Osbaldo Hurtado Avalos and Antonio Hurtado as Assignees of Karla Flores Guevara v. Loya Insurance Company ( 2018 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-17-00070-CV
Osbaldo Hurtado AVALOS and Antonio Hurtado, as Assignees of Karla Flores Guevara,
Appellants
v.
LOYA INSURANCE COMPANY,
Appellee
From the 111th Judicial District Court, Webb County, Texas
Trial Court No. 2016CVT001431 D2
Honorable Monica Z. Notzon, Judge Presiding
Opinion by: Marialyn Barnard, Justice
Concurring Opinion by: Karen Angelini, Justice
Sitting: Karen Angelini, Justice
Marialyn Barnard, Justice
Rebeca C. Martinez, Justice
Delivered and Filed: July 25, 2018
REVERSED AND REMANDED
Appellants, Osbaldo Hurtado Avalos and Antonio Hurtado, as Assignees of Karla Flores
Guevara (collectively, “the Hurtados”), appeal from a summary judgment in favor of appellee,
Loya Insurance Company, on their claims for negligence, breach of contract, breach of the duty of
good faith and fair dealing, and violations of the Texas Deceptive Trade Practices Act (“DTPA”).
On appeal, the Hurtados argue the trial court improperly granted summary judgment in favor of
Loya Insurance Company because: (1) under the eight-corners rule, it had a duty to defend its
insured, Guevara, as a matter of law; (2) its request for declaratory relief was moot; and (3) it failed
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to specify which elements of the Hurtados’ causes of action were not supported by evidence.
Because we hold Loya Insurance Company had a duty to defend Guevara under the eight-corners
rule, we reverse the judgment of the trial court and remand the cause to the trial court for further
proceedings consistent with this opinion.
BACKGROUND
This case arises out of a car accident between the Hurtados and Guevara’s husband,
Rodolfo Flores. On the day of the accident, Flores was moving Guevara’s car outside of their
home when he collided with the Hurtados’ vehicle. Although Guevara was insured by Loya
Insurance Company, the policy contained a named driver exclusion for Flores. The record reflects
that Guevara, Flores, and the Hurtados reported to the police and insurance company that Guevara
— not Flores — was driving the vehicle at the time of the accident.
The Hurtados then pursued an insurance claim against Guevara, ultimately filing a
negligence suit against her in the 49th District Court of Webb County. In their petition, the
Hurtados alleged Guevara negligently operated her vehicle and her negligence was the proximate
cause of their injuries. Counsel appointed by Loya Insurance Company to represent Guevara
(hereinafter, “Guevara’s counsel’) filed an answer on behalf of Guevara.
During the early course of the discovery process, Guevara identified herself as the driver
of the vehicle at the time of the accident. However, according to Loya Insurance Company, it
learned Guevara was not the driver at the time of the accident; rather, Flores was. Accordingly,
Guevara’s counsel cancelled Guevara’s deposition and, on that same day, a Loya Insurance
Company claim representative sent a letter to the Hurtados, denying coverage for their loss
pursuant to the driver exclusion provision in Guevara’s policy. The letter identified Flores as the
driver of the vehicle at the time of the accident. A month later, Guevara’s counsel withdrew from
its representation of Guevara. A judgment was ultimately rendered against Guevara for
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$450,343.34, which constituted damages for the Hurtados’ past medical expenses, “other”
damages, prejudgment interest, and costs.
The Hurtados, as assignees of Guevara, filed suit against Loya Insurance Company,
alleging negligence, breach of contract, breach of the duty of good faith and fair dealing, and
violations of the Texas Deceptive Trade Practices Act (“DTPA”). According to the Hurtados,
Loya Insurance Company had a duty to defend Guevara in the negligence suit they had filed against
her, and Loya Insurance Company breached its duty when the counsel it appointed to represent
Guevara withdrew. In response, Loya Insurance Company answered and counterclaimed,
asserting claims for breach of contract and fraud. Loya Insurance Company also sought
declaratory relief, seeking a declaration that it had no duty to defend Guevara in the negligence
suit filed by the Hurtados and Guevara was not covered for the car accident involving Flores and
the Hurtados due to the driver exclusion provision.
