from National Union.
BNSF filed this lawsuit against National Union following the insurance company’s
decision to deny the railroad’s claims for defense and indemnity for liability arising out of a
railroad crossing accident near Shallowater, Texas. On August 25, 1995, two people were killed
and a third was injured when a BNSF train collided with an automobile. The decedents’ families
(“Lara” and “Rosales”) sued the railroad alleging, in part, that the collision was caused by the
railroad’s failure to properly maintain the vegetation at the crossing. BNSF settled one of the
cases, and the second proceeded to a multi-million dollar jury verdict.
BNSF and National Union filed competing summary judgment motions in early 2002.
The trial court denied National Union’s motion on May 30, 2002. On June 5, 2003, the trial
court granted partial summary judgment in the railroad’s favor on the insurance company’s duty
to defend and BNSF’s indemnity claim. The order provided that damages would be determined
at a later date.
On July 8, 2003, National Union filed a motion to reconsider the partial summary
judgment order. There is no record that the trial court ruled on this motion expressly. On
. . .
(b) Comprehensive General Liability and Contractual Liability Policy insuring the Contractor for one million each occurrence/three million dollars aggregate ($1,000,000/$3,000,000). The Company will be named as an additional insured. The insurance must provide for coverage of incidents occurring within fifty (50) feet of a railroad track, and any provision to the contrary in the insurance policy must be specifically deleted and the insurance certificate must so state.
-2- June 17, 2005, BNSF filed a motion for entry of final summary judgment on the damages issues
remaining from the court’s June 2003 partial summary judgment. On October 5, 2005, National
Union filed a second motion for summary judgment, raising both traditional and no-evidence
grounds. The trial court entered a final, take-nothing judgment in National Union’s favor on
December 27, 2005. The court withdrew its June 5, 2003, partial summary judgment order and
denied the railroad’s motion for entry of summary judgment on the damages issue. The trial
court also granted National Union’s October 5 motion for summary judgment “in all things.”
BNSF filed its notice of appeal on January 26, 2006.
There are four issues: (1) whether the trial court erred by granting summary judgment in
National Union’s favor on no-evidence grounds; (2) whether the trial court properly granted
National Union’s traditional motion for summary judgment, and properly denied BNSF’s partial
motion for summary judgment on its claim for breach of the duty to defend; (3) whether
summary judgment was appropriate regarding BNSF’s claim for indemnity; and (4) whether a
material fact issue remains regarding apportionment of liability.
When both sides move for summary judgment, and the trial court grants one motion and
denies the other, the reviewing court considers both sides’ summary judgment evidence and
determines all issues presented. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005). The reviewing court must consider all the grounds presented in both motions, and render
the judgment the trial court should have rendered. Id. The cross motions in this case presented
both traditional and no-evidence grounds for summary judgment. See TEX .R.CIV .P. 166a(c) and
166a(i). An appellate court reviews summary judgment de novo. Provident Life & Accident Ins.
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).
-3- We turn first to National Union’s tradition motion under Rule 166a(c). The standards for
reviewing traditional summary judgments are well established. In a traditional summary
judgment proceeding, the standard of review on appeal asks whether the successful movant
carried the burden to show that there is no genuine issue of material fact, and that the judgment
was properly granted as a matter of law. See TEX .R.CIV .P.166a(c); Fertic v. Spencer, 247
S.W.3d 242, 248 (Tex.App.--El Paso 2007, pet. denied). Thus, the question before the reviewing
court is limited to whether the summary judgment proof establishes as a matter of law that there
is no genuine issue of material fact as to one or more elements of the underlying claim. See
Fertic, 247 S.W.3d at 248. To resolve this question, the reviewing court will take all evidence
favorable to the nonmovnat as true; and all reasonable inferences, including any doubts, must be
resolved in the non-movant’s favor. Id., citing Nixon v. Mr. Property Mgmt. Co., Inc., 690
S.W.2d 546, 548-49 (Tex. 1985).
In Issue Two, BNSF contends the trial court erred in granting summary judgment on its
duty to defend claim by misapplying the “eight corners rule.” National Union responds by
arguing that the trial court was correct in concluding that the petitions in the underlying personal
injury lawsuits fail to allege any fact that could potentially place the claims within coverage
provisions.
Whether a duty to defend exists is a question of law, reviewed de novo. KLN Steel Prod.
