Blest Investments v. Insurance Co of PA ( 1999 )

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this opinion should not be published and is not precedent except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.
12