Thereafter, Loya Insurance Company filed traditional and no-evidence motions for
summary judgment on the following grounds: (1) as a matter of law it had no duty to defend or
cover Guevara with regard to the negligence suit filed against her by the Hurtados because Flores,
an excluded driver, was driving the vehicle involved in the underlying car accident; and (2) there
was no evidence it had a duty to defend Guevara or that Guevara was covered, and therefore, there
was no evidence as to any of the claims asserted by the Hurtados.
In support of its motion, Loya Insurance Company attached portions of Guevara’s
deposition testimony, which was taken in the suit brought by the Hurtados against Loya Insurance
Company. In that deposition, Guevara admitted Flores was driving her car at the time of the
accident. She also testified she did not tell anyone from Loya Insurance Company that Flores was
driving the car until “right before [her] deposition was to begin.”
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The Hurtados filed a response to the summary judgment motions filed by Loya Insurance
Company. In their response to the no evidence motion, the Hurtados argued Loya Insurance
Company’s no-evidence summary judgment motion was premature because an adequate time for
discovery had not yet elapsed. The Hurtados also filed a competing traditional motion for
summary judgment. With regard to their competing motion for summary judgment, the Hurtados
argued Loya Insurance Company’s request for a declaration that it owed no duty to defend Guevara
in their negligence suit was moot and Loya Insurance Company owed Guevara a duty to defend as
a matter of law. In support of their traditional motion, the Hurtados submitted: (1) copies of
portions of Guevara’s deposition taken in the suit brought by the Hurtados against Loya Insurance
Company; (2) the original petition and final judgment in their negligence suit against Guevara; (3)
Guevara’s insurance declaration page from Loya Insurance Company; (4) portions of written
discovery provided by Guevara and Mr. Hurtado; (5) the police accident report from the underlying
car accident; (6) and the letter from Loya Insurance Company to the Hurtados denying coverage
for their claim. Loya Insurance Company filed objections to portions of the Hurtados’ summary
judgment evidence, and the trial court ultimately struck the written discovery provided by Guevara
and Mr. Hurtado, as well as the police accident report. Thereafter, summary judgment was granted
in favor of Loya Insurance Company, and the Hurtados perfected this appeal.
ANALYSIS
On appeal, the Hurtados contend the trial court improperly granted summary judgment in
favor of Loya Insurance Company. According to the Hurtados, summary judgment was improper
because Loya Insurance Company had a duty to defend its insured, Guevara, as a matter of law
based on the face of the pleadings and the terms of the insurance policy. The Hurtados also contend
summary judgment was improper because Loya Insurance Company’s request for declaratory
relief — that it owed no duty to defend Guevara — was moot because at the time of its request, it
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no longer provided coverage to Guevara. Finally, the Hurtados assert the trial court erred in
granting a no evidence summary judgment in favor of Loya Insurance Company because Loya
Insurance Company failed to specify which elements of the Hurtados’ causes of action were not
supported by any evidence.
Standard of Review
When reviewing traditional and no evidence summary judgments, we perform a de novo
review of the entire record in the light most favorable to the nonmovant, indulging every
reasonable inference and resolving any doubts against the movant. See Sudan v. Sudan, 199
S.W.3d 291, 292 (Tex. 2006); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005); Strandberg v. Spectrum Office Bldg., 293 S.W.3d 736, 738 (Tex. App.—San Antonio 2009,
no pet.). When conducting our review, we are not required to ascertain the credibility of summary
judgment affiants nor are we required to determine the weight of evidence in the affidavits,
depositions, exhibits and other summary judgment proof. Palestine Herald–Press Co. v. Zimmer,
257 S.W.3d 504, 508 (Tex. App.–Tyler 2008, pet. denied) (citing Gulbenkian v. Penn, 151 Tex.
412, 252 S.W.2d 929, 932 (1952)); McCullough v. Godwin, 214 S.W.3d 793 (Tex. App.—Tyler
2007, no pet.).
To prevail on a traditional motion for summary judgment, the movant must show that it is
entitled to judgment as a matter of law and no genuine issue of material fact exists. TEX. R. CIV.
P. 166a(c); Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); Nixon v. Mr.
Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985). A defendant who conclusively negates
at least one essential element of the nonmovant’s cause of action is entitled to summary judgment
as to that cause of action. Little v. Texas Dep’t of Criminal Justice, 148 S.W.3d 374, 386 (Tex.