Co., Ltd. v. CNA Ins. Co., 278 S.W.3d 429, 434 (Tex.App.--San Antonio 2008, pet. denied). The
insured bears the initial burden to establish that its claim falls within the scope of coverage
provided by the policy. CNA Ins. Co., 278 S.W.3d at 434. Should the insured establish a right to
coverage, the burden then shifts to the insurer to demonstrate that the claim is subject to a policy
-4- exclusion. Venture Encoding Serv., Inc. v. Atl. Mut. Ins. Co., 107 S.W.3d 729, 733 (Tex.App.--
Fort Worth 2003, pet. denied). If the insurer is able to establish that an exclusion applies, the
burden shifts back to the insured to show that an exception to the exclusion brings the claim back
within the terms of the policy. Id.
Generally, the duty to defend is dependant on the type and scope of coverage provided by
the policy agreement. See King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). An
insurer’s duty to defend is determined according to the “eight corners,” or “complaint
allegations” rule. See id. at 187; Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex.
1997). The insurer’s duty to defend is determined entirely by the allegations in the pleadings and
the language of the insurance policy. King, 85 S.W.3d at 187. All that is needed to invoke the
duty are factual allegations which support a claim potentially covered by the policy. See
GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 310 (Tex. 2006). Any
doubt that the facts alleged give rise to the duty are resolved in favor of the insured. See National
Union Fire Ins. Co. of Pittsburgh, PA v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139,
141 (Tex.1997). Facts outside the pleadings, regardless of how easily they can be found or
validated, are not ordinarily considered. GuideOne Elite Ins. Co., 197 S.W.3d at 308; see also
Argonaut Sw. Ins. Co. v. Maupin, 500 S.W.2d 633, 636 (Tex. 1973)(“The duty to defend does
not depend on what the facts are, or what might be determined finally by the trier of the facts. It
depends only on what the facts are alleged to be.”).
Both parties moved for summary judgment on the duty to defend. National Union’s
argument was two-fold: first, the insurer argued that BNSF was barred from coverage because it
could not qualify as an insured according to the terms of the policy; second, to the extent BNSF
-5- was an insured, National Union argued that one or more policy exclusions excused it from
providing a defense. In its own motion, BNSF argued it was entitled to coverage as an additional
insured by the terms of the policy. The railroad further argued that the petitions in the underlying
case established its right to a defense, and that the policy exclusions are not applicable or not
established as a matter of law.
We begin by considering whether BNSF qualifies as an “additional insured” under the
terms of the CGL policy. The policy provides coverage for bodily injury and property damage,
and obligates National Union to defend any suit seeking damages for such injuries. Section II of
the CGL policy defines “WHO IS AN INSURED” as those individuals, partnerships, or
organizations listed in the policy declaration.2 Who is an insured is amended by an “Additional
Insured” endorsement page attached to the policy. The endorsement states, “(Section II) is
amended to include as an insured the person or organization shown in the Schedule, but only
with respect to liability arising out of ‘your work’ for that insured by or for you.” The
endorsement provides further:
BLANKET - AS REQUIRED BY WRITTEN CONTRACT, BUT ONLY WITH RESPECT TO LIABILITIES ARISING OUT OF THEIR OPERATIONS PERFORMED BY OR FOR THE NAMED INSURED, BUT EXCLUDING ANY NEGLIGENT ACTS COMMITTED BY SUCH ADDITIONAL INSURED.
Whether BNSF can be considered an “additional insured” requires us to construe the
meaning of these contract terms. Insurance contracts are interpreted according to the general
rules of contract construction. American Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157
(Tex. 2003). The primary concern in interpreting a contract is to determine the true intent of the
2 SSI Mobley is the “named insured” under the policy.
-6- parties. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. CBI Indus., Inc., 907 S.W.2d 517, 520
(Tex. 1995). When a policy permits only one interpretation, we construe it as a matter of law and
enforce it as written. Upshaw v. Trinity Cos,, 842 S.W.2d 631, 633 (Tex. 1992).3 When the term
to be construed is unambiguous, we will construe the language according to the plain meaning of
the words. Archon Investments, Inc. v. Great Am. Lloyds Ins. Co., 174 S.W.3d 334, 338
(Tex.App.--Houston [1st Dist.] 2005, pet. denied).
According to the plain meaning of the language used in the endorsement, BNSF is
entitled to coverage for liability arising from bodily injury or property damage caused by SSI
Mobley’s operations, and is not covered for claims alleging the railroad’s own negligence.
