FIFTH CIRCUIT WEIGHS IN ON TEXAS DUTY TO DEFEND CASE INVOLVING A CRANE COLLAPSE
In Hartford Casualty Insurance Company v. DP Engineering, L.L.C., 2016 WL 3552312 (5th Cir. June 29, 2016), the dispute arose from an industrial crane accident when it collapsed with its supported load, called a “stator,” at Entergy Corp.’s Arkansas Nuclear One facility, causing widespread damage and personal injuries, including one death.
Entergy sued DP Engineering and Scroggins, along with others involved in the project, for breach of contract and negligence. DP Engineering, Entergy, and the other companies involved in the stator project were sued by the estate of the deceased worker and three injured workers. Scroggins was not a defendant in these four lawsuits. DP Engineering based in Fort Worth, and their employee John Scroggins tendered these lawsuits to Hartford and requested a defense under their general liability policies.
The underlying plaintiffs, including Entergy, alleged DP Engineering was hired for certain work related to the project. DP assigned Scroggins to perform work related to the stator project. The underlying lawsuit alleged that, in order to ensure the safe, efficient and effective lifting and movement of an article such as the stator a load test of the structure should have been completed before performing the actual project and not doing so was negligent. The underlying lawsuit further alleged that DP and Scroggins were involved in a decision not to perform a load test, instead relying on a representation that the structure had previously been used in the same configuration to lift equipment that exceeded the anticipated weight of the stator.
DP Engineering's insurers, Hartford Casualty Insurance Company and Hartford Lloyds Insurance Company, sought a declaratory judgment that there was no duty to defend or indemnify under their policies. Hartford Casualty had issued a primary insurance policy and an umbrella policy to DP Engineering. Hartford Lloyds had issued only a primary insurance policy. All three policies contained an exclusion of coverage for injuries or damages arising out of DP Engineering's professional services. Hartford argued the underlying lawsuits alleged “bodily injury” or “property damage,” for which coverage was excluded because DP assumed liability in the insurance contract.
DP Engineering asserted counterclaims against Hartford, seeking a declaratory judgment that Hartford had a duty to defend and bringing a breach of contract claim for Hartford's refusal to accept the defense. Both parties moved for summary judgment. The district court granted Hartford's motion, holding there was no duty to defend or duty to indemnify, and denied DP Engineering's motion. The district court reasoned that the allegations in the underlying lawsuits only related to DP Engineering's professional engineering services, and so the policies' professional services exclusions applied. The court entered judgment for Hartford on Hartford's claims and DP Engineering's counterclaims.
On appeal, the court agreed that Hartford did not have a duty to defend, but ruled “the district court should not have determined the duty to indemnify based on the pleadings in the underlying lawsuit.” The court found that since under Texas law the duty to defend is determined by pleadings and the duty to indemnify is decided by facts that eventually come out of an underlying lawsuit, both duties can arise independently of one another. The court reasoned that the Texas Supreme Court has identified only one scenario where the duty to indemnify can be resolved solely on the pleadings in the underlying lawsuit: where there is “no set of facts that could be proved” that could provide coverage.
The court reasoned that “The underlying lawsuits here involve complex facts and multiple allegedly negligent parties," and there is ‘an array of possible factual and legal scenarios,’ that could have caused the crane and stator to fall, some of which may create coverage.” The court concluded that, “The allegations in the underlying lawsuits here do not conclusively foreclose that facts adduced at trial may show DP Engineering also provided non-professional services, which would be covered under the policy.”
Based on these findings the court affirmed the district court’s summary judgment ruling on the duty to defend, but reversed the ruling as to the duty to indemnify.