2004); Randall’s Food Mkts., Inc. v. Johnson, 891 S.W.3d 640, 644 (Tex. 1995). Once the movant
has established its right to summary judgment, the nonmovant bears the burden of responding to
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the motion and producing evidence, raising a genuine issue of material fact. In re Estate of Flores,
76 S.W.3d 624, 629 (Tex. App.—Corpus Christi-Edinburg 2002, no pet.).
A no evidence motion for summary judgment is essentially a motion for a pretrial directed
verdict, in which case we apply the same legal sufficiency standard as we apply when reviewing a
directed verdict. See TEX. R. CIV. P. 166a(i); King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750-
51 (Tex. 2003); Moore v. K Mart Corp., 981 S.W.2d 266, 269 (Tex. App.—San Antonio 1998,
pet. denied). We review the evidence in the light most favorable to the nonmovant, “crediting
evidence favorable to [the nonmovant] if reasonable jurors could, and disregarding contrary
evidence unless reasonable jurors could not.” Mann Frankfort Stein & Lipp Advisors, Inc. v.
Fielding, 289 S.W.3d 844, 848 (Tex. 2009); King Ranch, 118 S.W.3d at 751. Once a no evidence
motion has been filed, the burden shifts to the nonmovant to bring forth more than a scintilla of
evidence that raises a genuine issue of material fact. Neurodiagnostic Tex, L.L.C. v. Pierce, 506
S.W.3d 153, 162 (Tex. App.—Tyler 2016, no pet.) A no evidence motion is properly granted if
the nonmovant fails to bring forth more than a scintilla of probative evidence to raise a genuine
issue of material fact as to an essential element of the nonmovant’s claim on which the nonmovant
would have the burden of proof at trial. Id. “More than a scintilla of evidence exists when the
evidence would enable reasonable and fair-minded people to reach different conclusions.” All Am.
Tel., Inc. v. USLD Commc’ns, 291 S.W.3d 518, 526 (Tex. App.—Fort Worth 2009, pet. denied).
Less than a scintilla of evidence exists when the evidence is so weak as to do no more than create
a mere surmise or suspicion of a fact, and the legal effect is that there is no evidence.
Neurodiagnostic Tex, L.L.C., 506 S.W.3d at 162.
Lastly, when a party moves for both a traditional and a no-evidence summary judgment,
we generally review the trial court’s summary judgment under the no-evidence standard. Ford
Motor Co. v. Ridgeway, 135 S.W.3d 598, 600 (Tex. 2004); Neurodiagnostic Tex, L.L.C., 506
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S.W.3d at 163. This is because if the non-movant fails to meet its burden to produce more than a
scintilla of evidence as to any challenged element, then we need not analyze whether the movant
satisfied its burden to prove its entitlement to judgment as a matter of law by producing evidence
of same. Ford Motor Co., 135 S.W.3d at 600; Neurodiagnostic Tex, L.L.C., 506 S.W.3d at 163.
However, this rule is not absolute. Neurodiagnostic Tex, L.L.C, 506 S.W.3d at 163. Because our
disposition of whether Loya Insurance Company owed Guevara a duty to defend is dispositive of
this cause, we will consider the traditional motion for summary judgment first. See id.
Duty to Defend
As indicated above, the Hurtados argue the trial court erred in granting summary judgment
in favor of Loya Insurance Company because as a matter of law Loya Insurance Company had a
duty to defend Guevara in the negligence suit they filed. This argument is based on the eight-
corners rule. The Hurtados assert that under the eight-corners rule, an insurance company’s duty
to defend its insured in a lawsuit is determined by looking to the allegations contained in the
petition and the terms of the insurance company’s policy. According to the Hurtados, because
they alleged Guevara was negligently operating her vehicle in the underlying car accident and she
is covered by the insurance policy, Loya Insurance Company had a duty to defend Guevara in the
negligence suit the Hurtados filed against her.
Loya Insurance Company argues, however, it did not owe a duty to defend Guevara in the
negligence suit filed against her. According to Loya Insurance Company, its duty to defend did
not arise because Guevara breached the insurance policy prior to the filing of the Hurtados’
negligence suit against her. Loya Insurance Company contends that Guevara breached the policy
by falsely representing to the police and insurance company that she was driving the car in the
accident.