Therefore, BNSF qualifies as an “additional insured” if the plaintiffs in the underlying lawsuits
sought recovery based on SSI Mobley’s negligence and not the railroad’s. For this inquiry, we
must apply the “eight corners rule,” and compare the policy provisions as stated above, to the
allegations in the underlying petition. See King, 85 S.W.3d at 187.
When applying the eight-corners rule, a reviewing court interprets the allegations in the
petition liberally, and resolves any doubts in favor of the duty to defend. KLN Steel Prod. Co.,
Ltd., 278 S.W.3d at 435. The insured need only show that a reasonable reading of the allegations
would allow evidence of a claim that is covered by the policy, not that the claim itself be clearly
demonstrated by the language of the pleadings. KLN Steel Prod. Co., Ltd., 278 S.W.3d at 435.
In addition, the reviewing court must read the underlying petitions in light of the insurance
policy’s provisions, and focus the analysis on the “origin of the damages rather than on the legal
3 Neither party argues that the “Who is insured provision” or the “additional insured” endorsement are ambiguous or create an ambiguity in the meaning of the policy.
-7- theories alleged.” Nat’l Union Fire Ins., Co., 939 S.W.2d at 141; see also Adamo v. State Farm
Lloyds Co., 853 S.W.2d 673, 676 (Tex.App.--Houston [14th Dist.] 1993, writ denied)(“It is not
the cause of action alleged which determines coverage but the facts giving rise to the alleged
actionable conduct.”).
BNSF relies on the following passage from the Rosales’s third amended and the Lara’s
sixth amended petitions to establish the underlying suits fall within coverage under the policies:
4. The Railroad has two (2) methods it uses to control vegetation. One is mechanical weed control, that is using shredders on tractors to mow weeds. The second method is chemical weed control. Even through this duty is a non-delegable duty, the Railroad contracts out both methods of weed control. The Railroad had a contract with SS Mobley Company to carry out chemical weed control. SS Mobley failed to use reasonable care to carry out its chemical weed control, and because of its improper timing and application of chemical weed control, there was excessive vegetation at the crossing at the time of the collision, which proximately caused the collision.
As a preliminary matter, National Union attempts to demonstrate that BNSF failed to
establish its right to coverage by citing to several pieces of extrinsic evidence. We cannot
consider such evidence under the eight-corners rule. See King, 85 S.W.3d at 187. The Texas
Supreme Court has continually, and recently, declined to create an exception to the eight-corners
rule which would allow consideration of extrinsic evidence in determining whether an insurer
owes a duty to defend. See Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d
650, 654 (Tex. 2009); Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 497 (Tex. 2008);
GuideOne Elite Ins. Co., 197 S.W.3d at 310-11. Therefore, our analysis will focus exclusively
on the language of the policy and the allegations in the petitions.
Relying on the additional insured endorsement, National Union argues it has no duty to
-8- defend BNSF because the Lara and Rosales petitions include allegations that BNSF was at fault
for the collision. The Texas Supreme Court has recently rejected this argument in Evanston Ins.
Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 665-66 (Tex. 2008). In key respects, the
facts in Evanston are parallel to the facts presented here: Atofina hired a contractor, Triple S, to
perform maintenance at its oil refinery. Atofina was an additional insured on Triple S’s
indemnity policy with Evanston Insurance Company. A Triple S employee was killed while
servicing equipment at the refinery, and the employee’s family sued Atofina along with Triple S.
Triple S was later dismissed from the suit. Atofina asserted its status as an additional insured
and requested coverage related to the remaining litigation. Evanston denied the request, arguing
that Atofina was not an additional insured because the policy language did not cover an
additional insured for its own negligence. Evanston, 256 S.W.3d at 663-64. The additional
insured endorsement at issue in Evanston provided coverage for:
A person or organization for whom [Triple S] [has] agreed to provide insurance as is afforded by this policy; but that person or organization is an insured only with respect to operations performed by [Triple S] or on [Triple S’s] behalf, or facilities owned or used by [Triple S].
Id. at 664.
Atofina, much like BNSF, claimed it was covered by the endorsement because it was an
organization for whom Triple S had agreed to provide insurance. Id. Evanston, much like
National Union, countered by arguing that Atofina was not an additional insured because the
endorsement did not cover an additional insured for the additional insured’s own negligence.
Evanston, 256 S.W.3d at 664.
Although the focus of the Evanston decision was indemnity coverage, the Court reiterated
-9- that the insurer must “determine its duty to defend solely from terms of the policy and the
pleadings of the third-party claimant.” Id. at 665 [Internal quotations omitted]. The Court then
rejected the fault-based interpretation of the additional insured endorsement. Id. at 666. In
determining the effect of the policy’s limitation of coverage based on allegations that the
additional insured itself was negligent, the Court held “[t]he particular attribution of fault
between insured and additional insured does not change the outcome.” Id. The Court also noted
that had the parties intended to insure Atofina only for vicarious liability, such language was
available. Id.
In accordance with Evanston, we conclude that BNSF qualifies as an additional insured
under SSI Mobley’s CGL policy, and National Union breached its duty to defend. There is no
dispute that the injuries at the center of the underlying lawsuit constitute “bodily” injuries as
defined by the policy. The Lara and Rosales families alleged, in part, that SSI Mobley did not
carry out its chemical weed control with reasonable care. SSI Mobley’s negligence resulted in
the overgrowth of vegetation which obstructed the view of the crossing and led to the collision.
The fact that the petitions also contain factual allegations also charging BNSF was at fault for the
collision; either because of its delegation of weed control to SSI Mobley, or because of its failure
to properly supervise and manage SSI Mobley’s work does not change the insurer’s duty to
defend the entire suit. See ATOFINA, 256 S.W.3d at 665-66; Zurich Am. Ins. Co., 268 S.W.3d at
495-96.
Having determined BNSF established its right to coverage as an additional insured, our
final inquiry in Issue Two, is whether the “PRODUCTS- COMPLETED OPERATIONS
HAZARD” exclusion negates National Union’s duty to defend. This exclusion states, “[t]his
-10- insurance does not apply to ‘bodily injury’ or ‘property damage’ included within the ‘products-
completed operations hazard.’” The CGL defines “Products-completed operations hazard” as
follows:
11.a ‘Products-completed operations hazard’ includes all ‘bodily injury’ . . . occurring away from premises [SSI Mobley] [owns] or [rents] and arising out of ‘[SSI Mobley’s] product’ or ‘[SSI Mobley’s] work’ except
(2) Work that has not yet been completed or abandoned.
b. ‘[SSI Mobley’s] work’ will be deemed completed at the earliest of the following times:
(1) When all of the work called for in [SSI Mobley’s] contract has been completed.
(2) When all of the work to be done at the site has been completed if [SSI Mobley’s] contract calls for work at more than one site.
(3) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or sub-contractor working on the same project.
Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
We begin with the premise that the policy covers bodily injuries. The “products-
completed operations hazard” endorsement provides an exclusion from that coverage. The
exclusion bars coverage which arises out of SSI Mobley’s work or product, and occurs away
from SSI Mobley’s premises. According to the record before us, the underlying bodily injuries
occurred at a BNSF crossing, away from SSI Mobley’s premises. According to the Lara’s and
Rosales’s petitions, SSI Mobley’s negligent weed control operations contributed to the collision.
-11- Therefore, pursuant to paragraph “a.” the facts before us seem to fall within the exclusion. This
is not the end of our analysis however.
The parties agree that ultimately the controlling issue is whether SSI Mobley’s work at
the crossing was completed at the time of the collision. The point of contention is how to
characterize the language in paragraph “a.(2)” and paragraph “b” of the exclusion. BNSF
characterizes these provisions as additional elements of the exclusion, and argues it was National
Union’s burden to establish that SSI Mobley’s work was complete at the time of the collision in
order to demonstrate that the exclusion applies. In response, National Union characterizes the
provisions as exceptions to the exclusion and concludes it was BNSF’s burden to demonstrate
that SSI Mobley’s work at the crossing was not complete. To settle this dispute, we again turn to
our principles of contract interpretation.
As in our discussion of the “additional insured” provision above, we are faced with an
unambiguous contract provision and must construe the definition of this exclusion according to
the plain meaning of the words chosen by the parties. See Archon Investments, Inc., 174 S.W.3d
at 338. In this instance, the presence of the word “except” following the primary definition of the
exclusion is determinative. The first clause in paragraph “a.” provides the requirements for the
exclusion. The exclusion applies to bodily and property injuries: (1) that occur away from SSI
Mobley’s premises; and (2) that arise out of SSI Mobley’s work or product. See Houston
Building Serv. Inc. v. Am Gen. Fire & Cas. Co., 799 S.W.2d 308, 309-10 (Tex.App.--Houston
[1st Dist.] 1990, writ denied)(noting an identical products - completed operations hazard
definition contained two elements: (1) damage arose out of the insured’s work; and (2) damage
occurred on premises the insured does not own or lease).