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Applicable Law
To determine whether an insurer has a duty to defend, Texas courts follow the “eight-
corners rule.” Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596 (5th Cir. 2006); 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. v. Fielder Rd. Baptist Church,
197 S.W.3d 305, 308 (Tex. 2006). The rule takes its name from the fact that only two documents
– the insurance policy and pleadings – are relevant to the determination of the duty to defend.
Graham, 473 F.3d at 600; GuideOne Elite Ins. Co., 197 S.W.3d at 308. Under the eight-corners
rule, “an 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.” Nokia,
268 S.W.3d at 490 (quoting GuideOne Elite Ins. Co., 197 S.W.3d at 308); see Graham, 473 F.3d
at 596; Pine Oak Builders, Inc., 279 S.W.3d at 654.
When applying the eight-corners rule, we resolve all doubts regarding the duty to defend
in favor of the existence of a duty and liberally construe the allegations in the petition in favor of
the insured. Nokia, 268 S.W.3d at 491; GuideOne Elite Ins. Co., 197 S.W.3d at 308. Even if the
allegations in the petition are groundless, false, or fraudulent, an insurer is obligated to defend.
Nokia, 268 S.W.3d at 491 (quoting 14 COUCH ON INSURANCE § 200:19). The duty to defend is not
affected by facts that may be ascertained before suit or developed during the course of ligation.
Id. Thus, facts outside the pleadings are not material to the determination of the duty to defend
even if those facts directly contradict the allegations in the underlying petition. Pine Oak Builders,
Inc., 279 S.W.3d at 655-56; GuideOne Elite Ins. Co., 197 S.W.3d at 308.
Although the Texas Supreme Court has recognized that some courts have adopted
exceptions to the eight-corners rule, it has declined to do so. See Graham, 473 F.3d at 601; Pine
Oak Builders, Inc., 279 S.W.3d at 654; Nokia, Inc., 268 S.W.3d at 497; GuideOne Elite Ins., 197
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S.W.3d at 308-09. The Fifth Circuit observed that if the Texas Supreme Court were to recognize
an exception, it would only occur in a “narrow circumstance where ‘it is initially impossible to
discern whether coverage is potentially implicated and when the extrinsic evidence goes solely to
a fundamental issue of coverage which does not overlap with the merits of or engage in the truth
or falsity of any facts alleged in the underlying case.’” Graham, 473 F.3d at 601-02 (quoting
GuideOne Elite Ins., 197 S.W.3d at 308-09). In other words, the narrow exception would permit
the use of extrinsic evidence only in cases where it was relevant to an independent and discrete
coverage issue, but did not touch on the merits of the underlying claim. Pine Oak Builders, Inc.,
279 S.W.3d at 655; GuideOne Elite Ins., 197 S.W.3d at 310. Notwithstanding the forgoing, the
Texas Supreme Court has made it clear that if the extrinsic evidence directly contradicts the
allegations in the underlying petition, then it will not be considered when determining whether an
insurance provider has a duty to defend. Pine Oak Builders, Inc., 279 S.W.3d at 655; GuideOne
Elite Ins., 197 S.W.3d at 310.
Application
With these legal principles in mind, we turn to the Hurtados’ pleadings in the negligence
suit against Guevara and the terms of the insurance policy provided to Guevara by Loya Insurance
Company. It is undisputed that Guevara is a named insured under the insurance policy provided
by Loya Insurance Company, and the policy provides coverage to Guevara for any of the vehicles,
including the car involved in the accident, listed on the policy. It is also undisputed that Flores is
named as an excluded driver in the policy. In their petition, the Hurtados alleged that on the day
of the accident, Guevara was operating her vehicle negligently, and she had a duty to exercise
ordinary care and operate her vehicle in a reasonable and prudent matter. The Hurtados further
alleged Guevara breached that duty when she failed to make a proper turn, failed to maintain a
proper lookout, failed to timely apply her brakes, and failed to turn her vehicle in order to avoid
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the collision. The Hurtados also alleged that as a result of her negligence, she proximately caused
the Hurtados’ injuries.
Nowhere in the petition did the Hurtados allege that Flores negligently operated the vehicle
involved in the underlying car accident. Loya Insurance Company, however, urges us to consider
portions of Guevara’s deposition that was taken in the suit brought by the Hurtados against it and
submitted in support of its summary judgment motion. In that deposition, Guevara admitted she
was not driving the vehicle at the time of the accident, but rather her husband, Flores, was driving
the vehicle. However, under the eight-corners rule, we may not consider such extrinsic evidence
as it directly contradicts the Hurtados’ allegations that Guevara was driving. See Pine Oak
Builders, Inc., 279 S.W.3d at 655 (“In deciding the duty to defend, the court should not consider
extrinsic evidence from either the insurer or the insured that contradicts the allegations of the
underlying petition.”); GuideOne Elite Ins., 197 S.W.3d at 310 (declining to consider extrinsic
evidence regarding whether individual was employed during insured’s coverage period because
such evidence directly contradicted allegations that individual was employed by insured).
Even if we consider the potential narrow exception to the eight-corners rule described by
the Texas Supreme Court, the facts of this case do not fall within it. See Graham, 473 F.3d at 601-
02; Pine Oak Builders, Inc., 279 S.W.3d at 655; GuideOne Elite Ins., 197 S.W.3d at 310. Here,
the deposition testimony upon which Loya Insurance Company relies does not strictly go to the
question of coverage. See Pine Oak Builders, Inc., 279 S.W.3d at 655 (describing narrow
exception as one that would permit use of extrinsic evidence only when relevant to independent
and discrete coverage issue); GuideOne Elite Ins., 197 S.W.3d at 310 (recognizing exception
would be limited to circumstances involving “pure coverage questions”). Rather, the deposition
testimony directly contradicts the allegations in the Hurtados’ pleading — that Guevara
negligently operated the vehicle — which is material to the merits of their negligence claim. See
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Pine Oak Builders, Inc., 279 S.W.3d at 655; GuideOne Elite Ins., 197 S.W.3d at 310. Accordingly,
and as logically contrary as it may seem, we hold that under the eight-corners rule, it was the duty
of Loya Insurance Company to defend Guevara against allegations that she negligently operated
the vehicle even if the allegations were false or fraudulent. See Graham, 473 F.3d at 596; Pine
Oak Builders, Inc., 279 S.W.3d at 654; Nokia, 268 S.W.3d at 490; GuideOne Elite Ins. Co., 197
S.W.3d at 308.
Loya Insurance Company argues Guevara’s deposition testimony — that Flores was the
driver of the vehicle — should be considered because it establishes Guevara materially breached
the policy by falsely reporting she was the driver; and therefore, it had no duty to defend or provide
coverage to her. We disagree. As pointed out by the Texas Supreme Court, “[a] defense of third-
party claims provided by the insurer is a valuable benefit granted to the insured by the policy.”
Pine Oak Builders, Inc., 279 S.W.3d at 656. Thus, if Loya Insurance Company knew the
allegations asserted by the Hurtados to be untrue, then it had a duty to establish such facts in
defense of Guevara in the underlying negligence suit filed against her by the Hurtados. See
GuideOne Elite Ins. Co., 197 S.W.3d at 311.
Therefore, we hold that under the eight-corners rule, we may not consider Guevara’s
deposition testimony that was attached to Loya Insurance Company’s motion for summary
judgment. We further hold Loya Insurance Company has failed to establish as a matter of law that
it had no duty to defend or provide coverage to Guevara, and based on the Hurtados’ petition,
which alleges Guevara was negligently operating the vehicle and the insurance policy, there was
some evidence that Loya Insurance Company owed a duty to defend Guevara in the negligence
suit. Accordingly, we hold the trial court erred in granting summary judgment in favor of Loya
Insurance Company. Given our disposition, we need not consider the Hurtados’ other issues.
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CONCLUSION
Based on the foregoing, we hold that under the eight-corners rule, we may not consider
Guevara’s deposition testimony that Flores was driving the vehicle in the underlying car accident.
Accordingly, we hold the trial court erred in granting summary judgment in favor of Loya
Insurance Company. We therefore reverse the summary judgment and remand the cause to the
trial court for further proceedings consistent with this court’s opinion.
Marialyn Barnard, Justice
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