-12- The definition then provides an exception to the exclusion which brings a case back
within the policy’s coverage if SSI Mobley’s work “has not yet been completed or abandoned.”
Had the parties intended to make proof that the named insured’s work was completed as an
element of the exclusion, they could have done so. Instead, the provision is worded as an
exception to the exclusion. Therefore, in response to the products - completed operations hazard
exclusion, it was BNSF’s burden to establish SSI Mobley’s work was “not complete” at the time
of the collision. See Atl. Mut. Ins. Co., 107 S.W.3d at 733 (once the insurer establishes the
application of a policy exclusion, the burden shifts back to the insured to demonstrate an
exception to the exclusion). In determining whether BNSF met its burden, we are again
prohibited from considering extrinsic evidence. See Pine Oak Builders, Inc. v. Great Am. Lloyds
Ins. Co., 279 S.W.3d 650, 653-56 (Tex. 2009).
To determine whether SSI Mobley’s work was “not completed” at the time of the
collision, we must look to sub-paragraph (2). In sub-paragraph (2), we find three definitions of
“completed.” First, SSI Mobley’s work is completed when all of the work called for in its
contract with the railroad is complete. The second definition provides that work is completed on
a site by site basis, regardless of the status of the work at other locations. Third, work is
completed when the site has been put to its intended use. The policy further specifies that the
need for ongoing maintenance or service does not prevent the work from being completed for the
purposes of the exclusion. The definition which provides the earliest date for completion
controls.
Again, we turn to the allegations in the Lara’s and Rosales’s petitions. See Pine Oak
Builders, Inc., 279 S.W.3d at 653-54. The factual allegations regarding SSI Mobley’s work at
-13- the site of the collision are written in the past tense. The allegations refer to SSI Mobley having
“failed” to use reasonable care in its work, and that “because of its improper timing and
application of chemical weed control,” excessive vegetation was permitted to grow. The
petitions further allege that “there was excessive vegetation at the crossing.” [Emphasis added].
All of the allegations related to SSI Mobley’s work at the site indicate the company sprayed prior
to the collision.
Only “work completed” definition three, which makes the completion date dependant on
the length of SSI Mobley’s contract, would support the application of this exception. We cannot
apply definition three for two reasons: (1) the exception specifically provides that the controlling
work completion date is the earliest of the three; and (2) in order to determine when SSI
Mobley’s work was completed under definition two, we would have to refer to the contract. We
are not permitted to consider extrinsic evidence in determining the duty to defend. See id.
Neither definition two nor definition three provide support for the proposition that SSI
Mobley’s work was “not completed” at the time of the collision. Under either definition, when
considered in light of the allegations, SSI Mobley’s work at the site had been done prior to the
collisions. Therefore, BNSF establish the exception, and the products - completed operations
hazard exclusion applies and bars coverage. Accordingly, National Union did not have a duty to
defend the railroad, and the trial court did not err by granting summary judgment in the insurer’s
favor on this cause of action. Issue Two is overruled.
In its final issue, BNSF contends the trial court erred by granting National Union’s
motion for summary judgment on the insurer’s duty to indemnify. BNSF’s arguments are based
entirely on its duty to defend arguments. First, BNSF argues the products - completed operations
-14- hazard exclusion does not apply to bar coverage. Given our conclusion that this argument fails in
the duty to defend context, we must also overrule this argument in the indemnity context.
Second, the railroad asserts that National Union failed to establish that allegations of BNSF’s
own negligence prevented it from qualifying as an additional insured under the policy. As we
have already discussed at length, BNSF did meet the requirements to qualify as an additional
insured under the policy. However, as we have concluded that National Union’s coverage
exclusion does apply, any coverage BNSF may have been entitled to is negated. Based on our
analysis and conclusions above, the trial court did not err in granting summary judgment
regarding indemnity, and Issue Three is overruled.4
We concluded that the trial court did not err by granting summary judgment in National
Union’s favor and we affirm the court’s judgment.
December 9, 2009 DAVID WELLINGTON CHEW, Chief Justice
Before Chew, C.J., McClure, and Carr, JJ. Carr, J., Not Participating
4 As the summary judgment was properly based on National Union’s traditional summary judgment grounds, there is no need to address the propriety of the insurer’s no-evidence motion. Accordingly, Issue One is overruled. In addition, having concluded the summary judgment was proper, there is no need to address BNSF’s request that the case be remanded for reconsideration of apportionment of liability and attorney’s fees and costs. See TEX .R.APP .P. 43.3.
-15-